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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COLORADO PRIME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5963 11-2826129
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL CLASSIFICATION CODE (I.R.S. EMPLOYER
OF INCORPORATION OR NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
KAL-MAR PROPERTIES CORP.
(REGISTRANT WITH RESPECT TO THE SUBSIDIARY GUARANTEE)
NEW YORK 6519
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
CONCORD FINANCIAL SERVICES, INC.
(REGISTRANT WITH RESPECT TO THE SUBSIDIARY GUARANTEE)
NEW YORK 6146
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
PRIME FOODS DEVELOPMENT CORPORATION
(REGISTRANT WITH RESPECT TO THE SUBSIDIARY GUARANTEE)
DELAWARE 5963
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
THOMAS S. TAYLOR, CHIEF FINANCIAL OFFICER ONE
MICHAEL AVENUE FARMINGDALE, NEW YORK 11735 (516)
ONE MICHAEL AVENUE FARMINGDALE, NEW YORK 11735 694-1111 (NAME, ADDRESS, INCLUDING ZIP CODE, AND
(516) 694-1111 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT
TELEPHONE NUMBER, INCLUDING AREA CODE, OF EACH FOR SERVICE FOR EACH REGISTRANT)
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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COPIES TO:
CARL SELDIN KOERNER, ESQ. KOERNER SILBERBERG & NEIL M. GOODMAN, ESQ. ARNOLD & PORTER 555 TWELFTH
WEINER, LLP 112 MADISON AVENUE, 3RD FLOOR NEW STREET, N.W. WASHINGTON, D.C. 20004-1202 (202)
YORK, NEW YORK 10016-7424 (212) 689-4400 942-5191
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as possible after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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============================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE(2)
- ------------------------------------------------------------------------------------------------------------
12 1/2% Senior Notes due 2004........... $100,000,000 $101.25 $101,250,000 $30,682
- ------------------------------------------------------------------------------------------------------------
Subsidiary Guarantee of the Senior Notes
due 2004.............................. -- -- -- (3)
- ------------------------------------------------------------------------------------------------------------
Total................................... $100,000,000 $ $101,250,000 $30,682
============================================================================================================
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(1) Pursuant to Rule 457(f) under the Securities Act of 1933, the registration
fee has been calculated based on the average of the bid and asked prices in
the PORTAL market on June 25, 1997 of the 12 1/2% Senior Notes due 2004 of
Colorado Prime Corporation, for which the securities registered hereby will
be exchanged.
(2) The filing fee was paid on June 26, 1997.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Subsidiary Guarantee (as defined herein).
------------------------
THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 27, 1997
COLORADO PRIME FOODS LOGO
OFFER TO EXCHANGE
ALL OUTSTANDING 12 1/2% SENIOR NOTES DUE 2004
FOR
12 1/2% SENIOR NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OF
COLORADO PRIME CORPORATION
GUARANTEED BY
KAL-MAR PROPERTIES CORP.
CONCORD FINANCIAL SERVICES, INC.
PRIME FOODS DEVELOPMENT CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997 UNLESS EXTENDED
Colorado Prime Corporation, a Delaware corporation ("CPC"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange its outstanding 12 1/2% Senior Notes due 2004 (the
"Old Notes"), of which an aggregate of $100,000,000 in principal amount is
outstanding as of the date hereof, for an equal principal amount of newly issued
12 1/2% Senior Notes due 2004 (the "New Notes" or the "Exchange Notes"). The
form and terms of the New Notes will be the same as the form and terms of the
Old Notes except that (i) the New Notes will be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and hence will not bear legends
restricting the transfer thereof and (ii) the holders of the New Notes will not
be entitled to certain rights of holders of the Old Notes under the Registration
Rights Agreement (as defined herein), which rights will terminate upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of an indenture between CPC,
the Subsidiary Guarantors (as defined) and The Bank of New York, as trustee,
(the "Trustee") dated as of May 9, 1997 (the "Indenture") governing the Old
Notes and the New Notes. The Indenture provides for the issuance of both the New
Notes and the Old Notes. The New Notes and the Old Notes are sometimes referred
herein collectively as the "Notes" or the "Senior Notes."
(Continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS
EVALUATING THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
The Notes bear interest at the rate of 12 1/2% per annum. Interest on the Notes
is payable semi-annually in arrears on May 1 and November 1 of each year,
commencing November 1, 1997. The Notes are redeemable at the option of CPC, in
whole or in part at anytime on or after May 1, 2002. The redemption price will
be equal to 106.250% of the principal amount of the Notes together with accrued
and unpaid interest at any time on or after May 1, 2002 and prior to May 1, 2003
and the redemption price will be equal to 103.125% of the principal amount of
the Notes together with accrued and unpaid interest on or after May 1, 2003. In
addition, prior to May 1, 2000, CPC may redeem up to 35% of the aggregate
principal amount of the Notes with the net cash proceeds received by CPC or its
parent corporation from one or more offerings of Capital Stock (other than
Disqualified Stock) at a redemption price of 112.50% of the principal amount
thereof plus accrued and unpaid interest to the redemption date; provided,
however, that at least $65.0 million in aggregate principal amount remains after
such redemption. See "Description of Notes."
The Notes have the benefit of a guarantee (the "Subsidiary Guarantee") issued on
a senior unsecured basis by all existing subsidiaries and any future U.S.
subsidiaries of CPC (the "Subsidiary Guarantors"). The Notes and the Subsidiary
Guarantee will be unsecured senior obligations of CPC and the Subsidiary
Guarantors, respectively, and will rank pari passu in right of payment with all
existing and future unsecured unsubordinated obligations and will be senior in
right of payment to all subordinated indebtedness of CPC and the Subsidiary
Guarantors, respectively. As of March 28, 1997, on a pro forma basis, CPC and
its subsidiaries (collectively, CPC and its subsidiaries are referred to herein
as the "Company" or "Colorado Prime"), would have had approximately $124.4
million principal amount of indebtedness outstanding, approximately $24.0
million of which would have been secured indebtedness under a senior secured
revolving bank facility with a syndicate of banks led by Dresdner AG, New York
and Grand Cayman Branches (the "Credit Agreement") and $0.4 million of which
would have been capital leases.
The Old Notes were originally issued and sold on May 9, 1997 in transactions not
registered under the Securities Act, in reliance on Rule 144A and Regulation S
under the Securities Act. The Old Notes are designated for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market. The New Notes constitute a new issue of securities for which there is no
established trading market. CPC does not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the New
Notes will develop. To the extent that a market for the New Notes does develop,
the market value of the New Notes will depend on market conditions (such as
yields on alternative investments), general economic conditions, the Company's
financial condition and other conditions. Such conditions might cause the New
Notes, to the extent that they are actively traded, to trade at a significant
discount from face value. See "Risk Factors -- Lack of Public Market."
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered, and tendered but unaccepted, Old
Notes could be adversely affected. Following the consummation of the Exchange
Offer, the holders of Old Notes will continue to be subject to the existing
restrictions on transfer thereof and CPC will have no further obligations to
such holders to provide for the registration under the Securities Act of the Old
Notes. The Old Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. No assurance can be given as to the liquidity of the trading
market, for either the Old Notes or the New Notes.
The New Notes will be available only in book-entry form. CPC expects that the
New Notes issued pursuant to the Exchange Offer will be issued in the form of
one or more fully registered global notes that will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in its name or in
the name of Cede & Co., as its nominee. Beneficial interests in the global notes
representing the New Notes will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. After the
initial issuance of such global notes, New Notes in certificated form will be
issued in exchange for the global notes only in accordance with the terms and
conditions set forth in the Indenture. See "The Exchange Offer."
CPC will accept for exchange any and all Old Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New York City time, on
, 1997 (if and as extended, the "Expiration Date"). Tenders of
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. Old Notes may be
tendered only in integral multiples of $1,000. In the event CPC terminates the
Exchange Offer and does not accept for exchange any Old Notes, CPC will promptly
return all previously tendered Old Notes to the holders thereof.
Based on a previous interpretation by the staff of the Securities and Exchange
Commission (the "Commission" or the "SEC") set forth in no-action letters to
third parties, CPC believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold, and otherwise
transferred by a holder thereof (other than (i) a broker-
2
<PAGE> 4
dealer who purchases such New Notes directly from CPC to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an affiliate of the Company (within the meaning of Rule 405 under the
Securities Act)) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the New Notes in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of the New Notes. Holders of Old Notes wishing to accept the
Exchange Offer must represent to CPC that such conditions have been met.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter," within the meaning of the Securities Act, in connection with
resale of New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. CPC has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
CPC believes that none of the registered holders of the Old Notes is an
affiliate (as such term is defined in Rule 405 under the Securities Act) of the
Company. CPC has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and to
the best of CPC's information and belief, each person participating in the
Exchange Offer is acquiring the New Notes in the ordinary course of business and
has no arrangement or understanding with any person to participate in the
distribution of the New Notes to be received in the Exchange Offer.
CPC will not receive any proceeds from the Exchange Offer. CPC has agreed to
bear the expenses of the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer.
3
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT, A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY STATE.
AVAILABLE INFORMATION
CPC has filed with the Commission a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act with respect to the Exchange
Notes being offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted pursuant to the
rules and regulations of the Commission. Statements made in this Prospectus as
to any contract, agreement or other document are summaries of the material terms
of such contracts, agreements or other documents and are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
is qualified in its entirety by such reference.
CPC is not currently subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Upon completion of the
Exchange Offer, CPC will be subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file periodic reports and other
information with the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. So long as any of the Notes remain outstanding, whether or not CPC is
subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision
thereto, following the effectiveness of the Exchange Offer, CPC shall file with
the Commission the annual reports, quarterly reports and other documents which
CPC would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if CPC were so
required, such documents to be filed with the Commission on or prior to the
respective dates by which CPC would have been required to file. Regardless of
whether CPC files such reports or other documents with the Commission, CPC shall
(a) within 15 days of each required filing date (i) transmit by mail to all
holders of Notes, as their names and addresses appear in the Note Register,
without cost to such holders, and (ii) file with the Trustee, copies of such
annual reports, quarterly reports and other documents, and (b) if filing such
documents with the Commission is not permitted under the Exchange Act, promptly
upon written request supply copies of such documents to any prospective holder
of Notes.
Reports and other information filed by CPC with the Commission and the
Registration Statement (with exhibits and schedules thereto), may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
will also be available for inspection and copying at the regional offices of the
Commission at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies
of such reports and other information may also be accessible electronically by
means of the Commission's home page on the worldwide web on the Internet at
http://www.sec.gov.
4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements of the Company, including the notes
thereto, appearing elsewhere in this Prospectus. Unless the context otherwise
requires, references in this Prospectus to "CPC" refer to Colorado Prime
Corporation and references to the "Company" or "Colorado Prime" refer
collectively to CPC and its subsidiaries. All references in this Prospectus to
"fiscal year" refer to the Company's fiscal year which ends on the last Friday
of September in that calendar year. All fiscal years presented herein are 52
weeks with the exception of fiscal 1994, which consists of 53 weeks.
Certain of the information contained in this summary and elsewhere in this
Prospectus, including that set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and information
with respect to the Company's plans and strategy for its business, are
forward-looking statements which are based on a number of assumptions and are
subject to significant business, economic and competitive uncertainties which
are beyond the control of the Company. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, investors should carefully consider the information set forth under
the caption "Risk Factors."
THE COMPANY
The Company is a leading direct marketer of high quality, value-added food
programs and products related to in-home dining and entertainment. Using a
combination of telemarketing and in-home selling, Colorado Prime believes that
it is the only company to offer this type of in-home shopping service on a broad
scale, serving 31 states through 76 sales offices. The Company sells
individually packaged, top quality meats and poultry, seafood, assorted pasta
dishes and a wide selection of prepared entrees for direct delivery to consumer
households. The Company's food products are of a quality generally found only in
specialty gourmet shops and high-end restaurants and require simple preparation
using a microwave, conventional oven or grill. As a complement to its food
products, the Company also sells food-related and home entertainment appliances
and accessories with unique features not generally available in traditional
retail channels. The purchase of non-food items enables customers to earn a
lifetime discount on food purchases, which management believes is a key driver
of the Company's high customer retention rate. In each of the last five fiscal
years, the Company experienced a customer retention rate of at least 81% as
measured by the percent of customers who reordered when solicited during the
period. The Company attributes its high customer retention to the quality of its
products, the convenience of its services and its discount marketing program.
The Company uses a network of approximately 1,500 telemarketers to schedule
in-home sales presentations. During a sales presentation, one of the Company's
approximately 650 sales representatives presents the Company's product offerings
and designs a customized food program for the customer. In fiscal 1996, a
customer's average initial food order was approximately $1,500. The average food
order is designed to meet approximately two-thirds of a family's evening meal
needs for a six month period. In addition, approximately 73% of initial orders
in fiscal 1996 included the purchase of non-food items at an average cost of
approximately $1,600. After a customer places an order, a Company representative
delivers and stores the food directly into the customer's freezer. To facilitate
the purchase of its products, the Company offers convenient financing options
through a wholly-owned finance subsidiary. In fiscal 1996, food and non-food
items accounted for approximately 62% and 38% of product sales, respectively.
The Company targets its marketing efforts toward dual income families who are
typically homeowners with children at home. Faced with increasing time
constraints and the pressures of planning and preparing meals, the customers
find the Company a convenient alternative to the supermarket and a higher
quality alternative to other convenience-oriented offerings such as delivery
services or restaurant takeout. Management expects to benefit from the continued
growth in consumer direct marketing sales, which are projected to grow by 7.4%
per year from 1996 to 2001. In 1996 consumer direct marketing sales are
estimated to have been $634.6 billion.
The quality of the Company's products and the appeal of its services are
evidenced by the Company's consistent revenue and earnings growth since its
founding in 1959. Since 1986, the Company's revenues have grown at a compound
annual growth rate of 7.7% to $155.4 million in fiscal 1996. During the same
period, EBITDA grew at a compound annual growth rate of 12.5% to $20.1 million
in fiscal 1996. In addition, in the past three fiscal years under new
management, the Company's revenues and EBITDA have grown at compound annual
growth rates of 4.3% and 26.4%, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
5
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COMPETITIVE STRENGTHS
The Company has developed a strong market position through a carefully tailored
mix of products aimed at upper and middle income customers who value high
quality, superior service and the convenience of home purchasing and delivery.
This strategy has capitalized on the growing number of dual income families and
the scarcity of time for shopping and meal preparation. The Company has earned
strong brand name recognition among its customers and suppliers and has
distinguished itself as the nation's premier in-home food shopping company. With
no significant direct competition and no middleman between the Company and the
consumer, the Company plans to increase its market penetration while continuing
to differentiate its products based on quality and service rather than on price.
The Company attributes its success and its continued opportunities for growth
and profitability to the following competitive strengths:
- High customer retention. The Company has enjoyed a high customer
retention rate of at least 81% in each of the past five fiscal years. The
Company believes its retention rate is primarily attributable to its wide
selection of high quality food, the convenience of its integrated
services and its discount marketing program. During fiscal 1996,
approximately 66% of the Company's food revenue came from customer
reorders. Reorder customers are particularly valuable to the Company due
to the reduced sales and marketing costs associated with the sale.
- High quality products. The Company's value-added food items are either
custom-prepared at the Company's own facility or are supplied by
restaurant providers and premium food wholesalers, and as such are of a
quality generally unavailable in supermarkets. The Company purchases top
quality meats and specially tenderizes, trims, flash-freezes and vacuum
packages each portion to ensure tenderness, taste and freshness. Food
items purchased from suppliers are prepared and packaged to the Company's
stringent specifications and generally carry the Colorado Prime(R) label.
Food products are delivered to the customer's home typically within ten
days after leaving the Company's plant, and have a 100% customer
satisfaction guarantee. Non-food products are purchased by special
arrangements from manufacturers and, as a result, have unique features
which are not generally available in traditional retail channels.
- Value-added service. The Company provides a fully integrated customer
service package from the initial contact through the life of the customer
relationship. The Company differentiates its service offering by four key
features: (i) an initial convenient in-home sales presentation with
customized meal planning; (ii) delivery of its food and non-food products
directly into the customer's home; (iii) the option to finance purchases
through its wholly-owned finance subsidiary; and (iv) the 100% customer
satisfaction guarantee on all of the Company's food products.
- Effective discount marketing program. The Company's marketing efforts
are facilitated by its discount marketing program which enables customers
to earn a lifetime discount on food products when they purchase non-food
products. The discount on the food products generally offsets the
customer's incremental monthly payments on their non-food purchases. In
fiscal 1996, the food discount earned on the average initial food order
was 17% and increased with each subsequent non-food purchase to a maximum
possible discount of 50%. In fiscal 1996, 87% of the Company's customers
participated in the discount marketing program. Over the past five fiscal
years, the retention rate among customers who achieved the maximum food
discount averaged 89%.
- Strong management team. The Company's management team has considerable
experience in both the direct marketing and food industries and has
implemented a number of growth initiatives to enhance profitability and
operating leverage. Since 1993, the Company has recruited four senior
officers who have extensive experience in food marketing, direct sales
and customer acquisition. The senior management team is complemented by
experienced individuals in sales, operations and service management
positions who have been with the Company for many years. Collectively,
members of the management team average 20 years of experience in the food
industry, 32 years in marketing and direct sales and 20 years in senior
operating positions. See "Management."
BUSINESS STRATEGY
The Company believes that it has significant opportunities for revenue and
earnings growth. Management's strategy includes the following principal
elements:
- - Continued geographic expansion. Since its inception, new office openings have
provided a significant portion of the Company's growth. Management is pursuing
a measured pace of geographic expansion based upon a new office opening
program developed in fiscal 1995. Over the last two fiscal years, 79% of the
Company's product sales growth has come from new office openings. As a result,
with a concentration of offices on the East Coast, geographic expansion
remains a priority for the Company. The western region of the country is of
particular interest, as revenues of the Company's two established offices in
this region have grown at a compound annual growth rate of 29% over the past
three fiscal years and outperformed
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<PAGE> 8
the Company's average office sales by 50% in fiscal 1996. Management believes
there is potential for 10 to 12 additional offices in this region.
- - Increased market penetration. The Company believes that there is significant
growth potential in its existing markets through the following:
- Customer acquisition. Referrals represent the Company's most efficient
form of customer acquisition as they avoid the cost of purchased
telemarketing lists. Referral customers are also more likely to accept an
in-home sales presentation. The Company plans to offer different
incentives to customers who provide referral names. This plan increased
the average number of referral names from a new customer by 27% in the
Company's test markets. In addition, the Company has implemented
initiatives aimed at improving the quality and performance of the sales
representatives and managers through the use of part-time personnel, new
recruiting methods, new employee retention programs, enhanced training
and development.
- Customer retention. Sales to existing customers are more profitable than
sales to new customers as a result of lower selling and telemarketing
costs; thus, the Company strives to continually improve the current level
of customer retention. Marketing programs and new product introductions
are being implemented to accelerate customer participation in the
Company's discount program, as customer retention is highly correlated to
the level of discount the customer receives.
- - Margin improvement opportunities. Since fiscal 1993, the Company has achieved
a 5.6 percentage point increase in EBITDA margins from 7.3% to 12.9%. In
fiscal 1997, management has already implemented additional margin enhancement
programs including greater efficiency in food processing, the introduction of
more high value appliances, extending the food service period and certain cost
reductions in delivery and insurance expenses. In addition, the Company
believes opportunities exist to further enhance profitability through
additional measures such as reduced telecommunications costs, more productive
telemarketing lists and increased finance income.
- - Continued product development. The Company has and will continue to refine
its products and menus to increase variety and adapt to consumers' changing
eating patterns, lifestyle demands and tastes. The Company introduced 208 new
food and non-food products in the last three fiscal years, including the
"Healthy Gourmet" and "Easy Gourmet" prepared entree product lines. Food items
introduced in the last three fiscal years are generating sales at an
annualized rate of $20.0 million. Large screen televisions and camcorders were
introduced in fiscal 1995 and generated sales of approximately $8.5 million in
fiscal 1996. The Company currently intends to introduce at least 12 food
products and test three non-food products in fiscal 1997.
- - Development of new customer segments and new distribution
channels. Management believes that customer segments currently not within the
Company's target market, such as urban dwellers, customers over age 60, higher
income households and one-member households, may hold additional growth and
profit opportunities. These customers face the same lifestyle issues which
have attracted targeted consumers to the Company's product and service
offerings. The Company believes it can address the needs of these markets due
to its ability to assemble and deliver many different food offerings at
various price ranges. The Company also believes further growth may also be
obtained from new distribution channel alternatives, such as institutional
food services, corporate gift offerings and strategic alliances with
food-related catalog marketers.
The Company's principal executive offices are located at One Michael Avenue,
Farmingdale, New York 11735. Its telephone number is (516) 694-1111.
THE TRANSACTIONS
Pursuant to a Merger Agreement dated as of March 25, 1997 (the "Merger
Agreement"), between CPC's parent corporation, KPC Holdings Corporation
("Holdings") and Thayer Equity Investors III, L.P., a private equity investment
limited partnership and its affiliates ("Thayer"), Colorado Prime Acquisition
Corp. ("CPAC"), a transitory acquisition subsidiary established by Thayer prior
to the consummation of the merger, merged with and into Holdings (the "Merger"),
following which Holdings was the surviving corporation and was renamed Colorado
Prime Holdings Inc. ("CPH"). In connection with the establishment of CPAC,
immediately prior to the consummation of the Merger, $25.0 million was
contributed to the capital of CPAC as follows: (i) Thayer contributed cash in
the amount of $22.9 million in exchange for 128,800 shares of common stock,
$0.01 par value per share, of CPAC, 10,000 shares of 15% payable-in-kind
redeemable preferred stock, $0.01 par value per share, of CPAC which is
mandatorily redeemable on May 9, 2007 and warrants to purchase 26,471 shares of
CPH Common Stock at an exercise price of $0.01 per share and (ii) certain
existing senior managers of CPC, including Mr. Dordelman, Mr. Willett,
7
<PAGE> 9
Mr. Taylor, Mr. DeSantis and certain other executive officers (the "Management
Investors"), exchanged certain of their existing shares of common stock of
Holdings (valued for such purpose at the amount that would otherwise be payable
for such shares in connection with the Merger) or contributed cash in the
aggregate amount of $2.1 million in exchange for an aggregate of 21,200 shares
of common stock of CPAC. The contribution of cash by Thayer, common stock of
Holdings by the Management Investors and cash by the Management Investors is
collectively referred to herein as the "Equity Contribution." Upon the
consummation of the Merger, (i) the shareholders of Holdings, other than CPAC,
received in the aggregate approximately $33.1 million in cash upon the surrender
of their shares of Holdings and (ii) each share of outstanding common stock and
preferred stock of CPAC was converted into a share of common or preferred stock,
as the case may be, of CPH.
Simultaneously with the Merger, CPC consummated the offering of the Old Notes
pursuant to transactions under Rule 144A and Regulation S of the Securities Act
(the "Offering") and entered into a senior secured working capital bank facility
with a syndicate of commercial banks led by Dresdner Bank AG, New York and
Cayman Island Branches (the "Credit Agreement"). The Equity Contribution,
initial borrowings under the Credit Agreement and the net proceeds of the
Offering, comprising an aggregate of approximately $147.0 million, was used (i)
to repay the Company's existing senior notes payable ("Existing Senior Notes")
and the Company's note payable under its existing receivables financing facility
("Existing Finance Facility") along with accrued interest, expenses and premiums
required in connection with such repayments (estimated to be approximately
$102.7 million in the aggregate (collectively, the "Existing Debt")), (ii) to
pay the amounts payable in cash to the shareholders of Holdings pursuant to the
Merger and (iii) to pay certain expenses and fees in connection with the Merger.
The series of transactions described as the Equity Contribution, the Merger, the
Offering and the initial borrowings under the Credit Agreement are collectively
referred to herein as the "Transactions."
All of CPC's issued and outstanding capital stock is owned by CPH. CPH is
controlled by Thayer, which owns 100% of CPH's preferred stock and approximately
86% of CPH's Common Stock, while the Management Investors own approximately 14%
of CPH's Common Stock, without taking into account any warrants issued to the
holders of Old Notes (the "Warrants"), warrants issued to Thayer in connection
with the Transactions, or shares issuable in connection with CPH's 1997 Stock
Option Plan. Holders of the Warrants issued in connection with the Old Notes,
are entitled to purchase an aggregate of approximately 10% of CPH's Common Stock
on a fully diluted basis. See "Principal Stockholders." All of the issued and
outstanding capital stock of the Subsidiary Guarantors is owned by CPC.
8
<PAGE> 10
THE EXCHANGE OFFER
THE EXCHANGE OFFER..................CPC is offering to exchange up to
$100,000,000 in aggregate principal amount
of its new 12 1/2% Senior Notes due 2004
which will be registered under the
Securities Act (the "Exchange Notes" or the
"New Notes") for a like principal amount of
its outstanding 12 1/2% Senior Notes due
2004 (the "Old Notes") which were issued and
sold on May 9, 1997 in a transaction exempt
from registration under the Securities Act.
Old Notes may be exchanged only in integral
multiples of $1,000. The terms of the New
Notes are identical in all material respects
(including principal amount, interest rate,
maturity and ranking) to the terms of the
Old Notes for which they may be exchanged
pursuant to the Exchange Offer, except that
the New Notes will have been registered
under the Securities Act and therefor will
be generally freely transferable by holders
thereof (except as provided herein -- see
"The Exchange Offer"), and are not subject
to any covenant of CPC regarding
registration. CPC has agreed to make the
Exchange Offer in order to satisfy its
obligations under a registration rights
agreement (the "Registration Rights
Agreement"), dated as of May 9, 1997 among
CPC and J.P. Morgan & Co., NatWest Capital
Markets Limited and Dresdner Kleinwort
Benson North America LLC (together, the
"Initial Purchasers") relating to the Old
Notes. CPC will issue the New Notes on or
promptly after the Expiration Date. See "The
Exchange Offer."
Based on an interpretation of the staff of
the Commission set forth in no-action
letters issued to third parties, CPC
believes that New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and
otherwise transferred by any holder thereof
(other than (i) a broker-dealer who
purchases such New Notes directly from CPC
to resell pursuant to Rule 144A or any other
available exemption under the Securities Act
or (ii) any such holder which is an
"affiliate" of CPC within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder has
no arrangement or understanding with any
person to participate in the distribution of
such New Notes. In the event that CPC's
belief is inaccurate, holders of New Notes
who transfer New Notes in violation of the
prospectus delivery provisions of the
Securities Act and without an exemption from
registration thereunder may incur liability
thereunder. CPC does not assume or indemnify
holders against such liability. The Exchange
Offers are not being made to, nor will CPC
accept surrenders for exchange from, holders
of Old Notes (i) in any jurisdiction in
which the Exchange Offer or the acceptance
thereof would not be in compliance with the
securities or blue sky laws of such
jurisdiction or (ii) if any holder is
engaged or intends to engage in a
distribution of New Notes. Each
broker-dealer that receives New Notes for
its own account in exchange for Old Notes,
where such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale
of such New Notes. See "Plan of
Distribution."
EXPIRATION DATE.....................The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ,
1997, unless the Exchange Offer is extended
by CPC, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is extended. CPC
will accept for
9
<PAGE> 11
exchange any and all Old Notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be delivered on or promptly after the
Expiration Date.
EXCHANGE OFFER LIMITATION...........The Old Notes were issued and sold with the
Warrants to purchase 19,608 shares of common
stock of CPH. The Old Notes and Warrants
were sold as units (the "Units"). The
Exchange Offer is limited to an exchange of
Old Notes for New Notes with no effect on
the Warrants. Neither CPC nor CPH has an
obligation under the Registration Rights
Agreement or any other agreement to exchange
the Warrants or register the Warrants under
the Securities Act.
CERTAIN CONDITIONS TO THE EXCHANGE
OFFER...............................CPC may terminate the Exchange Offer,
subject to the Registration Rights
Agreement, if it determines that its ability
to proceed with the Exchange Offer could be
materially impaired due to any legal or
governmental action, any new law, statute,
rule or regulation, any interpretation by
the staff of the Commission of any existing
law, statute, rule or regulation or the
failure to obtain any necessary approvals of
governmental agencies or holders of the Old
Notes. CPC does not expect any of the
foregoing conditions to occur, although
there can be no assurances any such
conditions will not occur.
The Exchange Offer is not conditioned on any
minimum principal amount of the Old Notes
being tendered for exchange. The Exchange
Offer is subject to certain other customary
conditions, each of which may be waived by
CPC. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
PROCEDURES FOR TENDERING OLD
NOTES...............................Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together
with such Old Notes and any other required
documentation to The Bank of New York, as
Exchange Agent, at the address set forth
herein. By executing the Letter of
Transmittal or by transmitting an Agent's
Message (as defined below) in lieu thereof,
each holder will represent to CPC that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business
of the person receiving such New Notes, such
person does not have an arrangement or
understanding with any person to participate
in the distribution of such New Notes and
that neither the holder nor any such other
person is an "affiliate," as defined in Rule
405 under the Securities Act, of CPC.
Certain brokers, dealers, commercial banks,
trust companies and other nominees may also
effect tenders by book-entry transfer,
including an Agent's Message in lieu of a
Letter of Transmittal.
SPECIAL PROCEDURES FOR BENEFICIAL
OWNERS..............................Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior
to completing and executing the Letter of
Transmittal and delivering his Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer
10
<PAGE> 12
of registered ownership may take considerable time and may not be able to be
completed prior to the Expiration Date.
GUARANTEED DELIVERY PROCEDURES......Holders of Old Notes who wish to tender
their Old Notes and who cannot deliver their
Old Notes or the Letter of Transmittal to
The Bank of New York, as Exchange Agent,
prior to the Expiration Date, or the
procedures for book-entry transfer cannot be
completed on a timely basis, must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS...................Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES........................For a discussion of certain federal income
tax consequences relating to the exchange of
Old Notes for New Notes, see "Certain United
States Federal Income Tax Considerations."
EXCHANGE AGENT......................The Bank of New York is the Exchange Agent.
Its telephone number is (212) 815-6286. The
address of the Exchange Agent is set forth
in "The Exchange Offer -- Exchange Agent."
The Bank of New York also serves as trustee
under the Indenture.
SHELF REGISTRATION STATEMENT........Under certain circumstances described in the
Registration Rights Agreement, certain
holders of Notes (including holders who are
not permitted to participate in the Exchange
Offer or who may not freely resell New Notes
received in the Exchange Offer) may require
CPC to file, and use best efforts to cause
to become effective, a shelf registration
statement under the Securities Act, which
would cover resales of Notes by such
holders. See "Description of Notes --
Registration Rights Agreement."
11
<PAGE> 13
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and certain registration
rights relating to the Old Notes. Whenever defined terms of the Indenture or the
Registration Rights Agreement not otherwise defined herein are referred to, such
defined terms are incorporated herein by reference. In the event that (i) the
Exchange Registration Statement (or, if the Exchange Offer is not permitted
under applicable law or the Commission policy, the Initial Shelf Registration)
has not been filed on or prior to July 8, 1997; (ii) neither the Exchange
Registration Statement is declared effective by the Commission nor the Shelf
Registration is filed with the Commission on or prior to September 21, 1997 or
(iii) CPC has not exchanged the Exchange Notes for all Old Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
October 21, 1997, or if applicable, the Shelf Registration has not been declared
effective on or prior to October 21, 1997 or such Shelf Registration ceases to
be effective at any time during the Effectiveness Period (each such event
referred to in clauses (i) through (iii) a "Registration Default"), the annual
interest rate borne by the Old Notes will be increased 0.25% for the first 90
days following the occurrence of such Registration Default and such interest
will be increased an additional 0.25% at the beginning of each subsequent 90-day
period until such Registration Default is cured, up to a maximum additional
amount of 1.00% per annum. Upon the curing of a Registration Default, the
interest rate on the Notes will revert to the rate set forth on the cover page
of this Prospectus.
The Notes will bear interest from the most recent date to which interest has
been paid on the Old Notes or, if no interest has been paid on the Old Notes,
from May 9, 1997. Accordingly, registered holders of New Notes on the relevant
record date for the first interest payment date following the consummation of
the Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Notes or, if no interest has been paid,
from May 9, 1997. Old Notes accepted for exchange will cease to accrue interest
from and after the date of consummation of the Exchange Offer. Holders whose Old
Notes are accepted for exchange will not receive any payment in respect of
interest on such Old Notes otherwise payable on any interest payment date the
record date for which occurs on or after consummation of the Exchange Offer.
THE NEW NOTES
<TABLE>
<S> <C>
SECURITIES OFFERED........................... $100,000,000 12 1/2 Senior Notes due 2004. See
"Description of Notes."
MATURITY DATE................................ May 1, 2004.
INTEREST PAYMENT DATES....................... May 1 and November 1, commencing November 1, 1997.
OPTIONAL REDEMPTION.......................... The Notes are redeemable at the option of CPC, in whole or
in part, at any time on or after May 1, 2002, at the
redemption prices set forth herein, plus accrued and
unpaid interest to the redemption date. See "Description
of Notes -- Optional Redemption." In addition, prior to
May 1, 2000, CPC may redeem up to an aggregate of 35% of
the principal amount of the Notes with the cash proceeds
received by CPC or CPH from one or more public or private
offerings of its Capital Stock (other than Disqualified
Stock) at a redemption price of 112.50% of the principal
amount thereof, plus accrued and unpaid interest to the
redemption date; provided, however, that at least $65.0
million in aggregate principal amount of the Notes remains
outstanding immediately after any such redemption.
GUARANTEE.................................... The Notes are unconditionally guaranteed on a senior
unsecured basis by all existing subsidiaries and any
future U.S. subsidiaries of CPC.
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C>
RANKING...................................... The Notes constitute senior unsecured debt obligations of
CPC. After giving pro forma effect to the Transactions, as
of March 28, 1997, the Company would have had
approximately $124.4 million of indebtedness outstanding,
approximately $24.0 million of which would have been
secured indebtedness under the Credit Agreement and $0.4
million of which would have been capital leases. CPC would
also have had an additional $26.0 million of availability
under the Credit Agreement. The Notes are not secured and
therefore, effectively rank behind any secured
indebtedness of CPC permitted under the Indenture
(including indebtedness under the Credit Agreement) to the
extent of the value of the assets securing such
indebtedness.
CHANGE OF CONTROL............................ Upon a Change of Control, each holder of the Notes may
require CPC to repurchase such holder's Notes, in whole or
part, at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the
purchase date. See "Description of Notes." The Credit
Agreement prohibits the purchase of outstanding Notes
prior to repayment of the borrowings under the Credit
Agreement. There can be no assurance that upon a Change of
Control CPC will have sufficient funds to repurchase any
of the Notes.
CERTAIN COVENANTS............................ The Indenture contains certain covenants that, among other
things, limit the ability of the Company to incur
additional Indebtedness, make certain Restricted Payments
and Investments, create Liens, enter into certain
transactions with Affiliates or Related Persons or
consummate certain mergers, consolidations or similar
transactions (each as defined herein). In addition, in
certain circumstances, CPC will be required to offer to
purchase Notes at 100% of the principal amount thereof
with the net proceeds of certain asset sales. These
covenants are subject to a number of significant
exceptions and qualifications. See "Description of Notes."
</TABLE>
RISK FACTORS
See "Risk Factors" immediately following this summary for a discussion of
certain risks that should be considered when evaluating an investment in the
Notes.
13
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA FOR THE COMPANY
Set forth below are (i) summary historical consolidated financial data of the
Company for the three fiscal years ended September 27, 1996 and the twenty-six
weeks ended March 29, 1996 and March 28, 1997 and (ii) pro forma financial data
for the Company as of and for fiscal 1996 and the twenty-six weeks ended March
28, 1997. The summary historical financial data as of March 28, 1997 and for
each of the twenty-six week periods ended March 29, 1996 and March 28, 1997 were
derived from the Unaudited Consolidated Interim Financial Statements of the
Company for such period contained herein, which, in the opinion of management
for the Company reflect all adjustments necessary to present fairly the
financial position and results of operations for the periods presented. All
fiscal years presented herein are 52 weeks with the exception of fiscal 1994,
which consists of 53 weeks.
The information contained in this table should be read in conjunction with
"Selected Financial and Operating Data," "Pro Forma Unaudited Condensed
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Audited Consolidated
Financial Statements, Unaudited Consolidated Interim Financial Statements and
accompanying notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA (A)
FISCAL
1996
--------
TWENTY-SIX
TWENTY-SIX WEEKS ENDED WEEKS ENDED
FISCAL YEAR ENDED SEPTEMBER MARCH 28 MARCH 28
1994 1995 1996 1997 1997
-------- -------- -------- MARCH 29 --------- -----------
1996
---------
<CAPTION>
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Dollars in thousands
STATEMENT OF OPERATING DATA
Product sales $134,025 $144,966 $142,651 $72,313 $70,516 $142,651 $70,516
Finance income earned 11,201 11,524 12,792 6,302 7,012 12,792 7,012
-------- -------- -------- --------- --------- -------- -----------
Total revenue 145,226 156,490 155,443 78,615 77,528 155,443 77,528
Cost of goods sold 58,640 59,906 56,387 28,402 27,083 56,387 27,083
-------- -------- -------- --------- --------- -------- -----------
Gross profit 86,586 96,584 99,056 50,213 50,445 99,056 50,445
Selling, general and administrative 75,326 80,988 80,901 40,006 39,762 80,901 39,762
Amortization of goodwill 1,187 1,164 1,164 582 582 1,294 647
Interest expense 6,783 8,017 9,130 4,486 4,668 15,547 7,774
Other expense 559 767(b) 7,089(b) 3,849(b) 293 7,089(b) 293
-------- -------- -------- --------- --------- -------- -----------
Income before provision (benefit)
for income taxes 2,731 5,648 772 1,290 5,140 (5,775) 1,969
Provision (benefit) for income
taxes 1,781 2,738 1,262 773 2,303 (1,305) 1,061
-------- -------- -------- --------- --------- -------- -----------
Net income (loss) $950 $2,910 $(490) $517 $2,837 $(4,470) $908
======== ======== ======== ========== ========== ======== =============
OTHER FINANCIAL DATA
EBITDA(c) $13,031 $17,424 $20,062 $11,197 $11,475 20,062 $11,475
EBITDA margin(c) 9.0% 11.1% 12.9% 14.2% 14.8% 12.9% 14.8%
Depreciation and amortization $3,517 $3,598 $3,661 $1,797 $1,667 $3,791 $1,732
Capital expenditures 1,792 2,534 1,958 866 540 1,958 540
Ratio of EBITDA to interest expense 1.3x 1.5x
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA(A)
AS OF AS OF
AS OF FISCAL YEAR ENDED SEPTEMBER MARCH 28 MARCH 28
1994 1995 1996 1997 1997
-------- -------- -------- --------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 44,826 $ 48,065 $ 52,902 $ 55,312 $ 62,303
Total assets 136,525 143,841 150,784 153,985 165,824
Long-term debt (including current
portion)(d) 76,897 82,102 93,541 92,928 122,400
Stockholders' equity $ 43,606 $ 44,278 $ 40,669 $ 43,506 $ 25,873
</TABLE>
- ------------
(a) Amounts represent the pro forma unaudited statement of condensed
consolidated operations data, balance sheet data and unaudited other
financial data of the Company after giving effect to the Transactions in the
manner described under "Pro Forma Unaudited Condensed Consolidated Financial
Statements."
(b) Fiscal 1996 includes debt financing expenses of $624 and payments to
management of $4,177 under a management incentive plan related to the
issuance of the Existing Senior Notes and a charge for unused office and
warehouse space of $1,698. The twenty-six week period ended March 29, 1996
includes debt refinancing expenses of $624 and payments to management under
a management incentive plan related to the issuance of the Existing Senior
Notes in the amount of $3,000. Fiscal 1995 includes a write-off of
capitalized software costs of $162. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
14
<PAGE> 16
(c) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization and certain nonrecurring expenses discussed in Note (b)
above. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. However, EBITDA
should not be considered in isolation as a substitute for net income or cash
flow data prepared in accordance with generally accepted accounting
principles or as measure of a company's profitability or liquidity. In
addition, this measure of EBITDA may not be comparable to similar measures
reported by other companies.
EBITDA margin is calculated as the ratio of EBITDA to total revenues for the
period.
(d) Long-term debt (including current portion) includes obligations under
capital leases.
------------------------
15
<PAGE> 17
RISK FACTORS
Holders of the Old Notes should consider carefully the following factors as well
as the other information and data included in this Prospectus prior to tendering
their Old Notes in the Exchange Offer, although the risk factors set forth below
(other than "-- Consequences of Failure to Exchange Old Notes" and "--Exchange
Offer Procedures") are generally applicable to the Old Notes as well as the New
Notes.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the Transactions. As of
March 28, 1997, after giving pro forma effect to the Transactions, the Company
would have had outstanding $124.4 million principal amount of indebtedness. In
addition, the Company would also have had an additional $26.0 million of
availability under the Credit Agreement. On a pro forma basis for fiscal 1996
earnings would have been insufficient to cover fixed charges by $5.5 million. On
a pro forma basis for the twenty-six week period ended March 28, 1997 the ratio
of earnings to fixed charges would have been 1.3x. The Company's leveraged
financial position poses certain risks to holders of the Notes, including: (i) a
substantial portion of the Company's cash flow from operations will be dedicated
to the payment of interest on the Notes and the payment of principal and
interest on indebtedness under the Credit Agreement and other indebtedness; (ii)
the Company's leveraged position may impair its ability to obtain financing in
the future for working capital, capital expenditures, acquisitions and general
corporate purposes; and (iii) the Company's leveraged financial position may
make it more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures. The Company believes that, based on its current
level of operations, it will have sufficient capital to carry on its business
and will be able to meet its scheduled debt service requirements. However, there
can be no assurance that the future cash flow of the Company will be sufficient
to meet the Company's obligations and commitments. In addition, the Credit
Agreement contemplates that all borrowings thereunder will become due by 2002,
prior to maturity of the Notes. If the Company is unable to generate sufficient
cash flow from operations in the future to service its indebtedness and to meet
its other commitments, the Company will be required to adopt one or more
alternatives, such as refinancing or restructuring its indebtedness, selling
material assets or operations or seeking to raise additional debt or equity
capital. There can be no assurance that any of these actions could be effected
on a timely basis or on satisfactory terms or that these actions would enable
the Company to continue to satisfy its capital requirements. In addition, the
terms of existing or future debt agreements, including the Indenture and the
Credit Agreement, may prohibit the Company from adopting any of these
alternatives. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Description of
Certain Indebtedness" and "Description of Notes."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any state
securities laws and therefore may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act
and any other applicable securities laws, or pursuant to an exemption therefrom
or in a transaction not subject thereto, and in each case in compliance with
certain other conditions and restrictions. Old Notes which remain outstanding
after consummation of the Exchange Offer will continue to bear a legend
reflecting such restrictions on transfer. In addition, upon consummation of the
Exchange Offer, holders of Old Notes which remain outstanding will not be
entitled to any rights to have such Old Notes registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions as described herein). See "Description of
Notes -- Registration Rights Agreement." The Company does not intend to register
under the Securities Act any Old Notes which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. See "The Exchange Offer -- Consequences of Failure to
Exchange Old Notes."
CPH has no intention or (except upon the occurrence of certain events relating
to the initial public offering of its common stock) obligation to register the
Warrants or the shares of Common Stock issuable upon their exercise under the
Securities Act.
EXCHANGE OFFER PROCEDURES
Unless tenders are made by book-entry transfer, issuance of the New Notes in
exchange for Old Notes pursuant to the Exchange Offer will be made only after a
timely receipt by the Exchange Agent of such Old Notes, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Notes desiring to tender such Old Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. Neither the
Exchange Agent nor the Company is under any duty to give notification of defects
or irregularities with respect to the tenders of Old Notes for exchange.
16
<PAGE> 18
LACK OF PUBLIC MARKET
The New Notes are being offered to the holders of the Old Notes. The Old Notes
were sold by CPC on May 9, 1997 and are eligible for trading in the Private
Offerings, Resale and Trading through Automated Linkages (PORTAL) Market. There
is no existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of holders of the New Notes to sell their New Notes or the price at which such
holders may be able to sell their New Notes. If such a market were to develop,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. Therefore, there can be no assurance as to the liquidity of
any trading market for the New Notes or that an active public market for the New
Notes will develop. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or stock market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
DEPENDENCE ON SALES PERSONNEL
As of March 28, 1997, the Company employed approximately 650 employees in its
direct sales force. Management believes that the Company's continued success
will depend to a large degree on its ability to identify, attract and retain
qualified sales personnel. The direct sales industry is characterized by high
levels of employee attrition. In recent periods the Company has found it
increasingly difficult to attract and retain qualified sales representatives in
a low unemployment environment. The Company has taken additional steps to
improve its ability to attract and retain qualified sales personnel through the
implementation of a variety of recruiting and employee retention programs, such
as utilizing additional part time personnel, providing special incentives for
staff retention and exploring new recruiting sources for sales representatives.
However, there can be no assurance of the timing of the effect or the ultimate
success of these measures. Continued difficulties with identifying, attracting
and retaining sales personnel could have a material adverse effect on the
Company's results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
CREDIT RISK
Virtually all of the Company's food and non-food sales in fiscal 1996 were
financed by the Company. The Company's provision for doubtful accounts as a
percent of total revenues was 3.5%, 2.9%, 3.4% and 3.3% for fiscal 1994, 1995
and 1996, and the twenty-six week period ended March 28, 1997. Although the
Company has established procedural controls relating to credit extension and
collection, a significant increase in the rate of bad debt experience among its
customers would have a material adverse effect on the Company's results of
operations and financial condition. In addition, rising consumer debt levels
have resulted in an increase in customer orders rejected by the Company,
particularly with respect to new customers. A prolonged continuation of such
trend could have a materially adverse effect on the Company's results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
STATE AND FEDERAL REGULATION
The Company is subject to extensive regulation by various federal and state
regulatory agencies with respect to the preparation and sale of its food
products and durable goods and the provision of financing to its customers. The
Company's Farmingdale, New York facility has United States Department of
Agriculture ("USDA") approval, which permits the Company to ship its meat
products nationwide without further inspection. Without such approval, the
Company's sale and delivery of meat products would be subject to state and local
inspection, thereby substantially reducing operating flexibility and increasing
costs. The Company's extension of credit to its customers is subject to the
Federal Truth-in-Lending Act and similar state laws, usury laws and licensing
and regulations under retail installment sales acts and similar statutes enacted
by states in which the Company does business. In addition, there are federal and
several state restrictions on telemarketing activities, and the Company's direct
marketing practices are subject to various federal and state regulations
including the home sales solicitation laws. If any federal or state regulatory
agency were to limit or prohibit the Company from engaging in such activities,
this could have a material adverse effect on the Company's results of
operations. See "Business -- Governmental Regulation, Claims or Assessments." To
date, the overall impact of regulation has not materially affected the Company's
business practices. However, no assurance can be given that additional
restrictions will not be adopted that may adversely affect the Company's
business.
17
<PAGE> 19
ABSENCE OF SECURITY
The borrowings under the Credit Agreement are secured by first priority
perfected security interests in all the assets of CPC. CPH also issued a
guarantee under the Credit Agreement, which guarantee is secured by a pledge by
CPH of all issued and outstanding capital stock of the Company. Each of CPC's
subsidiaries also issued a guarantee under the Credit Agreement which is secured
by first priority perfected security interests in all the assets of such
subsidiary, and the Company is required to pledge the issued and outstanding
capital stock of each such subsidiary owned by the Company to secure
indebtedness under the Credit Agreement. After giving pro forma effect to the
Transactions, as of March 28, 1997, the Company would have had approximately
$124.4 million principal amount of indebtedness outstanding, approximately $24.0
million of which would have been secured indebtedness under the Credit Agreement
and $0.4 million of which would have been capital leases. CPC would also have
had an additional $26.0 million of availability under the Credit Agreement. The
Notes are not secured and will, therefore, effectively rank behind any secured
indebtedness of the Company permitted under the Indenture (including
indebtedness under the Credit Agreement) to the extent of the value of the
assets securing such indebtedness. Subject to certain limitations, the Indenture
permits the Company to incur additional indebtedness. See "Description of
Certain Indebtedness" and "Description of Notes."
RESTRICTIONS IMPOSED BY THE CREDIT AGREEMENT AND THE INDENTURE; PLEDGE OF CPC
STOCK
The Credit Agreement, among other obligations, requires the Company to maintain
specified financial ratios and meet certain tests, including a minimum interest
coverage ratio, a minimum fixed charge coverage ratio, a maximum leverage ratio,
a minimum net worth requirement and a limitation on capital expenditures. In
addition, the Credit Agreement restricts, among other things, the Company's
ability to incur additional indebtedness. A failure to comply with the
restrictions contained in the Credit Agreement could lead to an event of default
thereunder which could result in an acceleration of the maturity of such
indebtedness and the foreclosure of the collateral provided as security for such
indebtedness. Such an acceleration would constitute an event of default under
the Indenture relating to the Notes. In addition, the Indenture restricts, among
other things, the Company's ability to incur additional indebtedness. A failure
to comply with the restrictions in the Indenture could result in an event of
default under the Indenture. In addition, CPH will issue a guarantee under the
Credit Agreement which guarantee is secured by a pledge by CPH of all issued and
outstanding capital stock of the Company. In the event the lenders under the
Credit Agreement were to realize upon such pledge, as stockholders of the
Company such lenders may take actions which further their own interests to the
detriment of holders of the Notes. See "Description of Certain Indebtedness" and
"Description of Notes."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management.
Although the Company has entered into employment agreements with certain
executive officers and believes it could replace key employees in an orderly
fashion should the need arise, the loss of such key personnel could have a
material adverse effect on the Company. The Company does not maintain key-person
insurance for any of its officers or directors. See "Management."
RELIANCE ON PROCESSING FACILITY
The Company processes 50% of its food products at a single facility, located in
Farmingdale, New York. In addition, many of the other food items sold by the
Company are shipped from or through such facility. Although the Company believes
that it could out-source the processing and shipping activities conducted at
this facility and obtain replacement goods in the event of a disruption at this
facility, such a disruption could result in increased processing and shipping
costs and less stringent quality controls. The Company believes that it
maintains adequate business disruption insurance. However, any major disruption
in the Company's Farmingdale facility could have a material adverse effect on
the Company's results of operations and financial condition.
SUPPLIER RELATIONSHIPS
Management believes it has strong relationships with many of its food and
non-food suppliers which afford the Company certain purchasing advantages,
including stable supply and favorable pricing arrangements. However,
arrangements are primarily by purchase order and terminable at will at the
option of either party. As a result, the Company may be unable to purchase
sufficient quantities of food and non-food goods to meet its requirements during
times of limited supply. In addition, the Company does not generally hedge
commodity prices and as a result is subject to price fluctuations. There can be
no assurance that the Company will continue to be successful in maintaining its
supplier relationships, that any of the supplier
18
<PAGE> 20
relationships will not be terminated in the future or that future increases in
prices will not have a material adverse effect on the Company's results of
operations. See "Business -- Products and Services" and "Business -- Suppliers."
CONTROLLING SHAREHOLDERS
Thayer owns approximately 86% (79.2% if all of the Warrants, including the
warrants owned by Thayer, are exercised) of the outstanding Common Stock and
100% of the preferred stock of CPH. As CPH owns 100% of the capital stock of
CPC, Thayer effectively controls the Company. Circumstances may occur in which
the interests of Thayer could be in conflict with the interests of the holders
of the Notes. In addition, Thayer may have an interest in pursuing acquisitions,
divestitures or other transactions that, in its judgment, could enhance its
equity investment, even though such transactions might involve risks to the
holders of the Notes. See "Principal Stockholders."
CONSEQUENCES OF CHANGE OF CONTROL
In the event of a Change of Control, CPC will be required to make an offer to
repurchase the Notes at 101% of the principal amount thereof, in cash, plus
accrued and unpaid interest, if any, thereon to the repurchase date. A Change of
Control will result in an event of default under the Credit Agreement and may
result in a default under other indebtedness of the Company that may be incurred
in the future. The Credit Agreement will prohibit the purchase of outstanding
Notes prior to repayment of the borrowings under the Credit Agreement and any
exercise by the holders of the Notes of their right to require CPC to repurchase
the Notes will cause an event of default under the Credit Agreement. There can
be no assurance that CPC will have the financial resources necessary to
repurchase the Notes upon a Change of Control. See "Description of Notes."
RISK OF FRAUDULENT TRANSFER
A portion of the net proceeds of the Offering was paid as a dividend to Holdings
in connection with the Transactions. CPC's obligations under the Notes are
guaranteed, jointly and severally by each of the Subsidiary Guarantors. Various
fraudulent conveyance laws have been enacted for the protection of creditors and
may be applied by a court on behalf of any unpaid creditor or a representative
of CPC's or a Subsidiary Guarantor's creditors in a lawsuit to subordinate or
avoid the Notes or the Subsidiary Guarantee in favor of other existing or future
creditors of CPC or a Subsidiary Guarantor. Under applicable provisions of the
U.S. Bankruptcy Code or comparable provisions of state fraudulent transfer or
conveyance laws, if CPC or a Subsidiary Guarantor, as the case may be, at the
time of issuance of the Notes or the Subsidiary Guarantee, (i) incurred such
indebtedness with intent to hinder, delay or defraud any present or future
creditor of CPC or the Subsidiary Guarantor, as the case may be, or contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (ii) received less than reasonably equivalent
value or fair consideration for issuing the Notes or the Subsidiary Guarantee,
as the case may be, and CPC or the Subsidiary Guarantor (a) was insolvent, (b)
was rendered insolvent by reason of the issuance of the Notes or a Subsidiary
Guarantee, (c) was engaged or about to engage in business or a transaction for
which the remaining assets of CPC or such Subsidiary Guarantor constitute
unreasonably small capital to carry on its business or (d) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
mature, then, in each case, a court of competent jurisdiction could void, in
whole or in part, the Notes or the Subsidiary Guarantee, as the case may be.
Among other things, a legal challenge of the Notes or the Subsidiary Guarantee
on fraudulent conveyance grounds may focus on the benefits, if any, realized by
CPC or the Subsidiary Guarantor as a result of the issuance by CPC of the Notes.
To the extent that any Subsidiary Guarantee were voided as a fraudulent
conveyance or held unenforceable for any other reason, holders of the Notes
would cease to have any claim in respect of such Subsidiary Guarantor and would
be creditors solely of CPC and any Subsidiary Guarantor whose Subsidiary
Guarantee was not voided or held unenforceable. In such event, the claims of the
holders of the Notes against the issuer of any invalid Subsidiary Guarantee
would be subject to the prior payment of all liabilities of such Subsidiary
Guarantor. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, CPC or a
Subsidiary Guarantor would be considered insolvent if the sum of its debts,
including contingent liabilities, were greater than all of its assets at fair
valuation or if the present fair market value of its assets were less than the
amount that would be required to pay the probable liability on its existing
debts, including contingent liabilities, as they become absolute and mature.
There can be no assurance that, after providing for all prior claims, there will
be sufficient assets to satisfy the claims of the holders of the Notes relating
to any voided Subsidiary Guarantee.
Management believes that, for purposes of all such insolvency, bankruptcy and
fraudulent transfer or conveyance laws, the Notes and the Subsidiary Guarantee
are being incurred without the intent to hinder, delay or defraud creditors and
for proper purposes and in good faith, and that CPC and each of the Subsidiary
Guarantors, after the issuance of the Notes and the Subsidiary Guarantee, as the
case may be, will be solvent, will have sufficient capital for carrying on their
respective
19
<PAGE> 21
businesses and will be able to pay their respective debts as they mature. There
can be no assurance, however, that a court passing on such questions would agree
with management's view.
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to federal, state and local environmental and
occupational health and safety laws and regulations. Such laws and regulations,
among other things, impose limitations on the discharge of pollutants and
establish standards for management of waste. While there can be no assurance
that the Company is at all times in complete compliance with all such
requirements, the Company believes that any such noncompliance is unlikely to
have a material adverse effect on the Company. As is the case with manufacturers
in general, if a release or threat of release of hazardous materials occurs on
or from the Company's properties or any associated offsite disposal location, or
if contamination from prior activities is discovered at any properties owned or
operated by the Company, the Company may be held liable for remediation costs
and damages to natural resources. There can be no assurance that the amount of
any such liability would not be material.
20
<PAGE> 22
THE TRANSACTIONS
THE MERGER
Pursuant to the Merger Agreement dated as of March 25, 1997, between Thayer and
Holdings, CPAC, a transitory acquisition subsidiary established by Thayer prior
to the consummation of the Merger, merged with and into Holdings, following
which Holdings was the surviving corporation. In connection with the
establishment of CPAC, immediately prior to the consummation of the Merger, an
Equity Contribution in the amount of $25.0 million was made to the capital of
CPAC as follows: (i) Thayer contributed cash in the amount of $22.9 million in
exchange for 128,800 shares of common stock, $0.01 par value per share of CPAC,
10,000 shares of 15% payable-in-kind redeemable preferred stock, $0.01 par value
per share, of CPAC which will be mandatorily redeemable on May 9, 2007 and
warrants to purchase 26,471 shares of CPH Common Stock at an exercise price of
$0.01 per share and (ii) the Management Investors exchanged certain of their
existing shares of common stock of Holdings (valued for such purpose at the
amount that would otherwise be payable for such shares in connection with the
Merger) and contributed cash in the aggregate amount of $2.1 million in exchange
for an aggregate of 21,200 shares of common stock of CPAC. Upon the consummation
of the Merger, (i) the shareholders of Holdings, other than CPAC, received in
the aggregate approximately $33.1 million in cash upon the surrender of their
shares of Holdings, (ii) each share of outstanding common stock and preferred
stock of CPAC was converted into a share of common or preferred stock, as the
case may be, of Holdings, and (iii) Holdings was renamed CPH.
Simultaneously with the Merger, CPC consummated the Offering and entered into
the Credit Agreement. The Equity Contribution, the borrowings under the Credit
Agreement and the net cash proceeds of the Offering, anticipated to be
approximately $147.0 million in the aggregate, were used to repay the Existing
Debt, to pay the amounts payable, in cash, in connection with the Merger to the
shareholders of Holdings (estimated to be approximately $33.1 million), and to
pay certain expenses and fees in connection with the Merger.
THE CREDIT AGREEMENT
The Credit Agreement provides for a senior secured revolver of $50.0 million
(the "Working Capital Revolver"), a portion of which will be available for
letters of credit. In connection with the Transactions, CPC borrowed
approximately $24.0 million under the Working Capital Revolver. The $26.0
million of undrawn availability under the Working Capital Revolver following
consummation of the Transactions will be available (subject to borrowing base
limitations) for working capital, permitted acquisitions and general corporate
purposes. CPH and each subsidiary of CPC guaranteed the obligations of CPC under
the Credit Agreement. The obligations under the Credit Agreement are secured by
first priority perfected security interests on all of the assets of CPC and its
subsidiaries and a stock pledge of 100% of the issued and outstanding capital
stock of CPC and its subsidiaries.
21
<PAGE> 23
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. On May 9,
1997, CPC issued $100,000,000 in principal amount of the Old Notes (the
"Offering"). The Old Notes were sold by CPC to the Initial Purchasers and were
in turn sold by the Initial Purchasers pursuant to Rule 144A and Regulation S
under the Securities Act and exemptions from applicable state securities laws.
The Offering was not subject to the registration requirements of the Securities
Act and applicable state securities laws. The net proceeds from the transactions
involving the sale of the Old Notes, the Equity Contribution and the borrowings
under the Credit Agreement, were collectively used to finance the Merger, to
refinance Existing Debt and to pay related transaction fees and expenses.
22
<PAGE> 24
CAPITALIZATION
The following table sets forth as of March 28, 1997 (i) the actual
capitalization of the Company and (ii) the pro forma capitalization of the
Company as adjusted to give effect to the Transactions. The information in this
table should be read in conjunction with "Pro Forma Unaudited Condensed
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Unaudited Consolidated
Interim Financial Statements and accompanying notes thereto appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
------------------------
AS OF MARCH 28, 1997
Dollars in thousands ACTUAL PRO FORMA
-------- ---------
(UNAUDITED)
<S> <C> <C>
SHORT-TERM DEBT:
Current portion of capital leases $ 231 $ 231
-------- --------
Total short-term debt obligations 231 231
-------- --------
LONG-TERM DEBT OBLIGATIONS, EXCLUDING CURRENT PORTION:
Working Capital Revolver 0 24,000
Existing Finance Facility 57,919 0
Existing Senior Notes 34,596 0
12.50% Senior Notes due 2004 0 97,987 (1)
Capital leases 182 182
-------- --------
Total long-term debt obligations 92,697 122,169
-------- --------
Total debt obligations 92,928 122,400
-------- --------
STOCKHOLDER'S EQUITY:
Contributed capital 51,291 25,873
Retained earnings (deficit) (7,785) 0
-------- --------
Total stockholder's equity 43,506 25,873
-------- --------
Total capitalization $136,434 $148,273
======== ========
</TABLE>
- ---------------
(1) Represents $100 million principal amount of Notes, less original issue
discount and the value of the Warrants.
23
<PAGE> 25
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial information is qualified by reference to, and
should be read in conjunction with, the Company's audited Consolidated Financial
Statements and Unaudited Consolidated Interim Financial Statements and the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained elsewhere in this Prospectus. The selected
Statement of Operating Data for fiscal 1994, 1995 and 1996 and the selected
Balance Sheet Data as of September 29, 1995 and September 27, 1996 are derived
from and should be read in conjunction with the Company's audited financial
statements which are included elsewhere herein. The Selected Statement of
Operating Data and Balance Sheet Data for the twenty-six week periods ended
March 29, 1996 and March 28, 1997 have been derived from, and should be read in
conjunction with the Company's unaudited interim financial statements included
elsewhere herein and include all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for a fair
presentation of the results of the Company for such periods. Results for interim
periods are not necessarily indicative of results that may be achieved for the
full fiscal year. The Selected Balance Sheet Data as of September 25, 1992,
September 24, 1993 and September 30, 1994 and the selected Statement of
Operating Data for the fiscal years ended September 25, 1992 and September 24,
1993 are derived from audited financial statements of the Company not included
herein.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
TWENTY-SIX WEEKS
ENDED
FISCAL YEAR ENDED SEPTEMBER MARCH 29 MARCH 28
Dollars in thousands 1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA
Product sales $ 122,330 $ 126,171 $ 134,025 $ 144,966 $ 142,651 $ 72,313 $ 70,516
Finance income earned 9,912 10,725 11,201 11,524 12,792 6,302 7,012
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenue 132,242 136,896 145,226 156,490 155,443 78,615 77,528
Cost of goods sold 56,726 59,371 58,640 59,906 56,387 28,402 27,083
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit 75,516 77,525 86,586 96,584 99,056 50,213 50,445
Selling, general and
administrative 62,260 69,450 75,326 80,988 80,901 40,006 39,762
Amortization of goodwill 1,164 1,164 1,187 1,164 1,164 582 582
Interest expense 11,706 9,745 6,783 8,017 9,130 4,486 4,668
Other expense 400 6,357(a) 559 767(a) 7,089(a) 3,849(a) 293
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before provision
(benefit) for income taxes (14) (9,191) 2,731 5,648 772 1,290 5,140
Provision (benefit) for income
taxes 300 (2,929) 1,781 2,738 1,262 773 2,303
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ (314) $ (6,262) $ 950 $ 2,910 $ (490) $ 517 $ 2,837
=========== =========== =========== =========== =========== =========== ===========
OTHER FINANCIAL DATA
EBITDA (b) $ 14,757 $ 9,932 $ 13,031 $ 17,424 $ 20,062 $ 11,197 $ 11,475
EBITDA margin (b) 11.2% 7.3% 9.0% 11.1% 12.9% 14.2% 14.8%
Depreciation and amortization $ 3,062 $ 3,405 $ 3,517 $ 3,598 $ 3,661 $ 1,797 $ 1,667
Capital expenditures 3,164 1,003 1,792 2,534 1,958 866 540
Ratio of earnings to fixed
charges (c) 1.0x 0(d) 1.4x 1.6x 1.1x 1.3x 2.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF FISCAL YEAR ENDED SEPTEMBER MARCH 29 MARCH 28
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 41,470 $ 45,674 $ 44,826 $ 48,065 $ 52,902 $ 52,591 $ 55,312
Total assets 137,685 141,303 136,525 143,841 150,784 150,735 153,985
Long-term debt
(including current portion)(e) 101,088 78,097 76,897 82,102 93,541 93,884 92,928
Stockholder's equity 22,224 45,115 43,606 44,278 40,669 40,296 43,506
</TABLE>
24
<PAGE> 26
- ---------------
(a) Fiscal 1996 includes debt financing expenses of $624 and payments to
management of $4,177 under a management incentive plan related to the
issuance of the Existing Senior Notes and also includes a charge for unused
office and warehouse space of $1,698. The twenty-six week period ended
March 29, 1996 includes debt refinancing expenses of $624 and payments to
management under a management incentive plan related to the issuance of the
Existing Senior Notes in the amount of $3,000. Fiscal 1995 includes a
write-off of capitalized software costs of $162. Fiscal 1993 also includes
a charge for unused office and warehouse space and severance of $5,973.
(b) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization and certain nonrecurring expenses (as discussed in Note
(a) above). EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. However, EBITDA
should not be considered in isolation as a substitute for net income or
cash flow data prepared in accordance with generally accepted accounting
principles or as measure of a company's profitability or liquidity. In
addition, this measure of EBITDA may not be comparable to similar measures
reported by other companies.
EBITDA margin is calculated as the ratio of EBITDA to total revenues for
the period.
(c) For purposes of the ratio of earnings to fixed charges, (i) earnings are
calculated as the Company's earnings, before income taxes and fixed charges
and (ii) fixed charges include interest on all indebtedness, amortization
of deferred financing costs and one-third of operating lease expense.
(d) As a result of the charge for unused office and warehouse space and
severance of $5,973 discussed in Note (a) above and losses generated from
the opening of new offices, earnings were insufficient to cover fixed
charges by approximately $9.2 million for fiscal 1993.
(e) Long-term debt (including current portion) includes obligations under
capital leases.
25
<PAGE> 27
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying pro forma unaudited condensed consolidated financial statements
of the Company assume that the Transactions occurred, in the case of the
unaudited condensed consolidated balance sheet, on March 28, 1997, and in the
case of the unaudited condensed consolidated statements of operations, at the
beginning of each period presented. The Merger has been reflected using the
purchase method of accounting for business combinations.
The allocation of the purchase price to the assets and liabilities of the
Company is preliminary and can be expected to change as various appraisals are
obtained and studies are completed following the Transactions.
This unaudited pro forma information is not intended to reflect, and should not
be used as a measure of, what results of operations and financial position might
have been had the Transactions taken place at an earlier date nor is the
unaudited pro forma information intended to reflect results of operations or
financial position that may be attained in the future. Among other factors, the
pro forma information does not include adjustments for new compensation
arrangements following the Transactions.
26
<PAGE> 28
COLORADO PRIME CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
----------------------------------------------
PRO FORMA PRO FORMA
SEPTEMBER 27 ADJUSTING SEPTEMBER 27
Dollars in thousands 1996 ENTRIES 1996
------------ ---------- ------------
<S> <C> <C> <C>
Product sales $142,651 $142,651
Finance income earned 12,792 12,792
------------ ---------- ------------
Total revenue 155,443 155,443
Cost of goods sold 56,387 56,387
------------ ---------- ------------
Gross profit 99,056 99,056
------------ ---------- ------------
Other cost and expenses:
Selling, general and administrative 80,901 80,901
Amortization of goodwill 1,164 130(a) 1,294
Interest expense 9,130 6,417(b) 15,547
Other expense 7,089 7,089
------------ ---------- ------------
Total cost and expenses 98,284 6,547 104,831
------------ ---------- ------------
Income (loss) before provision (benefit) for income taxes 772 (6,547) (5,775)
Provision (benefit) for income taxes 1,262 (2,567)(c) (1,305)
------------ ---------- ------------
Net loss $ (490) $ (3,980) $ (4,470)
========== ========== ==========
Ratio of EBITDA to interest expense 2.2x 1.3x
Ratio of earnings to fixed charges 1.1x 0(d)
</TABLE>
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWENTY-SIX WEEKS ENDED MARCH 28, 1997
<TABLE>
<CAPTION>
--------------------------------------------
PRO FORMA
TWENTY-SIX TWENTY-SIX
WEEKS WEEKS
ENDED PRO FORMA ENDED
MARCH 28 ADJUSTING MARCH 28
Dollars in thousands 1997 ENTRIES 1997
----------- ---------- -----------
<S> <C> <C> <C>
Product sales $ 70,516 $ 70,516
Finance income earned 7,012 7,012
----------- ---------- -----------
Total revenue 77,528 77,528
Cost of goods sold 27,083 27,083
----------- ---------- -----------
Gross profit 50,445 50,445
----------- ---------- -----------
Other cost and expenses:
Selling, general and administrative 39,762 39,762
Amortization of goodwill 582 65(e) 647
Interest expense 4,668 3,106(f) 7,774
Other expense 293 293
----------- ---------- -----------
Total cost and expenses 45,305 3,171 48,476
----------- ---------- -----------
Income before provision for income taxes 5,140 (3,171) 1,969
Provision for income taxes 2,303 (1,242)(c) 1,061
----------- ---------- -----------
Net income $ 2,837 $ (1,929) $ 908
========== ========== ==========
Ratio of EBITDA to interest expense 2.5x 1.5x
Ratio of earnings to fixed charges 2.0x 1.2x
</TABLE>
SEE NOTES TO THE PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS.
27
<PAGE> 29
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Dollars in thousands
(a) The pro forma adjustments to goodwill amortization reflect the following:
<TABLE>
<S> <C>
Elimination of historical goodwill amortization $ (1,164)
Amortization of goodwill related to the Transactions over 30 years 1,294
--------
$ 130
=======
</TABLE>
(b) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<S> <C>
Elimination of historical interest expense for the Existing Debt repaid in connection
with the Transactions $ (9,130)
Interest expense on Working Capital Revolver at an interest rate of 7.75% 1,860
Interest expense on the Notes ($97,987 principal balance) at an interest rate of 12.95% 12,689
Amortization of the estimated debt issuance costs related to the Transactions 998
--------
$ 6,417
=======
</TABLE>
(c) To reflect the estimated income tax provision on pro forma adjustments at an
assumed rate of 40%.
(d) As a result of debt financing expenses of $624, payments to management of
$4,177 under a management incentive plan related to the issuance of the
Existing Senior Notes and a charge for unused office and warehouse space of
$1,698, earnings would have been insufficient to cover fixed charges by $5.5
million on a pro forma basis for fiscal 1996.
(e) The pro forma adjustments to goodwill amortization reflect the following:
<TABLE>
<S> <C>
Elimination of historical goodwill amortization $ (582)
Amortization of goodwill related to the Transactions over 30 years 647
--------
$ 65
=======
</TABLE>
(f) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<S> <C>
Elimination of historical interest expense for the Existing Debt repaid in connection
with the Transactions $ (4,668)
Interest expense on Working Capital Revolver at an interest rate of 7.75% 930
Interest expense on the Notes ($97,987 principal balance) at an interest rate of 12.95% 6,345
Amortization of the estimated debt issuance costs related to the Transactions 499
--------
$ 3,106
=======
</TABLE>
28
<PAGE> 30
COLORADO PRIME CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 28, 1997
<TABLE>
<CAPTION>
-------------------------------------------
PRO FORMA PRO FORMA
MARCH 28 ADJUSTING MARCH 28
Dollars in thousands 1997 ENTRIES 1997
------------ --------- ------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 1,719 $ 1,697 (a) $ 3,416
Accounts receivable-net 58,871 58,871
Other current assets 11,249 5,294 (b) 16,543
-------- -------- --------
Total current assets 71,839 6,991 78,830
Property, plant and equipment-net 6,733 6,733
Noncurrent accounts receivable-net 34,428 34,428
Goodwill-net 37,831 1,113 (c) 38,944
Other assets 3,154 3,735 (d) 6,889
-------- -------- --------
Total assets $153,985 $ 11,839 $165,824
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 16,527 $ $ 16,527
Note payable 57,919 (57,919) (e)
Working Capital Revolver 24,000 (f) 24,000
Notes 97,987 (g) 97,987
Senior notes payable 34,596 (34,596) (h)
Other liabilities 1,437 1,437
New equity 25,873 (i) 25,873
Stockholders' equity 43,506 (43,506) (j)
-------- -------- --------
Total liabilities and stockholders' equity $153,985 $ 11,839 $165,824
======== ======== ========
</TABLE>
SEE NOTES TO THE PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET DATA.
29
<PAGE> 31
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
Dollars in thousands ------------------------------------------------------------------------
ACCOUNT (1) (2) (3) (4) (5) TOTAL
- ------------------------------------------------------ ------- -------- --------- ------- -------- --------
<C> <S> <C> <C> <C> <C> <C> <C>
(a) Cash $ $116,506 $(102,173) $25,000 $(37,636) $ 1,697
(b) Other current assets 3,863 1,011 420 5,294
(c) Goodwill -- net 1,113 1,113
(d) Other assets 6,354 (2,619) 3,735
------------------------------------------------------------------
Total assets $ 3,863 $122,860 $(103,781) $25,000 $(36,103) $ 11,839
------------------------------------------------------------------
(e) Note payable $ 1,682 $ $ (59,601) $ $ $(57,919)
(f) Working Capital Revolver 24,000 24,000
(g) Notes 97,987 97,987
(h) Senior notes payable 7,976 (42,572) (34,596)
(i) New equity 873 25,000 25,873
(j) Stockholders' equity (5,795) (1,608) (36,103) (43,506)
------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,863 $122,860 $(103,781) $25,000 $(36,103) $ 11,839
------------------------------------------------------------------
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS
(1) To reflect fees to be incurred in connection with the early retirement of
the Existing Debt and the related tax effect (assuming a 40% rate). The
$5,795 after-tax cost is a non-recurring charge directly attributable to the
Transactions and will not affect reported earnings following the
Transactions.
(2) To reflect the proceeds and the related debt issuance costs from the
issuance of the Units and borrowings under the Working Capital Revolver in
connection with the Transactions.
(3) To reflect the (i) retirement of Existing Debt from the proceeds of the
Transactions and (ii) expensing of the related unamortized debt issuance
costs and the related tax effect (assuming a 40% rate). The $1,608 after-tax
cost is a non-recurring charge directly attributable to the Transactions and
will not affect reported earnings following the Transactions.
(4) To reflect the capital contribution from Holdings of the proceeds of the
Equity Contribution.
(5) To reflect the Merger in accordance with the purchase method of accounting
and the recognition of goodwill based on an assumed purchase price of $37.6
million, including $4.5 million in acquisition expenses. The actual purchase
price will depend on debt outstanding at the date of consummation of the
Transactions.
30
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the "Selected
Financial and Operating Data," the audited Consolidated Financial Statements and
the Unaudited Consolidated Interim Financial Statements and accompanying notes
thereto included elsewhere in this Prospectus.
HISTORICAL OVERVIEW
During the early 1990's, the Company's previous management elected to implement
an accelerated plan of new office openings. Ultimately, the Company failed to
realize increases in revenues commensurate with the number of new offices opened
due in large part to the inability of the Company to adequately recruit, train
and manage a rapidly expanding sales force. As a result, the Company installed a
new management team starting in late 1993. Under the direction of the new
management team, which will continue following the consummation of the
Transactions, the Company embarked on a measured revenue growth strategy with a
focus on profit improvement. The Company implemented a number of initiatives to
enhance its profitability which included: (i) closing unprofitable offices; (ii)
adopting a measured strategy for opening new offices; (iii) increasing sales
effectiveness by placing telemarketers close to the sales force; (iv) increasing
average order sizes through the introduction of more higher value appliances and
extending the food service period; (v) improving and expanding the quality and
breadth of the product line and (vi) implementing an aggressive cost reduction
program. The combination of these initiatives increased the Company's revenues
and EBITDA from fiscal 1993 through fiscal 1996 at a compound annual growth rate
of 4.3% and 26.4%, respectively.
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of operations as
a percentage of total revenue. All fiscal years presented herein are 52 weeks,
with the exception of fiscal 1994, which consists of 53 weeks.
<TABLE>
<CAPTION>
----------------------------------------------------------------
TWENTY-SIX WEEKS ENDED
FISCAL YEAR ENDED SEPTEMBER MARCH
-------------------------------- -------------------------
1994 1995 1996 1996 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS AND OTHER
FINANCIAL DATA:
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 59.6 61.7 63.7 63.9 65.1
Selling, general and administrative
expenses 51.9 51.7 52.0 50.9 51.3
Interest expense 4.7 5.1 5.9 5.7 6.0
Amortization of goodwill 0.8 0.7 0.7 0.7 0.7
Other expense 0.4 0.5 4.6 4.9 0.4
Provision for income taxes 1.2 1.7 0.8 1.0 3.0
Net income (loss) 0.6 2.0 (0.3) 0.7 3.7
Depreciation and amortization 2.4 2.3 2.3 2.3 2.1
EBITDA 9.0 11.1 12.9 14.2 14.8
</TABLE>
TWENTY-SIX WEEKS ENDED MARCH 28, 1997 COMPARED TO TWENTY-SIX WEEKS ENDED MARCH
29, 1996
Total revenue for the twenty-six weeks ended March 28, 1997 decreased by $1.1
million, or 1.4%, to $77.5 million from $78.6 million for the twenty-six weeks
ended March 29, 1996. Food revenue for the twenty-six weeks ended March 28, 1997
decreased by $1.6 million, or 3.6%, to $42.8 million from $44.4 million for the
twenty-six weeks ended March 29, 1996. Decrease in revenue was primarily due to
difficulties experienced by the Company locating and hiring qualified sales
representatives in a low unemployment environment. New programs designed to
improve the recruitment and retention of sales representatives were initiated on
a trial basis at the end of the prior period to respond to this staffing issue
such as utilizing additional part-time personnel, providing special incentives
for staff retention and exploring new recruiting sources for sales
representatives. Management is encouraged by the test results to date but will
require further testing before these programs can be expanded throughout the
Company. Food revenue was positively affected by price increases commensurate
with inflation. Non-food revenue for the twenty-six weeks ended March 28, 1997
decreased by $0.2 million, or 0.7%, to $27.7 million from
31
<PAGE> 33
$27.9 million for the twenty-six weeks ended March 29, 1996. The decrease was
primarily due to the reduction in food orders as non-food sales are only
consummated if a food sale is made. Non-food revenue was positively affected by
price increases commensurate with inflation, and the sale of higher value
appliances such as large screen televisions and camcorders. Finance income for
the twenty-six weeks ended March 28, 1997 increased by $0.7 million, or 11.1% to
$7.0 million from $6.3 million for the twenty-six weeks ended March 29, 1996.
The increase in finance income earned resulted from larger customer accounts
receivable balances due primarily to the sale of higher value appliances and
extended financing terms.
Gross profit for the twenty-six weeks ended March 28, 1997 increased by $0.2
million, or 0.5%, to $50.4 million from $50.2 million for the twenty-six weeks
ended March 29, 1996. Gross profit margin increased to 65.1% for the twenty-six
weeks ended March 28, 1997 from 63.9% for the twenty-six weeks ended March 29,
1996. The increase in gross profit margin was a result of shifting processing
for the Company's poultry items to its in-house facility, lower labor and
overhead costs and an increase in finance income. Additionally, gross profit
margin benefited from a greater mix of non-food product sales toward items which
generally have a higher profit margin.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For the twenty-six weeks ended March 28,
1997, these expenses decreased by $0.2 million, or 0.5%, to $39.8 million from
$40.0 million for the twenty-six weeks ended March 29, 1996. As a percentage of
total revenues, SG&A expenses increased to 51.3% for the twenty-six weeks ended
March 29, 1997 from 50.9% for the twenty-six weeks ended March 29, 1996. The
increase was primarily due to higher telemarketing costs as a result of an
increase in employee hours and higher bad debt and related collection costs due
to a higher level of customer payment delinquencies, offset by lower selling
costs associated with reduced marketing spending.
Interest expense for the twenty-six weeks ended March 28, 1997 increased by $0.2
million, or 4.4% to $4.7 million from $4.5 million for the twenty-six weeks
ended March 29, 1996. The increase was primarily attributable to a greater level
of borrowing under the Existing Finance Facility and interest charges relating
to the Existing Senior Notes which carried a higher interest rate than financing
in effect in the previous period.
Other expense for the twenty-six weeks ended March 28, 1997 decreased by $3.5
million, or 92.1% to $0.3 million from $3.8 million for the twenty-six weeks
ended March 29, 1996. The decrease was primarily due to nonrecurring expense of
refinancing-related bonuses in connection with a management incentive plan of
$3.0 million and debt financing expenses of $0.6 million related to the issuance
of the Existing Senior Notes for the twenty-six weeks ended March 29, 1996.
Provision for income taxes for the twenty-six weeks ended March 28, 1997
increased by $1.5 million to $2.3 million from $0.8 million for the twenty-six
weeks ended March 29, 1996. The increase is primarily attributable to pretax
income of $5.1 million for the twenty-six weeks ended March 28, 1997 compared to
$1.3 million for the twenty-six weeks ended March 29, 1996.
Net income increased to $2.8 million or 3.7% of total revenue for the twenty-six
weeks ended March 28, 1997 from $0.5 million or 0.7% of total revenue for the
twenty-six weeks ended March 29, 1996 for the reasons discussed above.
Depreciation and amortization decreased to $1.7 million or 2.1% of total revenue
for the twenty-six weeks ended March 28, 1997 from $1.8 million or 2.2% of total
revenue for the twenty-six weeks ended March 29, 1996. The decrease is primarily
attributable to additional amortization in 1995 related to debt acquisition
costs which were written off as a result of the Existing Senior Notes.
EBITDA increased to $11.5 million for the twenty-six weeks ended March 28, 1997
from $11.2 million for the twenty-six weeks ended March 29, 1996 for the reasons
stated above. As a percent of total revenues, EBITDA increased to 14.8% for the
twenty-six weeks ended March 28, 1997 from 14.2% for the twenty-six weeks ended
March 29, 1996, for the reasons stated above. See footnote (b) to "Selected
Financial and Operating Data."
FISCAL YEAR ENDED SEPTEMBER 27, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 29,
1995
Total revenue for fiscal 1996 decreased by $1.1 million, or 0.7%, to $155.4
million from $156.5 million for fiscal 1995. Food revenue for fiscal 1996
decreased by $0.6 million, or 0.7%, to $88.7 million from $89.3 million for
fiscal 1995. The decrease was primarily due to difficulties in hiring qualified
sales representatives in a low unemployment environment, which resulted in fewer
orders from new customers than in the prior period. Additionally, the number of
in-home appointments which were cancelled as a result of inadequate staffing
increased by 28% in fiscal 1996. As discussed above, new programs designed to
improve the recruitment and retention of sales representatives were initiated to
respond to this staffing issue at the close of the period. In addition, the
decrease was due to an increase in rejected orders for credit reasons resulting
from rising consumer debt levels. Food revenue was positively affected by price
increases commensurate with inflation and larger order sizes. The Company
32
<PAGE> 34
experienced a larger average order size principally due to a change in the
Company's sales presentation from one based upon five months of anticipated food
requirements to one based upon six months. The change had been introduced in
some markets during fiscal 1995 and continued to be implemented throughout the
Company during fiscal 1996. Non-food revenue for fiscal 1996 decreased by $1.6
million, or 2.9%, to $54.0 million from $55.6 million for fiscal 1995. The
decrease was primarily due to the reduction in food orders. Non-food revenue was
positively affected by price increases commensurate with inflation and the sale
of higher value appliances such as large screen televisions and camcorders.
Finance income for fiscal 1996 increased by $1.3 million, or 11.0%, to $12.8
million from $11.5 million for fiscal 1995. The increase in finance income
earned resulted from larger customer accounts receivable balances due to the
sale of higher value appliances.
Gross profit for fiscal 1996 increased by $2.5 million, or 2.6%, to $99.1
million from $96.6 million for fiscal 1995. Gross profit margin increased to
63.7% for fiscal 1996 from 61.7% for fiscal 1995. The increase in gross profit
margin was primarily due to an increase in finance income, lower beef costs and
the impact of the Company's cost reduction activities.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For fiscal 1996, these expenses remained
relatively flat at $80.9 million compared to $81.0 million for fiscal 1995. As a
percentage of total revenues, SG&A expenses were 52.0% for fiscal 1996 compared
to 51.7% for fiscal 1995. The increase was primarily due to an increase in bad
debt expense due to the higher level of customer payment delinquencies, offset
by lower selling costs as a result of lower revenues.
Interest expense for fiscal 1996 increased by $1.1 million, or 13.9% to $9.1
million from $8.0 million for fiscal 1995. The increase was primarily
attributable to higher average debt balance and higher interest expense as a
result of the issuance of the Existing Senior Notes.
Other expense for fiscal 1996 increased by $6.3 million, to $7.1 million from
$0.8 million for fiscal 1995. The increase was primarily due to payment of
refinancing-related bonuses of $3.0 million, redemption of management stock of
$1.2 million, and unrecovered costs of $0.6 million related to the issuance of
the Existing Senior Notes. In addition, the increase was due to a charge of $1.7
million for lease obligations on unused office and warehouse space for fiscal
1996.
Provisions for income taxes for fiscal 1996 decreased by $1.4 million to $1.3
million from $2.7 million for fiscal 1995. The decrease is primarily
attributable to lower earnings as a result of nonrecurring expenses associated
with the Existing Senior Notes.
Net income decreased to a loss of $0.5 million or (0.3%) of total revenue for
fiscal 1996 from net income of $2.9 million or 2.0% of total revenue for fiscal
1995 for the reasons discussed above.
Depreciation and amortization for fiscal 1996 increased by $0.1 million to $3.7
million from $3.6 million for fiscal 1995.
EBITDA for fiscal 1996 increased by $2.7 million or 15.5% to $20.1 million from
$17.4 million for fiscal 1995. EBITDA margin as a percentage of total revenue
increased to 12.9% for fiscal 1996 from 11.1% for fiscal 1995 for the reasons
stated above. See footnote (b) to "Selected Financial and Operating Data."
FISCAL YEAR ENDED SEPTEMBER 29, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1994
Total revenue for the 52 week fiscal 1995 increased by $11.3 million, or 7.8%,
to $156.5 million from $145.2 million for the 53 week fiscal 1994. Food revenue
for fiscal 1995 increased by $5.5 million, or 6.5%, to $89.3 million from $83.8
million for fiscal 1994. The increase in food revenue was attributable to a
greater number of orders from new customers and a change in the Company's sales
presentation to one based upon anticipated food requirements during a six month
period from one based upon five months. The change was introduced in some
markets during fiscal 1995. Non-food revenue for fiscal 1995 increased by $5.4
million, or 10.8%, to $55.6 million from $50.2 million for fiscal 1994. The
increase in non-food sales was primarily due to the greater number of food
orders and increased sales of higher value appliances. Finance income for fiscal
1995 increased by $0.3 million, or 2.7%, to $11.5 million from $11.2 million for
fiscal 1994. The increase in finance income resulted from larger customer
accounts receivable balances due to increased non-food orders and the sale of
higher value appliances.
Gross profit for fiscal 1995 increased by $10.0 million, or 11.6%, to $96.6
million from $86.6 million for fiscal 1994. Gross profit margin increased to
61.7% for fiscal 1995 from 59.6% for fiscal 1994. The increase in gross profit
margin was primarily related to increased sales of non-food products which
generally have a higher profit margin, enhanced purchasing procedures and the
impact of the Company's cost reduction programs.
SG&A expenses are principally comprised of selling, telemarketing, delivery and
general and administrative expenses. For fiscal 1995, these expenses increased
by $5.7 million, or 7.5%, to $81.0 million from $75.3 million for fiscal 1994.
As a percentage
33
<PAGE> 35
of total revenues, SG&A expenses decreased to 51.7% for fiscal 1995 from 51.9%
for fiscal 1994 as a result of greater sales volume. The increase in expenses is
a result of an increase in volume related costs.
Interest expense for fiscal 1995 increased by $1.2 million, or 17.6%, to $8.0
million from $6.8 million for fiscal 1994. The increase was primarily
attributable to greater borrowings under the Company's credit facility to fund
the sales growth.
Other expense for fiscal 1995 was relatively flat at $0.8 million compared to
$0.6 million for fiscal 1994.
Provision for income taxes for fiscal 1995 increased by $1.0 million to $2.7
million from $1.7 million for fiscal 1994. The increase was primarily
attributable to a significant increase in pretax profits due to increases in
revenues.
Net income increased to $2.9 million or 2.0% of total revenue for fiscal 1995
from $0.9 million or 0.6% of total revenue for fiscal 1994 for the reasons
discussed above.
Depreciation and amortization for fiscal 1995 increased by $0.1 million to $3.6
million from $3.5 million for fiscal 1994.
EBITDA for fiscal 1995 increased by $4.4 million or 33.8% to $17.4 million from
$13.0 million for fiscal 1994. EBITDA margin as a percentage of total revenue
increased to 11.1% for fiscal 1995 from 9.0% for fiscal 1994, for the reasons
stated above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the twenty-six weeks ended March
28, 1997 was $1.2 million, primarily comprised of net income of $2.8 million,
non-cash charges of $4.0 million and an increase in income tax payable of $2.6
million, partially offset by increases in accounts receivable and inventories of
$6.6 million and decreases in accounts payable, accrued expenses and other
accrued liabilities of $1.6 million.
Net cash used in operating activities for the twenty-six weeks ended March 29,
1996 was $3.8 million, primarily comprised of net income of $0.5 million, non
cash charges of $4.0 million, partially offset by an increase in accounts
receivable of $6.8 million and a decrease in accrued expenses and other
liabilities of $1.5 million.
Cash used in financing activities for the twenty-six weeks ended March 28, 1997
was $0.6 million, comprised of repayments of notes payable and obligations under
capital lease.
Cash provided by financing activities for the twenty-six weeks ended March 29,
1996 was $4.6 million, primarily comprised of the issuance of the Existing
Senior Notes of $34.5 million, $2.5 million of borrowings under a note payable,
partially offset by repayment of a note to an affiliate of $25.0 million,
payment of fees of $3.1 million and return of capital to Holdings of $3.8
million, payment of obligations under capital leases of $0.3 million and payment
of a dividend of $0.2 million.
Net cash used in operating activities for fiscal 1996 was $2.3 million,
primarily comprised of a net loss of $0.5 million and an increase in accounts
receivable of $11.5 million partially offset by non-cash charges of $9.2 million
and a decrease in inventories of $0.6 million.
Net cash used in operating activities for fiscal 1995 was $0.1 million,
primarily comprised of net income of $2.9 million, non-cash charges of $8.4
million, a decrease in prepaid expenses and other assets of $1.0 million, a
decrease in accounts payable and accrued liabilities of $1.6 million and a
decrease in taxes payable of $0.8 million, partially offset by increases in
accounts receivable and inventory of $14.0 million and decrease in other
liabilities of $1.0 million.
Cash provided by financing activities for fiscal 1996 was $4.1 million,
primarily comprised of the issuance of the Existing Senior Notes of $34.5
million and borrowings under the Existing Finance Facility of $2.4 million,
partially offset by repayment of note to affiliate of $25.0 million, payment of
fees of $3.2 million, return of capital to Holdings of $3.8 million and
repayment of obligations under capital lease of $0.5 million.
Cash provided by financing activities for fiscal 1995 was $2.9 million,
primarily comprised of borrowings under the Existing Finance Facility of $5.8
million partially offset by payment of dividends of $2.4 million and repayment
of obligations under capital lease of $0.6 million.
The Company's primary use of cash in investing activities is the purchase of
property and equipment. Capital expenditures in twenty-six weeks ended March 28,
1997 and March 29, 1996 and fiscal 1996, 1995 and 1994 were $0.5 million, $0.9
million, $2.0 million, $2.5 million and $1.8 million, respectively. The Company
expects that capital expenditure requirements will be approximately $1.7 million
for fiscal 1997.
The Company's average working capital borrowings under the Existing Finance
Facility for the twenty-six weeks ended March 28, 1997 and March 29, 1996 and
the 1996, 1995 and 1994 fiscal years was $58.7 million, $57.0 million, $58.4
34
<PAGE> 36
million, $54.4 million and $49.1 million, respectively. The Company's maximum
working capital borrowings outstanding during such periods were $60.5 million,
$64.9 million, $64.9 million, $57.6 million and $52.1 million, respectively.
In connection with the Transactions, the Company entered into the Credit
Agreement to replace its Existing Finance Facility and Existing Senior Notes.
Availability under the Credit Agreement is expected to be $26.9 million.
Additional interest expense associated with the Working Capital Revolver and the
Notes will significantly increase the Company's liquidity requirements. The
Working Capital Revolver and the Notes impose certain restrictions on the
Company, including restrictions on its ability to incur indebtedness, pay
dividends, make investments, grant liens, sell its assets and engage in certain
other activities. In addition, the indebtedness of the Company under the Credit
Agreement is secured by all of the assets of the Company, including the
Company's real and personal property, inventory, accounts receivable,
intellectual property and other intangibles. See "Description of Certain
Indebtedness."
Management believes that cash flow from operations, together with other
available sources of funds including the availability of borrowings under the
Credit Agreement will be adequate for the foreseeable future to make required
payments of principal and interest on the Company's indebtedness and to fund
anticipated capital expenditures and working capital requirements. The ability
of the Company to meet its debt service obligations and reduce its total debt
will be dependent, however, upon the future performance of the Company which, in
turn, will be subject to general economic conditions and to financial, business
and other factors, including factors beyond the Company's control. Debt
outstanding under the Credit Agreement will bear interest at floating rates;
therefore, the Company's financial condition is and will continue to be affected
by changes in prevailing interest rates.
INFLATION
The Company believes that inflation has not had a material impact on its results
of operations for the three fiscal years ended September 27, 1996.
35
<PAGE> 37
BUSINESS
GENERAL
The Company is a leading direct marketer of high quality, value-added food
programs and products related to in-home dining and entertainment. Using a
combination of telemarketing and in-home selling, Colorado Prime believes that
it is the only company to offer this type of in-home shopping service on a broad
scale, serving 31 states through 76 sales offices. The Company sells
individually packaged, top quality meats and poultry, seafood, assorted pasta
dishes and a wide selection of prepared entrees for direct delivery to consumer
households. The Company's food products are of a quality generally found only in
specialty gourmet shops and high-end restaurants and require simple preparation
using a microwave, conventional oven or grill. As a complement to its food
products, the Company also sells food-related and home entertainment appliances
and accessories with unique features not generally available in traditional
retail channels. The purchase of non-food items enables customers to earn a
lifetime discount on food purchases, which management believes is a key driver
of the Company's high customer retention rate. In each of the last five fiscal
years, the Company experienced a customer retention rate of at least 81% as
measured by the percent of customers who reordered when solicited during the
period. The Company attributes its high customer retention to the quality of its
products, the convenience of its services and its discount marketing program.
The Company uses a network of approximately 1,500 telemarketers to schedule
in-home sales presentations. During a sales presentation, one of the Company's
approximately 650 sales representatives presents the Company's product offerings
and designs a customized food program for the customer. In fiscal 1996, a
customer's average initial food order was approximately $1,500. The average food
order is designed to meet approximately two-thirds of a family's evening meal
needs for a six month period. In addition, approximately 73% of initial orders
in fiscal 1996 included the purchase of non-food items at an average cost of
approximately $1,600. After a customer places an order, a Company representative
delivers and stores the food directly into the customer's freezer. To facilitate
the purchase of its products, the Company offers convenient financing options
through a wholly-owned finance subsidiary. In fiscal 1996, food and non-food
items accounted for approximately 62% and 38% of product sales, respectively.
The Company targets its marketing efforts toward dual income families who are
typically homeowners with children at home. Faced with increasing time
constraints and the pressures of planning and preparing meals, the customers
find the Company a convenient alternative to the supermarket and a higher
quality alternative to other convenience-oriented offerings such as delivery
services or restaurant takeout. Management expects to benefit from the continued
growth in consumer direct marketing sales, which is projected to grow by 7.4%
per year from 1996 to 2001. In 1996, consumer direct marketing sales are
estimated to have been $634.6 billion.
The quality of the Company's products and the appeal of its services are
evidenced by the Company's consistent revenue and earnings growth since its
founding in 1959. Since 1986, the Company's revenues have grown at a compound
annual growth rate of 7.7% to $155.4 million in fiscal 1996. During the same
period, EBITDA grew at a compound annual growth rate of 12.5% to $20.1 million
in fiscal 1996. In addition, in the past three fiscal years under new
management, the Company's revenues and EBITDA have grown at compound annual
growth rates of 4.3% and 26.4%, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITIVE STRENGTHS
The Company has developed a strong market position through a carefully tailored
mix of products aimed at upper and middle income customers who value high
quality, superior service and the convenience of home purchasing and delivery.
This strategy has capitalized on the growing number of dual income families and
the scarcity of time for shopping and meal preparation. The Company has earned
strong brand name recognition among its customers and suppliers and has
distinguished itself as the nation's premier in-home food shopping company. With
no significant direct competition and no middleman between the Company and the
consumer, the Company plans to increase its market penetration while continuing
to differentiate its products based on quality and service rather than on price.
The Company attributes its success and its continued opportunities for growth
and profitability to the following competitive strengths:
- High customer retention. The Company has enjoyed a high customer
retention rate of at least 81% in each of the past five fiscal years. The
Company believes its retention rate is primarily attributable to its wide
selection of high quality food, the convenience of its integrated
services and its discount marketing program. During fiscal 1996,
approximately 66% of the Company's food revenue came from customer
reorders. Reorder customers are particularly valuable to the Company due
to the reduced sales and marketing costs associated with the sale.
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<PAGE> 38
- High quality products. The Company's value-added food items are either
custom-prepared at the Company's own facility or are supplied by
restaurant providers and premium food wholesalers, and as such are of a
quality generally unavailable in supermarkets. The Company purchases top
quality meats and specially tenderizes, trims, flash-freezes and vacuum
packages each portion to ensure tenderness, taste and freshness. Food
items purchased from suppliers are prepared and packaged to the Company's
stringent specifications and generally carry the Colorado Prime(R) label.
Food products are delivered to the customer's home typically within ten
days after leaving the Company's plant, and have a 100% customer
satisfaction guarantee. Non-food products are purchased by special
arrangements from manufacturers and, as a result, have unique features
which are not generally available in traditional retail channels.
- Value-added service. The Company provides a fully integrated customer
service package from the initial contact through the life of the customer
relationship. The Company differentiates its service offering by four key
features: (i) an initial convenient in-home sales presentation with
customized meal planning; (ii) delivery of its food and non-food products
directly into the customer's home; (iii) the option to finance purchases
through its wholly-owned finance subsidiary; and (iv) the 100% customer
satisfaction guarantee on all of the Company's food products.
- Effective discount marketing program. The Company's marketing efforts
are facilitated by its discount marketing program which enables customers
to earn a lifetime discount on food products when they purchase non-food
products. The discount on the food products generally offsets the
customer's incremental monthly payments on their non-food purchases. In
fiscal 1996, the food discount earned on the average initial food order
was 17% and increased with each subsequent non-food purchase to a maximum
possible discount of 50%. In fiscal 1996, 87% of the Company's customers
participated in the discount marketing program. Over the past five fiscal
years, the retention rate among customers who achieved the maximum food
discount averaged 89%.
- Strong management team. The Company's management team has considerable
experience in both the direct marketing and food industries and has
implemented a number of growth initiatives to enhance profitability and
operating leverage. Since 1993, the Company has recruited four senior
officers who have extensive experience in food marketing, direct sales
and customer acquisition. The senior management team is complemented by
experienced individuals in sales, operations and service management
positions who have been with the Company for many years. Collectively,
members of the management team average 20 years of experience in the food
industry, 32 years in marketing and direct sales and 20 years in senior
operating positions. See "Management."
BUSINESS STRATEGY
The Company believes that it has significant opportunities for revenue and
earnings growth. Management's strategy includes the following principal
elements:
- - Continued geographic expansion. Since its inception, new office openings have
provided a significant portion of the Company's growth. Management is pursuing
a measured pace of geographic expansion based upon a new office opening
program developed in fiscal 1995. Over the last two fiscal years, 79% of the
Company's product sales growth has come from new office openings. As a result,
with a concentration of offices on the East Coast, geographic expansion
remains a priority for the Company. The western region of the country is of
particular interest, as revenues of the Company's two established offices in
this region have grown at a compound annual growth rate of 29% over the past
three fiscal years and outperformed the Company's average office sales by 50%
in fiscal 1996. Management believes there is potential for 10 to 12 additional
offices in this region.
- - Increased market penetration. The Company believes that there is significant
growth potential in its existing markets through the following:
- Customer acquisition. Referrals represent the Company's most efficient
form of customer acquisition as they avoid the cost of purchased
telemarketing lists. Referral customers are also more likely to accept an
in-home sales presentation. The Company plans to offer different
incentives to customers who provide referral names. This plan increased
the average number of referral names from a new customer by 27% in the
Company's test markets. In addition, the Company has implemented
initiatives aimed at improving the quality and performance of the sales
representatives and managers through the use of part-time personnel, new
recruiting methods, new employee retention programs, enhanced training
and development.
- Customer retention. Sales to existing customers are more profitable than
sales to new customers as a result of lower selling and telemarketing
costs; thus, the Company strives to continually improve the current level
of customer retention. Marketing programs and new product introductions
are being implemented to accelerate customer
37
<PAGE> 39
participation in the Company's discount program, as customer retention is
highly correlated to the level of discount the customer receives.
- - Margin improvement opportunities. Since fiscal 1993, the Company has achieved
a 5.6 percentage point increase in EBITDA margins from 7.3% to 12.9%. In
fiscal 1997, management has already implemented additional margin enhancement
programs including greater efficiency in food processing, the introduction of
more high value appliances, extending the food service period and certain cost
reductions in delivery and insurance expenses. In addition, the Company
believes opportunities exist to further enhance profitability through
additional measures such as reduced telecommunications costs, more productive
telemarketing lists and increased finance income.
- - Continued product development. The Company has and will continue to refine
its products and menus to increase variety and adapt to consumers' changing
eating patterns, lifestyle demands and tastes. The Company introduced 208 new
food and non-food products in the last three fiscal years, including the
"Healthy Gourmet" and "Easy Gourmet" prepared entree product lines. Food items
introduced in the last three fiscal years are generating sales at an
annualized rate of $20.0 million. Large screen televisions and camcorders were
introduced in fiscal 1995 and generated sales of approximately $8.5 million in
fiscal 1996. The Company currently intends to introduce at least 12 food
products and test three non-food products in fiscal 1997.
- - Development of new customer segments and new distribution
channels. Management believes that customer segments currently not within the
Company's target market, such as urban dwellers, customers over age 60, higher
income households and one-member households, may hold additional growth and
profit opportunities. These customers face the same lifestyle issues which
have attracted targeted consumers to the Company's product and service
offerings. The Company believes it can address the needs of these markets due
to its ability to assemble and deliver many different food offerings at
various price ranges. The Company also believes further growth may also be
obtained from new distribution channel alternatives, such as institutional
food services, corporate gift offerings and strategic alliances with
food-related catalog marketers.
PRODUCTS AND SERVICES
The Company offers a selected mix of food and non-food products targeted toward
middle and upper-middle income families who value high quality products and
services with the convenience of in-home purchasing and delivery. In fiscal
1996, food and non-food items accounted for approximately 62% and 38% of product
sales, respectively.
Food Products
The Company's food product line consists of approximately 320 items, with
entrees of a grade and quality comparable to those available only through
specialty butchers, fine gourmet shops or specialty catalogs. These products
range from select cuts of top quality beef, pork, veal, lamb and poultry, to
prepared gourmet dishes such as stuffed chicken breast, marinated pork chops and
Mexican and Italian entrees. The Company's frozen entrees may be prepared using
a microwave, conventional oven or grill, with 70% of such products requiring
only 20 minutes or less for preparation. As a service to its customers, the
Company also sells a selected line of brand name grocery items and other
household products generally available in local retail food outlets. The Company
continually refines its menu to accommodate changing customer demands. For
instance, in fiscal 1995, the Company added "Healthy Gourmet" (meals for the
health conscious consumer) and in fiscal 1996 added "Easy Gourmet"
(convenience-focused meals) to its menu. In the last three fiscal years, the
Company introduced 197 new food products.
The Company takes a high degree of care in the preparation and packaging of its
food products. The Company employs 20 full-time butchers at its centralized
meat-cutting and processing facility in Farmingdale, New York who specially
tenderize and gourmet trim the meats to ensure freshness and high quality. Each
item is then individually vacuum-packed in clear plastic packaging and
flash-frozen. Unlike frozen-food products typically available in supermarkets
which may undergo several freezing and thawing cycles, the Company's entrees are
maintained in a frozen state from preparation through delivery to the customer's
freezer. Additionally, most of the Company's frozen entrees are delivered to the
customer within four weeks from the time they were prepared, which the Company
believes is significantly less than comparable products sold in supermarkets and
other retail channels.
With the exception of brand name grocery items, the Company's food items are
produced either by the Company or by premium food wholesalers according to the
Company's stringent specifications. Approximately 50% of the Company's food
revenue consists of items that are processed in the Company's processing
facility. Most food products carry the Company's trademark and all food products
are sold with a 100% customer satisfaction guarantee that the Company will
replace any product that does not completely satisfy the customer's
expectations.
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<PAGE> 40
Non-Food Products
As an additional convenience to its customers and as a complement to the
customer's food purchases, the Company sells a diverse line of non-food items
related to in-home dining and entertainment. The non-food products serve as an
effective marketing tool since the purchase of non-food items enables customers
to receive a lifetime discount on their food purchases through the discount
marketing program. The Company has always offered freezers as a logical
complement to its food products. In response to customer interest, the Company
has continued to add food-related appliances and accessories to its product
lines. The Company currently offers approximately 20 food-related appliances or
accessories, such as microwave ovens, barbecue grills, cookware, china and
crystal, imported stainless flatware and cutlery. The Company recently expanded
its appliance line to include home entertainment products such as large screen
televisions and camcorders. The Company's non-food items are purchased by
special arrangements with manufacturers and have unique features that are not
generally available in typical retail channels. During fiscal 1996, non-food
items were purchased by 73% of all customers on their initial orders, including
approximately 65% who purchased a freezer.
CUSTOMER FINANCING
As an additional source of revenue and as a service to its customers, the
Company offers the option to finance purchases through the Company's
wholly-owned finance subsidiary. Most customer purchases are financed on a
revolving credit account. Generally, food products may be paid in six monthly
installments without additional cost to the consumer except for a nominal
monthly charge. During fiscal 1996, approximately 98% of non-food products were
financed using open-end credit accounts with balances which are typically paid
over a period of 24 to 36 months at the market interest rate for credit card
balances. Customers are billed separately for food and non-food purchases.
All credit applications are submitted to the Company's credit and collections
department for evaluation. In processing each application, the Company obtains
personal credit reports from various credit reporting agencies and, in many
instances, checks bank and employment references. The Company does not provide
its customers with a line of credit to purchase products; instead credit is
approved on a purchase by purchase basis. Customer credit files are typically
updated when customers reorder. In addition, customers whose accounts are in
delinquent status are not solicited for reorders.
Despite recent increases in consumer debt levels, the Company's strict credit
guidelines, collection procedures and the financial profile of its customer base
have enabled the Company to limit its provision for doubtful accounts to
approximately 3.4% of total revenues in fiscal 1996 and 3.3% of total revenues
in the twenty-six weeks ended March 28, 1997. The Company has established
procedures for its trained collections department to maximize customer
satisfaction while promptly collecting accounts past due.
MARKETING
The Company targets its marketing efforts toward dual-income homeowners with
annual household incomes in excess of $50,000. The Company's target customers
are professionals and white collar workers between the ages of 25 and 49. The
typical target customer owns a home and has children living at home. This
marketing strategy has capitalized on the growing number of dual-income families
and the scarcity of time for shopping and meal preparation.
Customer Acquisition
The Company purchases telemarketing target lists from a variety of sources.
Donnelley Marketing, Inc. is the primary source of outside lists, accounting for
25% of the Company's new customers in fiscal 1996. Additional sources include
JAMI Marketing Services, Inc., recent home buyer lists and neighborhood and zip
code canvassing. The screened lists of potential customers are distributed to
the Company's telemarketing forces who contact the prospective customers to
introduce the Company's product offerings and schedule an in-home presentation.
The Company also identifies potential customers through recommendations from
existing customers. During fiscal 1996, sales representatives collected on
average approximately 14 referral names during a customer's initial presentation
and approximately four referral names during subsequent sales calls. During
fiscal 1996, the Company's referral customers were the source of approximately
33% of all new customers. The Company has implemented programs to increase
referral rates, such as giving additional free products to customers who provide
the Company with referral names. Referrals are particularly valuable to the
Company due to the reduced marketing and sales costs associated with the sale.
Management frequently evaluates its customer acquisition efforts and has taken a
number of new initiatives to enhance its customer acquisition program and hence
increase market penetration. Future initiatives may include: (i) developing
customer segments not within the Company's current target market, such as urban
dwellers, customers over the age of 60, higher income households and one member
households; (ii) exploring new distribution channels such as institutional food
services, corporate
39
<PAGE> 41
gift offerings and strategic alliances with food-related catalog marketers;
(iii) continuing the Company's geographic expansion; (iv) increasing customers'
average order sizes through the introduction of more high value appliances and
extending the food service period; (v) encouraging more in-house presentations
by offering incentives such as free products to potential customers who agree to
a presentation; and (vi) utilizing potential applications in affinity marketing.
Discount Marketing Program
The Company's marketing efforts are facilitated by its discount marketing
program which provides customers with a lifetime discount on food products when
they purchase the Company's non-food products. The discount on the food products
generally offsets a customer's incremental monthly payments on non-food
purchases. In fiscal 1996, the food discount earned on the average initial food
order was 17%. The discount increases with each subsequent non-food purchase up
to a maximum possible discount of 50%. During fiscal 1996, 87% of the Company's
customers participated in the discount marketing program. Over each of the past
five fiscal years, the retention rate among customers who achieved the maximum
food discount averaged 89%.
SALES
The Company employs a direct sales force of approximately 650 sales
representatives. The Company believes that the key to strong sales force
performance is a talented, motivated sales management team coupled with ongoing
recruiting, training and retention programs. The Company's sales management team
has been promoted entirely from within. On average, its senior sales management
has 16 years of experience. The Company has an ongoing sales training process
conducted at the local and corporate level. New representatives are trained in
the hiring office by experienced sales personnel using standardized Company
training procedures and materials. Additionally, the Company runs regular food
and non-food training seminars to educate all sales personnel on the Company's
full complement of products. The Company also maintains a corporate management
training program for management candidates demonstrating high potential. Sales
personnel are compensated by commission, earning a percentage of each new sale
and a lower percentage on subsequent reorder sales. The Company has recently
developed an enhanced sales representative retention program which has yielded
encouraging results on a test basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Sales representatives call on prospective customers in their home at pre-set
appointment times scheduled by the telemarketers, often on weekends and at
night. The in-home sales presentation is generally delivered with both adult
family members present. It consists of a food-related presentation, the
development of a monthly budget and a custom-designed menu as well as a
presentation of non-food merchandise. The sales presentation emphasizes the
quality, service and convenience of shopping with the Company compared to the
supermarket, and affords the representative the opportunity to identify
customers' needs. Sales representatives also cover reorder appointments. The
reorder presentation focuses on additional food products and the Company's full
complement of non-food merchandise.
DISTRIBUTION AND DELIVERY
One of the Company's key competitive advantages is the efficient distribution of
perishable foods to its customers' homes. All food items are shipped from the
Company's Farmingdale, New York plant. Products are transported either by
Company-operated 48-foot freezer tractor trailers or independent carriers which
pick up shipments from Farmingdale and off-load them to the Company's delivery
trucks at one of 18 leased regional depots for delivery to customers. An
appointment is made with each customer for delivery of an order at the
customer's convenience, including evening hours and Saturdays. Orders are
delivered into the home and packed into the customer's freezer by Company
employees. With the exception of a customer service follow-up call, this serves
as the final step in the Company's quality control process. Generally non-food
items are stored regionally by the Company's suppliers and are delivered by UPS
or some other delivery service. This significantly reduces the Company's direct
storage, shrinkage, handling and inventory carrying costs.
The Company believes its distribution system delivers food to the consumer's
home which is generally fresher than food that can be purchased in the typical
supermarket. All food products are custom-prepared in anticipation of the
freezing process. Generally, the customer receives delivery of an order within
ten days of its leaving the Company's plant.
SUPPLIERS
The Company purchases its food and non-food products from a variety of vendors.
The Company strives to maintain relationships with several suppliers for each of
its major food and non-food items to ensure product availability and to maintain
flexibility with regard to cost control. In fiscal 1996, the Company's two
largest suppliers, Broich Enterprises (a freezer supplier) and Beef America,
accounted for 12.6% and 9.4%, respectively, of total non-food and food
purchases. The Company believes it has a good relationship with each of its
suppliers and that alternate suppliers are readily available.
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<PAGE> 42
The Company generally does not enter into purchasing agreements with any of its
vendors and does not hedge commodity prices in the futures market. However,
since management expected beef prices to increase in 1997, the Company entered
into one year fixed-price supply contracts with its two largest beef suppliers.
COMPETITION
The Company is a leading direct marketer of high quality, value-added food
programs and products related to in-home dining and entertainment. The Company's
primary competition is local supermarkets, convenience stores and specialty food
retailers. Although the Company competes in each of those markets, the Company
operates in a niche market, providing benefits and services in addition to those
of each of the above businesses. The Company believes that it competes
effectively with these other businesses on the basis of service, product variety
and quality, marketing, convenience and the availability of credit.
Other companies which provide services similar to the Company's are
regionally-focused with limited sales areas, including Southern Foods in
Greensboro, North Carolina, American Frozen Foods in Stratford, Connecticut and
Prime Time Foods in Bristol, Pennsylvania. However, the Company does not
consider these companies to be major competitors, due to the limited geographic
scope, product offerings and service of their business. Management estimates the
Company to be two times larger than its largest in-home food service competitor.
PROPERTY AND FACILITIES
The Company believes that its corporate headquarters, processing facility,
storage facilities, regional sales offices and equipment are adequate for its
current needs. The Company believes all facilities are adequately insured. The
Company is currently in the process of evaluating its physical requirements and
opportunities in anticipation of the headquarters' lease expiration in August
1998.
The following table summarizes the Company's primary facilities by location.
- --------------------------------------------------------------------------------
COMPANY FACILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OWNED/ LEASE
LOCATION LEASED DESCRIPTION OF FACILITY EXPIRATION
- ------------------------------------- ------- ------------------------------------- --------------
<S> <C> <C> <C>
Farmingdale, NY Leased Headquarters August 1998
Farmingdale, NY Owned Preparation, storage and shipping --
plant
Pompano Beach, FL Leased Office, warehouse and vehicle repair November 2006
depot
Farmingdale, NY Owned Vehicle repair depot --
Farmingdale, NY Owned Grocery warehouse --
</TABLE>
In addition to those facilities indicated in the table above, the Company leases
space for its 76 regional sales offices and 18 regional delivery depots under
short-term commercial leases, which typically have terms of three years.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the conduct
of its business. Management believes that such proceedings would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the financial position or results of operations of the
Company.
GOVERNMENTAL REGULATION, CLAIMS OR ASSESSMENTS
The Company is subject to extensive regulation by a number of federal and state
regulatory agencies with respect to the preparation and sale of its food and
durable goods and the provision of financing to its customers. The Company's
Farmingdale, New York facility has USDA approval, which permits the Company to
ship its meat products nationwide without being subject to numerous state and
local inspection procedures. In the absence of USDA approval, the Company's sale
and delivery of meat products would become subject to state and local
inspection. The Company's telemarketing activities and practices are subject to
various state authorities and its direct marketing activities are subject to
federal and state regulation including the home sales solicitation laws.
Additionally, the Company's extension of credit to its customers is subject to
federal and state truth-in-lending laws, licensing and regulation under retail
installment sales acts, usury laws and similar statutes enacted by the states in
which it does business.
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From time to time the Company is the subject of inquiries from regulatory
agencies in various states in which it conducts business. The Company is often
required to provide information concerning its business practices. Such
inquiries have generally not resulted in any material change in the Company's
business practices. However, on occasion, the Company has agreed in the form of
a settlement agreement, consent decree, voluntary compliance or other similar
agreement to adjust individual customer accounts, replace merchandise, modify
sales and credit practices and/or pay costs, fines and penalties. None of these
matters have had a material adverse effect on the Company.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to federal, state and local environmental and
occupational health and safety laws and regulations. Such laws and regulations,
among other things, impose limitations on the discharge of pollutants and
establish standards for management of waste. While there can be no assurance
that the Company is at all times in complete compliance with all such
requirements, the Company believes that any such noncompliance is unlikely to
have a material adverse effect on the Company. If a release or threat of release
of hazardous materials occurs on or from the Company's properties or any
associated offsite disposal location, or if contamination from prior activities
is discovered at any properties owned or operated by the Company, the Company
may be held liable for remediation costs and damages to natural resources. There
can be no assurance that the amount of any such liability would not be material.
INTELLECTUAL PROPERTY
The Company seeks trademark protection from the United States Patent and
Trademark Office for many of its products' and services' trade names. The
Company presently holds nine registered trademarks covering trade names and
designs including Colorado Prime(R) and Colorado Prime Foods(R). The Company
also has trademarks currently pending registration including Home Restaurant,
Chef's Finest and Maria Nesta.
EMPLOYEES
As of March 28, 1997, the Company had approximately 2,916 employees.
Approximately 120 manufacturing and delivery personnel located at its
Farmingdale, New York facility are represented in collective bargaining
agreements by Local 210 Warehouse and Production Employees Union. The Company
believes it has a satisfactory relationship with unionized labor. In the last 10
years, the Company has lost only four days as a result of a work stoppage. The
current contract expires on September 30, 1998 and provides for a 3% per year
increase in wages.
<TABLE>
<CAPTION>
------------------------------------
EMPLOYEES CATEGORIZED BY FUNCTION
FUNCTION FULL-TIME PART-TIME TOTAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales, sales management and sales support 787 130 917
Customer acquisition 479 1,051 1,530
Office 130 20 150
Delivery 118 52 170
Manufacturing 108 7 115
Customer service 24 10 34
----- ----- -----
Total 1,646 1,270 2,916
===== ===== =====
</TABLE>
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<PAGE> 44
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth the names, ages as of June 27, 1997 and positions
of each person who is a director, executive officer or key employee of CPC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
William Dordelman 56 Chairman of the Board and Chief Executive Officer
William Willett 60 President, Chief Operating Officer and Director
Thomas Taylor 39 Chief Financial Officer, Vice President and Director
Ricardo DeSantis 54 Vice President of Marketing
Joseph Murphy 39 Vice President of Finance and Administration
Charles Montanino 69 Vice President of Plant Operations
Kenneth Payne 49 Vice President of Operations
Joseph Ugenti 52 Vice President of Customer Acquisition
Brian Mulvehill 40 Vice President-East Coast Division
Ronald Mel 30 Vice President-Midwest Division
John DeMaio 42 Vice President-Southwest Division
Joseph Billi 32 Vice President-New York, New Jersey Division
Lawrence Scuderi 56 Vice President-Management, Development and Training
Donald Keller 65 Director
Frederic Malek 60 Director
Dr. Paul Stern 58 Director
V. Frank Pottow 33 Director
Daniel J. Altobello 56 Director
William Nicholson 54 Director
</TABLE>
William Dordelman has been Chairman of the Board and Chief Executive Officer of
CPC since March 1993. Prior to joining CPC, Mr. Dordelman served as Co-Chief
Executive Officer of The B. Manischewitz Company from May 1992 to March 1993.
Previously, Mr. Dordelman was employed 22 years with General Foods Corporation
("General Foods"), where he was President of the Foods Products Division and
Group Vice President, overseeing General Foods' six U.S. packaged food
divisions.
William Willett has been President, Chief Operating Officer and Director of CPC
since June 1994. From 1992 until 1994, Mr. Willett was principal owner and
President of Brights Creek, a direct response children's clothing business. From
1987 through 1992, Mr. Willett served as Chairman and Chief Executive Officer of
New Hampton, a leveraged buyout of Avon's former women's fashion catalog
business. Previously, Mr. Willett was corporate Executive Vice President at Avon
where he led its effort to build a mail-order fashion business. Before joining
Avon, Mr. Willett was Vice President of Downe Communications and National Sales
Manager for Time Telemarketing.
Thomas Taylor was appointed Vice President, Chief Financial Officer and Director
in April 1996. Previously, Mr. Taylor served as Vice President of Finance and
Sales Strategy at Kraft Foods for five years. Prior to joining Kraft, Mr. Taylor
was Vice President and Controller of Central Soya Company, Inc., a $2.3 billion
agribusiness company, and audit manager at Price Waterhouse in Chicago.
Ricardo DeSantis was appointed Vice President of Marketing in June 1993.
Previously, Mr. DeSantis was Senior Vice President of Marketing for Cigna
Healthcare. From 1989 to 1991, Mr. DeSantis was President of the Consumer
Division of Pendaflex Corporation. Prior to that, Mr. DeSantis was a business
unit manager at General Foods.
Joseph Murphy joined CPC in 1987. Mr. Murphy was appointed Vice President,
Finance and Administration in 1996. From 1995 until 1996, Mr. Murphy served as
Acting Chief Financial Officer of CPC. Prior to that, Mr. Murphy served as Vice
President of Planning and Information Services and earlier as the Controller and
Secretary for CPC. From 1985 to 1987, Mr. Murphy was Controller at Four Seasons
Solar Products Corporation.
Charles Montanino has been Vice President of Plant Operations since March 1987.
Mr. Montanino joined CPC in April 1973 and served as plant manager from 1980
through March 1987.
Kenneth Payne joined CPC as Credit Collections Manager in August 1976. From 1981
until 1987, Mr. Payne served as Operations Manager of CPC. In 1987 Mr. Payne was
elected Vice President of Operations.
Joseph Ugenti began in CPC's sales department in 1975 and was elected Vice
President of Customer Acquisition in August 1991. From June 1983 to July 1991,
Mr. Ugenti was Director of Telemarketing of CPC.
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<PAGE> 45
Brian Mulvehill has held the position of Vice President of the East Coast
Division since 1991. Mr. Mulvehill began his career with CPC in 1985. From 1988
until 1991, Mr. Mulvehill served as Divisional Sales Manager. Previously, Mr.
Mulvehill held the position of Sales Manager of Don Rich Industries from 1978 to
1985.
Ronald Mel was appointed Vice President of the Midwest Division in May 1997. Mr.
Mel joined CPC in 1992 as a branch manager. In 1994, Mr. Mel served as East
Coast Divisional Trainer. From 1995 through 1997, Mr. Mel served as Divisional
Manager for the Florida region.
John DeMaio has been Vice President of the Southwest Division since 1984. Mr.
DeMaio joined CPC in 1982 and served as Divisional Manager of the Mid-Atlantic
Area from 1982 to 1984. Previously, Mr. DeMaio served as General Sales Manager
of American Frozen Foods from 1974 to 1981.
Joseph Billi was appointed Vice President of the New York/New Jersey Division in
May 1997. Mr. Billi joined CPC in 1990. He held the positions of Corporate
Trainer, Field Manager, Branch Sales Manager and sales representative.
Lawrence Scuderi was appointed Vice President of Management, Development and
Training in May 1997. Prior to that, Mr. Scuderi served as Vice President of the
Midwest Division since 1993. Mr. Scuderi joined CPC in 1980 and held the
position of Divisional Sales Manager from 1992 to 1993. From 1980 to 1992, Mr.
Scuderi served as Branch Sales Manager and Corporate Training Director.
Donald Keller has been Vice Chairman of CPC since April 1993. Since 1993, Mr.
Keller has also served as Chairman of Mano Holdings, a holding company for The
B. Manischewitz Company, and Non Executive Chairman of Prestone Products. From
May 1992 to April 1993, Mr. Keller served as Co-Chief Executive Officer of The
B. Manischewitz Company. From April 1989 until May 1992, Mr. Keller was a
consultant and private investor. Prior to that time, Mr. Keller was President
and Chief Operating Officer of Westpoint Pepperell and earlier served as
Executive Vice President of General Foods.
Frederic Malek became a Director of CPC and CPH following the consummation of
the Transactions. Mr. Malek founded Thayer Capital Partners in 1991 and
co-founded Thayer Equity Investors III, L.P. in 1995. From 1989 to 1991, Mr.
Malek was President and then Vice Chairman of Northwest Airlines. Prior to that
time, Mr. Malek served as President of Marriott Hotels and Resorts from 1980
through 1988. Mr. Malek currently serves as director of several publicly-traded
companies, including Automatic Data Processing Corp., American Management
Systems, Manor Care Inc., FPL Group and Northwest Airlines.
Dr. Paul Stern became a Director of CPC following the consummation of the
Transactions. Dr. Stern co-founded Thayer Equity Investors III, L.P. in 1995.
Prior to that, Dr. Stern was a Special Limited Partner at Forstmann Little & Co.
From 1989 until 1993, Dr. Stern served as the Chairman and Chief Executive
Officer of Northern Telecom Ltd. Prior to that, Dr. Stern served as President
and Chief Operating Officer of Burroughs (later Unisys) Corporation, Corporate
Vice President and later President of Commercial Electronics Operations at
Rockwell International Corporation and Chairman and Chief Executive Officer of
Braun AG in Germany. Dr. Stern serves on the Board of Dow Chemical Company, LTV
Corporation and Whirlpool Corporation.
V. Frank Pottow became a Director of CPC and CPH following the consummation of
the Transactions. Mr. Pottow joined Thayer Capital Partners as a Managing
Director in 1996. From 1992 through 1996, Mr. Pottow was a Principal at Odyssey
Partners, L.P., a private investment partnership. Prior to joining Odyssey
Partners, L.P., Mr. Pottow was an Associate with Wasserstein Perella & Co.
Daniel J. Altobello became a Director of CPC in June, 1997. He has been Chairman
of the Board of Directors of Onex Food Services, Inc., the world's largest
airline catering group, since September 1995. From 1989 to 1995, Mr. Altobello
was the Chairman and CEO of Caterair Holdings Corporation, the leveraged buyout
of the In-Flite Services Division of Marriott Corporation. He is a former
Executive Vice President of Marriott Corporation and President of Marriott's
Airport Operations Group. Mr. Altobello currently serves as a director of
American Management Systems, Inc. and Blue Cross and Blue Shield of Maryland,
Inc.
William Nicholson became a Director of CPC in June, 1997. Mr. Nicholson has been
a private investor since September 1992. Prior to that, he served for eight
years as the Chief Operating Officer of Amway Corporation, the world's largest
multilevel marketing company, based in Ada, Michigan. He remains an advisor to
the Parent Corporation's Policies Board.
BOARD COMMITTEES
The Board of Directors of the Company has established a compensation committee
(the "Compensation Committee") and an audit committee (the "Audit Committee").
The Compensation Committee, which consists of Dr. Stern and Messrs. Malek and
Nicholson, determines the salaries and bonuses of the Company's executive
officers. The Compensation Committee will also administer the Company's Stock
Option Plan (the "Option Plan"). The Audit Committee recommends the appointment
of auditors and oversees the accounting and audit functions of the Company.
Messrs. Keller, Altobello and Pottow currently serve as members of the Audit
Committee.
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<PAGE> 46
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
paid or earned during fiscal 1996 by the Company's Chief Executive Officer and
the four other most highly paid executive officers whose total salary and bonus
exceeded $100,000 for services rendered to the Company during fiscal 1996. The
Company did not maintain any long-term incentive plans nor did it grant stock
appreciation rights or restricted stock awards.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION FOR YEAR ENDED
SEPTEMBER 27, 1996
-----------------------------------------
OTHER ANNUAL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION(2)(3)
- ------------------------------------------------ -------- -------- --------------- ------------------
<S> <C> <C> <C> <C>
William Dordelman............................... $455,000 $315,000 0 $1,607,500
Chairman of the Board and Chief Executive
Officer
William Willett................................. $300,000 $225,000 0 $ 475,000
President, Chief Operating Officer and
Director
Ricardo DeSantis................................ $174,576 $115,000 0 $ 175,000
Vice President of Marketing
Joseph Ugenti................................... $111,000 $ 50,000 0 $ 100,000
Vice President of Customer Acquisition
Kenneth Payne................................... $128,000 $ 45,000 0 $ 50,000
Vice President of Operations
</TABLE>
- ---------------
(1) Represents perquisites and other personal benefits, if such benefit exceeds
the lesser of $50,000 or 10% of the total annual salary and bonus for the
executive officer.
(2) Represents amounts awarded based on the Company's performance incentive
adopted in January 1995, which provided certain senior managers with a
nonrecurring cash bonus earned and paid in fiscal 1996 in connection with
the refinancing of the Company's debt.
(3) Amount excludes the redemption of management stock as follows; $293,000 to
William Dordelman, $193,000 to William Willet, $64,000 to Ricardo DeSantis,
$32,000 to Joseph Ugenti and $19,000 to Kenneth Payne. See "Certain
Relationships and Related Transactions -- Management Equity Incentive Plan."
DIRECTOR COMPENSATION
Directors are reimbursed for certain expenses incurred by them in connection
with attendance to meetings of the Board. Other than with respect to
reimbursements for expenses, directors who are also employees or officers of the
Company do not receive compensation to serve as directors. The Company
compensated non-employee directors for services provided in such capacity in the
aggregate amount of $10,500 in fiscal 1996.
EMPLOYMENT AGREEMENTS
In connection with the consummation of the Transactions, the Company entered
into employment agreements with Messrs. William Dordelman, William Willett,
Thomas Taylor and Ricardo DeSantis. The employment agreements are for a one year
rolling term. The employment agreements provide for (i) payment of a base annual
salary of $455,000 to William Dordelman, $300,000 to William Willett, $195,000
to Thomas Taylor and $195,000 to Ricardo DeSantis; (ii) a minimum annual base
salary increase to reflect the consumer price index; (iii) payment of bonuses
based upon achievement of certain profitability targets of the Company; and (iv)
certain fringe benefits. Each employment agreement provides that the executive
may be terminated by the Company only with cause or upon payment of a full
year's salary and benefits (excluding bonus) following notice of termination.
Each employment agreement provides that the executive will not compete with the
Company during the period of employment and for a period of two years following
termination of employment for good cause and one year following termination of
employment other than for good cause.
MANAGEMENT EQUITY INVESTMENT
In connection with the consummation of the Transactions, the Management
Investors exchanged certain of their existing shares of common stock of Holdings
(valued for such purpose at the amount that would otherwise be payable for such
shares in connection with the Merger) and contributed cash in the aggregate
amount of $2.1 million in exchange for an aggregate of
45
<PAGE> 47
21,200 shares of common stock of CPAC. Upon consummation of the Merger, each
share of common stock of CPAC was converted into one share of common stock of
CPH. Pursuant to shareholders' agreement entered into in connection with the
Equity Contribution, the Management Investors have incidental registration
rights, tag-along rights, antidilution protection and in certain circumstances a
mandatory redemption right, and are subject to certain restrictions on the
transfer of their shares, a bring-along right and certain call provisions
exercisable by CPH or Thayer.
STOCK OPTION PLAN
In connection with the consummation of the Transactions, the Board of Directors
will adopt and the stockholders of CPH will approve the 1997 Stock Option Plan.
Options for an aggregate of 15% of CPH's common equity will be granted to
management of the Company under such plan. The options will become vested based
upon service or the achievement of certain performance objectives of the
Company. Two-thirds of the options will become fully vested upon a change of
control or other similar transaction involving CPH.
EMPLOYEES' PENSION PLAN
Since 1976, the Company has maintained a defined contribution pension plan (the
"Plan"). Employees who have completed six months of service and have reached the
age 20 1/2 are eligible to participate in the Plan. The Company contributes
annually to a participant's account based upon a variable percentage of a
participant's annual compensation. The Plan also permits eligible employees to
make voluntary contributions within specified limits. The contributions for
employees who became participants prior to January 1, 1989 are 30% vested after
three years of service and the contributions for employees who become
participants after January 1, 1989 are 20% vested after three years of service.
Contributions become vested thereafter at a rate of 20% for each additional full
year of service, until fully vested. Benefits are distributed at the time of the
employee's death, disability, termination or retirement after age 55 and may be
distributed in the form of an annuity or, in some circumstances, other methods
of payment, such as lump sum or in installments over a fixed period.
Contributions are forfeited when a participant's employment is terminated prior
to full vesting under the Plan. Such forfeited amounts are used to reduce the
Company's contributions to the Plan. Pension expenses under the Plan were
approximately $908,000, $885,000 and $633,000 for the fiscal years ended
September 27, 1996, September 29, 1995, and September 30, 1994, respectively.
401(K) PLAN
The Company sponsors a 401(k) Plan available for all non-union employees who
have attained the age 21 and have completed one year of service with the
Company. The plan was adopted effective February 1, 1986 and was amended
effective February 1, 1988 and January 1, 1989, as hereinafter described. Under
the plan's qualified cash or deferred arrangement, a participant may, under an
arrangement with the Company, elect to have up to 20% of their annual
compensation paid to the plan on behalf of the participant, in lieu of the
participant's current receipt of such compensation. In addition to the
employee's contribution, the Company may, but need not, make discretionary
contributions to the plan in such amounts as it determines. A participant's
contributions made under the qualified cash or deferred arrangement are 100%
vested at all times. For employees who became participants of the plan prior to
January 1, 1989, discretionary contributions are 30% vested after three years of
service and for employees who become participants after January 1, 1989,
discretionary contributions made under the plan are 20% vested after three years
of service. Discretionary contributions become vested thereafter at the rate of
20% for each additional full year of service, until 100% vested. Benefits are
payable upon a participant's termination of employment for any reason, in the
form of one lump sum payment or in installments extending over a fixed period of
years, depending upon the employee's election.
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<PAGE> 48
PRINCIPAL STOCKHOLDERS
All of CPC's issued and outstanding capital stock is owned by CPH. The issued
and outstanding capital stock of each of the Subsidiary Guarantors is owned by
CPC. The table sets forth, as of June 27, 1997, the Common Stock of CPH owned
beneficially or of record (i) by any person in an amount in excess of five
percent of such Common Stock; (ii) by each director of the Company who is a
shareholder; (iii) by each executive officer of the Company; and (iv) by all
directors and executive officers of the Company as a group. In addition, Thayer
owns 100% of CPH's 10,000 outstanding shares of 15% payable-in-kind redeemable
preferred stock, par value $0.01 per share. See "The Transactions."
<TABLE>
<CAPTION>
---------------------------------
PERCENTAGE
NUMBER OF OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OF CPH(1)(3) OF CPH(1)(3)
- ---------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Thayer Equity Investors III, L.P. (2) 128,800(3)(4) 85.9%
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
William Dordelman 10,000 6.7%
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
William Willett 5,000 3.3%
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Thomas Taylor 2,300 1.5%
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Ricardo DeSantis 1,650 1.1%
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Other Executive Officers 2,250 1.5%
All directors and executive officers as a group (2) 21,200(2) 14.1%
</TABLE>
- ---------------
(1) Excludes 19,608 shares of CPH Common Stock that may be acquired upon the
exercise of the Warrants which represent 10% of CPH Common Stock on a
fully-diluted basis (without taking into account shares of CPH Common Stock
which will be subject to CPH's 1997 Stock Option Plan). See
"Management -- Stock Option Plan."
(2) Thayer Equity Investors III, L.P. is a Delaware limited partnership whose
general partner is TC Equity Partners, L.L.C. ("TC Equity Partners"). The
members of TC Equity Partners are Frederic Malek, Dr. Paul Stern and Rick
Rickertsen. Mr. Malek and Dr. Stern are directors of CPC and may be deemed
to be the beneficial owners of the shares of CPH common stock owned and
controlled by Thayer. Mr. Malek and Dr. Stern disclaim beneficial ownership
of such shares.
(3) Excludes 26,471 shares of CPH Common Stock that may be acquired upon the
exercise of warrants held by Thayer, which represent 13.5% of CPH Common
Stock on a fully-diluted basis (without taking into account shares of CPH
common stock which will be subject to CPH's 1997 Stock Option Plan). See
"Management -- Stock Option Plan."
(4) Includes shares of CPH Common Stock owned by TC Co-Investors, LLC
("Co-Investors"). Co-Investors is a Delaware limited liability company which
is controlled by TC Equity Partners.
47
<PAGE> 49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
11.5% Senior Subordinated Notes
During fiscal 1994, 1995 and 1996, the Company paid interest of $2.9 million,
$2.9 million and $0.6 million, respectively, on $25.0 million aggregate
principal amount of its 11.5% Senior Subordinated Notes due May 17, 1998 to KPC
Acquisition Company L.P. ("KPC"). KPC, the controlling shareholder of Holdings,
purchased the Notes as part of a series of transactions resulting from the
purchase of Holdings. These Notes were repaid on December 20, 1995.
Management Advisory and Transaction Fees
During each of the three fiscal years ended September 27, 1996, the Company paid
Kohlberg & Co. management advisory and consulting services fees in the amount of
$0.5 million.
In connection with the Transactions, the Company paid a transaction fee of $1.4
million to TC Management L.L.C. ("TC Management"), an affiliate of Thayer Equity
Investors III, L.P., in consideration for services in arranging the financing
for the Transactions.
In May, 1997 following the consummation of the transactions the Company and TC
Management entered into a management and consulting agreement pursuant to which
TC Management will provide management advisory and consulting services to the
Company for which it will receive a payment of $0.5 million annually.
Management Equity Incentive Plan
In January 1995, the Company implemented an equity incentive plan to provide a
performance incentive to the Company's management. An aggregate of approximately
747,000 shares of Class A, Class B and Class C Management Common Stock of
Holdings ("Management Stock") were issued to certain members of management,
including Messrs. Dordelman, Willett, DeSantis and Taylor. In May 1996,
approximately 44,730 shares of Management Stock were redeemed from certain
members of management in exchange for $1.2 million in connection with a
refinancing of the Company's debt. All outstanding shares of Management Stock
were redeemed in connection with the closing of the Transactions for an
aggregate consideration of approximately $7.3 million of which approximately
$2.1 million was reinvested in CPAC as discussed below.
Equity Contribution of CPAC
In connection with the Transactions and immediately prior to the Merger, Thayer
contributed cash in the amount of $22.9 million in exchange for 128,800 shares
of common stock, $0.01 par value per share, of CPAC, 10,000 shares of 15%
payable-in-kind redeemable preferred stock, $0.01 par value per share, of CPAC
and warrants to purchase 26,471 common shares of CPAC at an exercise price of
$0.01 per share. Certain senior managers of CPC including Messrs. Dordelman,
Willett, Taylor and DeSantis exchanged certain of their existing common shares
of Holdings (valued for such purpose at the amount that would otherwise be
payable for such shares in connection with the Merger) and contributed cash in
the aggregate amount of $2.1 million in exchange for an aggregate of 21,200
shares of common stock of CPAC.
Shareholders Agreement
In connection with the Transactions, Thayer, CPH and the Management Investors
entered into a shareholders agreement provides the Management Investors with
incidental registration rights, tag-along rights, antidilution protection and in
certain circumstances mandatory redemption rights. The Management Investors are
subject to a bring-along right and certain call provisions exercisable by CPH or
Thayer.
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<PAGE> 50
DESCRIPTION OF CERTAIN INDEBTEDNESS
GENERAL
In connection with the Transactions, CPC entered into the Credit Agreement with
Dresdner Bank AG, New York and Grand Cayman Branches ("Dresdner"), as agent, and
certain other financial institutions (collectively with Dresdner, the
"Lenders"). The information relating to the Credit Agreement is qualified in its
entirety by reference to the complete text of the documents entered into in
connection therewith. The following is a description of the terms of the Credit
Agreement.
The Credit Agreement provides for a Working Capital Revolver of $50.0 million, a
portion of which is available for letters of credit. In connection with the
Transactions, CPC borrowed approximately $24.0 million under the Working Capital
Revolver. The $26.0 million of undrawn availability under the Working Capital
Revolver is available for working capital, permitted acquisitions and general
corporate purposes.
The obligations of the Company under the Credit Agreement to the Lenders and any
banks issuing letters of credit is guaranteed by CPH. The borrowings under the
Credit Agreement is secured by first priority perfected security interests in
all the assets of CPC. CPH's guarantee under the Credit Agreement is secured by
a pledged by CPH of all issued and outstanding capital stock of the Company.
Each of CPC's subsidiaries were also required to issue a guarantee under the
Credit Agreement which is secured by first priority perfected security interests
in all the assets of such subsidiary, and CPC pledged the issued and outstanding
capital stock of each such subsidiary owned by CPC to secure indebtedness under
the Credit Agreement.
Under the Working Capital Revolver, CPC is entitled to draw amounts subject to
availability pursuant to a borrowing base requirement in order to meet the
Company's working capital requirements for permitted acquisitions and for
general corporate purposes including having letters of credit issued. The
borrowing base consists of the sum of certain percentages of (i) eligible
food-related and non-food-related accounts receivable (excluding certain overdue
accounts receivable, discounted and credited items, certain governmental items
and other exclusions as may be determined by Dresdner) and (ii) Eligible
Inventory (as defined in the Credit Agreement). The Company believes that the
available borrowing base is at least $50.0 million. The Working Capital Revolver
has a final maturity date of April 30, 2002.
INTEREST RATES
The Working Capital Revolver accrues interest at the Base Rate (as defined in
the Credit Agreement) or LIBOR (as defined in the Credit Agreement) plus, in
each case, the applicable margin. The applicable margin is expected to be 0.0%
per annum over the Base Rate, and 1.75% per annum over LIBOR with respect to
initial borrowings under the Working Capital Revolver. The applicable margin
will vary over the term of the Credit Agreement based on the Company's
achievement of specified financial ratios.
MANDATORY PREPAYMENTS
The Credit Agreement requires that upon an initial public offering by CPH, CPC
or any subsidiary of CPC of its common or other voting stock, 100% of the net
proceeds from such offering will be applied to reduce permanently borrowings
outstanding under the Notes, the Working Capital Revolver or both, as the
Company elects.
COVENANTS
The Credit Agreement provides that the Working Capital Revolver will impose
certain covenants and other requirements on CPC and CPC's subsidiaries. The
Credit Agreement requires the Company to meet certain financial tests, including
a minimum fixed charge coverage ratio, a minimum interest coverage ratio, a
maximum leverage ratio, the maintenance of a minimum net worth and a limitation
on capital expenditures.
The Credit Agreement also contains, among other things, certain negative
covenants and restrictions on actions by the Company that will, among other
things, restrict: (i) the incurrence and existence of indebtedness; (ii)
consolidations, mergers and sales of assets; (iii) the incurrence and existence
of liens or other encumbrances; (iv) the incurrence and existence of contingent
obligations; (v) the payment of dividends and repurchases of capital stock; (vi)
prepayments and amendments of certain subordinated debt instruments; (vii)
investments, loans and advances; (viii) changes in fiscal year; (ix) certain
transactions with affiliates; and (x) changes in lines of business.
49
<PAGE> 51
EVENTS OF DEFAULT
The Credit Agreement specifies certain customary events of default, including
non-payment of principal, interest or fees; violation of covenants; inaccuracy
of representations and warranties in any material respect; cross-default to
certain other indebtedness and agreements; bankruptcy and insolvency events;
material judgments and liabilities; change of control of CPC and
unenforceability of certain documents under the Credit Agreement.
FEES AND EXPENSES
The Credit Agreement provides that CPC will pay a fee on the unused portion of
the Working Capital Revolver at an annual rate determined pursuant to the Credit
Agreement. In addition, annual fees at a rate equal to the applicable margin in
effect on the date of payment on LIBOR loans under the Working Capital Revolver
will be payable with respect to credit enhancement letters of credit and a fee
at an annual rate of 1.25% will be payable with respect to documentary letters
of credit. A bank issuing a letter of credit will be entitled to an annual fee
at a rate of at least 0.25%. Letters of credit issued under the Working Capital
Revolver shall count as utilization for all purposes, including the commitment
fee calculation.
50
<PAGE> 52
THE EXCHANGE OFFER
The Old Notes were sold by CPC on May 9, 1997 to the Initial Purchasers who in
turn sold the Old Notes in transactions exempt from the registration
requirements of the Securities Act. In connection with the sale of the Old
Notes, CPC and the Initial Purchasers entered into the Registration Rights
Agreement, which requires CPC to file with the Commission a registration
statement under the Securities Act with respect to the New Notes, identical in
all material respects to the Old Notes, and to use its best efforts to cause
such registration statement to become effective under the Securities Act. CPC is
further obligated, upon the effectiveness of that registration statement, to
offer the holders of the Old Notes the opportunity to exchange their Old Notes
for a like principal amount of New Notes, which will be issued without a
restrictive legend and may be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. In the event certain
circumstances occur which would result in either the New Notes not becoming
freely tradeable or certain holders of the Old Notes not being eligible to
participate in the Exchange Offer, then CPC is required to file and use its best
efforts to cause the Old Notes to be registered under the Securities Act. A copy
of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Exchange Offer is
being made pursuant to the Registration Rights Agreement to satisfy CPC's
obligations thereunder. The term "Holder" with respect to the Exchange Offer
means any person in whose name the Old Notes are registered on the Registrar's
books or any other person who has obtained a properly completed assignment from
the registered holder or any participant in The Depository Trust Company ("DTC")
system whose name appears on a security position listing as the holder of such
Old Notes and who desires to deliver such Old Notes by book-entry transfer at
DTC. See "Description of Notes -- Registration Rights Agreement."
Upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal (which together constitute the Exchange
Offer), CPC will accept for exchange Old Notes which are properly tendered on or
prior to the Expiration Date and not withdrawn as permitted below. As used
herein, the term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997; provided, however, that if CPC, in its sole discretion, has
extended the period of time during which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the applicable
Exchange Offer is extended.
As of the date of this Prospectus, $100,000,000 aggregate principal amount of
the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997 to all Holders
of Old Notes known to CPC. CPC's obligation to accept Old Notes for exchange
pursuant to the Exchange Offer is subject to certain customary conditions as set
forth under "-- Certain Conditions to the Exchange Offer" below.
CPC expressly reserves the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Old Notes, by giving oral or written notice of
such extension to the Holders thereof as described below. During any such
extension, all Old Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by CPC. Any Old Notes not accepted for
exchange for any reason will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of principal
amount of $1,000 or any integral multiple thereof.
CPC expressly reserves the right to amend or terminate the Exchange Offer, and
not to accept for exchange any Old Notes not theretofore accepted for exchange,
upon the occurrence of any of the conditions of the Exchange Offer specified
below under "-- Certain Conditions to the Exchange Offer." CPC will give oral or
written notice of any extension, amendment, non-acceptance or termination to the
Holders of the Old Notes as promptly as practicable, such notice in the case of
any extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer. The
tender to CPC of Old Notes by a Holder thereof as set forth below and the
acceptance thereof by CPC will constitute a binding agreement between the
tendering Holder and CPC upon the terms and subject to the conditions set forth
in this Prospectus and in the accompanying Letter of Transmittal. A Holder who
wishes to tender Old Notes for exchange pursuant the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, to The Bank of New
York as the Exchange Agent at the address set forth below under "-- Exchange
Agent" or (in the case of a book-entry transfer) an Agent's Message in lieu of
the Letter of Transmittal on or prior to the Expiration Date. In addition,
51
<PAGE> 53
either (i) certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal, (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if such
procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD
NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR CERTIFICATES FOR OLD NOTES SHOULD BE SENT TO CPC.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that DTC has received an express
acknowledgment from the tendering Participant, which acknowledgment states that
such Participant has received and agrees to be bound by the Letter of
Transmittal and that the Company may enforce the Letter of Transmittal against
such Participant.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's behalf, such owner must, prior
to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described below
(see "-- Withdrawal Rights"), as the case may be, must be guaranteed (see
"-- Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by CPC in its sole discretion, duly executed by
the registered Holder exactly as the name or names of the registered Holder or
Holders appear on the Old Notes with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of receipt)
and acceptance of Old Notes tendered for exchange will be determined by CPC in
its sole discretion, which determination shall be final and binding. CPC
reserves the absolute right to reject any and all tenders of any particular Old
Notes not properly tendered or not to accept any particular Old Notes which
acceptance might, in the judgment of CPC or its counsel, be unlawful. CPC also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation of the
terms and conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by CPC shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as CPC shall
determine. None of CPC, the Exchange Agent or any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by CPC, proper
evidence satisfactory to CPC of their authority to so act must be submitted with
the Letter of Transmittal.
By tendering, each Holder will represent to CPC that, among other things, the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the Holder, and that neither the Holder nor such other person
has any arrangement or understanding with any person to participate in the
distribution of the New Notes. If any Holder or any such other person is an
"affiliate," as defined under
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<PAGE> 54
Rule 405 of the Securities Act, of CPC or is engaged in or intends to engage in,
or has an arrangement or understanding with any person to participate in, a
distribution of such New Notes to be acquired pursuant to the Exchange Offers,
such Holder or any such other person (i) may not rely on the applicable
interpretation of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes. See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer, CPC
will accept, promptly after the Expiration Date, all Old Notes properly tendered
and will issue the New Notes promptly after acceptance of the Old Notes. See
"-- Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, CPC will be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral (promptly confirmed in
writing) or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Notes will
receive as set forth below under "Description of Notes" a New Note having a
principal amount equal to that of the surrendered Old Notes. Accordingly,
registered Holders of New Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid, from May 9, 1997. Old
Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Holders whose Old Notes are accepted
for exchange will not receive any payment in respect of accrued interest on such
Old Notes otherwise payable on any interest payment date the record date for
which occurs on or after consummation of the Exchange Offer. In the event that
(i) the Registration Statement (or, if the Exchange Offer is not permitted under
applicable law or the Commission policy, the Initial Shelf Registration) has not
been filed on or prior to July 8, 1997, (ii) neither the Exchange Registration
Statement is declared effective by the Commission nor, if applicable, the Shelf
Registration is filed with the Commission on or prior to September 21, 1997, or
(iii) CPC has not exchanged the Exchange Notes for all Old Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
October 21, 1997, the Shelf Registration has not been declared effective on or
prior to October 21, 1997 or such Shelf Registration ceases to be effective
during the Effectiveness Period (each such event referred to in clauses (i)
through (iii), a ("Registration Default"), the annual interest rate borne by the
Notes will be increased 0.25% for the first 90 days following the occurrence of
such Registration Default and such interest will be increased an additional
0.25% at the beginning of each subsequent 90-day period until such Registration
Default is cured, up to a maximum of an additional amount of 1.00% per annum. If
the annual interest rate borne by the Old Notes shall have been increased by
reason of the circumstances described in one or more of the preceding sentences,
upon the cure of the Registration Default, the annual interest rates on the Old
Notes will revert to the annual interest rates set forth on the cover page of
this Prospectus. See "Description of Notes -- Registration Rights Agreement."
Old Notes not tendered or not accepted for exchange will continue to accrue
interest from and after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal or an Agent's Message in lieu there of and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the Holder desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering Holder thereof (or, in the cases of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
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<PAGE> 55
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus unless the
Exchange Agent already has established an account with the Book-Entry Transfer
Facility suitable for the Exchange Offer, and any financial institution that is
a participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or a facsimile thereof, with any required signature guarantees or on
Agent's Message in lieu thereof and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the addresses set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or the
guaranteed procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
time will not permit such Holder's Old Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) on or
prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
CPC (by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the Holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange ("NYSE") trading days after the date
of execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof) with any required signature guarantees and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. For a withdrawal to be effective, a written
notice or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at the address set forth below under "-- Exchange Agent." Any
such notice of withdrawal must specify the name of the person having tendered
the Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including
the principal amount of such Old Notes), and (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are registered,
if different from that of the withdrawing Holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution in which case such guarantee will
not be required. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by CPC, whose
determination will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
Holder thereof without cost to such Holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
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<PAGE> 56
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to its
obligations pursuant to the Registration Rights Agreement, CPC shall not be
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer, if at any time before the
acceptance of such New Notes for exchange, any of the following events shall
occur:
(i) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of CPC to proceed with the Exchange Offer; or
(ii) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of CPC and may be asserted by
CPC in whole or in part at any time and from time to time upon advice of outside
counsel. The failure by CPC at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
In addition, CPC will not accept for exchange any Old Notes tendered and no New
Notes will be issued in exchange for any such Old Notes, if at such time any
stop order is threatened by the Commission or in effect with respect to the
Registration Statement of which this Prospectus is a part or the qualification
of the Indenture under the Trust Indenture Act of 1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at the address set forth below. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests or Notices of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
The Bank of New York, Exchange Agent
By Mail:
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
By Hand or Overnight Courier:
101 Barclay Street
New York, New York 10286
Attn: Corporate Trust Services Window
Ground Level Reorganization, 7E
By Facsimile:
212-815-5915
Confirm by Telephone:
212-815-2742
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
CPC will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer.
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<PAGE> 57
The cash expenses to be incurred in connection with the Exchange Offer will be
paid by CPC. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
TRANSFER TAXES
Holders who tender their Old Notes for exchanges will not be obligated to pay
any transfer taxes in connection therewith, except that Holders who instruct CPC
to register New Notes in the name of, or request that Old Notes not tendered or
not accepted in the Exchange Offer be returned to, a person other than the
registered tendering Holder will be responsible for the payment of the
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the provisions in the Old
Notes regarding transfer and exchange of the Old Notes and the restrictions on
transfer of such Old Notes as set forth in the legend thereon as a consequence
of the issuance of the Old Notes pursuant to the exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the Securities Act. See "Description of Notes -- Registration
Rights Agreement."
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, CPC believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than any such
holder which is an "affiliate" of CPC within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course or such Holders' business and such Holders, other than
broker-dealers, have no arrangement or understanding with any person to
participate in the distribution of such New Notes. However, the Commission has
not considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of such New Notes and has
no arrangement or understanding to participate in a distribution of New Notes.
If any Holder is an affiliate of CPC or is engaged in or intends to engage in or
has any arrangements or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) may not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes pursuant
to the Exchange Offer must acknowledge that such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. CPC has agreed that for a period of 180
days after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such laws of certain jurisdictions,
if applicable, where the New Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with. CPC has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer or
sale under the securities laws of such jurisdictions as any Holder reasonably
requests in writing. Unless a Holder so requests, CPC does not currently intend
to register or qualify the sale of the New Notes in any such jurisdictions.
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DESCRIPTION OF NOTES
The Old Notes were issued under the Indenture and the New Notes also will be
issued under the Indenture. The Old Notes and the New Notes will be treated as a
single class of securities under the Indenture. The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended. A copy of
the Indenture is available from CPC upon request. Whenever defined terms of the
Indenture not otherwise defined herein are referred to, such defined terms are
incorporated herein by reference. The term Notes means the New Notes and the Old
Notes treated as a single class.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on May 1, 2004 and will bear interest at the rate per
annum shown on the cover page hereof, except as noted under "-- Registration
Rights," from the Issue Date or from the most recent interest payment date to
which interest has been paid or provided for. Interest will be payable
semiannually on May 1 and November 1 of each year, commencing November 1, 1997,
to the Person in whose name a Note is registered at the close of business on the
preceding April 15 or October 15 (each, a "Record Date"), as the case may be.
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months. Holders must surrender the Notes to the paying agent for the
Notes to collect principal payments. CPC will pay principal and interest by
check and may mail interest checks to a holder's registered address, except that
CPC may pay principal and interest on the Global Notes in immediately available
funds.
OPTIONAL REDEMPTION
The Notes will be subject to redemption, at the option of CPC, in whole or in
part, at any time on or after May 1, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' notice mailed to each holder of Notes to be
redeemed at his address appearing in the register for the Notes, in amounts of
$1,000 or an integral multiple of $1,000, at the following redemption prices
(expressed as percentages of principal amount) plus accrued interest to but
excluding the date fixed for redemption (subject to the right of holders of
record on the relevant Record Date to receive interest due on an interest
payment date that is on or prior to the date fixed for redemption), if redeemed
during the 12-month period beginning May 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------------------------------------- ----------
<S> <C>
2002.................................................................. 106.250%
2003.................................................................. 103.125
</TABLE>
In addition, prior to May 1, 2000, CPC may redeem up to 35% of the aggregate
principal amount of the Notes with the net cash proceeds received by CPC or CPH
from one or more public or private offerings of Capital Stock (other than
Disqualified Stock) of CPC or CPH, at a redemption price (expressed as a
percentage of the principal amount) of 112.50% of the principal amount thereof,
plus accrued and unpaid interest to the date fixed for redemption; provided,
however, that at least $65.0 million in aggregate principal amount of the Notes
remains outstanding immediately after any such redemption (excluding any Notes
owned by CPC or any of its Affiliates). Notice of redemption pursuant to this
paragraph must be mailed to holders of Notes not later than 60 days following
the consummation of such offering.
Selection of Notes for any partial redemption shall be made by the Trustee, in
accordance with the rules of any national securities exchange on which the Notes
may be listed or, if the Notes are not so listed, pro rata or by lot or in such
other manner as the Trustee shall deem appropriate and fair. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. Notice of redemption will be mailed before the date fixed
for redemption to each holder of Notes to be redeemed at his or her registered
address. On and after the date fixed for redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
The Notes will not have the benefit of any sinking fund.
RANKING
The Notes will rank pari passu in right of payment with all other unsubordinated
indebtedness of the Company. After giving pro forma effect to the Transactions,
as of March 28, 1997, the Company would have had approximately $124.4 million
principal amount of indebtedness outstanding, approximately $24.0 million of
which would have been secured indebtedness under the Credit Agreement and $0.4
million of which would have been capital leases. CPC would also have had an
additional $26.0 million of availability under the Credit Agreement. The Notes
are not secured and will, therefore, effectively rank behind
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<PAGE> 59
any secured indebtedness of the Company permitted under the Indenture (including
all indebtedness under the Credit Agreement) to the extent of the value of the
assets securing such indebtedness.
THE SUBSIDIARY GUARANTEE
The Indenture provides that the Subsidiary Guarantors will unconditionally
guarantee, on an unsecured basis, all of the obligations of CPC under the Notes,
including its obligations to pay principal, premium, if any, and interest with
respect to the Notes. The obligations of each Subsidiary Guarantor are limited
to the maximum amount which, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor, will result in the obligations
of the Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Except
as provided in "-- Covenants" below, CPC is not restricted from selling or
otherwise disposing of any of the Subsidiary Guarantors.
The Indenture provides that if the Notes are defeased in accordance with the
terms of the Indenture, or if all or substantially all of the assets of a
Subsidiary Guarantor or all of the Capital Stock of a Subsidiary Guarantor are
sold (including by issuance or otherwise) by CPC or any of its Subsidiaries in a
transaction constituting an Asset Disposition, and if (x) the Net Available
Proceeds from such Asset Disposition are used in accordance with the covenant
described under "-- Covenants -- Limitation on Certain Asset Dispositions" or
(y) CPC delivers to the Trustee an Officers' Certificate to the effect that the
Net Available Proceeds from such Asset Disposition shall be used in accordance
with the covenant described under "-- Covenants -- Limitation on Certain Asset
Dispositions" and within the time limits specified by such covenant, then the
Subsidiary Guarantor (in the event of a sale or other disposition of all of the
Capital Stock of the Subsidiary Guarantor) or the corporation acquiring such
assets (in the event of a sale or other disposition of all or substantially all
of the assets of the Subsidiary Guarantor) shall be released and discharged of
its Subsidiary Guarantee obligations.
The Subsidiary Guarantee will be pari passu in right of payment with any other
senior unsecured indebtedness of the Subsidiary Guarantor.
REGISTRATION RIGHTS AGREEMENT
CPC and the Subsidiary Guarantors have agreed with the Initial Purchasers
pursuant to the terms of the Registration Rights Agreement, for the benefit of
the holders of the Old Notes, that CPC and the Subsidiary Guarantors will use
their best efforts, and at their cost, to file and cause to become effective a
registration statement with respect to a registered offer to exchange the Old
Notes for an issue of Exchange Notes of CPC with terms identical to the Old
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions or the additional interest provisions described below)
which Exchange Notes will be guaranteed by the Subsidiary Guarantors with terms
identical to the Subsidiary Guarantee. Upon such registration statement being
declared effective, CPC shall offer the Exchange Notes in return for surrender
of the Old Notes. Such offer shall remain open for not less than 20 business
days after the date that notice of the exchange offer is mailed to holders of
the Old Notes. For each Old Note surrendered to CPC under the Exchange Offer,
the holder will receive an Exchange Note of equal principal amount.
In the event that applicable interpretations of the staff of the Commission do
not permit CPC to effect such an Exchange Offer, CPC and the Subsidiary
Guarantors shall, at their cost, use their best efforts to cause to become
effective a shelf registration statement with respect to resales of the Old
Notes (a "Shelf Registration Statement") and to keep such Shelf Registration
Statement effective until the earliest of (i) two years after the Issue Date,
(ii) the time when the Notes registered thereunder can be sold by non-affiliates
of CPC pursuant to Rule 144(k), or (iii) such time as all the Old Notes have
been sold thereunder. CPC shall, in the event of such a shelf registration,
provide to each holder copies of the prospectus, notify each holder when a
registration statement for the Old Notes has become effective and take certain
other actions as are required to permit resales of the Old Notes.
In the event that (i) the registration statement relating to the exchange offer
(or, if the exchange offer is not permitted under applicable law or Commission
policy, a Shelf Registration Statement) is not filed with the Commission on or
prior to July 8, 1997, (ii) such registration statement is not declared
effective by the Commission or a Shelf Registration Statement is not filed with
the Commission on or prior to September 21, 1997 or (iii) the exchange offer is
not consummated or a Shelf Registration Statement is not declared effective on
or prior to October 21, 1997 (each such event referred to in clauses (i) through
(iii), a "Registration Default"), then CPC will pay additional interest (in
addition to the interest otherwise due on the Notes) to each holder of Notes
during the first 90-day period immediately following the occurrence of each such
Registration Default in an amount of equal to 0.25% per annum. The amount of
interest will increase by an additional 0.25% per annum for each subsequent
90-day period until such Registration Default is cured, up to a maximum amount
of additional interest of 1.00% per annum. Such additional interest will cease
accruing on such Notes when the Registration Default has been cured.
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COVENANTS
The Indenture contains, among others, the following covenants:
Limitation of Indebtedness
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness), except: (i) Indebtedness of CPC or any of its
Restricted Subsidiaries, if immediately after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the net proceeds thereof,
the Consolidated Fixed Charge Coverage Ratio of CPC for the four full fiscal
quarters for which quarterly or annual financial statements are available next
preceding the Incurrence of such Indebtedness, calculated on a pro forma basis
as if such Indebtedness had been Incurred, and such net proceeds received and
applied, on the first day of such four full fiscal quarters, would be greater
than 2.0 to 1.00; (ii) Indebtedness of CPC and its Restricted Subsidiaries
Incurred under the Credit Agreement in an amount not to exceed $50.0 million;
(iii) Indebtedness owed by CPC to any direct or indirect Wholly Owned Subsidiary
of CPC; provided, however, upon either (I) the transfer or other disposition by
such direct or indirect Wholly Owned Subsidiary or CPC of any Indebtedness so
permitted under this clause (iii) to a Person other than CPC or another direct
or indirect Wholly Owned Subsidiary of CPC or (II) the issuance (other than
directors' qualifying shares), sale, transfer or other disposition of shares of
Capital Stock or other ownership interests (including by consolidation or
merger) of such direct or indirect Wholly Owned Subsidiary to a Person other
than CPC or another such Wholly Owned Subsidiary of CPC, the provisions of this
clause (iii) shall no longer be applicable to such Indebtedness and such
Indebtedness shall be deemed to have been Incurred at the time of any such
issuance, sale, transfer or other disposition, as the case may be; (iv)
Indebtedness of CPC or any Restricted Subsidiary under any interest rate
agreement to the extent entered into to hedge any other Indebtedness permitted
under the Indenture (including the Notes); (v) Indebtedness Incurred to renew,
extend, refinance or refund (collectively for purposes of this clause (v) to
"refund") any Indebtedness outstanding on the Issue Date, any Indebtedness
Incurred under the prior clause (i) above or the Notes and the Subsidiary
Guarantee; provided, however, that (I) such Indebtedness does not exceed the
principal amount (or accrual amount, if less) of Indebtedness so refunded (plus
unused commitments under revolving credit facilities) plus the amount of any
premium required to be paid in connection with such refunding pursuant to the
terms of the Indebtedness refunded or the amount of any premium reasonably
determined by the issuer of such Indebtedness as necessary to accomplish such
refunding by means of a tender offer, exchange offer, or privately negotiated
repurchase, plus the expenses of such issuer reasonably incurred in connection
therewith and (II)(A) in the case of any refunding of Indebtedness that is pari
passu with the Notes, such refunding Indebtedness is made pari passu with or
subordinate in right of payment to the Notes, and, in the case of any refunding
of Indebtedness that is subordinate in right of payment to the Notes, such
refunding Indebtedness is subordinate in right of payment to the Notes on terms
no less favorable to the holders of the Notes than those contained in the
Indebtedness being refunded, (B) in either case, the refunding Indebtedness by
its terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, does not have an Average Life that is less than the
remaining Average Life of the Indebtedness being refunded and does not permit
redemption or other retirement (including pursuant to any required offer to
purchase to be made by CPC or a Restricted Subsidiary of CPC) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refunded, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by CPC or a Restricted Subsidiary of CPC)
which is conditioned upon a change of control of CPC pursuant to provisions
substantially similar to those contained in the Indenture described under
"-- Change of Control" below and (C) any Indebtedness Incurred to refund any
Indebtedness is Incurred by the obligor on the Indebtedness being refunded or by
CPC; (vi) Indebtedness of CPC or its Subsidiaries not otherwise permitted to be
Incurred pursuant to clauses (i) through (v) above which, together with any
other outstanding Indebtedness Incurred pursuant to this clause (vi), has an
aggregate principal amount not in excess of $5.0 million at any time
outstanding, which Indebtedness may be incurred under the Credit Agreement or
otherwise; (vii) Indebtedness of CPC under the Notes incurred in accordance with
the Indenture; (viii) Indebtedness outstanding on the Issue Date; (ix)
Indebtedness incurred by CPC or any of its Restricted Subsidiaries constituting
reimbursement obligations with respect to letters of credit issued in the
ordinary course of business, including, without limitation, letters of credit in
respect of workers' compensation claims or self-insurance, or other Indebtedness
with respect to reimbursement type obligations regarding workers' compensation
claims or self-insurance, and obligations in respect of performance and surety
bonds and completion guarantees provided by CPC or any Restricted Subsidiary of
CPC in the ordinary course of business; (x) guarantees by CPC or its Restricted
Subsidiaries of Indebtedness otherwise permitted to be Incurred hereunder; (xi)
Indebtedness pursuant to a Permitted Receivables Financing; provided, however,
that Indebtedness Incurred under such Permitted Receivables Financing and
Indebtedness Incurred pursuant to clause (ii) above shall not exceed $50.0
million in the aggregate at any time outstanding; and (xii) Indebtedness
(including Capitalized Lease Obligations) Incurred by CPC or any of its
Restricted Subsidiaries to finance the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct purchase of
assets or the Capital Stock of
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any Person owning such assets) in an aggregate principal amount outstanding not
to exceed 5.0% of Tangible Assets at any time (which amount may, but need not,
be Incurred in whole or in part under the Credit Agreement) provided that the
principal amount of such Indebtedness does not exceed the fair market value of
such property or equipment at the time of Incurrence thereof.
Limitation on Restricted Payments
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any
dividend, or make any distribution of any kind or character (whether in cash,
property or securities), in respect of any class of the Capital Stock of CPC or
any of its Restricted Subsidiaries or to the holders thereof, excluding any (x)
dividend or distribution payable solely in shares of Capital Stock of CPC (other
than Disqualified Stock) or in options, warrants or other rights to acquire
Capital Stock of CPC (other than Disqualified Stock), or (y) in the case of any
Restricted Subsidiary of CPC, dividends or distributions payable to CPC or a
Restricted Subsidiary of CPC, (ii) purchase, redeem, or otherwise acquire or
retire for value shares of Capital Stock of CPC or any of its Restricted
Subsidiaries, any options, warrants or rights to purchase or acquire shares of
Capital Stock of CPC or any of its Restricted Subsidiaries or any securities
convertible or exchangeable into shares of Capital Stock of CPC or any of its
Restricted Subsidiaries, excluding any such shares of Capital Stock, options,
warrants, rights or securities which are owned by CPC or a Restricted Subsidiary
of CPC, (iii) make any Investment in (other than a Permitted Investment), or
payment on a guarantee of any obligation of, any Person, other than CPC or a
direct or indirect Wholly Owned Subsidiary of CPC, or (iv) redeem, defease,
repurchase, retire or otherwise acquire or retire for value, prior to any
scheduled maturity, repayment or sinking fund payment, Subordinated Indebtedness
(each of the transactions described in clauses (i) through (iv) (other than any
exception to any such clause) being a "Restricted Payment") if at the time
thereof, (1) a Default or an Event of Default shall have occurred and be
continuing, or (2) upon giving effect to such Restricted Payment, CPC could not
Incur at least $1.00 of additional Indebtedness pursuant to the terms of the
Indenture described in clause (i) of "-- Limitation on Indebtedness" above, or
(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments made on or after the Issue Date exceeds the sum of: (a) 50%
of cumulative Consolidated Net Income of CPC (or, in the case cumulative
Consolidated Net Income of CPC shall be negative, less 100% of such deficit)
since the end of the fiscal quarter in which the Issue Date occurs through the
last day of the fiscal quarter for which financial statements are available;
plus (b) 100% of the aggregate net proceeds received after the Issue Date,
including the fair market value of the property other than cash (determined in
good faith by the Board of Directors of CPC as evidenced by a resolution of such
Board of Directors filed with the Trustee), from the issuance of, or equity
contribution with respect to, Capital Stock (other than Disqualified Stock) of
CPC and warrants, rights or options on Capital Stock (other than Disqualified
Stock) of CPC (other than in respect of any such issuance to a Restricted
Subsidiary of CPC) and the principal amount of Indebtedness of CPC or any of its
Restricted Subsidiaries that has been converted into or exchanged for Capital
Stock of CPC which Indebtedness was Incurred after the Issue Date; plus (c) 100%
of the aggregate after-tax net proceeds, including the fair market value of
property other than cash (determined in good faith by the Board of Directors of
CPC as evidenced by a resolution of such Board of Directors filed with the
Trustee) of the sale or other disposition of any Investment constituting a
Restricted Payment made after the Issue Date; provided that any gain on the sale
or disposition included in such after tax net proceeds shall not be included in
determining Consolidated Net Income for purposes of clause (a) above.
The foregoing provisions will not be violated by (i) any dividend on any class
of Capital Stock of CPC or any of its Restricted Subsidiaries paid within 60
days after the declaration thereof if, on the date when the dividend was
declared, CPC or such Restricted Subsidiary, as the case may be, could have paid
such dividend in accordance with the provisions of the Indenture, (ii) the
renewal, extension, refunding or refinancing of any Indebtedness otherwise
permitted pursuant to the terms of the Indenture described in clause (v) of
"-- Limitation on Indebtedness" above, (iii) the exchange or conversion of any
Indebtedness of CPC or any of its Restricted Subsidiaries for or into Capital
Stock of CPC (other than Disqualified Stock), (iv) the redemption, repurchase,
retirement or other acquisition of any Capital Stock of CPC in exchange for or
out of the net cash proceeds of the substantially concurrent sale (other than to
a Restricted Subsidiary of CPC) of Capital Stock of CPC (other than Disqualified
Stock); provided, however, that the proceeds of such sale of Capital Stock shall
not be (and have not been) included in subclause (b) of clause (3) of the
preceding paragraph, (v) the payment of dividends to CPH in an amount equal to
the amount required for CPH to pay Federal, state and local income taxes to the
extent such income taxes are attributable to the income of CPC and its
Restricted Subsidiaries, (vi) payments of up to $500,000 annually to TC
Management L.L.C., for management and financial advisory services pursuant to
the terms of a management and consulting agreement entered into between the
Company and TC Management L.L.C., (vii) other Restricted Payments of up to $5.0
million in the aggregate, (viii) payments in lieu of fractional shares in an
amount not in excess of $100,000 in the aggregate; (ix) distributions to CPH to
permit CPH to repurchase its common stock at no more than fair market value
(determined in good faith by the Board of Directors of CPC as evidenced by a
resolution of such Board of Directors filed with the Trustee) from present or
former Management Investors in an amount not in excess of $2.0 million in the
aggregate; and (x) a payment of merger fees to
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TC Management L.L.C. in connection with the consummation of the Transactions
which payment is made on the Issue Date. Each Restricted Payment described in
clauses (i) (to the extent not already taken into account for purposes of
computing the aggregate amount of all Restricted Payments pursuant to clause (3)
of the preceding paragraph), (v), (vi), (vii), (viii) and (ix) of the previous
sentence shall be taken into account for purposes of computing the aggregate
amount of all Restricted Payments pursuant to clause (3) of the preceding
paragraph.
The Indenture will provide that for purposes of this covenant, (i) an
"Investment" shall be deemed to have been made at the time any Restricted
Subsidiary is designated as an Unrestricted Subsidiary in an amount
(proportionate to CPC's equity interest in such Subsidiary) equal to the net
worth of such Restricted Subsidiary at the time that such Restricted Subsidiary
is designated as an Unrestricted Subsidiary; (ii) at any date the aggregate of
all Restricted Payments made as Investments since the Issue Date shall exclude
and be reduced by an amount (proportionate to CPC's equity interest in such
Subsidiary) equal to the net worth of an Unrestricted Subsidiary at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary, not to
exceed, in the case of any such redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the amount of Investments previously made by CPC and the
Restricted Subsidiaries in such Unrestricted Subsidiary (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation which shall, in no event,
be less than zero), and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market at the time of such
transfer.
Limitation Concerning Distributions and Transfers by Restricted
Subsidiaries
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary of CPC to (i) pay, directly or indirectly, dividends or
make any other distributions in respect of its Capital Stock or pay any
Indebtedness or other obligations owed to CPC or any Restricted Subsidiary of
CPC, (ii) make loans or advances to CPC or any Restricted Subsidiary of CPC or
(iii) transfer any of its property or assets to CPC or any Restricted Subsidiary
of CPC, except for such encumbrances or restrictions existing under or by reason
of (a) any agreement in effect on the Issue Date as any such agreement is in
effect on such date, (b) the Credit Agreement, (c) any agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary prior to the date on which
such Restricted Subsidiary was acquired by CPC and outstanding on such date and
not Incurred in anticipation or contemplation of becoming a Restricted
Subsidiary and provided such encumbrance or restriction shall not apply to any
assets of CPC or its Restricted Subsidiaries other than such Restricted
Subsidiary, (d) customary provisions contained in an agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of a Restricted Subsidiary; provided, however, that such
encumbrance or restriction is applicable only to such Restricted Subsidiary or
assets, (e) an agreement effecting a renewal, exchange, refunding, amendment or
extension of Indebtedness Incurred pursuant to an agreement referred to in
clause (a) above, provided, however, that the provisions contained in such
renewal, exchange, refunding, amendment or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement that is the subject thereof in the
reasonable judgment of the Board of Directors of CPC as evidenced by a
resolution of such Board of Directors filed with the Trustee, (f) the Indenture,
(g) applicable law, (h) customary provisions restricting subletting or
assignment of any lease governing any leasehold interest of any Restricted
Subsidiary of CPC, (i) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the type referred to in
clause (iii) of this covenant, (j) restrictions of the type referred to in
clause (iii) of this covenant contained in security agreements securing
Indebtedness of a Restricted Subsidiary of CPC to the extent that such Liens
were otherwise incurred in accordance with "-- Limitation on Liens" below and
restrict the transfer of property subject to such agreements or (k) any
agreement relating to a Permitted Receivables Financing.
Limitation on Liens
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, incur any Lien on or with respect to any property or
assets of CPC or such Restricted Subsidiary owned on the Issue Date or
thereafter acquired or on the income or profits thereof, which Lien secures
Indebtedness, without making, or causing any such Restricted Subsidiary to make,
effective provisions for securing the Notes and all other amounts due under the
Indenture (and, if CPC shall so determine, any other Indebtedness of CPC or such
Restricted Subsidiary, including Subordinated Indebtedness; provided, however,
that Liens securing the Notes and any Indebtedness pari passu with the Notes are
senior to such Liens securing such Subordinated Indebtedness) equally and
ratably with such Indebtedness or, in the event such Indebtedness is subordinate
in right of payment to the Notes or the Subsidiary Guarantee prior to such
Indebtedness, as to such property or assets for so long as such Indebtedness
shall be so secured.
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The foregoing restrictions shall not apply to (i) Liens existing on the Issue
Date securing Indebtedness existing on the Issue Date; (ii) Liens securing
Indebtedness outstanding under the Credit Agreement and any guarantees thereof
to the extent that the Indebtedness secured thereby is permitted to be incurred
under the covenant described under "-- Limitation on Indebtedness" above; (iii)
Liens securing only the Notes and the Subsidiary Guarantees; (iv) Liens in favor
of CPC or a Subsidiary Guarantor; (v) Liens to secure Indebtedness Incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction or improvement of the property (or any other capital expenditure
financing) subject to such Liens; provided, however, that (a) the aggregate
principal amount of any Indebtedness secured by such a Lien does not exceed 100%
of such purchase price or cost, (b) such Lien does not extend to or cover any
other property other than such item of property and any improvements on such
item, (c) the Indebtedness secured by such Lien is Incurred by CPC within 180
days of the acquisition, construction or improvement of such property and (d)
the Incurrence of such Indebtedness is permitted by the provisions of the
Indenture described under "-- Limitation on Indebtedness" above; (vi) Liens on
property existing immediately prior to the time of acquisition thereof (and not
created in anticipation or contemplation of the financing of such acquisition);
(vii) Liens on property of a Person existing at the time such Person is acquired
or merged with or into or consolidated with CPC or any such Restricted
Subsidiary (and not created in anticipation or contemplation thereof); (viii)
Liens to secure Indebtedness Incurred to extend, renew, refinance or refund (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, any Indebtedness secured by the Liens referred to in the foregoing clauses
(i)-(vii) so long as such Liens do not extend to any other property and the
principal amount of Indebtedness so secured is not increased except for the
amount of any premium required to be paid in connection with such extension,
renewal, refinancing or refunding pursuant to the terms of the Indebtedness
extended, renewed, refinanced, or refunded by means of a tender offer, exchange
offer or private negotiation plus the expenses of the issuer of such
Indebtedness reasonably incurred in connection with such extension, renewal,
refinancing or refunding; (ix) liens in favor of the Trustee as provided for in
the Indenture; (x) Liens incurred in the ordinary course of business securing
assets not having a fair market value in excess of $250,000 and (xi) Liens
incurred in connection with a Permitted Receivables Financing.
Limitation on Certain Asset Dispositions
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make one or more Asset
Dispositions unless: (i) CPC or such Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the fair
market value of the assets sold or disposed of as determined by the Board of
Directors of CPC in good faith and evidenced by a resolution of such Board of
Directors filed with the Trustee; (ii) except in the case of a Permitted Asset
Swap, not less than 75% of the consideration for the disposition consists of
cash or readily marketable cash equivalents or the assumption of Indebtedness
(other than non-recourse Indebtedness or any Subordinated Indebtedness) of CPC
or such Restricted Subsidiary or other obligations relating to such assets (and
release of CPC or such Restricted Subsidiary from all liability on the
Indebtedness or other obligations assumed); and (iii) all Net Available
Proceeds, less any amounts invested within 360 days of such Asset Disposition in
assets related to the business of CPC (including the Capital Stock of another
Person (other than any Person that is a Restricted Subsidiary of CPC immediately
prior to such investment); provided, however, that immediately after giving
effect to any such investment (and not prior thereto) such Person shall be a
Restricted Subsidiary of CPC), are applied, on or prior to the 360th day after
such Asset Disposition, unless and to the extent that CPC shall determine to
make an Offer to Purchase, to the permanent reduction and prepayment of any
unsubordinated Indebtedness of CPC then outstanding (including a permanent
reduction of commitments in respect thereof). Any Net Available Proceeds from
any Asset Disposition which is subject to the immediately preceding sentence
that are not applied as provided in the immediately preceding sentence shall be
used promptly after the expiration of the 360th day after such Asset
Disposition, or promptly after CPC shall have earlier determined to not apply
any Net Available Proceeds therefrom as provided in clause (iii) of the
immediately preceding sentence, to make an Offer to Purchase outstanding Notes
at a purchase price in cash equal to 100% of their principal amount plus accrued
interest to the Purchase Date. Notwithstanding the foregoing, CPC may defer
making any Offer to Purchase outstanding Notes until there are aggregate
unutilized Net Available Proceeds from Asset Dispositions otherwise subject to
the two immediately preceding sentences equal to or in excess of $5.0 million
(at which time, the entire unutilized Net Available Proceeds from Asset
Dispositions otherwise subject to the two immediately preceding sentences, and
not just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph). Any remaining Net Available Proceeds following the
completion of the required Offer to Purchase may be used by CPC for any other
purposes (subject to other provisions of the Indenture) and the amount of Net
Available Proceeds then required to be otherwise applied in accordance with this
covenant shall be reset to zero, subject to any subsequent Asset Disposition.
These provisions will not apply to a transaction consummated in compliance with
the provisions of the Indenture described under "-- Merger, Consolidations and
Certain Sales of Assets" below.
In the event that CPC makes an Offer to Purchase the Notes, CPC shall comply
with any applicable securities laws and regulations, including any applicable
requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange Act.
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Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, (a) transfer, convey, sell or otherwise dispose of
any shares of Capital Stock of any Restricted Subsidiary of CPC (other than to
CPC or a Wholly Owned Subsidiary of CPC), except that CPC and any such
Restricted Subsidiary may, in any single transaction, sell all, but not less
than all, of the issued and outstanding Capital Stock of any such Restricted
Subsidiary to any Person, subject to complying with the provisions of the
Indenture described under "-- Limitation on Certain Asset Dispositions" above or
(b) issue shares of Capital Stock of a Restricted Subsidiary of CPC (other than
directors' qualifying shares), or securities convertible into, or warrants,
rights or options to subscribe for or purchase shares of, Capital Stock of a
Restricted Subsidiary of CPC to any Person other than to CPC or a Wholly Owned
Subsidiary of CPC.
Limitation on Transactions with Affiliates and Related Persons
The Indenture will provide that CPC will not, and will not permit any of its
Restricted Subsidiaries to, enter into directly or indirectly any transaction
with any of their respective Affiliates or Related Persons (other than CPC or a
Restricted Subsidiary of CPC), including, without limitation, the purchase,
sale, lease or exchange of property, the rendering of any service, or the making
of any guarantee, loan, advance or Investment, either directly or indirectly,
involving aggregate consideration in excess of $1,000,000 unless a majority of
the disinterested directors of the Board of Directors of CPC determines, in its
good faith judgment evidenced by a resolution of such Board of Directors filed
with the Trustee, that the terms of such transaction are at least as favorable
as the terms that could be obtained by CPC or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arms-length basis between
unaffiliated parties; provided, however, that if the aggregate consideration is
in excess of $5,000,000 CPC shall also obtain, prior to the consummation of the
transaction, the favorable opinion as to the fairness of the transaction to CPC
or such Restricted Subsidiary, from a financial point of view from an
independent financial advisor. The provisions of this covenant shall not apply
to (i) transactions permitted by the provisions of the Indenture described above
under the caption "-- Limitation on Restricted Payments" above, (ii) reasonable
fees and compensation paid to, and indemnity provided on behalf of, officers,
directors and employees of CPC and its Restricted Subsidiaries as determined in
good faith by the Board of Directors of CPC, (iii) loans to employees in the
ordinary course of business which are approved in good faith by the Board of
Directors of CPC and (iv) transactions in connection with a Permitted
Receivables Financing.
Change of Control
Within 30 days following the date of the consummation of a transaction resulting
in a Change of Control, CPC will commence an Offer to Purchase all outstanding
Notes at a purchase price in cash equal to 101% of their principal amount plus
accrued interest to the Purchase Date. Such Offer to Purchase will be
consummated not earlier than 30 days and not later than 60 days after the
commencement thereof. Each holder shall be entitled to tender all or any portion
of the Notes owned by such holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Note tendered must be an integral multiple
of $1,000 principal amount. A "Change of Control" will be deemed to have
occurred in the event that (whether or not otherwise permitted by the
Indenture), after the Issue Date (a) any Person or any Persons acting together
that would constitute a group (for purposes of Section 13(d) of the Exchange
Act, or any successor provision thereto) (a "Group"), together with any
Affiliates or Related Persons thereof, other than Permitted Holders, shall
"beneficially own" (as defined in Rule 13d-3 under the Exchange Act, or any
successor provision thereto) at least 40% of the voting power of the outstanding
Voting Stock of CPC; (b) any sale, lease or other transfer (in one transaction
or a series of related transactions) is made by CPC or any of its Restricted
Subsidiaries of all or substantially all of the consolidated assets of CPC and
its Restricted Subsidiaries to any Person; (c) CPC consolidates with or merges
with or into another Person or any Person consolidates with, or merges with or
into, CPC, in any such event pursuant to a transaction in which immediately
after the consummation thereof Persons owning a majority of the Voting Stock of
CPC immediately prior to such consummation shall cease to own a majority of the
Voting Stock of CPC or the surviving entity if other than CPC, (d) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
CPC; or (e) the stockholders of CPC approve any plan or proposal for the
liquidation or dissolution of CPC.
In the event that CPC makes an Offer to Purchase the Notes, CPC shall comply
with any applicable securities laws and regulations, including any applicable
requirements of Section 14(e), and Rule 14e-1 under, the Exchange Act.
With respect to the sale of assets referred to in the definition of "Change of
Control," the phrase "all or substantially all" of the assets of CPC will likely
be interpreted under applicable law and will be dependent upon particular facts
and circumstances. As a result, there may be a degree of uncertainty in
ascertaining whether a sale or transfer of "all or substantially all" of the
assets of CPC has occurred. In addition, no assurances can be given that CPC
will be able to acquire Notes tendered upon the occurrence of a Change of
Control. The ability of CPC to pay cash to the holders of Notes upon a
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Change of Control may be limited by its then existing financial resources. The
Credit Agreement will prohibit the purchase of outstanding Notes prior to
repayment of the borrowings under the Credit Agreement and any exercise by the
holders of the Notes of their right to require CPC to repurchase the Notes will
cause an event of default under the Credit Agreement. If CPC does not obtain
such waiver or consent to repay such Indebtedness, CPC will remain prohibited
from repurchasing the Notes. In such event, CPC's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture which would in
turn constitute a default under the Credit Agreement and possibly other
Indebtedness. None of the provisions relating to a repurchase upon a Change of
Control are waivable by the Board of Directors of CPC or the Trustee.
Mergers, Consolidations and Certain Sales of Assets
CPC will not consolidate or merge with or into any Person, or sell, assign,
lease, convey or otherwise dispose of (or cause or permit any Restricted
Subsidiary of CPC to consolidate or merge with or into any Person or sell,
assign, lease, convey or otherwise dispose of) all or substantially all of CPC's
assets (determined on a consolidated basis for CPC and its Restricted
Subsidiaries), whether as an entirety or substantially as an entirety in one
transaction or a series of related transactions, including by way of liquidation
or dissolution, to any Person unless, in each such case: (i) the entity formed
by or surviving any such consolidation or merger (if other than CPC or such
Restricted Subsidiary, as the case may be), or to which such sale, assignment,
lease, conveyance or other disposition shall have been made (the "Surviving
Entity"), is a corporation organized and existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the Surviving Entity
assumes by supplemental indenture all of the obligations of CPC on the Notes and
under the Indenture; (iii) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis, CPC or the
Surviving Entity, as the case may be, could Incur at least $1.00 of Indebtedness
pursuant to clause (i) of the provisions of the Indenture described under
"-- Limitation on Indebtedness" above; (iv) immediately before and after giving
effect to such transaction and treating any Indebtedness which becomes an
obligation of CPC or any of its such Restricted Subsidiaries as a result of such
transaction as having been incurred by CPC or such Restricted Subsidiary, as the
case may be, at the time of the transaction, no Default or Event of Default
shall have occurred and be continuing; and (v) if, as a result of any such
transaction, property or assets of CPC or a Restricted Subsidiary would become
subject to a Lien not excepted from the provisions of the Indenture described
under "-- Limitation on Liens" above, CPC, Restricted Subsidiary or the
Surviving Entity, as the case may be, shall have secured the Notes as required
by said covenant. The provisions of this paragraph shall not apply to any merger
of a Restricted Subsidiary of CPC with or into CPC or a Wholly Owned Subsidiary
of CPC or any transaction pursuant to which a Subsidiary Guarantor is to be
released in accordance with the terms of the Subsidiary Guarantee and the
Indenture in connection with any transaction complying with the provisions of
the Indenture described under "-- Limitation on Certain Asset Dispositions"
above.
Future Subsidiary Guarantors
The Indenture will provide that CPC will not create or acquire, nor permit any
of its Restricted Subsidiaries to create or acquire, any Restricted Subsidiary
after the Issue Date (other than a Securitization Subsidiary) unless, at the
time such Restricted Subsidiary has either assets or stockholder's equity in
excess of $25,000, such Restricted Subsidiary executes and delivers to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of CPC's obligations under the Notes and the Indenture on the terms set forth in
the Indenture.
PROVISION OF FINANCIAL INFORMATION
Whether or not CPC is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision thereto, following the effectiveness of the Exchange
Offer CPC shall file with the Commission the annual reports, quarterly reports
and other documents which CPC would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if CPC were so required, such documents to be filed with the Commission
on or prior to the respective dates (the "Required Filing Dates") by which CPC
would have been required so to file such documents if CPC were so required.
Regardless of whether CPC files such reports or other documents with the
Commission, CPC shall (a) within 15 days of each Required Filing Date (i)
transmit by mail to all holders of Notes, as the names and addresses appear in
the Note Register, without cost to such holders, and (ii) file with the Trustee,
copies of such annual reports, quarterly reports and other documents, and (b) if
filing such documents by CPC with the Commission is not permitted under the
Exchange Act, promptly upon written request supply copies of such documents to
any prospective holder of Notes.
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EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to pay
principal of (or premium, if any, on) any Note when due; (b) failure to pay any
interest on any Note when due and payable, and the default continues for 30
days; (c) default in the payment of principal of and interest on Notes required
to be purchased pursuant to an Offer to Purchase as described under
"-- Covenants -- Change of Control" and "-- Covenants -- Limitation on Certain
Asset Dispositions" above when due and payable; (d) failure to perform or comply
with any of the provisions described under "-- Covenants -- Mergers,
Consolidations and Certain Sales of Assets" above; (e) failure to perform any
other covenant or agreement of CPC under the Indenture or the Notes and the
default continues for 30 days after written notice to CPC by the Trustee or
holders of at least 25% in aggregate principal amount of outstanding Notes; (f)
default under the terms of one or more instruments evidencing or securing
Indebtedness of CPC or any of its Subsidiaries having an outstanding principal
amount of $5.0 million or more individually or in the aggregate that has
resulted in the acceleration of the maturity of such Indebtedness or failure to
pay principal when due at the stated maturity of any such Indebtedness; (g) the
rendering of a final judgment or judgments (not covered by insurance and not
subject to appeal) against CPC or any of its Subsidiaries in an amount of $5.0
million or more which remains undischarged or unstayed for a period of 60 days
after the date on which the right to appeal has expired; (h) certain events of
bankruptcy, insolvency or reorganization affecting CPC or any of its
Subsidiaries; and (i) the Subsidiary Guarantee ceases to be in full force and
effect or is declared null and void and unenforceable or is found to be invalid
or a Subsidiary Guarantor denies its liability under the Subsidiary Guarantee
(other than by reason of a release of such Subsidiary Guarantor from the
Subsidiary Guarantee in accordance with the terms of the Indenture and the
Subsidiary Guarantee).
If an Event of Default (other than an Event of Default with respect to CPC
described in clause (h) of the preceding paragraph) shall occur and be
continuing, either the Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Notes may accelerate the maturity of all
Notes, provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in aggregate principal
amount of outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default specified in clause (h) of the preceding paragraph with
respect to CPC occurs, the outstanding Notes will ipso facto become immediately
due and payable without any declaration or other act on the part of the Trustee
or any holder. For information as to waiver of defaults, see "-- Modification
and Waiver."
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes, give
the holders thereof notice of all uncured Defaults or Events of Default known to
it; provided, however, that, except in the case of an Event of Default or a
Default in payment with respect to the Notes or a Default or Event of Default in
complying with "-- Covenants -- Mergers, Consolidations and Certain Sales of
Assets," the Trustee shall be protected in withholding such notice if and so
long as the Trustee in good faith determines that the withholding of such notice
is in the interest of the holders of the Notes.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Notes.
CPC will be required to furnish to the Trustee annually a statement as to its
performance of certain of its obligations under the Indenture and as to any
default in such performance.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
CPC may terminate its substantive obligations and the substantive obligations of
the Subsidiary Guarantors in respect of the Notes by delivering all outstanding
Notes to the Trustee for cancellation and paying all sums payable by CPC on
account of principal of, premium, if any, and interest on all Notes or
otherwise. In addition to the foregoing, CPC may, provided that no Default or
Event of Default has occurred and is continuing on the date of the deposit
referred to below or during the period ending on the 95th calendar day after the
date of such deposit, or would arise therefrom, terminate, on the 95th calendar
day following the deposit referred to below, its substantive obligations and the
substantive obligations of the Subsidiary Guarantors in respect of the Notes
(except for CPC's obligation to pay the principal of (and premium, if any, on)
and the interest on the Notes and such Subsidiary Guarantors' guarantee thereof)
by (i) depositing with the Trustee, under the terms of an irrevocable
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trust agreement, money or United Sates Government Obligations sufficient
(without reinvestment) to pay all remaining indebtedness on the Notes, (ii)
delivering to the Trustee either an Opinion of Counsel or a ruling directed to
the Trustee from the Internal Revenue Service to the effect that the holders of
the Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that CPC's
exercise of its option under this paragraph will not result in CPC, the Trustee
or the trust created by CPC's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended, and (iv) complying with certain other
requirements set forth in the Indenture. In addition, CPC may, provided that no
Default or Event of Default has occurred, and is continuing on the date of the
deposit referred to below or during the period ending on the 95th calendar day
after the date of such deposit, or would arise therefrom, terminate, on the 95th
calendar day following the deposit referred to below, all of its substantive
obligations and all of the substantive obligations of the Subsidiary Guarantors
in respect of the Notes (including CPC's obligation to pay the principal of (and
premium, if any, on) and interest on the Notes and such Subsidiary Guarantors'
guarantee thereof) by (i) depositing with the Trustee, under the terms of an
irrevocable trust agreement, money or United States Government Obligations
sufficient (without reinvestment) to pay all remaining indebtedness on the
Notes, (ii) delivering to the Trustee either a ruling directed to the Trustee
from the Internal Revenue Service to the effect that the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and termination of obligations or an Opinion of Counsel
based upon such a ruling addressed to the Trustee or a change in the applicable
Federal tax law since the date of the Indenture, to such effect, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that CPC's
exercise of its option under this paragraph will not result in CPC, the Trustee
or the trust created by CPC's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended, and (iv) complying with certain other
requirements set forth in the Indenture.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantee will be governed by the
laws of the State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by CPC, the Subsidiary
Guarantors and the Trustee with the consent of the holders of a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
Note affected thereby, (a) change the Stated Maturity of the principal of or any
installment of interest on any Note or alter the optional redemption or
repurchase provisions of any Note or the Indenture in a manner adverse to the
holders of the Notes, (b) reduce the principal amount of (or the premium) of any
Note, (c) reduce the rate of or extend the time for payment of interest on any
Note, (d) change the place or currency of payment of principal of (or premium)
or interest on any Note, (e) modify any provisions of the Indenture relating to
the waiver of past defaults or the right of the holders to institute suit for
the enforcement of any payment on or with respect to any Note or the Subsidiary
Guarantee or the modification and amendment of the Indenture and the Notes
(other than to add sections of the Indenture or the Notes which may not be
amended, supplemented or waived without the consent of each holder affected),
(f) reduce the percentage of the principal amount of outstanding Notes necessary
for amendment to or waiver of compliance with any provision of the Indenture or
the Notes or for waiver of any Default, (g) waive a default in the payment of
principal of, interest on, or redemption payment with respect to, any Note
(except a recision of acceleration of the Notes by the holders as provided in
the Indenture and a waiver of the payment default that resulted from such
acceleration), (h) modify the ranking or priority of the Notes or the Subsidiary
Guarantee, (i) release the Subsidiary Guarantors from any of their respective
obligations under the Subsidiary Guarantee or the Indenture otherwise than in
accordance with the Indenture, or (j) modify the provisions relating to any
Offer to Purchase required under the covenants described under
"-- Covenants -- Limitation on Certain Asset Dispositions" or
"-- Covenants -- Change of Control" in a manner materially adverse to the
holders of Notes with respect to any Asset Disposition that has been consummated
or Change of Control that has occurred.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by CPC with
certain restrictive provisions of the Indenture. Subject to certain rights of
the Trustee, as provided in the Indenture, the holders of a majority in
aggregate principal amount of the outstanding Notes, on behalf of all holders of
Notes, may waive any past default under the Indenture, except a default in the
payment of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase, or a default in
respect of a provision that under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Note affected.
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THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of a Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of CPC or
any other obligor upon the Notes, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with CPC or an Affiliate of CPC; provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture or the Registration Rights Agreement. Reference is made to the
Indenture or the Registration Rights Agreement for the full definitions of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means, with respect to any Person, Indebtedness of such
Person (i) existing at the time such Person becomes a Restricted Subsidiary or
(ii) assumed in connection with the acquisition of assets from another Person,
including Indebtedness Incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, transfer or other disposition (including,
without limitation, by merger, consolidation or sale-and-leaseback transaction)
of (i) shares of Capital Stock of a Subsidiary of CPC (other than directors'
qualifying shares) or (ii) property or assets of CPC or any Subsidiary of CPC;
provided, however, that an Asset Disposition shall not include (a) any sale,
transfer or other disposition of shares of Capital Stock, property or assets by
a Restricted Subsidiary of CPC to CPC or to any Wholly Owned Subsidiary of CPC,
(b) any sale, transfer or other disposition of defaulted receivables for
collection or any sale, transfer or other disposition of property or assets in
the ordinary course of business, (c) any individual isolated sale, transfer or
other disposition that does not involve aggregate consideration in excess of
$250,000, (d) the grant in the ordinary course of business of any nonexclusive
license of patents, trademarks, registrations therefor and other similar
intellectual property, (e) any Lien (or foreclosure thereon) securing
Indebtedness to the extent that such Lien is granted in compliance with
"-- Covenants -- Limitation on Liens" above, (f) any Restricted Payment
permitted by "-- Covenants -- Limitation on Restricted Payments" above, (g) the
sale, lease, conveyance or disposition or other transfer of all or substantially
all of the assets of CPC as permitted under "-- Covenants -- Mergers,
Consolidations and Certain Sales of Assets" above; provided, that the assets not
so sold, leased, conveyed, disposed of or otherwise transferred shall be deemed
an Asset Disposition, (h) any disposition that constitutes a Change of Control
or (i) any Permitted Receivables Financing.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"Capital Lease Obligations" of any Person means the obligations to pay rent or
other amounts under a lease of (or other arrangements conveying the right to
use) real or personal property of such Person which are required to be
classified and accounted for as capital leases or liabilities on the face of a
balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person (including any Preferred Stock outstanding on the Issue Date).
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"Common Stock" of any Person means Capital Stock of such Person that does not
rank prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Consolidated EBITDA" of any Person means for any period the Consolidated Net
Income of such Person for such period increased (to the extent Consolidated Net
Income for such period has been reduced thereby) by the sum of (without
duplication) (i) Consolidated Interest Expense of such Person for such period,
plus (ii) Consolidated Income Tax Expense of such Person for such period, plus
(iii) the consolidated depreciation and amortization expense included in the
income statement of such Person prepared in accordance with GAAP for such
period, plus (iv) any other non-cash charges to the extent deducted from or
reflected in Consolidated Net Income except for any non-cash charges that
represent accruals of, or reserves for, cash disbursements to be made in any
future accounting period.
"Consolidated Fixed Charge Coverage Ratio" of any Person means for any period
the ratio of (i) Consolidated EBITDA of such Person for such period to (ii) the
sum of (A) Consolidated Interest Expense of such Person for such period, plus
(B) the annual interest expense with respect to any Indebtedness proposed to be
Incurred by such Person or its Restricted Subsidiaries, minus (C) Consolidated
Interest Expense of such Person to the extent included in clause (ii)(A) with
respect to any Indebtedness that will no longer be outstanding as a result of
the Incurrence of the Indebtedness proposed to be Incurred, plus (D) the annual
interest expense with respect to any other Indebtedness Incurred by such Person
or its Restricted Subsidiaries since the end of such period to the extent not
included in clause (ii)(A), minus (E) Consolidated Interest Expense of such
Person to the extent included in clause (ii)(A) with respect to any Indebtedness
that no longer is outstanding as a result of the Incurrence of the Indebtedness
referred to in clause (ii)(D); provided, however, that in making such
computation, the Consolidated Interest Expense of such Person attributable to
interest on any Indebtedness bearing a floating interest rate shall be computed
on a pro forma basis as if the rate in effect on the date of computation (after
giving effect to any hedge in respect of such Indebtedness that will, by its
terms, remain in effect until the earlier of the maturity of such Indebtedness
or the date one year after the date of such determination) had been the
applicable rate for the entire period; provided, further, however, that, in the
event such Person or any of its Restricted Subsidiaries has made any Asset
Dispositions or acquisitions of assets not in the ordinary course of business
(including acquisitions of other Persons by merger, consolidation or purchase of
Capital Stock) during or after such period and on or prior to the date of
computation, such computation shall be made on a pro forma basis as if the Asset
Dispositions or acquisitions had taken place on the first day of such period.
Calculations of pro forma amounts in accordance with this definition shall be
done in accordance with Article 11 of Regulation S-X under the Securities Act of
1933 or any successor provision and may include reasonably ascertainable cost
savings.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" for any Person means for any period, without
duplication, (a) the consolidated interest expense included in a consolidated
income statement (without deduction of interest or finance charge income) of
such Person and its Restricted Subsidiaries for such period calculated on a
consolidated basis in accordance with GAAP and (b) dividend requirements of such
Person and its Restricted Subsidiaries with respect to Disqualified Stock and
with respect to all other Preferred Stock of Restricted Subsidiaries of such
Person (in each case whether in cash or otherwise (except dividends payable
solely in shares of Capital Stock of such Person or such Restricted Subsidiary))
paid, declared, accrued or accumulated during such period times a fraction the
numerator of which is one and the denominator of which is one minus the then
effective consolidated Federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Net Income" of any Person means for any period the consolidated
net income (or loss) of such Person and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided,
however, that there shall be excluded therefrom (a) the net income (or loss) of
any Person acquired by such Person or a Restricted Subsidiary of such Person in
a pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (but not net loss) of any Restricted Subsidiary
of such Person which is subject to restrictions which prevent or limit the
payment of dividends or the making of distributions to such Person to the extent
of such restrictions (regardless of any waiver thereof), (c) non-cash gains and
losses due solely to fluctuations in currency values, (d) the net income of any
Person that is not a Restricted Subsidiary of such Person, except to the extent
of the amount of dividends or other distributions representing such Person's
proportionate share of such other Person's net income for such period actually
paid in cash to such Person by such other Person during such period, (e) gains
but not losses on Asset Dispositions by such Person or its Restricted
Subsidiaries, (f) all gains and losses classified as extraordinary, unusual or
nonrecurring in accordance with GAAP and (g) in the case of a successor to the
referent Person by consolidation or merger or as a transferee of the referent
Person's assets, any earnings (or losses) of the successor corporation prior to
such consolidation, merger or transfer of assets.
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"Continuing Director" means a director who either was a member of the Board of
Directors of CPC on the Issue Date or who became a director of CPC subsequent to
the Issue Date and (i) whose election, or nomination for election by CPC's
stockholders, was duly approved by a majority of the Continuing Directors then
on the Board of Directors of CPC either by a specific vote or by approval of the
proxy statement issued by CPC on behalf of the entire Board of Directors of CPC
in which such individual is named as nominee for director or (ii) whose election
was duly approved by the Principals at a meeting of stockholders of CPC called
for such purpose.
"Credit Agreement" means, collectively, (i) that certain Credit Agreement, to be
dated as of May 9, 1997 between CPC and Dresdner Bank AG, New York and Grand
Cayman Branches, as agent and certain other financial institutions and (ii) any
deferrals, renewals, extensions, replacements, refinancings or refundings of any
of the foregoing, or amendments, modifications or supplements to (including,
without limitation, any amendment increasing the amount borrowed or
reimbursement obligation thereunder) whether by or with the same or any other
lender, creditor, or group of creditors and including related notes, guarantee
agreements and other instruments and agreements executed in connection
therewith.
"Default" means any event that is, or after notice or lapse of time or both
would become, an Event of Default.
"Disqualified Stock" of any Person means any Capital Stock of such Person which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and the
rules and regulations promulgated by the Commission thereunder.
"GAAP" means generally accepted accounting principles, consistently applied, as
in effect on the Issue Date in the United States of America, as set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as is approved by a significant segment of the accounting
profession in the United States. All ratios and computations based on GAAP
contained in the Indenture shall be computed in conformity with GAAP applied on
a consistent basis.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of CPC (or is merged into or consolidates with CPC or any of its
Restricted Subsidiaries), whether or not such Indebtedness was incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary of CPC (or being merged into or consolidated with CPC or any of its
Restricted Subsidiaries), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary of CPC or merges into or consolidates with CPC
or any of its Restricted Subsidiaries.
"Indebtedness" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every Capital Lease Obligation of such Person, (vi) every
net obligation under interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements of such Person and (vii) every
obligation of the type referred to in clauses (i) through (vi) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor, guarantor or otherwise. Indebtedness shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Stock of CPC, and any Preferred Stock of a Subsidiary of CPC.
Indebtedness shall never be calculated taking into account any cash and cash
equivalents held by such Person. Indebtedness shall not include obligations
arising from agreements of CPC or a Restricted Subsidiary of CPC to provide for
indemnification, adjustment of purchase price, earn-out, or other similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business or assets of a Restricted Subsidiary of CPC.
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"Investment" by any Person means any direct or indirect loan, advance, guarantee
or other extension of credit or capital contribution to (by means of transfers
of cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by any other Person.
"Issue Date" means the original issue date of the Notes.
"Lien" means, with respect to any property or assets, any mortgage or deed of
trust, pledge, hypothecation, assignment, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
with respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Management Investors" means full-time members of management of CPC who acquire
stock of CPH on or after the Issue Date and any of their Permitted Transferees.
"Net Available Proceeds" from any Asset Disposition by any Person means cash or
readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form) therefrom by such Person, including any
cash received by way of deferred payment or upon the monetization or other
disposition of any non-cash consideration (including notes or other securities)
received in connection with such Asset Disposition, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred and
all federal, state, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its Restricted Subsidiaries on any Indebtedness which is secured
by such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all payments made with
respect to liabilities associated with the assets which are the subject of the
Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Restricted Subsidiary thereof, as the case may be, as a reserve in
accordance with GAAP against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, until such time as
such amounts are no longer reserved or such reserve is no longer necessary (at
which time any remaining amounts will become Net Available Proceeds to be
allocated in accordance with the provisions of clause (iii) of the covenant of
the Indenture described under "-- Covenants -- Limitation on Certain Asset
Dispositions") and (v) all distributions and other payments made to minority
interest holders in Restricted Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition.
"Offer To Purchase" means a written offer (the "Offer") sent by CPC by first
class mail, postage prepaid, in the case of the Global Notes to DTC and in the
case of certificated Notes to each holder at his address appearing in the
register for the Notes, in each case, on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase which shall
be not less than 30 days nor more than 60 days after the date of such Offer and
a settlement date (the "Purchase Date") for purchase of Notes within five
Business Days after the Expiration Date. CPC shall notify the Trustee at least
15 Business Days (or such shorter period as is acceptable to the Trustee) prior
to the mailing of the Offer of CPC's obligation to make an Offer to Purchase,
and the Offer shall be mailed by CPC or, at CPC's request, by the Trustee in the
name and at the expense of CPC. The Offer shall contain all the information
required by applicable law to be included therein. The Offer shall contain all
instructions and materials necessary to enable such holders to tender Notes
pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to
be purchased by CPC pursuant to the Offer to Purchase (including, if less
than 100%, the manner by which such amount has been determined pursuant to
the Section of the Indenture requiring the Offer to Purchase) (the
"Purchase Amount");
(4) the purchase price to be paid by CPC for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to
the Indenture) (the "Purchase Price");
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<PAGE> 72
(5) that the holder may tender all or any portion of the Notes
registered in the name of such holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by CPC pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if CPC or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to CPC and the Trustee duly executed by, the
holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
Notes tendered if CPC (or its paying agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Note the holder tendered,
the certificate number of the Note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, CPC shall purchase all such Notes and (b) if
Notes in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, CPC shall
purchase Notes having an aggregate principal amount equal to the Purchase
Amount on a pro rata basis (with such adjustments as may be deemed
appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in
part, CPC shall execute and the Trustee shall authenticate and deliver to
the holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"Permitted Asset Swap" means any one or more transactions in which CPC or any of
its Restricted Subsidiaries exchanges assets for consideration consisting of (i)
cash, (ii) assets used or useful in the business of CPC as conducted on the
Issue Date or reasonable extensions, developments or expansions thereof or
ancillary thereto and/or (iii) other assets in an amount less than 15% of the
fair market value of such transaction or transactions.
"Permitted Holder" means any of (i) the Principals and their Related Persons and
Affiliates and (ii) the Management Investors.
"Permitted Investments" means (i) Investments in marketable, direct obligations
issued or guaranteed by the United States of America, or any governmental entity
or agency or political subdivision thereof (provided, that the full faith and
credit of the United States of America is pledged in support thereof), maturing
within one year of the date of purchase; (ii) Investments in commercial paper
issued by corporations or financial institutions maturing within 180 days from
the date of the original issue thereof, and rated "P-1" or better by Moody's
Investors Service or "A-1" or better by Standard & Poor's Corporation or an
equivalent rating or better by any other nationally recognized securities rating
agency; (iii) Investments in time deposits and certificates of deposit issued or
acceptances accepted by or guaranteed by any bank or trust company organized
under the laws of the United States of America or any state thereof or the
District of Columbia or incorporated in a foreign jurisdiction and having a
branch office in the United States (each, an "Approved Bank"), in each case
having capital, surplus and undivided profits totaling more than $500,000,000,
maturing within one year of the date of purchase; (iv) Investments representing
Capital Stock or obligations issued to CPC or any of its Restricted Subsidiaries
in the course of the good faith settlement of claims against any other Person or
by reason of a composition or readjustment of debt or a reorganization of any
debtor of CPC or any of its Restricted Subsidiaries; (v) deposits, including
interest-bearing deposits, maintained in the ordinary course of business in
banks; (vi) repurchase obligations of an Approved Bank for government
obligations with a term of not more than seven days; (vii) investments in money
market mutual funds having assets in excess of $2.5 billion all of whose assets
are comprised of government obligations; (viii) any acquisition of the Capital
Stock of any Person; provided, however, that after giving effect to any such
acquisition such Person shall become a Restricted Subsidiary of CPC; (ix) trade
receivables and
71
<PAGE> 73
prepaid expenses, in each case arising in the ordinary course of business;
provided, however, that such receivables and prepaid expenses would be recorded
as assets of such Person in accordance with GAAP; (x) endorsements for
collection or deposit in the ordinary course of business by such Person of bank
drafts and similar negotiable instruments of such other Person received as
payment for ordinary course of business trade receivables; (xi) any interest
swap or hedging obligation with an unaffiliated Person otherwise permitted by
the Indenture; (xii) Investments received as consideration for an Asset
Disposition in compliance with the provisions of the Indenture described under
"-- Covenants -- Limitation on Certain Asset Dispositions" above; (xiii)
Investments in Restricted Subsidiaries or by virtue of which a person becomes a
Restricted Subsidiary; (xiv) loans and advances to employees made in the
ordinary course of business; (xv) Investments the sole consideration for which
consists of Capital Stock of CPC; and (xvi) Investments required in connection
with any Permitted Receivables Financing to the extent such Investments are
customary in respect of transactions of such nature.
"Permitted Receivables Financing" means a transaction or series of transactions
(including amendments, supplements, extensions, renewals, replacements,
refinancings or modifications thereof) pursuant to which (a) a Securitization
Subsidiary purchases Receivables and Related Assets from CPC or any Restricted
Subsidiary and finances such Receivables and Related Assets through the issuance
of indebtedness or equity interests or through the sale of the Receivables and
Related Assets or a fractional undivided interest in the Receivables and Related
Assets or (b) the Company or a Restricted Subsidiary finances Receivables and
Related Assets through the sale of the Receivables and Related Assets or
fractional undivided interests therein; provided that (i) the Board of Directors
shall have determined in good faith that such Permitted Receivables Financing is
economically fair and reasonable to CPC and the Securitization Subsidiary, (ii)
all sales of Receivables and Related Assets to the Securitization Subsidiary are
made at fair market value (as determined in good faith by the Board of
Directors), (iii) the financing terms, covenants, termination events and other
provisions thereof shall be market terms (as determined in good faith by the
Board of Directors), (iv) no portion of the Indebtedness of a Securitization
Subsidiary is guaranteed by or is recourse to CPC or any Restricted Subsidiary
(other than recourse for customary representations, warranties, covenants and
indemnities, none of which shall relate to the collectibility of the Receivables
and Related Assets) and (v) neither CPC nor any Subsidiary has any obligation to
maintain or preserve the Securitization Subsidiary's financial condition.
"Permitted Transferee" means, with respect to any Management Investor (i) any
spouse or lineal descendant (including by adoption and stepchildren) of such
Management Investor and (ii) any trust, corporation or partnership, the
beneficiaries, stockholders or partners of which consist entirely of one or more
Management Investors or individuals described in clause (i) above.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock", as applied to the Capital Stock of any Person, means Capital
Stock of such Person of any class or classes (however designated) that ranks
prior, as to the payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Principals" means TC Equity Partners, L.L.C. and any Person controlled by TC
Equity Partners, L.L.C., any Related Person of TC Equity Partners, L.L.C. and
certain other Persons related to TC Equity Partners, L.L.C.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Receivables and Related Assets" means accounts receivable and instruments,
chattel paper, obligations, general intangibles and other similar assets, in
each case, relating to such receivables, including interests in merchandise or
goods, the sale or lease of which gave rise to such receivable, related
contractual rights, guarantees, insurance proceeds, collections, other related
assets and proceeds of all of the foregoing.
"Related Person" of any Person means any other Person directly or indirectly
owning (a) 5% or more of the outstanding Common Stock of such Person (or, in the
case of a Person that is not a corporation, 5% or more of the equity interest in
such Person) or (b) 5% or more of the combined voting power of the Voting Stock
of such Person.
"Restricted Subsidiary" means (i) any Subsidiary of CPC other than an
Unrestricted Subsidiary and (ii) any successor to a substantial portion of the
assets of any Subsidiary other than an Unrestricted Subsidiary.
"Securitization Subsidiary" means a Wholly Owned Subsidiary of CPC, which is
established for the limited purpose of acquiring and financing Receivables and
Related Assets and engaging in activities ancillary thereto.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding on the
date hereof or hereafter incurred) which is by its terms expressly subordinate
or junior in right of payment to the Notes.
72
<PAGE> 74
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Subsidiary Guarantee" means the guarantee of the Notes by each Subsidiary
Guarantor under the Indenture.
"Subsidiary Guarantor" means each Restricted Subsidiary of CPC existing as of
the Issue Date, or formed or acquired after the Issue Date, which pursuant to
the terms of the Indenture executes a supplement to the Indenture as guarantor.
"Tangible Assets" means the total amount of assets of CPC and the Restricted
Subsidiaries after deducting therefrom all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangible assets,
all as set forth on the most recent balance sheet of CPC and its Subsidiaries
and computed in accordance with GAAP.
"Unrestricted Subsidiary" means (i) any Subsidiary of CPC formed or acquired
after the Issue Date that at the time of determination is designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. Any such designation by
the Board of Directors will be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation and
an officers' certificate certifying that such designation complied with the
following provisions. The Indenture will provide that, the Board of Directors of
CPC may not designate any Subsidiary of CPC to be an Unrestricted Subsidiary if,
after such designation, (a) CPC or any other Restricted Subsidiary (i) provides
credit support for, or a guarantee of, any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (b) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of CPC or any Restricted
Subsidiary to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity or
(c) such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any Restricted Subsidiary which is not a Subsidiary of the
Subsidiary to be so designated.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal material United States federal income
tax consequences which may result to holders of Notes from the purchase,
ownership and disposition of the Notes is based on existing provisions of the
U.S. Internal Revenue Code (the "Code"), applicable permanent, temporary and
proposed Treasury Regulations ("Treasury Regulations"), judicial authority, and
administrative rulings and pronouncements of the Internal Revenue Service (the
"Service") and is based on facts concerning the Company and its subsidiaries as
of the date hereof. There can be no assurances that the Service will not take a
contrary view, and no ruling from the Service has been or will be sought, on the
issues discussed herein. Legislative, judicial, or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders of Notes. This
discussion applies only to a person who is (i) a citizen or resident of the
United States for U.S. federal income tax purposes, (ii) a corporation,
partnership or other entity created or organized under the laws of the United
States or any political subdivision thereof, or (iii) an estate or trust the
income of which is subject to U.S. federal income taxation regardless of its
source (a "U.S. Holder").
This summary does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to particular U.S. Holders of Notes in light of
their personal investment or tax circumstances, or to certain types of investors
(including insurance companies, certain financial institutions, broker-dealers,
tax-exempt organizations, foreign corporations and persons who are not citizens
or resident of the United States, and U.S. Holders of Notes who directly or
indirectly own 10% or more of the voting
73
<PAGE> 75
power of the Company) who are subject to special treatment under the United
States federal income tax laws, or persons that hold Notes that are a hedge
against, or that are hedged against, currency risk or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. Moreover, the effect of any applicable state, local or foreign
tax laws is not discussed.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF PURCHASING, HOLDING, AND DISPOSING OF THE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS.
Exchange of Old Notes for New Notes. An exchange of the Old Notes for the New
Notes pursuant to the Exchange Offer will not constitute a taxable event for
federal income tax purposes because the New Notes will not be considered to
differ materially in kind or extent from the Old Notes. Rather, the New Notes
received by U.S. Holders will be treated as a continuation of the Old Notes in
the hands of such holders. As a result, U.S. Holders who exchange their Old
Notes for New Notes should not recognize any income, gain or loss for federal
income tax purposes with respect to such exchange.
Interest on New Notes. A holder of a New Note will be required to report as
ordinary interest income for U.S. federal income tax purposes interest earned on
the New Note in accordance with the holder's method of tax accounting.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. CPC has agreed that, for a
period of 180 days after the Expiration Date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
CPC will not receive any proceeds from any sale of New Notes by broker-dealers.
New Notes received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus meeting the requirements of the
Securities Act, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
CPC has agreed, pursuant to the Registration Rights Agreement, to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for all the holders of the Notes as a single class) other than commissions or
concessions of any brokers or dealers and will indemnify the Holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the Company
by Koerner Silberberg & Weiner, LLP, New York, New York.
EXPERTS
The consolidated balance sheets of Colorado Prime Corporation and Subsidiaries
as of September 29, 1995 and September 27, 1996 and the related statements of
consolidated operations, shareholder's equity and cash flows for each of the
three fiscal years in the period ended September 27, 1996, included in this
filing have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
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<PAGE> 76
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
COLORADO PRIME CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants......................................................... F-2
Financial statements:
Consolidated balance sheets as of September 29, 1995 and September 27, 1996.................... F-3
Statements of consolidated operations for the fiscal years ended September 30, 1994, September
29, 1995 and September 27, 1996............................................................. F-4
Statements of consolidated stockholder's equity for the fiscal years ended September 30, 1994,
September 29, 1995 and September 27, 1996................................................... F-5
Statements of consolidated cash flows for the fiscal years ended September 30, 1994, September
29, 1995 and September 27, 1996............................................................. F-6
Notes to consolidated financial statements..................................................... F-7
Unaudited consolidated balance sheets as of March 29, 1996 and March 28, 1997.................. F-14
Unaudited statements of consolidated operations for the twenty-six weeks ended March 29, 1996
and March 28, 1997.......................................................................... F-15
Unaudited statements of consolidated cash flows for the twenty-six weeks ended March 29, 1996
and March 28, 1997.......................................................................... F-16
Notes to unaudited consolidated interim financial statements................................... F-17
</TABLE>
F-1
<PAGE> 77
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Colorado Prime Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Colorado Prime
Corporation (a Delaware corporation) and Subsidiaries as of September 29, 1995
and September 27, 1996 and the related statements of consolidated operations,
stockholder's equity and cash flows for each of the three fiscal years in the
period ended September 27, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Colorado Prime Corporation and
Subsidiaries as of September 29, 1995 and September 27, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended September 27, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
December 10, 1996
F-2
<PAGE> 78
COLORADO PRIME CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, 1995 AND SEPTEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------
SEPTEMBER 29, SEPTEMBER 27,
NOTES 1995 1996
----- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,830 $ 1,716
Accounts receivable-net 3 53,788 56,773
Inventories-net 4 4,225 3,638
Prepaid expenses and other current assets 1,391 1,665
Deferred income tax benefit 11 4,092 4,429
------------ ------------
Total current assets 65,326 68,221
------------ ------------
Property, Plant and Equipment-Net 5,12 7,727 7,240
------------ ------------
Noncurrent accounts receivable-net 3 30,127 33,416
------------ ------------
Goodwill-net 2 39,578 38,414
------------ ------------
Other assets-net 7,8 1,083 3,493
------------ ------------
Total assets $ 143,841 $ 150,784
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 5,742 $ 6,651
Accrued expenses 6 7,994 7,135
Income and other taxes payable 11 2,078 1,172
Current portion of capital lease obligations 12 547 361
Accrued dividend payable 9 900 --
------------ ------------
Total current liabilities 17,261 15,319
------------ ------------
Note payable 7 55,917 58,343
------------ ------------
Loan payable to affiliate 9 25,000 --
------------ ------------
Senior notes payable 8 -- 34,560
------------ ------------
Long-term portion of capital lease obligations 12 638 277
------------ ------------
Other liabilities 747 1,616
------------ ------------
Commitments and contingent liabilities 13
Stockholder's equity:
Common stock--par value, $.01, per share; 1,000 shares authorized, issued
and outstanding. 9
Paid-in capital 9 55,120 51,291
Accumulated deficit (10,842) (10,622)
------------ ------------
Total stockholder's equity 44,278 40,669
------------ ------------
Total liabilities and stockholder's equity $ 143,841 $ 150,784
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE> 79
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE FISCAL YEARS ENDED
SEPTEMBER 30, 1994, SEPTEMBER 29, 1995 AND SEPTEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------
SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 27,
NOTES 1994 1995 1996
------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Product sales $ 134,025 $ 144,966 $ 142,651
Finance income earned 11,201 11,524 12,792
-------- -------- --------
Total revenue 145,226 156,490 155,443
Cost of goods sold 58,640 59,906 56,387
-------- -------- --------
Gross profit 86,586 96,584 99,056
-------- -------- --------
Other cost and expenses:
Selling, general and administrative 75,326 80,988 80,901
Amortization of goodwill 2 1,187 1,164 1,164
Interest expense 6,783 8,017 9,130
Other expense 6,7,8,9 559 767 7,089
-------- -------- --------
Total cost and expenses 83,855 90,936 98,284
-------- -------- --------
Income before provision for income taxes 2,731 5,648 772
Provision for income taxes 11 1,781 2,738 1,262
-------- -------- --------
Net income (loss) $ 950 2,910 $ (490)
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE> 80
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDER'S EQUITY
FOR THE FISCAL YEARS ENDED
SEPTEMBER 30, 1994, SEPTEMBER 29, 1995, AND SEPTEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
COMMON STOCK
----------------------
NUMBER OF TOTAL
OUTSTANDING DOLLAR PAID-IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at September 24, 1993 1,000 $ -- $54,964 $ (9,002) $45,962
Payment of dividend to Holdings (2,400) (2,400)
Accrued dividend (906) (906)
Net income 950 950
----- ----- ------- --------- -------
Balance at September 30, 1994 1,000 -- $54,964 $ (11,358) $43,606
Reversal of prior year accrued dividend 906 906
Payment of dividend to Holdings (2,400) (2,400)
Accrued dividend (900) (900)
Capital contribution from Holdings 156 156
Net income 2,910 2,910
----- ----- ------- --------- -------
Balance at September 29, 1995 1,000 $ -- $55,120 $ (10,842) $44,278
Reversal of prior years accrued dividend 900 900
Payment of dividend to Holdings (190) (190)
Net return of capital to Holdings (3,829) (3,829)
Net loss (490) (490)
----- ----- ------- --------- -------
Balance at September 27, 1996 1,000 -- $51,291 $ (10,622) $40,669
===== ===== ======= ========= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE> 81
COLORADO PRIME CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1994, SEPTEMBER 29, 1995 AND SEPTEMBER
27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------
SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 27,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 950 $ 2,910 ($ 490)
----------- ------------ ------------
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 3,517 3,598 3,661
Amortization of deferred loan costs 468 476 611
Deferred income taxes 920 (237) (337)
Provision for doubtful accounts 5,145 4,596 5,280
Change in operating assets and liabilities:
Accounts receivable (3,073) (12,951) (11,554)
Inventories-net (15) (1,054) 587
Prepaid expenses and other current assets (66) 838 (274)
Other assets-net (574) 247 232
Accounts payable (1,231) 961 909
Accrued expenses (509) 682 (859)
Other liabilities (588) (1,017) 869
Income and other taxes payable 200 819 (906)
----------- ------------ ------------
Total adjustments 4,194 (3,042) (1,781)
----------- ------------ ------------
Net cash (used in) provided by operating activities 5,144 (132) (2,271)
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investments in property, plant and equipment (1,792) (2,534) (1,958)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable (655) 5,784 2,426
Decrease in capital lease obligations (545) (579) (547)
Decrease in loan payable to affiliate (25,000)
Issuance of senior notes payable 34,508
Payment of dividend (2,400) (2,400) (190)
Payment of fees related to debt refinancing (3,253)
Net return of capital to Holdings 156 (3,829)
----------- ------------ ------------
Net cash provided by (used in) financing activities (3,600) 2,961 4,115
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH (248) 295 (114)
CASH, BEGINNING OF PERIOD 1,783 1,535 1,830
----------- ------------ ------------
CASH, END OF PERIOD $ 1,535 $ 1,830 $ 1,716
=========== ============ ============
</TABLE>
Income tax payments totaled approximately $856, $2,045 and $2,490 for fiscal
1994, 1995 and 1996, respectively.
Interest payments totaled approximately $7,329, $6,056 and $9,138 for fiscal
1994, 1995 and 1996, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE> 82
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. COMPANY BACKGROUND
Colorado Prime Corporation (the "Company") is a wholly owned subsidiary of KPC
Holdings Corporation ("Holdings"). Holdings is owned by KPC Acquisition Co.
L.P., a partnership which includes Kohlberg Associates L.P. ("Kohlberg") as the
general and controlling partner. The Company is a leading direct marketer of
high quality, value-added food programs and products related to in-home dining
and entertainment.
The accompanying consolidated financial statements give effect to the
acquisition of Holdings by Kohlberg in 1989. The excess of the aggregate
purchase price over the fair value of the net assets acquired, after recording
purchase adjustments to adjust the carrying value of the Company's assets and
liabilities to fair value (substantially related to fixed assets and deferred
income taxes), was recorded as goodwill.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue on the sale of food, appliances and accessories
at the time of delivery and on finance charges earned under the effective
interest method.
Company's Year End
The Company's fiscal year ends on the last Friday of September. The financial
statements for 1996, 1995 and 1994 contain fifty-two, fifty-two and fifty-three
weeks, respectively.
Principles of Consolidation
The consolidated financial statements include the accounts of the "Company" and
its wholly-owned subsidiaries. Intercompany accounts and transactions have been
eliminated in consolidation.
Fair Value of Financial Instruments
At September 27, 1996, the recorded and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
RECORDED ESTIMATED FAIR VALUE
-------- --------------------
<S> <C> <C>
Cash $ 1,716 $ 1,716
Accounts receivable-net 56,773 56,773(a)
Noncurrent accounts receivable-net 33,416 33,416(a)
Note payable 58,343 58,343(b)
Senior notes payable 34,560 34,560(b)
Interest rate cap -- 450(c)
</TABLE>
- ---------------
(a) Based on the Company's credit policies and the terms of its receivables,
management believes that the fair value of the Company's receivables
approximates the recorded amounts. Since these receivables arise solely in
connection with the sale of the Company's products and are an integral part
of the Company's marketing program, it is not practical to obtain an
appraisal.
(b) Based on the terms of the Company's debt instruments as compared to credit
market conditions at September 27, 1996, management believes that the
carrying value of its debt instruments approximates its fair value.
(c) Based on dealer's quotations of the approximate cost to exit the interest
rate cap arrangement.
Accounts Receivable
The term of accounts receivable relating to food sales is less than one year.
The term of accounts receivable relating to appliance sales is generally greater
than one year. As a result, the financial statements reflect a current and
noncurrent portion
F-7
<PAGE> 83
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
of these accounts receivable. The Company's customers are families and
individuals located throughout the United States resulting in no significant
concentration of credit risk.
Inventories
Inventories are stated at the lower of cost or market, with the cost determined
on the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation and amortization (Note 5). Depreciation and amortization are
computed using primarily the straight-line method over the estimated useful
lives of the related assets, or the life of the related leases, if less, as
follows:
<TABLE>
<S> <C>
Buildings 17-25 years
Assets under capital leases 5-14 years
Machinery and equipment 5-8 years
Software 7 years
Furniture and fixtures 5-8 years
Delivery equipment 4-8 years
Automobiles 4 years
Leasehold improvements 5-19 years
</TABLE>
Goodwill
Goodwill is amortized on the straight-line basis over forty years. At September
29, 1995 and September 27, 1996, goodwill is shown net of accumulated
amortization of $6,999 and $8,163, respectively. Goodwill is reviewed for
impairment based upon estimated undiscounted future cash flow from operations.
Income Taxes
The Company files its Federal income tax return on a consolidated basis, while
separate state and local income tax returns are filed for each company that is
part of the consolidated group (except for New York State, for which a combined
tax return is filed).
The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, income taxes are recognized using a liability approach
whereby deferred tax assets and liabilities are computed for temporary
differences between taxable income for financial reporting and income tax
purposes, using current income tax rates (Note 11).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Accounting for the Impairment of Long Lived Assets
During March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
of." This statement establishes financial accounting and reporting standards for
the impairment of long lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for the long lived
assets and certain
F-8
<PAGE> 84
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
identifiable intangibles to be disposed of. This statement is effective for
financial statements for fiscal years beginning after December 15, 1995,
although earlier application is encouraged. The Company does not expect that the
adoption of SFAS 121 will have a material effect on its financial statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable at September 29, 1995 and September 27, 1996 consisted of
the following:
<TABLE>
<CAPTION>
---------------------------------
SEPTEMBER 29, SEPTEMBER 27,
1995 1996
-------------- --------------
<S> <C> <C>
Short-term food receivables $ 25,292 $ 27,766
Appliance and accessories
receivables 65,959 69,867
----------- --------- --
Total accounts receivable 91,251 97,633
Less: allowance for doubtful accounts 7,336 7,444
----------- --------- --
Accounts receivable -- net 83,915 90,189
Noncurrent accounts receivable 30,127 33,416
----------- --------- --
Current accounts receivable $ 53,788 $ 56,773
=========== ===========
</TABLE>
4. INVENTORIES
Inventories, net of allowance for slow moving, excess and obsolete inventory of
$153, $237 and $309 at September 30, 1994, September 29, 1995 and September 27,
1996, respectively, consisted of the following:
<TABLE>
<CAPTION>
----------------------------------------------------
SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 27,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Food $2,633 $2,575 $2,412
Appliances, tableware, entertainment products
and cookware 538 1,650 1,226
---------- -------- -- -------- --
Total $3,171 $4,225 $3,638
========== ========== ==========
</TABLE>
F-9
<PAGE> 85
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 29, 1995 and September 27, 1996
consisted of the following:
<TABLE>
<CAPTION>
-----------------------------
SEPTEMBER 29, SEPTEMBER 27,
1995 1996
------------- -------------
<S> <C> <C>
Land $ 603 $ 603
Buildings 1,643 1,650
Assets under capital leases 3,903 3,846
Machinery and equipment 5,443 6,659
Software 419 506
Furniture and fixtures 1,200 1,296
Delivery equipment 3,248 3,085
Automobiles 92 114
Leasehold improvements 771 801
----------- --------- --
Total 17,322 18,560
Less: accumulated depreciation and amortization 9,595 11,320
----------- --------- --
Property, plant and equipment -- net $ 7,727 $ 7,240
=========== ===========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses at September 29, 1995 and September 27, 1996 consisted of the
following:
<TABLE>
<CAPTION>
-----------------------------
SEPTEMBER 29, SEPTEMBER 27,
1995 1996
------------- -------------
<S> <C> <C>
Payroll $ 2,586 $ 2,251
Professional 495 672
Pension 579 577
Health benefits 499 599
Insurance 398 498
Severance 447 462
Interest 1,118 --
Other 1,872 2,076
---------- -------- --
Total $ 7,994 $ 7,135
========== ==========
</TABLE>
7. NOTE PAYABLE
During March 1993, the Company refinanced its bank indebtedness with Triple-A
Funding Corporation ("Triple-A") as lender and Capital Markets Assurance
Corporation ("CapMAC") as the surety provider, via a receivables financing
facility reflecting various agreements hereinafter referred to as the "CapMAC
Agreements". During March 1994, the CapMAC Agreements were amended to transfer
and assign all rights and obligations of Triple-A to Triple-A One Funding
Corporation ("Triple-A One"). During December 1995, the Company amended the
CapMAC Agreements to extend the term to December 2000 and modify certain of the
financial covenants. Pursuant to the terms of the CapMAC Agreements, the
Company's accounts receivable are pledged to Triple-A One. From the proceeds of
issuing commercial paper, Triple-A One makes loans to the Company based upon
eligible accounts receivable and other factors as defined in the CapMAC
Agreements, up to a maximum of $70,000. Such
F-10
<PAGE> 86
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
loans bear interest at the commercial paper rate available to TripleA One. The
commercial paper rate at September 29, 1995 and September 27, 1996 was
approximately 5.96% and 5.38%, respectively.
The Company is also required to pay various fees to CapMAC and Triple-A One for
administration and maintenance of the credit facility. The Company incurred fees
payable to CapMAC and Triple-A One of approximately $796, $780 and $696 for the
fiscal years ended September 30, 1994, September 29, 1995 and September 27,
1996, respectively. Such amounts are included in interest expense in the
accompanying statements of consolidated operations. Interest expense for the
fiscal years ended September 30, 1994, September 29, 1995 and September 27, 1996
amounted to $1,864, $3,246 and $3,199, respectively. The Company's available
unused credit facility with CapMAC was approximately $8,700 and $8,600 at
September 29, 1995 and September 27, 1996, respectively.
In connection with the CapMAC Agreements, the Company has entered into an
interest rate cap agreement with a bank covering $55,627 of notional principal.
The interest rate cap agreement extends for a term of 30 months from the date of
execution and provides coverage when the 30 day rate for commercial paper (as
published by the Federal Reserve Schedule H.15) exceeds 6.5%. The Company
utilizes a contingent premium instrument to execute the cap which provides for
fixed monthly payments if the rate exceeds 6.5% during the term of the
agreement. The cap has not been utilized as of September 27, 1996.
The CapMAC Agreements contain certain financial covenants which: (i) require the
maintenance of a specified minimum level of net worth, as defined, (ii) require
the maintenance of a specified minimum ratio of indebtedness to net worth, as
defined, and (iii) require the maintenance of a specified minimum ratio of
earnings before interest, taxes, depreciation, amortization and other expenses,
as defined, to cash interest paid. As of September 27, 1996, the Company was in
compliance with all such financial covenants.
In connection with the December 1995 amendment discussed above, the Company
incurred $617 of debt issuance costs which will be amortized over the life of
the agreement (5 years).
8. SENIOR NOTES PAYABLE
In December 1995, the Company entered into the Senior Note Agreement (the
"Senior Agreement") in which the Company issued to unrelated investors $35,000
of 13% Senior Secured Notes which mature in December 2002 along with a warrant
to purchase 1,234,839 shares of common stock of Holdings for $.001 per share.
The warrant was valued at approximately $494 and recorded as a discount and will
be amortized over the life of the Senior Secured Notes. With the proceeds of the
issuance, the Company repaid a $25,000 note due to an affiliated company plus
accrued interest of approximately $1,700, retired 800,000 shares of cumulative
preferred stock of Holdings for $4,000 and paid other related fees and expenses,
including amounts paid to an affiliated company, of approximately $8,400.
Included in the $8,400 is approximately $2,600 of debt issuance costs which the
Company capitalized and will amortize over the life of the Senior Secured Notes.
The Senior Agreement contains certain financial covenants which: (i) require the
maintenance of a specified minimum level of net worth, as defined, and (ii)
require the maintenance of a specified minimum ratio of earnings before
interest, taxes, depreciation, amortization and other expenses, as defined, to
interest paid. As of September 27, 1996, the Company was in compliance with all
such financial covenants.
9. RELATED PARTY TRANSACTIONS
During fiscal 1994, 1995 and 1996 the Company paid interest of $2,900, $2,900,
and $600, respectively, on $25.0 million aggregate principal amount of its 11.5%
Senior Subordinated Notes due May 17, 1998 to KPC Acquisition Company L.P.
("KPC"). KPC the controlling shareholder of Holdings, purchased the Notes as
part of a series of transactions resulting from the purchase of Holding. These
Notes were repaid on December 20, 1995.
10. PENSION PLAN
The Company maintains a defined contribution pension plan (the "Plan").
Employees who have completed six months of service and have reached the entry
age (twenty and one-half years) are eligible to participate in the Plan. The
Plan provides
F-11
<PAGE> 87
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
for 100 percent vesting after seven years of service. The Plan requires the
Company to make annual contributions based upon a variable percentage of the
participant's annual compensation. Forfeitures are created when participants
terminate employment before becoming entitled to their full benefits under the
Plan. Such forfeited amounts are used to reduce the Company's contributions to
the Plan. In addition, the Plan allows for eligible employees to make voluntary
contributions within specified limits. Pension expense under the Plan was
approximately $633, $885 and $908 for the fiscal years ended September 30, 1994,
September 29, 1995 and September 27, 1996, respectively.
11. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
-------------------------------
9/30/94 9/29/95 9/27/96
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 707 $2,560 $1,301
State 154 416 299
------ ------ ------
861 2,976 1,600
------ ------ ------
Deferred:
Federal 708 (384) (277)
State 212 146 (61)
------ ------ ------
920 (238) (338)
------ ------ ------
Total $1,781 $2,738 $1,262
====== ====== ======
</TABLE>
Significant components of deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
-------------------
9/29/95 9/27/96
------- -------
<S> <C> <C>
Deferred tax assets:
Leases $ 59 $ 20
Allowance for bad debts 2,832 2,873
UNICAP 116 108
Accrued interest--Sec. 267 431 --
Accrued expenses and other, net 1,212 1,857
------ ------
4,650 4,858
Deferred tax liabilities:
Depreciation (558) (429)
------ ------
Net deferred tax asset $4,092 $4,429
====== ======
</TABLE>
F-12
<PAGE> 88
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
A reconciliation between the federal statutory tax rate and the effective rate
is as follows:
<TABLE>
<CAPTION>
-------------------------------
9/30/94 9/29/95 9/27/96
------- ------- -------
<S> <C> <C> <C>
Federal income tax provision at U.S. statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 8.9 4.9 25.6
Nondeductible goodwill amortization 14.8 7.0 51.3
Nondeductible compensation -- -- 51.8
Meals and entertainment 1.0 0.8 5.4
All other, net 6.5 1.8 (4.7)
---- ---- -----
Provision for income taxes 65.2% 48.5% 163.4%
==== ==== =====
</TABLE>
12. CAPITAL LEASE OBLIGATIONS
The Company has entered into agreements to lease a building and certain
equipment from non-related parties. These leases are accounted for as capital
leases. The future minimum lease payments, under these capital leases, and the
present value of the future minimum lease payments as of September 27, 1996 are
as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDING SEPTEMBER,
----------------------------------------------------------------------------------
<S> <C>
1997 $453
1998 291
1999 16
2000 6
----
Total future minimum lease payments 766
Less: amount representing interest 128
----
Present value of future minimum lease payments (including $361 payable currently) $638
====
</TABLE>
Assets acquired under capital leases during the year ended September 29, 1995
amounted to approximately $46. No assets were acquired under capital leases in
1996. Accumulated amortization relating to the assets classified as capital
leases was $2,874 and $3,235 at September 29, 1995 and September 27, 1996,
respectively.
13. COMMITMENTS AND CONTINGENT LIABILITIES
Future minimum lease payments at September 27, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDING SEPTEMBER,
-------------------------------------------------------------------------------
<S> <C>
1997 $ 2,787
1998 2,336
1999 1,752
2000 1,227
2001 794
Thereafter 2,198
-------
Total $11,094
=======
</TABLE>
Rent expense for fiscal 1994, 1995 and 1996 amounted to approximately $2,491,
$2,717 and $3,040, respectively. The Company expensed $2,129 in fiscal 1993 and
$1,698 in fiscal 1996 to record estimated losses on unused office and warehouse
space.
The Company is involved in various legal matters involving claims and
counterclaims arising from the ordinary course of business. In management's
opinion, any unfavorable outcome associated with these matters would not have a
material adverse effect on the Company's financial statements.
F-13
<PAGE> 89
COLORADO PRIME CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
MARCH 29, 1996 AND MARCH 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------
MARCH 29, MARCH 28,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,792 $ 1,719
Accounts receivable-net 56,626 58,871
Inventories-net 4,104 4,610
Prepaid expenses and other current assets 2,193 1,702
Deferred income tax benefit 4,593 4,937
-------- --------
Total current assets 69,308 71,839
-------- --------
Property, Plant and Equipment-Net 7,396 6,733
-------- --------
Noncurrent accounts receivable-Net 31,731 34,428
-------- --------
Goodwill-net 38,996 37,831
-------- --------
Other assets 3,304 3,154
-------- --------
Total Assets $150,735 $153,985
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 5,807 $ 5,738
Accrued expenses 6,826 6,800
Income and other taxes payable 2,161 3,758
Current portion of capital lease obligations 547 231
Accrued dividend payable 1,376
-------- --------
Total current liabilities 16,717 16,527
-------- --------
Note payable 58,456 57,919
-------- --------
Senior notes payable 34,525 34,596
-------- --------
Long-Term portion of capital lease obligations 356 182
-------- --------
Other liabilities 385 1,255
-------- --------
Stockholder's Equity
Common stock--par value $.01 per share; 1,000 shares authorized issued and outstanding.
Paid-in capital 51,286 51,291
Accumulated deficit (10,990) (7,785)
-------- --------
Total stockholder's equity 40,296 43,506
-------- --------
Total Liabilities and Stockholder's Equity $150,735 $153,985
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-14
<PAGE> 90
COLORADO PRIME CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE TWENTY-SIX WEEKS ENDED MARCH 29, 1996 AND MARCH 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------
TWENTY-SIX WEEKS TWENTY-SIX WEEKS
ENDED ENDED
MARCH 29, MARCH 28,
1996 1997
---------------- ----------------
<S> <C> <C>
Product Sales 72,313 $ 70,516
Finance Income Earned 6,302 7,012
----------- -----------
Total Revenue 78,615 77,528
Cost of Goods Sold 28,402 27,083
----------- -----------
Gross profit 50,213 50,445
----------- -----------
Other Cost and Expenses:
Selling, general and administrative 40,006 39,762
Amortization of goodwill 582 582
Interest expense 4,486 4,668
Other expense 3,849 293
----------- -----------
Total cost and expenses 48,923 45,305
----------- -----------
Income before provision
for income taxes 1,290 5,140
Provision for income taxes 773 2,303
----------- -----------
Net income $ 517 $ 2,837
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-15
<PAGE> 91
COLORADO PRIME CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED MARCH 29, 1996 AND MARCH 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------
TWENTY-SIX WEEKS TWENTY-SIX WEEKS
ENDED ENDED
MARCH 29, MARCH 28,
1996 1997
---------------------- ----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 517 $ 2,837
------------ --------- --
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,797 1,667
Amortization of deferred loan costs 361 251
Deferred income taxes (501) (508)
Provision for doubtful accounts 2,350 2,544
Change in operating assets and liabilities:
Accounts receivable (6,792) (5,654)
Inventories-net 121 (972)
Prepaid expenses and other current assets (319) (37)
Other assets-net 82 87
Accounts payable 65 (913)
Accrued expenses (1,168) (335)
Other liabilities (362) (361)
Income and other taxes payable 83 2,586
------------ --------- --
Total adjustments (4,283) (1,645)
------------ --------- --
Net cash (used in) provided by operating activities (3,766) 1,192
============ ===========
Cash Flows from Investing Activities:
Investments in property, plant and equipment (866) (540)
------------ --------- --
Cash Flows from Financing Activities:
Increase (decrease) in notes payable 2,539 (424)
Decrease in capital lease obligations (282) (225)
Decrease in loan payable to affiliate (25,000)
Issuance of senior notes payable 34,508
Payment of dividend (190)
Payment of fees related to debt refinancing (3,152)
Net return of capital to Holdings (3,829)
------------ --------- --
Net cash provided by (used in) financing activities 4,594 (649)
============ ===========
Net Increase (Decrease) in Cash (38) 3
Cash, Beginning of Period 1,830 1,716
------------ --------- --
Cash, End of Period $ 1,792 $ 1,719
============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-16
<PAGE> 92
COLORADO PRIME CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 28, 1997
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Colorado Prime
Corporation, a Delaware corporation, have been prepared in accordance with
generally accepted accounting principles applicable for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Operating results for the twenty-six weeks ended March 28, 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ended September 26, 1997. These financial statements should be read
in conjunction with the Company's audited consolidated financial statements.
2. SENIOR NOTE PAYABLE
In December 1995, the Company entered into the Existing Senior Notes (the
"Senior Agreement") in which the Company issued to unrelated investors $35,000
or 13% Senior Secured Notes which mature in December 2002 along with a warrant
to purchase 1,234,839 shares of common stock of Holdings for $.001 per share.
The warrant was valued at approximately $494 and recorded as a discount and will
be amortized over the life of the Senior Secured Notes. With the proceeds of the
issuance, the Company repaid a $25,000 note due to an affiliated company plus
accrued interest of approximately $1,700, retired 800,000 shares of cumulative
preferred stock of Holdings for $4,000 and paid other related fees and expenses,
including amounts paid to an affiliated company, of approximately $8,400.
The Senior Agreement contains certain financial covenants which (i) require the
maintenance of a specified minimum level of net worth, as defined, and (ii)
require the maintenance of a specified minimum ratio of earnings before
interest, taxes depreciation, amortization and other expenses, as defined, to
interest paid.
F-17
<PAGE> 93
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Prospectus Summary.................... 5
Risk Factors.......................... 16
Transactions.......................... 21
Use of Proceeds....................... 22
Capitalization........................ 23
Selected Financial and Operating
Data................................ 24
Pro Forma Unaudited Condensed
Consolidated Financial Statements... 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Business.............................. 36
Management............................ 43
Principal Stockholders................ 47
Certain Relationships and Related
Transactions........................ 48
Description of Certain Indebtedness... 49
The Exchange Offer.................... 51
Description of Notes.................. 57
Certain United States Federal Income
Tax Considerations.................. 73
Plan of Distribution.................. 74
Legal Matters......................... 74
Experts............................... 74
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS EXCHANGE
OFFER), ALL DEALERS OFFERING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
======================================================
======================================================
$100,000,000
COLORADO PRIME CORPORATION
12 1/2% SENIOR NOTES DUE 2004
PAYMENT OF PRINCIPAL AND INTEREST
GUARANTEED BY
KAL-MAR PROPERTIES CORP.
CONCORD FINANCIAL SERVICES, INC.
PRIME FOODS DEVELOPMENT CORPORATION
--------------------
PROSPECTUS
--------------------
, 1997
======================================================
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CPC is a Delaware corporation, subject to the applicable provisions of the
General Corporation Law of the State of Delaware. Section 145 of the General
Corporation Law provides that a corporation may indemnify any persons, including
directors and officers, who are (or are threatened to be made) parties to any
threatened, pending or completed legal action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of their being
directors or officers of the corporation. The indemnity may include expenses,
attorneys' fees, judgments, fines and amounts paid in settlement, provided such
sums were actually and reasonably incurred in connection with such action, suit
or proceeding and provided the director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests and, in the case of criminal proceedings, provided he had no
reasonable cause to believe that his conduct was unlawful. The corporation may
indemnify directors and officers in a derivative action (in which suit is
brought by a stockholder on behalf of the corporation) under the same
conditions, except that no indemnification is permitted without judicial
approval if the director or officer is adjudged liable to the corporation. If
the director or officer is successful on the merits or otherwise in defense of
any actions referred to above, the corporation must indemnify him against the
expenses and attorneys' fees he actually and reasonably incurred.
Article Eighth of CPC's Certificate of Incorporation and Article VI, section
6.01 of CPC's By-laws provides that CPC shall indemnify its officers and
directors to the fullest extent permitted by Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
(a) Exhibits
3.1. Certificate of Incorporation of CPC, with Amendments.
3.2. Bylaws of CPC, as amended.
3.3 Certificate of Incorporation of Kal-Mar Properties Corp., with Amendments.
3.4 Bylaws of Kal-Mar Properties Corp., as amended.
3.5 Certificate of Incorporation of Concord Financial Services, Inc., with Amendments.
3.6 Bylaws of Concord Financial Services, Inc., as amended.
3.7 Certificate of Incorporation of Prime Foods Development Corporation, with Amendments.
3.8 Bylaws of Prime Foods Development Corporation, as amended.
4.1. Indenture for the Notes dated as of May 9, 1997 among CPC, the Subsidiary Guarantors and The Bank
of New York, as Trustee (including form of Note).
4.2. Purchase Agreement dated as of May 6, 1997 among CPC, CPH, the Subsidiary Guarantors and the
Initial Purchasers.
4.3. Registration Rights Agreement dated May 9, 1997 among CPC, the Subsidiary Guarantors and the
Initial Purchasers.
4.4. Form of Note (included in Exhibit 4.1).
4.5. Form of Letter of Transmittal.
*5. Form of Opinion of Koerner Silberberg & Weiner, LLP as to the legality of the New Notes being
registered (including consent).
10.1. Form of Exchange Agent Agreement between CPC and The Bank of New York, as Exchange Agent.
*10.2. Form of Stock Option Plan of CPH.
10.3. Stock Purchase Agreement between CPH and certain executive officers.
10.4. Shareholders' Agreement between CPH and certain executive officers.
10.5. Employment Agreement between CPC, CPH and William F. Dordelman.
10.6. Employment Agreement between CPC, CPH and William Willett.
10.7. Employment Agreement between CPC, CPH and Ricardo DeSantis.
10.8. Employment Agreement between CPC, CPH and Thomas S. Taylor.
10.9. Lease dated September 1, 1983 between Thrift-Pak Food Service, Inc., and Masciandaro, Kalpakjian
& Masciandaro Co., and Sublease dated October 15, 1984 between Colorado Prime, Inc., formerly
known as Thrift-Pak Food Service, Inc. and Masciandaro, Kalpakjian & Masciandaro Co., regarding
the space at One Michael Avenue, Farmingdale, New York.
10.10 Lease dated November 1, 1985 between Colorado Prime (Florida), Inc., and Kalpakjian, Masciandaro
and Masciandaro Partnership and Amendment to Lease dated December 26, 1986, regarding the office,
warehouse and vehicle repair depot in Pompano Beach, Florida.
10.11. Credit Agreement among CPC, the institutions party thereto as Lenders and Dresdner AG, New York
and Cayman Branches, as the Agents, dated May 9, 1997, with Amendment No. 1 dated as of May 9,
1997.
</TABLE>
II-1
<PAGE> 95
<TABLE>
<S> <C>
12. Statement regarding computation of ratio of earnings to fixed charges.
21. List of subsidiaries of the Company.
23.1. Consent of Arthur Andersen LLP.
*23.2. Consent of Koerner Silberberg & Weiner, LLP (contained in its opinion to be filed as Exhibit 5
hereto).
24. Power of Attorney (included on the signature page hereto).
25. Statement of eligibility under the Trust Indenture Act of 1939, as amended, on Form T-1 of The
Bank of New York, as Trustee under the Indenture.
</TABLE>
- ---------------
* To be Filed By Amendment
(b) Financial Statement Schedules.
The following schedule is included in Part II of this Registration Statement:
Schedule II -- Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The undersigned registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on June , 1997.
COLORADO PRIME CORPORATION
By: /s/ WILLIAM F. DORDELMAN
---------------------------------------
William F. Dordelman
Chief Executive Officer
and Chairman of the Board of Directors
Colorado Prime Corporation
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints William F. Dordelman and Thomas S. Taylor or one of
them acting alone, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto each said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully and
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or any substitute or
substitutes of any of them, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------
<C> <S> <C>
/s/ WILLIAM F. DORDELMAN Chief Executive Officer and Chairman of the June , 1997
- --------------------------------------------- Board (Principal Executive Officer)
William F. Dordelman
/s/ THOMAS S. TAYLOR Chief Financial Officer, Vice President and June , 1997
- --------------------------------------------- Director (Principal Accounting Officer)
Thomas S. Taylor
/s/ WILLIAM WILLETT President, Chief Operating Officer and June , 1997
- --------------------------------------------- Director
William Willett
/s/ DONALD KELLER Director June , 1997
- ---------------------------------------------
Donald Keller
/s/ FREDERIC MALEK Director June , 1997
- ---------------------------------------------
Frederic Malek
/s/ DR. PAUL STERN Director June , 1997
- ---------------------------------------------
Dr. Paul Stern
/s/ V. FRANK POTTOW Director June , 1997
- ---------------------------------------------
V. Frank Pottow
/s/ DANIEL J. ALTOBELLO Director June , 1997
- ---------------------------------------------
Daniel J. Altobello
/s/ WILLIAM NICHOLSON Director June , 1997
- ---------------------------------------------
William Nicholson
</TABLE>
II-3
<PAGE> 97
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors of Colorado Prime Corporation and Subsidiaries:
We have audited the consolidated financial statements of Colorado Prime
Corporation and Subsidiaries as of September 29, 1995, and September 27, 1996,
and for each of the three fiscal years in the period ended September 27, 1996,
included in this filing and have issued our report thereon dated December 10,
1996. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the accompanying
index is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
December 10, 1996
S-1
<PAGE> 98
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
COLORADO PRIME CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
COLUMN C
--------------------------
COLUMN B
------------ ADDITIONS COLUMN E
COLUMN A BALANCE AT -------------------------- COLUMN D -------------
- ---------------------------------------------- BEGINNING OF CHARGED TO COST CHARGED ------------- BALANCE AT
DESCRIPTION PERIOD AND EXPENSES TO OTHER DEDUCTIONS(1) END OF PERIOD
- ---------------------------------------------- ------------ --------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended September 27, 1996
Allowance for Doubtful Accounts............. $7,336 $ 5,280 $(5,172) $ 7,444
Accumulated Amortization of Goodwill........ 6,999 1,164 8,163
Year ended September 29, 1995
Allowance for Doubtful Accounts............. $6,501 $ 4,596 $(3,761) $ 7,336
Accumulated Amortization of Goodwill........ 5,835 1,164 6,999
Year ended September 30, 1994
Allowance for Doubtful Accounts............. $5,803 $ 5,145 $(4,447) $ 6,501
Accumulated Amortization of Goodwill........ 4,648 1,187 5,835
</TABLE>
- ---------------
(1) Recovery of amounts previously written off.
S-2
<PAGE> 99
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- -------- ------------------------------------------------------------------------------------------- ----
<S> <C> <C>
3.1. Certificate of Incorporation of CPC, with Amendments.
3.2. Bylaws of CPC, as amended.
3.3 Certificate of Incorporation of Kal-Mar Properties Corp., with Amendments.
3.4 Bylaws of Kal-Mar Properties Corp., as amended.
3.5 Certificate of Incorporation of Concord Financial Services, Inc., with Amendments.
3.6 Bylaws of Concord Financial Services, Inc., as amended.
3.7 Certificate of Incorporation of Prime Foods Development Corporation, with Amendments.
3.8 Bylaws of Prime Foods Development Corporation, as amended.
4.1. Indenture for the Notes dated as of May 9, 1997 among CPC, the Subsidiary Guarantors and
The Bank of New York, as Trustee (including form of Note).
4.2. Purchase Agreement dated as of May 6, 1997 among CPC, CPH, the Subsidiary Guarantors and
the Initial Purchasers.
4.3. Registration Rights Agreement dated May 9, 1997 among CPC, the Subsidiary Guarantors and
the Initial Purchasers.
4.4. Form of Note (included in Exhibit 4.1).
4.5. Form of Letter of Transmittal.
*5. Form of Opinion of Koerner Silberberg & Weiner, LLP as to the legality of the New Notes
being registered (including consent).
10.1. Form of Exchange Agent Agreement between CPC and The Bank of New York, as Exchange Agent.
*10.2. Form of Stock Option Plan of CPH.
10.3. Stock Purchase Agreement between CPH and certain executive officers.
10.4. Shareholders' Agreement between CPH and certain executive officers.
10.5. Employment Agreement between CPC, CPH and William F. Dordelman.
10.6. Employment Agreement between CPC, CPH and William Willett.
10.7. Employment Agreement between CPC, CPH and Ricardo DeSantis.
10.8. Employment Agreement between CPC, CPH and Thomas S. Taylor.
10.9. Lease dated September 1, 1983 between Thrift-Pak Food Service, Inc., and Masciandaro,
Kalpakjian & Masciandaro Co., and Sublease dated October 15, 1984 between Colorado Prime,
Inc., formerly known as Thrift-Pak Food Service, Inc. and Masciandaro, Kalpakjian &
Masciandaro Co., regarding the space at One Michael Avenue, Farmingdale, New York.
10.10 Lease dated November 1, 1985 between Colorado Prime (Florida), Inc., and Kalpakjian,
Masciandaro and Masciandaro Partnership and Amendment to Lease dated December 26, 1986,
regarding the office, warehouse and vehicle repair depot in Pompano Beach, Florida.
10.11. Credit Agreement among CPC, the institutions party thereto as Lenders and Dresdner AG, New
York and Cayman Branches, as the Agents, dated May 9, 1997, with Amendment No. 1 dated as
of May 9, 1997.
12. Statement regarding computation of ratio of earnings to fixed charges.
21. List of subsidiaries of the Company.
23.1. Consent of Arthur Andersen LLP.
*23.2. Consent of Koerner Silberberg & Weiner, LLP (contained in its opinion to be filed as
Exhibit 5 hereto).
24. Power of Attorney (included on the signature page hereto).
25. Statement of eligibility under the Trust Indenture Act of 1939, as amended, on Form T-1 of
The Bank of New York, as Trustee under the Indenture.
</TABLE>
- ---------------
* To be Filed By Amendment
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF OWNERSHIP AND MERGER
(Pursuant to Section 253 of the
General Corporation Law of the State of Delaware)
merging
KPC ACQUISITION CORPORATION
into
COLORADO PRIME CORPORATION
KPC ACQUISITION CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
DOES HEREBY CERTIFY:
FIRST: That KPC Acquisition Corporation ("Acquisition") was
incorporated on the 8th day of June, 1989 pursuant to the General Corporation
Law of the State of Delaware.
SECOND: That Acquisition is the owner of more than 90% of the
outstanding shares of common stock of Colorado Prime Corporation, a corporation
incorporated on the 10th day of September, 1986 pursuant to the General
Corporation Law of the State of Delaware ("Colorado Prime").
THIRD: That Acquisition, by the following resolutions of its Board of
Directors (the "Board"), duly adopted by the Board by unanimous written consent,
determined to and effective upon the close of business on the date of the filing
of this Certificate of Ownership and Merger with the Secretary of State of the
State of Delaware, does hereby merge itself with and into Colorado Prime (the
"Merger") in accordance with Section 253 (a) of the General Corporation Law of
the State of Delaware:
WHEREAS, Acquisition is the owner of more than 90% of the
outstanding common stock, par value $.01 per share ("Colorado Prime
Common Stock"), of Colorado Prime Corporation, a Delaware corporation
("Colorado Prime"); and
<PAGE> 2
WHEREAS, the Colorado Prime Common Stock is the only issued and
outstanding capital stock of Colorado Prime; and
WHEREAS, in accordance with the Agreement and Plan of Merger,
dated as of June 25, 1989, (the "Merger Agreement"), among KPC Holdings
Corporation ("Holdings"), Acquisition and Colorado Prime, Acquisition desires
to merge itself with and into Colorado Prime pursuant to the provisions of
Section 253 of the General Corporation Law of the State of Delaware;
NOW, THEREFORE, BE IT RESOLVED, that, subject to the approval of
the sole stockholder of Acquisition, Acquisition merge itself into Colorado
Prime (sometimes hereinafter referred to as the "Surviving Corporation"), which
will assume all of the obligations of Acquisition; and
RESOLVED, that the terms and conditions of the Merger are as
follows:
1. The authorized capital stock of Acquisition consists of
1,000 shares of common stock, par value $.01 per share, of which all
1,000 shares of such common stock are issued and outstanding. The
authorized capital stock of Colorado Prime consists of 10,000,000
shares of Common Stock, $. 01 par value, of which 4,671,446 shares are
issued and outstanding, of which 4,664,260 shares are owned by
Acquisition.
2. Acquisition shall be merged into Colorado Prime in
accordance with the laws of the State of Delaware and, upon the
effectiveness of the Merger, the separate existence and organization of
Acquisition shall cease. The Surviving Corporation shall retain the
name of Colorado Prime Corporation, shall continue its corporate
existence under the laws of the State of Delaware, shall succeed to
and assume all rights, assets, liabilities and obligations of
Acquisition including, but not by way of limitation, all rights,
assets, liabilities and obligations of Acquisition under the Note
Purchase Agreement dated as of
2
<PAGE> 3
August 2, 1989, among KPC Acquisition Company, L.P., a Delaware limited
partnership, Holdings and Acquisition, as such agreement may be
amended, supplemented or restated from time to time, and shall execute
and deliver to KPC Acquisition Company, L.P., the Assumption Agreement,
dated as of September 29, 1989.
3. The Merger of Acquisition into Colorado Prime shall
become effective upon the close of business on the date on which a
properly executed Certificate of Ownership and Merger, together with
any other documents required by law to effectuate such merger, shall be
filed with the Secretary of State of the State of Delaware, pursuant to
Section 253 of the General Corporation Law of the State of Delaware
(the "Effective Time").
4. The Certificate of Incorporation of the Surviving
Corporation shall be amended at the Effective Time to read in its
entirety as set forth in Exhibit A to the Certificate of Ownership and
Merger.
5. The By-Laws of Acquisition as in effect immediately
prior to the Effective Time shall become the By-Laws of the Surviving
Corporation.
6. The officers of Colorado Prime immediately prior to the
Effective Time shall continue as the officers of the Surviving
Corporation, to hold office subject to the Certificate of Incorporation
and By-Laws of the Surviving Corporation and the General Corporation
Law of the State of Delaware.
7. The directors of Acquisition immediately prior to the
Effective Time shall be the directors of the Surviving Corporation,
each to serve as such until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal.
3
<PAGE> 4
8. At the Effective Time;
(a) Each share of common stock, par value $.0l per share
("Colorado Prime Common Stock"), of Colorado Prime issued and
outstanding immediately prior to the Effective Time (except for (i)
shares of Colorado Prime Common Stock then owned beneficially or of
record by Holdings or Acquisition or any other subsidiary of Holdings,
(ii) shares of Colorado Prime Common Stock held in the treasury of
Colorado Prime, and (iii) Dissenting Shares (as defined below), shall
by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and represent the right to receive
$17.00 in cash, subject to any applicable withholding or back-up
withholding taxes, payable to the holder thereof, without interest
thereon, upon surrender of the certificate representing such share of
Colorado Prime Common Stock. Dissenting Shares as used above shall mean
shares of Colorado Prime Common Stock which are outstanding immediately
prior to the Effective Time and which are held by stockholders who have
not consented to the Merger and who shall have delivered a written
demand for appraisal of such shares in the manner provided in Section
262 of the General Corporation Law of the State of Delaware.
(b) Each share of Colorado Prime Common Stock issued and
outstanding immediately prior to the Effective Time which is then owned
beneficially or of record by Holdings or Acquisition or any other
subsidiary of Holdings shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired and
cease to exist, without payment of any consideration therefor and
without any conversion thereof.
(c) Each share of Colorado Prime Common Stock held in the
treasury of Colorado Prime immediately prior to the Effective Time
shall, by virtue of the Merger, be cancelled and retired and cease to
exist, without payment of
4
<PAGE> 5
any consideration therefor and without any conversion thereof.
(d) The holders of certificates representing shares of
Colorado Prime Common Stock issued and outstanding immediately prior to
the Effective Time shall as of the Effective Time cease to have any
rights as stockholders of Colorado Prime, except such rights, if any,
as they may have pursuant to Section 262 of the General Corporation
Law of the State of Delaware, and, except as aforesaid, their sole
right shall be the right to receive cash as aforesaid.
(e) Each share of common stock, par value $.01 per share,
of Acquisition ("Acquisition Common Stock"), issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into and exchangeable for one fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving Corporation
("Surviving Corporation Common Stock").
(f) From and after the Effective Time, each outstanding
certificate theretofore representing shares of Acquisition Common Stock
shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation Common Stock
into which such shares of Acquisition Common Stock shall have been
converted. Promptly after the Effective Time, the Surviving Corporation
shall issue to Holdings a stock certificate or certificates
representing 1,000 shares of Surviving Corporation Common Stock in
exchange for the certificate or certificates which formerly represented
shares of Acquisition Common Stock, which shall be cancelled.
(g) Each holder of an option to purchase shares of Colorado
Prime Common Stock outstanding immediately prior to the Effective Time
under the Colorado Prime Corporation Employee Stock Option Plan,
whether or not then
5
<PAGE> 6
exercisable, will be entitled to receive from the Surviving Corporation
for each share of Colorado Prime Common Stock subject to such option
(whether vested or non-vested) an amount in cash equal to the excess,
if any, of $17.00 over the per share exercise price of such option,
and, by virtue of the Merger and without any action on the part of the
holder thereof, each such option shall be cancelled.
FURTHER RESOLVED, that the President or any Vice President
and the Secretary or any Assistant Secretary are authorized and
directed on behalf of Acquisition pursuant to Section 253 of the
General Corporation Law of the State of Delaware to execute,
acknowledge and file a Certificate of Ownership and Merger giving
effect to the foregoing with the Secretary of State of the State of
Delaware, and to take all such further action as they or any of them
deem necessary or advisable to give effect to the foregoing.
FOURTH: That the Merger has been approved by the written consent of the
sole stockholder of Acquisition in accordance with Section 228 of the General
Corporation Law of the State of Delaware.
FIFTH: That the name of the surviving corporation of the Merger is
Colorado Prime Corporation.
SIXTH: That the Certificate of Incorporation of Colorado Prime shall be
the Certificate of Incorporation of the surviving corporation, as amended in its
entirety as set forth in Exhibit A and made a part hereof.
6
<PAGE> 7
IN WITNESS WHEREOF, Acquisition has caused this certificate to be
signed by Kim G. Davis, its President, and attested by George W. Peck IV, its
Secretary, as of the 29th day of September, 1989.
KPC ACQUISITION CORPORATION
By: /s/ Kim G. Davis
----------------
Kim G. Davis
President
Attest:
By: /s/ George W. Peck IV
---------------------
George W. Peck IV
Secretary
7
<PAGE> 8
EXHIBIT A
To the Certificate of
Ownership and Merger
CERTIFICATE OF INCORPORATION
OF
COLORADO PRIME CORPORATION
FIRST: The name of the Corporation is COLORADO PRIME CORPORATION.
SECOND: The Corporation's registered office in the State of Delaware
is at 15 North Street in the City of Dover, County of Kent. The name of its
registered agent at such address is National Corporate Research, Ltd.
THIRD: The nature of the business of the Corporation and its purpose
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common stock, par value $.01
per share.
FIFTH: The name and mailing address of the incorporator is as follows:
Cecil R. House
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be
fixed and may be altered from time to time in the manner provided in
the By-Laws, and vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of
directors may be filled, and directors may be removed, as provided in
the By-Laws.
<PAGE> 9
(b) The election of directors may be conducted in any manner
approved by the stockholders at the time when the election is held and
need not be by ballot.
(c) All corporate powers and authority of the Corporation
(except as at the time otherwise provided by law, by this Certificate
of Incorporation or by the By-Laws) shall be vested in and exercised
by the Board of Directors.
(d) The Board of Directors shall have the power without the
assent or vote of the stockholders to adopt, amend, alter or repeal
the By-Laws of the Corporation, except to the extent that the By-Laws
or this Certificate of Incorporation otherwise provide.
(e) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his
or her fiduciary duty as a director, provided that nothing contained
in this Article shall eliminate or limit the liability of a director
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit. Any
repeal or modification of this Article SIXTH by the stockholders of
the Corporation shall not adverse affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
SEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or directors are granted subject to this
reservation.
2
<PAGE> 10
Corporate Acknowledgment
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Be it remembered that on this 28th day of September, 1989, personally
came before me, the undersigned, a Notary Public in and for said State duly
commissioned and sworn, Kim G. Davis, the President of KPC Acquisition
Corporation, a corporation of the State of Delaware, party to the within and
foregoing instrument, known to me personally to be such and the person who
executed such instrument on behalf of such corporation, and acknowledged to me
that such instrument was his own act and deed and the act and deed of such
corporation, that the signature therein is his own proper handwriting, that his
act of executing and delivering such instrument was duly authorized by
resolution of directors or by the by-laws of such corporation, and that the
facts stated therein are true. Given under my hand and seal of office the date
and year aforesaid.
[Seal] /s/ Andrea L. Schuman
--------------------------
Signature of Notary Public
My Commission expires:
ANDREA L. SCHUMAN
Notary Public State of New York
No. 4948905
Qualified in New York County
Term Expires February 6, 1991
<PAGE> 11
Corporate Acknowledgement
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Be it remembered that on this 28th day of September, 1989, personally
came before me, the. undersigned, a Notary Public in and for said State duly
commissioned and sworn, George W. Peck IV, the Secretary of KPC Acquisition
Corporation, a corporation of the State of Delaware, party to the within and
foregoing instrument, known to me personally to be such and the person who
executed such instrument on behalf of such corporation, and acknowledged to me
that such instrument was his own act and deed and the act and deed of such
corporation, that the signature therein is his own proper handwriting, that his
act of executing and delivering such instrument was duly authorized by
resolution of directors or by the by-laws of such corporation, and that the
facts stated therein are true. Given under my hand and seal of office the date
and year aforesaid.
[Seal] /s/ Andrea L. Schuman
--------------------------
Signature of Notary Public
My Commission expires:
ANDREA L. SCHUMAN
Notary Public State of New York
No. 4948905
Qualified in New York County
Term Expires February 6, 1991
<PAGE> 12
CERTIFICATE OF OWNERSHIP AND MERGER
OF
COLORADO PRIME SALES CORP.
(a Delaware corporation)
INTO
COLORADO PRIME CORPORATION
(a Delaware corporation)
It is hereby certified that:
1. Colorado Prime Corporation hereinafter sometimes referred to as the
"Corporation" is a corporation incorporated under the laws of the State of
Delaware.
2. The Corporation is the owner of all of the outstanding shares of
each class of the stock of Colorado Prime Sales Corp. which is also a
corporation incorporated under the laws of the State of Delaware.
3. On July 27, 1989, the Board of Directors of the Corporation adopted
the following resolutions by unanimous written consent to merge Colorado Prime
Sales Corp. into the Corporation (the "Merger"), effective at the close of
business on September 28, 1989 or on such other date as the President of the
Corporation, upon the advice of counsel, shall deem appropriate:
RESOLVED, that Colorado Prime Sales Corp. be merged with and into the
Corporation, and that all of the estate, property, rights, privileges, powers
and franchises of Colorado Prime Sales Corp. be vested in and held and enjoyed
by the Corporation as the same were before held and enjoyed by Colorado Prime
Sales Corp. in its name; and further
RESOLVED, that the Corporation shall assume all of the obligations of
Colorado Prime Sales Corp; and further
RESOLVED, that the Corporation shall cause to be executed and file
and/or record the documents prescribed by the laws of the State of Delaware and
by the laws of any other appropriate jurisdiction and will cause to be performed
all necessary acts within the State of Delaware and within any other appropriate
jurisdiction; and further
RESOLVED, that the effective time of the Certificate of Ownership and
Merger setting forth a copy of these resolutions, and the time when the merger
therein provided for shall become effective, shall be at the close
<PAGE> 13
of business on September 28, 1989, or on such other date as the President, upon
the advice of counsel, shall deem appropriate; and further
RESOLVED, that without in any way limiting the authority hereby granted
to the officers of the Corporation, the officers of the Corporation be, and each
of them hereby is, authorized, empowered and directed to take any and all
actions and steps, and to execute and deliver all such officers' certificates
and such other documents and instruments as they shall determine to be
necessary, appropriate and advisable to carry out the intent of the foregoing
resolutions and the transactions contemplated therein, such determination to be
conclusively evidenced by the taking of such actions and steps and the execution
and delivery of such officers, certificates, documents and instruments.
4. The name of the surviving corporation of the Merger shall be
Colorado Prime Corporation.
5. The Certificate of Incorporation of the surviving corporation shall
be the certificate of incorporation of the Corporation.
6. The President and Chairman of the Board of the Corporation, upon the
advice of counsel, deemed that the effective time of the Certificate of
Ownership and Merger, and the time when the Merger therein agreed upon shall
become effective, shall be on September 29, 1989.
Executed on September 28, 1989.
COLORADO PRIME CORPORATION
By: /s/ John B. Masciandaro
-------------------------------
Its Chairman of the Board
and President
Attest:
/s/ Joseph Murphy
- -----------------------------------
Its Secretary
prime;cert-of-ownership928
2
<PAGE> 14
CORPORATE ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF SUFFOLK )
Be it remembered that on this 28th day of September, 1989, personally
came before me, the undersigned, a Notary Public in and for said State duly
commissioned and sworn, John B. Masciandaro, the President of Colorado Prime
Corporation, a corporation of the State of Delaware, party to the within and
foregoing instrument, known to me personally to be such and the person who
executed such instrument on behalf of such corporation, and acknowledged to me
that such instrument was his own act and deed and the act and deed of such
corporation, that the signature therein is his own proper handwriting, that his
act of executing and delivering such instrument was duly authorized by
resolution of directors or by the by-laws of such corporation, and that the
facts stated therein are true. Given under my hand and seal of office the date
and year aforesaid.
[Seal]
/s/ RICHARD LoCURTO
------------------------------------
Signature of Notary Public
My Commission expires: June 30, 1991
d3-prime;jmca-92689 RICHARD LoCURTO
Notary Pubic, State of New York
No. 2388785
Qualified in Suffolk County
Commission Expires June 30, 1991
<PAGE> 15
CORPORATE ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF SUFFOLK )
Be it remembered that on this 28th day of September, 1989, personally
came before me, the undersigned, a Notary Public in and for said State duly
commissioned and sworn, Joseph Murphy, the Secretary of Colorado Prime
Corporation, a corporation of the State of Delaware, party to the within and
foregoing instrument, known to me personally to be such and the person who
executed such instrument on behalf of such corporation, and acknowledged to me
that such instrument was his own act and deed and the act and deed of such
corporation, that the signature therein is his own proper handwriting, that his
act of executing and delivering such instrument was duly authorized by
resolution of directors or by the by-laws of such corporation, and that the
facts stated therein are true. Given under my hand and seal of office the date
and year aforesaid.
[Seal]
/s/ RICHARD LoCURTO
------------------------------------
Signature of Notary Public
My Commission expires: June 30, 1991
d3-prime;ca-92689 RICHARD LoCURTO
Notary Public, State of New York
No. 2388785
Qualified in Suffolk County
Commission Expires June 30, 1991
<PAGE> 16
CERTIFICATE OF OWNERSHIP AND MERGER
OF
COLORADO PRIME (DE), INC.
(a Delaware corporation)
INTO
COLORADO PRIME CORPORATION
(a Delaware corporation)
It hereby certified that:
1. Colorado Prime Corporation hereinafter sometimes referred to as the
"Corporation" is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of
each class of the stock of Colorado Prime (DE), Inc. which is also a business
corporation of the State of Delaware.
3. On October 14, 1988, the Board of Directors of the Corporation
adopted the following resolutions to merge Colorado Prime (DE), Inc. into the
Corporation:
RESOLVED that Colorado Prime (DE), Inc. be merged into this
Corporation, and that all of the estate, property, rights, privileges,
powers and franchises of Colorado Prime (DE), Inc. be vested in and
held and enjoyed by this Corporation as fully and entirely and without
change or diminution as the same were before held and enjoyed by
Colorado Prime (DE), Inc. in its name.
RESOLVED that this Corporation shall assume all of the obligations of
Colorado Prime (DE), Inc.
RESOLVED that this Corporation shall cause to be executed and filed
and/or recorded the documents prescribed by the laws of the State of
Delaware and by the laws of any other appropriate jurisdiction and will
cause to be performed all necessary acts within the State of Delaware
and within any other appropriate jurisdiction.
RESOLVED that the effective time of the Certificate of Ownership and
Merger setting forth a copy of these resolutions, and the time when the
merger therein provided for, shall become
<PAGE> 17
effective shall be at the close of business on October 28, 1988.
Executed on October 17, 1988.
COLORADO PRIME CORPORATION
By: /s/ John B. Masciandaro
--------------------------------------
Its Chairman of the Board
Attests:
/s/ Joseph Murphy
- -----------------------------------
Its Secretary
prime;ownership-cert
2
<PAGE> 18
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLORADO HOLDING COMPANY, INC.
The undersigned hereby certifies that:
1. The name of the Corporation (hereinafter called the "Corporation")
is Colorado Holding Company, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article First in its entirety, and substituting in lieu
thereof the following:
"First: The name of the corporation is Colorado Prime Corporation
(the "Corporation")."
3. The Certificate of Incorporation of the Corporation is hereby
further amended by deleting Article Fourth in its entirety, and substituting in
lieu thereof the following:
"Fourth: The total number of shares which the Corporation is
authorized to issue is 10,000,000 and the par value of each share is
one cent ($.01)."
4. The Certificate of Incorporation of the Corporation is hereby
further amended by deleting Article Eighth in its entirety, and substituting in
lieu thereof the following:
"Eighth: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary
<PAGE> 19
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall
be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended. No modification or
repeal of the provisions of this Article shall adversely affect any
right or protection of any director of the Corporation existing at
the date of such modification or repeal or create any liability or
adversely affect any such right or protection for any acts or
omissions of such director occurring prior to such modification or
repeal."
5. The Amendments of the Certificate of Incorporation herein certified
have been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
<PAGE> 20
IN WITNESS WHEREOF, the undersigned hereby certifies that the facts
herein stated are true and, accordingly, has signed this Certificate of
Amendment this 20th day of April, 1987.
/s/Thomas Epstein
-------------------------------
Thomas Epstein
Vice President
ATTEST:
/s/Steven A. Hobbs
- ---------------------------------
Steven A. Hobbs
Assistant Secretary
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLORADO HOLDING, INC.
Colorado Holding, Inc., a Delaware corporation (the "Corporation"),
pursuant to Section 241 of the General Corporation Law of the State of Delaware,
certifies that:
1. The Certificate of incorporation of the Corporation is hereby
amended by striking out Article First thereof and by substituting in lieu
thereof the following:
First: The name of the Corporation is Colorado Holding Company,
Inc. (the "Corporation").
2. The Corporation has not received any payment for any of its capital
stock and the Amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 241 of the
General Corporation Law of the State of Delaware.
<PAGE> 22
IN WITNESS WHEREOF, the undersigned hereby certifies that the facts
herein stated are true and, accordingly, has signed this Certificate of
Amendment this 25th day of September, 1986.
/s/Steven A. Hobbs
-----------------------------
Steven A. Hobbs,
Incorporator
-2-
<PAGE> 23
CERTIFICATE OF INCORPORATION
OF
COLORADO HOLDING, INC.
The undersigned, for the purposes of forming a corporation pursuant to
Sections 101 and 102 of the General Corporation Law of Delaware, does hereby
certify as follows:
First: The name of the corporation is Colorado Holding, Inc. (the
"Corporation').
Second: The address of the Corporation's registered office in Delaware
is 229 South State Street, City of Dover, County of Kent, Delaware 19901. The
name of the Corporation's registered agent at that address is The Prentice-Hall
Corporation System, Inc.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
Fourth: The total number of shares of stock which the Corporation shall
have authority to issue is one million (1,000,000), par value of One Cent
($0.01) per share, all of which shares are Common Stock.
Fifth: The name and mailing address of the incorporator is:
Name Mailing Address
Steven A. Hobbs 400 Park Avenue
New York, New York 10022
<PAGE> 24
Sixth: The Board of Directors is expressly authorized to adopt, amend,
or repeal the By-Laws of the Corporation.
Seventh: Pursuant to Section 211(e) of the General Corporation Law of
Delaware, the directors of the Corporation shall not be required to be elected
by written ballots.
Eighth: To the fullest extent permitted by the General Corporation Law
of Delaware, as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, the undersigned, being the sole incorporator
hereinabove named, hereby further certifies that the facts herein stated are
true and, accordingly, has signed this Certificate of Incorporation this 8th day
of September, 1986.
/s/Steven A. Hobbs
--------------------------------
Steven A. Hobbs
-2-
<PAGE> 1
EXHIBIT 3.2
===============================================================================
COLORADO PRIME CORPORATION
BY-LAWS
===============================================================================
<PAGE> 2
KPC ACQUISITION CORPORATION
BY-LAWS
_______________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I STOCKHOLDERS
1.01 Annual Meetings................................................. 1
1.02 Special Meetings................................................ 1
1.03 Notice of Meetings; Waiver...................................... 2
1.04 Quorum.......................................................... 2
1.05 Voting.......................................................... 2
1.06 Voting by Ballot................................................ 3
1.07 Adjournment..................................................... 3
1.08 Proxies......................................................... 3
1.09 Organization; Procedure......................................... 4
1.10 Consent of Stockholders in Lieu of Meeting...................... 4
ARTICLE II BOARD OF DIRECTORS
2.01 General Powers.................................................. 5
2.02 Number and Term of Office....................................... 5
2.03 Election of Directors........................................... 5
2.04 Annual and Regular Meetings..................................... 5
2.05 Special Meetings; Notice........................................ 6
2.06 Quorum; Voting.................................................. 6
2.07 Adjournment..................................................... 7
2.08 Action Without a Meeting........................................ 7
2.09 Regulations; Manner of Acting................................... 7
2.10 Action by Telephonic Communications............................. 7
2.11 Resignations.................................................... 7
2.12 Removal of Directors............................................ 7
2.13 Vacancies and Newly Created Directorships....................... 8
2.14 Compensation.................................................... 8
2.15 Reliance on Accounts and Reports, etc........................... 8
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES
3.01 How Constituted................................................. 9
3.02 Powers.......................................................... 9
3.03 Proceedings..................................................... 10
3.04 Quorum and Manner of Acting..................................... 10
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
3.05 Action by Telephonic Communications ................. 11
3.06 Absent or Disqualified Members ...................... 11
3.07 Resignations ........................................ 11
3.08 Removal ............................................. 11
3.09 Vacancies ........................................... 11
ARTICLE IV OFFICERS
4.01 Number .............................................. 11
4.02 Election ............................................ 12
4.03 Salaries ............................................ 12
4.04 Removal and Resignation; Vacancies .................. 12
4.05 Authority and Duties of Officers .................... 12
4.06 The President ....................................... 12
4.07 The Vice President .................................. 13
4.08 The Secretary ....................................... 13
4.09 The Treasurer ....................................... 14
4.10 Additional Officers ................................. 15
4.11 Security ............................................ 16
ARTICLE V CAPITAL STOCK
5.01 Certificates of Stock, Uncertificated Shares ........ 16
5.02 Signatures; Facsimile ............................... 16
5.03 Lost, Stolen or Destroyed Certificates .............. 17
5.04 Transfer of Stock ................................... 17
5.05 Record Date ......................................... 17
5.06 Registered Stockholders ............................. 19
5.07 Transfer Agent and Registrar ........................ 19
ARTICLE VI INDEMNIFICATION
6.01 Nature of Indemnity ................................. 19
6.02 Successful Defense .................................. 20
6.03 Determination That Indemnification Is Proper ........ 20
6.04 Advance Payment of Expenses ......................... 21
6.05 Procedure for Indemnification of Directors
and Officers ...................................... 21
6.06 Survival; Preservation of Other Rights .............. 22
6.07 Insurance ........................................... 23
6.08 Severability ........................................ 23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE VII OFFICES
7.01 Registered Office ................................... 23
7.02 Other Offices ....................................... 24
ARTICLE VIII GENERAL PROVISIONS
8.01 Dividends ........................................... 24
8.02 Reserves ............................................ 24
8.03 Execution of Instruments ............................ 25
8.04 Corporate Indebtedness .............................. 25
8.05 Deposits ............................................ 25
8.06 Checks .............................................. 25
8.07 Sale, Transfer, etc. of Securities .................. 26
8.08 Voting as Stockholder ............................... 26
8.09 Fiscal Year ......................................... 26
8.10 Seal ................................................ 26
8.11 Books and Records; Inspection ....................... 26
ARTICLE IX AMENDMENT OF BY-LAWS
9.01 Amendment ........................................... 27
ARTICLE X CONSTRUCTION
10.01 Construction ........................................ 27
</TABLE>
iii
<PAGE> 5
KPC ACQUISITION CORPORATION
BY-LAWS
As adopted on June 8, 1989
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, either within or without the State of Delaware, and at 2:00 P.M. local
time on the last Tuesday in September (or, if such day is a legal holiday, then
on the next succeeding business day), or at such other date and hour, as may be
fixed from time to time by resolution of the Board of Directors and set forth in
the notice or waiver of notice of the meeting. [Sections 211(a), (b).]*
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the President (or, in the event of his absence or
disability, by any Vice President), or by the Board of Directors. A special
meeting shall be called by the President (or, in the event of his absence or
disability, by any Vice President), or by the Secretary, immediately upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such officers or
the Board of Directors shall fail to call such meeting within 20 days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such
places, within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. [Section 211(d).]
- ----------
* Citations are to the General Corporation Law of the State of Delaware as in
effect on February 2, 1988, and are inserted for reference only, and do not
constitute a part of the By-Laws.
<PAGE> 6
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If
such notice is mailed, it shall be deemed to have been given to a stockholder
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the record of stockholders of the
Corporation, or, if he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, then
directed to him at such other address. Such further notice shall be given as
may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of business
on such record date. If no record date has been fixed, then every holder of
record of shares entitled to vote at a meeting of stockholders shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation at the close
2
<PAGE> 7
of business on the day next preceding the day on which notice of the meeting is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. Except as otherwise required by
law or by the Certificate of Incorporation, the vote of a majority of the
shares represented in person or by proxy at any meeting at which a quorum is
present shall be sufficient for the transaction of any business at such
meeting. [Sections 212(a), 216.]
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot or conducted by inspectors of election, unless otherwise
required by law. Any vote which need not be taken by ballot may be conducted in
any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting of
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for
the adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a
notice of the adjourned meeting, conforming to the requirements of Section 1.03
hereof, shall be given to each stockholder of record entitled to vote at such
meeting. At any adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted on the original date of the
meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting
of the stockholders or to express consent to or dissent from corporate action
without a meeting may, by a written instrument signed by such stockholder or
his attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except in
those cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any
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proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or by filing another duly
executed proxy bearing a later date with the Secretary. [Section 212(b), (c).]
Section 1.09. Organization; Procedure. At every meeting of stockholders
the presiding officer shall be the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders present
in person or by proxy. The Secretary, or in the event of his absence or
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined by
such presiding officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the
fullest extent permitted by law, whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder or member who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest dated consent delivered in the manner required by law to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware,
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its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation [Section 141(a).]
Section 2.02. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be two, which number may be
modified from time to time by resolution of the Board of Directors, but in no
event shall the number of Directors be less than one. Each Director (whenever
elected) shall hold office until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal.
[Section 141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of Directors, provided a quorum is
present, the Directors shall be elected by a plurality of the votes validly
cast in such election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual
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meeting of the stockholders. Notice of such annual meeting of the Board of
Directors need not be given. The Board of Directors from time to time may by
resolution provide for the holding of regular meetings and fix the place (which
may be within or without the State of Delaware) and the date and hour of such
meetings. Notice of regular meetings need not be given, provided, however, that
if the Board of Directors shall fix or change the time or place of any regular
meeting, notice of such action shall be mailed promptly, or sent by telegram,
radio or cable, to each Director who shall not have been present at the meeting
at which such action was taken, addressed to him at his usual place of
business, or shall be delivered to him personally. Notice of such action need
not be given to any Director who attends the first regular meeting after such
action is taken without protesting the lack of notice to him, prior to or at
the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting. [Section 141(g).]
Section 2.05. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the President or, in the event of
his absence or disability, by any Vice President, at such place (within or
without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Special meetings of
the Board of Directors may be called on 24 hours' notice, if notice is given to
each Director personally or by telephone or telegram, or on five days' notice,
if notice is mailed to each Director, addressed to him at his usual place of
business. Notice of any special meeting need not be given to any Director who
attends such meeting without protesting the lack of notice to him, prior to or
at the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting, and any business may be
transacted thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. [Section 141(b).]
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Section 2.07. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.05 shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting. [Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any Director may be removed at
any time, either for or without cause, upon the affirmative vote of the holders
of a majority of the outstanding shares of stock of the Corpo-
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ration entitled to vote for the election of such Director, cast at a special
meeting of stockholders called for the purpose. Any vacancy in the Board of
Directors caused by any such removal may be filled at such meeting by the
stockholders entitled to vote for the election of the Director so removed. If
such stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 2.13 of these By-Laws. [Section 141(b).]
Section 2.13. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and
such vacancies and newly created directorships may be filled by a majority of
the Directors then in office, although less than a quorum. A Director elected
to fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his earlier death,
resignation or removal. Any such vacancy or newly created directorship may also
be filled at any time by vote of the stockholders. [Section 223.]
Section 2.14. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for his services as such shall be
fixed from time to time by resolution of the Board of Directors. [Section
141(h).]
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. [Section 141(e).]
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ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be designated
at the annual meeting of the Board of Directors. Any such Committee may be
abolished or re-designated from time to time by the Board of Directors. Each
member (and each alternate member) of any such Committee (whether designated at
an annual meeting of the Board of Directors or to fill a vacancy or otherwise)
shall hold office until his successor shall have been designated or until he
shall cease to be a Director, or until his earlier death, resignation or
removal. [Section 141(c).]
Section 3.02. Powers. During the intervals between the meetings
of the Board of Directors, the Executive Committee, except as otherwise provided
in this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to amend the Certificate of Incorporation (except that a
Committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of
Directors as provided in Section 131(a) of the General Corporation Law,
fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion
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into, or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or classes of
stock of the Corporation or fix the number of shares of any series of
stock or authorize the increase or decrease of the shares of any
series),
(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets, or
(d) to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03. Proceedings. Each such Committee may fix its own
rules of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine from
time to time. Each such Committee shall keep minutes of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be
otherwise provided in the resolution creating such Committee, at all meetings
of any Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute
a quorum for the transaction of business. The act of the majority of the
members present at any meeting at which a quorum is present shall be the act of
such Committee. Any action required or permitted to be taken at any meeting of
any such Committee may be taken without a meeting, if all members of such
Committee shall consent to such action in writing and such writing or writings
are filed with the minutes of the proceedings of the Committee. The members of
any such Committee shall act only as a Committee, and the individual members of
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such Committee shall have no power as such. [Section 141(c).]
Section 3.05. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
Section 3.06. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any Committee,
by reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, one or more Vice
Presidents, a
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Secretary, a Treasurer, one or more Assistant Secretaries and one or more
Assistant Treasurers. Any number of offices may be held by the same person. No
officer need be a Director of the Corporation. [Section 142(a), (b).]
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal.
[Section 142(b).]
Section 4.03. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors.
[Section 142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
Section 4.06. The President. The President shall preside at all
meetings of the stockholders and directors at which he is present, shall be the
chief executive officer and the chief operating officer of the Corporation,
shall have general control and supervision of the policies and operations of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall manage and administer the
Corporation's business and affairs and
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shall also perform all duties and exercise all powers usually pertaining to the
office of a chief executive officer and a chief operating officer of a
corporation. He shall have the authority to sign, in the name and on behalf of
the Corporation, checks, orders, contracts, leases, notes, drafts and other
documents and instruments in connection with the business of the Corporation,
and together with the Secretary or an Assistant Secretary, conveyances of real
estate and other documents and instruments to which the seal of the Corporation
is affixed. He shall have the authority to cause the employment or appointment
of such employees and agents of the Corporation as the conduct of the business
of the Corporation may require, to fix their compensation, and to remove or
suspend any employee or agent elected or appointed by the President or the
Board of Directors. The President shall perform such other duties and have such
other powers as the Board of Directors or the Chairman may from time to time
prescribe.
Section 4.07. The Vice President. Each Vice President shall
perform such duties and exercise such powers as may be assigned to him from
time to time by the President. In the absence of the President, the duties of
the President shall be performed and his powers may be exercised by such Vice
President as shall be designated by the President, or failing such designation,
such duties shall be performed and such powers may be exercised by each Vice
President in the order of their earliest election to that office; subject in
any case to review and superseding action by the President.
Section 4.08. The Secretary. The Secretary shall have the
following powers and duties:
(a) He shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He shall cause all notices to be duly given in accordance
with the provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he shall furnish a copy of such
resolution to the members of such Committee.
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(d) He shall be the custodian of the records and of the seal of
the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior
to the issuance thereof and to all instruments the execution of which on
behalf of the Corporation under its seal shall have been duly
authorized in accordance with these By-Laws, and when so affixed he may
attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shares held by each holder and the date as of
which each became such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer
or Assistant Secretary shall have signed) certificates representing
shares of the Corporation the issuance of which shall have been
authorized by the Board of Directors.
(h) He shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these
By-Laws or as may be assigned to him from time to time by the Board of
Directors, or the President.
Section 4.09. The Treasurer. The Treasurer shall be the chief
financial officer of the Corporation and shall have the following powers and
duties:
(a) He shall have charge and supervision over and be responsible
for the moneys, securities, receipts and disbursements of the
Corporation, and shall keep or cause to be kept full and accurate
records of all receipts of the Corporation.
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(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or
other depositaries as shall be selected in accordance with Section 8.05
of these By-Laws.
(c) He shall cause the moneys of the Corporation to be disbursed
by checks or drafts (signed as provided in Section 8.06 of these
By-Laws) upon the authorized depositaries of the Corporation and cause
to be taken and preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer, and render a full
financial report at the annual meeting of the stockholders, if called
upon to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the
Secretary or an Assistant Secretary shall have signed) certificates
representing stock of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(g) He shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
By-Laws or as may be assigned to him from time to time by the Board of
Directors, or the President.
Section 4.10. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective
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rights, terms of office, authorities and duties. Any such officer or agent may
remove any such subordinate officer or agent appointed by him, for or without
cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his duties, in such amount and of such character as may
be determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock. Uncertificated Shares. The
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or
all of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until each certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock in the Corporation represented by certificates
and upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation, by the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. Such certificate shall be in such form as the
Board of Directors may determine, to the extent consistent with applicable law,
the Certificate of Incorporation and these By-Laws. [Section 158.]
Section 5.02. Signatures; Facsimile. All of such signatures on
the certificate may be a facsimile, engraved or printed, to the extent
permitted by law. In case any officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same
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effect as if he were such officer, transfer agent or registrar at the date of
issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of the
uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the
General Corporation Law of the State of Delaware. Subject to the provisions of
the Certificate of Incorporation and these By-Laws, the Board of Directors may
prescribe such additional rules and regulations as it may deem appropriate
relating to the issue, transfer and registration of shares of the Corporation.
[Section 151.]
Section 5.05. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that
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the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
[Section 213.]
18
<PAGE> 23
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registration owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other
person, whether or not the Corporation shall have notice of such claim or
interests. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer or uncertificated shares are requested to be transferred, both the
transferor and transferee request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partner-
19
<PAGE> 24
ship, joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to produce a judgment
in its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 6.01 hereof or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
hereof
20
<PAGE> 25
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.01 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 6.05. Procedure for Indemnification of Directors and Officers.
Any indemnification of a director or officer of the Corporation under Sections
6.01 and 6.02, or advance of costs, charges and expenses to a director or
officer under Section 6.04 of this Article, shall be made promptly, and in any
event within 30 days, upon the written request of the director or officer. If a
determination by the Corporation that the director or officer is entitled to
indemnification pursuant to this Article is required, and the Corporation fails
to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request.
21
<PAGE> 26
If the Corporation denies a written request for indemnity or advancement of
expenses, in whole or in part, or if payment in full pursuant to such request
is not made within 30 days, the right to indemnification or advances as granted
by this Article shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section 6.04 of this
Article where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of this Article, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, its independent legal counsel, and its stockholders) to have made
a determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 of this Article, nor
the fact that there has been an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel, and its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which
22
<PAGE> 27
those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01 Registered Office. The registered office of the
Corporation in the State of Delaware shall be National Corporate Research, Ltd.
located at 15 North Street in City of Dover, County of Kent.
23
<PAGE> 28
Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property, or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or Committees of the Board of Directors, or by any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid. [Sections 172, 173.]
Section 8.02. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation,
and the Board of Directors may similarly modify or abolish any such reserve.
[Section 171.]
24
<PAGE> 29
Section 8.03. Execution of Instruments. The President, any Vice
President, the Secretary or the Treasurer may enter into any contract or
execute and deliver any instrument in the name and on behalf of the
Corporation. The Board of Directors or the President may authorize any other
officer or agent to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. Any such authorization
may be general or limited to specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the President. Such
authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors or the President shall authorize. When so authorized by
the Board of Directors or the President, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositaries as may
be determined by the Board of Directors or the President, or by such officers
or agents as may be authorized by the Board of Directors or the President to
make such determination.
Section 8.06. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
25
<PAGE> 30
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or the Treasurer or any other officers designated by the Board of
Directors or the President may sell, transfer, endorse, and assign any shares
of stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
26
<PAGE> 31
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or
repealed
(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained
in the notice or waiver of notice of such meeting; or
(b) at any regular, or special meeting of the stockholders if, in the
case of such special meeting only, notice of such amendment, alteration or
repeal is contained in the notice or waiver of notice of such meeting.
[Section 109(a).]
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between the
provisions of these By-Laws as in effect from time to time and the provisions of
the certificate of incorporation of the Corporation as in effect from time to
time, the provisions of such certificate of incorporation shall be controlling.
27
<PAGE> 32
REVISION OF THE BY-LAWS
OF
COLORADO PRIME CORPORATION
Pursuant to the authority vested in the Board of Directors in Paragraph
(d) of Article Sixth of the Certificate of Incorporation, Section 6.04 of the
By-Laws was amended at the July 30, 1991 meeting of the Board of Directors to
read as follows:
Section 6.04. Advance Payment of Expenses. Expenses (including
attorney's fees) incurred by a director or officer defending any civil,
criminal, administrative or investigative action, suit or proceeding shall
be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized by this Article. Such expenses (including attorney's fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board
of Directors may authorize the Corporation's counsel to represent such
director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or
proceeding.
<PAGE> 1
EXHIBIT 3.3
Certificate of Incorporation of
KAL-MAR PROPERTIES CORP.
under Section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the proposed corporation is
KAL-MAR PROPERTIES CORP.
(2) The purpose or purposes for which this corporation is formed, are
as follows, to wit:
To own, operate, lease, manage, improve, buy, sell, exchange, and
otherwise deal with, and in, real estate, real and personal
property, buildings, land, and all other forms of property real,
personal, and otherwise; for hiring and firing employees; borrowing
monies, negotiating and executing all necessary bonds and
promissory notes, bills of exchange and other obligations of the
corporation for monies borrowed, or any payment for the property
acquired or for any other objects or purposes of the corporation or
its business, and to secure the payment of such obligations by
mortgage, pledge, deed or otherwise, by any instrument or trust, or
by other lien upon assignment in regard to all or any part of the
property of the corporation, wheresoever situated, whether now
owned or hereafter acquired.
The corporation, in furtherance of its corporate purposes above set
forth, shall have all of the powers enumerated in Section 202 of the Business
Corporation law, subject to any limitations provided in the Business
Corporation Law or any other statute of the State of New York.
<PAGE> 2
(3) The office of the corporation is to be located in the Town
of Babylon County of Suffolk State of New York.
(4) The aggregate number of shares which the corporation shall have
the authority to issue is
Two hundred (200) shares, all of which are to be one
class, without par value.
<PAGE> 3
(5) The Secretary of State is designated as agent of the corporation
upon whom process against it may be served. The post office
address to which the Secretary of State shall mail a copy of any
process against the corporation served upon him is
Verdi Street
South Farmingdale, New York
The undersigned incorporator, or each of them if there are more than
one, is of the age of twenty-one years or over.
IN WITNESS WHEREOF, this certificate has been executed this 7th day of June,
1965.
MICHAEL C. DUBAN /s/ Michael C. Duban
- -------------------------------------- --------------------------------------
Type name of incorporator Signature
350 East 52nd Street, N.Y.C.
- -----------------------------------------------------------
Address
- -------------------------------------- --------------------------------------
Type name of incorporator Signature
- -----------------------------------------------------------
Address
- -------------------------------------- --------------------------------------
Type name of incorporator Signature
- -----------------------------------------------------------
Address
<PAGE> 4
CERTIFICATE OF CHANGE
OF
KAL-MAR PROPERTIES CORP.
(under Section 805-A of the Business Corporation Law)
The undersigned corporation submits the following statement for the
purpose of changing its registered agent in the State of New York:
FIRST: The name of the corporation is Kal-Mar Properties Corp.
SECOND: The certificate of incorporation was filed by the Department of
State on June 9, 1965.
THIRD: The certificate of incorporation of the corporation is hereby
changed, pursuant to the unanimous written consent of the Board of Directors of
the corporation, so as to change the designation of agent for service of
process; and, to accomplish said change, the statement in paragraph five of the
certificate of incorporation relating to said agent is hereby stricken and the
following statement is substituted in lieu thereof:
"The post office address within the State of New York
to which the Secretary of State shall mail a copy of any
process against the corporation served upon him is
33 Irving Place, c/o Koerner Silberberg & Weiner, Att:
Carl Seldin Koerner, New York, New York 10003."
IN WITNESS WHEREOF, this certificate has been subscribed this 18 day of
August, 1992 by the undersigned officers of the corporation who affirm that the
statements made herein are true under penalties of perjury.
Kal-Mar Properties Corp.
By: /s/ John B. Masciandaro,
------------------------------
John B. Masciandaro, President
/s/ Joseph Murphy,
-------------------------------
Joseph Murphy, Secretary
August 18, 1992
<PAGE> 1
Exhibit 3.4
BY-LAWS
of
KAL-MAR PROPERTIES CORP.
-------------------------------------
ARTICLE I - OFFICES
The principal office of the corporation shall be in the incorporated
village of Farmingdale County of Nassau State of New York. The corporation
may also have offices at such other places within or without the State of New
York as the board may from time to time determine or the business of the
corporation may require.
ARTICLE II - SHAREHOLDERS
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of New York as the
board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the day of
at 10 A.M. in each year if not a legal holiday, and, if
a legal holiday, then on the next business day following at the same hour, when
the shareholders shall elect a board and transact such other business as may
properly come before the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the board or by
the president and shall be called by the president or the secretary at the
request in writing of a majority of the board or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other
By-Laws A
<PAGE> 2
action, the board shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than fifty nor less
than ten days before the date of such meeting, nor more than fifty days prior
to any other action. If no record date is fixed it shall be determined in
accordance with the provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose
or purposes for which the meeting is called, the place, date and hour of the
meeting and unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, not less than ten nor more than fifty days before the
date of the meeting. If action is proposed to be taken that might entitle
shareholders to payment for their shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice is given when
deposited in the United States mail, with postage thereon prepaid, directed to
the shareholder at his address as it appears on the record of shareholders, or,
if he shall have filed with the secretary a written request that notices to
him be mailed to some other address, then directed to him at such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
7. QUORUM OF SHAREHOLDERS.
Unless the certificate of incorporation provides otherwise, the holders
of a majority of the shares entitled to vote thereat shall constitute a quorum
at a meeting of shareholders for the transaction of any business, provided that
when a specified item of business is required to be voted on by a class or
classes, the holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken by
the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of
a quorum.
By-Laws B
<PAGE> 3
BY-LAWS
of
KAL-MAR PROPERTIES CORP.
----------------------------------------------------------------
ARTICLE I - OFFICES
The principal office of the corporation shall be in the incorporated
village of Farmingdale County of Nassau State of New York. The corporation may
also have offices at such other places within or without the State of New York
as the board may from time to time determine or the business of the corporation
may require.
ARTICLE II - SHAREHOLDERS
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of New York as the
board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the day of
at 10 A.M. in each year if not a legal holiday,
and, if a legal holiday, then on the next business day following at the same
hour, when the shareholders shall elect a board and transact such other
business as may properly come before the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the board or by
the president and shall be called by the president or the secretary at the
request in writing of a majority of the board or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other
By-Laws A
<PAGE> 4
action, the board shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than fifty nor less
than ten days before the date of such meeting, nor more than fifty days prior
to any other action. If no record date is fixed it shall be determined in
accordance with the provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose
or purposes for which the meeting is called, the place, date and hour of the
meeting and unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, not less than ten nor more than fifty days before the
date of the meeting. If action is proposed to be taken that might entitle
shareholders to payment for their shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice is given when
deposited in the United States mail, with postage thereon prepaid, directed to
the shareholder at his address as it appears on the record of shareholders, or,
if he shall have filed with the secretary a written request that notices to him
be mailed to some other address, then directed to him at such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
7. QUORUM OF SHAREHOLDERS.
Unless the certificate of incorporation provides otherwise, the holders
of a majority of the shares entitled to vote thereat shall constitute a quorum
at a meeting of shareholders for the transaction of any business, provided
that when a specified item of business is required to be voted on by a class or
classes, the holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of
a quorum.
By-Laws B
<PAGE> 5
8. PROXIES
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
9. QUALIFICATION OF VOTERS.
Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record of
shareholders, unless otherwise provided in the certificate of incorporation.
10. VOTE OF SHAREHOLDERS.
Except as otherwise required by statute or by the certificate of
incorporation:
(a) directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election;
(b) all other corporate action shall be authorized by a majority of the
votes cast.
11. WRITTEN CONSENT OF SHAREHOLDERS.
Any action that may be taken by vote may be taken without a meeting on
written consent, setting forth the action so taken, signed by the holders of
all the outstanding shares entitled to vote thereon or signed by such lesser
number of holders as may be provided for in the certificate of incorporation.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS.
Subject to any provision in the certificate of incorporation the
business of the corporation shall be managed by its board of directors, each of
whom shall be at least 18 years of age and need not be shareholders.
2. NUMBER OF DIRECTORS.
The number of directors shall be not less than 3 nor more than 7. When
all of the shares are owned by less than three shareholders, the number of
directors may be less than three but not less than the number of shareholders.
By-Laws C
<PAGE> 6
NO. 2 - A
Any action required or permitted to be taken by the Board of Directors
or any Committee thereof may be taken without a meeting if all members of the
Board or Committee consent, in writing, to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the Board or Committee shall be filed with the minutes of the
proceedings of the Board or Committee.
BY-LAWS C-1
<PAGE> 7
3. ELECTION AND TERM OF DIRECTORS.
At each annual meeting of shareholders, the shareholders shall elect
directors to hold office until the next annual meeting. Each director shall
hold office until the expiration of the term for which he is elected and until
his successor has been elected and qualified, or until his prior resignation
or removal.
4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the
removal of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
provided in the certificate of incorporation. Vacancies occurring by reason of
the removal of directors without cause shall be filled by vote of the
shareholders unless otherwise provided in the certificate of incorporation. A
director elected to fill a vacancy caused by resignation, death or removal
shall be elected to hold office for the unexpired term of his predecessor.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
shareholders or by action of the board. Directors may be removed without cause
only by vote of the shareholders.
6. RESIGNATION.
A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the board or such officer, and the acceptance of the resignation shall not
be necessary to make it effective.
7. QUORUM OF DIRECTORS.
Unless otherwise provided in the certificate of incorporation, a
majority of the entire board shall constitute a quorum for the transaction of
business or of any specified item of business.
8. ACTION OF THE BOARD.
Unless otherwise required by law, the vote of a majority of the
directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the board. Each director present shall have one vote
regardless of the number of shares, if any, which he may hold.
By-Laws D
<PAGE> 8
9. PLACE AND TIME OF BOARD MEETINGS.
The board may hold its meetings at the office of the corporation or at
such other places, either within or without the State of New York, as it may
from time to time determine.
10. REGULAR ANNUAL MEETING.
A regular annual meeting of the board shall be held immediately
following the annual meeting of shareholders at the place of such annual
meeting of shareholders.
11. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) Regular meetings of the board may be held without notice at such
time and place as it shall from time to time determine. Special meetings of the
board shall be held upon notice to the directors and may be called by the
president upon three days notice to each director either personally or by mail
or by wire; special meetings shall be called by the president or by the
secretary in a like manner on written request of two directors. Notice of a
meeting need not be given to any director who submits a waiver of notice
whether before or after the meeting or who attends the meeting without
protesting prior thereto or at its commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to
the other directors.
12. CHAIRMAN.
At all meetings of the board the president, or in his absence, a
chairman chosen by the board shall preside.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors. Each such committee shall serve at
the pleasure of the board.
14. COMPENSATION.
No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance, at each regular or special meeting of the board may be author-
By-Laws E
<PAGE> 9
ized. Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV - OFFICERS
1. OFFICES, ELECTION, TERM.
(a) Unless otherwise provided for in the certificate of incorporation,
the board may elect or appoint a president, one or more vice-presidents, a
secretary and a treasurer, and such other officers as it may determine, who
shall have such duties, powers and functions as hereinafter provided.
(b) All officers shall be elected or appointed to hold office until the
meeting of the board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected
or appointed and until his successor has been elected or appointed and
qualified.
2. REMOVAL, RESIGNATION, SALARY, ETC.
(a) Any officer elected or appointed by the board may be removed by the
board with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the board in its discretion may elect or appoint a successor to fill the
unexpired term.
(c) Any two or more offices may be held by the same person, except the
offices of president and secretary.
(d) The salaries of all officers shall be fixed by the board.
(e) The directors may require any officer to give security for the
faithful performance of his duties.
3. PRESIDENT.
The president shall be the chief executive officer of the corporation;
he shall preside at all meetings of the shareholders and of the board; he shall
have the management of the business of the corporation and shall see that all
orders and resolutions of the board are carried into effect.
4. VICE-PRESIDENTS.
During the absence or disability of the president, the vice-president,
or if there are more than one, the executive vice-president, shall have all
By-Laws F
<PAGE> 10
the powers and functions of the president. Each vice-president shall perform
such other duties as the board shall prescribe.
5. SECRETARY
The secretary shall:
(a) attend all meetings of the board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to be
kept for that purpose;
(c) give or cause to be given notice of all meetings of shareholders
and of special meetings of the board;
(d) keep in safe custody the seal of the corporation and affix it to
any instrument when authorized by the board;
(e) when required, prepare or cause to be prepared and available at
each meeting of shareholders a certified list in alphabetical order of the
names of shareholders entitled to vote thereat, indicating the number of shares
of each respective class held by each;
(f) keep all the documents and records of the corporation as required
by law or otherwise in a proper and safe manner.
(g) perform such other duties as may be prescribed by the board.
6. ASSISTANT-SECRETARIES.
During the absence or disability of the secretary, the
assistant-secretary, or if there are more than one, the one so designated by
the secretary or by the board, shall have all the powers and functions of the
secretary.
7. TREASURER.
The treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in
the corporate books;
(c) deposit all money and other valuables in the name and to the credit
of the corporation in such depositories as may be designated by the board;
(d) disburse the funds of the corporation as may be ordered or
authorized by the board and preserve proper vouchers for such disbursements;
(e) render to the president and board at the regular meetings of the
board, or whenever they require it, an account of all his transactions as
By-Laws G
<PAGE> 11
treasurer and of the financial condition of the corporation;
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents at his request,
with such reports and statements as he may require as to all financial
transactions of the corporation;
(h) perform such other duties as are given to him by these by-laws or
as from time to time are assigned to him by the board or the president.
8. ASSISTANT-TREASURER.
During the absence or disability of the treasurer, the
assistant-treasurer, or if there are more than one, the one so designated by
the secretary or by the board, shall have all the powers and functions of the
treasurer.
9. SURETIES AND BONDS.
In case the board shall so require, any officer or agent of the
corporation shall execute to the corporation a bond in such sum and with such
surety or sureties as the board may direct, conditioned upon the faithful
performance of his duties to the corporation and including responsibility for
negligence and for the accounting for all property, funds or securities of the
corporation which may come into his hands.
ARTICLE V - CERTIFICATES FOR SHARES
1. CERTIFICATES.
The shares of the corporation shall be represented by certificates.
They shall be numbered and entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares and shall
be signed by the president or a vice-president and the treasurer or the
secretary and shall bear the corporate seal.
2. LOST OR DESTROYED CERTIFICATES.
The board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
By-Laws H
<PAGE> 12
require and/or give the corporation a bond in such sum and with such surety or
sureties as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
3. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered
on the transfer book of the corporation which shall be kept at its principal
office. No transfer shall be made within ten days next preceding the annual
meeting of shareholders.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of New York.
4. CLOSING TRANSFER BOOKS.
The board shall have the power to close the share transfer books of the
corporation for a period of not more than ten days during the thirty day period
immediately preceding (1) any shareholders' meeting, or (2) any date upon which
shareholders shall be called upon to or have a right to take action without a
meeting, or (3) any date fixed for the payment of a dividend or any other form
of distribution, and only those shareholders of record at the time the transfer
books are closed, shall be recognized as such for the purpose of (1) receiving
notice of or voting at such meeting, or (2) allowing them to take appropriate
action, or (3) entitling them to receive any dividend or other form of
distribution.
ARTICLE VI -- DIVIDENDS
Subject to the provisions of the certificate of incorporation and to
applicable law, dividends on the outstanding shares of the corporation may be
declared in such amounts and at such time or times as the board may determine.
Before payment of any dividend, there may be set aside out of the next profits
of the corporation available for dividends such sum or sums as the board from
time to time in its absolute discretion deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other
By-Laws I
<PAGE> 13
purpose as the board shall think conducive to the interests of the corporation,
and the board may modify or abolish any such reserve.
ARTICLE VII -- CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name
of the corporation, the year of its organization and the words "Corporate Seal,
New York." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be a facsimile, engraved or printed.
ARTICLE VIII -- EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or
countersigned, executed, verified or acknowledged by such officer or officers
or other person or persons as the board may from time to time designate.
ARTICLE IX -- FISCAL YEAR
The fiscal year shall begin the first day of February in each year.
ARTICLE X -- REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the certificate of incorporation in these by-laws shall
include all amendments thereto or changes thereof unless specifically excepted.
ARTICLE XI -- BY-LAW CHANGES
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS
(a) Except as otherwise provided in the certificate of incorporation
the by-laws may be amended, repealed or adopted by vote of the holders of the
shares at the time entitled to vote in the election of any directors. By-laws
may also be amended, repealed or adopted by the board but any by-law adopted by
the board may be amended by the shareholders entitled to vote thereon as
hereinabove provided.
(b) If any by-law regulating an impending election of directors is
adopted, amended or repealed by the board, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
By-Laws J
<PAGE> 14
ANNEX C
<PAGE> 15
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
KPC HOLDINGS CORPORATION
ADOPTED OCTOBER 24, 1995
WHEREAS, the Board of Directors of the Corporation deems it advisable
and in the best interests of the Corporation for Colorado Prime Corporation, a
wholly-owned subsidiary of the Corporation, to issue $35 million of senior
notes and, in connection therewith, for the Corporation to issue warrants to
purchase an aggregate of 14% of its fully-diluted common stock and for Colorado
Prime Corporation to refinance or amend its existing accounts receivable
facility (collectively, the "Refinancing");
WHEREAS, the Board of Directors has approved the Refinancing in
principle and wishes to provide for an amendment to the Corporation's
Certificate of Incorporation necessary to effect certain of the transactions
contemplated by the Refinancing and to establish a special committee of the
Board for the purpose of approving the various transactions contemplated by the
Refinancing;
NOW, THEREFORE, BE IT:
RESOLVED, that the amendment to the Corporation's Certificate of
Incorporation attached hereto as Annex A (the "Amendment") is hereby adopted
and approved in all respects;
RESOLVED, that the Amendment be submitted for approval by the
stockholders of the Corporation acting by written consent in lieu of a meeting
of stockholders, and the Board hereby recommends that the Amendment be
approved;
RESOLVED, that upon stockholder approval of the Amendment, the proper
officers of the Corporation are hereby authorized and directed to file an
appropriate certificate of amendment with the Delaware Secretary of State and
to take such further actions as may be necessary to give effect to the
Amendment;
RESOLVED, that the Board of Directors hereby establishes a special
committee of the Board (the "Committee") comprised of James A. Kohlberg,
William F. Dordelman and Christopher Lacovara for the purpose of approving the
various transactions and agreements contemplated by the Refinancing; and
FURTHER RESOLVED, that the Committee may exercise the full power of the
Board of Directors in connection with the Refinancing, including the power to
issue securities of the Corporation and to declare and pay dividends or other
distributions with respect to the capital stock of the Corporation.
<PAGE> 16
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
KPC HOLDINGS CORPORATION
KPC HOLDINGS CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The name of the corporation is KPC HOLDINGS CORPORATION
(hereinafter the "Corporation").
2. The Certificate of Incorporation of the Corporation, as
amended, is hereby further amended by deleting the first paragraph of Article
FOURTH and replacing it with the following:
FOURTH: The Corporation shall have authority to issue
17,801,050 shares, divided into seven classes consisting of 10,000,000
shares of common stock, par value $0.001 per share (the "Common-Stock");
455,000 shares of Class A Management Common Stock, par value $0.10 per
share (the "Class A Management Stock"); 455,000 shares of Class B
Management Common Stock, value $0.10 per share (the "Class B Management
Stock"); 390,000 shares of Class C Management Common Stock, par value
$0.10 per share (the "Class C Management Stock" and, collectively with
the Class A Management Stock and the Class B Management Stock, the
"Management Stock")); 500,000 shares of Series A Convertible Preferred
Stock, par value $0.10 per share (the "Series A Preferred Stock"); 1,050
shares of Series B Junior Preferred Stock, par value $0.01 per share
(the "Series B Preferred Stock"); and 6,000,000 shares of Series C
Preferred Stock, par value $0.01 per share (the "Series C Preferred
Stock" and, collectively with the Series A and Series B Preferred Stock,
the "Preferred Stock").
3. The amendment set forth above was duly adopted in accordance
with the provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
*****
<PAGE> 17
IN WITNESS WHEREOF, the undersigned, being the Vice President of the
Corporation, for the purpose of amending the Certificate of Incorporation of
the Corporation pursuant to Section 242 of the General Corporation Law of the
State of Delaware, do make and file this Certificate, hereby declaring and
- -certifying that the facts herein stated are true, and accordingly have
hereunto set my hand this _______ day of December, 1995.
____________________________________
Vice President
-2-
<PAGE> 18
RESOLUTIONS OF THE SPECIAL COMMITTEE
OF THE BOARD OF DIRECTORS OF
KPC HOLDINGS CORPORATION
ADOPTED DECEMBER 15, 1995
WHEREAS, the Board of Directors of the Corporation has formed a special
committee of the Board (the "Committee") comprised of James A. Kohlberg,
William F. Dordelman and Christopher Lacovara for the purpose of reviewing and
approving the various transactions contemplated by the issuance by Colorado
Prime Corporation, a wholly-owned subsidiary of the Corporation, of $35 million
of senior notes and the issuance by the Corporation of warrants to purchase an
aggregate of 14 1/4% of its fully-diluted common stock (the "Note Offering")
and the refinancing or amendment of Colorado Prime's existing accounts
receivable facility (collectively, the "Refinancing");
WHEREAS, the Committee deems it in the best interests of the
Corporation to approve the various transactions contemplated by the Refinancing;
NOW, THEREFORE, the following resolutions are unanimously adopted
pursuant to the authority delegated by the Board;
RESOLVED, that the amendment to the Corporation's Certificate of
Incorporation attached hereto as Annex A (the "Amendment") is hereby adopted
and approved in all respects;
RESOLVED, that the Note and Warrant Purchase Agreement among the
Corporation, Colorado Prime Corporation and the various purchasers signatory
thereto (the "Purchase Agreement") providing for the issuance by Colorado Prime
of $35 million principal amount of 13% Senior Secured Notes due 2002 (the
"Notes") to be guaranteed by the Corporation and the issuance by the
Corporation of warrants to purchase 14 1/4% of the Corporation's fully-diluted
common stock (the "Warrants") is hereby adopted and approved in all respects in
the form presented to the Committee;
RESOLVED, that the Investor Stockholders Agreement and Stock Purchase
Warrant to be executed by the Corporation in connection with the transactions
contemplated by the Purchase Agreement is hereby adopted and approved in all
respects in the forms presented to the Committee;
RESOLVED, that the proper officers of the Corporation are hereby
authorized and directed to negotiate and approve such changes to the Purchase
Agreement and related Investor Stockholders Agreement and Stock Purchase
Warrant as such officers may deem necessary or desirable upon the advice of
counsel (such approval to be conclusively evidenced by such officers' execution
thereof), and to execute and deliver the Purchase Agreement and Investor
Stockholders Agreement on behalf of the Corporation and to carry out the
transactions contemplated thereby;
<PAGE> 19
RESOLVED, that the Corporation issue the Warrants to the various
purchasers party to the Purchase Agreement in the denominations and for the
purchase prices specified therein;
RESOLVED, that the Corporation reserve a total of 1,234,839 shares of
its common stock for issuance pursuant to exercise of the Warrants; and
RESOLVED, that concurrently with the closing of the transactions
contemplated by the Purchase Agreement the Corporation shall (i) issue 400,000
shares of the Corporation's Series C Preferred Stock in exchange for 40,000
shares of the Corporation's Series A Preferred Stock held by KPC Acquisition
Company L.P., (ii) issue a total of 6,325,000 shares of the Corporation's
common stock upon exercise of the stock purchase warrant held by KPC
Acquisition Company, L.P. and the conversion of 325,000 shares of Series A
Preferred Stock held by KPC Acquisition Company, L.P., (iii) redeem $25 million
principal amount of its 11-1/2% subordinated notes at 100% of principal amount
plus accrued interest thereon, (iv) redeem 800,000 shares of its Series C
Preferred Stock at liquidation value plus accrued and unpaid dividends thereon,
(v) issue 228,925 shares of Class A Management Stock pro rata to the holders of
the outstanding Class A Management Common Stock, 228,925 shares of Class B
Management Common Stock pro rata to the holders of the outstanding Class B
Management Common Stock, and 199,047 shares of Class C Management Common Stock
pro rata to the holders of the outstanding Class C Management Common Stock,
in each case pursuant to the anti-dilution provisions of the management
incentive plan (which issuance shall reduce the "Class A Redemption Price" and
the "Class B Redemption Price" under the management incentive plan to $26.46763
and reduce the "Class C Redemption Price" under the management incentive plan
to $17.64509, (vi) redeem up to 44,729 shares of its Class A Management Common
Stock pursuant to the terms of the Corporation's management incentive plan for
total consideration not to exceed $1.2 million, and (vii) pay a transaction fee
to Kohlberg & Co. of $1.0 million;
RESOLVED, that the officers of the Corporation are hereby authorized
and directed, by and on behalf of the Corporation, to execute and deliver such
further documents and to take such further action as may be necessary to carry
out the transactions contemplated by the Refinancing and to carry out the
intent of these resolutions; and
RESOLVED, that the actions to date of the Corporation's officers in
furtherance of the Refinancing are hereby ratified, confirmed and approved in
all respects.
RESOLVED, that this action by Unanimous consent of the Special
Committee of the Board of Directors of the Corporation may be executed in more
than one counterpart, each of shall be deemed to be an original, but all of
which shall constitute one and the same Consent.
<PAGE> 20
The executed copy of this Consent shall be filed with the minutes of
the proceedings of the Board of Directors of the Corporation.
/s/ William F. Dordelman
- --------------------------------------
William F. Dordelman
- -------------------------------------- --------------------------------------
James A. Kohlberg Christopher Lacovara
<PAGE> 21
The executed copy of this Consent shall be filed with the minutes of
the proceedings of the Board of Directors of the Corporation.
- --------------------------------------
William F. Dordelman
/s/ James A. Kohlberg /s/ Christopher Lacovara
- -------------------------------------- --------------------------------------
James A. Kohlberg Christopher Lacovara
<PAGE> 22
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
KPC HOLDINGS CORPORATION
KPC HOLDINGS CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The name of the corporation is KPC HOLDINGS CORPORATION
(hereinafter the "Corporation").
2. The Certificate of Incorporation of the Corporation, as
amended, is hereby further amended by deleting the first paragraph of Article
FOURTH and replacing it with the following:
FOURTH: The Corporation shall have authority to issue 17,801,050
shares, divided into seven classes consisting of 10,000,000 shares of
common stock, par value $0.001 per share (the "Common-Stock"); 455,000
shares of Class A Management Common Stock, par value $0.10 per share
(the "Class A Management Stock"); 455,000 shares of Class B Management
Common Stock, value $0.10 per share (the "Class B Management Stock");
390,000 shares of Class C Management Common Stock, par value $0.10 per
share (the "Class C Management Stock" and, collectively with the Class A
Management Stock and the Class B Management Stock, the "Management
Stock")); 500,000 shares of Series A Convertible Preferred Stock, par
value $0.10 per share (the "Series A Preferred Stock"); 1,050 shares of
Series B Junior Preferred Stock, par value $0.01 per share (the "Series
B Preferred Stock"); and 6,000,000 shares of Series C Preferred Stock,
par value $0.01 per share (the "Series C Preferred Stock" and,
collectively with the Series A and Series B Preferred Stock, the
"Preferred Stock").
3. The amendment set forth above was duly adopted in accordance
with the provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
*****
<PAGE> 1
Exhibit 3.5
CERTIFICATE OF CHANGE
OF
CONCORD FINANCIAL SERVICES, INC.
(under Section 805-A of the Business Corporation Law)
The undersigned corporation submits the following statement for the
purpose of changing its address for process in the State of New York:
FIRST: The name of the corporation is Concord Financial Services, Inc.
The name under which the corporation was formed was Concord Credit Corp.
SECOND: The certificate of incorporation was filed by the Department of
State on April 16, 1964.
THIRD: A Certificate of Amendment changing the name of the corporation
to CONCORD FINANCIAL SERVICES, INC. was filed by the Department of State on
December 18, 1984.
FOURTH: The certificate of incorporation of the corporation is hereby
changed, pursuant to the unanimous written consent of the Board of Directors of
the corporation, so as to change the designation of agent for service of
process; and, to accomplish said change, the statement in paragraph five of the
certificate of incorporation relating to said agent is hereby stricken and the
following statement is substituted in lieu thereof:
"The post office address within the State of New York to which the
Secretary of State shall mail a copy of any process against the
corporation served upon him is 33 Irving Place, c/o Koerner
Silberberg & Weiner, Att: Carl Seldin Koerner, New York,
New York 10003."
IN WITNESS WHEREOF, this certificate has been subscribed this 18th day
of August, 1992 by the undersigned officers of the corporation who affirm that
the statements made herein are true under penalties of perjury.
Concord Financial Services, Inc.
August 18, 1992 By: /s/ John B. Masciandaro
----------------------------------
John B. Masciandaro, President
/s/ Joseph Murphy
----------------------------------
Joseph Murphy, Secretary
<PAGE> 2
OF
CERTIFICATE OF INCORPORATION
OF
CONCORD CREDIT CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the President and the Secretary of CONCORD
CREDIT CORP. do hereby certify and set forth:
(1) The name of the corporation is CONCORD CREDIT CORP.
(2) The Certificate of Incorporation of CONCORD CREDIT CORP. was filed
by the Department of State on April 16, 1964.
(3) The Certificate of Incorporation of CONCORD CREDIT CORP. is hereby
amended to correct a change in the corporate name pursuant to Section 401(b) (1)
of the Business Corporation Law.
(4) Paragraph (1) of the Certificate of Incorporation is hereby amended
as follows:
(1) The name of the corporation is CONCORD FINANCIAL SERVICES,
INC.
(5) The manner in which this amendment to the Certificate of
Incorporation of CONCORD CREDIT CORP. was authorized by a unanimous vote of
the Board of Directors followed by a unanimous vote of all outstanding shares
entitled to vote thereon at a joint meeting of the Directors and Shareholders
<PAGE> 3
of said corporation duly called and held on the 12th day of December, 1984, a
quorum being present.
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 17th day of December, 1984.
/s/ GARY KALPAKJIAN
--------------------------------
GARY KALPAKJIAN, President
/s/ JOHN MASCIANDARO
--------------------------------
JOHN MASCIANDARO, Sr., Secretary
<PAGE> 4
CERTIFICATE OF INCORPORATION OF
CONCORD CREDIT CORP.
under Section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the proposed corporation is CONCORD CREDIT CORP.
(2) The purpose or purposes for which this corporation is formed, are
as follows, to wit:
To engage in the business of purchasing or otherwise acquiring
investment contracts, obligations and credit agreements made by and between
other parties, or any other interest therein; for hiring and discharging
employees; borrowing monies; negotiating and executing all necessary bonds and
promissory notes, bills of exchange and other obligations of the corporation for
monies borrowed, or any payment for the property acquired or for any other
objects or purposes of the corporation or its business, and to secure the
payment of such obligation by mortgage, pledge, deed, or otherwise by any
instrument or trust, or by lien upon assignment in regard to all or any part of
the property rules or privileges of the corporation, wheresoever situated,
whether now owned or hereafter acquired.
The corporation, in furtherance of its corporate purposes above set
forth, shall have all of the powers enumerated in Section 202 of the Business
Corporation Law, subject to any limitations provided in the Business
Corporation Law or any other statute of the State of New York.
<PAGE> 5
(3) The office of the corporation is to be located in So. Farmingdale,
Township of Babylon, County of Suffolk State of New York.
(4) The aggregate number of shares which the corporation shall have the
authority to issue is
Two Hundred (200) shares, all of which are to be one class without par
value.
A. That all of the directors shall be present at any meeting in order to
constitute a quorum for the transaction of any business or of any specified
item of business.
B. That a unanimous vote of the directors shall be necessary for the
transaction of any business or any meeting of directors of the corporation.
C. That all of the stockholders shall be present in person or represented by
proxy at any meeting in order to constitute a quorum for the transaction of
any business or any specified item of business.
D. That a unanimous vote or consent of all stockholders shall be necessary for
the transaction of any business or any specified item of business including
amendments to the certificate of incorporation or the giving of any consent.
E. Notice of the requirements set forth in paragraph "Fourth" subdivisions A,
B, C, D, shall appear plainly upon the faces or back of all stock certificates.
F. Notice of the requirements set forth in paragraph "Fourth" subdivisions A,
B, C, D, and E of this certificate shall be for the duration of Ten (10) years
from the date hereof.
2
<PAGE> 6
(5) The Secretary of State is designated as agent of the corporation upon whom
process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is
Verdi Street
South Farmingdale, New York
The undersigned incorporator, or each of them if there are more than
one, is of the age of twenty-one years or over.
IN WITNESS WHEREOF, this certificate has been executed this 8th day of
April 1964.
MICHAEL C. DUBAN /s/ Michael C. Duban
- ------------------------------- ------------------------------
Type name of Incorporator Signature
117 Wilson Street, Garden City,
New York
- ------------------------------- -------------------------------
Address Signature
- -------------------------------
Type name of Incorporator
- ------------------------------- -------------------------------
Assets Signature
- -------------------------------
Type name of Incorporator
- -------------------------------
Assets
<PAGE> 1
Exhibit 3.6
BY-LAWS
of
CONCORD FINANCIAL SERVICES, INC.
----------------------------------
ARTICLE I - OFFICES
-------------------
The principal office of the corporation shall be in the incorporated
village of Farmingdale County of Nassau State of New York. The corporation may
also have offices at such other places within or without the State of New York
as the board may from time to time determine or the business of the corporation
may require.
ARTICLE II - SHAREHOLDERS
-------------------------
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
corporation or at such place within or without the State of New York as the
board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the day
of at 10 A.M. in each year if not a legal holiday, and, if a
legal holiday, then on the next business day following at the same hour, when
the shareholders shall elect a board and transact such other business as may
properly come before the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the board or by
the president and shall be called by the president or the secretary at the
request in writing of a majority of the board or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other
By-Laws A
<PAGE> 2
action, the board shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than fifty nor less
than ten days before the date of such meeting, nor more than fifty days prior
to any other action. If no record date is fixed it shall be determined in
accordance with the provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose
of purposes for which the meeting is called, the place, date and hour of the
meeting and unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, not less than ten nor more than fifty days before the
date of the meeting. If action is proposed to be taken that might entitle
shareholders to payment for their shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice is given when
deposited in the United States mail, the postage thereon prepaid, directed to
the shareholder at his address as it appears on the record of shareholders, or,
if he shall have filed with the secretary a written request that notices to him
be mailed to some other address, then directed to him at such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall consolidate a waiver of notice by him.
7. QUORUM OF CARDHOLDERS.
Unless the certificate of incorporation provides otherwise, the holders
of a majority of the shares entitled to vote thereat shall constitute a quorum
at a meeting of shareholders for the transaction of any business, provided that
when a specified item of business is required to be voted on by a class or
classes, the holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of
a quorum.
<PAGE> 3
8. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
9. QUALIFICATION OF VOTERS.
Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record of
shareholders, unless otherwise provided in the certificate of incorporation.
10. VOTE OF SHAREHOLDERS.
Except as otherwise required by statute or by the certificate of
incorporation:
(a) directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election;
(b) all other corporate action shall be authorized by a majority of the
votes cast.
11. WRITTEN CONSENT OF SHAREHOLDERS.
Any action that may be taken by vote may be taken without a meeting on
written consent, setting forth the action so taken, signed by the holders of
all the outstanding shares entitled to vote thereon or signed by such lesser
number of holders as may be provided for in the certificate of incorporation.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS.
Subject to any provision in the certificate of incorporation the
business of the corporation shall be managed by its board of directors, each of
whom shall be at least 18 years of age and need not be shareholders.
2. NUMBER OF DIRECTORS.
The number of directors shall be not less than 3 nor more than 7. When
all of the shares are owned by less than three shareholders, the number of
directors may be less than three but not less than the number of shareholders.
By-Laws C
<PAGE> 4
NO. 2 - A
Any action required or permitted to be taken by the Board of
Directors or any Committee thereof may be taken without a meeting if all
members of the Board or Committee consent, in writing, to the adoption of a
resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board or Committee shall be filed with the
minutes of the proceedings of the Board or Committee.
BY-LAWS C-1
<PAGE> 5
3. ELECTION AND TERM OF DIRECTORS.
At each annual meeting of shareholders, the shareholders shall elect
directors to hold office until the next annual meeting. Each director shall
hold office until the expiration of the term for which he is elected and until
his successor has been elected and qualified, or until his prior resignation
or removal.
4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the
removal of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists, unless otherwise
provided in the certificate of incorporation. Vacancies occurring by reason of
the removal of directors without cause shall be filled by vote of the
shareholders unless otherwise provided in the certificate of incorporation. A
director elected to fill a vacancy caused by resignation, death or removal
shall be elected to hold office for the unexpired term of his predecessor.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
shareholders or by action of the board. Directors may be removed without cause
only by vote of the shareholders.
6. RESIGNATION.
A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the board or such officer, and the acceptance of the resignation shall not
be necessary to make it effective.
7. QUORUM OF DIRECTORS.
Unless otherwise provided in the certificate of incorporation, a
majority of the entire board shall constitute a quorum for the transaction of
business or of any specified item of business.
8. ACTION OF THE BOARD.
Unless otherwise required by law, the vote of a majority of the
directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the board. Each director present shall have one vote
regardless of the number of shares, if any, which he may hold.
By-Laws D
<PAGE> 6
9. PLACE AND TIME OF BOARD MEETINGS.
The board may hold its meetings at the office of the corporation or at
such other places, either within or without the State of New York, as it may
from time to time determine.
10. REGULAR ANNUAL MEETING.
A regular annual meeting of the board shall be held immediately
following the annual meeting of shareholders at the place of such annual meeting
of shareholders.
11. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) Regular meetings of the board may be held without notice at such
time and place as it shall from time to time determine. Special meetings of the
board shall be held upon notice to the directors and may be called by the
president upon three days notice to each director either personally or by mail
or by wire; special meetings shall be called by the president or by the
secretary in a like manner on written request of two directors. Notice of a
meeting need not be given to any director who submits a waiver of notice
whether before or after the meeting or who attends the meeting without
protesting prior thereto or at its commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
12. CHAIRMAN.
At all meetings of the board the president, or in his absence, a
chairman chosen by the board shall preside.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors. Each such committee shall serve at
the pleasure of the board.
14. COMPENSATION.
No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance, at each regular or special meeting of the board may be author-
By-Laws E
<PAGE> 7
ized. Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV - OFFICERS
1. OFFICES, ELECTION, TERM.
(a) Unless otherwise provided for in the certificate of incorporation,
the board may elect or appoint a president, one or more vice-presidents, a
secretary and a treasurer, and such other officers as it may determine, who
shall have such duties, powers and functions as hereinafter provided.
(b) All officers shall be elected or appointed to hold office until the
meeting of the board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected
or appointed and until his successor has been elected or appointed and
qualified.
2. REMOVAL, RESIGNATION, SALARY, ETC.
(a) Any officer elected or appointed by the board may be removed by the
board with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the board in its discretion may elect or appoint a successor to fill the
unexpired term.
(c) Any two or more offices may be held by the same person, except the
offices of president and secretary.
(d) The salaries of all officers shall be fixed by the board.
(e) The directors may require any officer to give security for the
faithful performance of his duties.
3. PRESIDENT.
The president shall be the chief executive officer of the corporation;
he shall preside at all meetings of the shareholders and of the board; he shall
have the management of the business of the corporation and shall see that all
orders and resolutions of the board are carried into effect.
4. VICE-PRESIDENTS.
During the absence or disability of the president, the vice-president,
or if there are more than one, the executive vice-president, shall have all
By-Laws F
<PAGE> 8
the powers and functions of the president. Each vice-president shall perform
such other duties as the board shall prescribe.
5. SECRETARY.
The secretary shall:
(a) attend all meetings of the board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to be
kept for that purpose;
(c) give or cause to be given notice of all meetings of shareholders
and of special meetings of the board;
(d) keep in safe custody the seal of the corporation and affix it to
any instrument when authorized by the board;
(e) when required, prepare or cause to be prepared and available at
each meeting of shareholders a certified list in alphabetical order of the
names of shareholders entitled to vote thereat, indicating the number of shares
of each respective class held by each;
(f) keep all the documents and records of the corporation as required
by law or otherwise in a proper and safe manner.
(g) perform such other duties as may be prescribed by the board.
6. ASSISTANT-SECRETARIES.
During the absence or disability of the secretary, the
assistant-secretary, or if there are more than one, the one so designated by
the secretary or by the board, shall have all the powers and functions of the
secretary.
7. TREASURER.
The treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in
the corporate books;
(c) deposit all money and other valuables in the name and to the credit
of the corporation in such depositories as may be designated by the board;
(d) disburse the funds of the corporation as may be ordered or
authorized by the board and preserve proper vouchers for such disbursements;
(e) render to the president and board at the regular meetings of the
board, or whenever they require it, an account of all his transactions as
By-Laws G
<PAGE> 9
treasurer and of the financial condition of the corporation;
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents at his request, with
such reports and statements as he may require as to all financial transactions
of the corporation;
(h) perform such other duties as are given to him by these by-laws or as
from time to time are assigned to him by the board or the president.
8. ASSISTANT-TREASURER.
During the absence or disability of the treasurer, the assistant-treasurer,
or if there are more than one, the one so designated by the secretary or by the
board, shall have all the powers and functions of the treasurer.
9. SURETIES AND BONDS.
In case the board shall so require, any officer or agent of the
corporation shall execute to the corporation a bond in such sum and with such
surety or sureties as the board may direct, conditioned upon the faithful
performance of his duties to the corporation and including responsibility for
negligence and for the accounting for all property, funds or securities of the
corporation which may come into his hands.
ARTICLE V - CERTIFICATES FOR SHARES
1. CERTIFICATES.
The shares of the corporation shall be represented by certificates. They
shall be numbered and entered in the books of the corporation as they are
issued. They shall exhibit the holder's name and the number of shares and shall
be signed by the president or a vice-president and the treasurer or the
secretary and shall bear the corporate seal.
2. LOST OR DESTROYED CERTIFICATES.
The board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
By-Laws H
<PAGE> 10
require and/or give the corporation a bond in such sum and with such surety or
sureties as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
3. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office. No transfer shall be made within ten days next preceding the annual
meeting of shareholders.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of New York.
4. CLOSING TRANSFER BOOKS.
The board shall have the power to close the share transfer books of the
corporation for a period of not more than ten days during the thirty day period
immediately preceding (1) any shareholders' meeting, or (2) any date upon which
shareholders shall be called upon to or have a right to take action without a
meeting, or (3) any date fixed for the payment of a dividend or any other form
of distribution, and only those shareholders of record at the time the transfer
books are closed, shall be recognized as such for the purpose of (1) receiving
notice of or voting at such meeting, or (2) allowing them to take appropriate
action, or (3) entitling them to receive any dividend or other form of
distribution.
ARTICLE VI - DIVIDENDS
Subject to the provisions of the certificate of incorporation and to
applicable law, dividends on the outstanding shares of the corporation may be
declared in such amounts and at such time or times as the board may determine.
Before payment of any dividend, there may be set aside out of the net profits of
the corporation available for dividends such sum or sums as the board from time
to time in its absolute discretion deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other
By-Laws I
<PAGE> 11
purpose as the board shall think conducive to the interests of the corporation,
and the board may modify or abolish any such reserve.
ARTICLE VII - CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of
the corporation, the year of its organization and the worlds "Corporate Seal,
New York." The seal may be used by causing it to be impressed directly on the
instrument or writing to be sealed, or upon adhesive substance affixed thereto.
The seal on the certificates for shares or on any corporate obligation for the
payment of money may be a facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or counter-signed,
executed, verified or acknowledged by such officer or officers or other person
or persons as the board may from time to time designate.
ARTICLE IX - FISCAL YEAR
The fiscal year shall begin the first day of February in each year.
ARTICLE X - REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the certificate of incorporation in these by-laws shall
include all amendments thereto or changes thereof unless specifically excepted.
ARTICLE XI - BY-LAW CHANGES
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS.
(a) Except as otherwise provided in the certificate of incorporation the
by-laws may be amended, repealed or adopted by vote of the holders of the
shares at the time entitled to vote in the election of any directors. By-laws
may also be amended, repealed or adopted by the board but any by-law adopted by
the board may be amended by the shareholders entitled to vote thereon as
hereinabove provided.
(b) If any by-law regulating an impending election of directors is
adopted, amended or repealed by the board, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
By-Laws J
<PAGE> 1
Exhibit 3.7
CERTIFICATE OF INCORPORATION
OF
PRIME FOODS DEVELOPMENT CORPORATION
FIRST: The name of the Corporation is PRIME FOODS DEVELOPMENT CORPORATION
(hereinafter the "Corporation").
SECOND: The address of its registered office in the State of Delaware and
the name of its registered agent at such address is National Corporate
Research, Ltd., 9 East Loockerman Street, Dover, Delaware 19901.
THIRD: The nature of the business of the Corporation and its purpose is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware ("GCL").
FOURTH: The Corporation shall have authority to issue 10,000 shares of
common stock, par value $.01 per share. The holders of capital stock of the
Corporation shall not have any pre-exemptive rights.
FIFTH: The name and mailing address of the incorporator is as follows:
Carl Seldin Koerner, Esq.
Koerner Silberberg & Weiner
33 Irving Place, 11th Floor
New York, New York 10003
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation (except as at the
time otherwise provided by law, by this Certificate of
Incorporation or by the By-Laws) shall be managed by or under the
direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. The number of directors shall initially be
fixed at one. Election of directors need not be by written ballot
unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or
any of its stockholders for monetary
<PAGE> 2
damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty if loyalty
to the Corporation or its stockholders, (ii) for acts or
commissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this article
SIXTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of this Corporation
existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
(5) In addition to the powers and authority hereinafter or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the GCL, this Certificate of
Incorporation, and By-Laws adopted by the incorporator,
provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been
adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receives appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of the GCL, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or if the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been
<PAGE> 3
made, be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: The Corporation reserves the right to amend, alter,change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named for the purpose of forming a corporation pursuant to the
GCL, do make and file this Certificate, hereby declaring and certifying that
the facts herein stated are true, and accordingly have hereunto set my hand
this 27th day of May, 1994.
/s/ Carl S. Koerner
-----------------------------------
Carl S. Koerner, Incorporator
STATE OF NEW YORK }
: SS.:
COUNTY OF NEW YORK}
BE IT REMEMBERED that on the 27th day of May, 1994 personally appeared before
me, Jodi M. Clark, a notary public for the State of New York, Carl. S. Koerner,
the party to the foregoing Certificate of Incorporation, known to me personally
to be such, and acknowledged the said Certificate of his act and deed and that
the facts therein stated are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Jodi M. Clark
-------------------------------------
Notary Public, State of New York
No. 24-4845815
Qualified in Suffolk County
Commission Expires April 30, 1995
<PAGE> 1
EXHIBIT 3.8
PRIME FOODS DEVELOPMENT CORPORATION
BY-LAWS
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I STOCKHOLDERS
1.01 Annual Meetings............................................... 1
1.02 Special Meetings.............................................. 1
1.03 Notice of Meetings; Waiver.................................... 2
1.04 Quorum........................................................ 2
1.05 Voting........................................................ 2
1.06 Voting by Ballot.............................................. 3
1.07 Adjournment................................................... 3
1.08 Proxies....................................................... 3
1.09 Organization; Procedure....................................... 4
1.10 Consent of Stockholders in Lieu of Meeting.................... 4
ARTICLE II BOARD OF DIRECTORS
2.01 General Powers................................................ 5
2.02 Number and Term of Office..................................... 5
2.03 Election of Directors......................................... 5
2.04 Annual and Regular Meetings................................... 5
2.05 Special Meetings; Notice...................................... 6
2.06 Quorum; Voting................................................ 6
2.07 Adjournment................................................... 7
2.08 Action Without a Meeting...................................... 7
2.09 Regulations; Manner of Acting................................. 7
2.10 Action by Telephonic Communications........................... 7
2.11 Resignations.................................................. 7
2.12 Removal of Directors.......................................... 7
2.13 Vacancies and Newly Created Directorships..................... 8
2.14 Compensation.................................................. 8
2.15 Reliance on Accounts and Reports, etc......................... 8
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES
3.01 How Constituted............................................... 9
3.02 Powers........................................................ 9
3.03 Proceedings................................................... 10
3.04 Quorum and Manner of Acting................................... 10
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SECTION PAGE
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3.05 Action by Telephonic Communications........................... 11
3.06 Absent or Disqualified Members................................ 11
3.07 Resignations.................................................. 11
3.08 Removal....................................................... 11
3.09 Vacancies..................................................... 11
ARTICLE IV OFFICERS
4.01 Number........................................................ 11
4.02 Election...................................................... 12
4.03 Salaries...................................................... 12
4.04 Removal and Resignation; Vacancies............................ 12
4.05 Authority and Duties of Officers.............................. 12
4.06 The President................................................. 12
4.07 The Vice President............................................ 13
4.08 The Secretary................................................. 13
4.09 The Treasurer................................................. 14
4.10 Additional Officers........................................... 15
4.11 Security...................................................... 16
ARTICLE V CAPITAL STOCK
5.01 Certificates of Stock, Uncertificated Shares.................. 16
5.02 Signatures; Facsimile......................................... 16
5.03 Lost, Stolen or Destroyed Certificates........................ 17
5.04 Transfer of Stock............................................. 17
5.05 Record Date................................................... 17
5.06 Registered Stockholders....................................... 19
5.07 Transfer Agent and Registrar.................................. 19
ARTICLE VI INDEMNIFICATION
6.01 Nature of Indemnity........................................... 19
6.02 Successful Defense............................................ 20
6.03 Determination That Indemnification Is Proper.................. 20
6.04 Advance Payment of Expenses................................... 21
6.05 Procedure for Indemnification of Directors and Officers....... 21
6.06 Survival; Preservation of Other Rights........................ 22
6.07 Insurance..................................................... 23
6.08 Severability.................................................. 23
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SECTION PAGE
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ARTICLE VII OFFICES
7.01 Registered Office............................................. 23
7.02 Other Offices................................................. 24
ARTICLE VIII GENERAL PROVISIONS
8.01 Dividends..................................................... 24
8.02 Reserves...................................................... 24
8.03 Execution of Instruments...................................... 25
8.04 Corporate Indebtedness........................................ 25
8.05 Deposits...................................................... 25
8.06 Checks........................................................ 25
8.07 Sale, Transfer, etc. of Securities............................ 26
8.08 Voting as Stockholder......................................... 26
8.09 Fiscal Year................................................... 26
8.10 Seal.......................................................... 26
8.11 Books and Records; Inspection................................. 26
ARTICLE IX AMENDMENT OF BY-LAWS
9.01 Amendment..................................................... 27
ARTICLE X CONSTRUCTION
10.01 Construction.................................................. 27
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<PAGE> 4
PRIME FOODS DEVELOPMENT CORPORATION
BY-LAWS
As adopted on
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of
such other business as properly may come before such meeting shall be held at
such place, either within or without the State of Delaware, and at 2:00 P.M.
local time on the last Tuesday in September (or, if such day is a legal
holiday, then on the next succeeding business day), or at such other date and
hour, as may be fixed from time to time by resolution of the Board of Directors
and set forth in the notice or waiver of notice of the meeting. [Sections
211(a), (b).]*
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the President (or, in the event of his absence or
disability, by any Vice President), or by the Board of Directors. A special
meeting shall be called by the President (or, in the event of his absence or
disability, by any Vice President), or by the Secretary, immediately upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such officers or
the Board of Directors shall fail to call such meeting within 20 days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such places,
within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. [Section 211(d).]
- -------------------------
* Citations are to the General Corporation Law of the State of Delaware as in
effect on February 2, 1988, and are inserted for reference only, and do not
constitute a part of the By-Laws.
<PAGE> 5
Section 1.03. Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each meeting
of the stockholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called, to be given personally or by mail,
not less than ten nor more than sixty days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he shall have filed with the Secretary of the Corporation a written request that
notices to him be mailed to some other address, then directed to him at such
other address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of business
on such record date. If no record date has been fixed, then every holder of
record of shares entitled to vote at a meeting of stockholders shall be
entitled to one vote for each share of stock standing in his name on the books
of the Corporation at the close
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<PAGE> 6
of business on the day next preceding the day on which notice of the meeting is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. Except as otherwise required by
law or by the Certificate of Incorporation, the vote of a majority of the
shares represented in person or by proxy at any meeting at which a quorum is
present shall be sufficient for the transaction of any business at such
meeting. [Sections 212(a), 216.]
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot or conducted by inspectors of election, unless
otherwise required by law. Any vote which need not be taken by ballot may be
conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting of
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for
the adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a
notice of the adjourned meeting, conforming to the requirements of Section 1.03
hereof, shall be given to each stockholder of record entitled to vote at such
meeting. At any adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted on the original date of the
meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting
of the stockholders or to express consent to or dissent from corporate action
without a meeting may, by a written instrument signed by such stockholder or
his attorney-in-fact, authorize another person or persons to vote at any such
meeting and express such consent or dissent for him by proxy. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy
shall be revocable at the pleasure of the stockholder executing it, except in
those cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any
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<PAGE> 7
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or by filing another duly
executed proxy bearing a later date with the Secretary. [Section 212(b), (c).]
Section 1.09. Organization; Procedure. At every meeting of
stockholders the presiding officer shall be the President or, in the event of
his absence or disability, a presiding officer chosen by a majority of the
stockholders present in person or by proxy. The Secretary, or in the event of
his absence or disability, the Assistant Secretary, if any, or if there be no
Assistant Secretary, in the absence of the Secretary, an appointee of the
presiding officer, shall act as Secretary of the meeting. The order of business
and all other matters of procedure at every meeting of stockholders may be
determined by such presiding officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the
fullest extent permitted by law, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in connection with any
corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder or member who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest dated consent delivered in the manner required by law to
the Corporation, written consents signed by a sufficient number of holders or
members to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware,
4
<PAGE> 8
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation. [Section 141(a).]
Section 2.02. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be two, which number may be
modified from time to time by resolution of the Board of Directors, but in no
event shall the number of Directors be less than one. Each Director (whenever
elected) shall hold office until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal. [Section
141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall
cause the meeting to be held as soon thereafter as convenient. At each meeting
of the stockholders for the election of Directors, provided a quorum is
present, the Directors shall be elected by a plurality of the votes validly
cast in such election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual
5
<PAGE> 9
meeting of the stockholders. Notice of such annual meeting of the Board of
Directors need not be given. The Board of Directors from time to time may by
resolution provide for the holding of regular meetings and fix the place (which
may be within or without the State of Delaware) and the date and hour of such
meetings. Notice of regular meetings need not be given, provided, however, that
if the Board of Directors shall fix or change the time or place of any regular
meeting, notice of such action shall be mailed promptly, or sent by telegram,
radio or cable, to each Director who shall not have been present at the meeting
at which such action was taken, addressed to him at his usual place of
business, or shall be delivered to him personally. Notice of such action need
not be given to any Director who attends the first regular meeting after such
action is taken without protesting the lack of notice to him, prior to or at
the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting. [Section 141(g).]
Section 2.05. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the President or, in the event of
his absence or disability, by any Vice President, at such place (within or
without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Special meetings of
the Board of Directors may be called on 24 hours' notice, if notice is given to
each Director personally or by telephone or telegram, or on five days' notice,
if notice is mailed to each Director, addressed to him at his usual place of
business. Notice of any special meeting need not be given to any Director who
attends such meeting without protesting the lack of notice to him, prior to or
at the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting, and any business may be
transacted thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. [Section 141(b).]
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<PAGE> 10
Section 2.07. Adjournment. A majority of the Directors present, whether
or not a quorum is present, may adjourn any meeting of the Board of Directors
to another time or place. No notice need be given of any adjourned meeting
unless the time and place of the adjourned meeting are not announced at the
time of adjournment, in which case notice conforming to the requirements of
Section 2.05 shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the Board
of Directors may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this provision shall constitute presence in person at
such meeting. [Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any Director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of
a majority of the outstanding shares of stock of the Corpo-
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<PAGE> 11
ration entitled to vote for the election of such Director, cast at a special
meeting of stockholders called for the purpose. Any vacancy in the Board of
Directors caused by any such removal may be filled at such meeting by the
stockholders entitled to vote for the election of the Director so removed. If
such stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in
Section 2.13 of these By-Laws. [Section 141(b).]
Section 2.13. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and
such vacancies and newly created directorships may be filled by a majority of
the Directors then in office, although less than a quorum. A Director elected
to fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his earlier death,
resignation or removal. Any such vacancy or newly created directorship may also
be filled at any time by vote of the stockholders. [Section 223.]
Section 2.14. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for his services as such shall be
fixed from time to time by resolution of the Board of Directors. [Section
141(h).]
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. [Section 141(e).]
8
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ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be
designated at the annual meeting of the Board of Directors. Any such Committee
may be abolished or re-designated from time to time by the Board of Directors.
Each member (and each alternate member) of any such Committee (whether
designated at an annual meeting of the Board of Directors or to fill a vacancy
or otherwise) shall hold office until his successor shall have been designated
or until he shall cease to be a Director, or until his earlier death,
resignation or removal. [Section 141(c).]
Section 3.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to amend the Certificate of Incorporation (except that a
Committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion
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<PAGE> 13
into, or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or classes of
stock of the Corporation or fix the number of shares of any series of stock
or authorize the increase or decrease of the shares of any series),
(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, or
(d) to recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03. Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the meeting of the Board of
Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee. The members of any such
Committee shall act only as a Committee, and the individual members of
10
<PAGE> 14
such Committee shall have no power as such. [Section 141(c).]
Section 3.05. Action by Telephonic Communications. Members of any Committee
designated by the Board of Directors may participate in a meeting of such
Committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. [Section 141(i).]
Section 3.06. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of any
Committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any Committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, one or more Vice Presidents, a
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Secretary, a Treasurer, one or more Assistant Secretaries and one or more
Assistant Treasurers. Any number of offices may be held by the same person. No
officer need be a Director of the Corporation. [Section 142(a),(b).]
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal. [Section
142(b).]
Section 4.03. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Section
142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these By-Laws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law. [Section 142(a).]
Section 4.06. The President. The President shall preside at all
meetings of the stockholders and directors at which he is present, shall be the
chief executive officer and the chief operating officer of the Corporation,
shall have general control and supervision of the policies and operations of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall manage and administer the
Corporation's business and affairs and
12
<PAGE> 16
shall also perform all duties and exercise all powers usually pertaining to the
office of a chief executive officer and a chief operating officer of a
corporation. He shall have the authority to sign, in the name and on behalf of
the Corporation, checks, orders, contracts, leases, notes, drafts and other
documents and instruments in connection with the business of the Corporation,
and together with the Secretary or an Assistant Secretary, conveyances of real
estate and other documents and instruments to which the seal of the Corporation
is affixed. He shall have the authority to cause the employment or appointment
of such employees and agents of the Corporation as the conduct of the business
of the Corporation may require, to fix their compensation, and to remove or
suspend any employee or agent elected or appointed by the President or the Board
of Directors. The President shall perform such other duties and have such other
powers as the Board of Directors or the Chairman may from time to time
prescribe.
Section 4.07. The Vice President. Each Vice President shall perform
such duties and exercise such powers as may be assigned to him from time to time
by the President. In the absence of the President, the duties of the President
shall be performed and his powers may be exercised by such Vice President as
shall be designated by the President, or failing such designation, such duties
shall be performed and such powers may be exercised by each Vice President in
the order of their earliest election to that office; subject in any case to
review and superseding action by the President.
Section 4.08. The Secretary. The Secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all the proceedings
of the meetings of the stockholders and of the Board of Directors in books
provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a resolution
of the Board of Directors, he shall furnish a copy of such resolution to the
members of such Committee.
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(d) He shall be the custodian of the records and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be affixed to
all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf
of the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shares held by each holder and the date as of
which each became such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
Assistant Secretary shall have signed) certificates representing shares of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(h) He shall perform, in general, all duties incident to the office
of secretary and such other duties as may be specified in these By-Laws or
as may be assigned to him from time to time by the Board of Directors, or
the President.
Section 4.09. The Treasurer. The Treasurer shall be the chief
financial officer of the Corporation and shall have the following powers and
duties:
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts
of the Corporation.
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(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or
other depositaries as shall be selected in accordance with Section 8.05
of these By-Laws.
(c) He shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.06 of
these by-Laws) upon the authorized depositaries of the Corporation and
cause to be taken and preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer, and render a full
financial report at the annual meeting of the stockholders, if called
upon to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary
or an Assistant Secretary shall have signed) certificates representing
stock of the Corporation the issuance of which shall have been authorized
by the Board of Directors.
(g) He shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
By-Laws or as may be assigned to him from time to time by the Board of
Directors, or the President.
Section 4.10. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective
15
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rights, terms of office, authorities and duties. Any such officer or agent may
remove any such subordinate officer or agent appointed by him, for or without
cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any officer,
agent or employee of the Corporation to provide security for the faithful
performance of his duties, in such amount and of such character as may be
determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock, Uncertificated Shares. The shares
of the Corporation shall be represented by certificates, provided that the
Board of Directors may provide by resolution or resolutions that some or all of
any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until each certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock in the Corporation represented by certificates
and upon request every holder of uncertificated shares shall be entitled to
have a certificate signed by, or in the name of the Corporation, by the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. Such certificate shall be in such form as the
Board of Directors may determine, to the extent consistent with applicable law,
the Certificate of Incorporation and these By-Laws. [Section 158.]
Section 5.02. Signatures; Facsimile. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same
16
<PAGE> 20
effect as if he were such officer, transfer agent or registrar at the date of
issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of the State of Delaware. Subject to the provisions of the
Certificate of Incorporation and these By-Laws, the Board of Directors may
prescribe such additional rules and regulations as it may deem appropriate
relating to the issue, transfer and registration of shares of the Corporation.
[Section 151.]
Section 5.05. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing
the record date is adopted by the Board of Directors, and which shall not be
more than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, provided,
however, that
17
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the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
[Section 213.]
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<PAGE> 22
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partner-
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ship, joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment
in its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent
that the Delaware Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 6.01 hereof or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
hereof
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<PAGE> 24
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.01 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including
attorney's fees) incurred by a director or officer defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized by
this Article. Such expenses (including attorney's fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate. The Board of Directors may authorize
the Corporation's counsel to represent such director, officer, employee or
agent in any action, suit or proceeding, whether or not the Corporation is a
party to such action, suit or proceeding.
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<PAGE> 25
Section 6.05. Procedure for Indemnification of Directors and Officers.
Any indemnification of a director or officer of the Corporation under Sections
6.01 and 6.02, or advance of costs, charges and expenses to a director or
officer under Section 6.04 of this Article, shall be made promptly, and in any
event within 30 days, upon the written request of the director or officer. If a
determination by the Corporation that the director or officer is entitled to
indemnification pursuant to this Article is required, and the Corporation fails
to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request.
21(a)
<PAGE> 26
If the Corporation denies a written request for indemnity or advancement of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within 30 days, the right to indemnification or advances as granted by
this Article shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under Section 6.04 of this
Article where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of this Article, but the burden of proving such defense shall be on
the Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 6.01 of this Article, nor the fact that
there has been an actual determination by the Corporation (including its Board
of Directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which
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those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be National Corporate Research, Ltd.
located at 15 North Street in City of Dover, County of Kent.
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Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property, or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or Committees of the Board of Directors, or by any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid. [Section 172, 173.]
Section 8.02. Reserves. There may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any
such reserve. [Section 171.]
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Section 8.03. Execution of Instruments. The: President, any Vice
President, the Secretary or the Treasurer may enter into any contract or
execute and deliver any instrument in the name and on behalf of the
Corporation. The Board of Directors or the President may authorize any other
officer or agent to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. Any such authorization
may be general or limited to specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the President. Such
authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors or the President shall authorize. When so authorized by
the Board of Directors or the President, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation, and of the interest thereon, by instruments
executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositaries as may
be determined by the Board of Directors or the President, or by such officers
or agents as may be authorized by the Board of Directors or the President to
make such determination.
Section 8.06. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
25
<PAGE> 30
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or the Treasurer or any other officers designated by the Board of
Directors or the President may sell, transfer, endorse, and assign any shares
of stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any
meeting of stockholders of any corporation in which the Corporation may hold
stock, and to act, vote (or execute proxies to vote) and exercise in person or
by proxy all other rights, powers and privileges incident to the ownership of
such stock. Such officers acting on behalf of the Corporation shall have full
power and authority to execute any instrument expressing consent to or dissent
from any action of any such corporation without a meeting. The Board of
Directors may by resolution from time to time confer such power and authority
upon any other person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
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ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or
repealed
(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained in
the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the
case of such special meeting only, notice of such amendment, alteration or
repeal is contained in the notice or waiver of notice of such meeting. [Section
109(a).]
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between the
provisions of these By-Laws as in effect from time to time and the provisions
of the certificate of incorporation of the Corporation as in effect from time
to time, the provisions of such certificate of incorporation shall be
controlling.
27
<PAGE> 1
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of May 9, 1997
Among
COLORADO PRIME CORPORATION,
THE SUBSIDIARY GUARANTORS LISTED HEREIN
and
THE BANK OF NEW YORK, AS TRUSTEE
---------------------------
up to $100,000,000
12.50% Senior Notes due 2004
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions ................................................. 1
SECTION 1.02. Other Definitions ........................................... 18
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ........... 19
SECTION 1.04. Rules of Construction ....................................... 19
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating ............................................. 20
SECTION 2.02. Execution and Authentication ................................ 22
SECTION 2.03. Registrar and Paying Agent .................................. 22
SECTION 2.04. Paying Agent to Hold Money in Trust ......................... 23
SECTION 2.05. Noteholder Lists ............................................ 23
SECTION 2.06. Transfer and Exchange ....................................... 23
SECTION 2.07. Replacement Notes ........................................... 33
SECTION 2.08. Outstanding Notes ........................................... 33
SECTION 2.09. Treasury Notes .............................................. 33
SECTION 2.10. Temporary Notes ............................................. 34
SECTION 2.11. Cancellation ................................................ 34
SECTION 2.12. Defaulted Interest .......................................... 34
SECTION 2.13. CUSIP or CINS Number ........................................ 34
SECTION 2.14. Payments of Interest ........................................ 35
SECTION 2.15. Ranking ..................................................... 35
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee .......................................... 35
SECTION 3.02. Selection of Notes to Be Redeemed ........................... 36
SECTION 3.03. Notice of Redemption ........................................ 36
SECTION 3.04. Effect of Notice of Redemption .............................. 37
SECTION 3.05. Deposit of Redemption Price ................................. 37
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.06. Notes Redeemed in Part ...................................... 37
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes ............................................ 37
SECTION 4.02. Maintenance of Office or Agency ............................. 38
SECTION 4.03. Limitation on Transactions with Affiliates and Related
Persons ..................................................... 38
SECTION 4.04. Limitation on Indebtedness .................................. 39
SECTION 4.05. Limitation on Certain Asset Dispositions .................... 41
SECTION 4.06. Limitation on Restricted Payments ........................... 42
SECTION 4.07. Corporate Existence ......................................... 44
SECTION 4.08. Payment of Taxes and Other Claims ........................... 45
SECTION 4.09. Notice of Defaults .......................................... 45
SECTION 4.10. Maintenance of Properties ................................... 46
SECTION 4.11. Compliance Certificate ...................................... 46
SECTION 4.12. Provision of Financial Information .......................... 46
SECTION 4.13. Waiver of Stay, Extension or Usury Laws ..................... 47
SECTION 4.14. Change of Control ........................................... 47
SECTION 4.15. Limitations Concerning Distributions and Transfers by
Restricted Subsidiaries ..................................... 48
SECTION 4.16. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries ..................................... 49
SECTION 4.17. Limitation on Liens ......................................... 49
SECTION 4.18. Future Subsidiary Guarantors ................................ 50
ARTICLE 5
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers, Consolidations and Certain Sales
of Assets ................................................... 51
SECTION 5.02. Successor Corporation Substituted ........................... 51
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default ........................................... 52
SECTION 6.02. Acceleration ................................................ 54
SECTION 6.03. Other Remedies .............................................. 54
SECTION 6.04. Waiver of Past Default ...................................... 54
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.05. Control by Majority 55
SECTION 6.06. Limitation on Suits 55
SECTION 6.07. Rights of Holders to Receive Payment 56
SECTION 6.08. Collection Suit by Trustee 56
SECTION 6.09. Trustee May File Proofs of Claim 56
SECTION 6.10. Priorities 57
SECTION 6.11. Undertaking for Costs 57
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee 58
SECTION 7.02. Rights of Trustee 59
SECTION 7.03. Individual Rights of Trustee 59
SECTION 7.04. Trustee's Disclaimer 60
SECTION 7.05. Notice of Defaults 60
SECTION 7.06. Reports by Trustee to Holders 60
SECTION 7.07. Compensation and Indemnity 60
SECTION 7.08. Replacement of Trustee 61
SECTION 7.09. Successor Trustee by Merger, etc 62
SECTION 7.10. Eligibility; Disqualification 63
SECTION 7.11. Preferential Collection of Claims Against Company 63
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations 63
SECTION 8.02. Application of Trust Money 65
SECTION 8.03. Repayment to Company 65
SECTION 8.04. Reinstatement 65
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVER
SECTION 9.01. Without Consent of Holders 66
SECTION 9.02. With Consent of Holders 67
SECTION 9.03. Compliance with Trust Indenture Act 68
SECTION 9.04. Revocation and Effect of Consents 68
SECTION 9.05. Notation on or Exchange of Notes 69
SECTION 9.06. Trustee to Sign Amendments, etc 69
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE 10
SUBSIDIARY GUARANTEE
<S> <C> <C>
SECTION 10.01. Unconditional Subsidiary Guarantee 70
SECTION 10.02. Severability 71
SECTION 10.03. Release of a Subsidiary Guarantor 71
SECTION 10.04. Limitation of Subsidiary Guarantor's Liability . 71
SECTION 10.05. Contribution 72
SECTION 10.06. Execution of Subsidiary Guarantee 72
SECTION 10.07. Subordination of Subrogation and Other Rights 73
SECTION 10.08. Ranking 73
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls 73
SECTION 11.02. Notices 73
SECTION 11.03. Communications by Holders with Other Holders 74
SECTION 11.04. Certificate and Opinion as to Conditions Precedent 75
SECTION 11.05. Statements Required in Certificate or Opinion 75
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar 76
SECTION 11.07. Governing Law 76
SECTION 11.08. No Recourse Against Others 76
SECTION 11.09. Successors 76
SECTION 11.10. Counterpart Originals 76
SECTION 11.11. Severability 76
SECTION 11.12. No Adverse Interpretation of Other Agreements 76
SECTION 11.13. Legal Holidays 76
</TABLE>
SIGNATURES
ANNEX A - Subsidiary Guarantors
EXHIBIT A - Form of Note
EXHIBIT B - Form of Certificate of Transfer
EXHIBIT C - Form of Certificate of Exchange
- ---------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be part of
this Indenture.
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<PAGE> 6
INDENTURE dated as of May 9, 1997, among COLORADO PRIME CORPORATION, a
Delaware corporation (the "COMPANY"), the Subsidiary Guarantors listed on Annex
A hereto and The Bank of New York, a New York banking company, as trustee (the
"TRUSTEE").
Each party hereto agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's 12.50%
Senior Notes due 2004:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"ACQUIRED INDEBTEDNESS" means, with respect to any Person, Indebtedness of
such Person (i) existing at the time such Person becomes a Restricted Subsidiary
or (ii) assumed in connection with the acquisition of assets from another
Person, including Indebtedness Incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary or such acquisition, as the
case may be.
"ADDITIONAL INTEREST" shall have the meaning set forth in the Registration
Rights Agreement.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar. See Section
2.03.
"APPLICABLE PROCEDURES" means with respect to any transfer or exchange of
interests in a Global Note, the rules and procedures of DTC, Euroclear or Cedel
that apply to such transfer or exchange.
<PAGE> 7
"ASSET DISPOSITION" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of a Subsidiary of the Company
(other than directors' qualifying shares) or (ii) property or assets of the
Company or any Subsidiary of the Company; provided, however, that an Asset
Disposition shall not include (a) any sale, transfer or other disposition of
shares of Capital Stock, property or assets by a Restricted Subsidiary of the
Company to the Company or to any Wholly Owned Subsidiary of the Company, (b) any
sale, transfer or other disposition of defaulted receivables for collection or
any sale, transfer or other disposition of property or assets in the ordinary
course of business, (c) any individual isolated sale, transfer or other
disposition that does not involve aggregate consideration in excess of $250,000,
(d) the grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (e) any Lien (or foreclosure thereon) securing Indebtedness to the
extent that such Lien is granted in compliance with Section 4.17, (f) any
Restricted Payment permitted by Section 4.06, (g) the sale, lease, conveyance or
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Section 5.01; provided, that the assets not so sold,
leased, conveyed, disposed of or otherwise transferred shall be deemed an Asset
Disposition, (h) any disposition that constitutes a Change of Control or (i) any
Permitted Receivables Financing.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
Subsidiary Guarantor, as the case may be, or any authorized committee of that
Board.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in the City of New York are
authorized or obligated by law, resolution or executive order to close.
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<PAGE> 8
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations to pay
rent or other amounts under a lease of (or other arrangements conveying the
right to use) real or personal property of such Person which are required to be
classified and accounted for as capital leases or liabilities on the face of a
balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person (including any Preferred Stock outstanding on the Issue Date).
"CEDEL" means Cedel Bank, societe anonyme.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"COMPANY" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"CONSOLIDATED EBITDA" of any Person means for any period the Consolidated
Net Income of such Person for such Period increased (to the extent Consolidated
Net Income for such period has been reduced thereby) by the sum of (without
duplication) (i) Consolidated Interest Expense of such Person for such period,
plus (ii) Consolidated Income Tax Expense of such Person for such period, plus
(iii) the consolidated depreciation and amortization expense included in the
income statement of such Person prepared in accordance with GAAP for such
period, plus (iv) any other non-cash charges to the extent deducted from or
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<PAGE> 9
reflected in Consolidated Net Income except for any non-cash charges that
represent accruals of, or reserves for, cash disbursements to be made in any
future accounting period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" of any Person means for any
period the ratio of (i) Consolidated EBITDA of such Person for such period to
(ii) the sum of (A) Consolidated Interest Expense of such Person for such
period, plus (B) the annual interest expense with respect to any Indebtedness
proposed to be Incurred by such Person or its Restricted Subsidiaries, minus (C)
Consolidated Interest Expense of such Person to the extent included in clause
(ii) (A) with respect to any Indebtedness that will no longer be outstanding as
a result of the Incurrence of the Indebtedness proposed to be Incurred, plus (D)
the annual interest expense with respect to any other Indebtedness Incurred by
such Person or its Restricted Subsidiaries since the end of such period to the
extent not included in clause (ii) (A), minus (E) Consolidated Interest Expense
of such Person to the extent included in clause (ii) (A) with respect to any
Indebtedness that no longer is outstanding as a result of the Incurrence of the
Indebtedness referred to in clause (ii) (D); provided, however, that in making
such computation, the Consolidated Interest Expense of such Person attributable
to interest on any Indebtedness bearing a floating interest rate shall be
computed on a pro forma basis as if the rate in effect on the date of
computation (after giving effect to any hedge in respect of such Indebtedness
that will, by its terms, remain in effect until the earlier of the maturity of
such Indebtedness or the date one year after the date of such determination) had
been the applicable rate for the entire period; provided, further, however,
that, in the event such Person or any of its Restricted Subsidiaries has made
any Asset Dispositions or acquisitions of assets not in the ordinary course of
business (including acquisitions of other Persons by merger, consolidation or
purchase of Capital Stock) during or after such period and on or prior to the
date of computation, such computation shall be made on a pro forma basis as if
the Asset Dispositions or acquisitions had taken place on the first day of such
period. Calculations of pro forma amounts in accordance with this definition
shall be done in accordance with Article 11 of Regulation S-X under the
Securities Act of 1933, as amended, or any successor provision and may include
reasonably ascertainable cost savings.
"CONSOLIDATED INCOME TAX EXPENSE" of any Person means for any period the
consolidated provision for income taxes of such Person and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED INTEREST EXPENSE" for any Person means for any period,
without duplication, (a) the consolidated interest expense included in a
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<PAGE> 10
consolidated income statement (without deduction of interest or finance charge
income) of such Person and its Restricted Subsidiaries for such period
calculated on a consolidated basis in accordance with GAAP and (b) dividend
requirements of such Person and its Restricted Subsidiaries with respect to
Disqualified Stock and with respect to all other Preferred Stock of Restricted
Subsidiaries of such Person (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of such Person or such
Restricted Subsidiary)) paid, declared, accrued or accumulated during such
period times a fraction the numerator of which is one and the denominator of
which is one minus the then effective consolidated Federal, state and local tax
rate of such Person, expressed as a decimal.
"CONSOLIDATED NET INCOME" of any Person means for any period the
consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) the net income (or
loss) of any Person acquired by such Person or a Restricted Subsidiary of such
Person in a pooling-of-interests transaction for any period prior to the date of
such transaction, (b) the net income (but not net loss) of any Restricted
Subsidiary of such Person which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to such Person to
the extent of such restrictions (regardless of any waiver thereof), (c) non-cash
gains and losses due solely to fluctuations in currency values, (d) the net
income of any Person that is not a Restricted Subsidiary of such Person, except
to the extent of the amount of dividends or other distributions representing
such Person's proportionate share of such other Person's net income for such
period actually paid in cash to such Person by such other Person during such
period, (e) gains but not losses on Asset Dispositions by such Person or its
Restricted Subsidiaries, (f) all gains and losses classified as extraordinary,
unusual or nonrecurring in accordance with GAAP and (g) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets.
"CONTINUING DIRECTOR" means a director who either was a member of the
Board of Directors of the Company on the Issue Date or who became a director of
the Company subsequent to the Issue Date and (i) whose election, or nomination
for election by the Company's stockholders, was duly approved by a majority of
Continuing Directors then on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director or (ii) whose election was duly approved by the
Principals at a meeting of stockholders of the Company called for such purpose.
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<PAGE> 11
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice to the Company.
"CREDIT AGREEMENT" means, collectively, (i) that certain Credit Agreement,
dated as of May 9, 1997, between the Company and Dresdner Bank AG, New York and
Grand Cayman Branches, as agent and certain other financial institutions and
(ii) any deferrals, renewals, extensions, replacements, refinancings or
refundings of any of the foregoing, or amendments, modifications or supplements
to (including, without limitation, any amendment increasing the amount borrowed
or reimbursement obligation thereunder) whether by or with the same or any other
lender, creditor, or group of creditors and including related notes, guarantee
agreements and other instruments and agreements executed in connection
therewith.
"DEFAULT" means any event that is, or after notice or lapse of time or
both would become, an Event of Default.
"DISQUALIFIED STOCK" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Notes.
"DTC" means the Depository Trust Company or its successors.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York
(Brussels Office) as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"EXCHANGE REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"EXPIRATION DATE" has the meaning set forth in the definition of "Offer to
Purchase" below.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect on the Issue Date in the United States of America, as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the
6
<PAGE> 12
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession in the United States. All ratios and computations based on
GAAP contained in this Indenture shall be computed in conformity with GAAP
applied on a consistent basis.
"GLOBAL NOTE" means the global note, without coupons, representing all or
a portion of the Notes deposited with DTC substantially in the form of Exhibit A
attached hereto.
"GUARANTEE" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing any Indebtedness of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition of liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "guaranteed,"
"guaranteeing" and "guarantor" shall have meanings correlative to the
foregoing); provided, however, that the guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the books of the Registrar or any co-Registrar.
"HOLDINGS" means Colorado Prime Holdings, Inc., a Delaware corporation.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company (or is merged into or consolidates with the Company or
any of its Restricted Subsidiaries), whether or not such Indebtedness was
incurred in
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connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary of the Company (or being merged into or consolidated with the Company
or any of its Restricted Subsidiaries), shall be deemed Incurred at the time any
such Person becomes a Restricted Subsidiary of the Company or merges into or
consolidates with the Company or any of its Restricted Subsidiaries.
"INDEBTEDNESS" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) every net obligation under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements of such
Person and (vii) every obligation of the type referred to in clauses (i) through
(vi) of another Person and all dividends of another Person the payment of which,
in either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise. Indebtedness shall
include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Stock of the Company, and any
Preferred Stock of a Subsidiary of the Company. Indebtedness shall never be
calculated taking into account any cash and cash equivalents held by such
Person. Indebtedness shall not include obligations arising from agreements of
the Company or a Restricted Subsidiary of the Company to provide for
indemnification, adjustment of purchase price, earn-out, or other similar
obligations, in each case, incurred or assumed in connection with the
disposition of any business or assets of a Restricted Subsidiary of the Company.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INITIAL GLOBAL NOTES" means the Regulation S Global Note and the
Restricted Global Note, each of which contains a Securities Act Legend.
"INITIAL NOTES" means the Notes containing a Securities Act Legend.
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<PAGE> 14
"INSTITUTIONAL ACCREDITED INVESTORS" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a) (1), (2), (3) or
(7) of Regulation D promulgated under the Securities Act
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Notes.
"INVESTMENT" by any Person means any direct or indirect loan, advance,
guarantee or other extension of credit or capital contribution to (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidences of Indebtedness issued by any other Person.
"ISSUE DATE" means the original issue date of the Notes.
"LIEN" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
with respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"MANAGEMENT INVESTORS" means full-time members of management of the
Company who acquire stock of Holdings, on or after the Issue Date, and any of
their Permitted Transferees.
"MATURITY DATE" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"NET AVAILABLE PROCEEDS" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiror of Indebtedness or other obligations relating to such properties or
assets or received in any other non-cash form) therefrom by such Person,
including any cash received by way of deferred payment or upon the monetization
or other disposition of any non-cash consideration (including notes or other
securities) received in connection with such Asset Disposition, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a
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consequence of such Asset Disposition, (ii) all payments made by such Person or
its Restricted Subsidiaries on any Indebtedness which is secured by such assets
in accordance with the terms of any Lien upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such Assets Disposition or by applicable law, be repaid out of the proceeds
from such Asset Disposition, (iii) all payments made with respect to liabilities
associated with the assets which are the subject of the Asset Disposition,
including, without limitation, trade payables and other accrued liabilities,
(iv) appropriate amounts to be provided by such Person or any Restricted
Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, until such time as such amounts are no
longer reserved or such reserve is no longer necessary (at which time any
remaining amounts will become Net Available Proceeds to be allocated in
accordance with the provisions of clause (iii) of Section 4.05) and (v) all
distributions and other payments made to minority interest holders in Restricted
Subsidiaries of such Person or joint ventures as a result of such Asset
Disposition.
"NOTEHOLDER" has the meaning set forth in the definition of "Holder"
above.
"NOTES" means the 12.50% Senior Notes due 2004 issued pursuant to the
terms of this Indenture, as amended or supplemented from time to time.
"OFFER" has the meaning set forth in the definition of "Offer to Purchase"
below.
"OFFER TO PURCHASE" means a written offer (the "OFFER") sent by the
Company by first class mail, postage prepaid, in the case of the Global Notes to
DTC and in the case of Certificated Notes to each Holder at his address
appearing in the register for the Notes, in each case, on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such Offer
at the purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "EXPIRATION DATE") of the Offer to Purchase which shall
be not less than 30 days nor more than 60 days after the date of such Offer and
a settlement date (the "PURCHASE DATE") for purchase of Notes within five
Business Days after the Expiration Date. The Company shall notify the Trustee at
least 15 Business Days (or such shorter period as is acceptable to the Trustee)
prior to the mailing of the
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Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(i) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the outstanding Notes
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer
to Purchase) (the "PURCHASE AMOUNT");
(iv) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to this Indenture) (the "PURCHASE PRICE");
(v) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(vi) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(vii) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue
to accrue;
(viii) that on the Purchase Date the Purchase Price will become due
and payable upon each Note being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date;
(ix) that each Holder electing to tender all or any portion of a
Note pursuant to the Offer to Purchase will be required to surrender such
Note at the place or places specified in the Offer prior to the close of
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business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly authorized in
writing);
(x) that Holders will be entitled to withdraw all or any portion
of Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note the
Holder tendered, the certificate number of the Note the Holder tendered
and a statement that such Holder is withdrawing all or a portion of his
tender;
(xi) that (a) if Notes in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Notes and (b) if Notes in an aggregate principal amount in excess of the
Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Notes having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis (with such
adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 or integral multiples thereof shall be purchased);
and
(xii) that in the case of any Holder whose Note is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"OFFICER" means the Chairman, the President, any Vice President, the Chief
Financial Officer, the Treasurer, or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers (one of
whom shall be the Chief Financial Officer of the Company) or by an Officer and
an Assistant Treasurer or Assistant Secretary of the Company complying with
Sections 11.04 and 11.05.
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<PAGE> 18
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and with respect to
DTC, shall include Euroclear and Cedel).
"PERMITTED ASSET SWAP" means any one or more transactions in which the
Company or any of its Restricted Subsidiaries exchanges assets for consideration
consisting of (i) cash, (ii) assets used or useful in the business of the
Company as conducted on the Issue Date or reasonable extensions, developments or
expansions thereof or ancillary thereto and/or (iii) other assets in an amount
less than 15% of the fair market value of such transaction or transactions.
"PERMITTED HOLDER" means any of (i) the Principals and their Related
Persons and Affiliates and (ii) the Management Investors.
"PERMITTED INVESTMENTS" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or any
governmental entity or agency or political subdivision thereof (provided, that
the full faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) Investments in
commercial paper issued by corporations or financial institutions maturing
within 180 days from the date of the original issue thereof, and rated "P-1" or
better by Moody's Investors Service or "A-1" or better by Standard & Poor's
Corporation or an equivalent rating or better by any other nationally recognized
securities rating agency; (iii) Investments in time deposits and certificates of
deposit issued or acceptances accepted by or guaranteed by any bank or trust
company organized under the laws of the United States of America or any state
thereof or the District of Columbia or incorporated in a foreign jurisdiction
and having a branch office in the United States (each, an "APPROVED BANK"), in
each case having capital, surplus and undivided profits totaling more than
$500,000,000, maturing within one year of the date of purchase; (iv) Investments
representing Capital Stock or obligations issued to the Company or any of its
Restricted Subsidiaries in the course of the good faith settlement of claims
against any other Person or by reason of a composition or readjustment of debt
or a reorganization of any debtor of the Company or any of its Restricted
Subsidiaries; (v) deposits, including interest-bearing deposits, maintained in
the ordinary course of business in banks; (vi) repurchase obligations of an
Approved Bank for government obligations with a term of not more than seven
days; (vii) investments in money market mutual funds having assets in excess of
$2.5 billion all of whose assets are comprised of
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government obligations; (viii) any acquisition of the Capital Stock of any
Person; provided, however, that after giving effect to any such acquisition such
Person shall become a Restricted Subsidiary of the Company; (ix) trade
receivables and prepaid expenses, in each case arising in the ordinary course of
business; provided, however, that such receivables and prepaid expenses would be
recorded as assets of such Person in accordance with GAAP; (x) endorsements for
collection or deposit in the ordinary course of business by such Person of bank
drafts and similar negotiable instruments of such other Person received as
payment for ordinary course of business trade receivables; (xi) any interest
swap or hedging obligation with an unaffiliated Person otherwise permitted by
this Indenture; (xii) Investments received as consideration for an Asset
Disposition in compliance with Section 4.05; (xiii) Investments in Restricted
Subsidiaries or by virtue of which a Person becomes a Restricted Subsidiary;
(xiv) loans and advances to employees made in the ordinary course of business;
(xv) Investments the sole consideration for which consists of Capital Stock of
the Company and (xvi) Investments required in connection with any Permitted
Receivables Financing to the extent such Investments are customary in respect of
transactions of such nature.
"PERMITTED RECEIVABLES FINANCING" means a transaction or series of
transactions (including amendments, supplements, extensions, renewals,
replacements, refinancings or modifications thereof) pursuant to which (a) a
Securitization Subsidiary purchases Receivables and Related Assets from the
Company or any Restricted Subsidiary and finances such Receivables and Related
Assets through the issuance of indebtedness or equity interests or through the
sale of the Receivables and Related Assets or a fractional undivided interest in
the Receivables and Related Assets or (b) the Company or a Restricted Subsidiary
finances Receivables and Related Assets through the sale of Receivables and
Related Assets or fractional undivided interests therein; provided that (i) the
Board of Directors shall have determined in good faith that such Permitted
Receivables Financing is economically fair and reasonable to the Company and the
Securitization Subsidiary, (ii) all sales of Receivables and Related Assets to
the Securitization Subsidiary are made at fair market value (as determined in
good faith by the Board of Directors), (iii) the financing terms, covenants,
termination events and other provisions thereof shall be market terms (as
determined in good faith by the Board of Directors), (iv) no portion of the
Indebtedness of a Securitization Subsidiary is guaranteed by or is recourse to
the Company or any Restricted Subsidiary (other than recourse for customary
representations, warranties, covenants and indemnities, none of which shall
relate to the collectibility of the Receivables and Related Assets) and (v)
neither the Company nor any Subsidiary has any obligation to maintain or
preserve the Securitization Subsidiary's financial condition.
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<PAGE> 20
"PERMITTED TRANSFEREE" means, with respect to any Management Investor (i)
any spouse or lineal descendant (including by adoption and stepchildren) of such
Management Investor and (ii) any trust, corporation or partnership, the
beneficiaries, stockholders or partners of which consist entirely of one or more
Management Investors or individuals described in clause (i) above.
"PERSON" means any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREFERRED STOCK," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"PRINCIPAL" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.
"PRINCIPALS" means TC Equity Partners, L.L.C. and any Person controlled
by TC Equity Partners, L.L.C., any Related Person of TC Equity Partners, L.L.C.
and certain other Persons related to TC Equity Partners, L.L.C.
"PRIVATE EXCHANGE NOTES" shall have the meaning set forth in the
Registration Rights Agreement.
"PURCHASE AMOUNT" has the meaning set forth in the definition of "Offer
to Purchase" above.
"PURCHASE DATE" has the meaning set forth in the definition of "Offer to
Purchase" above.
"PURCHASE PRICE" has the meaning set forth in the definition of "Offer to
Purchase" above.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"RECEIVABLES AND RELATED ASSETS" means accounts receivable and
instruments, chattel paper, obligations, general intangibles and other similar
assets, in each case, relating to such receivables, including interests in
merchandise or goods, the sale or lease of which gave rise to such receivable,
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<PAGE> 21
related contractual rights, guarantees, insurance proceeds, collections, other
related assets and proceeds of all of the foregoing.
"REDEMPTION DATE," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture.
"REDEMPTION PRICE," when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture as set
forth in the form of Note annexed as Exhibit A.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated the date hereof among the Company, the Subsidiary Guarantors,
J.P. Morgan Securities Inc. and Dresdner Kleinwort Benson North America LLC.
"REGULATION S" means Regulation S promulgated under the Securities Act
(including any successor regulation thereto) as it may be amended from time to
time.
"RELATED PERSON" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"RESTRICTED CERTIFICATED NOTE" means a Certificated Note containing a
Securities Act Legend.
"RESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company other than
an Unrestricted Subsidiary and (ii) any successor to a substantial portion of
the assets of any Subsidiary other than an Unrestricted Subsidiary.
"RULE 144" shall have the meaning set forth in the Registration Rights
Agreement.
"RULE 144A" shall have the meaning set forth in the Registration Rights
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission thereunder.
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<PAGE> 22
"SECURITIZATION SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company, which is established for the limited purpose of acquiring and financing
Receivables and Related Assets and engaging in activities ancillary thereto.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"STATED MATURITY," when used with respect to any Note or any installment
of interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness (whether outstanding on
the date hereof or hereafter incurred) which is by its terms expressly
subordinate or junior in right of payment to the Notes.
"SUBSIDIARY" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more other Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"SUBSIDIARY GUARANTEE" means the guarantee of the Notes by each Subsidiary
Guarantor under this Indenture.
"SUBSIDIARY GUARANTOR" means each Restricted Subsidiary existing as of the
Issue Date and listed on Schedule I hereto and each Restricted Subsidiary, if
any, of the Company formed or acquired after the Issue Date, which pursuant to
the terms of this Indenture executes a supplement to this Indenture as a
guarantor.
"TANGIBLE ASSETS" means the total amount of assets of the Company and the
Restricted Subsidiaries after deducting therefrom all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangible assets, all as set forth on the most recent balance sheet of the
Company and its Subsidiaries and computed in accordance with GAAP.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code SectionSection
77aaa- 77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03
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"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TRUST OFFICER" means any officer within the corporate trust department
(or any successor group of the Trustee) including any vice president, assistant
vice president, assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer to whom such trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
"UNRESTRICTED GLOBAL NOTES" means one or more Global Notes that do not and
are not required to bear the Securities Act Legend.
"UNRESTRICTED NOTES" means the Notes that do not and are not required to
bear the Securities Act Legend.
"UNRESTRICTED CERTIFICATED NOTES" means one or more Certificated Notes
that do not and are not required to bear the Securities Act Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company formed
or acquired after the Issue Date that at the time of determination is designated
an Unrestricted Subsidiary by the Board of Directors in the manner provided
below and (ii) any Subsidiary of an Unrestricted Subsidiary. Any such
designation by the Board of Directors will be evidenced to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the following provisions. The Board of Directors of the Company
may not designate any Subsidiary of the Company to be an Unrestricted Subsidiary
if, after such designation, (a) the Company or any other Restricted Subsidiary
(i) provides credit support for, or a guarantee of, any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) or (ii) is directly or indirectly liable for any Indebtedness of
such Subsidiary, (b) a default with respect to any Indebtedness of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its final scheduled
maturity or (c) such Subsidiary owns any Capital Stock of, or owns or holds any
Lien on any
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<PAGE> 24
property of, any Restricted Subsidiary which is not a Subsidiary of the
Subsidiary to be so designated.
"VOTING STOCK" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
<S> <C>
"Bankruptcy Law" 6.01
"Certificated Note" 2.01(b)
"Change of Control" 4.14
"Custodian" 6.01
"Event of Default" 6.01
"Funding Subsidiary Guarantor" 10.05
"Paying Agent" 2.03
"Registrar" 2.03
"Regulation S Global Note" 2.01(a)
"Required Filing Dates" 4.12
"Restricted Global Note" 2.01(a)
"Securities Act Legend" 2.06(f)
"United States Government Obligations" 8.01(b)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act .
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"INDENTURE SECURITIES" means the Notes.
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<PAGE> 25
"INDENTURE SECURITY HOLDER" means a Holder or Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
in effect from time to time, and any other reference in this Indenture to
"generally accepted accounting principles" refers to GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions; and
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating.
(a) GLOBAL NOTES. Notes offered and sold to QIBs in reliance on Rule 144A
shall be issued initially in the form of one or more permanent Global Notes in
registered from substantially in the form of Exhibit A hereto in the name of
Cede & Co. as nominee of DTC, duly executed by the Company and
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<PAGE> 26
authenticated by the Trustee as hereinafter provided and deposited with the
Trustee, as custodian for DTC. Such Note or Notes shall be referred to herein as
the "RESTRICTED GLOBAL NOTE." Notes offered and sold in reliance on Regulation S
shall be issued initially in the form of one or more permanent Global Notes in
registered form substantially in the form of Exhibit A hereto in the name of
Cede & Co. as nominee of DTC, duly executed by the Company and authenticated by
the Trustee as hereinafter provided and deposited with the Trustee, as custodian
for DTC. Such Note or Notes shall be referred to herein as the "REGULATION S
GLOBAL NOTE." Unrestricted Global Notes shall be issued initially in accordance
with Sections 2.06(b) (iv), 2.06(c) (ii) and 2.06(e) in the name of Cede & Co.
as nominee of DTC, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of each of the Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
principal amount of outstanding Notes from time to time endorsed thereon and
that the aggregate principal amount of outstanding Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and transfers of interests therein in accordance with the terms of
this Indenture. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the principal amount of outstanding Notes represented
thereby shall be made by the Trustee in accordance with instructions given by
the Holder thereof as required by Section 2.06 hereof.
Upon the issuance of the Global Note to DTC, DTC shall credit, on its
internal book-entry registration and transfer system, its Participant's accounts
with the respective interests owned by such Participants. Interests in the
Global Notes shall be limited to Participants, including Euroclear and Cedel,
and indirect participants.
The Participants shall not have any rights either under this Indenture or
under any Global Note with respect to such Global Note held on their behalf by
DTC, and DTC may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for the purpose
of receiving payment of or on account of the principal of and, subject to the
provisions of this Indenture, interest and Additional Interest, if any, on the
Global Notes and for all other purposes. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Participants,
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<PAGE> 27
the operation of customary practices of DTC governing the exercise of the rights
of an owner of a beneficial interest in any Global Note.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be applicable
to interests in the Regulation S Global Note that are held by the Participants
through Euroclear or Cedel.
(b) CERTIFICATED NOTES. Notes offered and sold to Institutional Accredited
Investors who are not also QIBs shall be issued initially substantially in the
form of Exhibit A hereto, in certificated form and issued in the names of the
purchasers thereof (or their nominees), duly executed by the Company and
authenticated by the Trustee as hereinafter provided. Such Notes, together with
any Notes subsequently issued, whether pursuant to the terms of Section 2.06
hereof or otherwise, that are not Global Notes, shall be referred to herein as
the "CERTIFICATED NOTES."
(c) NOTES. The provisions of the form of Notes contained in Exhibit A
hereto are incorporated herein by reference. The Notes and the Trustee's
Certificates of Authentication shall be substantially in the form of Exhibit A
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. The Company shall approve the form of the Notes
and any notation, legend or endorsement (including notations relating to the
Subsidiary Guarantee) on them. If required, the Notes may bear the appropriate
legend regarding original issue discount for federal income tax purposes. Each
Note shall be dated the date of its authentication. The terms and provisions
contained in the Notes shall constitute, and are hereby expressly made, a part
of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers of the Company
shall sign the Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at
the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
A Note shall not be valid until an authorized officer of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in the
aggregate principal amount of $100,000,000 in one series, (ii) Private Exchange
Notes from time to time only in exchange for a like principal amount of Initial
Notes and (iii) Unrestricted Notes from time to time only in exchange for a like
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<PAGE> 28
principal amount of Initial Notes upon a written order signed by an Officer of
the Company. The order shall be based upon a Board Resolution of the Company to
similar effect filed with the Trustee and shall specify the amount of Notes to
be authenticated and the date on which the original issue of Notes is to be
authenticated. The order shall also provide instructions concerning
registration, amounts for each Holder and delivery. The aggregate principal
amount of Notes outstanding at any time may not exceed $100,000,000 except as
provided in Section 2.07. The Notes shall be issued only in registered form,
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an
office or agency where Notes may be presented for registration of transfer or
for exchange ("REGISTRAR") and an office or agency where Notes may be presented
for payment ("PAYING AGENT"). The Company may have one or more co-Registrars and
one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying Agent.
The Company shall give written notice to the Trustee in the event that the
Company decides to act as Registrar. None of the Company, its Subsidiaries or
any of their Affiliates may act as Paying Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent to agree in writing to hold in trust for the benefit
of Noteholders or the Trustee all money held by the Paying Agent for the payment
of principal of or interest on the Notes (whether such money has been paid to it
by the Company or any other obligor on the Notes), and the Company and the
Paying Agent shall each notify the Trustee of any default by the Company (or any
other obligor on the Notes) in making any such payment. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon making such payment the Paying Agent shall
have no further liability for the money delivered to the Trustee.
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<PAGE> 29
SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Noteholders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee at least five Business Days before each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Noteholders.
SECTION 2.06. Transfer and Exchange.
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. Transfers of a Global Note
shall be limited to transfer of such Global Note in whole, but not in part to
DTC, its successors or their respective nominees by delivery. Global Notes will
be exchanged by the Company for Certificated Notes only (i) if DTC notifies the
Company that it is unwilling or unable to continue to act as depositary with
respect to the Global Notes or ceases to be a clearing agency registered under
the Exchange Act and, in either case, a successor depositary registered as a
clearing agency under the Exchange Act is not appointed by the Company within 90
days or (ii) if the owner of an interest in the Global Notes requests such
Certificated Notes, following an Event of Default under the Indenture, in a
writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the previous
paragraph, Certificated Notes shall be issued in such names as DTC shall
instruct the Trustee and the Trustee shall cause the aggregate principal amount
of the applicable Global Note to be reduced accordingly and direct DTC to make a
corresponding reduction in its book-entry system. The Company shall execute and
the Trustee shall authenticate and deliver to the Person designated in the
instructions a Certificated Note in the appropriate principal amount. The
Trustee shall deliver such Certificated Notes to the Persons in whose names such
Notes are so registered. Certificated Notes issued in exchange for an Initial
Global Note pursuant to this Section 2.06(a) shall bear the Securities Act
Legend and shall be subject to all restrictions on transfer contained therein.
Global Notes may also be exchanged or replaced, in whole or in part, as provided
in Sections 2.07 and 2.10. Every Note authenticated and delivered in exchange
for, or in lieu of, a Global Note or any portion thereof, pursuant to Section
2.07 or 2.10, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a).
(b) TRANSFER AND EXCHANGE OF INTERESTS IN GLOBAL NOTES. The transfer and
exchange of interests in Global Notes shall be effected through DTC, in
accordance with this Indenture and the procedures of DTC therefor. Interests in
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<PAGE> 30
Initial Global Notes shall be subject to restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. The Trustee
shall have no obligation to ascertain DTC's compliance with any such
restrictions on transfer. Transfers of interests in Global Notes shall also
require compliance with subparagraph (i) below, as well as one or more of the
other following subparagraphs as applicable:
(i) All Transfers and Exchanges of Interests in Global Notes. In
connection with all transfers and exchanges of interests in Global Notes
(other than transfers of Interests in a Global Note to Persons who take
delivery thereof in the form of an interest in the same Global Note), the
transferor of such interest must deliver to the Registrar (1) instructions
given in accordance with the Applicable Procedures from a Participant or
an indirect participant directing DTC to credit or cause to be credited an
interest in the specified Global Note in an amount equal to the interest
to be transferred or exchanged, (2) a written order given in accordance
with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase and (3) instructions
given by the Holder of the Global Note to effect the transfer referred to
in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global Note.
Interests in any Initial Global Note may be transferred to Persons who
take delivery thereof in the form of an interest in the same Initial
Global Note in accordance with the transfer restrictions set forth in
Section 2.06(f) hereof.
(iii) Transfer of Interests to Another Initial Global Note.
Interests in any Initial Global Note may be transferred to Persons who
take delivery thereof in the form of an interest in another Initial Global
Note if the Registrar receives the following:
(A) if the transferee will take delivery in the form of an
interest in the Restricted Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item 1 thereof; or
(B) if the transferee will take delivery in the form of an
interest in the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item 2 thereof.
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(iv) Transfer and Exchange of Interests in Initial Global Note for
Interests in an Unrestricted Global Note. Interests in any Initial Global
Note may be exchanged by the holder thereof for an interest in the
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of an interest in the Unrestricted Global Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the Holder of such an interest in an Initial
Global Note proposes to exchange it for an interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item 1(a) thereof;
(2) if the Holder of such an interest in an Initial
Global Note proposes to transfer it to a Person who shall take
delivery thereof in the form of an interest in an Unrestricted
Global Note, a certificate in the form of Exhibit B hereto,
including the certification in item 3 thereof; and
(3) in each such case set forth in this paragraph (C),
an Opinion of Counsel in form reasonably acceptable to the
Company, to the effect that such exchange or transfer is in
compliance with the Securities Act and, that the restrictions
on transfer contained herein and in Section 2.06(f) hereof are
not required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to this paragraph (iv) at a time when
an Unrestricted Global Note has not yet been issued, the Company shall issue
and, upon receipt of an authentication order in accordance with Section 2.02,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate
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principal amount equal to the principal amount of interests in the Initial
Global Note transferred pursuant to this paragraph (iv).
(v) Notation by the Trustee of Transfer of Interests Among Global
Notes. Upon satisfaction of the requirements for transfer of interests in
Global Notes pursuant to clauses (iii) or (iv) above, the Trustee, as
Registrar, shall reduce or cause to be reduced the aggregate principal
amount of the relevant Global Note from which the interests are being
transferred, and increase or cause to be increased the aggregate principal
amount of the Global Note to which the interests are being transferred, in
each case, by the principal amount so transferred and shall direct DTC to
make corresponding adjustments in its book-entry system. No transfer of
interests of a Global Note shall be effected until, and any transferee
pursuant thereto shall succeed to the rights of a holder of such interests
only when, the Registrar has made appropriate adjustments to the
applicable Global Note in accordance with this paragraph.
(c) TRANSFER OR EXCHANGE OF RESTRICTED CERTIFICATED NOTES FOR INTERESTS IN
A GLOBAL NOTE.
(i) If any holder of Restricted Certificated Notes proposes to
exchange such Notes for an interest in a Global Note or to transfer such
Certificated Notes to a Person who takes delivery thereof in the form of
an interest in a Global Note, then, upon receipt by the Registrar of the
following documentation (all of which may be submitted by facsimile):
(A) if the holder of such Restricted Certificated Notes
proposes to exchange such Notes for an interest in an Initial Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item 2 thereof;
(B) if such Restricted Certificated Notes are being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item 1 thereof;
(C) if such Restricted Certificated Notes are being
transferred to a Non-U.S. Person (as defined in Regulation S) in an
offshore transaction in accordance with Rule 904 under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item 2 thereof,
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the Trustee shall cancel the Restricted Certificated Notes, increase or
cause to be increased the aggregate principal amount of, in the case of clause
(B) above, the Restricted Global Note, and in the case of clause (C) above, the
Regulation S Global Note and direct DTC to make a corresponding increase in its
book-entry system.
(ii) A holder of Restricted Certificated Notes may exchange such
Notes for an interest in the Unrestricted Global Note or transfer such
Restricted Certificated Notes to a Person who takes delivery thereof in
the form of an interest in the Unrestricted Global Note only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(1) if the Holder of such Restricted Certificated Notes
proposes to exchange such Notes for an interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item 1(b) thereof;
(2) if the Holder of such Restricted Certificated Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an interest in the
Unrestricted Global Note, a certificate in the form of Exhibit
B hereto, including the certifications in item 3 thereof; and
(3) in each such case set forth in this paragraph (C),
an Opinion of Counsel in form reasonably acceptable to the
Company, to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in Section 2.06(f) hereof are
not required in order to maintain compliance with the
Securities Act.
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If any such transfer is effected pursuant to paragraph (ii) above at a
time when an Unrestricted Global Note has not yet been issued, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.02, the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Restricted
Certificated Notes transferred pursuant to paragraph (ii) above.
(d) TRANSFER AND EXCHANGE OF CERTIFICATED NOTES.
(i) Transfer of a Certificated Note to Another Certificated Note.
Following the occurrence of one or more of the events specified in Section
2.06(a), a Certificated Note may be transferred to Persons who take
delivery thereof in the form of another Certificated Note if the Registrar
receives the following:
(A) if the transfer is being effected pursuant to and in
accordance with Rule 144A, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 1 thereof; or
(B) if the transfer is being effected pursuant to and in
accordance with Regulation S, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 2 thereof.
(ii) Transfer and Exchange of Restricted Certificated Note for
Unrestricted Certificated Note. Following the occurrence of one or more of
the events specified in Section 2.06(a), a Restricted Certificated Note
may be exchanged by the Holder thereof for an Unrestricted Certificated
Note or transferred to a Person who takes delivery thereof in the form of
an Unrestricted Certificated Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
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(C) the Registrar receives a certificate from such holder in
the form of Exhibit B hereto, including the certifications in item 4
thereof in the case of a transfer, or in the form of Exhibit C
hereto, including the certifications in item 1(c) thereof in the
case of an exchange, and, in each case, an Opinion of Counsel in
form reasonably acceptable to the Company, to the effect that such
exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in Section
2.06(f) hereof are not required in order to maintain compliance with
the Securities Act.
(iii) Exchange of Certificated Notes. When Restricted Certificated
Notes are presented by a Holder to the Registrar with a request to
register the exchange of such Restricted Certificated Notes for an equal
principal amount of Restricted Certificated Notes of other authorized
denominations, the Registrar shall make the exchange as requested only if
the Restricted Certificated Notes are endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed
by such Holder or by his attorney duly authorized in writing and shall be
issued only in the name of such Holder or its nominee. The Restricted
Certificated Notes issued in exchange shall bear the Securities Act Legend
and shall be subject to all restrictions on transfer contained herein in
each case to the same extent as the Restricted Certificated Notes so
exchanged.
(iv) Return of Certificated Notes. In the event of a transfer
pursuant to clauses (i) or (ii) above and the Holder thereof has delivered
certificates representing an aggregate principal amount of Notes in excess
of that to be transferred, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Note without service
charge, a new Certificated Note or Notes of any authorized denomination
requested by the Holder, in an aggregate principal amount equal to the
portion of the Note not so transferred.
(e) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer (as defined
in the Registration Rights Agreement) in accordance with the Registration Rights
Agreement, the Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of the interests in the Initial Global Notes and Restricted
Certificated Notes tendered for acceptance by persons participating therein.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Initial Global Notes to be reduced
accordingly and direct DTC to
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make a corresponding reduction in its book-entry system. The Trustee shall
cancel any Restricted Certificated Notes in accordance with Section 2.11 hereof.
In the case that one or more of the events specified in Section 2.06(a)
have occurred, upon the occurrence of such Exchange Offer, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.02, the Trustee shall authenticate Unrestricted Certificated Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Certificated Notes tendered for acceptance by persons participating therein.
(f) LEGENDS.
Each Initial Global Note and each Restricted Certificated Note shall bear
the legend (the "SECURITIES ACT LEGEND") in substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO COLORADO PRIME CORPORATION ("CPC") OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO CPC THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH
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RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS."
(g) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO A NOMINEE OF DTC, OR
BY ANY SUCH NOMINEE OF DTC, OR BY DTC TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE
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AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE
INDENTURE.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
interests in the Global Notes have been exchanged for Certificated Notes, all
Global Notes shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any interest in a Global Note is exchanged for an interest in another Global
Note or for Certificated Notes, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note, by the Trustee to reflect such reduction.
(i) GENERAL PROVISIONS RELATING TO ALL TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Certificated Notes upon a written order signed by an Officer of the
Company or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any stamp or transfer tax or similar
governmental charge payable in connection therewith (other than any such
stamp or transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 4.05, 4.14 and 9.05
hereof).
(iii) All Global Notes and Certificated Notes issued upon any
registration of transfer or exchange of Global Notes or Certificated Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Certificated Notes surrendered upon such registration of transfer
or exchange.
(iv) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
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the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by noticed to the contrary.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. An indemnify bond in an amount sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee or
any Agent from any loss which any of them may suffer if a Note is replaced shall
be required by the Trustee or the Company. The Company and the Trustee each may
charge such Holder for its expenses in replacing such Note.
Every replacement Note is an additional obligation of the Company.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes that have been authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. A Note does
not cease to be outstanding because the Company or one of its Affiliates holds
the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or Maturity Date money
sufficient to pay the principal of, and interest on Notes payable on that date,
then on and after that date such Notes cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Subsidiary or any of their respective Affiliates shall be
disregarded, except that for the purposes of determining whether the Trustee
shall
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be protected in relying on any such direction, waiver or consent, only Notes
that the Trustee actually knows are so owned shall be so disregarded.
The Trustee may require an Officers' Certificate listing securities owned
by the Company, any Subsidiary or any of their respective Affiliates.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes. Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee and no one
else shall cancel all Notes surrendered for transfer, exchange, payment or
cancellation. The Company may not issue new Notes to replace, or reissue or
resell Notes which the Company has redeemed, paid, purchased on the open market
or otherwise, or otherwise acquired or have been delivered to the Trustee for
cancellation. The Trustee (subject to the record-retention requirements of the
Exchange Act) may, but shall not be required to destroy cancelled Notes.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus any interest payable on the defaulted interest
pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date, and such term, as used in this Section 2.12 with
respect to the payment of any defaulted interest, shall mean the fifteenth day
next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Noteholder and to the
Trustee a notice that states such special record date, the payment date and the
amount of defaulted interest to be paid.
SECTION 2.13. CUSIP or CINS Number.
The Company in issuing the Notes may use a "CUSIP" or "CINS" number, and
if so, such CUSIP or CINS number shall be included in notices of redemption or
exchange as a convenience to Holders; provided that any such
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notice may state that no representation is made as to the correctness or
accuracy of the CUSIP or CINS number printed in the notice or on the Notes, and
that reliance may be placed only on the other identification numbers printed on
the Notes. The Company will promptly notify the Trustee of any change in the
CUSIP or CINS number.
SECTION 2.14. Payments of Interest.
(a) The Holder of a Certificated Note at the close of business on the
regular record date with respect to any Interest Payment Date shall be entitled
to receive the interest and Additional Interest, if any, payable on such
Interest Payment Date notwithstanding any transfer or exchange of such
Certificated Note subsequent to the regular record date and prior to such
Interest Payment Date, except if and to the extent the Company shall default in
the payment of the interest or Additional Interest due on such Interest Payment
Date, in which case such defaulted interest and Additional Interest, if any,
shall be paid in accordance with Section 2.12; provided that, in the event of an
exchange of a Certificated Note for a beneficial interest in any Global Note
subsequent to a regular record date or any special record date and prior to or
on the related Interest Payment Date or other payment date under Section 2.12,
any payment of the interest and Additional Interest payable on such payment date
with respect to any such Certificated Note shall be made to the Person in whose
name such Certificated Note was registered on such record date. Payments of
interest on the Global Notes will be made to the Holder of the Global Note on
each Interest Payment Date; provided that, in the event of an exchange of all or
a portion of a Global Note for Certificated Notes subsequent to the regular
record date or any special record date and prior to or on the related Interest
Payment Date or other payment date under Section 2.12 any payment of interest or
Additional Interest payable on such Interest Payment Date or other payment date
with respect to the Certificated Notes shall be made to the Holder of the Global
Note.
(b) The Trustee shall pay interest and Additional Interest, if any, to
DTC, with respect to any Global Note held by DTC, on the applicable Interest
Payment Date in accordance with instructions received from DTC at least five
Business Days before the applicable Interest Payment Date.
SECTION 2.15. Ranking. The Notes shall rank pari passu in right of payment
with any other senior unsecured Indebtedness of the Company.
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ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Notes pursuant to paragraph (e) of the
Notes at the applicable redemption price set forth thereon, it shall notify the
Trustee in writing of the redemption date and the principal amount of Notes to
be redeemed.
The Company shall give the notice provided for in this Section 3.01 at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing) but not more than 60 days before the
redemption date, together with an Officers' Certificate stating that such
redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed pursuant to paragraph (e)
thereof, the Trustee shall select the Notes to be redeemed in accordance with
the rules of any national securities exchange on which the Notes may be listed
or, if the Notes are not so listed, pro rata or by lot or in such other manner
as the Trustee shall deem appropriate and fair. The Trustee shall make the
selection from the Notes then outstanding, subject to redemption and not
previously called for redemption. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of Notes
that have denominations larger than $1,000. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the CUSIP or CINS number(s);
(d) the name and address of the Paying Agent to which the Notes are to
be surrendered for redemption;
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(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after
the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying
Agent; and
(g) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption
date, upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of redemption
on behalf of the Company, in the Company's name and at the Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Notes called for redemption become
due and payable on the redemption date and at the redemption price. Upon
surrender to the Paying Agent, such Notes shall be paid at the redemption price,
plus accrued interest thereon to the redemption date, but interest installments
whose maturity is on or prior to such redemption date shall be payable to the
Holders of record at the close of business on the relevant record dates referred
to in the Notes. The Trustee shall not be required to (i) issue, authenticate,
register the transfer of or exchange any Note during a period beginning 15 days
before the date a notice of redemption is mailed and ending at the close of
business on the date the redemption notice is mailed, or (ii) register the
transfer or exchange of any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the redemption date, the Company shall
deposit with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date other than Notes
or portions thereof called for redemption on that date which have been delivered
by the Company to the Trustee for cancellation.
SECTION 3.06. Notes Redeemed in Part.
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Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for the Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the Notes in the
manner provided in the Notes. An installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent holds on that
date money designated for and sufficient to pay the installment in full and is
not prohibited from paying such money to the Holders of the Notes pursuant to
the terms of this Indenture.
The Company shall pay interest on overdue principal at the same rate per
annum borne by the Notes. The Company shall pay interest on overdue installments
of interest at the same rate per annum borne by the Notes, to the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
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SECTION 4.03. Limitation on Transactions with Affiliates and Related
Persons.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into directly or indirectly any transaction with any of
their respective Affiliates or Related Persons (other than the Company or a
Restricted Subsidiary of the Company), including, without limitation, the
purchase, sale, lease or exchange of property, the rendering of any service, or
the making of any guarantee, loan, advance or Investment, either directly or
indirectly, involving aggregate consideration in excess of $1,000,000 unless a
majority of the disinterested directors of the Board of Directors of the Company
determines, in its good faith judgment evidenced by a resolution of such Board
of Directors filed with the Trustee, that the terms of such transaction are at
least as favorable as the terms that could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction made on
an arms-length basis between unaffiliated parties; provided, however, that if
the aggregate consideration is in excess of $5,000,000 the Company shall also
obtain, prior to the consummation of the transaction, the favorable opinion as
to the fairness of the transaction to the Company or such Restricted Subsidiary,
from a financial point of view from an independent financial advisor. The
provisions of this covenant shall not apply to (i) transactions permitted by
Section 4.06, (ii) reasonable fees and compensation paid to, and indemnity
provided on behalf of , officers, directors and employees of the Company and its
Restricted Subsidiaries as determined in good faith by the Board of Directors of
the Company, (iii) loans to employees in the ordinary course of business which
are approved in good faith by the Board of Directors of the Company and (iv)
transactions in connection with a Permitted Receivables Financing.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness), except: (i) Indebtedness of the Company or any of its
Restricted Subsidiaries, if immediately after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the net proceeds thereof,
the Consolidated Fixed Charge Coverage Ratio of the Company for the four full
fiscal quarters for which quarterly or annual financial statements are available
next preceding the Incurrence of such Indebtedness, calculated on a pro forma
basis as if such Indebtedness had been Incurred, and such net proceeds received
and applied, on the first day of such four full fiscal quarters, would be
greater than 2.0 to 1.00; (ii) Indebtedness of the Company and its Restricted
Subsidiaries, Incurred under the Credit Agreement in an amount not to exceed
$50,000,000; (iii) Indebtedness owed by the Company to any direct or indirect
Wholly Owned
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Subsidiary of the Company; provided, however, upon either (I) the transfer or
other disposition by such direct or indirect Wholly Owned Subsidiary or the
Company of any Indebtedness so permitted under this clause (iii) to a Person
other than the Company or another direct or indirect Wholly Owned Subsidiary of
the Company or (II) the issuance (other than directors' qualifying shares),
sale, transfer or other disposition of shares of Capital Stock or other
ownership interests (including by consolidation or merger) of such direct or
indirect Wholly Owned Subsidiary to a Person other than the Company or another
such Wholly Owned Subsidiary of the Company, the provisions of this clause (iii)
shall no longer be applicable to such Indebtedness and such Indebtedness shall
be deemed to have been Incurred at the time of any such issuance, sale, transfer
or other disposition, as the case may be; (iv) Indebtedness of the Company or
any Restricted Subsidiary under any interest rate agreement to the extent
entered into to hedge any other Indebtedness permitted under this Indenture
(including the Notes), (v) Indebtedness Incurred to renew, extend, refinance or
refund (collectively for purposes of this clause (v) to "refund") any
Indebtedness outstanding on the Issue Date, any Indebtedness Incurred under the
prior clause (i) above or the Notes and the Subsidiary Guarantee; provided,
however, that (I) such Indebtedness does not exceed the principal amount (or
accrual amount, if less) of Indebtedness so refunded (plus unused commitments
under revolving credit facilities) plus the amount of any premium required to be
paid in connection with such refunding pursuant to the terms of the Indebtedness
refunded or the amount of any premium reasonably determined by the issuer of
such Indebtedness as necessary to accomplish such refunding by means of a tender
offer, exchange offer, or privately negotiated repurchase, plus the expenses of
such issuer reasonably incurred in connection therewith and (II) (A) in the case
of any refunding of Indebtedness that is pari passu with the Notes, such
refunding Indebtedness is made pari passu with or subordinate in right of
payment to the Notes, and, in the case of any refunding of Indebtedness that is
subordinate in right of payment to the Notes, such refunding Indebtedness is
subordinate in right of payment to the Notes on terms no less favorable to the
Holders of the Notes than those contained in the Indebtedness being refunded,
(B) in either case, the refunding Indebtedness by its terms, or by the terms of
any agreement or instrument pursuant to which such Indebtedness is issued, does
not have an Average Life that is less than the remaining Average Life of the
Indebtedness being refunded and does not permit redemption or other retirement
(including pursuant to any required offer to purchase to be made by the Company
or a Restricted Subsidiary of the Company) of such Indebtedness at the option of
the holder thereof prior to the final stated maturity of the Indebtedness being
refunded, other than a redemption or other retirement at the option of the
holder of such Indebtedness (including pursuant to a required Offer to Purchase
made by the Company or a Restricted Subsidiary of the Company) which is
conditioned
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upon a change of control of the Company pursuant to provisions substantially
similar to those contained in Section 4.14 and (C) any Indebtedness Incurred to
refund any Indebtedness is Incurred by the obligor on the Indebtedness being
refunded or by the Company, (vi) Indebtedness of the Company or its Subsidiaries
not otherwise permitted to be Incurred pursuant to clauses (i) through (v) above
which, together with any other outstanding Indebtedness Incurred pursuant to
this clause (vi), has an aggregate principal amount not in excess of $5,000,000
at any time outstanding, which Indebtedness may be incurred under the Credit
Agreement or otherwise; (vii) Indebtedness of the Company under the Notes
incurred in accordance with this Indenture; (viii) Indebtedness outstanding on
the Issue Date; (ix) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims or self-insurance, and
obligations in respect of performance and surety bonds and completion guarantees
provided by the Company or any Restricted Subsidiary of the Company in the
ordinary course of business; (x) guarantees by the Company or its Restricted
Subsidiaries of Indebtedness otherwise permitted to be Incurred hereunder; (xi)
Indebtedness pursuant to a Permitted Receivables Financing, provided, however,
that Indebtedness Incurred under such Permitted Receivables Financing and
Indebtedness Incurred pursuant to clause (ii) above shall not exceed $50,000,000
in the aggregate at any time outstanding; and (xii) Indebtedness (including
Capitalized Lease Obligations) Incurred by the Company or any of its Restricted
Subsidiaries to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate principal amount
outstanding not to exceed 5.0% of Tangible Assets at any time (which amount may,
but need not, be Incurred in whole or in part under the Credit Agreement)
provided that the principal amount of such Indebtedness does not exceed the fair
market value of such property or equipment at the time of Incurrence thereof.
SECTION 4.05. Limitation on Certain Asset Dispositions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make one or more Asset Dispositions
unless: (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the fair
market value of the assets sold or disposed of as determined by the Board of
Directors of the Company in good faith and evidenced by a resolution of such
Board of Directors filed with the Trustee; (ii) except in the case of a
Permitted Asset Swap, not less than 75% of the consideration for the disposition
consists of cash or
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readily marketable cash equivalents or the assumption of Indebtedness (other
than non-recourse Indebtedness or any Subordinated Indebtedness) of the Company
or such Restricted Subsidiary or other obligations relating to such assets (and
release of the Company or such Restricted Subsidiary from all liability on the
Indebtedness or other obligations assumed); and (iii) all Net Available
Proceeds, less any amounts invested within 360 days of such Asset Disposition in
assets related to the business of the Company (including the Capital Stock of
another Person (other than any Person that is a Restricted Subsidiary of the
Company immediately prior to such investment); provided, however, that
immediately after giving effect to any such investment (and not prior thereto)
such Person shall be a Restricted Subsidiary of the Company), are applied, on or
prior to the 360th day after such Asset Disposition, unless and to the extent
that the Company shall determine to make an Offer to Purchase, to the permanent
reduction and prepayment of any unsubordinated Indebtedness of the Company then
outstanding (including a permanent reduction of commitments in respect thereof).
Any Net Available Proceeds from any Asset Disposition which is subject to the
immediately preceding sentence that are not applied as provided in the
immediately preceding sentence shall be used promptly after the expiration of
the 360th day after such Asset Disposition, or promptly after the Company shall
have earlier determined to not apply any Net Available Proceeds therefrom as
provided in clause (iii) of the immediately preceding sentence, to make an Offer
to Purchase outstanding Notes at a purchase price in cash equal to 100% of their
principal amount plus accrued interest to the Purchase Date. Notwithstanding the
foregoing, the Company may defer making any Offer to Purchase outstanding Notes
until there are aggregate unutilized Net Available Proceeds from Asset
Dispositions otherwise subject to the two immediately preceding sentences equal
to or in excess of $5,000,000 (at which time, the entire unutilized Net
Available Proceeds from Asset Dispositions otherwise subject to the two
immediately preceding sentences, and not just the amount in excess of
$5,000,000, shall be applied as required pursuant to this paragraph). Any
remaining Net Available Proceeds following the completion of the required Offer
to Purchase may be used by the Company for any other purposes (subject to the
other provisions of this Indenture) and the amount of Net Available Proceeds
then required to be otherwise applied in accordance with this Section 4.05 shall
be reset to zero, subject to any subsequent Asset Disposition. These provisions
will not apply to a transaction consummated in compliance with the provisions of
Section 5.01.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
SECTION 4.06. Limitation on Restricted Payments.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend, or
make any distribution of any kind or character (whether in cash, property or
securities), in respect of any class of the Capital Stock of the Company or any
of its Restricted Subsidiaries or to the holders thereof, excluding any (x)
dividends or distributions payable solely in shares of Capital Stock of the
Company (other than Disqualified Stock) or in options, warrants or other rights
to acquire Capital Stock of the Company (other than Disqualified Stock), or (y)
in the case of any Restricted Subsidiary of the Company, dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company,
(ii) purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or any of its Restricted Subsidiaries, any options,
warrants or rights to purchase or acquire shares of Capital Stock of the Company
or any of its Restricted Subsidiaries or any securities convertible or
exchangeable into shares of Capital Stock of the Company or any of its
Restricted Subsidiaries, excluding any such shares of Capital Stock, options,
warrants, rights or securities which are owned by the Company or a Restricted
Subsidiary of the Company, (iii) make any Investment in (other than a Permitted
Investment), or payment on a guarantee of any obligation of, any Person, other
than the Company or a direct or indirect Wholly Owned Subsidiary of the Company,
or (iv) redeem, defease, repurchase, retire or otherwise acquire or retire for
value, prior to any scheduled maturity, repayment or sinking fund payment,
Subordinated Indebtedness (each of the transactions described in clauses (i)
through (iv) (other than any exception to any such clause) being a "Restricted
Payment") if at the time thereof: (1) a Default or an Event of Default shall
have occurred and be continuing, or (2) upon giving effect to such Restricted
Payment, the Company could not Incur at least $1.00 of additional Indebtedness
pursuant to clause (i) of Section 4.04, or (3) upon giving effect to such
Restricted Payment, the aggregate of all Restricted Payments made on or after
the Issue Date exceeds the sum of: (a) 50% of cumulative Consolidated Net Income
of the Company (or, in the case cumulative Consolidated Net Income of the
Company shall be negative, less 100% of such deficit) since the end of the
fiscal quarter in which the Issue Date occurs through the last day of the fiscal
quarter for which financial statements are available; plus (b) 100% of the
aggregate net proceeds received after the Issue Date, including the fair market
value of property other than cash (determined in good faith by the Board of
Directors of the Company as evidenced by a resolution of such Board of Directors
filed with the Trustee), from the issuance of, or equity contribution with
respect to, Capital Stock (other than Disqualified Stock) of the Company and
warrants, rights or options on Capital Stock (other than Disqualified Stock) of
the Company (other than in respect of any such issuance to a Restricted
Subsidiary of the Company) and the principal amount of Indebtedness of the
Company or any of its Restricted Subsidiaries that has been converted into or
exchanged for Capital
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Stock of the Company which Indebtedness was Incurred after the Issue Date; plus
(c) 100% of the aggregate after-tax net proceeds, including the fair market
value of property other than cash (determined in good faith by the Board of
Directors of the Company as evidenced by a resolution of such Board of Directors
filed with the Trustee) of the sale or other disposition of any Investment
constituting a Restricted Payment made after the Issue Date; provided that any
gain on the sale or disposition included in such after tax net proceeds shall
not be included in determining Consolidated Net Income for purposes of clause
(a) above.
The foregoing provisions shall not be violated by (i) any dividend on any
class of Capital Stock of the Company or any of its Restricted Subsidiaries paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or such Restricted Subsidiary, as the case may be,
could have paid such dividend in accordance with the provisions of this
Indenture, (ii) the renewal, extension, refunding or refinancing of any
Indebtedness otherwise permitted pursuant to clause (v) of Section 4.04, (iii)
the exchange or conversion of any Indebtedness of the Company or any of its
Restricted Subsidiaries for or into Capital Stock of the Company (other than
Disqualified Stock), (iv) the redemption, repurchase, retirement or other
acquisition of any Capital Stock of the Company in exchange for or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of Capital Stock of the Company (other
than Disqualified Stock); provided, however, that the proceeds of such sale of
Capital Stock shall not be (and have not been) included in subclause (b) of
clause (3) of the preceding paragraph, (v) the payment of dividends to Holdings
in an amount equal to the amount required for Holdings to pay Federal, state and
local income taxes to the extent such income taxes are attributable to the
income of the Company and its Restricted Subsidiaries, (vi) payments of up to
$500,000 annually for management and financial advisory fees to TC Management
L.L.C. pursuant to the terms of a management and consulting agreement entered
into between the Company and TC Management L.L.C., (vii) other Restricted
Payments of up to $5,000,000 in the aggregate, (viii) payments in lieu of
fractional shares in an amount not in excess of $100,000 in the aggregate, (ix)
distributions to Holdings to permit Holdings to repurchase its common stock at
no more than fair market value (determined in good faith by the Board of
Directors of the Company as evidenced by a resolution of such Board of Directors
filed with the Trustee) from present or former Management Investors in an amount
not in excess of $2,000,000 in the aggregate and (x) a payment of merger fees to
TC Management L.L.C. in connection with the consummation of the Transactions
which payment is made on the Issue Date. Each Restricted Payment described in
clauses (i) (to the extent not already taken into account for purposes of
computing the aggregate amount of all Restricted Payments pursuant to clause 3
above), (v), (vi), (vii), (viii) and (ix) of the previous
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sentence shall be taken into account for purposes of computing the aggregate
amount of all Restricted Payments pursuant to clause (3) of the preceding
paragraph.
For purposes of this Section 4.06, (i) an "Investment" shall be deemed to
have been made at the time any Restricted Subsidiary is designated as an
Unrestricted Subsidiary in an amount (proportionate to the Company's equity
interest in such Subsidiary) equal to the net worth of such Restricted
Subsidiary at the time that such Restricted Subsidiary is designated as an
Unrestricted Subsidiary; (ii) at any date the aggregate of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by an amount (proportionate to the Company's equity interest in such Subsidiary)
equal to the net worth of an Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary, not to exceed, in
the case of any such redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the amount of Investments previously made by the Company and the
Restricted Subsidiaries in such Unrestricted Subsidiary (in each case (i) and
(ii) "net worth" to be calculated based upon the fair market value of the assets
of such Subsidiary as of any such date of designation which shall, in no event,
be less than zero); and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
SECTION 4.07. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Subsidiaries in accordance with the respective organizational documents of each
such Subsidiary and the rights (charter and statutory) and material franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right or franchise, or the corporate
existence of any Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not, and will not be, adverse in any material respect to the
Holders; provided, further, however, that a determination of the Board of
Directors of the Company shall not be required in the event of a merger of one
or more Wholly-Owned Subsidiaries of the Company with or into another
Wholly-Owned Subsidiary of the Company or another Person, if the surviving
Person is a Wholly-Owned Subsidiary of the Company organized under the laws of
the United States or a State thereof or of the District of Columbia.
SECTION 4.08. Payment of Taxes and Other Claims.
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The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary of the
Company or upon the income, profits or property of the Company or any Subsidiary
of the Company and (2) all lawful claims for labor, materials and supplies
which, in each case, if unpaid, might by law become a material liability, or
Lien upon the property, of the Company or any Subsidiary of the Company;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the Company
shall promptly deliver an Officer's Certificate to the Trustee specifying the
Default or Event of Default.
SECTION 4.10. Maintenance of Properties.
The Company shall cause all material properties owned by or leased to
it or any of its Subsidiaries and used or useful in the conduct of its business
or the business of any of its Subsidiaries to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 4.10 shall prevent the Company or any of its
Subsidiaries from discontinuing the use, operation or maintenance of any such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors or of the board of directors of the
Subsidiary concerned, or of an officer (or other agent employed by the Company
or of any of its Subsidiaries) of the Company or such Subsidiary having
managerial responsibility for any such property, desirable in the conduct of the
business of the Company or
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any of its Subsidiaries, and if such discontinuance or disposal is not adverse
in any material respect to the Holders.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 90 days after the close
of each fiscal year an Officer's Certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Company is taking or proposes to take with respect thereto.
SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act or any successor provision thereto, following the effectiveness of
the Exchange Offer the Company shall file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so required, such documents
to be filed with the Commission on or prior to the respective dates (the
"REQUIRED FILING DATES") by which the Company would have been required so to
file such documents if the Company were so required. Regardless of whether the
Company files such reports or other documents with the Commission, the Company
shall (a) within 15 days of each Required Filing Date (i) transmit by mail to
all Holders of Notes, as their names and addresses appear in the Note Register,
without cost to such Holders, and (ii) file with the Trustee, copies of such
annual reports, quarterly reports and other documents, and (b) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective holder of Notes.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law, which would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so)
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the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it shall not hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law had been enacted.
SECTION 4.14. Change of Control.
Within 30 days following the date of the consummation of a transaction
resulting in a Change of Control, the Company will commence an Offer to Purchase
all outstanding Notes at a purchase price in cash equal to 101% of their
principal amount plus accrued interest to the Purchase Date. Such Offer to
Purchase will be consummated not earlier than 30 days and not later than 60 days
after the commencement thereof. Each Holder shall be entitled to tender all or
any portion of the Notes owned by such Holder pursuant to the Offer to Purchase,
subject to the requirement that any portion of a Note tendered must be an
integral multiple of $1,000 principal amount. A "CHANGE OF CONTROL" will be
deemed to have occurred in the event that (whether or not otherwise permitted by
this Indenture), after the Issue Date (a) any Person or any Persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "GROUP"), together with any
Affiliates or Related Persons thereof, other than Permitted Holders, shall
"beneficially own" (as defined in Rule 13d-3 under the Exchange Act, or any
successor provision thereto) at least 40% of the voting power of the outstanding
Voting Stock of the Company; (b) any sale, lease or other transfer (in one
transaction or a series of related transactions) is made by the Company or any
of its Restricted Subsidiaries of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any Person; (c) the
Company consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which immediately after the consummation thereof
Persons owning a majority of the Voting Stock of the Company immediately prior
to such consummation shall cease to own a majority of the Voting Stock of the
Company or the surviving entity if other than the Company, (d) Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company; or (e) the stockholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act.
SECTION 4.15. Limitations Concerning Distributions and Transfers by
Restricted Subsidiaries.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (i) pay, directly or indirectly, dividends or make
any other distributions in respect of its Capital Stock or pay any Indebtedness
or other obligations owed to the Company or any Restricted Subsidiary of the
Company, (ii) make loans or advances to the Company or any Restricted Subsidiary
of the Company or (iii) transfer any of its property or assets to the Company or
any Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (a) any agreement in effect on the
Issue Date as any such agreement is in effect on such date, (b) the Credit
Agreement, (c) any agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary prior to the date on which such Restricted Subsidiary was
acquired by the Company and outstanding on such date and not Incurred in
anticipation or contemplation of becoming a Restricted Subsidiary and provided
such encumbrance or restriction shall not apply to any assets of the Company or
its Restricted Subsidiaries other than such Restricted Subsidiary, (d) customary
provisions contained in an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of a
Restricted Subsidiary; provided , however, that such encumbrance or restriction
is applicable only to such Restricted Subsidiary or assets, (e) an agreement
effecting a renewal, exchange, refunding, amendment or extension of Indebtedness
Incurred pursuant to an agreement referred to in clause (a) above; provided,
however, that the provisions contained in such renewal, exchange, refunding,
amendment or extension agreement relating to such encumbrance or restriction are
no more restrictive in any material respect than the provisions contained in the
agreement that is the subject thereof in the reasonable judgment of the Board of
Directors of the Company as evidenced by a resolution of such Board of Directors
filed with the Trustee, (f) this Indenture, (g) applicable law, (h) customary
provisions restricting subletting or assignment of any lease governing any
leasehold interest of any Restricted Subsidiary of the Company, (i) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the type referred to in clause (iii) of this covenant,
(j) restrictions of the type referred to in clause (iii) of this covenant
contained in security agreements securing Indebtedness of a Restricted
Subsidiary of the Company to the extent that such Liens were otherwise incurred
in accordance with Section 4.17 and restrict the transfer of property subject to
such agreements or (k) any agreement relating to a Permitted Receivables
Financing.
SECTION 4.16. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, (a) transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of any Restricted Subsidiary of the Company (other than to the
Company or a Wholly Owned Subsidiary of the Company), except that the Company
and any such Restricted Subsidiary may, in any single transaction, sell all, but
not less than all, of the issued and outstanding Capital Stock of any such
Restricted Subsidiary to any Person, subject to complying with Section 4.05 or
(b) issue shares of Capital Stock of a Restricted Subsidiary of the Company
(other than directors' qualifying shares), or securities convertible into, or
warrants, rights or options to subscribe for or purchase shares of, Capital
Stock of a Restricted Subsidiary of the Company to any Person other than to the
Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.17. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, incur any Lien on or with respect to any property or assets of
the Company or such Restricted Subsidiary owned on the Issue Date or thereafter
acquired or on the income or profits thereof, which Lien secures Indebtedness,
without making, or causing any such Restricted Subsidiary to make, effective
provisions for securing the Notes and all other amounts due under this Indenture
(and, if the Company shall so determine, any other Indebtedness of the Company
or such Restricted Subsidiary, including Subordinated Indebtedness; provided,
however, that Liens securing the Notes and any Indebtedness pari passu with the
Notes are senior to such Liens securing such Subordinated Indebtedness) equally
and ratably with such Indebtedness or, in the event such Indebtedness is
subordinate in right of payment to the Notes or the Subsidiary Guarantee, prior
to such Indebtedness, as to such property or assets for so long as such
Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness existing on the Issue Date; (ii) Liens securing
Indebtedness outstanding under the Credit Agreement and any guarantees thereof
to the extent that the Indebtedness secured thereby is permitted to be incurred
under Section 4.04; (iii) Liens securing only the Notes and the Subsidiary
Guarantees; (iv) Liens in favor of the Company or a Subsidiary Guarantor; (v)
Liens to secure Indebtedness Incurred for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement of the
property (or any other capital expenditure financing) subject to such Liens;
provided, however, that (a) the aggregate principal amount of any Indebtedness
secured by such a Lien does not exceed 100% of such purchase price or cost, (b)
such Lien does not extend to or cover any other property other than such item of
property and any improvements on such item, (c) the Indebtedness secured by such
Lien is
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Incurred by the Company within 180 days of the acquisition, construction or
improvement of such property and (d) the Incurrence of such Indebtedness is
permitted by Section 4.04; (vi) Liens on property existing immediately prior to
the time of acquisition thereof (and not created in anticipation or
contemplation of the financing of such acquisition); (vii) Liens on property of
a Person existing at the time such Person is acquired or merged with or into or
consolidated with the Company or any such Restricted Subsidiary (and not created
in anticipation or contemplation thereof); (viii) Liens to secure Indebtedness
Incurred to extend, renew, refinance or refund (or successive extensions,
renewals, refinancings or refundings), in whole or in part, any Indebtedness
secured by Liens referred to in the foregoing clauses (i)-(vii) so long as such
Liens do not extend to any other property and the principal amount of
Indebtedness so secured is not increased except for the amount of any premium
required to be paid in connection with such extension, renewal, refinancing or
refunding pursuant to the terms of the Indebtedness extended, renewed,
refinanced or refunded by means of a tender offer, exchange offer or private
negotiation, plus the expenses of the issuer of such Indebtedness reasonably
incurred in connection with such extension, renewal, refinancing or refunding;
(ix) Liens in favor of the Trustee as provided for in this Indenture on money or
property held or collected by the Trustee in its capacity as Trustee; (x) Liens
incurred in the ordinary course of business securing assets not having a fair
market value in excess of $250,000 and (xi) Liens incurred in connection with a
Permitted Receivables Financing.
SECTION 4.18. Future Subsidiary Guarantors.
The Company shall not create or acquire, nor permit any of its
Restricted Subsidiaries to create or acquire, any Restricted Subsidiary after
the Issue Date (other than a Securitization Subsidiary) unless, at the time such
Restricted Subsidiary has either assets or stockholder's equity in excess of
$25,000, such Restricted Subsidiary executes and delivers to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes and this Indenture on the terms set forth
in Article Ten.
ARTICLE 5
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers, Consolidations and Certain Sales
of Assets.
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The Company shall not consolidate or merge with or into any Person, or
sell, assign, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to consolidate or merge with or into any
Person or sell, assign, lease, convey or otherwise dispose of) all or
substantially all of the Company's assets (determined on a consolidated basis
for the Company and its Restricted Subsidiaries), whether as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution, to any Person
unless, in each such case: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company or such Restricted
Subsidiary, as the case may be), or to which such sale, assignment, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Surviving Entity assumes by
supplemental indenture all of the obligations of the Company on the Notes and
under this Indenture; (iii) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis, the Company or
the Surviving Entity, as the case may be, could Incur at least $1.00 of
Indebtedness pursuant to clause (i) of Section 4.04; (iv) immediately before and
after giving effect to such transaction and treating any Indebtedness which
becomes an obligation of the Company or any of its such Restricted Subsidiaries
as a result of such transaction as having been Incurred by the Company or such
Restricted Subsidiary, as the case may be, at the time of the transaction, no
Default or Event of Default shall have occurred and be continuing; and (v) if,
as a result of any such transaction, property or assets of the Company or a
Restricted Subsidiary would become subject to a Lien not excepted from Section
4.17, the Company, Restricted Subsidiary or the Surviving Entity, as the case
may be, shall have secured the Notes as required by said Section 4.17. The
provisions of this paragraph shall not apply to any merger of a Restricted
Subsidiary of the Company with or into the Company or a Wholly-Owned Subsidiary
of the Company or any transaction pursuant to which a Subsidiary Guarantor is to
be released in accordance with the terms of the Subsidiary Guarantee and this
Indenture in connection with any transaction complying with the provisions of
Section 4.05.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation of the Company or any Subsidiary of the Company
with, or merger of the Company or any such Subsidiary into, any other Person or
any sale, assignment, lease, conveyance or other disposition of all or
substantially all of the Company's consolidated assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution) in accordance with
Section 5.01, upon the execution of a supplemental indenture by the Surviving
Person in form
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and substance satisfactory to the Trustee (as evidenced by the Trustee's
execution thereof), the Surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of and shall assume all obligations
of, the Company or such Subsidiary, as the case may be, under this Indenture and
the Notes or the Subsidiary Guarantee, as the case may be, with the same effect
as if such Surviving Person had been named as the Company or such Subsidiary, as
the case may be, herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Notes or the Subsidiary Guarantee, as the case may be.
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company fails to pay principal of (or premium, if any, on) any
Note when due;
(b) the Company fails to pay any interest on any Note when due and
payable, and the default continues for 30 days;
(c) the Company defaults in the payment of principal of and interest on
Notes required to be purchased pursuant to an Offer to Purchase, as described
under Sections 4.05 or 4.14 hereof, when due and payable;
(d) the Company fails to perform or comply with any of the provisions
of Section 5.01;
(e) the Company fails to perform any other covenant or agreement under
this Indenture or the Notes, and the default continues for 30 days after written
notice to the Company by the Trustee or Holders of at least 25% in aggregate
principal amount of outstanding Notes;
(f) the Company defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company of any of its Subsidiaries
having an outstanding principal amount of $5,000,000 or more individually or in
the aggregate that has resulted in the acceleration of the maturity of such
Indebtedness or the Company or any of its Subsidiaries fails to pay principal
when due at the stated maturity of any such Indebtedness;
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(g) there shall have been rendered any final judgment or judgments (not
covered by insurance and not subject to appeal) against the Company or any of
its Subsidiaries in an amount of $5,000,000 or more which remains undischarged
or unstayed for a period of 60 days after the date on which the right to appeal
has expired;
(h) the Company or any of its Subsidiaries pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any
Subsidiary,
and in each case the order or decree remains unstayed and in effect for
60 days; provided, however, that if the entry of such order or decree
is appealed and dismissed on appeal then the Event of Default hereunder
by reason of the entry of such order or decree shall be deemed to have
been cured; or
(j) the Subsidiary Guarantee ceases to be in full force and effect or
is declared null and void and unenforceable or found to be invalid or any
Subsidiary Guarantor denies its liability under the Subsidiary Guarantee (other
than by reason
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of a release of such Subsidiary Guarantor from its Subsidiary Guarantee in
accordance with the terms of this Indenture and the Subsidiary Guarantee).
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "CUSTODIAN"
means any receiver, trustee, assignee, liquidator, sequestration or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Notes (other than an Event
of Default with respect to the Company described in clause (h) or (i) of Section
6.01) shall occur and be continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Notes may accelerate
the maturity of all Notes; provided, however, that after such acceleration, but
before a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of outstanding Notes may, by written notice to the
Company and the Trustee, rescind and annul such acceleration if all Events of
Default, other than the nonpayment of accelerated principal, have been cured or
waived as provided in this Indenture. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. If an Event of
Default specified in clause (h) or (i) of Section 6.01 with respect to the
Company occurs, the outstanding Notes will ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, prior to the declaration of
acceleration of the Notes, the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes by written notice to the Trustee and
the Company may waive an existing Default or Event of Default and its
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consequences, except a Default in the payment of principal of or interest on any
Note as specified in clauses (a) and (b) of Section 6.01, a Default arising from
failure to purchase any Note rendered pursuant to an Offer to Purchase or a
Default in respect of any term or provision of this Indenture that may not be
amended or modified without the consent of each Holder affected as provided in
Section 9.02. The Company shall deliver to the Trustee an Officers' Certificate
stating that the requisite percentage of Holders have consented to such waiver
and attaching copies of such consents. In case of any such waiver, the Company,
the Trustee and the Holders shall be restored to their former positions and
rights hereunder and under the Notes, respectively. This paragraph of this
Section 6.04 shall be in lieu of Section 316 (a) (1) (B) of the TIA and such
Section 316 (a) (1) (B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Notes, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of another Noteholder, or that may involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction. This Section 6.05 shall be in
lieu of Section 316 (a) (1) (A) of the TIA, and such Section 316 (a) (1) (A) of
the TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Noteholder may not pursue any remedy with respect to this Indenture
or the Notes unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
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(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes make a written request to the Trustee to pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the outstanding Notes (excluding Affiliates of the Company) do not
give the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over such other
Noteholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the Note, on or after
the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified in
Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Notes for the whole amount of principal and accrued
interest remaining unpaid, together with interest overdue on principal and to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
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and advances of the Trustee, its agents and counsel) and the Noteholders allowed
in any judicial proceedings relative to the Company (or any other obligor upon
the Notes), its creditors or its property shall be entitled and empowered to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Noteholder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Noteholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustees to vote
in respect of the claim of any Noteholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Noteholders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 shall not apply to a suit by the Trustee, a suit by a Holder
or group of Holders of more than 10% in aggregate principal amount of the
outstanding Notes, or to any suit instituted by any Holder
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for the enforcement or the payment of the principal or interest on any Notes on
or after the respective due dates expressed in the Note.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of a Default:
(i) The Trustee shall not be liable except for the performance
of such duties as are specifically set forth herein; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; however, the
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of
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any of its duties hereunder or to take or omit to take any action under this
Indenture or take any action at the request or direction of Holders if it shall
have reasonable grounds for believing that repayment of such funds is not
assured to it or it does not receive an indemnity satisfactory to it in its sole
discretion against such risk, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree with the Company. Money or assets
held in trust by the Trustee need not be segregated from other funds or assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate and an
Opinion of Counsel, which shall conform to the provisions of Section 11.05. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent or
attorney (other than an agent who is an employee of the Trustee) appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Noteholders pursuant to this Indenture, unless such Noteholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
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SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Company in this Indenture or any
document issued in connection with the sale of Notes or any statement in the
Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Defaults, the Trustee shall mail to
each Noteholder notice of the Default or Event of Default within 30 days after
the occurrence thereof; provided, however, that, except in the case of an Event
of Default or a Default in payment with respect to the Notes or a failure by the
Company to comply with Section 5.01, the Trustee shall be protected in
withholding such notice if and so long as the Trustee in good faith determines
that the withholding of such notice is in the interest of the holders of the
Note.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Noteholder a report dated as of such May 15 that complies
with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b),
(c) and (d).
A copy of each such report at the time of its mailing to Noteholders
shall be filed with the Commission and each stock exchange, if any, on which the
Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by any
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law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances (including fees, disbursements and expenses of its agents and
counsel) incurred or made by it in addition to the compensation for its services
except any such disbursements, expenses and advances as may be attributable to
the Trustee's negligence or bad faith. Such expense shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee and its agents for, and hold
them harmless against any and all loss, damage, claims, liability or expense,
including taxes (other than franchise taxes imposed on the Trustee and taxes
based upon, measured by or determined by the income of the Trustee), arising out
of or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of enforcing this Indenture against
the Company (including Section 7.07) and of defending itself against any claim
(whether asserted by any Noteholder or the Company) or liability in connection
with the exercise or performance of any of their powers or duties hereunder,
except to the extent that such loss, damage, claim, liability or expense is due
to their own negligence or bad faith. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense; provided, however, that the Company's
reimbursement obligation with respect to counsel employed by the Trustee will be
limited to the reasonable fees and expenses of such counsel. The Company need
not pay for any settlement made without its written consent, which consent shall
not be unreasonably withheld. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee as a result of
the violation of this Indenture by the Trustee.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes against all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration
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under any Bankruptcy Law. The Company's obligation under this Section 7.07 and
any claim arising hereunder shall survive the resignation or removal of any
Trustee, the discharge of the Company's obligations pursuant to Article Eight
and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing
and may appoint a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Notes may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another corporation
or banking corporation, the resulting, surviving or transferee corporation or
banking corporation without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA Sections 310(a)(1) and 310(a)(5). The Trustee (or
in the case of a corporation included in a bank holding company, the related
bank holding company) shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. If the Trustee has or shall acquire any "conflicting interest" within
the meaning of TIA Section 310(b), the Trustee and the Company shall comply with
the provisions of TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
(a) Discharge. The Company may terminate its substantive obligations
and the substantive obligations of the Subsidiary Guarantors in respect of the
Notes by delivering all outstanding Notes to the Trustee for cancellation and
paying all sums payable by the Company on account of principal of, premium, if
any, and interest on all Notes or otherwise.
(b) Covenant Defeasance. The Company may, provided that no Default or
Event of Default has occurred and is continuing on the date of the deposit
referred to below or during the period ending on the 95th calendar day after the
date of such deposit, or would arise therefrom, terminate, on the 95th calendar
day following the deposit referred to below, its obligations and the obligations
of the Subsidiary Guarantors contained in Article 5, Sections 4.03 to 4.06,
Sections 4.08 to Section 4.18 in respect of the Notes by (i) depositing with the
Trustee, under the terms of an irrevocable trust agreement, money or direct
noncallable obligations of the United States of America for the payment of which
its full faith and credit is pledged ("UNITED STATES GOVERNMENT OBLIGATIONS")
sufficient (without reinvestment) to pay all remaining indebtedness on the
Notes, (ii) delivering to the Trustee either an Opinion of Counsel or a ruling
directed to the Trustee from the Internal Revenue Service to the effect that the
holders of the Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and termination of obligations, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that CPC's
exercise of its option under this paragraph will not result in the Company, the
Trustee or the trust created by the Company's deposit of funds pursuant to this
provision becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940, as amended, and (iv) delivering to the Trustee
an Officers' Certificate and an Opinion of Counsel each stating that there has
been compliance with all conditions precedent provided for herein.
(c) Legal Defeasance. The Company may, provided that no Default or
Event of Default has occurred, and is continuing on the date of the deposit
referred to below or during the period ending on the 95th calendar day after the
date of such deposit or would arise therefrom, terminate, on the 95th calendar
day following the deposit referred to below, all of its substantive obligations
and all of the substantive obligations of the Subsidiary Guarantors in respect
of the Notes (including the Company's obligation to pay the principal of (and
premium, if any, on) and interest on the Notes and such Subsidiary Guarantors'
guarantee thereof)
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by (i) depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or United States Government Obligations sufficient (without
reinvestment) to pay all remaining indebtedness on the Notes, (ii) delivering to
the Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
termination of obligations or an Opinion of Counsel based upon such a ruling
addressed to the Trustee or a change in the applicable Federal tax law since the
date of this Indenture, to such effect, (iii) delivering to the Trustee an
Opinion of Counsel to the effect that the Company's exercise of its option under
this paragraph will not result in the Company, the Trustee or the trust created
by the Company's deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act of 1940,
as amended, and (iv) delivering to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that there has been compliance with all
conditions precedent provided for herein.
(d) Notwithstanding the foregoing paragraphs 8.01(b) and (c) above, the
Company's obligations contained in Sections 2.03, 2.05, 2.06, 2.07, 4.02, 7.07,
7.08, 8.03 and 8.04 shall survive until the securities are no longer
outstanding. Thereafter the Company's obligations in Section 7.07, 8.03 and 8.04
shall survive. After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon a Company Request
shall acknowledge in writing the discharge of the Company's and the Subsidiary
Guarantors' obligations under the Notes, the Subsidiary Guarantee and this
Indenture other than those surviving obligations specified in this paragraph
(d).
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 8.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Notes.
SECTION 8.03. Repayment to Company.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Company upon receipt by the Trustee of the Company's written request
accompanied by an Officers' Certificate any excess money held by it at any time.
The Trustee shall pay to the Company upon such request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
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may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Noteholders entitled to
money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.04. Reinstatement.
If the Trustee is unable to apply any money or United States Government
Obligations in accordance with Section 8.01 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
and the Subsidiary Guarantors' obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 until such time as the Trustee is permitted to apply all such money
or United States Government Obligations in accordance with Section 8.01;
provided, however, that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or United States Government Obligations held
by the Trustee.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVER
SECTION 9.01. Without Consent of Holders.
The Company and the Subsidiary Guarantors, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend or
supplement this Indenture or the Notes without notice to or consent of any
Noteholder:
(i) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not adversely affect
the rights of any Holder;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Notes and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
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(iii) to provide for uncertificated Notes in addition to or in
place of Certificated Notes;
(iv) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the TIA;
(v) to make any change that would provide any additional
benefit or rights to the Holders;
(vi) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(vii) to evidence the succession of another Person to any
Subsidiary Guarantor and the assumption by any such successor of the
covenants of such Subsidiary Guarantor herein and in the Subsidiary
Guarantee;
(viii) to add to the covenants of the Company or the
Subsidiary Guarantors for the benefit of the Holders, or to surrender
any right or power herein conferred upon the Company or any Subsidiary
Guarantor;
(ix) to secure the Notes pursuant to the requirements of
Section 4.17 or otherwise; or
(x) to reflect the release of a Subsidiary Guarantor from its
obligations with respect to its Subsidiary Guarantee in accordance with
the provisions of Section 10.03 and to add a Subsidiary Guarantor
pursuant to the requirements of Section 10.06;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel and an Officers' Certificate each stating that such amendment or
supplement complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture or the Notes with the written consent of the Holders
of at least a majority in principal amount of the outstanding Notes. However,
without the consent of each Holder affected, an amendment, supplement or waiver
may not:
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(a) change the Stated Maturity of the principal of or any installment
of interest on any Note or alter the optional redemption or repurchase
provisions of any Note or this Indenture in a manner adverse to the holders of
the Notes;
(b) reduce the principal amount (or the premium) of any Note;
(c) reduce the rate of or extend the time for payment of interest on
any Note;
(d) change the place or currency of payment of the principal (or
premium) of or interest on any Note;
(e) modify any provisions of this Indenture relating to the waiver of
past defaults or the right of the Holders to institute suit for the enforcement
of any payment on or with respect to any Note or the Subsidiary Guarantee or the
modification and amendment of this Indenture and the Notes (other than to add
sections of this Indenture or the Notes which may not be amended, supplemented
or waived without the consent of each Holder affected);
(f) reduce the percentage of the principal amount of outstanding Notes
necessary for amendment to or waiver of compliance with any provision of this
Indenture or the Notes or for waiver of any Default;
(g) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, any Note (except a rescission of
acceleration of the Notes by the Holders as provided in this Indenture and a
waiver of the payment default that resulted from such acceleration);
(h) modify the ranking or priority of the Notes or the Subsidiary
Guarantee;
(i) release the Subsidiary Guarantors from any of their respective
obligations under the Subsidiary Guarantee or this Indenture otherwise than in
accordance with this Indenture; or
(j) modify the provisions relating to any Offer to Purchase required
under Section 4.05 or Section 4.14 in a manner materially adverse to the Holders
of Notes with respect to any Asset Disposition that has been consummated or
Change of Control that has occurred.
The Holders of a majority in aggregate principal amount of the
outstanding Notes, on behalf of all holders of Notes, may waive compliance by
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the Company with certain restrictive provisions of this Indenture. Subject to
certain rights of the Trustee, as provided in this Indenture, the Holders of a
majority in aggregate principal amount of the outstanding Notes, on behalf of
all Holders of Notes, may waive any past default under this Indenture, except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Note tendered pursuant to an Offer to Purchase, or
a default in respect of a provision that under this Indenture cannot be modified
or amended without the consent of the Holder of each outstanding Note affected.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Note or portion of that Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. Subject
to the following paragraph, any such Holder or subsequent Holder may revoke the
consent as to such Holder's Note or portion of such Note by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Noteholder, unless it makes a change described in any of clauses (i)
through (x) of Section 9.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Note who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note.
SECTION 9.05. Notation on or Exchange of Notes.
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If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel and an Officers' Certificate each stating
that the execution of any amendment, supplement or waiver authorized pursuant to
this Article Nine is authorized or permitted by this Indenture and that such
amendment, supplement or waiver constitutes the legal, valid and binding
obligation of the Company and the Subsidiary Guarantors, enforceable in
accordance with its terms (subject to customary exceptions). The Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity reasonably satisfactory to it.
ARTICLE 10
SUBSIDIARY GUARANTEE
SECTION 10.01. Unconditional Subsidiary Guarantee.
Each Subsidiary Guarantor who is or becomes a party to this Indenture
hereby unconditionally, jointly and severally, guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns that: the principal of and interest on the Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration or otherwise, and interest on the overdue principal
and interest on any overdue interest on the Notes and all other obligations of
the Company to the Holders or the Trustee hereunder or under the Notes will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; subject, however, to the limitations set forth in Section 10.04. Each
such Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the
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recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each such Subsidiary Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that the Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Notes, this Indenture,
and this Subsidiary Guarantee. If any Holder or the Trustee is required by any
court or otherwise to return to the Company, any Subsidiary Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Subsidiary Guarantor, any amount paid by the Company or a
Subsidiary Guarantor to the Trustee or such Holder, this Subsidiary Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. Each Subsidiary Guarantor further agrees that, as between each
Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purpose of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forth will become due
and payable by each Subsidiary Guarantor for the purpose of this Subsidiary
Guarantee.
SECTION 10.02. Severability. In case any provision of this Subsidiary
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 10.03. Release of a Subsidiary Guarantor.
If the Notes are defeased in accordance with Section 8.01(c), or if all
or substantially all of the assets of any Subsidiary Guarantor or all of the
Capital Stock of any Subsidiary Guarantor is sold (including by issuance or
otherwise) by the Company or any of its Subsidiaries in a transaction
constituting an Asset Disposition and if (x) the Net Available Proceeds from
such Asset Disposition are used in accordance with Section 4.05 or (y) the
Company delivers to the Trustee an Officers' Certificate covenanting that the
Net Available Proceeds from such Asset Disposition shall be used in accordance
with Section 4.05 and within the time limits specified by such Section 4.05,
then such Subsidiary Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Subsidiary Guarantor) or the corporation
acquiring such assets (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor),
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shall be deemed released from all obligations under this Article Ten without any
further action required on the part of the Trustee or any Holder. The Trustee
shall, at the sole cost and expense of the Company and upon receipt at the
reasonable request of the Trustee of an Opinion of Counsel that the provisions
of this Section 10.03 have been complied with, deliver an appropriate instrument
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate certifying as to the compliance with this Section. Any
Subsidiary Guarantor not so released remains liable for the full amount of
principal of and interest on the Notes and the other obligations of the Company
hereunder as provided in this Article Ten.
SECTION 10.04. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee
not constitute a fraudulent transfer or conveyance for purposes of title 11 of
the United States Code, as amended, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar U.S. Federal or state or other
applicable law. To effectuate the foregoing intention, the Holders and such
Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to Section 10.05, result in the obligations
of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting
such fraudulent transfer or conveyance.
SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"FUNDING SUBSIDIARY GUARANTOR") under the Subsidiary Guarantee, such Funding
Subsidiary Guarantor shall be entitled to a contribution from all other
Subsidiary Guarantors in a pro rata amount, based on the net assets of each
Subsidiary Guarantor (including the Funding Subsidiary Guarantor), determined in
accordance with GAAP, subject to Section 10.04, for all payments, damages and
expenses incurred by that Funding Subsidiary Guarantor in discharging the
Company's obligations with respect to the Notes or any other Subsidiary
Guarantor's obligations with respect to the Subsidiary Guarantee.
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SECTION 10.06. Execution of Subsidiary Guarantee.
To further evidence the Subsidiary Guarantee, any Subsidiary Guarantor
required to Guarantee the Notes pursuant to the terms of Section 4.18 shall
execute the Subsidiary Guarantee in substantially the form set forth in Exhibit
A hereto to be endorsed on each Note ordered to be authenticated and delivered
by the Trustee. Each such Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee. Each such Subsidiary Guarantee shall be signed on behalf
of each Subsidiary Guarantor by its Chairman of the Board, its President or one
of its Vice Presidents prior to the authentication of the Note on which it is
endorsed, and the delivery of such Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of such Subsidiary Guarantee on
behalf of such Subsidiary Guarantor. Such signature upon the Subsidiary
Guarantee may be manual or facsimile signature of such officer and may be
imprinted or otherwise reproduced on the Subsidiary Guarantee, and in case such
officer who shall have signed the Subsidiary Guarantee shall cease to be such
officer before the Note on which such Subsidiary Guarantee is endorsed shall
have been authenticated and delivered by the Trustee or disposed of by the
Company, such Note nevertheless may be authenticated and delivered or disposed
of as though the Person who signed the Subsidiary Guarantee had not ceased to be
such officer of such Subsidiary Guarantor.
SECTION 10.07. Subordination of Subrogation and Other Rights.
Each Subsidiary Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement of such
Subsidiary Guarantor's obligations under its Subsidiary Guarantee or this
Indenture, including, without limitation, any right of subrogation, shall be
subject and subordinate to, and no payment with respect to any such claim of
such Subsidiary Guarantor shall be made before, the payment in full in cash of
all outstanding Notes in accordance with the provisions provided therefor in
this Indenture.
SECTION 10.08. Ranking.
Each Subsidiary Guarantee shall rank pari passu in right of payment
with any other senior unsecured Indebtedness of the Subsidiary Guarantor
executing such Subsidiary Guarantee.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties
on any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company:
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Attention: President
Facsimile: (516) 694-4131
Telephone: (516) 694-1111
with copies to:
Carl Seldin Koerner, Esq.
Koerner Silberberg & Weiner, LLP
112 Madison Avenue
New York, New York 10016
and
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Neil Goodman, Esq.
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-6286
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first class, postage prepaid, to a
Noteholder, including any notice delivered in connection with TIA Section
310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be
mailed to him at his address as set forth on the registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed. To the extent required by the TIA, any notice or communication shall
also be mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. Except
for a notice to the Trustee, which is deemed given only when received, if a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
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SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(a) an Officers' Certificate in form and substance satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with;
(b) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; and
(c) where applicable, a certificate or opinion by an independent
certified public accountant satisfactory to the Trustee that complies with TIA
Section 314(c).
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
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The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. Governing Law.
The laws of the State of New York shall govern this Indenture, the
Notes and the Subsidiary Guarantee without regard to principles of conflicts of
law.
SECTION 11.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or any Subsidiary Guarantor shall not have any liability for any obligations of
the Company or any Subsidiary Guarantor under the Notes, the Subsidiary
Guarantee or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Noteholder by accepting a
Note waives and releases all such liability.
SECTION 11.09. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of each Subsidiary Guarantor in this
Indenture and Notes shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 11.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.11. Severability.
In case any provision in this Indenture, in the Notes or in the
Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 11.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 11.13. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
79
<PAGE> 85
[Signature Page Follows]
80
<PAGE> 86
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
Very truly yours,
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
KAL-MAR PROPERTIES CORP.
By: /s/ Thomas S. Taylor
------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
CONCORD FINANCIAL SERVICES, INC.
By: /s/ Thomas S. Taylor
-----------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
PRIME FOODS DEVELOPMENT CORP.
By: /s/ Thomas S. Taylor
-----------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
81
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THE BANK OF NEW YORK, as Trustee
By: /s/ Stephen J. Giurlando
----------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
82
<PAGE> 88
ANNEX A
SUBSIDIARY GUARANTORS
KAL-MAR PROPERTIES CORP.
CONCORD FINANCIAL SERVICES, INC.
PRIME FOODS DEVELOPMENT CORP.
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EXHIBIT A
COLORADO PRIME CORPORATION
CUSIP NO.:
No. $
12.50% SENIOR NOTE DUE 2004
Colorado Prime Corporation promises to pay to or registered
assigns the principal sum of Dollars on the Maturity Date of May 1,
2004.
Interest Payment Dates: May 1 and November 1, beginning November 1,
1997.
Record Dates: April 15 and October 15, beginning October 15, 1997.
IN WITNESS WHEREOF, COLORADO PRIME CORPORATION has caused this
instrument to be executed in its corporate name by a facsimile signature of its
________________ and its _______________ and has caused the facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
COLORADO PRIME CORPORATION
By________________________
Name:
Title:
[SEAL]
Dated: By________________________
Name:
Title:
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Certificate of Authentication:
This is one of the 12.50% Senior Notes due 2004 referred to in the
within-mentioned Indenture.
The Bank of New York, Trustee
By ________________________________ Date:
Authorized Signatory
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[REVERSE OF SECURITY]
COLORADO PRIME CORPORATION
12.50% Senior Note due 2004
(a) Interest.
Colorado Prime Corporation, a Delaware corporation (the "COMPANY"),
promises to pay interest at the rate of 12.50% per annum on the principal amount
of this Note semiannually commencing on November 1, 1997, until the principal
hereof is paid or made available for payment. Interest on the Notes will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including May 9, 1997, through but excluding
the date on which interest is paid. If an Interest Payment Date falls on a day
that is not a Business Day, the interest payment to be made on such Interest
Payment Date will be made on the next succeeding Business Day with the same
force and effect as if made on such Interest Payment Date, and no additional
interest will accrue as a result of such delayed payment. Interest will be
computed on the basis of a 360- day year of twelve 30-day months.
(b) Method of Payment.
The interest payable on the Notes, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture (as defined
below), be paid to the person in whose name this Note is registered at the close
of business on the regular record date, which shall be the April 15 or October
15 (whether or not a Business Day) next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Note is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Company, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Note will be made at the agency of the Company maintained for that purpose
in New York, New York and at any other office or agency maintained by the
Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to
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the address of the person entitled thereto as such address shall appear in the
Note register and in the case of the Global Notes (as defined in the Indenture)
may be made in immediately available funds.
(c) Paying Agent and Registrar.
Initially, The Bank of New York (the "TRUSTEE") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders of Notes. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar but may not act as Paying
Agent.
(d) Indenture.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 12.50% Senior Notes due 2004 (the "NOTES"), limited in
aggregate principal amount to $100,000,000 (except for Notes issued in
substitution for destroyed, lost or stolen Notes) issuable under an indenture
dated as of May 9, 1997 (the "INDENTURE"), between the Company, the Subsidiary
Guarantors (as defined in the Indenture) and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
the Trust Indenture Act of 1939 (the "ACT") (15 U.S. Code Sections 77aaa-77bbbb)
as in effect on the date of the Indenture. The Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and the Act for a
statement of them. Each Noteholder, by accepting a Note, agrees to be bound to
all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Payment on each Note is guaranteed on a senior basis, jointly
and severally, by the Subsidiary Guarantors pursuant to Article Ten of the
Indenture.
Capitalized terms contained in this Note to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
(e) Optional Redemption.
The Notes will be subject to redemption, at the option of the Company,
in whole or in part, at any time on or after May 1, 2002 and prior to maturity,
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Notes to be redeemed at his address appearing in the register for the Notes, in
amounts of $1,000 or an integral multiple of $1,000, at the following redemption
prices (expressed as percentages of principal amount) plus accrued interest to
but excluding the date fixed for redemption (subject to the right of holders of
record
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on the relevant Record Date to receive interest due on an interest payment date
that is on or prior to the date fixed for redemption), if redeemed during the
12- month period beginning May 1 of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 106.250%
2003 103.125
</TABLE>
In addition, prior to May 1, 2000, the Company may redeem up to 35% of
the aggregate principal amount of the Notes at a redemption price (expressed as
a percentage of the principal amount) of 112.50% of the principal amount
thereof, plus accrued and unpaid interest to the date fixed for redemption, with
the net cash proceeds received by the Company or Holdings from one or more
public or private offerings of Capital Stock (other than Disqualified Stock) of
the Company or Holdings; provided, however, that at least $65,000,000 in
aggregate principal amount of the Notes remains outstanding immediately after
any such redemption (excluding any Notes owned by the Company or any of its
Affiliates). Notice of redemption pursuant to this paragraph must be mailed to
holders of Notes not later than 60 days following the consummation of such
offering.
Selection of Notes for any partial redemption shall be made by the
Trustee, in accordance with the rules of any national securities exchange on
which the Notes may be listed or, if the Notes are not so listed, pro rata or by
lot or in such other manner as the Trustee shall deem appropriate and fair.
Notes in denominations larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. Notice of redemption will be mailed before the
date fixed for redemption to each holder of Notes to be redeemed at his or her
registered address. On and after the date fixed for redemption, interest will
cease to accrue on Notes or portions thereof called for redemption.
The Notes will not have the benefit of any sinking fund.
(f) Purchase upon Occurrence of a Change of Control
Within 30 days of the occurrence of a Change of Control, the Company
will offer to purchase all of the Notes at a purchase price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest thereon.
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(g) Notice of Redemption.
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at his registered address. On and after the redemption
date, interest ceases to accrue on those Notes or portion of them called for
redemption.
(h) Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Notes selected for redemption.
(i) Persons Deemed Owners.
The registered Holder of a Note may be treated as the owner of it for
all purposes.
(j) Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Company at
its request. After such repayment Holders of Notes entitled to such funds must
look to the Company for payment unless an abandoned property law designates
another person.
(k) Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Notes or upon the irrevocable deposit with the Trustee of funds or United
States Government Obligations sufficient for such payment or redemption.
(l) Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Notes, and any past default or compliance
with any provision may be waived with the consent of the Holders of a majority
in principal amount of the outstanding Notes. Without notice to or the consent
of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend
or supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any Holder of Notes.
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(m) Restrictive Covenants.
The Indenture restricts, among other things, the ability of the Company
or any of its Subsidiaries to permit certain Liens to be imposed on their
assets, to make certain Restricted Payments and Investments, limits the
Indebtedness which the Company and its Subsidiaries may incur and limits the
terms on which the Company may engage in Asset Dispositions. The Company is also
obligated under certain circumstances to make an offer to purchase Notes with
the net cash proceeds of certain Asset Dispositions. The Company must report
annually to the Trustee on compliance with the covenants in the Indenture.
(n) Successor Corporation.
Pursuant to the Indenture, the ability of the Company to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
(o) Defaults and Remedies.
If an Event of Default shall occur and be continuing, the principal of
all of the outstanding Notes, plus all accrued and unpaid interest, if any, to
the date the Notes become due and payable, may be declared due and payable in
the manner and with the effect provided in the Indenture.
(p) Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Notes and make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
(q) No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or any Subsidiary Guarantor shall not have any liability for any obligations of
the Company or any Subsidiary Guarantor under the Notes, the Subsidiary
Guarantee or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
(r) Authentication.
This Note shall not be valid until the Trustee signs the certificate of
authentication on the other side of this Note.
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<PAGE> 96
(s) Abbreviations.
Customary abbreviations may be used in the name of Noteholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
(t) CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
(u) Governing Law.
The laws of the State of New York shall govern the Indenture, this Note
and the Subsidiary Guarantee without regard to principles of conflicts of law.
The Company will furnish to any Holder of record of Notes upon written
request and without charge a copy of the Indenture.
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<PAGE> 97
SENIOR GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture referred to in
the Note upon which this notation is endorsed) hereby, jointly and severally,
unconditionally guarantee on a senior basis (such guarantee by each Subsidiary
Guarantor being referred to herein as the "SUBSIDIARY GUARANTEE") the due and
punctual payment of the principal of, premium, if any, and interest on the
Notes, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal, premium and interest, if any, on
the Notes, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee, all in accordance with the terms set
forth in Article Ten of the Indenture.
The Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Notes upon which the
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
This Subsidiary Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Subsidiary Guarantee is subject to release upon the terms set
forth in the Indenture.
KAL-MAR PROPERTIES CORP.
By: ______________________________________
Name:
Title:
CONCORD FINANCIAL SERVICES, INC.
By: ______________________________________
Name:
Title:
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PRIME FOODS DEVELOPMENT CORP.
By: ______________________________________
Name:
Title:
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<PAGE> 99
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint_____________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated:_____________________________ Signed:___________________________________
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee:__________________________________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of The Bank of New York, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
The Bank of New York in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
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OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Note purchased by the Company,
check the box: / /
If you want to elect to have only part of this Note purchased by the Company,
state the amount: $________
Dated:__________________ Your signature:______________________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:__________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of The Bank of New York, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
The Bank of New York in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
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EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Attention:
[Name and Address of Registrar]
Re: 12.50% Senior Notes due 2004
Reference is hereby made to the Indenture, dated as of May 9, 1997 (the
"INDENTURE"), between Colorado Prime Corporation (the "COMPANY"), the Subsidiary
Guarantors listed therein and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
___________________ , (the "TRANSFEROR") owns and proposes to transfer
the Note[s] specified in Annex A hereto in the principal amount of $___ (the
"TRANSFER"), to (the "TRANSFEREE"), as further specified in Annex A hereto. In
the event that Transferor holds Certificated Notes, this Certificate is
accompanied by one or more certificates aggregating at least the principal
amount of Notes proposed to be Transferred. In connection with the Transfer, the
Transferor hereby certifies that:
1. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE RESTRICTED
GLOBAL NOTE OR RESTRICTED CERTIFICATED NOTES PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the Notes are being
transferred to a Person that the Transferor reasonably believes is purchasing
the Notes for its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and each such
account is a "QUALIFIED INSTITUTIONAL BUYER" within the meaning of Rule 144A in
a transaction meeting the requirements of Rule 144A and such Transfer is in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred Note will be subject to the restrictions
on
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transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S
GLOBAL NOTE PURSUANT TO REGULATION S OR CERTIFICATED NOTES PURSUANT TO
REGULATION S. The Transfer is being effected pursuant to and in accordance with
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of Regulation
S under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the Note will be subject to the restrictions on Transfer enumerated
in the Securities Act Legend printed on the Regulation S Global Note and in the
Indenture and the Securities Act.
3. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED
GLOBAL NOTE. The Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture, and the restrictions on transfer
contained in the Indenture and the Securities Act Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
Notes will no longer be subject to the restrictions on transfer enumerated in
the Securities Act Legend and in the Indenture and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN AN UNRESTRICTED
CERTIFICATED NOTE. One or more of the events specified in Section 2.06(a) of the
Indenture have occurred and the Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act and in compliance with the
transfer restrictions contained in the Indenture, and the restrictions on
transfer contained in the Indenture and the Securities Act Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred Notes will no longer be subject to the restrictions
on transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
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This certificate and the statements contained herein are made for your
benefit and the benefit of the Trustee.
__________________________________________
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
Dated:___________________
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FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / Interests in the
(i) / / Restricted Global Note (CUSIP ____), or
(ii) / / Regulation S Global Note (CINS ____).
(b) / / Certificated Note.
2. That the Transferee will hold:
[CHECK ONE]
(a) / / Interests in the:
(i) / / Restricted Global Note (CUSIP ____), or
(ii) / / Regulation S Global Note (CINS ____), or
(iii) / / Unrestricted Global Note (CUSIP ____);
or
(b) / / Restricted Certificated Notes;
(c) / / Unrestricted Certificated Notes;
in accordance with the terms of the Indenture.
<PAGE> 105
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Attention:
[Name and Address of Registrar]
Re: 12.50% Senior Notes due 2004
(CUSIP_____________)
Reference is hereby made to the Indenture, dated as of May 9, 1997 (the
"INDENTURE"), between Colorado Prime Corporation (the "COMPANY"), the Subsidiary
Guarantors listed therein and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
___________, (the "HOLDER") owns and proposes to exchange the Note[s]
specified herein, in the principal amount of $___ (the "EXCHANGE"). In the event
Holder holds Certificated Notes, this Certificate is accompanied by one or more
certificates aggregating at least the principal amount of Notes proposed to be
Exchanged. In connection with the Exchange, the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED CERTIFICATED NOTES OR INTERESTS IN THE
INITIAL GLOBAL NOTE FOR UNRESTRICTED CERTIFICATED NOTES OR UNRESTRICTED GLOBAL
NOTES
(a) / / CHECK IF EXCHANGE IS FROM INITIAL GLOBAL NOTES TO THE
UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Holder's
Initial Global Note to the Unrestricted Global Note in an equal principal
amount, the Holder hereby certifies (i) the Unrestricted Global Notes are being
acquired for the Holder's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Initial Global Notes and pursuant to and in accordance with the Securities Act
of 1933, as amended (the "SECURITIES ACT") and (iii) the restrictions on
transfer contained in the Indenture and the Securities Act Legend are not
required in order to maintain compliance with the Securities Act.
C-1
<PAGE> 106
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL NOTE. In connection with the Holder's
Exchange of Restricted Certificated Notes for an Interest in the Unrestricted
Global Note, (i) the Interest in the Unrestricted Global Note is being acquired
for the Holder's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act and
(iii) the restrictions on transfer contained in the Indenture and the Securities
Act Legend are not required in order to maintain compliance with the Securities
Act.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTES TO
UNRESTRICTED CERTIFICATED NOTES. In connection with the Holder's Exchange of a
Restricted Certificated Note for an Unrestricted Certificated Note, the Holder
hereby certifies (i) the Unrestricted Certificated Notes are being acquired for
the Holder's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Securities
Act Legend are not required in order to maintain compliance with the Securities
Act and (iv) one or more of the events specified in Section 2.06(a) of the
Indenture have occurred.
2. / / CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTES TO INTERESTS
IN AN INITIAL GLOBAL NOTE. In connection with the Exchange of the Holder's
Restricted Certificated Note for interests in the Initial Global Note in the
[CHECK ONE] o Restricted Global Note, o Regulation S Global Note, with an equal
principal amount, (i) the interests in the Initial Global Note are being
acquired for the Holder's own account without transfer and (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Restricted Certificated Notes and pursuant to and in accordance with the
Securities Act. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Interest in the Initial Global Note will be
subject to the restrictions on transfer enumerated in the Securities Act Legend
printed on the Initial Global Notes and in the Indenture and the Securities Act.
C-2
<PAGE> 107
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trustee.
_________________________________________
[Insert Name of Holder]
By:_____________________________________
Name:
Title:
Dated:__________________
C-3
<PAGE> 1
EXHIBIT 4.2
COLORADO PRIME CORPORATION
COLORADO PRIME HOLDINGS, INC.
100,000 Units Consisting of
$100,000,000 12.50% Senior Notes due 2004
and
Warrants to Purchase 19,608 Shares
Purchase Agreement
May 6, 1997
J.P. Morgan Securities Inc.
NatWest Capital Markets Limited
Dresdner Kleinwort Benson North America LLC
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
Colorado Prime Corporation, a corporation formed under the laws of the
state of Delaware (the "Company"), and Colorado Prime Holdings, Inc., a
corporation formed under the laws of the state of Delaware ("CPH"), propose to
issue and sell to J.P. Morgan Securities Inc., NatWest Capital Markets Limited
and Dresdner Kleinwort Benson North America LLC (the "Initial Purchasers")
100,000 Units (the "Units") consisting in the aggregate of $100,000,000
principal amount of the Company's 12.50% Senior Notes due 2004 (the "Notes") and
Warrants (the "Warrants") to purchase 19,608 shares of common stock, par value
$0.01 per share (the "Shares"), of CPH. The Company's payment obligations under
the Notes will be guaranteed by all existing subsidiaries and any future U.S.
subsidiaries (the "Subsidiary Guarantors"). The Notes will be issued pursuant to
the provisions of an Indenture to be dated as of May 9, 1997 (the "Indenture")
among the Company, the Subsidiary Guarantors and The Bank of New York, as
trustee (the "Trustee"). The Shares issuable upon exercise of the Warrants are
collectively referred to herein as the "Warrant Shares." The Warrants are to be
issued pursuant to a Warrant Agreement (the "Warrant Agreement") to be dated as
of the Closing Date (as defined) between CPH and The Bank of New York, as
warrant agent (the "Warrant Agent").
The sale of the Units to the Initial Purchasers will be made without
registration of the Units under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption therefrom provided in Section
4(2)
<PAGE> 2
of the Securities Act. Holders of the Notes will have the benefits of a
Registration Rights Agreement to be dated as of May 9, 1997 among the Company,
the Subsidiary Guarantors and the Initial Purchasers (the "Registration Rights
Agreement").
It is understood that the Units are being offered in connection with
the merger (the "Merger") of KPC Holdings Corporation ("KPC Holdings"), the
parent of the Company, and Colorado Prime Acquisition Corp. ("CPAC"), a
transitory acquisition subsidiary to be established prior to consummation of the
Merger. Upon consummation of the Merger, KPC Holdings will be the surviving
corporation and will be renamed Colorado Prime Holdings, Inc. References to
"Holdings" herein refer to KPC Holdings prior to the Merger and CPH after the
Merger. The Merger is part of the Transactions (as defined in the Offering
Memorandum). It is understood that the Company will, as part of the
Transactions, enter into a Credit Agreement (together with the related
guarantees and collateral documents required to be delivered by the Company, the
Subsidiary Guarantors and Holdings on the Closing Date, the "Credit Agreement")
with Dresdner Bank AG, New York and Grand Cayman Branches, as agent and certain
other financial institutions.
Each of the Company and Holdings hereby agrees with the Initial
Purchasers as follows:
1. Each of the Company and Holdings agrees to issue and sell the
Units to the Initial Purchasers as hereinafter provided, and each Initial
Purchaser, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Company and Holdings the respective amount
of Units set forth opposite such Initial Purchaser's name in Schedule I hereto
at a price (the "Purchase Price") equal to $958.60 per Unit.
2. Each of the Company and Holdings understands that the Initial
Purchasers intend (i) to offer privately their respective portions of the Units
as soon after this Agreement has become effective as in the judgment of the
Initial Purchasers is advisable and (ii) initially to offer the Units upon the
terms set forth in the Offering Memorandum (as defined below).
Each of the Company and Holdings confirms that it has authorized the
Initial Purchasers, subject to the restrictions set forth below, to distribute
copies of the Offering Memorandum in connection with the offering of the Units.
Each Initial Purchaser hereby makes to each of the Company and Holdings the
following representations and agreements:
(i) it is a qualified institutional buyer within the meaning
of Rule 144A under the Securities Act;
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<PAGE> 3
(ii) it will not solicit offers for, or offer to sell, the
Units by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act); and
(iii) it will solicit offers for the Units only from, and will
offer the Units only to, (1) in the case of offers inside the United
States (A) persons whom it reasonably believes to be "qualified
institutional buyers" within the meaning of Rule 144A under the
Securities Act and that in connection with each such offer it will take
reasonable steps to ensure that the purchaser of such Units is aware
that such sale is being made in reliance on Rule 144A and (B)
institutions which it reasonably believes are "accredited investors" as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act, who, in the case of purchasers described in this clause
(B), purchase not less than $250,000 in aggregate amount of Units for
their own account and for any discretionary account for which they are
acquiring Units and provide it a letter in the form of Annex A to the
Offering Memorandum and (2) in the case of offers outside the United
States, upon the terms and conditions set forth in Annex I hereto.
3. Payment for the Units shall be made by wire transfer in immediately
available funds, to the account specified by the Company to the Initial
Purchasers no later than noon on the Business Day (as defined below) prior to
the Closing Date (as defined below), on May 9, 1997, or at such other time on
the same or such other date, not later than the fifth Business Day thereafter,
as the Initial Purchasers and the Company may agree upon in writing. The time
and date of such payment are referred to herein as the "Closing Date." As used
herein, the term "Business Day" means any day other than a day on which banks
are permitted or required to be closed in New York City.
Certificates for the Units shall be registered in such names and issued
in such denominations as the Initial Purchasers shall request not later than two
Business Days prior to the Closing Date. Such certificates will be made
available for inspection by the Initial Purchasers at the office of J.P. Morgan
Securities Inc. at the address set forth above not later than 1:00 p.m., New
York City time, on the Business Day prior to the Closing Date. Certificates
evidencing the Units, each such Unit consisting of $1,000 aggregate principal
amount of Notes and one Warrant, shall be delivered to the Initial Purchasers on
the Closing Date against payment therefor, with any transfer taxes payable in
connection with the transfer to the Initial Purchasers of the Units duly paid by
the Company.
4. Each of the Company, Holdings and the Subsidiary Guarantors
represent and warrant to each Initial Purchaser that:
3
<PAGE> 4
(a) a preliminary offering memorandum, dated April 15, 1997,
as amended by alternative pages including a new cover page dated April
22, 1997 (the "Preliminary Offering Memorandum"), and an offering
memorandum, dated May 6, 1997 (the "Offering Memorandum"), have been
prepared in connection with the offering of the Units. The Offering
Memorandum and any amendments or supplements thereto did not, as of its
date, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading
and will not, as of the Closing Date, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties set forth in this Section 4(a) do not apply to
statements or omissions in the Offering Memorandum based upon
information furnished to the Company in writing by the Initial
Purchasers expressly for use therein;
(b) the financial statements, and the related notes thereto,
included in the Offering Memorandum present fairly in conformity with
United States generally accepted accounting principles and practices
applied on a consistent basis, the consolidated financial position of
the Company and its subsidiaries, as of the dates indicated and the
results of their operations and the changes in their consolidated cash
flows for the periods specified: and the pro forma financial
information, and the related notes thereto, included in the Offering
Memorandum are based upon good faith estimates and assumptions believed
by the Company to be reasonable;
(c) since the respective dates as of which information is
given in the Offering Memorandum, there has not been any material
change in the capital stock or long-term debt of either Holdings or the
Company and its subsidiaries, or any material adverse change, or any
development which could reasonably be expected to result in a
prospective material adverse change, in the general affairs, business,
prospects, management, financial position, stockholders' equity or
results of operations of either Holdings or the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Offering Memorandum; and except as set forth or contemplated in the
Offering Memorandum, none of Holdings, the Company or any of its
subsidiaries has entered into any transaction or agreement (whether or
not in the ordinary course of business) material to Holdings or the
Company and its subsidiaries taken as a whole;
(d) each of Holdings, the Company and each subsidiary of the
Company has been duly incorporated and is validly existing as a
corporation under the laws of its jurisdiction of incorporation, with
power and authority
4
<PAGE> 5
(corporate and other) to own its properties and conduct its business as
described in the Offering Memorandum, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on either of
Holdings or the Company and its subsidiaries taken as a whole; and all
the outstanding shares of capital stock of the Subsidiary Guarantors
have been duly authorized and validly issued, are fully paid and
nonassessable, and (except to secure obligations under the Credit
Agreement) are owned by the Company, directly or indirectly, free and
clear of all liens, encumbrances, security interests and claims; and
all of the outstanding shares of capital stock of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and (except to secure obligations under the Credit
Agreement) are owned directly or indirectly by Holdings, free and clear
of all liens, encumbrances, equities or claims;
(e) the Company and each of the Subsidiary Guarantors has all
requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement, the Indenture, the Notes and the
Registration Rights Agreement and in the case of the Company to issue,
sell and deliver the Notes to the Initial Purchasers as provided herein
and to consummate the Transactions and in the case of the Subsidiary
Guarantors to guarantee the Notes; and Holdings has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Warrant Agreement and the
Warrants and to issue, sell and deliver the Warrants to the Initial
Purchasers as provided herein and to consummate the Transactions and to
issue, sell and deliver the Warrant Shares upon exercise of the
Warrants;
(f) this Agreement has been duly authorized, executed and
delivered by each of the Company and each of the Subsidiary Guarantors
and on the Closing Date, this Agreement shall be duly authorized,
executed and delivered by Holdings;
(g) the Registration Rights Agreement has been duly and
validly authorized by each of the Company and the Subsidiary Guarantors
and, when duly executed and delivered by each of the Company and the
Subsidiary Guarantors, will be the legally valid and binding agreement
of the Company and the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its terms
except that (i) the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or similar laws relating to or
5
<PAGE> 6
affecting creditors generally, (ii) the availability of equitable
remedies may be limited by equitable principles of general
applicability and (iii) the enforceability of rights to indemnification
and contribution under the Registration Rights Agreement may be limited
by applicable law and equitable consideration of public policy issues;
when executed and delivered the Registration Rights Agreement will
conform in all material respects to the description thereof in the
Offering Memorandum.
(h) each of the agreements and other documents comprising the
Credit Agreement have been duly authorized by the Company and the
Subsidiary Guarantors, and when executed and delivered by the Company
and the Subsidiary Guarantors, will constitute valid and binding
agreements of the Company and the Subsidiary Guarantors, enforceable in
accordance with their terms, except that the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws relating to or affecting creditors
generally and the availability of equitable remedies may be limited by
equitable principles of general applicability;
(i) the Transactions have been duly authorized by all
requisite corporate action on the part of each of the Company and the
Subsidiary Guarantors and on the Closing Date, the Transactions shall
be duly authorized by all requisite corporate action on the part of
Holdings;
(j) the Notes and the guarantees thereof have been duly
authorized, and when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof will constitute valid and binding
obligations of the Company and the Subsidiary Guarantors, respectively,
enforceable against the Company and the Subsidiary Guarantors,
respectively, in accordance with their terms and entitled to the
benefits provided by the Indenture except that the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws relating to or
affecting creditors generally and the availability of equitable
remedies may be limited by equitable principles of general
applicability; the Indenture (including the guarantees of the Notes by
each of the Subsidiary Guarantors) has been duly authorized by the
Company and the Subsidiary Guarantors and, when executed and delivered
by the Company and the Subsidiary Guarantors (assuming the due
execution and delivery thereof by the Trustee), the Indenture will
constitute a valid and binding instrument of the Company and the
Subsidiary Guarantors enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except that the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws
relating to or
6
<PAGE> 7
affecting creditors generally and the availability of equitable
remedies may be limited by equitable principles of general
applicability; and the Notes and the Indenture will conform, in all
material respects, to the descriptions thereof in the Offering
Memorandum;
(k) as of the Closing Date, (i) the Warrants will have been
duly authorized and, when issued and countersigned in accordance with
the terms of the Warrant Agreement and delivered against payment
therefor in accordance with the terms hereof, will constitute valid and
binding obligations of Holdings, and (ii) the Warrant Agreement will
have been duly authorized and, when executed and delivered by Holdings,
will constitute a valid and binding instrument of Holdings, in each
case enforceable against Holdings in accordance with its terms, except
that the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar
laws relating to or affecting creditors generally and the availability
of equitable remedies may be limited by equitable principles of general
applicability; and the Warrants and the Warrant Agreement will conform,
in all material respects, to the descriptions thereof in the Offering
Memorandum;
(l) the authorized capital stock of Holdings conforms, in all
material respects, to the description thereof in the Offering
Memorandum; all shares of capital stock of Holdings to be outstanding
upon the consummation of the Transactions have been duly authorized and
will be validly issued, fully paid and non-assessable; and the Warrant
Shares have been duly authorized and reserved for issuance upon
exercise of the Warrants and, upon issuance in accordance with the
terms of the Warrants, the Warrant Shares will be validly issued, fully
paid and non-assessable and such issuance will not be subject to any
pre-emptive or similar rights;
(m) none of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale
of the Units) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including,
without limitation, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System;
(n) none of Holdings, the Company or any Subsidiary Guarantor
is (i) in violation of or in default under its Certificate of
Incorporation or ByLaws, (ii) in breach or violation of any judgment,
decree or order to which it is a named party, except for any such
breach or violation which would not individually or in the aggregate
have a material adverse effect on Holdings or the Company and its
subsidiaries, taken as a whole or (iii) in breach or default under any
terms of any indenture, mortgage, deed of trust, loan
7
<PAGE> 8
agreement or other agreement or instrument to which Holdings, the
Company or a Subsidiary Guarantor is a party or by which it or any of
its properties is bound, except for any breaches or defaults which
individually or in the aggregate do not have a material adverse effect
on Holdings or the Company and its subsidiaries, taken as a whole; the
issue and sale of the Units and the execution, delivery and performance
by Holdings, the Company and the Subsidiary Guarantors of all of their
respective obligations under the Notes, the Warrants, the Indenture,
the Warrant Agreement, the Registration Rights Agreement and this
Agreement and the consummation of the transactions herein and therein
contemplated and the consummation by Holdings, the Company and the
Subsidiary Guarantors of the Transactions will not conflict with or
constitute or result in a breach of any of the terms or provisions of,
or constitute a default under, or violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which Holdings, the Company or any
Subsidiary Guarantor is or will be, following the Transactions, a party
or by which it is or will be bound or to which any of the property or
assets of Holdings, the Company or any Subsidiary Guarantor is or will
be subject, except for conflicts, breaches, defaults or violations
which individually or in the aggregate would not have a material
adverse effect on Holdings or the Company and its subsidiaries, taken
as a whole, nor will any such action result in any violation of the
provisions of the Certificate of Incorporation or By-Laws of Holdings,
the Company or any Subsidiary Guarantor or any applicable law or
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over Holdings, the Company or any
Subsidiary Guarantor or any of their respective properties, except for
violations which individually or in the aggregate would not have a
material adverse effect on Holdings, the Company and its subsidiaries,
taken as a whole; and no consent, approval, authorization, order,
license, registration or qualification of or with any court or
governmental agency or body is required for the issue and sale of the
Units in accordance with this Agreement, the consummation by Holdings,
the Company and the Subsidiary Guarantors of the Transactions or, the
execution, delivery and performance of this Agreement, the Indenture,
the Warrant Agreement, the Notes, the Warrants or the Registration
Rights Agreement by Holdings, the Company and the Subsidiary
Guarantors, as the case may be, and compliance by Holdings, the Company
and the Subsidiary Guarantors with all the provisions thereof to which
they are subject, and the consummation of the transactions herein and
therein contemplated, except such consents, approvals, authorizations,
registrations or qualifications as have been, or prior to the Closing
Date will be, obtained or as may be required under any state securities
or Blue Sky Laws in connection with the purchase and distribution of
the Units by the Initial Purchasers;
8
<PAGE> 9
(o) there are no legal or governmental investigations,
actions, suits or proceedings pending or, to the knowledge of either of
Holdings or the Company, threatened against or affecting Holdings or
the Company or any of its subsidiaries or any of their properties or to
which Holdings or the Company or any of its subsidiaries is or may be a
party following the Transactions or to which any property of Holdings
or the Company or any of its subsidiaries is or may be subject which,
if determined adversely to Holdings or the Company or any of its
subsidiaries, could individually or in the aggregate have, or
reasonably be expected to have, a material adverse effect on the
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of Holdings or the
Company and its subsidiaries, taken as a whole or which would interfere
with or adversely affect the issuance of the Units or the consummation
of the Transactions or in any manner draw into question the validity of
this Agreement, the Indenture, the Warrant Agreement, the Notes, the
Warrants or the Registration Rights Agreement and, to the best of each
of Holdings' and the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(p) none of Holdings, the Company, any Subsidiary Guarantor or
any affiliate (as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D")) of Holdings or the Company or any
Subsidiary Guarantor has directly, or through any agent, sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Units in a manner that would require
the registration under the Securities Act of the offering contemplated
by the Offering Memorandum;
(q) none of Holdings, the Company, any Subsidiary Guarantor or
any person acting on its behalf (other than the Initial Purchasers as
to which Holdings, the Company and the Subsidiary Guarantors make no
representations) has offered or sold the Units by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or, with respect to Units sold outside the
United States to non- U.S. persons (as defined in Rule 902 under the
Securities Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Securities Act and each of Holdings, the
Company and each Subsidiary Guarantor and any person acting on its
behalf (other than the Initial Purchasers as to which Holdings, the
Company and the Subsidiary Guarantors make no representations) has
complied with and will implement the "offering restriction" within the
meaning of such Rule 902;
(r) none of Holdings, the Company or any subsidiary is or will
be after giving effect to the Transactions, an "investment company" or
an entity
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<PAGE> 10
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended;
(s) it is not necessary in connection with the offer, sale and
delivery of the Units in the manner contemplated by this Agreement to
register the Units under the Securities Act or to qualify an indenture
with respect to the Notes under the Trust Indenture Act of 1939, as
amended (the "TIA");
(t) the Units satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act;
(u) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries, are
independent public accountants as required by the Securities Act;
(v) each of Holdings and the Company and its subsidiaries have
good and marketable title in fee simple to all material items of real
property and good and marketable title to all material personal
property owned by them or to be owned by them following the
Transactions, in each case free and clear of all liens, encumbrances
and defects except to secure obligations under the Credit Agreement and
to secure other liens permitted by the terms and conditions of the
Notes and the Indenture and such as do not materially affect the value
of such property and do not interfere with the use made or proposed to
be made of such property by Holdings or the Company and its
subsidiaries; and after giving effect to the Transactions any material
real property and buildings held under lease by Holdings or the Company
and its subsidiaries are and will be held by them under valid, existing
and enforceable leases with such exceptions as are not material and do
not interfere with the use made or proposed to be made of such property
and buildings by Holdings or the Company and its subsidiaries;
(w) each of Holdings and the Company has complied, to the
extent applicable, with all provisions of Section 517.075, Florida
Statutes (Chapter 92-198, Laws of Florida) relating to doing business
with the Government of Cuba or with any person or affiliate located in
Cuba;
(x) Holdings, the Company and its subsidiaries have filed all
federal, state, local and foreign tax returns which have been required
to be filed and have paid all taxes shown thereon and all assessments
received by them or any of them to the extent that such taxes have
become due and are not being contested in good faith; and, there is no
material tax deficiency which has been or might reasonably be expected
to be asserted or threatened against Holdings, the Company or any of
its subsidiaries;
10
<PAGE> 11
(y) Holdings, the Company and its subsidiaries own, possess
or have obtained all material licenses, permits, certificates,
consents, orders, approvals and other authorizations from and have made
all declarations and filings with, all federal, state, local and other
governmental authorities (including foreign regulatory agencies), all
self-regulatory organizations and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be, and
to operate their properties, and Holdings, the Company and its
subsidiaries have not received any actual notice, and are not aware, of
any proceeding relating to revocation or modification of any such
license, permit, certificate, consent, order, approval or other
authorization; and, Holdings, the Company and its subsidiaries are in
compliance with all laws and regulations relating to the conduct of
their business as of the date hereof, except for violations which
individually and in the aggregate would not have a material adverse
effect on Holdings or the Company and its subsidiaries, taken as a
whole;
(z) there are no existing or, to the best knowledge of the
Company, threatened labor disputes with the employees of the Company
which are likely to have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(aa) the Company and its subsidiaries (i) are in compliance
with any and all applicable federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their business and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Company
and its subsidiaries, taken as a whole; associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties) would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(bb) upon consummation of the Transactions, the present fair
salable value of the assets of the Company and the Subsidiary
Guarantors, taken as a whole, will exceed the amount that will be
required to be paid on or in
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<PAGE> 12
respect of their existing debts and other liabilities (including
contingent liabilities) as they become absolute and matured. The assets
of the Company and the Subsidiary Guarantors, taken as a whole, upon
the issuance of the Notes, will not constitute unreasonably small
capital to carry out their business as now conducted, including the
capital needs of the Company and the Subsidiary Guarantors, taking into
account the projected capital requirements and capital availability of
the Company and the Subsidiary Guarantors. Neither the Company nor the
Subsidiary Guarantors (i) is entering into the Transactions with the
intent to hinder, delay, or defraud any entity to which it is or will
become indebted or (ii) will receive less than reasonably equivalent
value in exchange for entering into the Transactions;
(cc) except as disclosed in the Offering Memorandum, other
than this Agreement there are no contracts, agreements or
understandings that would give rise to a valid claim against Holdings,
the Company or any Subsidiary Guarantor or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with
the issuance, purchase or sale of the Units;
(dd) except as disclosed in the Offering Memorandum, there are
no business relationships or related party transactions which would be
required to be disclosed by Item 404 of Regulation S-K of the
Securities Act in a registration statement of Holdings, the Company and
the Subsidiary Guarantors becoming effective on the date hereof; and
(ee) following the merger of each of Lexington Funding, Inc.
and Verdi Funding Corp. with and into Concord Financial Services, Inc.,
there are no subsidiaries of the Company except for the Subsidiary
Guarantors.
5. Each of Holdings, the Company and the Subsidiary Guarantors
covenants and agrees with each of the Initial Purchasers as follows:
(a) before distributing any amendment or supplement to the
Offering Memorandum, to furnish to the Initial Purchasers a copy of the
proposed amendment or supplement for review and not to distribute any
such proposed amendment or supplement to which the Initial Purchasers
reasonably object;
(b) if, at any time prior to the completion of the offering
of the Units, any event shall occur as a result of which it is
necessary to amend or supplement the Offering Memorandum in order that
the Offering Memorandum does not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered
12
<PAGE> 13
to a purchaser, not misleading, or if it is necessary to amend or
supplement the Offering Memorandum to comply with law, forthwith to
prepare and furnish, at the expense of the Company, to the Initial
Purchasers, such amendments or supplements to the Offering Memorandum
as may be necessary so that the Offering Memorandum as so amended or
supplemented will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances when the Offering Memorandum
is delivered to a purchaser, not misleading or so that the Offering
Memorandum will comply with law;
(c) to cooperate with you and your counsel in connection with
the registration or qualification of the Units for offering and sale by
the Initial Purchasers under the securities or Blue Sky laws of such
jurisdictions as you may reasonably request and will file such consents
to service of process or other documents necessary or appropriate in
order to effect such registration or qualification; provided that in no
event shall any of Holdings, the Company or the Subsidiary Guarantors
be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to
taxation or service of process in suits, other than those arising out
of the offering or sale of the Units, in any jurisdiction where it is
not now so subject;
(d) for five years from the Closing Date, to furnish to the
Initial Purchasers copies of all reports or other material
communications (financial or other) furnished to holders of Units, and
copies of any reports and financial statements filed with the
Commission (other than where confidential treatment has been requested)
or any national securities exchange;
(e) other than the warrants to be issued to Thayer Equity
Investors III, L.P. in connection with the Transactions, during the
period beginning on the date hereof and continuing to and including the
Business Day following the Closing Date, not to offer, sell, contract
to sell, or otherwise dispose of any debt securities of or guaranteed
by the Company or any warrants, in each case which are substantially
similar to the Notes or the Warrants;
(f) to use the net proceeds received in connection with the
Transactions in the manner specified in the Offering Memorandum under
the caption "Use of Proceeds";
(g) if requested by you, to use its best efforts to cause such
the Units, the Notes and the Warrants to be eligible for the PORTAL
trading system of the National Association of Securities Dealers, Inc.;
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<PAGE> 14
(h) during the period of two years after the Closing Date,
not, and not to permit any of their "affiliates" (as defined in Rule
144 under the Securities Act) to, resell any of the Units which
constitute "restricted securities" under Rule 144 that have been
reacquired by any of them, except with respect to "affiliates" as may
be permitted by Rule 144A or Regulation S;
(i) whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company
will pay or cause to be paid all costs and expenses incident to the
performance of Holdings', the Company's and the Subsidiary Guarantors'
obligations hereunder, including without limiting the generality of the
foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution, authentication and delivery of the Notes,
including any expenses of the Trustee and its counsel, (ii) incident to
the preparation, printing and distribution of the Offering Memorandum
and any preliminary offering memorandum (including in each case all
exhibits, amendments and supplements thereto), (iii) incurred in
connection with the registration or qualification and determination of
eligibility for investment of the Units under the laws of such
jurisdictions as the Initial Purchasers may designate (including fees
of counsel for the Initial Purchasers and their disbursements), (iv) in
connection with the admission of the Notes to the PORTAL trading system
of the National Association of Securities Dealers, Inc., (v) in
connection with the printing (including word processing and duplication
costs) and delivery of the Preliminary and Supplemental Blue Sky
Memoranda and any Legal Investment Survey and the furnishing to the
Initial Purchasers and dealers of copies of the Offering Memorandum,
including mailing and shipping, as herein provided, (vi) payable to
rating agencies in connection with the rating of the Notes, (vii)
incurred in connection with a "road show" presentation to potential
investors, (viii) of any transfer agent, (ix) incident to the
preparation, issuance, execution, countersigning and delivery of the
Warrants and (x) of the Initial Purchasers (including, but not limited
to, the fees and expenses of counsel for the Initial Purchasers) in an
amount not to exceed $350,000;
(j) not to solicit any offer to buy or offer to sell the Units
by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the Securities
Act;
(k) for so long as any of the Notes or Warrants remain
outstanding and are "restricted securities" within the meaning of Rule
l44(a)(3) under the Securities Act the Company will, during any period
in which it is not subject to Section 13 or 15(d) under the Exchange
Act, make available to the Initial Purchasers and any holder of Notes
or Warrants in connection with any sale
14
<PAGE> 15
thereof and any prospective purchaser of such Notes or Warrants, in
each case upon request, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) ("Rule l44A(d)(4) Information") under
the Securities Act (or any successor thereto); and
(l) not to take any action prohibited by Regulation M under
the Exchange Act in connection with the distribution of the Units
contemplated hereby;
(m) to reserve and continue to reserve as long as any Warrants
are outstanding, a sufficient number of Shares for issuance upon
exercise of the Warrants.
6. The several obligations of the Initial Purchasers hereunder to
purchase the Units on the Closing Date are subject to the performance, in all
material respects, by Holdings, the Company and each Subsidiary Guarantor of its
obligations hereunder and to the following additional conditions:
(a) the representations and warranties of each of Holdings,
the Company and each Subsidiary Guarantor contained herein are true and
correct on and as of the Closing Date and after consummation of the
Transactions as if made on and as of the Closing Date and after
consummation of the Transactions; and Holdings, the Company and each
Subsidiary Guarantor shall have complied, in all material respects,
with all agreements and all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(b) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any
downgrading, (ii) any intended or potential downgrading or (iii) any
review or possible change that does not indicate an improvement, in the
rating accorded any securities of or guaranteed by Holdings or the
Company by any "nationally recognized statistical rating organization",
as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act;
(c) since the respective dates as of which information is
given in the Offering Memorandum, there shall not have been any
material change in the capital stock or long-term debt of Holdings or
the Company and its subsidiaries or any material adverse change, or any
development which could reasonably be expected to result in a
prospective material adverse change, in the general affairs, business,
prospects, management, financial position, stockholders' equity or
results of operations of Holdings or the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Offering Memorandum,
the effect of which in the judgment of the Initial Purchasers makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Units on the Closing Date on the terms and in the
manner contemplated in the Offering
15
<PAGE> 16
Memorandum; and none of Holdings, the Company and its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any material loss or interference
with their business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum;
(d) the Initial Purchasers shall have received on and as of
the Closing Date a certificate of an executive officer of Holdings and
a certificate of an executive officer of the Company, in each case with
specific knowledge about Holdings or the Company's and its
subsidiaries' financial matters, as the case may be, satisfactory to
the Initial Purchasers to the effect set forth in subsections (a) and
(b) of this Section and to the further effect that there has not
occurred any material adverse change, or any development which could
reasonably be expected to result in a prospective material adverse
change, in the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of
Holdings or the Company and its subsidiaries taken as a whole, as the
case may be, from those set forth or contemplated in the Offering
Memorandum;
(e) Koerner Silberberg & Weiner, LLP, counsel for the Company,
shall have furnished to the Initial Purchasers their written opinion,
dated the Closing Date in form and substance satisfactory to the
Initial Purchasers, to the effect that:
(i) the Company and each of its subsidiaries has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Offering Memorandum;
(ii) the Company and each of its subsidiaries have
been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases
properties or conducts any business, so as to require such
qualification, other than where the failure to be so qualified
or in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole;
16
<PAGE> 17
(iii) all of the outstanding shares of capital stock
of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable;
(iv) all of the outstanding shares of capital stock
of the Subsidiary Guarantors have been duly and validly
authorized and issued, are fully paid and non-assessable, and
(except to secure obligations under the Credit Agreement) are
owned by the Company, directly or indirectly, free and clear
of all liens, encumbrances, security interests and claims;
(v) each of the Company and its subsidiaries has
all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the
Indenture, the Notes and the Registration Rights Agreement and
in the case of the Company to issue, sell and deliver the
Notes to the Initial Purchasers as provided herein and to
consummate the Transactions and in the case of the Subsidiary
Guarantors to guarantee the Notes;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company and the Subsidiary
Guarantors;
(vii) the Registration Rights Agreement has been
duly and validly authorized, executed and delivered by the
Company and the Subsidiary Guarantors and is the legally valid
and binding agreement of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms except that (i) the
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
similar laws relating to or affecting creditors generally,
(ii) the availability of equitable remedies may be limited by
equitable principles of general applicability and (iii) the
enforceability of rights to indemnification and contribution
under the Registration Rights Agreement may be limited by
applicable law and equitable consideration of public policy
issues; the Registration Rights Agreement conforms in all
material respects to the description thereof in the Offering
Memorandum;
(viii) each of the agreements and other documents
comprising the Credit Agreement have been duly authorized,
executed and delivered by the Company and the Subsidiary
Guarantors, and constitute valid and binding agreements of the
Company and the Subsidiary Guarantors, enforceable in
accordance with their terms, except that the enforceability
thereof may be limited by bankruptcy,
17
<PAGE> 18
insolvency, reorganization, moratorium, fraudulent transfer or
similar laws relating to or affecting creditors generally and
the availability of equitable remedies may be limited by
equitable principles of general applicability;
(ix) the Transactions have been duly authorized by
all requisite corporate action on the part of each of the
Company and the Subsidiary Guarantors;
(x) the Notes and the guarantees thereof have been
duly authorized, and when issued and authenticated in
accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms hereof
will constitute valid and binding obligations of the Company
and the Subsidiary Guarantors, respectively, enforceable
against the Company and the Subsidiary Guarantors,
respectively, in accordance with their terms and entitled to
the benefits provided by the Indenture except that the
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
similar laws relating to or affecting creditors generally and
the availability of equitable remedies may be limited by
equitable principles of general applicability; the Indenture
(including the guarantees of the Notes by each of the
Subsidiary Guarantors) has been duly authorized by the Company
and the Subsidiary Guarantors and, when executed and delivered
by the Company and the Subsidiary Guarantors (assuming the due
execution and delivery thereof by the Trustee), the Indenture
will constitute a valid and binding instrument of the Company
and the Subsidiary Guarantors enforceable against the Company
and the Subsidiary Guarantors in accordance with its terms,
except that the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws relating to or affecting creditors
generally and the availability of equitable remedies may be
limited by equitable principles of general applicability; and
the Notes and the Indenture conform, in all material respects,
to the descriptions thereof in the Offering Memorandum;
(xi) no consent, approval, authorization, order,
license, registration or qualification of or with any United
States court or governmental agency or body is required for
the issue and sale by the Company of the Notes, the
consummation by the Company and the Subsidiary Guarantors of
the Transactions or, the execution, delivery and performance
of this Agreement, the Indenture, the Notes or the
Registration Rights Agreement by the Company and the
Subsidiary Guarantors and compliance by the Company and the
Subsidiary
18
<PAGE> 19
Guarantors with all the provisions thereof and the
consummation of the transactions herein and therein
contemplated, except as may be required under state securities
or Blue Sky laws (as to which such counsel need not express an
opinion), and those which have heretofore been obtained in
connection with the purchase and distribution of the Notes by
the Initial Purchasers;
(xii) to such counsel's knowledge, neither the
Company nor any Subsidiary Guarantor is (i) in violation of
its Certificate of Incorporation or By-Laws, (ii) in breach or
violation of any judgment, decree or order to which it is a
named party, except for any such breach or violation which
would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole, or (iii) in breach or default under any of the terms or
provisions of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the
Company or a Subsidiary Guarantor is or will be, following the
Transactions a party or by which it is or will be bound or to
which any of the property or assets of the Company or any
Subsidiary Guarantor is or will be subject, except for any
such breach, or default, which would not, individually or in
the aggregate, have a material adverse effect on the Company
and its subsidiaries taken as a whole; the issue and sale of
the Notes and the execution, delivery and performance by the
Company and the Subsidiary Guarantors of all of their
respective obligations under the Notes, the Indenture, the
Registration Rights Agreement and this Agreement and the
consummation of the transactions herein and therein
contemplated and the consummation by the Company and the
Subsidiary Guarantors of the Transactions will not conflict
with or constitute or result in a breach or a default under or
violation of any of (i) the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any Subsidiary
Guarantor is a party or by which it is bound or to which any
of the property or assets of the Company or any Subsidiary
Guarantor is subject except for any such conflict, breach,
default or violation which would not, individually or in the
aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole, (ii) the Certificate of
Incorporation or By-Laws of the Company or any Subsidiary
Guarantor, or (iii) any judgment, decree or order known to
such counsel to which the Company or any Subsidiary Guarantor
is a named party, except for any such conflict, breach or
violation which would not, individually or in the aggregate,
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
19
<PAGE> 20
(xiii) to such counsel's knowledge, no legal or
governmental investigations, actions, suits or proceedings are
pending or threatened to which the Company or any of its
subsidiaries is a party (i) that would be required under the
Securities Act to be described in a prospectus and are not
described in the Offering Memorandum or (ii) which seek to
restrain, enjoin or prevent the consummation of or otherwise
challenge (A) the issuance or sale of the Notes in the manner
contemplated by the Offering Memorandum or (B) the
Transactions; no contract, agreement, instrument or document
known to such counsel of a character required to be described
in the Offering Memorandum in order to make the statements
therein not misleading, is not so described;
(xiv) the statements in the Offering Memorandum
under "Certain Transactions" insofar as such statements
constitute a summary of the documents or legal matters
referred to therein, fairly present in all material respects
such documents or legal matters;
(xv) neither the Company nor any Subsidiary
Guarantor is, or, after giving effect to the Transactions,
will be, an "investment company" as defined in the Investment
Company Act of 1940, as amended;
(xvi) except as disclosed in the Offering
Memorandum, there are no business relationships or related
party transactions known to such counsel which would be
required to be disclosed by Item 404 of Regulation S-K of the
Securities and Exchange Commission in a registration statement
of the Company and the Subsidiary Guarantors becoming
effective on the date hereof;
(xvii) nothing has come to such counsel's attention
which causes such counsel to believe that (except for the
financial statements and other financial and statistical
information included therein as to which such counsel need
express no belief) the Offering Memorandum, as of its date of
issuance contained, and, as amended or supplemented if
applicable, as of the Closing Date contains, any untrue
statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of Delaware and New York, to the extent such counsel deems proper and
to the extent
20
<PAGE> 21
specified in such opinion, if at all, upon an opinion or opinions (reasonably
satisfactory to the Initial Purchasers' counsel) of other counsel, reasonably
acceptable to the Initial Purchasers' counsel, familiar with the applicable
laws; and (B) as to matters of fact, to the extent such counsel deems proper, on
certificates of public officials and responsible officers of the Company. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel upon which they relied is in form satisfactory to such counsel
and, in such counsel's opinion, the Initial Purchasers and they are justified in
relying thereon.
With respect to the matters to be covered in subparagraph (xiv) above
counsel may state their opinion and belief is based upon their participation in
the preparation of the Offering Memorandum and any amendment or supplement
thereto but is without independent check or verification except as specified.
The opinion of Koerner Silberberg & Weiner, LLP described above shall
be rendered to the Initial Purchasers at the request of the Company and shall so
state therein.
(f) Arnold & Porter, counsel for Holdings, shall have
furnished to the Initial Purchasers their written opinion, dated the
Closing Date in form and substance satisfactory to the Initial
Purchasers, to the effect that:
(i) Holdings has been duly incorporated and is
validly existing as a corporation in good standing under laws
of Delaware;
(ii) except to secure obligations under the Credit
Agreement, all of the outstanding shares of capital stock of
the Company are owned by Holdings, free and clear of all
liens, encumbrances, equities or claims;
(iii) Holdings has all requisite corporate power and
authority to consummate the Transactions, to execute, deliver
and perform its obligations under this Agreement, the Warrant
Agreement and the Warrants and to issue, sell and deliver the
Warrants to the Initial Purchasers as provided herein;
(iv) this Agreement has been duly authorized,
executed and delivered by Holdings;
(v) the Transactions have been duly authorized by
all requisite corporate action on the part of CPAC;
(vi) each of the agreements and other documents
comprising the Credit Agreement have been duly authorized,
executed and
21
<PAGE> 22
delivered by Holdings, and constitute valid and binding
agreements of Holdings, enforceable in accordance with their
terms, except that the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws relating to or affecting
creditors generally and the availability of equitable remedies
may be limited by equitable principles of general
applicability;
(vii) no consent, approval, authorization, order,
license, registration or qualification of or with any United
States court or governmental agency or body is required for
the issue and sale by Holdings of the Warrants, the
consummation by CPAC of the Transactions, the execution,
delivery and performance of this Agreement, the Warrant
Agreement or the Warrants, and compliance by Holdings with all
the provisions thereof and the consummation of the
transactions herein and therein contemplated, except as may be
required under state securities or Blue Sky laws (as to which
such counsel need not express an opinion), and those which
have been obtained in connection with the purchase and
distribution of the Units by the Initial Purchasers;
(viii) to such counsel's knowledge, Holdings is not
in violation of its Certificate of Incorporation or By-Laws,
except for any such breach, which would not, individually or
in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as a whole; the issue and
sale of the Warrants and the execution, delivery and
performance by Holdings of all of its obligations under the
Warrants, the Warrant Agreement and this Agreement and the
consummation of the transactions herein and therein by
Holdings will not conflict with or constitute or result in a
breach or a default under or violation of any of (i) the terms
or provisions of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which CPAC is a
party or by which it is bound or to which any of the property
or assets of CPAC is subject except for any such conflict,
breach, default or violation which would not, individually or
in the aggregate, have a material adverse effect on Holdings,
(ii) the Certificate of Incorporation or By-Laws of Holdings,
or (iii) any judgment, decree or order known to such counsel
to which Holdings is a named party, except for any such
conflict, breach or violation which would not, individually or
in the aggregate, have a material adverse effect on Holdings;
(ix) the consummation by CPAC of the Transactions
will not conflict with or constitute or result in a breach or
a default under or
22
<PAGE> 23
violation of any of (i) the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which CPAC is a party or by which
it is bound or to which any of the property or assets of CPAC
is subject except for any such conflict, breach, default or
violation which would not, individually or in the aggregate,
have a material adverse effect on the Company and its
subsidiaries, taken as a whole, (ii) the Certificate of
Incorporation or By-Laws of CPAC, or (iii) any judgment,
decree or order known to such counsel to which CPAC is a named
party, except for any such conflict, breach or violation which
would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(x) the capital stock of Holdings outstanding upon
consummation of the Transactions is as described in the
Offering Memorandum and is duly authorized, validly issued,
fully paid and non-assessable and owned by Thayer and the
Management Investors; the capital stock of Holdings held by
Thayer will be free and clear of all liens, encumbrances,
security interests and claims; and the Warrant Shares have
been duly authorized and reserved for issuance upon exercise
of the Warrants and, upon issuance in accordance with the
terms of the Warrants, the Warrant Shares will be validly
issued, fully paid and non-assessable and such issuance will
not be subject to any pre-emptive or similar rights;
(xi) the statements in the Offering Memorandum under
"The Transactions", "Description of the Units", "Description
of Notes," "Description of Warrants," "Description of Credit
Agreement" and "Certain Federal Income Tax Considerations,"
insofar as such statements constitute a summary of the
documents or legal matters referred to therein, fairly present
in all material respects such documents or legal matters;
(xii) no registration under the Securities Act of the
Units is required in connection with the sale of the Units to
the Initial Purchasers as contemplated by this Agreement and
the Offering Memorandum or in connection with the initial
resale of the Units by the Initial Purchasers in accordance
with Section 2 (including Annex I) of this Agreement, and the
Indenture is not required to be qualified under the TIA, in
each case assuming (i) that the purchasers who buy the Units
in the initial resales are "qualified institutional buyers"
(within the meaning of Rule 144A under the Securities Act),
non-U.S. Persons (as defined in Rule 902 under the Securities
Act) or accredited investors (as defined in Rule 501(a)(1),
(2), (3) or (7) of
23
<PAGE> 24
Regulation D under the Securities Act), (ii) the accuracy of
the Initial Purchasers' representations and those of the
Company and the Subsidiary Guarantors contained in this
Agreement regarding the absence of a general solicitation in
connection with the sale of the Units to the Initial
Purchasers and the initial resales thereof, and (iii) the
accuracy of the representations made by each accredited
investor who purchases Units in the initial resale as set
forth in the Offering Memorandum;
(xiii) the Units satisfy the requirements set forth
in Rule l44A(d)(3) under the Securities Act;
(xiv) the Warrants have been duly authorized and,
when issued and countersigned in accordance with the terms of
the Warrant Agreement and delivered against payment therefor
in accordance with the terms thereof, will conform in all
material respects to the description thereof in the Offering
Memorandum and will constitute valid and binding obligations
of Holdings, enforceable in accordance with their terms,
except that the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws relating to or affecting creditors
generally and the availability of equitable remedies may be
limited by equitable principles of general applicability; and
(xv) the Warrant Agreement has been duly authorized
and, when executed and delivered, will constitute a valid and
binding obligation of Holdings, enforceable against it in
accordance with its terms, except that the enforceability
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar
laws relating to or affecting creditors and the availability
of equitable remedies may be limited by equitable principles
of general applicability;
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of Delaware and New York, to the extent such counsel deems proper and
to the extent specified in such opinion, if at all, upon an opinion or opinions
(reasonably satisfactory to the Initial Purchasers' counsel) of other counsel,
reasonably acceptable to the Initial Purchasers' counsel, familiar with the
applicable laws; and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of public officials and responsible officers of the
Company. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel upon which they relied is in form satisfactory
to such counsel and, in such counsel's opinion, the Initial Purchasers and they
are justified in relying thereon.
24
<PAGE> 25
The opinion of Arnold & Porter described above shall be rendered to the
Initial Purchasers at the request of Holdings and shall so state therein.
(g) on the date of the issuance of the Offering Memorandum and
also on the Closing Date, Arthur Andersen LLP shall have furnished to
the Initial Purchasers letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, containing
statements and information of the type customarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain other financial information contained
in the Offering Memorandum;
(h) The Company and the Subsidiary Guarantors shall have
executed and delivered the Registration Rights Agreement substantially
in the form attached hereto as Annex II;
(i) the Credit Agreement shall have been executed in form and
substance reasonably satisfactory to the Initial Purchasers and each of
the other Transactions shall occur simultaneously with the Closing;
(j) the Initial Purchasers shall have received on and as of
the Closing Date an opinion of Davis Polk & Wardwell, counsel to the
Initial Purchasers, with respect to the validity of the Indenture, the
Warrant Agreement, the Notes and the Warrants, and such other related
matters as the Initial Purchasers may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(k) on or prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further certificates and
documents as the Initial Purchasers shall reasonably request; and
(l) on or prior to the Closing Date, each of Lexington
Funding, Inc. and Verdi Funding Corp. shall have merged with and into
Concord Financial Services, Inc., with Concord Financial Services, Inc.
as the surviving corporation.
7. Each of Holdings, the Company and the Subsidiary Guarantors jointly
and severally agree to indemnify and hold harmless each Initial Purchaser and
each person, if any, who controls any Initial Purchaser within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages and liabilities (including
without limitation the legal fees and other expenses reasonably incurred in
connection with any suit, action or proceeding or any claim asserted) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (and any
25
<PAGE> 26
amendment or supplement thereto if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Initial Purchaser furnished to the
Company in writing by such Initial Purchaser through J.P. Morgan Securities Inc.
expressly for use therein.
Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless Holdings, the Company, the Subsidiary Guarantors, their
directors and officers and each person who controls Holdings or the Company
within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from Holdings, the
Company and the Subsidiary Guarantors to each Initial Purchaser, but only with
reference to information relating to such Initial Purchaser furnished to the
Company in writing by such Initial Purchaser through J.P. Morgan Securities Inc.
expressly for use in the Offering Memorandum, any amendment or supplement
thereto, or any preliminary offering memorandum.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred, reasonably promptly after the Indemnifying
Person has been provided documentation in customary form therefor. Any such
separate firm for the Initial
26
<PAGE> 27
Purchasers and such control persons of Initial Purchasers shall be designated in
writing by J.P. Morgan Securities Inc. and any such separate firm for Holdings,
the Company, the Subsidiary Guarantors, their directors, and officers and such
control persons of Holdings and the Company shall be designated in writing by
Holdings or the Company, as the case may be. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to approve and consent to a
settlement of any proceeding or claim and to reimburse the Indemnified Person
for fees and expenses related thereto contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding or claim effected without its written consent if
(i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have given written notice to such Indemnified Person stating whether
or not such Indemnifying Person consents to such settlement in accordance with
such request prior to the date of such settlement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by Holdings, the Company and the Subsidiary Guarantors on the
one hand and the Initial Purchasers on the other hand from the offering of the
Units 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
Holdings, the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchasers on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by
Holdings, the Company and the Subsidiary Guarantors on the one hand and the
Initial Purchasers on the other shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting expenses)
received by Holdings and the Company, respectively, and the total discounts and
commissions received by the Initial
27
<PAGE> 28
Purchasers, in each case as set forth in the table on the cover of the Offering
Memorandum, bear to the aggregate offering price of the Units. The relative
fault of Holdings, the Company and the Subsidiary Guarantors on the one hand and
the Initial Purchasers on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Holdings, the Company, the Subsidiary Guarantors and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if the
Initial Purchasers 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. The amount paid or payable
by an Indemnified Person 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 incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall an Initial Purchaser be required to contribute any
amount in excess of the amount by which the total price at which the Notes
purchased by it were offered exceeds the amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 7 are several in proportion to the respective principal
amount of the Notes set forth opposite their names in Schedule I hereto, and not
joint.
The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
Indemnified Party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of Holdings, the Company and the
Subsidiary Guarantors set forth in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Initial Purchaser or any person
controlling any Initial Purchaser or by or on behalf of Holdings, the Company,
the Subsidiary Guarantors, their officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Units.
28
<PAGE> 29
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchasers, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of or
guaranteed by the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Initial Purchasers, is material and adverse and
which, in the judgment of the Initial Purchasers, makes it impracticable to
market the Notes on the terms and in the manner contemplated in the Offering
Memorandum.
9. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
If, on the Closing Date any of the Initial Purchasers shall fail or
refuse to purchase Units which it or they have agreed to purchase hereunder on
such date, and arrangements satisfactory to the Initial Purchasers and the
Company for the purchase of such Units are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Initial Purchaser or the Company. In any such case either the
Initial Purchasers or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Offering Memorandum or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
10. If this Agreement shall be terminated by the Initial Purchasers, or
any of them, because of any failure or refusal on the part of Holdings, the
Company or any Subsidiary Guarantor to comply with the terms or to fulfill any
of the conditions of this Agreement, or if for any reason Holdings, the Company
or any Subsidiary Guarantor shall be unable to perform their obligations under
this Agreement or any condition of the Initial Purchasers' obligations cannot be
fulfilled, the Company agrees to reimburse the Initial Purchasers or such
Initial Purchasers as have so terminated this Agreement with respect to
themselves severally, for all out-of-pocket expenses (including the fees and
expenses of their counsel) reasonably incurred by such Initial Purchasers in
connection with this Agreement or the offering contemplated hereunder.
29
<PAGE> 30
11. This Agreement shall inure to the benefit of and be binding upon
Holdings, the Company and the Subsidiary Guarantors, the Initial Purchasers, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Units from any Initial Purchaser
shall be deemed to be a successor by reason merely of such purchase.
12. Any action by the Initial Purchasers hereunder may be taken by J.P.
Morgan Securities Inc. alone on behalf of the Initial Purchasers, and any such
action taken by J.P. Morgan Securities Inc. alone shall be binding upon the
Initial Purchasers. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication and will be effective only on receipt.
Notices to the Initial Purchasers shall be given to the Initial Purchasers c/o
J.P. Morgan Securities Inc., 60 Wall Street, New York, New York 10260;
Attention: Syndicate Department. Notices to Holdings shall be given to it c/o
Thayer Equity Investors III, L.P., 1455 Pennsylvania Avenue, N.W., #350,
Washington, D.C. 20004; Attention: Paul G. Stern, with a copy to Arnold &
Porter, 555 12th Street, N.W., Washington, D.C. 20004; Attention: Neil Goodman.
Notice to the Company shall be given to it at One Michael Avenue, Farmingdale,
New York 11735; Attention: President with a copy to Koerner Silberberg & Weiner,
LLP, 112 Madison Avenue, New York, New York 10016-7424; Attention: Carl Seldin
Koerner.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
30
<PAGE> 31
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
---------------------------------
Name: Thomas S. Taylor
Title:
COLORADO PRIME HOLDINGS, INC.
By: /s/ V. Frank Pottow
---------------------------------
Name: V. Frank Pottow
Title: Treasurer
KAL-MAR PROPERTIES CORP.
By: /s/ Thomas S. Taylor
---------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
CONCORD FINANCIAL SERVICES, INC.
By: /s/ Thomas S. Taylor
---------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
PRIME FOODS DEVELOPMENT CORP.
By: /s/ Thomas S. Taylor
---------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
31
<PAGE> 32
Accepted: May 6, 1997
J.P. MORGAN SECURITIES INC.
NATWEST CAPITAL MARKETS LIMITED
DRESDNER KLEINWORT
BENSON NORTH AMERICA LLC
By: J.P. Morgan Securities Inc.
By: /s/ Brian J. Van Elslander
----------------------------------
Name: Brian J. Van Elslander
Title: Vice President
32
<PAGE> 33
ANNEX I
(A) The Units have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Initial Purchaser represents that in
connection with sales outside the United States, it has offered and sold the
Units and will offer and sell the Units to, or for the account or benefit of
U.S. persons (i) as part of their distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, only in accordance with Rule 903 of Regulation S or otherwise in
accordance with Section 2 of this Agreement. Accordingly, each Initial Purchaser
agrees that neither it, its affiliates nor any persons acting on its or their
behalf has engaged or will engage in any directed selling efforts with respect
to the Units and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Initial Purchaser agrees that, at
or prior to confirmation of sale of Units (other than a sale pursuant to Rule
144A), it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Units from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Units covered hereby has not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S under the Securities Act or otherwise in accordance
with Section 2 of this Agreement. Terms used above have the meaning
given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution or
delivery of the Units, except with its affiliates or with the prior written
consent of the Company.
(B) Notwithstanding the foregoing, Units in registered form may be
offered, sold and delivered by the Initial Purchasers in the United States and
to U.S. persons pursuant to Section 2 of this Agreement without delivery of the
written statement required by paragraph (A) above.
(C) Each Initial Purchaser agrees that it will not offer, sell or
deliver any of the Units in any jurisdiction outside the United States except
under circumstances that will result in compliance with the applicable laws
thereof, and that it will take
<PAGE> 34
at its own expense whatever action is required to permit its purchase and resale
of the Units in such jurisdictions. Each Initial Purchaser understands that no
action has been taken to permit a public offering in any jurisdiction outside
the United States where action would be required for such purposes. Each Initial
Purchaser agrees not to cause any advertisement of the Units to be published in
any newspaper or periodical or posted in any public place and not to issue any
circular relating to the Units.
(D) Each Initial Purchaser represents and agrees that it (i) will not
offer or sell any Notes or Warrants to persons in the United Kingdom prior to
admission of the Notes or Warrants as applicable, to listing in accordance with
Part IV of the Financial Services Act of 1986 (the "Financial Services Act"),
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for purpose of
their business within the meaning of the Public Offers of Securities Regulations
1995 or the Financial Services Act, (ii) will comply with all applicable
provisions of the Financial Services Act with respect to anything done by them
in relation to the Notes or Warrants in, from or otherwise involving the United
Kingdom, and (iii) will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Units other than any document
required or permitted to be published by listing rules under Part IV of the
Financial Services Act, to a person who is of a kind described in Article II(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom the document may otherwise lawfully be issued
or passed on.
<PAGE> 35
SCHEDULE I
<TABLE>
<CAPTION>
Number
of Units
Initial Purchaser To Be Purchased
- ----------------- ---------------
<S> <C>
J.P. Morgan Securities Inc ............................. 45,000
NatWest Capital Markets Limited ........................ 45,000
Dresdner Kleinwort Benson North America LLC ............ 10,000
-------
Total: ........................................ 100,000
=======
</TABLE>
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
Dated as of May 9, 1997
among
COLORADO PRIME CORPORATION,
THE SUBSIDIARY GUARANTORS NAMED HEREIN,
J.P. MORGAN SECURITIES INC.,
NATWEST CAPITAL MARKETS LIMITED
and
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of May
9, 1997, by and among COLORADO PRIME CORPORATION, a corporation formed under the
laws of the State of Delaware (the "Company"), the Subsidiary Guarantors listed
on Schedule I hereto (together with any future subsidiaries which shall become
party hereto pursuant to Section 10(m), the "Subsidiary Guarantors"), J.P.
MORGAN SECURITIES INC., NATWEST CAPITAL MARKETS LIMITED and DRESDNER KLEINWORT
BENSON NORTH AMERICA LLC (collectively, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 6, 1997, among the Company, Colorado Prime Holdings,
Inc. ("CPH"), the Subsidiary Guarantors and the Initial Purchasers (the
"Purchase Agreement") relating to the sale by the Company to the Initial
Purchasers, severally, of 100,000 Units (the "Units") consisting in the
aggregate of $100,000,000 aggregate principal amount of the Company's 12.50%
Senior Notes due 2004 (the "Notes") and Warrants (the "Warrants") to purchase
19,608 shares of common stock, par value $0.01 per share, of CPH. In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement for
the equal benefit of both of the Initial Purchasers and their direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"ADDITIONAL INTEREST": See Section 4(a).
"ADVICE": See Section 5.
"APPLICABLE PERIOD": See Section 2(b).
"COMPANY": See the introductory paragraph to this Agreement.
"CONSUMMATION DATE": The 165th day after the Issue Date.
"EFFECTIVENESS DATE": The 135th day after the Issue Date.
"EFFECTIVENESS PERIOD": See Section 3(a).
<PAGE> 3
-2-
"EVENT DATE": See Section 4(b).
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"EXCHANGE OFFER": See Section 2(a).
"EXCHANGE REGISTRATION STATEMENT": See Section 2(a).
"EXCHANGE NOTES": See Section 2(a).
"FILING DATE": The 60th day after the Issue Date.
"HOLDER": Any record holder of Registrable Securities.
"INDEMNIFIED PERSON": See Section 7.
"INDEMNIFYING PERSON": See Section 7.
"INDENTURE": The Indenture, dated as of May 9, 1997, among the Company,
the Subsidiary Guarantors and The Bank of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
"INITIAL PURCHASERS": See the introductory paragraph to this Agreement.
"INITIAL SHELF REGISTRATION": See Section 3(a).
"INSPECTORS": See Section 5(o).
"ISSUE DATE": The original issue date of the Notes.
"NASD": See Section 5(s).
"NOTES": See the preamble to this Agreement.
"PARTICIPANT": See Section 7.
"PARTICIPATING BROKER-DEALER": See Section 2(b).
"PERSON": An individual, corporation, limited or general partnership,
joint venture, limited liability company, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
<PAGE> 4
-3-
"PRIVATE EXCHANGE": See Section 2(b).
"PRIVATE EXCHANGE NOTES": See Section 2(b).
"PROSPECTUS": The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"RECORDS": See Section 5(o).
"REGISTRABLE SECURITIES": The Notes upon original issuance of the Notes
and at all times subsequent thereto, each Exchange Note as to which Section
2(c)(1)(i) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Notes, until in the case
of any such Notes, Exchange Notes or Private Exchange Notes, as the case may be,
(i) a Registration Statement (other than, with respect to any Exchange Note as
to which Section 2(c)(1)(i) hereof is applicable, the Exchange Registration
Statement) covering such Notes, Exchange Notes or Private Exchange Notes has
been declared effective by the SEC and such Notes, Exchange Notes or Private
Exchange Notes, as the case may be, have been disposed of in accordance with
such effective Registration Statement, (ii) such Notes, Exchange Notes or
Private Exchange Notes, as the case may be, are sold in compliance with Rule
144, or (iii) such Notes, Exchange Notes or Private Exchange Notes, as the case
may be, cease to be outstanding.
"REGISTRATION STATEMENT": Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that covers
any of the Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"RULE 144": Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
<PAGE> 5
-4-
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"RULE 144A": Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
"RULE 415": Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
"SEC": The Securities and Exchange Commission.
"SECURITIES ACT": The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
"SHELF NOTICE": See Section 2(c).
"SHELF REGISTRATION": See Section 3(b).
"SUBSEQUENT SHELF REGISTRATION": See Section 3(b).
"SUSPENSION": See Section 3(a).
"TIA": The Trust Indenture Act of 1939, as amended.
"TRUSTEE": The trustee as defined in the Indenture and the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING": A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
<PAGE> 6
-5-
2. EXCHANGE OFFER
(a) The Company and the Subsidiary Guarantors agree to file with the
SEC as soon as practicable after the Issue Date, but in no event later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Securities for a like aggregate principal amount of debt securities
of the Company which are identical in all material respects to the Notes (the
"Exchange Notes") and which are entitled to the benefits of the Indenture (which
shall be qualified under the TIA), except that the Exchange Notes shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Company and
the Subsidiary Guarantors agree to use their reasonable best efforts to keep the
Exchange Offer open for at least 20 business days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to Holders
and to consummate the Exchange Offer on or prior to the Consummation Date. The
Exchange Offer will be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and will comply with all applicable
rules and regulations under the Exchange Act. Each Holder who participates in
the Exchange Offer will be deemed to represent that any Exchange Notes received
by it will be acquired in the ordinary course of its business, that at the time
of the consummation of the Exchange Offer such Holder will have no arrangement
with any person to participate in the distribution of the Exchange Notes in
violation of the provisions of the Securities Act, and that such Holder is not
an affiliate of the Company within the meaning of the Securities Act. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
provisions of this Agreement shall continue to apply, mutatis mutandis, solely
with respect to Registrable Securities that are Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers, and neither the Company nor
any Subsidiary Guarantor shall have any further obligation to register
Registrable Securities (other than Private Exchange Notes and other than
Exchange Notes as to which clause (c)(l)(i) hereof applies) pursuant to Section
3 of this Agreement. No securities other than the Exchange Notes shall be
included in the Exchange Registration Statement.
(b) The Company and the Subsidiary Guarantors shall include within the
Prospectus contained in the Exchange Registration Statement one or more
section(s) reasonably acceptable to the Initial Purchasers, which shall contain
a summary statement of the positions taken or policies made by the Staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the Staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of
<PAGE> 7
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the Staff of the SEC. Such section(s) shall also allow the use of the Prospectus
by all persons subject to the prospectus delivery requirements of the Securities
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes.
In the event that any Exchange Notes are received by any Participating
Broker-Dealers and the Company is notified by such Participating Broker-Dealers
of such event, the Company and the Subsidiary Guarantors shall use their
reasonable best efforts to keep the Exchange Registration Statement effective
and to amend and supplement the Prospectus contained therein in order to permit
such Prospectus to be lawfully delivered by all persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as such persons must comply with such requirements in order to resell the
Exchange Notes, provided that such period shall not exceed 180 days after the
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, an Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Company upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to each such Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Company that are identical in all
material respects to the Exchange Notes (the "Private Exchange Notes") (and
which are issued pursuant to the same indenture as the Exchange Notes) except
for the placement of a restrictive legend on such Private Exchange Notes. The
Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and Private Exchange Notes will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
Issue Date.
The Indenture shall provide that the holders of any of the Exchange
Notes and the Private Exchange Notes will vote and consent together on all
matters (to which such holders are entitled to vote or consent) as one class and
that none of the holders of the Exchange Notes and the Private Exchange Notes
will have the right to vote or consent as a separate class on any matter (to
which such holders are entitled to vote or consent).
(c) If (1) prior to the consummation of the Exchange Offer, the Company
reasonably determines in good faith or Holders of at least a majority in
aggregate principal amount of the Registrable Securities notify the Company that
they have reasonably determined in good faith that (i) in the opinion of
counsel, the Exchange Notes would not, upon receipt, be tradeable by such
Holders who are
<PAGE> 8
-7-
not affiliates of the Company without restriction under the Securities Act and
without restrictions under applicable blue sky or state securities laws or (ii)
in the opinion of counsel, the SEC is unlikely to permit the consummation of the
Exchange Offer and/or (2) subsequent to the consummation of the Private
Exchange, holders of at least a majority in aggregate principal amount of the
Private Exchange Notes so request with respect to the Private Exchange Notes
and/or (3) the Exchange Offer is commenced and not consummated prior to the 45th
day following the Consummation Date for any reason, then the Company shall
promptly deliver to the Holders and the Trustee notice thereof (the "Shelf
Notice") and shall thereafter file an Initial Shelf Registration as set forth in
Section 3 (which in the circumstances contemplated by clause (2) of this
sentence will relate solely to the Private Exchange Notes) pursuant to Section
3. The parties hereto agree that, following the delivery of a Shelf Notice to
the Holders of Registrable Securities, in the circumstances contemplated by
clauses (1) and/or (3) of the preceding sentence, neither the Company nor any
Subsidiary Guarantor shall have any further obligation to conduct the Exchange
Offer or the Private Exchange under this Section 2.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company and the Subsidiary
Guarantors shall as promptly as reasonably practicable prepare and file with the
SEC a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities (the "Initial
Shelf Registration"). If the Company and the Subsidiary Guarantors shall have
not yet filed an Exchange Offer, the Company and the Subsidiary Guarantors shall
use their reasonable best efforts to file with the SEC the Initial Shelf
Registration on or prior to the Filing Date. Otherwise, the Company and the
Subsidiary Guarantors shall use their reasonable best efforts to file with the
SEC the Initial Shelf Registration within 45 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Securities for
resale by such holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company and the
Subsidiary Guarantors shall not permit any securities other than the Registrable
Securities to be included in the Initial Shelf Registration or any Subsequent
Shelf Registration. The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the 75th day after the filing
thereof with the Commission and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is 24
months from the Issue Date (the "Effectiveness Period"), or such shorter period
ending when (i) the Notes registered thereunder can be sold by non-
<PAGE> 9
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affiliates of the Company pursuant to Rule 144(k) under the Securities Act, (ii)
all Registrable Securities covered by the Initial Shelf Registration have been
sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (iii) a Subsequent Shelf Registration covering all of the
Registrable Securities has been declared effective under the Securities Act;
provided, however, that the Company will have the ability to suspend the
availability of the Shelf Registration during any consecutive 365-day period for
up to two periods of up to 45 consecutive days, but not more than an aggregate
of 60 days during any 365-day period (a "Suspension"), which Suspension shall
not constitute a default hereunder notwithstanding anything to the contrary
contained herein.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the securities registered thereunder or because the securities registered
thereunder may be sold by non-affiliates of the Company pursuant to Rule 144(k)
under the Securities Act), the Company and the Subsidiary Guarantors shall use
their reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
and the Subsidiary Guarantors shall use their reasonable best efforts to cause
the Subsequent Shelf Registration to be declared effective as soon as
practicable after such filing and to keep such Registration Statement
continuously effective until the end of the Effectiveness Period. As used herein
the term "Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company and the Subsidiary
Guarantors shall promptly supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Securities covered by such
Registration Statement or by any underwriter of such Registrable Securities.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Securities will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company
<PAGE> 10
-9-
agrees to pay, as liquidated damages, additional interest on the Registrable
Securities ("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect and shall not be
duplicative):
(i) if the Exchange Registration Statement (or, if the Exchange
Offer is not permitted under applicable law or SEC policy, the Initial
Shelf Registration) has not been filed on or prior to the Filing Date,
Additional Interest shall accrue on the Registrable Securities over and
above the stated interest at a rate of 0.25% per annum for the first 90
days immediately following the Filing Date, such Additional Interest
rate increasing by an additional 0.25% per annum at the beginning of
each subsequent 90-day period;
(ii) if neither the Exchange Registration Statement is declared
effective by the SEC nor the Shelf Registration is filed with the SEC
on or prior to the Effectiveness Date, Additional Interest shall accrue
on the Registrable Securities included or which should have been
included in such Registration Statement over and above the stated
interest at a rate of 0.25% per annum for the first 90 days immediately
following the day after the Effectiveness Date, such Additional
Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; and
(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on
or prior to the Consummation Date, (B) if applicable, the Shelf
Registration has not been declared effective on or prior to the
Consummation Date or (C) if applicable, such Shelf Registration ceases
to be effective at any time during the Effectiveness Period, then
Additional Interest shall accrue on the Registrable Securities (over
and above any interest otherwise payable on the Registrable Securities)
at a rate of 0.25% per annum for the first 90 days commencing on the
(x) 166th day after the Issue Date, in the case of (A) or (B) above, or
(y) the day such Shelf Registration ceases to be effective in the case
of (C) above, such Additional Interest rate increasing by an additional
0.25% per annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate 1.0% per annum; and
provided, further, that (1) upon the filing of the Exchange Registration
Statement (or, if the Exchange Offer is not permitted under applicable law or
SEC policy, the Initial Shelf Registration) as required hereunder (in the case
of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange
Registration Statement or the
<PAGE> 11
-10-
filing of the Shelf Registration as required hereunder (in the case of clause
(ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon
the effectiveness of the Shelf Registration (in the case of clause (iii)(B) of
this Section 4(a)) or upon the effectiveness of the Shelf Registration which had
ceased to remain effective (in the case of clause (iii)(C) of this Section
4(a)), Additional Interest on the Registrable Securities as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue. It being understood and agreed that, notwithstanding any provision to
the contrary, so long as any Registrable Security is then covered by an
effective Shelf Registration, no Additional Interest shall accrue on such
Registrable Security.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). The Company shall pay the
Additional Interest due on the Registrable Securities by depositing with the
Trustee, in trust, for the benefit of the Holders thereof, on or before the
applicable semi-annual interest payment date, immediately available funds in
sums sufficient to pay the Additional Interest then due to Holders of
Registrable Securities. The Additional Interest amount due shall be payable on
each interest payment date to the record Holder of Registrable Securities
entitled to receive the interest payment to be made on such date as set forth in
the Indenture. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the affected Registrable Securities of such Holders, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and, the denominator of which is 360. Each
obligation to pay Additional Interest shall be deemed to accrue immediately
following the occurrence of the applicable Event Date. The parties hereto agree
that the Additional Interest provided for in this Section 4 constitutes a
reasonable estimate of the damages that may be incurred by Holders of
Registrable Securities by reason of the failure of a Shelf Registration or
Exchange Offer to be filed or declared effective, or the Exchange Offer to be
consummated, or a Shelf Registration to remain effective, as the case may be, in
accordance with this Section 4.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3 hereof, the Company and the Subsidiary Guarantors
shall effect such registrations to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company and the Subsidiary Guarantors shall:
<PAGE> 12
-11-
(a) use their reasonable best efforts to prepare and file with
the SEC, as soon as practicable after the date hereof but in any event
prior to the Filing Date in the case of the Exchange Registration
Statement and the 45th day following the Consummation Date in the case
of the Shelf Registration Statement, a Registration Statement or
Registration Statements as prescribed by Section 2 or 3, and to use
their reasonable best efforts to cause each such Registration Statement
to become effective and remain effective as provided herein, provided
that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Registration Statement filed pursuant to
Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Company and
the Subsidiary Guarantors shall upon written request furnish to and
afford the Holders of the Registrable Securities (which in the case of
Registrable Securities in the form of global certificates shall be The
Depository Trust Company ("DTC")) and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed.
(b) Prepare and file with the SEC such amendments, and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities
Act; and comply with the provisions of the Securities Act, the Exchange
Act and the rules and regulations of the SEC promulgated thereunder
applicable to them with respect to the disposition of all Registrable
Securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent
resale of any Registrable Securities being sold by a Participating
Broker-Dealer covered by any such Prospectus; neither the Company nor
the Subsidiary Guarantors shall be deemed to have used their reasonable
best efforts to keep a Registration Statement effective during the
Applicable Period if any of them voluntarily takes any action that
would result in selling Holders of the Registrable Securities covered
thereby or Participating Broker-Dealers seeking to sell Exchange Notes
not being able to sell such Registrable Securities or such Exchange
Notes during that period unless such action is required by applicable
law
<PAGE> 13
-12-
or unless the Company or the Subsidiary Guarantor complies with this
Agreement, including without limitation, the provisions of paragraph
5(j) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Securities, or each such Participating Broker-Dealer, as
the case may be, their counsel and the managing underwriters, if any,
who have provided the Company and the Subsidiary Guarantors with their
names and addresses promptly (but in any event within two business
days), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities or the Exchange Notes to be sold by any Participating
Broker- Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (iv) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of
any changes in such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and (v) of the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
<PAGE> 14
-13-
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its reasonable best
efforts to prevent, during the Effectiveness Period in the case of (1)
or during the Applicable Period in the case of (2), the issuance of any
order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Securities or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any
such order is issued, to use its reasonable best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Securities
being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, or such Holders or
counsel reasonably request to be included therein, or (ii) make all
required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Securities and to each such Participating
Broker-Dealer who so requests and to counsel and each managing
underwriter, if any, without charge, one conformed copy of the
Registration Statement or Statements and each post-effective amendment
thereto, including financial statements and schedules, and if
requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes
<PAGE> 15
-14-
during the Applicable Period, deliver to each selling Holder of
Registrable Securities, or each such Participating Broker-Dealer, as
the case may be, their counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including
each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Company and the Subsidiary Guarantors hereby
consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Registrable Securities or
each such Participating Broker- Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection
with the offering and sale of the Registrable Securities covered by or
the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use their reasonable best efforts
to register or qualify, and cooperate with the selling Holders of
Registrable Securities or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities or
Exchange Notes for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriters reasonably
request in writing, provided that where Exchange Notes held by
Participating Broker-Dealers or Registrable Securities are offered
other than through an underwritten offering, the Company and the
Subsidiary Guarantors agree to cause their counsel to perform Blue Sky
investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and
all other reasonable acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Securities covered by
the applicable Registration Statement, provided that neither the
Company nor any Subsidiary Guarantor shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction.
<PAGE> 16
-15-
(i) If a Shelf Registration is filed pursuant to Section 3,
reasonably cooperate with the selling Holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with
DTC; and enable such Registrable Securities to be registered in such
names as the managing underwriter or underwriters, if any, or Holders
may request.
(j) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(iv) or 5(c)(v) above, as promptly
as practicable prepare and (subject to Section 5(a) above) file with
the SEC, solely at the expense of the Company and the Subsidiary
Guarantors, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(k) To the extent that no such rating has yet been assigned,
use their reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement or the Exchange Notes, as the case
may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Securities covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriters, if
any.
(l) Prior to the consummation of the Exchange Offer or the
sale of any of the Registrable Securities pursuant to a Shelf
Registration, (i) provide the Trustee with printed certificates for the
Registrable Securities or Exchange Notes, as the case may be, in a form
eligible for deposit with DTC and (ii) provide a CUSIP number for the
Registrable Securities or Exchange Notes, as the case may be.
<PAGE> 17
-16-
(m) Use their best efforts to cause all Registrable Securities
covered by such Registration Statement or the Exchange Notes, as the
case may be, to be (i) listed on each securities exchange, if any, on
which the Notes are then listed, or (i) authorized to be quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or the National Market System of NASDAQ if the Notes are so
authorized.
(n) In connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing underwriters
in order to expedite or facilitate the registration or the disposition
of such Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the
business of the Company and its subsidiaries, if any, and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings,
and confirm the same if and when requested; (ii) obtain an opinion of
counsel to the Company and the Subsidiary Guarantors and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by underwriters;
(iii) obtain "comfort" letters and updates thereof in form and
substance reasonably satisfactory to the managing underwriters from the
independent certified public accountant(s) of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters in
connection with underwritten offerings and such other matters as may be
reasonably requested by underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in
Section 7 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under
such underwriting agreement, or as and to the extent required
thereunder.
<PAGE> 18
-17-
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent
retained by any such selling holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business bears, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, if any
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and its
subsidiaries, if any to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement. Each selling Holder of such Registrable Securities and each
such Participating Broker- Dealer will be required to agree that
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company unless and until
such is made generally available to the public.
(p) Provide an indenture trustee for the Registrable
Securities or the Exchange Notes, as the case may be, and cause the
Indenture to be qualified under the TIA not later than the effective
date of the Exchange Offer or the first Registration Statement relating
to the Registrable Securities; and in connection therewith, cooperate
with the Trustee and the holders of the Registrable Securities, to
effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use its reasonable best efforts to cause the Trustee
to execute, all documents as may be required to effect such changes,
and all other forms and documents required to be filed with the SEC to
enable the Indenture to be so qualified in a timely manner.
(q) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of Section
ll(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 90 days after
the end of any 12- month period (i) commencing at the end of any fiscal
quarter in which
<PAGE> 19
-18-
Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters
in such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective date of a Shelf Registration
Statement, which statements shall cover said 12-month periods.
(r) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to
the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or caused to be marked, on such
Registrable Securities that such Registrable Securities are being
cancelled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall such Registrable
Securities be marked as paid or otherwise satisfied.
(s) Reasonably cooperate with each seller of Registrable
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to
be made with the National Association of Securities Dealers, Inc. (the
"NASD").
(t) Use their reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Company and the Subsidiary Guarantors may require each seller of
Registrable Securities or Participating Broker-Dealer as to which any
registration is being effected to furnish to the Company and the Subsidiary
Guarantors such information regarding such seller or Participating Broker-Dealer
and the distribution of such Registrable Securities or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, as the Company and the
Subsidiary Guarantors may, from time to time, reasonably request. The Company
and the Subsidiary Guarantors may exclude from such registration the Registrable
Securities of any seller or Participating Broker-Dealer who unreasonably fails
to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected is
deemed to agree to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon receipt
<PAGE> 20
-19-
of any notice from the Company of a Suspension or the happening of any event of
the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j), or until it is advised in writing (the "ADVICE")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company shall give any such notice, the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable
Securities covered by such Registration Statement or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, shall have received (x)
the copies of the supplemented or amended Prospectus contemplated by Section
5(j) or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company and the Subsidiary Guarantors shall be borne
by the Company whether or not the Exchange Offer or a Shelf Registration is
filed or becomes effective, including, without limitation, (i) all registration
and filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Securities or
Exchange Notes and determination of the eligibility of the Registrable
Securities or Exchange Notes for investment under the laws of such jurisdictions
in the United States (x) where the holders of Registrable Securities are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(h),
in the case of Registrable Securities or Exchange Notes to be sold by a
Participating Broker Dealer during the Applicable Period), (ii) printing and
delivery expenses (including, without limitation, expenses of printing
certificates for Registrable Securities or Exchange Notes in a form eligible for
deposit with DTC and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or, in respect of Registrable
Securities or Exchange Notes to be sold by any Participating Broker-Dealer
during the Applicable Period, by the Holders of a majority in aggregate
principal amount of the Registrable Securities included in any Registration
Statement or of such Exchange Notes, as the case may be), (iii) fees and
disbursements of counsel for the Company and the Subsidiary Guarantors and fees
and disbursements of special counsel for the sellers of Registrable Securities
(subject to the provisions of Section 6(b)), (iv) fees and disbursements of all
<PAGE> 21
-20-
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "comfort"
letters required by or incident to such performance), (v) rating agency fees,
(vi) Securities Act liability insurance, if the Company and the Subsidiary
Guarantors desire such insurance, (vii) fees and expenses of all other Persons
retained by the Company and the Subsidiary Guarantors, (viii) internal expenses
of the Company and the Subsidiary Guarantors (including, without limitation, all
salaries and expenses of officers and employees of the Company and the
Subsidiary Guarantors performing legal or accounting duties), (ix) the expense
of any annual audit, (x) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement; provided that, in any underwritten offering of the
Notes or the Exchange Notes, each Holder is responsible for any underwriting
discounts or commissions in connection with the sale of its Notes or Exchange
Notes thereby.
(b) In connection with any Shelf Registration hereunder, the Company
and the Subsidiary Guarantors shall reimburse the Holders of the Registrable
Securities being registered in such registration for the fees and disbursements
of not more than one counsel (in addition to appropriate local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Registrable
Securities to be included in such Registration Statement. Such Holders shall be
responsible for any and all other out-of-pocket expenses of the Holders of
Registrable Securities incurred in connection with the registration of the
Registrable Securities.
7. INDEMNIFICATION
The Company and the Subsidiary Guarantors agree to indemnify and hold
harmless each Holder of Registrable Securities and each Participating Broker-
Dealer selling Exchange Notes during the Applicable Period, the officers and
directors of each such person, and each person, if any, who controls any such
person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each, a "PARTICIPANT"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements
<PAGE> 22
-21-
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by such Participant
expressly for use therein.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless each of the Company and the Subsidiary
Guarantors, their directors, their officers and each person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
and the Subsidiary Guarantors to each Participant, but only with reference to
information relating to such Participant furnished to the Company in writing by
such Participant expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto, or any preliminary prospectus. The
liability of any Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Registrable Securities
giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred by such counsel related to such
proceeding, provided, that the failure to so notify the Indemnifying Person
shall not relieve it of any obligation or liability which it may have hereunder
or otherwise (unless and only to the extent that such failure directly results
in the loss or compromise of any material rights or defenses). In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person
has failed within a reasonable time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for
<PAGE> 23
-22-
all Indemnified Persons, and that all such fees and expenses shall be reimbursed
as they are incurred. Any such separate firm for the Participants shall be
designated in writing by Participants who sold a majority in interest of
Registrable Securities sold by all such Participants and any such separate firm
for the Company, the Subsidiary Guarantors, their directors, their officers and
such control persons of the Company shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, the Indemnifying Person agrees to indemnify any Indemnified Person from
and against any loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses actually incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company and the Subsidiary Guarantors on the one hand and the
Participants on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Subsidiary Guarantors on the one hand and the Participants on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Participants and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
<PAGE> 24
-23-
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants 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. The amount
paid or payable by an Indemnified Person 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 reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Securities
exceeds the amount of any damages that such Participant has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
The Company and the Subsidiary Guarantors covenant that they will file
the reports required to be filed by them under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company and the Subsidiary Guarantors are
not required to file such reports, they will, upon the request of any Holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company and the Subsidiary Guarantors further covenant that
they 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 provided by (a) Rule 144 and Rule
144A under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the SEC.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment
<PAGE> 25
-24-
banker or investment bankers and manager or managers that will manage the
offering will be selected by the Holders of a majority in aggregate principal
amount of such Registrable Securities included in such offering and reasonably
acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or any Subsidiary
Guarantor of any of its obligations under this Agreement, each Holder of
Registrable Securities, in addition to being entitled to exercise all rights
provided herein, in the Indenture or, in the case of the Initial Purchasers, in
the Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
and the Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by them of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, they shall waive the
defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Subsidiary
Guarantors have not, as of the date hereof, entered and shall not, after the
date of this Agreement, enter into any agreement with respect to any of their
securities that is inconsistent with the right granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company and the Subsidiary Guarantors have not entered
and will not enter into any agreement with respect to any of their securities
which will grant to any Person piggy-back rights with respect to a Registration
Statement.
(c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. Neither the Company
nor any Subsidiary Guarantor shall, directly or indirectly, take any action with
respect to the Registrable Securities as a class that would adversely affect the
ability of the Holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof
<PAGE> 26
-25-
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and that does not directly
or indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Securities may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement, provided that the provisions of
this sentence may not be amended, modified or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(e) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Company; and
(ii) if to the Company or the Subsidiary Guarantors, One
Michael Avenue, Farmingdale, New York, Attention: President; with a
copy to Koerner Silberberg & Weiner, LLP, 112 Madison Avenue, New
York, New York 10022, Attention: Carl Seldin Koerner.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under the
Indenture at the address specified in such Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign holds
Registrable Securities.
<PAGE> 27
-26-
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(l) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
(m) SUBSIDIARY GUARANTOR A PARTY. Immediately upon the designation of
any subsidiary of the Company as a Subsidiary Guarantor (as defined in the
<PAGE> 28
-27-
Indenture), the Company shall cause such Subsidiary Guarantor to become a party
hereto (including, without limitation, the obligation to pay Additional
Interest, if any, pursuant to the terms of Section 4 hereof), by executing and
delivering to the Initial Purchasers an appropriate amendment to this Agreement.
<PAGE> 29
-28-
IN WITNESS HEREOF, the parties have executed this Agreement as of the
date first written above.
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
----------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
KAL-MAR PROPERTIES CORP.
By: /s/ Thomas S. Taylor
----------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
CONCORD FINANCIAL SERVICES, INC.
By: /s/ Thomas S. Taylor
----------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
PRIME FOODS DEVELOPMENT CORP.
By: /s/ Thomas S. Taylor
----------------------------------------
Name: Thomas S. Taylor
Title: Chief Financial Officer
<PAGE> 30
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J.P. MORGAN SECURITIES INC.
NATWEST CAPITAL MARKETS LIMITED
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC.
By: J.P. Morgan Securities Inc.
By: /s/ Brian J. Van Elslander
----------------------------------------
Name: Brian J. Van Elslander
Title: Vice President
<PAGE> 31
-30-
SCHEDULE I
SUBSIDIARY GUARANTORS
Kal-Mar Properties Corp.
Concord Financial Services, Inc.
Prime Foods Development Corp.
<PAGE> 1
EXHIBIT 4.5
LETTER OF TRANSMITTAL
Offer For Any and All Outstanding
12 1/2% Senior Notes due 2004
in Exchange for
12 1/2% Senior Notes due 2004
Which Have Been Registered Under The Securities Act Of 1933
Pursuant to the Prospectus dated __________, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON __________, 1997, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent For The Exchange Offer Is:
The Bank Of New York
<TABLE>
<S> <C> <C>
By Hand Or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 571-3080 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section
Attention: Reorganization Section or for Information Call:
(212) 815-5920
</TABLE>
Delivery of this letter of transmittal to an address other than as set
forth above or transmission of this letter of transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
The undersigned acknowledges that he or she has received the Prospectus,
dated ____________, 1997 (the "Prospectus"), of Colorado Prime Corporation, a
Delaware corporation ("CPC"), and this Letter of Transmittal, which constitutes
CPC's offer (the "Exchange Offer") to exchange an aggregate Principal Amount of
up to $100,000,000 12 1/2% Senior Notes due 2004, which have been registered
under the Securities Act of 1933, as amended (the "Securities Act") (the "New
Notes") for a like Principal Amount of the issued and outstanding 12 1/2% Senior
Notes due 2004 (the "Old Notes") from the holders thereof.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes
(as defined below) either if Old Notes are to be forwarded herewith or if
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by The Bank of New York (the "Exchange Agent") at The Depository
Trust Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the
procedures set forth in "The Exchange Offer -- Procedures for Tendering Old
Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such
Old Notes are not immediately available or who cannot deliver their Certificates
and all other required documents to the Exchange Agent on or prior to the
Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
3
<PAGE> 3
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate
Principal Principal
Name(s) and Address(es) of Registered Holder(s): Certificate Amount of Amount of
(Please fill in, if blank) Number(s)* Old Notes Old Notes
Tendered**
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry holders.
** Old Notes may be tendered in whole or in part in integral multiples of
$1,000. See Instruction 4. Unless otherwise indicated in the column, a
holder will be deemed to have tendered all Old Notes represented by the Old
Notes indicated in Column 2. See Instruction 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
4
<PAGE> 4
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER- DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to CPC, the above described aggregate Principal
Amount of the 12 1/2% Senior Notes due 2004 (the "Old Notes") in exchange for a
like aggregate Principal Amount of the CPC 12 1/2% Senior Notes due 2004 (the
"New Notes") which have been registered under the Securities Act upon the terms
and subject to the conditions set forth in the Prospectus dated __________, 1997
(as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions
5
<PAGE> 5
of any such extension or amendment), the undersigned hereby sells,
assigns and transfers to or upon the order of CPC all right, title and
interest in and to such Old Notes as are being tendered herewith. The
undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent is also acting as agent of CPC in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power
of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) subject only to the right of
withdrawal described in the Prospectus, to (i) deliver Certificates for
Old Notes to CPC together with all accompanying evidences of transfer
and authenticity to, or upon the order of, CPC, upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to be
issued in exchange for such Old Notes, (ii) present Certificates for
such Old Notes for transfer, and to transfer the Old Notes on the books
of CPC, and (iii) receive for the account of CPC all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes,
all in accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, CPC
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF
ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES
TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY CPC OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE
EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE
UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS
AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
6
<PAGE> 6
The undersigned understands that tenders of Old Notes pursuant to any
one of the procedures described in "The Exchange Offer -- Procedures for
Tendering Old Notes" in the Prospectus and in the instruction, attached hereto
will, upon CPC's acceptance for exchange of such tendered Old Notes, constitute
a binding agreement between the undersigned, and CPC upon the terms and subject
to the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, CPC may not be required to
accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF CPC, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE
BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS
NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE
EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD
NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING
THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE
MEANING OF THE SECURITIES ACT).
7
<PAGE> 7
CPC HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN
CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE
SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR
A PERIOD ENDING 90 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER
CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN
ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN
THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM CPC OF THE OCCURRENCE OF
ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR
INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR
WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER
TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT
OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE
OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS
AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES
PURSUANT TO THE PROSPECTUS UNTIL CPC HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS
TO CORRECT SUCH MISSTATEMENT OR OMISSION AND CPC HAS FURNISHED COPIES OF THE
AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR CPC HAS
GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE.
IF CPC GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND
THE 90-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS
ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY
THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING
OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL
HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO
PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH CPC HAS
GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE.
Registered holders of New Notes on the relevant record date for the
first interest payment date following the consummation of the Exchange Offer
will receive interest accruing from the most recent date to which interest has
been paid on the Old Notes or, if no interest has been paid
8
<PAGE> 8
on the Old Notes, from May 9, 1997. Old Notes accepted for exchange will cease
to accrue interest from and after the date of consummation of the Exchange
Offer. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by CPC to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby. All authority herein
conferred or agreed to be conferred in this Letter of Transmittal shall survive
the death or incapacity of the undersigned and any, obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. Except as stated in
the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 7)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on the register of holders
maintained by CPC, or by any person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including such
opinions of counsel, certifications and other information as may be required by
CPC to comply with the restrictions on transfer applicable to the Old Notes). If
signature is by an attorney-in-fact, executor, administrator, trustee, guardian,
officer of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title. See
Instruction 5.
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date: __________, 1997
9
<PAGE> 9
Name(s) ________________________________________________________________________
________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
Date: ____________, 199__
Name of Firm ___________________________________________________________________
Capacity (full title) __________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
10
<PAGE> 10
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes or Old Notes not tendered are to be issued
in the name of someone other than the registered holder of the Old Notes whose
name(s) appear(s) above.
Issue:
[ ] Old Notes not tendered to:
[ ] New Notes, to:
Name(s) ________________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone Number _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be sent to
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above, or such registered holder(s) at an address other than that
shown above.
Mail
[ ] Old Notes not tendered to:
[ ] New Notes, to:
Name(s) ________________________________________________________________________
11
<PAGE> 11
Address ________________________________________________________________________
________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone Number _______________________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date. Old Notes may be tendered in whole or in part in integral
multiples of $1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Date or (iii) who cannot complete the procedures for
delivery by book-entry transfer on a timely basis, may tender their Old Notes by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedures set forth in "The Exchange Offer --
Procedures for Tendering Old Notes" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by CPC,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(iii) the Certificates (or a book-entry confirmation (as defined in the
Prospectus)) representing all tendered Old Notes, in proper form for transfer,
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent within five business days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in "The Exchange Offer --
Procedures for Tendering Old
12
<PAGE> 12
Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Old Notes to be properly tendered pursuant to the guaranteed delivery procedure,
the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to
the Expiration Date. As used herein and in the Prospectus, "Eligible
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as such terms
are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
CPC will not accept any alternative, conditional or contingent tenders.
Each tendering holder, by execution of a Letter of Transmittal (or facsimile
thereof), waives any right to receive any notice of the acceptance of such
tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter
of Transmittal is required if:
(I) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any
participant in DTC whose name appears on the register of holders
maintained by CPC as the owner of the Old Notes) of Old Notes
tendered herewith, unless such holder(s) has completed either the
box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
13
<PAGE> 13
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will
be accepted only in integral multiples of $1,000. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "Principal
Amount of Old Notes Tendered (if less than all)." In such case, new
Certificate(s) for the remainder of the Old Notes that were evidenced by your
old Certificate(s) will only be sent to the holder of the Old Notes, promptly
after the Expiration Date. All Old Notes represented by Certificates delivered
to the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any, time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn and (if Certificates for Old Notes
have been tendered) the name of the registered holder of the Old Notes as set
forth on the Certificate for the Old Notes, if different from that of the person
who tendered such Old Notes. If Certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in the Prospectus
under "The Exchange Offer -- Procedures for Tendering Old Notes," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Old Notes may not be
rescinded. Old Notes properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described in
the Prospectus under "The Exchange Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by CPC, in its sole
discretion, whose determination shall be final and binding on all parties. None
of CPC, any affiliates or assigns of CPC, the Exchange Agent or any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Old
14
<PAGE> 14
Notes which have been tendered but which are withdrawn will be returned to the
holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
When this Letter of Transmittal is signed by the registered owner(s) of
the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
CPC may require in accordance with the restrictions on transfer applicable to
the Old Notes. Signatures on such Certificates or bond powers must be guaranteed
by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to
be issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
15
<PAGE> 15
7. IRREGULARITIES. CPC will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. CPC reserves the
absolute right to reject any and all tenders that it determines not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to CPC, be unlawful. CPC also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer -- Conditions to the Exchange Offer"
or any conditions or irregularity in any tender of Old Notes of any particular
holder whether or not similar conditions or irregularities are waived in the
case of other holders. CPC's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Old Notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. CPC, any affiliates or assigns of CPC, the Exchange Agent, or
any other person shall not be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent at
its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal
income tax law, a holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange
16
<PAGE> 16
Agent with its TIN within such 60 day period, amounts withheld will be remitted
to the IRS as backup withholding. In addition, 31% of all payments made
thereafter will be withheld and remitted to the IRS until a correct TIN is
provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchanges.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
17
<PAGE> 17
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(See Instruction 9)
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <C>
PART 1 - PLEASE PROVIDE YOUR TIN ON THE LINE TIN:__________________________
AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number or
BELOW Employer Identification Number
PART 2 -- TIN Applied For [ ]
SUBSTITUTE CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Form W-9 (1) the number shown on this form is my correct taxpayer identification number (or I am waiting
Department Of The Treasury for a number to be issued to me).
Internal Revenue Service
(2) I am not subject to backup withholding either because (I) I am exempt from backup
Payor's Request For withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am
Taxpayer subject to backup withholding as a result of a failure to report all interest or dividends, or
Identification Number (iii) the IRS has notified me that I am no longer subject to backup withholding, and
("TIN")
and Certification (3) any other information provided on this form is true and correct.
Signature ______________________________ Date ________________________, 1997
</TABLE>
You must cross out item (iii) in Part (2) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
18
<PAGE> 18
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature _________________________________ Date ________________, 1997
19
<PAGE> 1
EXHIBIT 10.1
______________, 199__
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
Colorado Prime Corporation ("CPC") proposes to make an offer (the
"Exchange Offer") to exchange its 12 1/2% Senior Notes Due 2004 (the "Old
Notes") for its 12 1/2% Senior Notes Due 2004 which we expect to be registered
under the Securities Act of 1933, as amended (the "New Notes"). The terms and
conditions of the Exchange Offer as currently contemplated are set forth in a
prospectus, dated ___________, 1997 (the "Prospectus"), proposed to be
distributed to all record holders of the Old Notes. The Old Notes and the New
Notes are collectively referred to herein as the "Notes".
CPC hereby appoints The Bank of New York to act as exchange agent
(the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by CPC on or about
_____________, 1997. The Letter of Transmittal accompanying the Prospectus (or
in the case of book entry securities, the ATOP system) is to be used by the
holders of the Old Notes to accept the Exchange Offer and contains instructions
with respect to the delivery of certificates for Old Notes tendered in
connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
_____________, 1997 or on such later date or time to which CPC may extend the
Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set
forth in the Prospectus, CPC expressly reserves the right to extend the Exchange
Offer from time to time and may extend the Exchange Offer by giving oral
(confirmed in writing) or written notice to you before 9:00 A.M., New York City
time, on the business day following the previously scheduled Expiration Date.
CPC expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "The Exchange Offer -- Conditions
to the Exchange Offer." CPC will give oral (confirmed in writing) or written
notice of any amendment, termination or nonacceptance to you as promptly as
practicable.
<PAGE> 2
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the Prospectus or as specifically set forth herein;
provided, however, that in no way will your general duty to act in good faith be
discharged by the foregoing.
2. You will establish an account with respect to the Old Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into your account in
accordance with the Book-Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Notes (or confirmation of book-entry transfer into your
account at the Book-Entry Transfer Facility) and any other documents delivered
or mailed to you by or for holders of the Old Notes to ascertain whether: (i)
the Letters of Transmittal and any such other documents are duly executed and
properly completed in accordance with instructions set forth therein and (ii)
the Old Notes have otherwise been properly tendered. In each case where the
Letter of Transmittal or any other document has been improperly completed or
executed or any of the certificates for Old Notes are not in proper form for
transfer or some other irregularity in connection with the acceptance of the
Exchange Offer exists, you will endeavor to inform the presenters of the need
for fulfillment of all requirements and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
4. With the approval of William Dordelman or Thomas S. Taylor of CPC
(such approval, if given orally, to be confirmed in writing) or any other party
designated by such an officer in writing, you are authorized to waive any
irregularities in connection with any tender of Old Notes pursuant to the
Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the Letter
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer -- Procedures for Tendering Old Notes", and Old Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Notes which
William Dordelman or Thomas S. Taylor of CPC shall approve as having been
properly tendered shall be considered to be properly tendered (such approval, if
given orally, shall be confirmed in writing).
2
<PAGE> 3
6. You shall advise CPC with respect to any Old Notes received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Old Notes.
7. You shall accept tenders:
(a) in cases where the Old Notes are registered in two or more
names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Notes
provided that customary transfer requirements, including any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Old Notes where so indicated and
as permitted in the Letter of Transmittal and deliver certificates for Old Notes
to the transfer agent for split-up and return any untendered Old Notes to the
holder (or such other person as may be designated in the Letter of Transmittal)
as promptly as practicable after expiration or termination of the Exchange
Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, CPC will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Old Notes properly tendered and you, on behalf of CPC, will exchange such
Old Notes for New Notes and cause such Old Notes to be canceled. Delivery of New
Notes will be made on behalf of CPC by you at the rate of $1,000 principal
amount of New Notes for each $1,000 principal amount of the Old Notes tendered
promptly after notice (such notice if given orally, to be confirmed in writing)
of acceptance of said Old Notes by CPC; provided, however, that in all cases,
Old Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Old Notes (or confirmation of
book-entry transfer into your account at the Book-Entry Transfer Facility), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other required
documents. You shall issue New Notes only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date.
3
<PAGE> 4
10. CPC shall not be required to exchange any Old Notes tendered if
any of the conditions set forth in the Exchange Offer are not met. Notice of any
decision by CPC not to exchange any Old Notes tendered shall be given (and
confirmed in writing) by CPC to you.
11. If, pursuant to the Exchange Offer, CPC does not accept for
exchange all or part of the Old Notes tendered because of an invalid tender, the
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer -- Conditions to the Exchange Offer" or otherwise, you shall
as soon as practicable after the expiration or termination of the Exchange Offer
return those certificates for unaccepted Old Notes (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Old Notes, unaccepted Old Notes or
for New Notes shall be forwarded by first-class mail.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and CPC;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Old Notes represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telegram or
other document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any
4
<PAGE> 5
information contained therein, which you shall in good faith believe to be
genuine or to have been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of CPC;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Notes pursuant
to the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Old Notes.
15. You shall take such action as may from time to time be requested
by CPC or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by CPC, to all persons requesting such
documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. CPC
will furnish you with copies of such documents at your request. All other
requests for information relating to the Exchange Offer shall be directed to
CPC, Attention: Thomas S. Taylor.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Thomas S. Taylor of CPC and such
other person or persons as it may request, daily (and more frequently during the
week immediately preceding the Expiration Date and if otherwise requested) up to
and including the Expiration Date, as to the number of Old Notes which have been
tendered pursuant to the Exchange Offer and the items received by you pursuant
to this Agreement, separately reporting and giving cumulative totals as to items
properly received and items improperly received. In addition, you will also
inform, and cooperate in making available to, CPC or any such other person or
persons authorized by CPC, upon oral request made from time to time prior to the
Expiration Date of such other information as it or he or she reasonably
requests. Such cooperation shall include, without limitation, the granting by
you to CPC and such person as CPC may request of access to those persons on your
staff who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date CPC shall have received information in
sufficient detail to enable it to decide whether to extend the Exchange Offer.
You shall prepare a final list of all persons whose tenders were accepted, the
aggregate principal amount of Old Notes tendered, the aggregate principal amount
of Old Notes accepted and deliver said list to CPC.
5
<PAGE> 6
17. Letters of Transmittal and Notices of Guaranteed Delivery shall
be stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to CPC.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by
CPC, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
21. CPC covenants and agrees to indemnify and hold you harmless in
your capacity as Exchange Agent hereunder against any loss, liability, cost or
expense, including attorneys' fees and expenses, arising out of or in connection
with any act, omission, delay or refusal made by you in reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Old Notes reasonably believed by you in good faith to be authorized,
and in delaying or refusing in good faith to accept any tenders or effect any
transfer of Old Notes; provided, however, that CPC shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall CPC be liable under this indemnity with respect to any claim against you
unless CPC shall be notified by you, by letter or by facsimile confirmed by
letter, of the written assertion of a claim against you or of any other action
commenced against you, promptly after you shall have received any such written
assertion or notice of commencement of action. CPC shall be entitled to
participate at its own expense in the defense of any such claim or other action,
and, if CPC so elects, CPC shall assume the defense of any suit brought to
enforce any such claim. In the event that CPC shall assume the defense of any
such suit, CPC shall not be liable for the fees and expenses of any additional
counsel thereafter retained by you so long as CPC shall retain counsel
satisfactory to you to defend such suit.
6
<PAGE> 7
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. CPC understands that you are required to deduct 31% on payments
to holders who have not supplied their correct Taxpayer Identification Number or
required certification. Such funds will be turned over to the Internal Revenue
Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner
to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Old Notes, your check in the amount of all transfer
taxes so payable, and CPC shall reimburse you for the amount of any and all
transfer taxes payable in respect of the exchange of Old Notes; provided,
however, that you shall reimburse CPC for amounts refunded to you in respect of
your payment of any such transfer taxes, at such time as such refund is received
by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and
other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
7
<PAGE> 8
If to CPC:
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Facsimile: (516) 694-8493
Attention: Thomas S. Taylor
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
CPC any certificates for funds or property then held by you as Exchange Agent
under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
COLORADO PRIME CORPORATION
By:______________________________________
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:______________________________________
Name:
Title:
8
<PAGE> 9
SCHEDULE I
FEES
<PAGE> 1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of May 9,
1997, by and among Colorado Prime Acquisition Corp., a Delaware Corporation,
(the "Company"), Thayer Equity Investors III, L.P., a Delaware limited
partnership ("Thayer"), and certain individuals listed on Exhibit A hereto
(collectively, such individuals are referred to herein as the "Managers" and
together with Thayer are referred to herein as the "Buyers").
W I T N E S S E T H:
WHEREAS, Thayer and KPC Holdings Corporation, a Delaware corporation
("Holdings"), are parties to a Merger Agreement dated as of March 25, 1997 (the
"Merger Agreement");
WHEREAS, pursuant to the Merger Agreement the Company is to be merged with
and into Holdings, following which Holdings will be the surviving corporation,
the existing holders of capital stock of Holdings other than the Company are to
receive cash upon the surrender of their shares of capital stock of Holdings,
each share of Common Stock (as defined below) and Preferred Stock (as defined
below) of the Company will be converted into a share of common stock or
preferred stock of Holdings, as the case may be, and Holdings will be renamed
Colorado Prime Holdings, Inc. (the "Merger");
WHEREAS, in connection with the Merger, the Company is to be capitalized
by the Equity Contribution (as defined below) of Thayer and the Managers;
WHEREAS, the Company has 300,000 shares of authorized common stock, par
value $0.01 per share, (the "Common Stock") and 45,000 shares of authorized 15%
payable-in-kind redeemable preferred stock, par value $0.01 per share, (the
"Preferred Stock");
WHEREAS, subject to the terms and the conditions specified herein, the
Buyers desire to purchase from the Company, and the Company desires to sell to
the Buyers, 150,000 shares of Common Stock and 10,000 shares of Preferred Stock,
(such shares of Common Stock and Preferred Stock are referred to herein as the
"Shares"); and
<PAGE> 2
-2-
WHEREAS, in connection with the purchase by Thayer of the Preferred Stock,
the Company shall cause Holdings, upon the consummation of the Merger, to issue
to Thayer a warrant representing the right to acquire 26,471 shares of Common
Stock of Holdings upon the terms and conditions as more fully set forth in form
of Warrant Certificate (as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties and covenants contained herein and
intending to be legally bound hereby, the Parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS
In addition to other terms defined elsewhere herein, the following terms
shall have the meanings set forth below when used herein:
1.1. "Affiliate" with respect to a Party, shall mean (i) any Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Party or (ii) a general
partner, limited liability company manager or similar control person of such
Party.
1.2. "Closing" shall mean the closing described in Article 6 hereof at
which the Parties shall consummate the transactions contemplated hereby.
1.3. "Closing Date" shall mean the date that the Closing occurs.
1.4. "Common Stock Purchase Price" shall mean, (i) with respect to Thayer,
the dollar amount set forth opposite Thayer's name on Exhibit A hereto, and (ii)
with respect to each Manager, the dollar amount or the number of shares of
existing Management Common Stock of Holdings opposite such Manager's name on
Exhibit A hereto
<PAGE> 3
-3-
1.5. "Employment Agreements" shall mean the employment agreements, each
dated May 9, 1997, by and between Colorado Prime Corporation, a Delaware
corporation and a wholly-owned subsidiary of Holdings, and William F. Dordelman,
William Willett, Thomas S. Taylor, and Ricardo DeSantis.
1.6. "Encumbrance" shall mean any title defect, conflicting claim of
ownership, order, decree, judgment, stipulation, settlement, attachment,
restriction, lien, pledge, right of first refusal, option, charge, security
interest, mortgage, reservation, lease or any other encumbrance of any nature
whatsoever.
1.7. "Equity Contribution" shall mean the subscription of (i) Common Stock
and Preferred Stock pursuant to the terms and conditions of this Agreement by
Thayer in exchange for the Common Stock Purchase Price and Preferred Stock
Purchase Price of Thayer and (ii) Common Stock pursuant to the terms and
conditions of this Agreement by the Managers in exchange for the Common Stock
Purchase Price of each Manager.
1.8. "Governmental Entity" shall mean any federal, state, local or foreign
legislative authority, court, governmental agency or other regulatory, judicial
or administrative authority.
1.9. "Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on (i) the consolidated business, results of operations,
financial condition or prospects of such Person or (ii) the ability of such
Person to consummate the transactions contemplated hereby.
1.10. "Parties" shall mean the Company, Holdings and each of the Buyers.
1.11. "Person" shall mean an individual, partnership, corporation, trust,
unincorporated organization, government or any department or agency thereof and
any other entity.
<PAGE> 4
-4-
1.12. "Preferred Stock Purchase Price" shall mean $10,000,000.
1.13. "Related Agreements" shall mean the Merger Agreement, the
Shareholders' Agreement and Employment Agreements.
1.14. "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units, repurchase rights and other similar stock-based rights
whether they obligate the issuer thereof to issue stock or other securities or
to pay cash.
1.15. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.16. "Shareholders' Agreement" shall mean the Shareholders' Agreement
dated as of May 9, 1997 by and among Thayer Equity Investors III, L.P., Colorado
Prime Holding, Inc. and the Managers.
1.17. "Warrant Certificate" shall mean the warrant certificate attached
hereto as Exhibit B.
ARTICLE 2.
PURCHASE AND SALE
At the Closing, on the terms and subject to the conditions set forth
herein, the following actions shall occur simultaneously:
(i) The Company shall issue and sell to the Buyers, and each
Buyer shall purchase severally and not jointly, the number
of Shares set forth next to such Buyer's name on Exhibit A
at a price equal to such Buyer's Common Stock Purchase Price
and/or Preferred Stock Purchase Price, as the case may be;
(ii) (A) Thayer shall pay its Common Stock Purchase
<PAGE> 5
-5-
Price and the Preferred Stock Purchase Price to the Company in
immediately available funds by wire transfer to the account
designated by the Company in writing at least two business
days prior to the Closing and (B) each Manager shall pay his
Common Stock Purchase Price to the Company by the delivery to
the Company of the stock certificates representing the shares
of Management Common Stock of Holdings set forth opposite such
Manager's name on Exhibit A, which stock certificates shall
either be (i) duly endorsed to the Company, (ii) endorsed in
blank by such Manager or (iii) accompanied by a duly executed
instrument of transfer separate from such certificate,
provided that such instrument of transfer shall be in form and
substance satisfactory to the Company;
(iii) The Company shall deliver to each Buyer stock certificates
representing the Shares purchased by such Buyer and shall take
and cause to be taken all actions necessary to transfer to
each Buyer good and valid title to the Shares purchased by
such Buyer and to record the issuance of such Shares to such
Buyer on the books and records of the Company; and
(iv) The Company shall cause Holdings to deliver to Thayer the
Warrant Certificate and shall take and cause to be taken all
actions necessary to transfer to Thayer good and valid title
to the Warrant Certificate and to record the issuance of such
Warrant Certificate to Thayer on the books and records of the
Company.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<PAGE> 6
-6-
The Company represents and warrants to the Buyers as follows:
3.1. CAPITAL STRUCTURE OF THE COMPANY
The authorized capital stock of the Company (the "Capital Stock") consists
solely of (i) 300,000 shares of Common Stock, of which none are issued and
outstanding and (ii) 45,000 shares of Preferred Stock, of which none are issued
and outstanding.
3.2. ORGANIZATION, STANDING AND AUTHORITY
The Company is a duly organized corporation, validly existing and in good
standing under the laws of the State of Delaware. The Company (i) has full
corporate power and authority to carry on its business as now conducted and (ii)
is duly licensed or qualified to do business in all jurisdictions of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such licensing or qualification, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on the Company.
3.3. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement and the Related
Agreements to which it is a party. The execution and delivery of this Agreement
and the Related Agreements to which the Company is a party, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Company. This Agreement has been, and each of the Related Agreements to
which the Company is a party, shall be executed and delivered by a duly
authorized agent of the Company. The Shares, when issued, sold and delivered in
accordance with this Agreement, shall be duly authorized, validly issued, fully
paid and nonassessable and will not have been issued in violation of any
preemptive rights. Upon consummation of the purchase of the Shares, the Buyers
will acquire from the Company good and marketable title to the Shares, free and
clear of all Encumbrances.
<PAGE> 7
-7-
(b) Neither the execution and delivery of this Agreement or any of the
Related Agreements, nor consummation of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
certificate of incorporation or bylaws (or similar charter documents) of the
Company, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any Encumbrance upon any property or asset of the Company pursuant
to, any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation (other than Encumbrances to be granted pursuant
to the terms and conditions of that certain Credit Agreement dated as of May 9,
1997 by and among Colorado Prime Corporation, Holdings, Dresdner Bank AG, New
York and Cayman Branches, and certain other parties thereto (the "Credit
Agreement")), (iii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, except for such violations, rights,
breaches, Encumbrances or defaults which, either individually or in the
aggregate, will not have a Material Adverse Effect on the Company.
(c) No consent, approval or authorization of, or declaration, notice,
filing or registration with, any Governmental Entity (collectively,
"Governmental Authorizations") or any other Person, is required to be made or
obtained by the Company in connection with the execution, delivery and
performance of this Agreement or the Related Agreements or the consummation of
the transactions contemplated hereby or thereby, other than (i) any applicable
filings under federal or state securities laws, (ii) Governmental Authorizations
which have been made or obtained as of the date hereof and (iii) Governmental
Authorizations the failure of which to make or obtain would not have a Material
Adverse Effect on the Company.
<PAGE> 8
-8-
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer hereby severally represents and warrants (but only with respect
to the representations and warranties in this Article applicable to such Buyer)
to the Company as follows:
4.1. ORGANIZATION, STANDING AND AUTHORITY OF THAYER
Thayer is duly organized as a limited partnership, validly existing and in
good standing under the laws of the State of Delaware. Thayer (i) has all
requisite partnership power and authority to carry on its business as now
conducted or proposed to be conducted and (ii) is duly licensed or qualified to
do business in all jurisdictions of the United States and foreign jurisdictions
where its ownership or leasing of property or the conduct of its business
requires such licensing or qualification, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect.
4.2. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Each of the Managers has the legal capacity to enter into and perform
all of his obligations under this Agreement and the Related Agreements to which
such Manager is a party. Upon execution and delivery by each Manager of this
Agreement and each of the Related Agreements to which such Manager is a party,
the Agreement and each such Related Agreement shall constitute the legal, valid
and binding obligations of such Manager, enforceable against him in accordance
with its respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, bulk sales, or
similar laws from time to time in effect which affect the enforcement of
creditors' rights generally and by general equity principles.
(b) Thayer has all requisite partnership power and authority to enter into
and perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly
<PAGE> 9
-9-
and validly authorized by all necessary partnership action in respect thereof on
the part of Thayer. This Agreement, when executed and delivered by Thayer, shall
be executed and delivered by a duly authorized agent of Thayer and shall
constitute a valid and binding obligation of Thayer, enforceable against Thayer
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, bulk sales, or
similar laws from time to time in effect which affect the enforcement of
creditors' rights generally and by general equity principles.
(c) Neither the execution and delivery of this Agreement or the Related
Agreements to which such Buyer is a party, nor the consummation of the
transactions contemplated hereby or thereby, nor the compliance by any Buyer
with any of the provisions hereof, shall (i) conflict with or result in a breach
of such Buyer's constitutive documents (to the extent applicable), (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Encumbrance upon any property or asset of such Buyer pursuant to, any note,
bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation, or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to such Buyer, except for such
violations, rights, breaches, Encumbrances or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect.
(d) No consent, approval or authorization of, or declaration, notice,
filing or registration with, any Governmental Entity or any other Person, is
required to be made or obtained by such Buyer in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, other than (i) any applicable filings under
federal or state securities laws or (ii) Governmental Authorizations which have
been made or obtained as of the date hereof and (iii) Governmental
Authorizations the failure of which to make or obtain would not have a Material
Adverse Effect on the Company.
<PAGE> 10
-10-
4.3. ACCESS; SOPHISTICATION
Each Buyer has had an opportunity to ask questions and receive answers
concerning the terms and conditions of this Agreement and the Related Agreements
and has had full access to such other information concerning the Company,
Colorado Prime Corporation and Holdings and the transactions contemplated herein
and in the Related Agreements as such Buyer has requested. Each Buyer is an
"accredited investor," as such term is defined in Rule 501 under the Securities
Act. Each Buyer and such Buyer's respective agents and representatives have such
knowledge and experience in financial and business matters as to enable them to
utilize the information made available to them in connection with the
transactions contemplated hereby, to evaluate the merits and risks of an
investment in the Shares and to make an informed decision with respect thereto,
and such an evaluation and informed decision has been made. Each Buyer
acknowledges receipt of a copy of an Offering Memorandum dated May 6, 1997
relating to the issuance of certain senior Notes of Colorado Prime Corporation,
which Offering Memorandum contains information concerning the Merger, Holdings
and Colorado Prime Corporation.
4.4. INVESTMENT REPRESENTATION
Each Buyer is acquiring the Shares to be received by such Buyer at the
Closing for such Buyer's own account for investment only and not with a view to
making a distribution thereof within the meaning of the Securities Act. Each
Buyer agrees not to sell or transfer such Shares, except in accordance with the
terms of the Shareholders' Agreement and the legend set forth below. Each Buyer
is aware that the Shares have not been registered under the Securities Act or
any state or other jurisdiction's securities laws, and that the Shares must be
held indefinitely unless subsequently registered or an exemption from such
registration is available. Each Buyer acknowledges that investment in the Shares
involves substantial risks, including the risk of total loss of such Buyer's
investment in the Shares. Each Buyer represents that such Buyer (i) is able to
hold the Shares for an indefinite period of time; (ii) has adequate means, other
than the Shares or
<PAGE> 11
-11-
funds invested therein, of providing for such Buyer's current and foreseeable
needs; (iii) has no foreseeable need to sell or otherwise dispose of any of the
Shares; and (iv) has sufficient net worth to sustain a loss of such Buyer's
entire investment in the Shares in the event such loss should occur. Each
Manager is a bona fide resident of the States of Connecticut, Florida,
Pennsylvania, Texas or New York and has no present intention of changing such
Manager's residence. Each Buyer understands and agrees that the certificate or
certificates representing the Shares to be received by such Buyer will bear a
legend substantially to the effect set forth below and that a stop transfer
order may be placed with respect thereto.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER
RESTRICTIONS AND OTHER TERMS OF A SHAREHOLDERS' AGREEMENT DATED AS OF MAY
9, 1997, AMONG COLORADO PRIME HOLDINGS, INC. AND CERTAIN SHAREHOLDERS
THEREOF AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH
AGREEMENT. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
COLORADO PRIME CORPORATION AND WILL BE FURNISHED UPON REQUEST TO THE
HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
SECURITIES LAW OF ANY JURISDICTION AND MAY NOT BE TRANSFERRED UNTIL (A) A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (B) IN
THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
4.5. SPECIAL REPRESENTATIONS OF THE MANAGERS
In addition to the representations and warranties set forth above, each
Manager severally represents and warrants to the Company and to Thayer that such
Manager is, and on the Closing
<PAGE> 12
-12-
Date will be, the sole record and beneficial owner of the shares of Management
Common Stock of Holdings set forth opposite such Manager's name on Exhibit A
hereto, free and clear of any Encumbrances, and that such Manager has and shall
have full power and authority to transfer, assign, sell and contribute such
shares of Management Common Stock of Holdings to the Company as contemplated by
this Agreement.
ARTICLE 5.
COVENANTS
5.1. COMPLIANCE
The Parties covenant and agree that between the date hereof and the
Closing, none of them shall take any action that would cause their
representations and warranties made herein not to be true and correct, in all
material respects, as of such Closing.
5.2. BEST EFFORTS
Subject to the terms and conditions of this Agreement, each Party shall
use its reasonable best efforts and shall cooperate with the other Parties as
promptly as practicable to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations or otherwise to consummate, as soon as practicable, the
transactions contemplated hereby and by the Related Agreements.
ARTICLE 6.
CLOSING; CONDITIONS
6.1. CLOSING
The transactions contemplated by this Agreement shall be consummated at a
Closing to be held at the offices of Koerner Silberberg & Weiner LLP or at such
other place as the Company and
<PAGE> 13
-13-
the Buyers shall agree, on May 9, 1997 or such later date within 14 days
thereafter as shall be specified by the Company (the "Closing Date"). All
actions taken at the Closing shall be deemed to occur simultaneously, and no
document shall be deemed to be delivered until all documents are delivered.
Unless otherwise indicated, each document delivered at the Closing shall be
dated as of the Closing Date.
6.2. CONDITIONS TO THE OBLIGATIONS OF BUYERS
The Buyers' obligations under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by any Buyer:
(a) The Merger shall have been consummated in accordance with the terms
and conditions of the Merger Agreement and Thayer, the Company and Holdings
shall have executed and delivered all Related Agreements to which they are
parties;
(b) The representations and warranties of the Company contained in this
Agreement shall be true and correct, in all material respects, at and as of the
Closing, and Thayer, the Company and Holdings shall have performed and complied
with all the covenants and agreements and satisfied all the conditions, in all
material respects, required by this Agreement and Related Agreements, to be
performed or complied with or satisfied by Thayer, the Company and Holdings at
or prior to the Closing;
(c) No order, judgment or decree shall have been issued restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
or any of the Related Agreements. No inquiry, action or proceeding which, in the
opinion of Thayer, is material shall have been instituted to restrain or
prohibit the consummation of the transactions contemplated by this Agreement or
any of the Related Agreements, or to challenge the validity of such transactions
or any part thereof, or seeking damages on account or as a result thereof; and
<PAGE> 14
-14-
(d) All necessary Governmental Authorizations shall have been obtained and
all other requirements prescribed by law which are necessary to the consummation
of the transactions contemplated hereby or by any Related Agreement shall have
been satisfied.
6.3. CONDITIONS TO THE OBLIGATIONS OF COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by the Company:
(a) The Merger shall have been consummated in accordance with the terms
and conditions of the Merger Agreement and Thayer, the Company, Holdings and all
of the Managers shall have executed and delivered all Related Agreements to
which they are parties;
(b) The representations and warranties of the Buyers contained in this
Agreement shall be true and correct, in all material respects, at and as of the
Closing, and the Buyers shall have performed and complied with all the covenants
and agreements and satisfied all the conditions, in all material respects,
required by this Agreement and the Related Agreements to be performed or
complied with or satisfied by the Buyers at or prior to the Closing;
(c) No order, judgment or decree shall have been issued restraining or
prohibiting the consummation of the transactions contemplated by this Agreement
or any of the Related Agreements; and
(d) All necessary Governmental Approvals shall have been obtained and all
other requirements prescribed by law which are necessary to the consummation of
the transactions contemplated hereby or by any Related Agreement shall have been
satisfied.
<PAGE> 15
-15-
ARTICLE 7.
TERMINATION
7.1. TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing, only as follows:
(a) By Thayer in writing, if the Managers have, in any material respect,
breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if such breach
has not been cured by the earlier of 15 business days after the date on which
written notice of such breach is given to the Party committing such breach or
the Closing Date;
(b) By any Party in writing, if the Closing Date has not occurred by the
close of business on May 31, 1997, unless the failure of the Closing to occur by
such date shall be due to the failure of the Party seeking to terminate this
Agreement to perform or observe the covenants and agreements set forth herein;
or
(c) By Thayer in writing, if any Governmental Entity of competent
jurisdiction shall have issued a final non-appealable order enjoining or
otherwise prohibiting the transactions contemplated hereby and by the Related
Agreements.
7.2. EFFECT OF TERMINATION
In the event this Agreement is terminated pursuant to Section 7.1 hereof,
this Agreement shall become void and have no effect, provided, however, that
nothing herein shall relieve any Party from liability for the breach of any
representations or warranties or the breach of, or failure to perform, any
covenant made by it herein.
<PAGE> 16
-16-
ARTICLE 8.
MISCELLANEOUS
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties and covenants contained in this Agreement
shall not survive the Closing.
8.2. AMENDMENT
This Agreement may be amended or supplemented at any time by the mutual
agreement in writing of the Parties.
8.3. NO WAIVER OF RIGHTS
No failure or delay on the part of any Party in the exercise of any power
or right hereunder shall operate as a waiver thereof. No single or partial
exercise of any right or power hereunder shall operate as a waiver of such right
or of any other right or power. The waiver by any Party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach hereunder. Except as otherwise expressly provided
herein, all rights and remedies existing under this Agreement are cumulative
with, and not exclusive of, any rights or remedies otherwise available.
8.4. EXPENSES
Each Party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated in this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel.
8.5. ENTIRE AGREEMENT; SUCCESSORS; THIRD PARTIES
This Agreement and the Related Agreements contain the entire agreement
between the Parties with respect to the transactions contemplated hereunder and
thereunder and supersede all prior arrangements or understandings with respect
thereto, written or
<PAGE> 17
-17-
oral, other than documents referred to herein or therein. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the Parties hereto and their respective successors and permitted assigns. Except
as specifically set forth herein or in any Related Agreement, nothing in this
Agreement or any Related Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto and thereto, and their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities.
8.6. NO ASSIGNMENT
No Party hereto may assign any of its rights or obligations under this
Agreement to any other Person, except that Thayer may assign its rights and/or
obligations to an Affiliate of Thayer.
8.7. NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, by
facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company or Thayer:
Thayer Equity Investors, III, L.P.
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: V. Frank Pottow
Facsimile: (202) 371-0391
With a required copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
<PAGE> 18
-18-
Attention: Neil M. Goodman
Facsimile: (202) 942-5999
If to any of the Managers, to the address set forth beneath the signature of
such Manager on the signature page hereof, with a required copy to:
Koerner Silberberg & Weiner LLP
112 Madison Avenue
New York, New York 10016
Attention: Carl Seldin Koerner
Facsimile: (212)689-3077
All such deliveries shall be deemed effective when received by the Persons
entitled to such receipt or when delivery has been attempted but refused by such
Person or Persons. Any Party may change the Persons or addresses to which such
deliveries shall be made with respect to such Party by delivering notice thereof
to the other Parties hereto in accordance with this Section 8.7.
8.8. CAPTIONS
The captions contained in this Agreement are for reference purposes only
and are not part of any such agreement.
8.9. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.10. GOVERNING LAW AND VENUE
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware applicable to
agreements made and entirely to be performed within such jurisdiction. The Party
bringing any
<PAGE> 19
-19-
action under this Agreement shall only be entitled to choose the federal or
state courts of the State of Delaware or the federal or state courts of the
State of New York, sitting in the Borough of Manhattan, as the venue for such
action, and each Party consents to the jurisdiction of the court chosen in such
manner for such action.
8.11. SEVERABILITY
The provisions of this Agreement are severable, and the unenforceability
of any provision of this Agreement shall not affect the enforceability of the
remainder of this Agreement. The Parties acknowledge that it is their intention
that if any provision of this Agreement is determined by a court to be invalid,
illegal or unenforceable as drafted, that provision should be construed in a
manner designed to effectuate the purpose of that provision to the greatest
extent possible under applicable law.
8.12. SPECIFIC PERFORMANCE
The rights of the Parties under this Agreement and the Related Agreements
are unique and the failure of a Party to perform its obligations hereunder or
thereunder would irreparably harm the other Parties hereto. Accordingly, the
Parties shall, in addition to such other remedies as may be available at law or
in equity, have the right to enforce their rights hereunder by actions for
specific performance and/or injunctive relief to the extent permitted by law.
-- END OF PAGE --
[signatures appear on the following pages]
<PAGE> 20
-20-
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed as of the day and year first
above written.
COLORADO PRIME ACQUISITION CORP.
By: /s/ V. Frank Pottow
___________________________
THAYER EQUITY INVESTORS, III, L.P.
By: TC Equity Partners, L.L.C.,
its General Partner
By: /s/ Frederic Malek
_____________________
MANAGERS:
/s/ William F. Dordelman
________________________________________
William F. Dordelman
9 Woodley Road
Darien, Connecticut 06820
<PAGE> 21
-21-
/s/ William Willett
________________________________________
William Willett
137 Rose Hill Road
Southport, Connecticut 06490
/s/ Thomas Taylor
________________________________________
Thomas Taylor
155 West 70th Street, Apt. 12E
New York, New York 10023
/s/ Ricardo DeSantis
________________________________________
Ricardo DeSantis
217 Stewart Avenue
Garden City, New York 11530
/s/ Christine Mulvehill
/s/ Brian Mulvehill
________________________________________
Brian Mulvehill &
Christine Mulvehill
2788 Hampton Circle W.
Delray Beach, Florida 33445
<PAGE> 22
-22-
/s/ Joseph Ugenti
________________________________________
Joseph Ugenti
336 East Shore Drive
Massapequa, New York 11758
/s/ Kenneth Payne
________________________________________
Kenneth Payne
31 Markwood Lane
East Northport, New York 11731
/s/ Lawrence Scuderi
________________________________________
Lawrence Scuderi
4 Cedar Crest Drive
Dix Hills, New York 11746
/s/ Charles Montanino
________________________________________
Charles Montanino
103 Wilson Avenue
Amityville, New York 11701
<PAGE> 23
-23-
/s/ Niel Montanino
________________________________________
Niel Montanino
One Winthrop Street
Islip, New York 11751
/s/ Joseph Murphy
________________________________________
Joseph Murphy
One Stuyvesant Circle East
Setauket, New York 11733
/s/ John DeMaio
________________________________________
John DeMaio
11831 Spruce Hill
Houston, Texas 77077
/s/ Ronald F. Mel
________________________________________
Ronald F. Mel
776 Pine Island Drive
Melbourne, Florida 32940
<PAGE> 24
-24-
/s/ Joseph Billi
________________________________________
Joseph J. Billi
3300 Neshaminy Blvd., Apt. 347
Bensalem, Pennsylvania 19020
<PAGE> 25
EXHIBIT A
<TABLE>
<CAPTION>
SHARES OF SHARES OF
CLASS A COMPANY SHARES OF
MANAGEMENT COMMON COMPANY
CASH TO BE COMMON TO STOCK TO PREFERRED
CONTRIBUTED BE BE STOCK TO BE
BUYERS ($) CONTRIBUTED PURCHASED PURCHASED
- ------------------------------ ------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Thayer Equity Investors, III, 22,880,000 128,800 10,000
L.P.
Managers: 37,782.04 10,000
William Dordelman
William Willet 18,891.02 5,000
Thomas Taylor 8,689.87 2,300
Ricardo DeSantis 6,234.04 1,650
Brian Mulvehill and
Christine Mulvehill 1,511.28 400
Joseph Ugenti 1,322.37 350
Kenneth Payne 1,133.46 300
Lawrence Scuderi 944.55 250
Charles Montanino 755.64 200
Niel Montanino 755.64 200
Joseph Murphy 188.91 50
John DeMaio 40,000 400
Ronald F. Mel 5,000 50
Joseph J. Billi 5,000
---------- ---------- ------- ------
Total: $22,930,000 72,208.82 150,000 10,000
========== ========= ======= ======
</TABLE>
<PAGE> 26
EXHIBIT B
(Warrant Certificate)
<PAGE> 1
EXHIBIT 10.4
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered
into as of May 9, 1997, by and among Colorado Prime Holdings, Inc., a Delaware
corporation (the "Company"), Thayer Equity Investors III, L.P., a Delaware
limited partnership ("Thayer"), and certain other shareholders of the Company
listed on Exhibit A hereto (individually, a "Manager" and collectively, the
"Managers").
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement dated as of May 9, 1997
(the "Stock Purchase Agreement"), by and among Colorado Prime Acquisition Corp.
("CPAC"), Thayer and the Managers, Thayer and the Managers purchased from CPAC,
as of May 9, 1997, 150,000 shares of the common stock, par value $0.01 per
share, of CPAC (the "Common Stock");
WHEREAS, pursuant to a Merger Agreement, dated as of March 25, 1997,
between Thayer and KPC Holdings Corporation ("Holdings"), simultaneously with
the transactions contemplated by the Stock Purchase Agreement, CPAC will be
merged with and into Holdings, following which Holdings will be the surviving
corporation, each share of Common Stock shall be converted into a share of
common stock of Holdings (and from and after such time shall be the "Common
Stock" for all purposes hereunder), and Holdings shall be renamed Colorado Prime
Holdings, Inc.
WHEREAS, in connection with such purchase of Common Stock, the Company,
Thayer and the Managers have determined that it is in their respective best
interests to enter into, and perform under, this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants set
forth herein and intending to be legally bound hereby, the parties hereto agree
as follows:
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ARTICLE 1
DEFINITIONS
For purposes of this Agreement, in addition to terms defined elsewhere
herein, the following terms when used herein shall have the following meanings:
1.1 "Affiliate," with respect to a party, shall mean (i) any Person
that directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under Common Control with, such party or (ii) a general
partner, limited liability company manager or similar Control person of such
party.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Business Day" shall mean any calendar day which is not a Saturday,
Sunday or legal holiday or a day on which banking institutions in the State of
New York are permitted or required to be closed.
1.4 "Company Indemnitees" shall have the meaning ascribed to such term
in Section 6.5(b) herein.
1.5 "Company Notice" shall have the meaning ascribed to such term in
Section 3.2 herein.
1.6 "Company Period" shall have the meaning ascribed to such term in
Section 3.2 herein.
1.7 "Company's 1997 Stock Option Plan" shall have the meaning ascribed
to such term in Section 11.15 herein.
1.8 "Consummation Notice" shall have the meaning ascribed to such term
in Section 4.3 herein.
1.9 "Control" (including "Controlling," "Controlled by," and "under
Common Control with") shall
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mean the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
1.10 "CPC" shall mean Colorado Prime Corporation, a Delaware
Corporation and a wholly-owned subsidiary of the Company.
1.11 "Declination Notice" shall have the meaning ascribed to such term
in Section 3.2 herein.
1.12 "Disability" shall mean (i) incapacity due to physical or mental
illness or injury where the Manager shall have been absent from his full time
duties at CPC for four (4) consecutive months; or (ii) the Manager's health
should become impaired to an extent that makes the continued performance of his
duties at CPC hazardous to his physical or mental health or his life, provided
that the Manager shall have furnished CPC with a written statement from a
qualified doctor to such effect and provided further, that, at CPC's request
made within thirty (30) days of the date of such written statement, the Manager
shall submit to an examination by a doctor selected by CPC who is reasonably
acceptable to the Manager or the Manager's doctor and such doctor shall have
concurred in the conclusion of the Manager's doctor.
1.13 "Drag-Along Notice" shall have the meaning ascribed to such term
in Section 5.2 herein.
1.14 "Drag-Along Sale" shall have the meaning ascribed to such term in
Section 5.1(a) herein.
1.15 "Drag-Along Sale Date" shall have the meaning ascribed to such
term in Section 5.2 herein.
1.16 "Election Period" shall have the meaning ascribed to such term in
Article 8 herein.
1.17 "Election Notice" shall have the meaning ascribed to such term in
Article 8 herein.
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1.18 "Equity Securities" shall mean (i) any securities of the Company
having voting rights with respect to the election of the Board not contingent
upon default, including, but not limited to, shares of Common Stock, (ii) any
securities evidencing any voting equity ownership interest in the Company, and
(iii) any securities convertible into or exercisable or exchangeable for any of
the foregoing securities.
1.19 "Exercising Party" shall have the meaning ascribed to such term in
Article 8 herein.
1.20 "Family Members," with respect to an individual, shall mean such
individual's spouse, parents, siblings and children.
1.21 "Final Prospectus" shall have the meaning ascribed to such term in
Section 6.5(a) herein.
1.22 "Good Cause" shall mean a termination based on a Manager's (i)
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of the Manager's material duties and responsibilities for
CPC; (2) willful dishonesty, fraud, alcohol or illegal drug abuse, or misconduct
with respect to the business or affairs of CPC, which materially and adversely
affects the operations, prospects or reputation of CPC; or (3) conviction of a
felony or other crime involving moral turpitude.
1.23 "Good Reason" shall mean the continuance of any of the following
after ten (10) days prior written notice by the Manager to CPC and to Thayer,
specifying the basis for such Manager's having Good Reason to terminate such
Manager's employment with CPC:
(i) a material adverse change in the Manager's status, title,
position or responsibilities with CPC;
(ii) the assignment to the Manager of any
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duties materially and adversely inconsistent with the Manager's
position at CPC as of the date of this Agreement (or such other
position to which he may be promoted);
(iii) the Manager's removal from, or failure to be reappointed
or reelected to, the Manager's position under such Manager's written
employment agreement (if applicable), except where a Manager's
employment with CPC under such a written employment agreement has been
terminated by such Manager's death, Disability, or for Good Cause; or
(iv) any other material breach by CPC of a Manager's written
employment agreement (if applicable), including the regular failure to
pay the Manager on a timely basis the amounts to which he is entitled
under such a written employment agreement.
1.24 "Indemnitees" shall have the meaning ascribed to such
term in Section 6.5(a) herein.
1.25 "Indemnified Party" shall have the meaning ascribed to
such term in Section 6.5(c) herein.
1.26 "Indemnifying Party" shall have the meaning ascribed to
such term in Section 6.5(c) herein.
1.27 "Indenture" shall mean the Indenture dated as of May 9,
1997, by and among CPC and the Bank of New York, as Indenture Trustee,
relating to the Notes.
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1.28 "IPO Event" shall mean the consummation of an
underwritten public offering, pursuant to an effective registration
statement under the Securities Act, that is underwritten by one or more
nationally-recognized investment banking firms and results in the
Company receiving not less than $25,000,000 in aggregate cash proceeds
from such offering.
1.29 "Manager's Cost" shall mean the dollar amount that such
Manager would have received pursuant to the Merger Agreement for such
Manager's shares of Management Common Stock of Holdings had such
Manager not exchanged such shares for shares of Common Stock pursuant
to the Stock Purchase Agreement.
1.30 "Manager's Representative" shall have the meaning
ascribed to such term in Section 8.1 herein.
1.31 "Market Value" shall mean, as of any date prior to an IPO
Event, seven and one-half (7.5) times consolidated EBIT of CPC for the
four preceding fiscal quarters for which financial statements have been
delivered to the holders of the Notes in accordance with the terms of
Section 4.12 of the Indenture, minus the aggregate amount of
outstanding indebtedness of CPC as of the last day of such four fiscal
quarters.
1.32 "Merger Agreement" shall mean the merger agreement, dated
as of March 25, 1997, between Thayer and Holdings.
1.33 "Notes" shall mean the $100,000,000 12 1/2% Senior Notes
of Colorado Prime Corporation due 2004.
1.34 "Operating Income Projections" shall have the meaning
ascribed to such term in Schedule 5.2 to the Merger Agreement.
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1.35 "Option" shall have the meaning ascribed to such term in
Section 11.15 herein.
1.36 "Optionees" shall have the meaning ascribed to such term in
Section 11.15 herein.
1.37 "Permitted Transfer" shall mean a Transfer of Common Stock by
a Shareholder to (i) one or more Family Members of such Shareholder or
(ii) a trust solely for the benefit of one or more Family Members of
such Shareholder; provided that, prior to any such Transfer, each
transferee shall agree in writing, in a form satisfactory to the
Company and Thayer, that such transferee shall receive and hold such
Common Stock subject to the provisions of this Agreement.
1.38 "Permitted Transferee" shall mean any Person receiving Common
Stock pursuant to a Permitted Transfer and any such Permitted
Transferee shall be included within the definition of "Shareholder" for
purposes of this Agreement.
1.39 "Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust unincorporated association,
joint venture, or other entity of whatever nature.
1.40 "Pro Rata Share" shall mean the holder's pro rata share of
the outstanding Equity Securities which shall be a fraction calculated
by dividing (i) the number of shares of Common Stock held by the holder
as of the applicable date plus the number of shares of Common
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Stock issuable upon conversion, exercise or exchange of all other
outstanding Equity Securities held by the holder as of the applicable
date, by (ii) the total number of shares of Common Stock outstanding as
of such date plus the total number of shares of Common Stock issuable
upon conversion, exercise or exchange of all other outstanding Equity
Securities as of such date.
1.41 "Register," "Registered" and "Registration" as used herein
shall refer to a registration of Registrable Securities effected by
filing with the SEC a registration statement in compliance with the
Securities Act and the declaration or ordering by the SEC of
effectiveness of such registration statement.
1.42 "Registrable Securities" shall mean shares of Common Stock
issued pursuant to the Stock Purchase Agreement, shares of Common Stock
issued pursuant to the Company's 1997 Stock Option Plan or any other
stock option plan or employee benefit or other incentive plan which may
be adopted by the Company after the date hereof and shares of Common
Stock issued to a Shareholder upon the exercise of any options or upon
the exercise of any preemptive rights granted by the Company with
respect to any shares of Common Stock. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities
when (i) such securities shall have been registered under the
Securities Act, the registration statement with respect to the sale of
such securities shall have become effective under the Securities Act
and such securities shall have been disposed of pursuant to such
effective registration statement, (ii) such securities shall have been
distributed pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act, (iii) such securities shall have been
otherwise transferred, if new certificates or other evidence of
ownership for them not bearing a legend restricting further transfer
and not subject to any stop transfer order or other restrictions on
transfer shall have been delivered by the Company, and subsequent
disposition of such securities shall not require
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Registration or qualification of securities under the Securities Act or
any state securities laws then in force, or (iv) such securities shall
cease to be outstanding.
1.43 "Retirement" shall mean a Manager's retirement upon the later
of (i) such Manager attaining the age of sixty-five (65), or (ii) two
(2) years after the date of this Agreement.
1.44 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.45 "Shareholders" shall mean Thayer, each Manager, each
Permitted Transferee, and any other Person that becomes a holder of
Equity Securities and agrees in writing to be bound by and comply with
the terms of this Agreement.
1.46 "Tag-Along Notice" shall have the meaning ascribed to such
term in Section 4.2 herein.
1.47 "Tag-Along Period" shall have the meaning ascribed to such
term in Section 4.2 herein.
1.48 "Tag-Along Shareholder" shall have the meaning ascribed to
such term in Section 4.2 herein.
1.49 "Thayer Notice" shall have the meaning ascribed to such term
in Section 3.3 herein.
1.50 "Thayer Period" shall have the meaning ascribed to such term
in Section 3.3 herein.
1.51 "Transfer" shall mean any actual or proposed disposition of
all or a portion of an interest (legal or equitable) by any means,
direct or indirect, absolute or conditional, voluntary or involuntary,
including, but not
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limited to, by sale, assignment, put, transfer, pledge, hypothecation,
mortgage or other encumbrance, court order, operation of law,
distribution, settlement, exchange, waiver, abandonment, gift,
alienation, bequest or disposal.
1.52 "Transfer Notice" shall have the meaning ascribed to such
term in Section 4.1 herein.
1.53 "Warrants" shall mean the warrants to purchase Common Stock
of the Company issued by the Company in connection with the sale of the
Notes.
1.54 "Without Cause" shall mean a Manager's termination by CPC
other than for Good Cause or as a result of a Manager's death or
Disability.
ARTICLE 2
GENERAL TRANSFERABILITY RESTRICTIONS
None of the Mangers or their Permitted Transferees shall Transfer
or cause or permit to be Transferred any Equity Securities owned or
controlled by such Shareholder, except pursuant to Permitted Transfers
and other Transfers carried out in compliance with this Agreement, and
any purported Transfer in violation hereof shall be null and void.
<PAGE> 11
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ARTICLE 3
RIGHTS OF FIRST REFUSAL
Prior to an IPO Event, before any Equity Securities owned or
Controlled by a Manager or a Permitted Transferee of a Manager (a
"Selling Shareholder") may be Transferred (other than in a Permitted
Transfer or a Transfer pursuant to Article 4 or 5 hereof), the Selling
Shareholder shall first comply with the following procedures with
respect to such Equity Securities:
3.1 Notice. The Selling Shareholder shall first deliver a written
notice (a "Shareholder Notice") to the Company and Thayer stating (i)
that the Selling Shareholder wishes to Transfer such Equity Securities,
(ii) the number and type of Equity Securities proposed to be
Transferred and (iii) the price and other material terms of the
proposed Transfer. The Shareholder Notice shall be accompanied by a
certificate of the Selling Shareholder certifying that it has received
from a Person not Affiliated with such Selling Shareholder a bona fide
offer to acquire such Equity Securities in cash at such price and on
such terms as are set forth in the Shareholder Notice and shall
identify such Person.
3.2 Company Right. Within thirty (30) days after receipt of a
Shareholder Notice (the "Company Period"), the Company may elect, by
delivering to the Selling Shareholder and to Thayer a written notice (a
"Company Notice") of its election to purchase all or any part of the
Equity Securities to which the Shareholder Notice refers, on the same
terms and conditions specified in such Shareholder Notice. If the
Company does not elect to purchase any of such Equity Securities, the
Company shall send a notice to such effect to the Selling Shareholder
and to Thayer prior to the end of the Company Period (a "Declination
Notice").
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3.3 Thayer Right. If the Company does not elect to purchase during
the Company Period any or all of the Equity Securities to which the
Shareholder Notice refers, then Thayer may elect, by delivering to the
Selling Shareholder a written notice (a "Thayer Notice") within thirty
(30) days after Thayer's receipt of the Company Notice or the
Declination Notice, as applicable (the "Thayer Period") of its election
to purchase, on the same terms and conditions specified in the
Shareholder Notice, any or all of the amount of such Equity Securities
that the Company has not elected to purchase.
3.4 Consummation. If the Company and/or Thayer elects to acquire
Equity Securities pursuant to this Article 3, the Company, Thayer and
the Selling Shareholder shall consummate the sale and purchase of such
Equity Securities within sixty (60) days after the date that the
Company or Thayer has received the Shareholder Notice, the Company
Notice or the Declination Notice, as the case may be.
3.5 Selling Shareholder Right. To the extent the Company and
Thayer do not exercise their respective rights under this Article 3
within the specified time periods, the Selling Shareholder may Transfer
the Equity Securities specified in its Shareholder Notice (and not
purchased by the Company or Thayer) to the Person specified in such
Shareholder Notice at the price and on the terms specified in such
notice, provided that such Transfer is consummated within sixty (60)
days after the end of the Thayer Period. If the Transfer of all of such
Equity Securities is not consummated within such time period, then the
Selling Shareholder must again comply with the provisions of this
Article 3 with respect to such of the Equity Securities which have not
been Transferred timely prior to their subsequent Transfer.
<PAGE> 13
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ARTICLE 4
TAG-ALONG RIGHTS
Until the later of (i) May 9, 1999, or (ii) the date of an IPO
Event or, if earlier, the date when Thayer's Pro Rata Share is less
than fifty-one percent (51%), Thayer shall not engage in a transaction
(including a merger, consolidation or similar business combination)
that involves the Transfer by Thayer to a Person unaffiliated with
Thayer (a "Third Party") of Common Stock representing greater than
fifty percent (50%) of the outstanding Common Stock (other than a
"Drag-Along Sale" as defined in Article 5 below and other than a
Transfer to one or more Affiliates of Thayer) without first offering
the Shareholders the right to participate in such Transfer in the
following manner:
4.1 Notice. Thayer shall first deliver a written notice (a
"Transfer Notice") to the Shareholders stating (i) Thayer's wish to
Transfer Common Stock to a Third Party, (ii) the number of shares of
Common Stock proposed to be Transferred and (iii) the price and the
other general terms of the proposed Transfer. Such notice may be
provided before Thayer has identified a purchaser or purchasers for
such Common Stock.
4.2 Shareholders Right. Each Shareholder may elect, by delivering
to Thayer a written notice (a "Tag-Along Notice") of its election
within fifteen (15) days after receipt of the Transfer Notice (the
"Tag-Along Period"), to participate in Thayer's Transfer of Common
Stock on the same terms and conditions specified in the Transfer
Notice. The Tag-Along Notice shall specify the maximum number of Common
Stock shares that the Shareholder (a "Tag-Along Shareholder") elects to
Transfer, which number shall not exceed the product (rounded down to
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the nearest whole number) of (x) the total number of shares to be
acquired by the Third Party as set forth in the Tag-Along Notice,
multiplied by (y) a fraction, (1) the numerator of which shall be the
number of shares of Common Stock owned by such Tag-Along Shareholder as
of the date of the Tag-Along Notice and (2) the denominator of which
shall be the aggregate number of outstanding shares of Common Stock
owned on such date by all Shareholders; provided that any share amounts
so determined shall be rounded to avoid fractional shares.
4.3 Consummation.
(a) At least ten (10) days prior to the consummation of a
Transfer by Thayer described in a Transfer Notice and not before the
earlier of (x) the end of the Tag-Along Period and (y) the receipt by
Thayer of a Tag-Along Notice from each Shareholder, Thayer shall
provide written notice (a "Consummation Notice") to each Tag-Along
Shareholder stating (i) the identity of the Third Party transferee,
(ii) the number of shares of Common Stock that such Tag-Along
Shareholder will be entitled to sell to such Third Party pursuant to
this Article 4, and (iii) the date the Transfer is contemplated to be
consummated. At least five (5) days prior to the date of such
consummation, each Tag-Along Shareholder shall deliver to Thayer for
Transfer to the Third Party one or more certificates, properly endorsed
for Transfer, which represent the number of shares of Common Stock such
Tag-Along Shareholder is entitled to sell as provided in the
Consummation Notice. The certificate(s) delivered to Thayer by each
Tag-Along Shareholder shall be Transferred to the Third Party
identified in the Consummation Notice, as part of the consummation of
the Transfer of Common Stock pursuant to the terms and conditions
specified in the Transfer Notice and the Consummation Notice. Upon
receipt of
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the proceeds of the Transfer, Thayer shall promptly remit to each
Tag-Along Shareholder that portion of such proceeds to which such
Tag-Along Shareholder is entitled by reason of such Shareholder's
participation in such Transfer.
(b) In connection with a Transfer pursuant to this Article 4,
each Tag-Along Shareholder shall be required to make representations
and warranties regarding the Common Stock that such Shareholder
proposes to Transfer identical to those required to be made by Thayer,
including, but not limited to, such Shareholder's ownership of and
authority to Transfer such Common Stock and the absence of any liens or
other encumbrances on such stock.
(c) Notwithstanding anything to the contrary contained in this
Article 4, Thayer shall have no liability to any Shareholder (i) if the
sale of Common Stock pursuant to this Article 4 is not consummated for
any reason whatsoever, or (ii) with respect to any of the terms or
provisions of such sale of Common Stock. Whether a sale of Common Stock
to a Third Party pursuant to this Article 4 is effected is in the sole
and absolute discretion of Thayer.
4.4 Securities Laws. Notwithstanding anything to the contrary in
this Article 4, Thayer shall have no obligation to permit a
Shareholder, and no Shareholder shall have a right, to participate as a
Tag-Along Shareholder in a Thayer Transfer of Common Stock if such
Shareholder's Transfer (i) would not be exempt from all registration
requirements under federal and state securities laws or (ii) would
violate, or cause Thayer's Transfer to violate, any applicable federal
or state laws.
<PAGE> 16
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ARTICLE 5
DRAG-ALONG RIGHTS
5.1 Drag-Along Sale. (a) If, prior to an IPO Event, Thayer, in its
sole discretion, determines to accept an offer from a Third Party to
purchase all of the Equity Securities then held by the Shareholders, or
such lesser number as will result in the Third Party owning fifty-one
percent (51%) or more of Equity Securities, then Thayer may, at its
option, require each other Shareholder to include in such Transfer to
the Third Party such number of Equity Securities owned by each of them
as determined in this Article 5 (the "Drag-Along Sale"). All sellers of
Equity Securities in such Drag-Along Sale (i) shall receive the same
consideration per Equity Security and shall be subject to the same
terms and conditions of sale as the Transfer by Thayer of its Equity
Securities and (ii) shall execute such documents and take such actions
as may be reasonably required by Thayer. For the purposes of this
Article 5, the consideration received for any option held by a
Shareholder included in a Drag-Along Sale shall equal (x) the
difference between the price per share of Common Stock to be acquired
by a Third Party in such Drag-Along Sale minus (y) $100.00.
(b) Each Shareholder shall be required to participate in the
proposed Drag-Along Sale by Transferring in connection therewith Equity
Securities equal to the product of (x) the total number of Equity
Securities to be acquired by the Third Party, multiplied by (y) a
fraction, the numerator of which shall be the total number of Equity
Securities owned by such Shareholder, and the denominator of which
shall be the total number of Equity Securities owned by all
Shareholders.
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5.2 Drag-Along Notice. Thayer shall provide each Shareholder with
written notice (the "Drag-Along Notice") of a Drag-Along Sale at least
fifteen (15) days prior to the contemplated date of consummation of
such sale (the "Drag-Along Sale Date"). Each Drag-Along Notice shall
set forth: (i) the identity of the Third Party transferee in the
Drag-Along Sale, (ii) the price and the other general terms of the
proposed Transfer and (iii) the Drag-Along Sale Date.
5.3 Form of Consideration. The provisions of this Article 5 shall
apply regardless of the form of consideration received in the
Drag-Along Sale, and any form of consideration received pursuant to the
terms of the Drag-Along Sale shall be allocated among the transferors
of Equity Securities pro rata based upon each transferor's percentage
ownership of the Equity Securities sold in the Drag-Along Sale.
5.4 Consummation.
(a) At least three (3) Business Days prior to the contemplated
date of consummation of a Drag-Along Sale, each Shareholder shall
deliver to Thayer for Transfer to the Third Party one or more
certificates, properly endorsed for Transfer, which represent the
Equity Securities held by such Shareholder required to be transferred
in the Drag-Along Sale. The certificate(s) delivered to Thayer by each
Shareholder shall be Transferred to the Third Party transferee
identified in the Drag-Along Notice as part of the consummation of the
Drag-Along Sale. Upon receipt of the proceeds of the Drag-Along Sale,
Thayer shall promptly remit to each Shareholder that portion of such
proceeds to which such Shareholder is entitled by reason of such
Shareholder's participation in such sale.
<PAGE> 18
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(b) In connection with a Drag-Along Sale, each Shareholder
shall be required to make representations and warranties regarding the
Equity Securities that such Shareholder Transfers in such sale
identical to those being made by Thayer, including, but not limited to,
such Shareholder's ownership of and authority to Transfer such Equity
Securities and the absence of any liens or other encumbrances on such
Equity Securities.
(c) Notwithstanding anything to the contrary contained in this
Article 5, Thayer shall have no liability to any Shareholder (i) if the
sale of Equity Securities pursuant to this Article 5 is not consummated
for any reason whatsoever, or (ii) with respect to any of the terms or
provisions of such sale of Equity Securities. Whether a sale of Equity
Securities to a Third Party pursuant to this Article 5 is effected is
in the sole and absolute discretion of Thayer.
ARTICLE 6
REGISTRATION RIGHTS AND PROCEDURES.
6.1 Piggyback Registration Rights. If at any time the Company
proposes to Register any of its Common Stock in connection with an IPO
Event or, if at any time prior to the second anniversary of the closing
of such IPO Event, the Company proposes to effect a subsequent primary
offering, whether or not for sale for its own account, in a manner
which would permit the Registration of Registrable Securities for sale
to the public under the Securities Act, the Company will, subject to
Section 6.2 hereof, give written notice to the Shareholders of its
intention to do so and of the Shareholders' rights under this Article 6
prior to the anticipated filing date of the registration statement
relating to such Registration. Such
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notice shall offer the Shareholders the opportunity to include in such
registration statement such number of Registrable Securities as the
Shareholders may request. Upon the written request of the Shareholders,
made within 20 Business Days after the receipt of the Company's notice
(which request shall specify the number of Registrable Securities
intended to be disposed of by the Shareholders), the Company will use
commercially reasonable efforts to effect the Registration (and
qualification under any applicable state securities or Blue Sky laws)
of all Registrable Securities which the Shareholders shall have
requested Registration thereof, to the extent required to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so requested to be Registered; provided that:
(i) if such Registration involves an underwritten offering, the
Shareholders wishing to participate must sell their Registrable
Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company or any other selling
security holder (or on equivalent terms and conditions, if the
Shareholders hold different securities from those being sold by the
Company or such other selling security holder), including, without
limitation, executing and delivering such underwriting agreements or
other
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related agreements to which the Company or any such other selling
security holder has agreed to execute and deliver;
(ii) if, at any time after giving written notice of its intention
to Register any securities pursuant to this Section 6.1 and prior to
the effective date of the registration statement filed in connection
with such Registration, the Company shall determine for any reason not
to Register such securities, the Company shall give written notice to
the Shareholders and, thereupon, shall be relieved of its obligation to
Register any Registrable Securities in connection with such
Registration;
(iii) if a Registration pursuant to this Section 6.1 involves an
underwritten offering, the Shareholders or parties requesting to be
included in such Registration may elect, in writing at least 10 days
prior to the effective date of the registration statement filed in
connection with such Registration, not to Register such securities in
connection with such Registration; and
(iv) the Company shall not be required to effect any Registration
of Common Stock under this Section 6.1 incidental to the Registration
of any of its securities in connection with mergers, acquisitions,
exchange offers, subscription offers, the Warrants, dividend
reinvestment plans, the Company's 1997 Stock Option Plan or other
executive or employee benefit or compensation claims (including,
without limitation, any registration of securities on a Form S-4 or S-8
registration statement or any successor or similar forms).
6.2 Limitations on Shares Included In Piggyback Registrations. If
the Registration of which the Company gives notice pursuant to Section
6.1 herein is for an underwritten
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offering, only securities that are to be included in the underwriting
may be included in the Registration. Notwithstanding any provision of
Section 6.1 herein, if the underwriter determines that marketing
factors require a limitation on the number of shares of Registrable
Securities to be underwritten or on the identity of the selling
shareholders in the case of any Registration for an IPO Event that
includes a secondary offering, the underwriter may exclude or otherwise
limit the number of shares of Registrable Securities to be included in
the registration and underwriting. The Company shall so advise the
Shareholders, and the number of shares of Registrable Securities that
may be included in the Registration and underwriting shall, subject to
the agreement of the underwriters, be allocated among the Shareholders
and, as further provided in the Agreement, all other Shareholders in
proportion, as nearly as practicable, to the respective numbers of
shares of Registrable Securities which all such Shareholders initially
requested to be included in the Registration. No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such Registration. If any Shareholder
disapproves of any such underwriting, such Shareholder may elect to
withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so
withdrawn from such underwriting shall be withdrawn from such
Registration, and the number of Shares of the remaining Shareholders
shall, if they have been cut back pursuant to this section 6.2, be
increased pro rata in the aggregate amount so withdrawn.
6.3 Expenses. The Company will pay all Registration expenses,
including legal fees and expenses of the Company, in connection with
each Registration of Registrable Securities pursuant
<PAGE> 22
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to this Article 6, except that each Shareholder having shares of the
Company's capital stock Registered pursuant to this Article 6 shall pay
all fees and expenses of such Shareholder's counsel and the
underwriting discounts, commissions and similar fees, and transfer
taxes applicable to the Registrable Securities of such Shareholder
included in such Registration.
6.4 Restrictions on Public Sale by Shareholders and the Company.
In connection with any offering of any securities of the Company,
including, without limitation, any offering contemplated by this
Article 6, each Shareholder agrees that, whether or not such
Shareholder's Registrable Securities are included in such Registration,
it will consent and agree to comply with any "hold back" restriction,
relating to Common Stock or any other securities of the Company then
owned by such Shareholder, that may be reasonably requested by the
underwriter(s) or placement or other selling agent(s) of such offering.
Without limitation to the foregoing, each Shareholder shall, upon
request by such underwriters or agent(s), agree not to effect any
public sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any Registrable Securities, and not to
effect any such public sales or distribution of any other equity
securities of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in
each case, other than as part of such underwritten public offering)
during the 30 days prior to, and the 180 day period beginning on, the
effective date of such registration statement (or such lesser period as
such underwriter(s) or placement or other selling agent(s) may permit)
(except as part of such Registration).
<PAGE> 23
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6.5 Indemnification. (i) To the extent permitted by law, the
Company shall indemnify the Shareholders upon requesting or joining in
a Registration, each agent, officer and director of Thayer, each Person
Controlling Thayer, and each underwriter and selling broker of the
securities so Registered (collectively, "Indemnitees") against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification
or compliance (or in any related registration statement, notification
or the like) 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 in the light of the circumstances in
which they were made, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to an action or inaction required of the Company
in connection with any such registration, qualification or compliance,
and shall reimburse each such Indemnitee for all legal and other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability is caused by any
untrue statement or omission so made in conformity with written
information relating to any such Indemnitees furnished by such
Indemnitees and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with
<PAGE> 24
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the SEC at the time the registration statement becomes effective or in
the amended prospectus filed with the SEC pursuant to Rule 424(b) (the
"Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any Indemnitee, if a copy of the Final Prospectus was not
furnished to the Person asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the Securities
Act; provided, further, that this indemnity shall not be deemed to
relieve any underwriter of any of its due diligence obligations; and
provided, further, that the indemnity agreement contained in this
Section 6.5(i) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld.
(ii) To the extent permitted by law, each Shareholder upon
requesting or joining in a Registration shall indemnify the Company,
each other Shareholder and their respective officers, directors and
Affiliates and their respective successors (collectively, the "Company
Indemnities") against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document incident to any
Registration, qualification or compliance (or in any related
registration statement, notification or the like) 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 in the light of the circumstances in which they were made
and shall reimburse the Company Indemnitees for all legal and other
expenses reasonably incurred in connection with
<PAGE> 25
-25-
investigating or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnification pursuant to this
Section 6.5(ii) shall apply only if (and only to the extent that) such
statement or omission was made in reliance upon and in conformity with
written information relating to such Shareholder (including, without
limitation, written negative responses to inquiries) furnished to the
Company, the other Shareholders or the underwriter or placement agent
and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement
becomes effective or in the Final Prospectus, such indemnity agreement
shall not inure to the benefit of any Company Indemnitees if a copy of
the Final Prospectus was not furnished to the Person asserting the
loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act; provided, further, that
this indemnity shall not be deemed to relieve any underwriter of any of
its due diligence obligations; provided, further, that the indemnity
agreement contained in this Section 6.5(ii) shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability or action
if such settlement is effected without the consent of such Shareholder,
which consent shall not be unreasonably withheld; and provided,
further, that the obligations of the Shareholder shall be limited to an
amount equal to the proceeds received by such Shareholder from the sale
of its Registrable Securities in such Registration, unless such claim,
loss, damage, liability or action resulted from such Shareholder's
fraudulent misconduct.
<PAGE> 26
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(iii) Each party entitled to indemnification hereunder (an
"Indemnified Party") shall give notice to the party required to provide
indemnification (an "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party (at
its expense) to assume the defense of any claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be
satisfactory to the Indemnified Party, and the Indemnified Party may
participate in such defense at such party's expense, and provided,
further, that the omission by any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6.5 except to the extent that the
omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged materially and adversely
solely as a result of the failure of the Indemnified Party to give
notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
either (i) 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 or (ii)
contains any finding of a violation of law by an Indemnified Party.
(iv) The reimbursement required by this Section 6.5 shall be made
by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses are incurred.
(v) If the indemnification provided for in this Section 6.5 is
unavailable to an
<PAGE> 27
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Indemnified Party in respect of any losses, claims, damages or
liabilities 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 losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the Company and the Shareholders in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations including the relative benefits received by
the Company and the Shareholders. The relative benefits received by the
Company on the one hand, and the Shareholders, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) to the Company bear to the
total net proceeds from the offering (before deducting expenses) to the
Shareholders. The relative fault of the Company and the Shareholders
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or the Shareholders and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(vi) The Company and the Shareholders agree that it would not be
just and equitable if contribution pursuant to this Section 6.5 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
in the immediately
<PAGE> 28
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preceding paragraph. 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 Section 6.5, the Shareholders shall not be
required to contribute any amount in excess of the proceeds received by
the Shareholders from the sale of Registrable Securities covered by any
registration statement filed pursuant hereto. 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.
(vii) The obligations under this Section 6.5 shall survive the
completion of any offering of Registrable Securities in a registration
statement under this Agreement or otherwise.
6.6 Cooperation by Prospective Sellers. (i) The Shareholders shall
furnish to the Company such information as the Company may reasonably
require from the Shareholders in connection with the registration
statement (and the prospectus included therein). The Shareholders may
not participate in any offering unless the Shareholders (A) agree to
sell their Registrable Securities to be sold on the basis provided in
any agreement governing the offering and (B) complete and execute all
questionnaires, indemnities, underwriting agreements and other
documents required in connection with the offering.
(ii) The Shareholders will not (until further notice by the
Company) effect sales thereof (or deliver a prospectus to any
purchaser) after receipt of telegraphic or written notice from the
Company to suspend sales to permit the Company to correct or update a
<PAGE> 29
-29-
registration statement or prospectus. In connection with any offering,
the Shareholders will not use any offering document, offering circular
or other offering materials with respect to the offer or sale of
Registrable Securities, other than the prospectuses provided by the
Company and any documents incorporated by reference therein.
ARTICLE 7
ANTIDILUTION PROTECTION
Upon any change in the outstanding Common Stock by reason of any
stock dividend, split-up (or reverse stock split), recapitalization,
reclassification, reorganization, reincorporation, combination or
exchange of shares, merger, consolidation, liquidation or similar
change in corporate structure, the Board shall provide for a
substitution for or adjustment in (i) the number of Equity Securities
held by each Shareholder, (ii) the number and class of shares subject
to outstanding options, (iii) the exercise price of outstanding
options, and (iv) the aggregate number and class of shares that may be
issued under the Company's 1997 Stock Option Plan.
ARTICLE 8
DISPOSITION OF STOCK
UPON MANAGER'S TERMINATION
8.1 If an IPO Event has not occured, upon the termination of a
Manager's employment with the Company, such Manager's Common Stock
shall be subject to disposition as set forth in this Article 8. For the
purposes of this Article 8 only, the term "Common Stock" shall mean (x)
a Manager's Common Stock plus (y) a Manager's options granted pursuant
to the Company's 1997
<PAGE> 30
-30-
Stock Option Plan if then vested and exercisable for Common Stock.
(i) If the Manager's employment with the Company has been
terminated as a result of the Manager's death, Disability or
Retirement, the Company shall purchase, and the Manager or Manager's
estate as the case may be, shall sell such Manager's Common Stock at
the higher of either the Manager's Cost or Market Value as of the date
of termination.
(ii) If the Manager's employment with the Company has been
terminated as a result of either the Manager's resigning without Good
Reason or the Manager's being terminated for Good Cause, the Company
shall have the option to purchase the Manager's Common Stock at the
lower of either the Manager's Cost or Market Value as of the date of
termination.
(iii) If the Manager's employment with the Company has been
terminated as a result of either the Manager's being terminated Without
Cause or the Manager's resigning for Good Reason and, as of the date of
such termination or resignation, the Company has achieved its Operating
Income Projections for the aggregate of the immediately preceding four
fiscal quarters for which financial statements have been delivered to
the holders of the Notes in accordance with the terms of Section 4.12
of the Indenture, the Manager shall have the option to cause the
Company to purchase the Manager's Common Stock at the higher of the
Manager's Cost or Market Value.
(iv) If the Manager's employment with the Company has been
terminated as a result of either the Manager's being terminated Without
Cause or the Manager's resigning for Good Reason and, as of the date of
such termination or resignation, the Company did not achieve its
<PAGE> 31
-31-
Operating Income Projections for the aggregate of the immediately
preceding four fiscal quarters for which financial statements have been
delivered to the holders of the Notes in accordance with the terms of
Section 4.12 of the Indenture, the Company shall have the option to
purchase the Manager's Common Stock at the higher of the Manager's Cost
or Market Value.
(v) Except as provided in Section 8.1(vi) below, a party
exercising an option under this Article 8, (an "Exercising Party")
shall provide written notice (an "Election Notice") of the Exercising
Party's election to the party entitled to receive such Election Notice
within sixty (60) days of the date of the termination giving rise to
such election (the "Election Period"). Failure to provide an Election
Notice within the Election Period shall cause any options subject to
such election to irrevocably lapse. If an Election Notice results in
the sale of a Manager's Common Stock to the Company pursuant to this
Article 8, the Company and the selling Manager shall consummate the
sale and purchase of such Manager's Common Stock within sixty (60) days
after the date that the Company or the Manager, as the case may be, has
received the Election Notice from the Exercising Party. Such a sale
shall be consummated (x) upon delivery to the Company by the Manager
one or more certificates, properly endorsed for transfer, which
represent the number of shares specified in the applicable Election
Notice, and (y) upon delivery to the Manager by the Company the amount,
in cash, to which such Manager is entitled pursuant to the Election
Notice and this Article 8; provided, however, that any sale of
Manager's Common Stock pursuant to a Manager's Retirement under Section
8.1(i) above shall be consummated within two (2) years after the date
that the Company has received the applicable Election Notice from the
Exercising Party. Such a sale shall be consummated (x)
<PAGE> 32
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upon delivery to the Company by the Manager one or more certificates,
properly endorsed for transfer, which represent one-half (1/2) the
number of shares subject to such a sale within one (1) year after the
date that the Company has received the Election Notice from the
Exercising Party, with the remaining shares to be delivered within two
(2) years from the date the Company received such Election Notice; and
(y) upon delivery to the Manager by the Company, within one (1) year
after the date that the Company has received the applicable Election
Notice from the Exercising Party, the amount, in cash, which represents
one-half (1/2) the amount such Manager is entitled pursuant to the
Election Notice and this Article 8, with the remaining amount, in cash,
to be delivered within two (2) years from the date the Company received
the applicable Election Notice.
(vi) Any sale of Manager's Common Stock pursuant to Article
8.1(i), other than a sale upon a Manager's Retirement, shall be
consummated as follows: The Manager, or the Manager's legal
representative (the "Manager's Representative"), as the case may be,
shall notify the Company of the Manager's Disability or death within
ninety (90) days of such Disability or death. Thereafter, within thirty
(30) days of receiving such notice, (x) the Company shall deliver to
the Manager, or the Manager's Representative, the amount, in cash, to
which such Manager is entitled pursuant to Section 8.1(i) and (y) the
Manager, or the Manager's Representative, shall deliver to the Company
one or more certificates, properly endorsed for transfer, representing
the number of shares purchased by the Company under this
Section 8.1(i).
(vii) Notwithstanding any provision of this Agreement to the
contrary, no Manager shall have any rights with respect to such
Manager's employment with the Company beyond those rights
<PAGE> 33
-33-
set forth in such Manager's written employment agreement. Any Manager
without such a written employment agreement shall be considered an
employee-at-will.
ARTICLE 9
MANAGER'S ACKNOWLEDGMENTS
Each Manager acknowledges that such Manager has carefully read and
considered all of the terms of this Agreement, that Thayer has made a
substantial investment in the Company's business and that the
provisions of this Agreement are reasonable and necessary for the
Company's and Thayer's protection. Each Manager further acknowledges
that damages at law will not be a measurable or adequate remedy for
breach of the covenants contained in is Agreement, and accordingly each
Manager consents to the entry by any court of competent jurisdiction of
any order enjoining such Manager from violating any such covenants. The
parties hereto further agree that if, in any judicial proceeding, a
court should refuse to enforce any covenants set forth herein because
of their term or geographical scope, then such covenants shall be
deemed to be modified to permit their enforcement to the maximum extent
permitted by law.
ARTICLE 10
TERMINATION
All rights and obligations set forth in this Agreement, to the
extent not previously terminated, shall terminate on May 9, 2007.
ARTICLE 11
MISCELLANEOUS
<PAGE> 34
-34-
11.1 Legend. All certificates evidencing Equity Securities shall bear a
legend indicating the existence of the restrictions imposed hereby and a stop
transfer order may be placed with respect to such securities. The legend
referred to in the preceding sentence shall be substantially in the following
form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE SECURITIES LAW
OF ANY JURISDICTION AND MAY NOT BE TRANSFERRED UNTIL (A) A REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (B) IN THE OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER
RESTRICTIONS AND OTHER TERMS OF A SHAREHOLDERS' AGREEMENT DATED AS OF MAY 9,
1997, AMONG COLORADO PRIME HOLDINGS, INC. AND CERTAIN SHAREHOLDERS THEREOF AND
MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF COLORADO PRIME CORPORATION AND
WILL BE FURNISHED UPON REQUEST TO THE HOLDER OF RECORD OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
11.2 Amendment. Except as otherwise expressly set forth in this
Agreement, this Agreement may be
<PAGE> 35
-35-
amended or supplemented only by the written agreement of the Company, Thayer and
the Managers.
11.3 No Waiver of Rights. No failure or delay on the part of any party
in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or power or of any other right or power. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach hereunder.
Except as otherwise expressly provided herein, all rights and remedies existing
under this Agreement are cumulative with, and not exclusive of, any rights or
remedies otherwise available.
11.4 Entire Agreement; Successors; Third Parties. This Agreement
contains the entire agreement among the parties with respect to the transactions
contemplated hereby and supersedes all prior arrangements or understandings with
respect thereto, written or oral. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
Except as specifically set forth herein, nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
11.5 No Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any other Person without the written consent
of Thayer, in the case of any assignment by any Manager, or a numerical majority
of the Managers, in the case of any assignment by Thayer, except that Thayer may
assign part or all of its rights and obligations hereunder to one or more
Affiliates of Thayer and any Manager may assign to one or more Permitted
Transferees of such Manager.
<PAGE> 36
-36-
11.6 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company to:
Colorado Prime Holdings, Inc.
1 Michael Avenue
Farmingdale, N.Y. 11735
Attention: Secretary
Facsimile: (516) 694-8493
With a required copy to Thayer
If to Thayer:
Thayer Equity Investors III, L.P.
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: V. Frank Pottow
Facsimile: (202) 371-0391
With a required copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
Attention: Neil M. Goodman
Facsimile: (202) 942-5999
If to any of the Managers, to:
Koerner Silberberg & Weiner, LLP
112 Madison Avenue, 3rd Floor
New York, New York 10016
Attention: Carl Seldin Koerner
Facsimile: (212) 689-3077
<PAGE> 37
-37-
If to a Manager, to the address set forth beneath the signature of such Manager
on the signature page hereof. Notices and other communications to parties
joining this Agreement after the date hereof shall be addressed in accordance
with the information received from the Company pursuant to the provisions of
this Agreement.
All deliveries of notice shall be deemed effective when received by the
Persons entitled to such receipt or when delivery has been attempted but refused
by such Person or Persons. Any party may change the Persons or addresses to
which such deliveries shall be made with respect to such party by delivering
notice thereof to the other parties hereto in accordance with this Section 11.6.
11.7 Captions. The captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11.9 Governing Law and Venue. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware applicable to agreements made and entirely to be performed
within such jurisdiction without reference to its conflicts of laws provisions.
The party bringing any action under this Agreement shall be entitled to choose
only the federal courts or state courts of the State of Delaware or the State of
New York, sitting in the Borough of Manhattan, as the venue for such action, and
each party consents to the sole and exclusive jurisdiction of the court chosen
in such manner for such action.
11.10 Severability. The provisions of this Agreement are severable, and
the unenforceability of
<PAGE> 38
-38-
any provision of this Agreement shall not affect the enforceability of the
remainder of this Agreement. The parties acknowledge that it is their intention
that if any provision of this Agreement is determined by a court to be invalid,
illegal or unenforceable as drafted, that provision should be construed in a
manner designed to effectuate the purpose of that provision to the greatest
extent possible under applicable law.
11.11 Specific Performance. The rights of the parties under this
Agreement are unique and the failure of a party to perform its obligations
hereunder would irreparably harm the other parties hereto. Accordingly, the
parties shall, in addition to such other remedies as may be available at law or
in equity, have the right to enforce their rights hereunder by actions for
specific performance and/or injunctive relief to the extent permitted by law.
11.12 Further Assurances. Each of the parties hereto agrees to execute
all such further instruments and documents and to take all such further action
as any other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
11.13 Publicity. No party shall issue any press release or undertake
any publicity concerning this Agreement or any of the transactions contemplated
hereby without the prior written consent of Thayer.
11.14 Books, Records and Reports. Within 120 days of the end of each
fiscal year, the Company shall mail to each Shareholder a report setting forth
an audited balance sheet as of the end of such fiscal year and audited
statements of income and source and use of funds for such fiscal year of the
Company, and any other information the Company deems necessary or desirable. If
requested by a Shareholder, the Company will furnish quarterly financial
statements to such Shareholder as soon as they become available.
11.15 The Company's 1997 Stock Option Plan. The parties hereto agree
that as soon as practicable
<PAGE> 39
-39-
after the Closing Date, but in no event later than May 31, 1997, the Company
will establish a stock option plan (the "Company's 1997 Stock Option Plan")
pursuant to which certain employees of the Company (the "Optionees") shall be
issued options (the "Options") to acquire the 31,600 allocated shares of the
Company. Under the Company's 1997 Stock Option Plan, (i) one-third of the
Options shall vest ratably over five years based upon service; (ii) one-third of
the Options shall vest over a five year period based upon achievement of
Operating Income for that fiscal year as projected in the Goldman Sachs
Memorandum dated December 1996. If the Company fails to achieve performance
objectives in one year by less than $500,000, the Options will vest to the
extent of one-half of the amount of the Options that would have vested if the
Operating Income objectives had been achieved. If in the subsequent year, total
Operating Income for that year and the prior year or years equals or exceeds the
total projected in the Goldman Sachs Memorandum dated December 1996 for that and
the prior year or years, the Optionees will be vested for each of the included
years; and (iii) one-third of the Options will vest if Thayer achieves a cash
Internal Rate of Return of at least forty percent (40%) achieved without taking
into account any payment made to Optionees from such Options.
-- END OF PAGE --
[signatures appear on the following pages]
<PAGE> 40
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed as of the day and year first
above written.
COLORADO PRIME HOLDINGS, INC.
By: /s/ V. Frank Pottow
_________________________
THAYER EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.,
its General Partner
By: /s/ Frederic Malek
______________________
MANAGERS:
/s/ William F. Dordelman
______________________________
William F. Dordelman
9 Woodley Road
Darien, Connecticut 06820
/s/ William Willett
_______________________________
William Willett
137 Rose Hill Road
Southport, Connecticut 06490
<PAGE> 41
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/s/ Thomas Taylor
_______________________________
Thomas Taylor
155 West 70th Street, Apt. 12E
New York, New York 10023
/s/ Ricardo DeSantis
_______________________________
Ricardo DeSantis
217 Stewart Avenue
Garden City, New York 11530
/s/ Brian Mulvehill
/s/ Christine Mulvehill
________________________________
Brian Mulvehill &
Christine Mulvehill
2788 Hampton Circle W.
Delray Beach, Florida 33445
/s/ Joseph Ugenti
________________________________
Joseph Ugenti
336 East Shore Drive
Massapequa, New York 11758
/s/ Kenneth Payne
________________________________
Kenneth Payne
31 Markwood Lane
East Northport, New York 11731
<PAGE> 42
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/s/ Lawrence Scuderi
_______________________________
Lawrence Scuderi
4 Cedar Crest Drive
Dix Hills, New York 11746
/s/ Charles Montanino
_______________________________
Charles Montanino
103 Wilson Avenue
Amityville, New York 11701
/s/ Niel Montanino
_______________________________
Niel Montanino
One Winthrop Street
Islip, New York 11751
/s/ Joseph Murphy
_______________________________
Joseph Murphy
One Stuyvesant Circle East
Setauket, New York 11733
<PAGE> 43
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/s/ John DeMaio
_______________________________
John DeMaio
11831 Spruce Hill
Houston, Texas 77077
/s/ Ronald F. Mel
_______________________________
Ronald F. Mel
776 Pine Island Drive
Melbourne, Florida 32940
/s/ Joseph J. Billi
_______________________________
Joseph J. Billi
3300 Neshaminy Blvd., Apt. 347
Bensalem, Pennsylvania 19020
<PAGE> 44
EXHIBIT A
Managers:
William Dordelman
William Willet
Thomas Taylor
Ricardo DeSantis
Brian Mulvehill
& Christine Mulvehill
Joseph Ugenti
Kenneth Payne
Lawrence Scuderi
Charles Montanino
Niel Montanino
Joseph Murphy
John DeMaio
Ronald F. Mel
Joseph J. Billi
__________________________
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Colorado Prime
Corporation, a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), a Delaware corporation, CPH,
and William F. Dordelman ("Employee") is hereby entered into and effective as of
the 9th day of May, 1997.
R E C I T A L S
The following statements are true and correct:
On this day the Company, CPH and certain other parties consummated a transaction
contemplated by the Merger Agreement dated as of March 25, 1997 (the "Merger
Agreement"), by and between Thayer Equity Investors III, L.P. and the Company's
parent entity, KPC Holdings Corporation.
Employee is employed hereunder by CPH and the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
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(a) The Company hereby employs Employee as Chief Executive Officer of the
Company and Chairman of the Board of Directors of the Company and CPH (or such
other comparable positions as shall be given to Employee by the Company's or
CPH's Board of Directors). Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of such positions, including those
set forth in the Company's and CPH's by-laws and as otherwise may be directed
from time to time by the Board of Directors of the Company and CPH (collectively
referred to as the "Board"), it being understood that such duties shall be
reasonably comparable to those duties previously performed by Employee for the
Company. Employee will report directly to the Board. Employee hereby accepts
this employment upon the terms and conditions contained herein and agrees to
devote his full business time, attention and efforts to promote and further the
business of the Company.
(b) Employee faithfully shall adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the Term of his employment hereunder (as
defined in Section 5 hereof), be engaged in any other business activity pursued
for gain, profit or other pecuniary advantage if such activity interferes with
Employee's duties and responsibilities hereunder without the prior consent of
the Board. However, the foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
Section 3 hereof.
2. Compensation. For all services rendered by Employee in any capacity
required hereunder, the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof through the end of the
Company's current fiscal year ending September 26, 1997, the base salary payable
to Employee shall be $420,000 per year, payable on a regular basis in accordance
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<PAGE> 3
with the Company's standard payroll procedures but not less frequently than
monthly. Such base salary shall, in the sole discretion of the Board, be subject
to an annual increase; provided that, at the beginning of the Company's fiscal
year, Employee's base salary shall be adjusted to reflect any increase during
the prior fiscal year in the consumer price index for All Urban Consumers, All
Items for New York-Northeast New Jersey-Long Island, NY-NJ-CT (1982-84 = 100),
published by the United States Bureau of Labor Statistics.
(b) Incentive Bonus Plan. Not later than June 30, 1997, the Board will
develop a written Annual Incentive Bonus Plan (the "Incentive Bonus Plan")
setting forth the criteria under which Employee and other officers and key
employees will be eligible to receive year-end bonus awards based upon
individual performance and the achievement by the Company of the prior year
projections. The Incentive Bonus Plan will provide for Employee's bonus as set
forth in Schedule 1 hereto.
(c) Performance Based Bonus Plan. Except in the case of a termination of
this Agreement pursuant to Section 5(a) or 5(c), for a period of five years
following the consummation of the transactions contemplated in the Merger
Agreement, the Employee, along with the Company's Chief Operating Officer, Chief
Financial Officer, and Vice President for Marketing (collectively, the "Senior
Executive Officers"), shall participate in a performance based bonus plan (the
"Performance Bonus Plan") in which each of the Senior Executive Officers will
receive an aggregate of 25% of the excess EBIT (after Incentive Bonus Plan
bonuses are awarded) for each fiscal year above EBIT projected for such year in
the Goldman, Sachs & Co. Confidential Memorandum dated December 1996 (the
"Goldman, Sachs Memorandum") or another mutually agreed-upon alternative profit
target. The maximum aggregate amount that the Senior Executive Officers shall be
entitled to receive under the term of the Performance Bonus Plan shall be
$750,000. The Board shall develop and approve the Performance Bonus Plan no
later than June 30, 1997.
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<PAGE> 4
(d) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Reimbursement of all premiums incurred by Employee to maintain
health insurance pursuant to the Employee's directly owned health
insurance policy.
(2) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses
shall be appropriately documented in reasonable detail by Employee
upon submission of any request for reimbursement, and in a format
and manner consistent with the Company's expense reporting policy.
(3) Reimbursement for all expenses associated with the Employee's
Rowayton, Connecticut office.
(4) Payment of car and driver expenses for Employee's transportation
to and from work.
(5) An annual payment by CPH of $35,000, paid monthly, for consultant
and director services provided to CPH.
(6) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and shall allow Employee to participate in
all other Company-wide employee benefits, including the Company's
defined contribution pension plan and 401(k) Plan, as may be made
available generally to employees of either from time to time. Such
perquisites shall be at least comparable to the Company's policies
with respect thereto prior to the consummation of the Merger
Agreement.
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<PAGE> 5
3. Non-Competition Agreement.
(a) Employee shall not, during the period of his employment by or with
the Company and for a two (2) year period following the termination of his
employment under Section 5(c) hereto, or for a one (1) year period following the
termination of his employment other than under Section 5(c) hereto, for any
reason whatsoever, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, trustee, or in a managerial capacity, whether as an
employee, independent contractor, agent, consultant or advisor, or as a
sales representative, in any business selling any products or services in
direct competition with the Company;
(ii) call upon any person who is, at that time, an employee of the
Company in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of the
Company for the purpose of soliciting or selling products or services in
competition with the Company; or
(iv) call upon any prospective acquisition candidate, on the
Employee's own behalf or on behalf of any competitor of the Company,
which candidate was either called upon by the Company or for which the
Company made an acquisition analysis, for the purpose of acquiring
such entity.
For purposes of this Section and for purposes of Sections 5, 6, 7, 8 and
16, the term "Company" shall be deemed to include all direct and indirect
subsidiaries, and affiliates of the Company. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit Employee from
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<PAGE> 6
acquiring as an investment not more than five percent (5%) of the capital stock
of a competing business, whose stock is publicly traded on a national securities
exchange or on the over-the-counter market.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the Company's current plans; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company throughout the term
of this covenant.
(d) The covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants; provided, however, that the
Company's continued failure to make payments to Employee under Section 2 of this
Agreement shall constitute such a defense.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in Section 3(a) hereof, the period of time
for which Employee shall be prohibited pursuant to Section 3(a) hereof shall be
the maximum time permitted by law.
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<PAGE> 7
4. Place of Performance.
(a) Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement.
In such event, if Employee agrees to relocate, the Company shall pay all
reasonable relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
reasonable closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if, but only to the extent that, any such relocation
costs are not deductible for tax purposes. The general intent of the foregoing
is that Employee shall not personally bear any out-of-pocket cost as a result of
the relocation, with an understanding that Employee shall use his best efforts
to incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of Section 5(c) and, if Employee
is terminated for such refusal, Employee shall be entitled to receive all
payments under this Agreement as if he were terminated by the Company without
cause.
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for one year (the "Initial Term"),
and, unless terminated as herein provided, shall be extended at the end of the
Initial Term and ongoing successive terms, for a period of one year on the same
terms and conditions contained herein (the "Term"), provided, however, that with
each successive Term, Employee's
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<PAGE> 8
compensation shall be adjusted in accordance with Section 2 hereof. This
Agreement and Employee's employment may be terminated in any one of the
followings ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full time duties
hereunder for four (4) consecutive months, then thirty (30) days after written
notice to the Employee (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume his full-time duties
at the conclusion of such notice period. Also, Employee may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company the
base salary at the rate then in effect for a period of eight (8) months from the
date of such termination (the "Disability Period"); provided that, such amounts
shall be offset by any amounts otherwise paid to the Employee under any
disability program then maintained by the Company. During the Disability Period,
Employee shall also receive all benefits to which Employee would otherwise be
entitled. In addition, earned but unpaid base salary as of the date of such
termination shall be paid in full and any bonus award to which the Employee
would have been entitled under the Incentive Bonus Plan had he been employed
throughout
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<PAGE> 9
the year in which such bonus is calculated shall be payable on a prorated basis
for the year in which such termination occurs only.
(c) Good Cause. The Company may terminate the Agreement immediately upon
written notice to Employee for good cause, which shall be: (1) Employee's
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of Employee's material duties and responsibilities
hereunder; (2) Employee's willful dishonesty, fraud, alcohol or illegal drug
abuse, or misconduct with respect to the business or affairs of the Company,
which materially and adversely affects the operations, prospects or reputation
of the Company; or (3) Employee's conviction of a felony or other crime
involving moral turpitude. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Employee.
Should Employee be terminated by the Company without cause, or if this Agreement
is not renewed pursuant to Section 5 hereof, Employee shall receive from the
Company the base salary at the rate then in effect for one year from the date
Employee's employment is terminated, payable over such time period, and any
other benefits to which Employee would otherwise be entitled. If Employee
resigns or otherwise terminates his employment for any reason other than Good
Reason as defined in Section 5(e), Employee shall receive no severance
compensation.
(e) Termination by Employee for Good Reason. The Employee may terminate
his employment hereunder for "Good Reason." As used herein, "Good Reason" shall
mean the continuance of any of the following after ten (10) days prior written
notice by Employee to the Company and to CPH, specifying the basis for such
Employee's having Good Reason to terminate this Agreement:
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<PAGE> 10
(i) a material adverse change in Employee's status, title,
position or responsibilities;
(ii) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in
Section 1 hereof (or such other position to which he may be promoted),
including status, offices, responsibilities or persons to whom the
Employee reports as contemplated under Section 1 of this Agreement, or
any other action by the Company which results in a material and adverse
change in such position, status, offices, titles or responsibilities;
(iii) Employee's removal from, or failure to be reappointed or
reelected to, Employee's position under this Agreement, except as
contemplated by Sections 5(a), (b) and (c); or
(iv) any other material breach of this Agreement by the Company,
including the regular failure to pay Employee on a timely basis the
amounts to which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, Employee shall
be entitled to receive from the Company the base salary at the rate then in
effect for one year from the date Employee's employment is terminated, payable
over such time period, and any other benefits to which Employee would otherwise
be entitled.
(f) Payment Through Termination. Upon termination of this Agreement for
any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave) due through the effective date of termination.
Additional compensation subsequent to termination, if any, shall be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section 9 herein and Employee's
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obligations under Sections 3, 6, 7, 8 and 10 herein shall survive such
termination in accordance with their terms.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Employee agrees that all such materials which he develops or conceives and/or
documents during such period shall be deemed works made-for-hire for the Company
within the meaning of the copyright laws of the United States or any similar or
analogous law or statute of any other jurisdiction and accordingly, the Company
shall be the sole and exclusive owner for all purposes for the distribution,
exhibition, advertising and exploitation of such materials or any part of them
in all media and by all means now known or which may hereafter be devised,
throughout the universe in perpetuity. Employee agrees that in furtherance of
the foregoing, he shall disclose, deliver and assign to the Company all such
conceptions, ideas, improvements and discoveries and shall execute all such
documents, including patent and copyright applications, as the Company
reasonably shall deem necessary to further document the Company's ownership
rights therein and to provide the Company the full and complete benefit thereof.
Should any arbitrator or court of competent jurisdiction ever hold that the
materials derived from Employee's contributions to the Company do not constitute
works made-for-hire, Employee hereby irrevocably assigns to the Company, and
agrees that the Company shall be the sole and exclusive owner of, all right,
title and interest in and to all such materials, including the copyrights and
any other proprietary rights arising therefrom. Employee reserves no rights with
respect to any such materials, and hereby acknowledges the adequacy and
sufficiency of the compensation paid and to be paid by the Company to Employee
for the materials and the contributions he will make to the
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<PAGE> 12
development of any such information or materials. Employee agrees to cooperate
with all lawful efforts of the Company to protect the Company's rights in and to
any or all of such information and materials and will at the request of the
Company execute any and all instruments or documents necessary or desirable in
order to register, establish, acquire, prosecute, maintain, perfect or defend
the Company's rights in and to such information materials.
7. Confidential Information and Trade Secrets. Employee acknowledges and
agrees that all Confidential Information, Trade Secrets and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company and be subject at all
times to its discretion and control. Employee agrees that he shall maintain
strictly the confidentiality of, and shall not, during or after the term of this
Agreement with the Company, disclose, any such Confidential Information or Trade
Secrets.
For purposes hereof, the parties agree that "Confidential Information"
means and includes
- All business or financial information, plans, processes and
strategies, market research and analyses, projections,
financing arrangements, consulting and sales methods and
techniques, expansion plans, forecasts and forecast
assumptions, business practices, operations and procedures,
marketing and merchandising information, distribution
techniques, customer information and other business
information, including records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and
other documentation respecting the Company;
- All information and materials which are proprietary and
confidential to a third party and which have been provided
to the Company
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<PAGE> 13
by such third party for the Company's use; and
- All information derived from such Confidential Information.
Confidential Information shall not include information and materials that
are already, or otherwise become, known by or generally available to the
public without restriction on disclosure, other than as a result of an
act or omission by the Employee in breach of the provisions of this
Agreement or any other applicable agreement between the Employee and the
Company.
For purposes hereof, the term "Trade Secret" shall have the
meaning given in the Delaware enactment of the Uniform Trade Secrets Act,
and shall include, without limitation, the whole or any portion or phase
of any scientific or technical information, design, process, formula,
concept, data organization, manual, other system documentation, or any
improvement of any thereof, in any case that is valuable and secret (in
the sense that it is not generally known to the Company's competitors).
8. Return Of Company Property; Termination of Employment. At such time,
if ever, as Employee's employment with the Company is terminated, he shall be
required to participate in an exit interview for the purpose of assuring a
proper termination of his employment and his obligations hereunder. On or before
the actual date of such termination, Employee shall return to the Company all
records, materials and other physical objects relating to his employment with
the Company, including, without limitation, all Company credit cards and access
keys and all materials relating to, containing or derived from any Trade Secrets
or Confidential Information.
9. Indemnification. If Employee is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Company against
Employee), by reason of the fact that he is or was performing services under
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<PAGE> 14
this Agreement or as an officer or director of the Company (and whether or not
the basis of such action is the Employee's action in such official capacity),
then the Company shall indemnify Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith to the fullest
extent permitted by applicable law, and such indemnification shall continue as
to Employee even if he has ceased to be an employee, officer or director of the
Company and shall inure to the benefit of his heirs and estate. The Company
shall advance to Employee all reasonable costs and expenses directly related to
the defense of such action, suit or proceeding within twenty days after written
request therefore by the Employee to the Company, provided that such request
shall include an undertaking by the Employee to repay such advances if it shall
ultimately be determined that Employee is or was not entitled to be indemnified
by the Company against such costs and expenses. If both Employee and the Company
are made a party to the same third-party action, complaint, suit or proceeding,
the Company agrees to engage competent legal representation, and Employee agrees
to use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
attorneys' fees of such separate counsel. Further, while Employee is expected at
all times to use his best efforts to faithfully discharge his duties under this
Agreement, Employee cannot be held liable to the Company for errors or omissions
made in good faith where Employee has not exhibited gross, willful or wanton
negligence or misconduct or performed criminal or fraudulent acts which
materially damage the business of the Company. The provisions of this Section 9
are in addition to, and not in derogation of, the indemnification provisions of
the Company's By-laws.
10. No Prior Agreements. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to
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<PAGE> 15
indemnify the Company for, and hold the Company harmless from and against, all
claims, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
noncompetition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
11. Binding Effect; Assignment. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. Employee
understands that he has been selected for employment by the Company on the basis
of his personal qualifications, experience and skills. Employee agrees,
therefore, that he cannot assign all or any portion of his performance under
this Agreement.
12. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements.
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<PAGE> 16
13. Notice. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Colorado Prime Corporation
1 Michael Avenue
Farmingdale, N.Y. 11735
Attention: Secretary
to CPH: Colorado Prime Holdings Inc.
1455 Pennsylvania Avenue, N.W.
Suite 350
Washington, D.C. 20004
Attn: V. Frank Pottow
To Employee: William F. Dordelman
9 Woodley Road
Darien, Connecticut 06820
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier.
Either party may change the address for notice by notifying the other party of
such change in accordance with this Section 13.
14. Severability; Headings. It is the intention of the parties that the
provisions herein shall be enforceable to the fullest extent permitted under
applicable law, and that the unenforceability of any the provision or provisions
hereof, or any portion thereof, shall not render unenforceable or otherwise
impair any other provisions or portions thereof. If any provision of this
Agreement is determined by a court of competent jurisdiction to be
unenforceable, void or invalid in whole or in part, this Agreement shall be
deemed amended to delete or modify, as necessary, the offending provisions or
portions thereof and to alter the bounds thereof, including specifically, any
time, place and manner restrictions contained in any of the restrictive
covenants contained herein, in order to render it valid and enforceable. In any
event, the balance of this Agreement shall be enforced to the fullest extent
possible without regard to such unenforceable, void or invalid provisions or
part thereof. The Section
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headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
15. Company Actions. Employee acknowledges that in any action by the
Company to enforce the provisions of Sections 3, 6, 7 or 8 of this Agreement,
claims asserted by Employee against the Company arising out of his employment
with the Company or otherwise shall not constitute a defense to enforcement of
his obligations hereunder; provided, however, that the Company's continued
failure to make payments to Employee under Section 2 of this Agreement shall
constitute such a defense.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement (excluding specifically, however, claims and
counterclaims of the Company arising out of any breach by Employee of the
provisions of Sections 3, 7 or 8 hereof) shall be settled exclusively by
arbitration, conducted in accordance with the rules of the American Arbitration
Association then in effect, as modified hereby. Notwithstanding anything
contained in the rules to the contrary, however, the arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof nor to
award punitive or special damages to any injured party. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. The arbitration
proceeding shall be held in New York, New York.
17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of New York without reference to its
conflicts of laws provisions.
18. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the
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<PAGE> 18
parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
20. Modifications. This Agreement may not be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought, or his or its duly authorized representative or officer. No waiver by
Employee or the Company of any breach of any provision hereof will be deemed a
waiver of any prior or subsequent breach of the same or any other provision. The
failure of Employee or the Company to exercise any right provided herein will
not be deemed on any subsequent occasions to be a waiver of any right granted
hereunder to either of them
21. EMPLOYEE ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, HE WAS
GIVEN AN OPPORTUNITY TO READ IT, CAREFULLY EVALUATE IT, AND ASK ANY QUESTIONS HE
MAY HAVE HAD REGARDING IT OR ITS PROVISIONS. EMPLOYEE ALSO ACKNOWLEDGES THAT HE
HAD THE RIGHT TO HAVE THIS AGREEMENT REVIEWED BY AN ATTORNEY OF HIS CHOOSING AND
THAT THE COMPANY GAVE HIM A REASONABLE PERIOD OF TIME TO DO SO IF HE SO WISHED.
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
------------------------------------
Title: Chief Financial Officer
COLORADO PRIME HOLDINGS INC.
By: /s/ V. Frank Pottow
------------------------------------
Title: Treasurer
EMPLOYEE:
/s/ William F. Dordelman
---------------------------------------
William F. Dordelman
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<PAGE> 20
SCHEDULE 1
<TABLE>
<CAPTION>
================================================================================
(A) (B)
OPERATING PROFIT PERCENTAGE PERCENT OF SALARY
(%)
================================================================================
<S> <C>
80 or lower 0
85-89 20
90-94 40
95-99 50
100-104 60
105-109 75
110-114 90
115-119 105
120 or greater 120
</TABLE>
The Employee's bonus with respect to any fiscal year shall equal the percentage
of the Employee's base salary set forth in column B that is opposite the
"Operating Profit Percentage" for such year set forth in column A. The
"Operating Profit Percentage" for a fiscal year shall equal the product of (i) a
fraction, the numerator of which equals the Company's operating income for such
fiscal year (without consideration of bonuses awarded under the Incentive Bonus
Plan for such year) calculated on a basis consistent with the Company's current
financial accounting and reporting policies, and the denominator of which equals
the Company's "Projected Operating Income Before Bonus" set forth below for such
fiscal year or another mutually agreed-upon alternative profit target and (ii)
100.
-20-
<PAGE> 21
<TABLE>
<CAPTION>
==================================================================
PROJECTED OPERATING INCOME BEFORE BONUS
=======================================
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
20,389 22,936 26,648 30,731 35,505 41,484
</TABLE>
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Colorado Prime
Corporation, a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), a Delaware corporation, CPH,
and William Willett ("Employee") is hereby entered into and effective as of the
9th day of May, 1997.
R E C I T A L S
The following statements are true and correct:
On this day the Company, CPH and certain other parties consummated a transaction
contemplated by the Merger Agreement dated as of March 25, 1997 (the "Merger
Agreement"), by and between Thayer Equity Investors III, L.P. and the Company's
parent entity, KPC Holdings Corporation.
Employee is employed hereunder by CPH and the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
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<PAGE> 2
(a) The Company hereby employs Employee as Chief Operating Officer of
the Company and Director of the Company and CPH (or such other comparable
positions as shall be given to Employee by the Company's or CPH's Board of
Directors). Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of such positions, including those set forth
in the Company's and CPH's by-laws and as otherwise may be directed from time to
time by the Board of Directors of the Company and CPH (collectively referred to
as the "Board"), it being understood that such duties shall be reasonably
comparable to those duties previously performed by Employee for the Company.
Employee hereby accepts this employment upon the terms and conditions contained
herein and agrees to devote his full business time, attention and efforts to
promote and further the business of the Company.
(b) Employee faithfully shall adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the Term of his employment hereunder
(as defined in Section 5 hereof), be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder without the
prior consent of the Board. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of Section 3 hereof.
2. Compensation. For all services rendered by Employee in any capacity
required hereunder, the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof through the end of the
Company's current fiscal year ending September 26, 1997, the base salary payable
to Employee shall be $300,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less frequently than
monthly. Such base salary shall, in the sole discretion of the Board, be subject
to an annual increase; provided that, at the beginning of
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<PAGE> 3
the Company's fiscal year, Employee's base salary shall be adjusted to reflect
any increase during the prior fiscal year in the consumer price index for All
Urban Consumers, All Items for New York-Northeast New Jersey-Long Island,
NY-NJ-CT (1982-84 = 100), published by the United States Bureau of Labor
Statistics.
(b) Incentive Bonus Plan. Not later than June 30, 1997, the Board will
develop a written Annual Incentive Bonus Plan (the "Incentive Bonus Plan")
setting forth the criteria under which Employee and other officers and key
employees will be eligible to receive year-end bonus awards based upon
individual performance and the achievement by the Company of the prior year
projections. The Incentive Bonus Plan will provide for Employee's bonus as set
forth in Schedule 1 hereto.
(c) Performance Based Bonus Plan. Except in the case of a termination
of this Agreement pursuant to Section 5(a) or 5(c), for a period of five years
following the consummation of the transactions contemplated in the Merger
Agreement, the Employee, along with the Company's Chief Executive Officer, Chief
Financial Officer, and Vice President for Marketing (collectively, the "Senior
Executive Officers"), shall participate in a performance based bonus plan (the
"Performance Bonus Plan") in which each of the Senior Executive Officers will
receive an aggregate of 25% of the excess EBIT (after Incentive Bonus Plan
bonuses are awarded) for each fiscal year above EBIT projected for such year in
the Goldman, Sachs & Co. Confidential Memorandum dated December 1996 (the
"Goldman, Sachs Memorandum") or another mutually agreed-upon alternative profit
target. The maximum aggregate amount that the Senior Executive Officers shall be
entitled to receive under the term of the Performance Bonus Plan shall be
$750,000. The Board shall develop and approve the Performance Bonus Plan no
later than June 30, 1997.
(d) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Payment of such premiums (or such portion thereof as is
provided by the Company's plans) for coverage for Employee
and his dependent family members under
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<PAGE> 4
health, hospitalization, disability, dental, life and other
insurance plans that the Company may have in effect from
time to time. Benefits provided to Employee under this
clause (1) shall be at least comparable to such benefits
provided to the Company's Senior Executive Officers
immediately prior to the date of this Agreement.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in
the performance of his services pursuant to this Agreement.
All reimbursable expenses shall be appropriately documented
in reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
(3) Payment of car and driver expenses for Employee's
transportation to and from work.
(4) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and shall allow Employee to
participate in all other Company-wide employee benefits,
including the Company's defined contribution pension plan
and 401(k) Plan, as may be made available generally to
employees of either from time to time. Such perquisites
shall be at least comparable to the Company's policies with
respect thereto prior to the consummation of the Merger
Agreement.
3. Non-Competition Agreement.
(a) Employee shall not, during the period of his employment by or with
the Company and for a two (2) year period following the termination of his
employment under Section 5(c) hereto, or for a one (1) year period following the
termination of his employment other than under Section 5(c) hereto, for any
reason whatsoever, for himself or on behalf of or in conjunction
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<PAGE> 5
with any other person, persons, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, trustee, or in a managerial capacity, whether
as an employee, independent contractor, agent, consultant or advisor,
or as a sales representative, in any business selling any products or
services in direct competition with the Company;
(ii) call upon any person who is, at that time, an employee
of the Company in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company;
(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
the Company for the purpose of soliciting or selling products or
services in competition with the Company; or
(iv) call upon any prospective acquisition candidate, on the
Employee's own behalf or on behalf of any competitor of the Company,
which candidate was either called upon by the Company or for which the
Company made an acquisition analysis, for the purpose of acquiring
such entity.
For purposes of this Section and for purposes of Sections 5, 6, 7, 8
and 16, the term "Company" shall be deemed to include all direct and indirect
subsidiaries, and affiliates of the Company. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit Employee from acquiring as an
investment not more than five percent (5%) of the capital stock of a competing
business, whose stock is publicly traded on a national securities exchange or on
the over-the-counter market.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
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<PAGE> 6
covenant may be enforced by the Company in the event of breach by him, by
injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the Company's current plans; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company throughout the term
of this covenant.
(d) The covenants in this Section 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants; provided, however, that the
Company's continued failure to make payments to Employee under Section 2 of this
Agreement shall constitute such a defense.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in Section 3(a) hereof, the period of time
for which Employee shall be prohibited pursuant to Section 3(a) hereof shall be
the maximum time permitted by law.
4. Place of Performance.
(a) Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement.
In such event, if Employee agrees to relocate, the Company shall pay all
reasonable relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move
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<PAGE> 7
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all reasonable closing costs on the
sale of Employee's present residence and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur
if, but only to the extent that, any such relocation costs are not deductible
for tax purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee shall use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Company and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of Section 5(c) and, if Employee
is terminated for such refusal, Employee shall be entitled to receive all
payments under this Agreement as if he were terminated by the Company without
cause.
5. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the date hereof and continue for one year (the "Initial
Term"), and, unless terminated as herein provided, shall be extended at the end
of the Initial Term and ongoing successive terms, for a period of one year on
the same terms and conditions contained herein (the "Term"), provided, however,
that with each successive Term, Employee's compensation shall be adjusted in
accordance with Section 2 hereof. This Agreement and Employee's employment may
be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been absent from his full time
duties hereunder for four (4)
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<PAGE> 8
consecutive months, then thirty (30) days after written notice to the Employee
(which notice may occur before or after the end of such four (4) month period,
but which shall not be effective earlier than the last day of such four (4)
month period), the Company may terminate Employee's employment hereunder
provided Employee is unable to resume his full-time duties at the conclusion of
such notice period. Also, Employee may terminate his employment hereunder if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health or his life,
provided that Employee shall have furnished the Company with a written statement
from a qualified doctor to such effect and provided, further, that, at the
Company's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by the
Company who is reasonably acceptable to Employee or Employee's doctor and such
doctor shall have concurred in the conclusion of Employee's doctor. In the event
this Agreement is terminated as a result of Employee's disability, Employee
shall receive from the Company the base salary at the rate then in effect for a
period of eight (8) months from the date of such termination (the "Disability
Period"); provided that, such amounts shall be offset by any amounts otherwise
paid to the Employee under any disability program then maintained by the
Company. During the Disability Period, Employee shall also receive all benefits
to which Employee would otherwise be entitled. In addition, earned but unpaid
base salary as of the date of such termination shall be paid in full and any
bonus award to which the Employee would have been entitled under the Incentive
Bonus Plan had he been employed throughout the year in which such bonus is
calculated shall be payable on a prorated basis for the year in which such
termination occurs only.
(c) Good Cause. The Company may terminate the Agreement immediately
upon written notice to Employee for good cause, which shall be: (1) Employee's
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of Employee's material duties and responsibilities
hereunder; (2) Employee's willful dishonesty, fraud, alcohol or illegal drug
abuse, or misconduct with respect to the business or affairs of the Company,
which materially and
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<PAGE> 9
adversely affects the operations, prospects or reputation of the Company; or (3)
Employee's conviction of a felony or other crime involving moral turpitude. In
the event of a termination for good cause, as enumerated above, Employee shall
have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
Employee. Should Employee be terminated by the Company without cause, or if this
Agreement is not renewed pursuant to Section 5 hereof, Employee shall receive
from the Company the base salary at the rate then in effect for one year from
the date Employee's employment is terminated, payable over such time period, and
any other benefits to which Employee would otherwise be entitled. If Employee
resigns or otherwise terminates his employment for any reason other than Good
Reason as defined in Section 5(e), Employee shall receive no severance
compensation.
(e) Termination by Employee for Good Reason. The Employee may
terminate his employment hereunder for "Good Reason." As used herein, "Good
Reason" shall mean the continuance of any of the following after ten (10) days
prior written notice by Employee to the Company and to CPH, specifying the basis
for such Employee's having Good Reason to terminate this Agreement:
(i) a material adverse change in Employee's status, title,
position or responsibilities;
(ii) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in
Section 1 hereof (or such other position to which he may be promoted),
including status, offices, responsibilities or persons to whom the
Employee reports as contemplated under Section 1 of this Agreement, or
any other action by the Company which results in a material and
adverse change in such position, status, offices, titles or
responsibilities;
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<PAGE> 10
(iii) Employee's removal from, or failure to be reappointed
or reelected to, Employee's position under this Agreement, except as
contemplated by Sections 5(a), (b) and (c); or
(iv) any other material breach of this Agreement by the
Company, including the regular failure to pay Employee on a timely
basis the amounts to which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, Employee shall
be entitled to receive from the Company the base salary at the rate then in
effect for one year from the date Employee's employment is terminated, payable
over such time period, and any other benefits to which Employee would otherwise
be entitled.
(f) Payment Through Termination. Upon termination of this Agreement
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave) due through the effective date of termination.
Additional compensation subsequent to termination, if any, shall be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section 9 herein and Employee's obligations under Sections 3, 6, 7, 8 and 10
herein shall survive such termination in accordance with their terms.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Employee agrees that all such materials which he develops or conceives and/or
documents during such period shall be deemed
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<PAGE> 11
works made-for-hire for the Company within the meaning of the copyright laws of
the United States or any similar or analogous law or statute of any other
jurisdiction and accordingly, the Company shall be the sole and exclusive owner
for all purposes for the distribution, exhibition, advertising and exploitation
of such materials or any part of them in all media and by all means now known or
which may hereafter be devised, throughout the universe in perpetuity. Employee
agrees that in furtherance of the foregoing, he shall disclose, deliver and
assign to the Company all such conceptions, ideas, improvements and discoveries
and shall execute all such documents, including patent and copyright
applications, as the Company reasonably shall deem necessary to further document
the Company's ownership rights therein and to provide the Company the full and
complete benefit thereof. Should any arbitrator or court of competent
jurisdiction ever hold that the materials derived from Employee's contributions
to the Company do not constitute works made-for-hire, Employee hereby
irrevocably assigns to the Company, and agrees that the Company shall be the
sole and exclusive owner of, all right, title and interest in and to all such
materials, including the copyrights and any other proprietary rights arising
therefrom. Employee reserves no rights with respect to any such materials, and
hereby acknowledges the adequacy and sufficiency of the compensation paid and to
be paid by the Company to Employee for the materials and the contributions he
will make to the development of any such information or materials. Employee
agrees to cooperate with all lawful efforts of the Company to protect the
Company's rights in and to any or all of such information and materials and will
at the request of the Company execute any and all instruments or documents
necessary or desirable in order to register, establish, acquire, prosecute,
maintain, perfect or defend the Company's rights in and to such information
materials.
7. Confidential Information and Trade Secrets. Employee acknowledges
and agrees that all Confidential Information, Trade Secrets and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company and be subject at all
times to its discretion and control. Employee agrees that he shall maintain
strictly the
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<PAGE> 12
confidentiality of, and shall not, during or after the term of this Agreement
with the Company, disclose, any such Confidential Information or Trade Secrets.
For purposes hereof, the parties agree that "Confidential Information"
means and includes
- All business or financial information, plans,
processes and strategies, market research and
analyses, projections, financing arrangements,
consulting and sales methods and techniques,
expansion plans, forecasts and forecast
assumptions, business practices, operations and
procedures, marketing and merchandising
information, distribution techniques, customer
information and other business information,
including records, designs, patents, business
plans, financial statements, manuals, memoranda,
lists and other documentation respecting the
Company;
- All information and materials which are
proprietary and confidential to a third party and
which have been provided to the Company by such
third party for the Company's use; and
- All information derived from such Confidential
Information.
Confidential Information shall not include information and materials
that are already, or otherwise become, known by or generally available
to the public without restriction on disclosure, other than as a
result of an act or omission by the Employee in breach of the
provisions of this Agreement or any other applicable agreement between
the Employee and the Company.
For purposes hereof, the term "Trade Secret" shall have the
meaning given in the Delaware enactment of the Uniform Trade Secrets
Act, and shall include, without limitation, the whole or any portion
or phase of any
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<PAGE> 13
scientific or technical information, design, process, formula,
concept, data organization, manual, other system documentation, or any
improvement of any thereof, in any case that is valuable and secret
(in the sense that it is not generally known to the Company's
competitors).
8. Return Of Company Property; Termination of Employment. At such
time, if ever, as Employee's employment with the Company is terminated, he shall
be required to participate in an exit interview for the purpose of assuring a
proper termination of his employment and his obligations hereunder. On or before
the actual date of such termination, Employee shall return to the Company all
records, materials and other physical objects relating to his employment with
the Company, including, without limitation, all Company credit cards and access
keys and all materials relating to, containing or derived from any Trade Secrets
or Confidential Information.
9. Indemnification. If Employee is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Company against
Employee), by reason of the fact that he is or was performing services under
this Agreement or as an officer or director of the Company (and whether or not
the basis of such action is the Employee's action in such official capacity),
then the Company shall indemnify Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith to the fullest
extent permitted by applicable law, and such indemnification shall continue as
to Employee even if he has ceased to be an employee, officer or director of the
Company and shall inure to the benefit of his heirs and estate. The Company
shall advance to Employee all reasonable costs and expenses directly related to
the defense of such action, suit or proceeding within twenty days after written
request therefore by the Employee to the Company, provided that such request
shall include an undertaking by the Employee to repay such advances if it shall
ultimately be determined that Employee is or was not entitled to be indemnified
by the Company against such costs and expenses. If both Employee and the Company
are made a party to the same third-party action, complaint, suit or proceeding,
the Company agrees to engage
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<PAGE> 14
competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton negligence
or misconduct or performed criminal or fraudulent acts which materially damage
the business of the Company. The provisions of this Section 9 are in addition
to, and not in derogation of, the indemnification provisions of the Company's
By-laws.
10. No Prior Agreements. Employee hereby represents and warrants to
the Company that the execution of this Agreement by Employee and his employment
by the Company and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify the Company for, and hold the
Company harmless from and against, all claims, including, but not limited to,
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against the Company based
upon or arising out of any noncompetition agreement, invention or secrecy
agreement between Employee and such third party which was in existence as of the
date of this Agreement.
11. Binding Effect; Assignment. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. Employee
understands that he has been selected for employment by the Company on the basis
of his personal qualifications, experience and skills. Employee agrees,
therefore, that he cannot assign all or any portion of his performance under
this Agreement.
12. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the
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<PAGE> 15
same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements.
13. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Colorado Prime Corporation
1 Michael Avenue
Farmingdale, N.Y. 11735
Attention: Secretary
to CPH: Colorado Prime Holdings Inc.
1455 Pennsylvania Avenue, N.W.
Suite 350
Washington, D.C. 20004
Attn: V. Frank Pottow
To Employee: William Willett
137 Rose Hill Road
Southport, Connecticut 06490
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier.
Either party may change the address for notice by notifying the other party of
such change in accordance with this Section 13.
14. Severability; Headings. It is the intention of the parties that
the provisions herein shall be enforceable to the fullest extent permitted under
applicable law, and that the unenforceability of any the provision or provisions
hereof, or any portion thereof, shall not render unenforceable or otherwise
impair any other provisions or portions thereof. If any provision of this
Agreement is determined by a court of competent jurisdiction to be
unenforceable, void or invalid in whole or in part, this Agreement shall be
deemed amended to delete or modify, as necessary, the offending provisions or
portions thereof and to
-15-
<PAGE> 16
alter the bounds thereof, including specifically, any time, place and manner
restrictions contained in any of the restrictive covenants contained herein, in
order to render it valid and enforceable. In any event, the balance of this
Agreement shall be enforced to the fullest extent possible without regard to
such unenforceable, void or invalid provisions or part thereof. The Section
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
15. Company Actions. Employee acknowledges that in any action by the
Company to enforce the provisions of Sections 3, 6, 7 or 8 of this Agreement,
claims asserted by Employee against the Company arising out of his employment
with the Company or otherwise shall not constitute a defense to enforcement of
his obligations hereunder; provided, however, that the Company's continued
failure to make payments to Employee under Section 2 of this Agreement shall
constitute such a defense.
16. Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement (excluding specifically, however, claims
and counterclaims of the Company arising out of any breach by Employee of the
provisions of Sections 3, 7 or 8 hereof) shall be settled exclusively by
arbitration, conducted in accordance with the rules of the American Arbitration
Association then in effect, as modified hereby. Notwithstanding anything
contained in the rules to the contrary, however, the arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof nor to
award punitive or special damages to any injured party. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. The arbitration
proceeding shall be held in New York, New York.
17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of New York without reference to its
conflicts of laws provisions.
18. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken
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<PAGE> 17
together shall constitute but one and the same instrument. This Agreement shall
become binding when one or more counterparts taken together shall have been
executed and delivered (which deliveries may be by telefax) by the parties. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
20. Modifications. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought, or his or its duly authorized representative or officer.
No waiver by Employee or the Company of any breach of any provision hereof will
be deemed a waiver of any prior or subsequent breach of the same or any other
provision. The failure of Employee or the Company to exercise any right provided
herein will not be deemed on any subsequent occasions to be a waiver of any
right granted hereunder to either of them
21. EMPLOYEE ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, HE WAS
GIVEN AN OPPORTUNITY TO READ IT, CAREFULLY EVALUATE IT, AND ASK ANY QUESTIONS HE
MAY HAVE HAD REGARDING IT OR ITS PROVISIONS. EMPLOYEE ALSO ACKNOWLEDGES THAT HE
HAD THE RIGHT TO HAVE THIS AGREEMENT REVIEWED BY AN ATTORNEY OF HIS CHOOSING AND
THAT THE COMPANY GAVE HIM A REASONABLE PERIOD OF TIME TO DO SO IF HE SO WISHED.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
-------------------------------
Title: Chief Financial Officer
COLORADO PRIME HOLDINGS INC.
By: /s/ V. Frank Pottow
-------------------------------
Title: Treasurer
EMPLOYEE:
/s/ William Willett
-----------------------------------
William Willett
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<PAGE> 19
SCHEDULE 1
<TABLE>
<CAPTION>
================================================================================
(A) (B)
OPERATING PROFIT PERCENTAGE PERCENT OF SALARY
(%)
================================================================================
<S> <C>
80 or lower 0
85-89 20
90-94 40
95-99 50
100-104 60
105-109 75
110-114 90
115-119 105
120 or greater 120
</TABLE>
The Employee's bonus with respect to any fiscal year shall equal the percentage
of the Employee's base salary set forth in column B that is opposite the
"Operating Profit Percentage" for such year set forth in column A. The
"Operating Profit Percentage" for a fiscal year shall equal the product of (i) a
fraction, the numerator of which equals the Company's operating income for such
fiscal year (without consideration of bonuses awarded under the Incentive Bonus
Plan for such year) calculated on a basis consistent with the Company's current
financial accounting and reporting policies, and the denominator of which equals
the Company's "Projected Operating Income Before Bonus" set forth below for such
fiscal year or another mutually agreed-upon alternative profit target and (ii)
100.
<PAGE> 20
PROJECTED OPERATING INCOME BEFORE BONUS
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
20,389 22,936 26,648 30,731 35,505 41,484
</TABLE>
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Colorado Prime
Corporation, a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), a Delaware corporation, CPH,
and Ricardo DeSantis ("Employee") is hereby entered into and effective as of the
9th day of May, 1997.
R E C I T A L S
The following statements are true and correct:
On this day the Company, CPH and certain other parties consummated a transaction
contemplated by the Merger Agreement dated as of March 25, 1997 (the "Merger
Agreement"), by and between Thayer Equity Investors III, L.P. and the Company's
parent entity, KPC Holdings Corporation.
Employee is employed hereunder by CPH and the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
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<PAGE> 2
(a) The Company hereby employs Employee as Vice President for
Marketing, or such other comparable positions as shall be given to Employee by
the Company's Board of Directors (the "Board"). Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of
such positions, including those set forth in the Company's by-laws and as
otherwise may be directed from time to time by the Board, it being understood
that such duties shall be reasonably comparable to those duties previously
performed by Employee for the Company. Employee hereby accepts this employment
upon the terms and conditions contained herein and agrees to devote his full
business time, attention and efforts to promote and further the business of the
Company.
(b) Employee faithfully shall adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the Term of his employment hereunder
(as defined in Section 5 hereof), be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder without the
prior consent of the Board. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of Section 3 hereof.
2. Compensation. For all services rendered by Employee in any capacity
required hereunder, the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof through the end of the
Company's current fiscal year ending September 26, 1997, the base salary payable
to Employee shall be $195,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less frequently than
monthly. Such base salary shall, in the sole discretion of the Board, be subject
to an annual increase; provided that, at the beginning of the Company's
- 2 -
<PAGE> 3
fiscal year, Employee's base salary shall be adjusted to reflect any increase
during the prior fiscal year in the consumer price index for All Urban
Consumers, All Items for New York-Northeast New Jersey-Long Island, NY-NJ-CT
(1982-84 = 100), published by the United States Bureau of Labor Statistics.
(b) Incentive Bonus Plan. Not later than June 30, 1997, the Board will
develop a written Annual Incentive Bonus Plan (the "Incentive Bonus Plan")
setting forth the criteria under which Employee and other officers and key
employees will be eligible to receive year-end bonus awards based upon
individual performance and the achievement by the Company of the prior year
projections. The Incentive Bonus Plan will provide for Employee's bonus as set
forth in Schedule 1 hereto.
(c) Performance Based Bonus Plan. Except in the case of a termination
of this Agreement pursuant to Section 5(a) or 5(c), for a period of five years
following the consummation of the transactions contemplated in the Merger
Agreement, the Employee, along with the Company's Chief Executive Officer, Chief
Operating Officer, and Chief Financial Officer (collectively, the "Senior
Executive Officers"), shall participate in a performance based bonus plan (the
"Performance Bonus Plan") in which each of the Senior Executive Officers will
receive an aggregate of 25% of the excess EBIT (after Incentive Bonus Plan
bonuses are awarded) for each fiscal year above EBIT projected for such year in
the Goldman, Sachs & Co. Confidential Memorandum dated December 1996 (the
"Goldman, Sachs Memorandum") or another mutually agreed-upon alternative profit
target. The maximum aggregate amount that the Senior Executive Officers shall be
entitled to receive under the term of the Performance Bonus Plan shall be
$750,000. The Board shall develop and approve the Performance Bonus Plan no
later than June 30, 1997.
(d) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
- 3 -
<PAGE> 4
(1) Payment of such premiums (or such portion thereof as is
provided by the Company's plans) for coverage for Employee and
his dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the
Company may have in effect from time to time. Benefits
provided to Employee under this clause (1) shall be at least
comparable to such benefits provided to the Company's Senior
Executive Officers immediately prior to the date of this
Agreement.
(2) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of
his services pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(3) Payment of an automobile allowance in an amount comparable to
such Employee's benefit prior to the consummation of the
Merger Agreement.
(4) Annual reimbursement in the fixed amount of $15,000 for
special medical expenses.
(5) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and shall allow Employee to participate
in all other Company-wide employee benefits, including the
Company's defined contribution pension plan and 401(k) Plan,
as may be made available generally to employees of either from
time to time. Such perquisites shall be at least comparable to
the Company's policies with respect thereto prior to the
consummation of the Merger Agreement.
3. Non-Competition Agreement.
- 4 -
<PAGE> 5
(a) Employee shall not, during the period of his employment by or with
the Company and for a two (2) year period following the termination of his
employment under Section 5(c) hereto, or for a one (1) year period following the
termination of his employment other than under Section 5(c) hereto, for any
reason whatsoever, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, trustee, or in a managerial capacity, whether
as an employee, independent contractor, agent, consultant or advisor,
or as a sales representative, in any business selling any products or
services in direct competition with the Company;
(ii) call upon any person who is, at that time, an employee
of the Company in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company;
(iii) call upon any person or entity which is, at that
time, or which has been, within one year prior to that time, a
customer of the Company for the purpose of soliciting or selling
products or services in competition with the Company; or
(iv) call upon any prospective acquisition candidate, on
the Employee's own behalf or on behalf of any competitor of the
Company, which candidate was either called upon by the Company or for
which the Company made an acquisition analysis, for the purpose of
acquiring such entity.
For purposes of this Section and for purposes of Sections 5, 6, 7, 8
and 16, the term "Company" shall be deemed to include all direct and indirect
subsidiaries, and affiliates of the Company. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit Employee from acquiring as an
investment not more than five percent (5%) of the capital stock of a competing
business, whose stock is
- 5 -
<PAGE> 6
publicly traded on a national securities exchange or on the over-the-counter
market.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant may be enforced by the Company in the event of breach by him, by
injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the Company's current plans; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company throughout the term
of this covenant.
(d) The covenants in this Section 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants; provided, however, that the
Company's continued failure to make payments to Employee under Section 2 of this
Agreement shall constitute such a defense.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in Section 3(a) hereof, the period of time
for which Employee shall be prohibited pursuant to Section 3(a) hereof shall be
the maximum time permitted by law.
4. Place of Performance.
- 6 -
<PAGE> 7
(a) Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement.
In such event, if Employee agrees to relocate, the Company shall pay all
reasonable relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
reasonable closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if, but only to the extent that, any such relocation
costs are not deductible for tax purposes. The general intent of the foregoing
is that Employee shall not personally bear any out-of-pocket cost as a result of
the relocation, with an understanding that Employee shall use his best efforts
to incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of Section 5(c) and, if Employee
is terminated for such refusal, Employee shall be entitled to receive all
payments under this Agreement as if he were terminated by the Company without
cause.
5. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the date hereof and continue for one year (the "Initial
Term"), and, unless terminated as herein provided, shall be extended at the end
of the Initial Term and ongoing successive terms, for a period of one year on
the same terms and conditions contained herein (the "Term"), provided, however,
that with each successive Term, Employee's compensation shall be adjusted in
accordance with Section 2
- 7 -
<PAGE> 8
hereof. This Agreement and Employee's employment may be terminated in any one of
the followings ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been absent from his full time
duties hereunder for four (4) consecutive months, then thirty (30) days after
written notice to the Employee (which notice may occur before or after the end
of such four (4) month period, but which shall not be effective earlier than the
last day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume his full-time duties
at the conclusion of such notice period. Also, Employee may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company the
base salary at the rate then in effect for a period of eight (8) months from the
date of such termination (the "Disability Period"); provided that, such amounts
shall be offset by any amounts otherwise paid to the Employee under any
disability program then maintained by the Company. During the Disability Period,
Employee shall also receive all benefits to which Employee would otherwise be
entitled. In addition, earned but unpaid base salary as of the date of such
termination shall be paid in full and any bonus award to which the Employee
would have been entitled under the Incentive Bonus Plan had he been employed
throughout the year in which such bonus is calculated shall be payable on
- 8 -
<PAGE> 9
a prorated basis for the year in which such termination occurs only.
(c) Good Cause. The Company may terminate the Agreement immediately
upon written notice to Employee for good cause, which shall be: (1) Employee's
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of Employee's material duties and responsibilities
hereunder; (2) Employee's willful dishonesty, fraud, alcohol or illegal drug
abuse, or misconduct with respect to the business or affairs of the Company,
which materially and adversely affects the operations, prospects or reputation
of the Company; or (3) Employee's conviction of a felony or other crime
involving moral turpitude. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
Employee. Should Employee be terminated by the Company without cause, or if this
Agreement is not renewed pursuant to Section 5 hereof, Employee shall receive
from the Company the base salary at the rate then in effect for one year from
the date Employee's employment is terminated, payable over such time period, and
any other benefits to which Employee would otherwise be entitled. If Employee
resigns or otherwise terminates his employment for any reason other than Good
Reason as defined in Section 5(e), Employee shall receive no severance
compensation.
(e) Termination by Employee for Good Reason. The Employee may
terminate his employment hereunder for "Good Reason." As used herein, "Good
Reason" shall mean the continuance of any of the following after ten (10) days
prior written notice by Employee to the Company and to CPH, specifying the basis
for such Employee's having Good Reason to terminate this Agreement:
- 9 -
<PAGE> 10
(i) a material adverse change in Employee's status, title,
position or responsibilities;
(ii) the assignment to Employee of any duties materially
and adversely inconsistent with the Employee's position as specified
in Section 1 hereof (or such other position to which he may be
promoted), including status, offices, responsibilities or persons to
whom the Employee reports as contemplated under Section 1 of this
Agreement, or any other action by the Company which results in a
material and adverse change in such position, status, offices, titles
or responsibilities;
(iii) Employee's removal from, or failure to be reappointed
or reelected to, Employee's position under this Agreement, except as
contemplated by Sections 5(a), (b) and (c); or
(iv) any other material breach of this Agreement by the
Company, including the regular failure to pay Employee on a timely
basis the amounts to which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, Employee shall
be entitled to receive from the Company the base salary at the rate then in
effect for one year from the date Employee's employment is terminated, payable
over such time period, and any other benefits to which Employee would otherwise
be entitled.
(f) Payment Through Termination. Upon termination of this Agreement
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave) due through the effective date of termination.
Additional compensation subsequent to termination, if any, shall be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section 9 herein and Employee's
- 10 -
<PAGE> 11
obligations under Sections 3, 6, 7, 8 and 10 herein shall survive such
termination in accordance with their terms.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Employee agrees that all such materials which he develops or conceives and/or
documents during such period shall be deemed works made-for-hire for the Company
within the meaning of the copyright laws of the United States or any similar or
analogous law or statute of any other jurisdiction and accordingly, the Company
shall be the sole and exclusive owner for all purposes for the distribution,
exhibition, advertising and exploitation of such materials or any part of them
in all media and by all means now known or which may hereafter be devised,
throughout the universe in perpetuity. Employee agrees that in furtherance of
the foregoing, he shall disclose, deliver and assign to the Company all such
conceptions, ideas, improvements and discoveries and shall execute all such
documents, including patent and copyright applications, as the Company
reasonably shall deem necessary to further document the Company's ownership
rights therein and to provide the Company the full and complete benefit thereof.
Should any arbitrator or court of competent jurisdiction ever hold that the
materials derived from Employee's contributions to the Company do not constitute
works made-for-hire, Employee hereby irrevocably assigns to the Company, and
agrees that the Company shall be the sole and exclusive owner of, all right,
title and interest in and to all such materials, including the copyrights and
any other proprietary rights arising therefrom. Employee reserves no rights with
respect to any such materials, and hereby acknowledges the adequacy and
sufficiency of the compensation paid and to be paid by the Company to Employee
for the materials and the contributions he will make to the development of any
such information or materials. Employee
- 11 -
<PAGE> 12
agrees to cooperate with all lawful efforts of the Company to protect the
Company's rights in and to any or all of such information and materials and will
at the request of the Company execute any and all instruments or documents
necessary or desirable in order to register, establish, acquire, prosecute,
maintain, perfect or defend the Company's rights in and to such information
materials.
7. Confidential Information and Trade Secrets. Employee acknowledges
and agrees that all Confidential Information, Trade Secrets and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company and be subject at all
times to its discretion and control. Employee agrees that he shall maintain
strictly the confidentiality of, and shall not, during or after the term of this
Agreement with the Company, disclose, any such Confidential Information or Trade
Secrets.
For purposes hereof, the parties agree that "Confidential Information"
means and includes
- All business or financial information, plans,
processes and strategies, market research and
analyses, projections, financing arrangements,
consulting and sales methods and techniques,
expansion plans, forecasts and forecast
assumptions, business practices, operations and
procedures, marketing and merchandising
information, distribution techniques, customer
information and other business information,
including records, designs, patents, business
plans, financial statements, manuals, memoranda,
lists and other documentation respecting the
Company;
- All information and materials which are
proprietary and confidential to a third party and
which have been provided to the Company by such
third party for the Company's use; and
- 12 -
<PAGE> 13
- All information derived from such Confidential
Information.
Confidential Information shall not include information and materials
that are already, or otherwise become, known by or generally available
to the public without restriction on disclosure, other than as a
result of an act or omission by the Employee in breach of the
provisions of this Agreement or any other applicable agreement between
the Employee and the Company.
For purposes hereof, the term "Trade Secret" shall have the
meaning given in the Delaware enactment of the Uniform Trade Secrets
Act, and shall include, without limitation, the whole or any portion
or phase of any scientific or technical information, design, process,
formula, concept, data organization, manual, other system
documentation, or any improvement of any thereof, in any case that is
valuable and secret (in the sense that it is not generally known to
the Company's competitors).
8. Return Of Company Property; Termination of Employment. At such
time, if ever, as Employee's employment with the Company is terminated, he shall
be required to participate in an exit interview for the purpose of assuring a
proper termination of his employment and his obligations hereunder. On or before
the actual date of such termination, Employee shall return to the Company all
records, materials and other physical objects relating to his employment with
the Company, including, without limitation, all Company credit cards and access
keys and all materials relating to, containing or derived from any Trade Secrets
or Confidential Information.
9. Indemnification. If Employee is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Company against
Employee), by reason of the fact that he is or was performing services under
this Agreement or as an officer or director of the Company (and whether or not
the basis of such action is the Employee's action in such official capacity),
then the Company shall
- 13 -
<PAGE> 14
indemnify Employee against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, as actually and reasonably incurred by
Employee in connection therewith to the fullest extent permitted by applicable
law, and such indemnification shall continue as to Employee even if he has
ceased to be an employee, officer or director of the Company and shall inure to
the benefit of his heirs and estate. The Company shall advance to Employee all
reasonable costs and expenses directly related to the defense of such action,
suit or proceeding within twenty days after written request therefore by the
Employee to the Company, provided that such request shall include an undertaking
by the Employee to repay such advances if it shall ultimately be determined that
Employee is or was not entitled to be indemnified by the Company against such
costs and expenses. If both Employee and the Company are made a party to the
same third-party action, complaint, suit or proceeding, the Company agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton negligence
or misconduct or performed criminal or fraudulent acts which materially damage
the business of the Company. The provisions of this Section 9 are in addition
to, and not in derogation of, the indemnification provisions of the Company's
By-laws.
10. No Prior Agreements. Employee hereby represents and warrants to
the Company that the execution of this Agreement by Employee and his employment
by the Company and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify the Company for, and hold the
Company harmless from and against, all claims, including, but not limited to,
attorneys' fees and expenses of investigation, by any such
- 14 -
<PAGE> 15
third party that such third party may now have or may hereafter come to have
against the Company based upon or arising out of any noncompetition agreement,
invention or secrecy agreement between Employee and such third party which was
in existence as of the date of this Agreement.
11. Binding Effect; Assignment. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. Employee
understands that he has been selected for employment by the Company on the basis
of his personal qualifications, experience and skills. Employee agrees,
therefore, that he cannot assign all or any portion of his performance under
this Agreement.
12. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements.
13. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Colorado Prime Corporation
1 Michael Avenue
Farmingdale, N.Y. 11735
Attention: Secretary
to CPH: Colorado Prime Holdings Inc.
1455 Pennsylvania Avenue, N.W.
Suite 350
Washington, D.C. 20004
Attn: V. Frank Pottow
To Employee: Ricardo DeSantis
217 Stewart Avenue
Garden City, New York 11530
- 15 -
<PAGE> 16
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier.
Either party may change the address for notice by notifying the other party of
such change in accordance with this Section 13.
14. Severability; Headings. It is the intention of the parties that
the provisions herein shall be enforceable to the fullest extent permitted under
applicable law, and that the unenforceability of any the provision or provisions
hereof, or any portion thereof, shall not render unenforceable or otherwise
impair any other provisions or portions thereof. If any provision of this
Agreement is determined by a court of competent jurisdiction to be
unenforceable, void or invalid in whole or in part, this Agreement shall be
deemed amended to delete or modify, as necessary, the offending provisions or
portions thereof and to alter the bounds thereof, including specifically, any
time, place and manner restrictions contained in any of the restrictive
covenants contained herein, in order to render it valid and enforceable. In any
event, the balance of this Agreement shall be enforced to the fullest extent
possible without regard to such unenforceable, void or invalid provisions or
part thereof. The Section headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define or limit the extent
or intent of the Agreement or of any part hereof.
15. Company Actions. Employee acknowledges that in any action by the
Company to enforce the provisions of Sections 3, 6, 7 or 8 of this Agreement,
claims asserted by Employee against the Company arising out of his employment
with the Company or otherwise shall not constitute a defense to enforcement of
his obligations hereunder; provided, however, that the Company's continued
failure to make payments to Employee under Section 2 of this Agreement shall
constitute such a defense.
16. Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement (excluding
- 16 -
<PAGE> 17
specifically, however, claims and counterclaims of the Company arising out of
any breach by Employee of the provisions of Sections 3, 7 or 8 hereof) shall be
settled exclusively by arbitration, conducted in accordance with the rules of
the American Arbitration Association then in effect, as modified hereby.
Notwithstanding anything contained in the rules to the contrary, however, the
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive or special damages to any injured party.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The arbitration proceeding shall be held in New York, New York.
17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of New York without reference to its
conflicts of laws provisions.
18. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
20. Modifications. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought, or his or its duly authorized representative or officer.
No waiver by Employee or the Company of any breach of any provision hereof will
be deemed a waiver of any prior or subsequent breach of the same or any other
provision. The failure of Employee or the Company to exercise any right provided
herein will not be deemed on any subsequent occasions to be a waiver of any
right granted hereunder to either of them
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<PAGE> 18
21. EMPLOYEE ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, HE WAS
GIVEN AN OPPORTUNITY TO READ IT, CAREFULLY EVALUATE IT, AND ASK ANY QUESTIONS HE
MAY HAVE HAD REGARDING IT OR ITS PROVISIONS. EMPLOYEE ALSO ACKNOWLEDGES THAT HE
HAD THE RIGHT TO HAVE THIS AGREEMENT REVIEWED BY AN ATTORNEY OF HIS CHOOSING AND
THAT THE COMPANY GAVE HIM A REASONABLE PERIOD OF TIME TO DO SO IF HE SO WISHED.
- 18 -
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLORADO PRIME CORPORATION
By: /s/ Thomas S. Taylor
-------------------------------
Title: Chief Financial Officer
COLORADO PRIME HOLDINGS INC.
By: /s/ V. Frank Pottow
-------------------------------
Title: Treasurer
EMPLOYEE:
/s/ Ricardo DeSantis
----------------------------------
Ricardo DeSantis
- 19 -
<PAGE> 20
SCHEDULE 1
<TABLE>
<CAPTION>
% OF SALARY
% Operating Income --------------------------------------------------------
Before Bonus Operating Profit Annual
Accomplished Before Bonus Objectives % Volume* Total
================================================================================
<S> <C> <C> <C> <C>
80 or lower 0 0 0 0
85 5.66 5.66 5.66 17
90 11.3 11.3 11.3 34
95 14 14 14 42
100 16.67 16.67 16.67 50
105 20.67 20.67 20.67 62
110 25 25 25 75
115 29.33 29.33 29.33 88
120+ 33.3 33.3 33.3 100
================================================================================
</TABLE>
* Volume standards are per attached.
<PAGE> 21
EXHIBIT A
[DEFINITION OF OPERATING INCOME]
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Colorado Prime
Corporation, a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Colorado Prime Holdings Inc. ("CPH"), a Delaware corporation, CPH,
and Thomas S. Taylor ("Employee") is hereby entered into and effective as of the
9th day of May, 1997.
R E C I T A L S
The following statements are true and correct:
On this day the Company, CPH and certain other parties consummated a transaction
contemplated by the Merger Agreement dated as of March 25, 1997 (the "Merger
Agreement"), by and between Thayer Equity Investors III, L.P. and the Company's
parent entity, KPC Holdings Corporation.
Employee is employed hereunder by CPH and the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
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<PAGE> 2
(a) The Company hereby employs Employee as Chief Financial Officer and
Director of the Company and CPH (or such other comparable positions as shall be
given to Employee by the Company's or CPH's Board of Directors). Employee shall
have responsibilities, duties and authority reasonably accorded to and expected
of such positions, including those set forth in the Company's and CPH's by-laws
and as otherwise may be directed from time to time by the Board of Directors of
the Company and CPH (collectively referred to as the "Board"), it being
understood that such duties shall be reasonably comparable to those duties
previously performed by Employee for the Company. Employee hereby accepts this
employment upon the terms and conditions contained herein and agrees to devote
his full business time, attention and efforts to promote and further the
business of the Company.
(b) Employee faithfully shall adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the Term of his employment hereunder
(as defined in Section 5 hereof), be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder without the
prior consent of the Board. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of Section 3 hereof.
2. Compensation. For all services rendered by Employee in any capacity
required hereunder, the Company shall compensate Employee as follows:
(a) Base Salary. Effective on the date hereof through the end of the
Company's current fiscal year ending September 26, 1997, the base salary payable
to Employee shall be $195,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less frequently than
monthly. Such base salary shall, in the sole discretion of the Board, be subject
to an annual increase; provided that, at the beginning of
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<PAGE> 3
the Company's fiscal year, Employee's base salary shall be adjusted to reflect
any increase during the prior fiscal year in the consumer price index for All
Urban Consumers, All Items for New York-Northeast New Jersey-Long Island,
NY-NJ-CT (1982-84 = 100), published by the United States Bureau of Labor
Statistics.
(b) Incentive Bonus Plan. Not later than June 30, 1997, the Board will
develop a written Annual Incentive Bonus Plan (the "Incentive Bonus Plan")
setting forth the criteria under which Employee and other officers and key
employees will be eligible to receive year-end bonus awards based upon
individual performance and the achievement by the Company of the prior year
projections. The Incentive Bonus Plan will provide for Employee's bonus as set
forth in Schedule 1 hereto.
(c) Performance Based Bonus Plan. Except in the case of a termination
of this Agreement pursuant to Section 5(a) or 5(c), for a period of five years
following the consummation of the transactions contemplated in the Merger
Agreement, the Employee, along with the Company's Chief Executive Officer, Chief
Operating Officer, and Vice President for Marketing (collectively, the "Senior
Executive Officers"), shall participate in a performance based bonus plan (the
"Performance Bonus Plan") in which each of the Senior Executive Officers will
receive an aggregate of 25% of the excess EBIT (after Incentive Bonus Plan
bonuses are awarded) for each fiscal year above EBIT projected for such year in
the Goldman, Sachs & Co. Confidential Memorandum dated December 1996 (the
"Goldman, Sachs Memorandum") or another mutually agreed-upon alternative profit
target. The maximum aggregate amount that the Senior Executive Officers shall be
entitled to receive under the term of the Performance Bonus Plan shall be
$750,000. The Board shall develop and approve the Performance Bonus Plan no
later than June 30, 1997.
(d) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Payment of such premiums (or such portion thereof as is
provided by the Company's plans) for coverage for Employee and
his dependent family members under
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<PAGE> 4
health, hospitalization, disability, dental, life and other
insurance plans that the Company may have in effect from time
to time. Benefits provided to Employee under this clause (1)
shall be at least comparable to such benefits provided to the
Company's Senior Executive Officers immediately prior to the
date of this Agreement.
(2) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of
his services pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in reasonable detail
by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's
expense reporting policy.
(3) Payment of costs associated with Employee's commute to and from
work, it being understood that Employee may elect whichever
reasonable means of transportation may be appropriate depending
upon the circumstances.
(4) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and shall allow Employee to participate
in all other Company-wide employee benefits, including the
Company's defined contribution pension plan and 401(k) Plan, as
may be made available generally to employees of either from
time to time. Such perquisites shall be at least comparable to
the Company's policies with respect thereto prior to the
consummation of the Merger Agreement.
3. Non-Competition Agreement.
(a) Employee shall not, during the period of his employment by or with
the Company and for a two (2) year period following the termination of his
employment under Section 5(c) hereto, or for a one (1) year period following the
termination of
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<PAGE> 5
his employment other than under Section 5(c) hereto, for any reason whatsoever,
for himself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, trustee, or in a managerial capacity, whether
as an employee, independent contractor, agent, consultant or advisor,
or as a sales representative, in any business selling any products or
services in direct competition with the Company;
(ii) call upon any person who is, at that time, an employee of
the Company in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of the
Company for the purpose of soliciting or selling products or services
in competition with the Company; or
(iv) call upon any prospective acquisition candidate, on the
Employee's own behalf or on behalf of any competitor of the Company,
which candidate was either called upon by the Company or for which the
Company made an acquisition analysis, for the purpose of acquiring
such entity.
For purposes of this Section and for purposes of Sections 5, 6, 7, 8
and 16, the term "Company" shall be deemed to include all direct and indirect
subsidiaries, and affiliates of the Company. Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit Employee from acquiring as an
investment not more than five percent (5%) of the capital stock of a competing
business, whose stock is publicly traded on a national securities exchange or on
the over-the-counter market.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage
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<PAGE> 6
that could be caused to the Company for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by the
Company in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the Company's current plans; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company throughout the term
of this covenant.
(d) The covenants in this Section 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant.
(e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants; provided, however, that the
Company's continued failure to make payments to Employee under Section 2 of this
Agreement shall constitute such a defense.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in Section 3(a) hereof, the period of time
for which Employee shall be prohibited pursuant to Section 3(a) hereof shall be
the maximum time permitted by law.
4. Place of Performance.
(a) Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement.
In such event, if Employee agrees to relocate, the Company shall pay all
reasonable relocation costs to move Employee, his immediate
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<PAGE> 7
family and their personal property and effects. Such costs may include, by way
of example, but are not limited to, pre-move visits to search for a new
residence, investigate schools or for other purposes; temporary lodging and
living costs prior to moving into a new permanent residence; duplicate home
carrying costs; all reasonable closing costs on the sale of Employee's present
residence and on the purchase of a comparable residence in the new location; and
added income taxes that Employee may incur if, but only to the extent that, any
such relocation costs are not deductible for tax purposes. The general intent of
the foregoing is that Employee shall not personally bear any out-of-pocket cost
as a result of the relocation, with an understanding that Employee shall use his
best efforts to incur only those costs which are reasonable and necessary to
effect a smooth, efficient and orderly relocation with minimal disruption to the
business affairs of the Company and the personal life of Employee and his
family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of Section 5(c) and, if Employee
is terminated for such refusal, Employee shall be entitled to receive all
payments under this Agreement as if he were terminated by the Company without
cause.
5. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the date hereof and continue for one year (the "Initial
Term"), and, unless terminated as herein provided, shall be extended at the end
of the Initial Term and ongoing successive terms, for a period of one year on
the same terms and conditions contained herein (the "Term"), provided, however,
that with each successive Term, Employee's compensation shall be adjusted in
accordance with Section 2 hereof. This Agreement and Employee's employment may
be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
-7-
<PAGE> 8
(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been absent from his full time
duties hereunder for four (4) consecutive months, then thirty (30) days after
written notice to the Employee (which notice may occur before or after the end
of such four (4) month period, but which shall not be effective earlier than the
last day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume his full-time duties
at the conclusion of such notice period. Also, Employee may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company the
base salary at the rate then in effect for a period of eight (8) months from the
date of such termination (the "Disability Period"); provided that, such amounts
shall be offset by any amounts otherwise paid to the Employee under any
disability program then maintained by the Company. During the Disability Period,
Employee shall also receive all benefits to which Employee would otherwise be
entitled. In addition, earned but unpaid base salary as of the date of such
termination shall be paid in full and any bonus award to which the Employee
would have been entitled under the Incentive Bonus Plan had he been employed
throughout the year in which such bonus is calculated shall be payable on a
prorated basis for the year in which such termination occurs only.
(c) Good Cause. The Company may terminate the Agreement immediately
upon written notice to Employee for good cause, which shall be: (1) Employee's
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of Employee's material duties and
-8-
<PAGE> 9
responsibilities hereunder; (2) Employee's willful dishonesty, fraud, alcohol or
illegal drug abuse, or misconduct with respect to the business or affairs of the
Company, which materially and adversely affects the operations, prospects or
reputation of the Company; or (3) Employee's conviction of a felony or other
crime involving moral turpitude. In the event of a termination for good cause,
as enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
Employee. Should Employee be terminated by the Company without cause, or if this
Agreement is not renewed pursuant to Section 5 hereof, Employee shall receive
from the Company the base salary at the rate then in effect for one year from
the date Employee's employment is terminated, payable over such time period, and
any other benefits to which Employee would otherwise be entitled. If Employee
resigns or otherwise terminates his employment for any reason other than Good
Reason as defined in Section 5(e), Employee shall receive no severance
compensation.
(e) Termination by Employee for Good Reason. The Employee may
terminate his employment hereunder for "Good Reason." As used herein, "Good
Reason" shall mean the continuance of any of the following after ten (10) days
prior written notice by Employee to the Company and to CPH, specifying the basis
for such Employee's having Good Reason to terminate this Agreement:
(i) a material adverse change in Employee's status, title,
position or responsibilities;
(ii) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in
Section 1 hereof (or such other position to which he may be promoted),
including status, offices, responsibilities or persons to whom the
Employee reports as contemplated under Section 1 of this Agreement, or
any other action by the Company which
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<PAGE> 10
results in a material and adverse change in such position, status,
offices, titles or responsibilities;
(iii) Employee's removal from, or failure to be reappointed
or reelected to, Employee's position under this Agreement, except as
contemplated by Sections 5(a), (b) and (c); or
(iv) any other material breach of this Agreement by the
Company, including the regular failure to pay Employee on a timely
basis the amounts to which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, Employee shall
be entitled to receive from the Company the base salary at the rate then in
effect for one year from the date Employee's employment is terminated, payable
over such time period, and any other benefits to which Employee would otherwise
be entitled.
(f) Payment Through Termination. Upon termination of this Agreement
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave) due through the effective date of termination.
Additional compensation subsequent to termination, if any, shall be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section 9 herein and Employee's obligations under Sections 3, 6, 7, 8 and 10
herein shall survive such termination in accordance with their terms.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the business or activities of the Company and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to
-10-
<PAGE> 11
assign all his interests therein to the Company or its nominee. Employee agrees
that all such materials which he develops or conceives and/or documents during
such period shall be deemed works made-for-hire for the Company within the
meaning of the copyright laws of the United States or any similar or analogous
law or statute of any other jurisdiction and accordingly, the Company shall be
the sole and exclusive owner for all purposes for the distribution, exhibition,
advertising and exploitation of such materials or any part of them in all media
and by all means now known or which may hereafter be devised, throughout the
universe in perpetuity. Employee agrees that in furtherance of the foregoing, he
shall disclose, deliver and assign to the Company all such conceptions, ideas,
improvements and discoveries and shall execute all such documents, including
patent and copyright applications, as the Company reasonably shall deem
necessary to further document the Company's ownership rights therein and to
provide the Company the full and complete benefit thereof. Should any arbitrator
or court of competent jurisdiction ever hold that the materials derived from
Employee's contributions to the Company do not constitute works made-for-hire,
Employee hereby irrevocably assigns to the Company, and agrees that the Company
shall be the sole and exclusive owner of, all right, title and interest in and
to all such materials, including the copyrights and any other proprietary rights
arising therefrom. Employee reserves no rights with respect to any such
materials, and hereby acknowledges the adequacy and sufficiency of the
compensation paid and to be paid by the Company to Employee for the materials
and the contributions he will make to the development of any such information or
materials. Employee agrees to cooperate with all lawful efforts of the Company
to protect the Company's rights in and to any or all of such information and
materials and will at the request of the Company execute any and all instruments
or documents necessary or desirable in order to register, establish, acquire,
prosecute, maintain, perfect or defend the Company's rights in and to such
information materials.
7. Confidential Information and Trade Secrets. Employee acknowledges
and agrees that all Confidential Information, Trade Secrets and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the
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<PAGE> 12
business of the Company shall be and remain the property of the Company and be
subject at all times to its discretion and control. Employee agrees that he
shall maintain strictly the confidentiality of, and shall not, during or after
the term of this Agreement with the Company, disclose, any such Confidential
Information or Trade Secrets.
For purposes hereof, the parties agree that "Confidential
Information" means and includes
- All business or financial information, plans, processes
and strategies, market research and analyses,
projections, financing arrangements, consulting and
sales methods and techniques, expansion plans, forecasts
and forecast assumptions, business practices, operations
and procedures, marketing and merchandising information,
distribution techniques, customer information and other
business information, including records, designs,
patents, business plans, financial statements, manuals,
memoranda, lists and other documentation respecting the
Company;
- All information and materials which are proprietary and
confidential to a third party and which have been
provided to the Company by such third party for the
Company's use; and
- All information derived from such Confidential
Information.
Confidential Information shall not include information and materials
that are already, or otherwise become, known by or generally available
to the public without restriction on disclosure, other than as a
result of an act or omission by the Employee in breach of the
provisions of this Agreement or any other applicable agreement between
the Employee and the Company.
-12-
<PAGE> 13
For purposes hereof, the term "Trade Secret" shall have the
meaning given in the Delaware enactment of the Uniform Trade Secrets
Act, and shall include, without limitation, the whole or any portion
or phase of any scientific or technical information, design, process,
formula, concept, data organization, manual, other system
documentation, or any improvement of any thereof, in any case that is
valuable and secret (in the sense that it is not generally known to
the Company's competitors).
8. Return Of Company Property; Termination of Employment. At such
time, if ever, as Employee's employment with the Company is terminated, he shall
be required to participate in an exit interview for the purpose of assuring a
proper termination of his employment and his obligations hereunder. On or before
the actual date of such termination, Employee shall return to the Company all
records, materials and other physical objects relating to his employment with
the Company, including, without limitation, all Company credit cards and access
keys and all materials relating to, containing or derived from any Trade Secrets
or Confidential Information.
9. Indemnification. If Employee is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Company against
Employee), by reason of the fact that he is or was performing services under
this Agreement or as an officer or director of the Company (and whether or not
the basis of such action is the Employee's action in such official capacity),
then the Company shall indemnify Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith to the fullest
extent permitted by applicable law, and such indemnification shall continue as
to Employee even if he has ceased to be an employee, officer or director of the
Company and shall inure to the benefit of his heirs and estate. The Company
shall advance to Employee all reasonable costs and expenses directly related to
the defense of such action, suit or proceeding within twenty days after written
request therefore by the Employee to the Company, provided that such request
shall include an undertaking by the Employee to repay such advances if it shall
ultimately be
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<PAGE> 14
determined that Employee is or was not entitled to be indemnified by the Company
against such costs and expenses. If both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
agrees to engage competent legal representation, and Employee agrees to use the
same representation, provided that if counsel selected by the Company shall have
a conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton negligence
or misconduct or performed criminal or fraudulent acts which materially damage
the business of the Company. The provisions of this Section 9 are in addition
to, and not in derogation of, the indemnification provisions of the Company's
By-laws.
10. No Prior Agreements. Employee hereby represents and warrants to
the Company that the execution of this Agreement by Employee and his employment
by the Company and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify the Company for, and hold the
Company harmless from and against, all claims, including, but not limited to,
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against the Company based
upon or arising out of any noncompetition agreement, invention or secrecy
agreement between Employee and such third party which was in existence as of the
date of this Agreement.
11. Binding Effect; Assignment. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns. Employee
understands that he has been selected for employment by the Company on the basis
of his personal qualifications, experience and skills. Employee agrees,
therefore, that he cannot assign all or any portion of his performance under
this Agreement.
-14-
<PAGE> 15
12. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements.
13. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Colorado Prime Corporation
1 Michael Avenue
Farmingdale, N.Y. 11735
Attention: Secretary
to CPH: Colorado Prime Holdings Inc.
1455 Pennsylvania Avenue, N.W.
Suite 350
Washington, D.C. 20004
Attn: V. Frank Pottow
To Employee: Thomas S. Taylor
155 West 70th Street
New York, New York 10023
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier.
Either party may change the address for notice by notifying the other party of
such change in accordance with this Section 13.
14. Severability; Headings. It is the intention of the parties that
the provisions herein shall be enforceable to the fullest extent permitted under
applicable law, and that the unenforceability of any the provision or provisions
hereof, or any portion thereof, shall not render unenforceable or otherwise
impair any other provisions or portions thereof. If any
-15-
<PAGE> 16
provision of this Agreement is determined by a court of competent jurisdiction
to be unenforceable, void or invalid in whole or in part, this Agreement shall
be deemed amended to delete or modify, as necessary, the offending provisions or
portions thereof and to alter the bounds thereof, including specifically, any
time, place and manner restrictions contained in any of the restrictive
covenants contained herein, in order to render it valid and enforceable. In any
event, the balance of this Agreement shall be enforced to the fullest extent
possible without regard to such unenforceable, void or invalid provisions or
part thereof. The Section headings herein are for reference purposes only and
are not intended in any way to describe, interpret, define or limit the extent
or intent of the Agreement or of any part hereof.
15. Company Actions. Employee acknowledges that in any action by the
Company to enforce the provisions of Sections 3, 6, 7 or 8 of this Agreement,
claims asserted by Employee against the Company arising out of his employment
with the Company or otherwise shall not constitute a defense to enforcement of
his obligations hereunder; provided, however, that the Company's continued
failure to make payments to Employee under Section 2 of this Agreement shall
constitute such a defense.
16. Arbitration. Any unresolved dispute or controversy arising under
or in connection with this Agreement (excluding specifically, however, claims
and counterclaims of the Company arising out of any breach by Employee of the
provisions of Sections 3, 7 or 8 hereof) shall be settled exclusively by
arbitration, conducted in accordance with the rules of the American Arbitration
Association then in effect, as modified hereby. Notwithstanding anything
contained in the rules to the contrary, however, the arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof nor to
award punitive or special damages to any injured party. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. The arbitration
proceeding shall be held in New York, New York.
17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of New York without reference to its
conflicts of laws provisions.
-16-
<PAGE> 17
18. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
20. Modifications. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought, or his or its duly authorized representative or officer.
No waiver by Employee or the Company of any breach of any provision hereof will
be deemed a waiver of any prior or subsequent breach of the same or any other
provision. The failure of Employee or the Company to exercise any right provided
herein will not be deemed on any subsequent occasions to be a waiver of any
right granted hereunder to either of them
21. EMPLOYEE ACKNOWLEDGES THAT, BEFORE SIGNING THIS AGREEMENT, HE WAS
GIVEN AN OPPORTUNITY TO READ IT, CAREFULLY EVALUATE IT, AND ASK ANY QUESTIONS HE
MAY HAVE HAD REGARDING IT OR ITS PROVISIONS. EMPLOYEE ALSO ACKNOWLEDGES THAT HE
HAD THE RIGHT TO HAVE THIS AGREEMENT REVIEWED BY AN ATTORNEY OF HIS CHOOSING AND
THAT THE COMPANY GAVE HIM A REASONABLE PERIOD OF TIME TO DO SO IF HE SO WISHED.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLORADO PRIME CORPORATION
By: /s/ William Willett
-----------------------------------
Title: President, Chief Operating
Officer
COLORADO PRIME HOLDINGS INC.
By: /s/ V. Frank Pottow
----------------------------------
Title: Treasurer
EMPLOYEE:
/s/ Thomas S. Taylor
--------------------------------------
Thomas S. Taylor
-18-
<PAGE> 19
SCHEDULE 1
<TABLE>
<CAPTION>
% Operating Income % OF SALARY
Before Bonus Operating Profit Annual
Accomplished Before Bonus Objectives Total
================================================================================
<S> <C> <C> <C>
80 or lower 0 0 0
85 8.5 8.5 17
90 17 17 34
95 21 21 42
100 25 25 50
105 31 31 62
110 37.5 37.5 75
115 44 44 88
120+ 50 50 100
================================================================================
</TABLE>
Note: (a) Any combination is possible, e.g., at 80% profit and achievement
of annual objectives a bonus equal to 25% of salary is paid.
(b) Performance between the levels is prorated on a straight line
basis.
(c) Performance vs. objectives is management judgment.
(d) "Operating Income" shall have the definition set forth in
Exhibit A hereto.
===============================================================================
<PAGE> 20
EXHIBIT A
[DEFINITION OF OPERATING INCOME]
<PAGE> 1
EXHIBIT 10.9
THIS LEASE AGREEMENT, made this 1st day of September, 1983,
Between MASCIANDARO, KALPAKJIAN & MASCIANDARO CO., a New York general
partnership having an office at 75 Verdi Street, South Farmingdale, New York
11735, herein designated as the Landlord,
and THRIFT PAK FOOD SERVICE, INC., a New York Corporation located at
Verdi Street, Farmingdale, New York 11735, herein designated as the tenant;
WITNESSETH THAT, the landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord, the premises described in Schedule A
for a term of fifteen (15) years commencing on September 1, 1983 and ending on
August 31, 1998 to be used and occupied only and for no other purposes than
UPON THE FOLLOWING ODNDITIONS AND COVENANTS:
lst. The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof an annual rental as provided in Schedule A
annexed in equal monthly installments as provided in said schedule.
2nd. It is the intention of the Landlord and the Tenant that the rent
herein specified shall be net to the Landlord in each year during the term of
this lease, that all costs, expenses, and obligations of every kind relating to
the leased property (except as otherwise specifically provided in this lease)
which may arise or become due during the term of this lease shall be paid by the
Tenant, and that the Landlord shall be indemnified by
<PAGE> 2
the Tenant against such costs, expenses and obligations.
The net rent shall be paid to the Landlord without notice or demand and
without abatement, deduction, or setoff (except as otherwise specifically
provided in this lease). The net rent shall be paid in equal monthly
installments in advance on the first day of each calendar month during the term
of this lease.
3rd. The Tenant has examined the premises and has entered into this
lease without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
4th. No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the leased
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as
-2-
<PAGE> 3
part thereof upon the expiration or sooner termination of this lease, without
hindrance, molestation or injury.
5th: The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof, except
of design and structure and in or at such places as may be indicated and
consented to by the Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to remove any such
signs in order to paint or make any repairs, alterations or improvements in or
upon said premises or any part thereof, they may be so removed, but shall be
replaced at the Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by the Landlord
shall at all times conform with all municipal ordinance or other laws and
regulations applicable thereto.
6th: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for lithe correction, prevention and abatement of nuisances,
violations or other greivances in, upon or connected with the said premises,
during the term hereof; and shall promptly comply with all, orders regulations,
requirements and directives of the Board of Fire Underwriters or similar,
authority and of any insurance companies which have issued or are about to
issue policies of Insurance covering the said premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own
-3-
<PAGE> 4
cost and expense.
7th: The Tenant, at Tenant's own cost and expense, shall obtain or provide
and keep in full force for the benefit of the Landlord, during the term hereof,
general public liability insurance, insuring the Landlord against any and all
liability or claims of liability arising out of, occasioned by or resulting from
any accident or otherwise in or about the leased premises, for injuries to any
person or persons, for limits of not less than $ 500,000.00 for injuries to one
person and $ 500,000.00 for injuries to more than one person, in any one
accident or occurrence, and for loss or damage to the property of any person or
persons or not less than $ 500,000.00 The policy or policies of insurance shall
be of a company or companies authorized to do business in this State and shall
be delivered to the Landlord--together with evidence of the payment of the
premiums therefor, not less than fifteen days prior to the commencement of the
term hereof or the date when the Tenant shall enter into possession whichever
occurs sooner. At least fifteen days prior to the expiration or termination date
of any policy, the Tenant shall deliver a renewal or replacement policy with
proof of the payment of the premium therefor. The Tenant also agrees to and
shall save, hold and keep harmless and indemnify the Landlord from and for any
and all payments, expenses, costs attorney fees and from any and all claims and
liability for losses or damage to property or injuries to persons occasioned
wholly or in part by or resulting from any acts or omissions by the Tenant or
the Tenant's agents, employees, guests, licensees, invitees, subtenants,
assignees or successors, or for any cause or reason whatsoever arising, out of
or by reason of the occupancy by the Tenant and the conduct of the Tenant's
business.
-4-
<PAGE> 5
8th: The Tenant shall not occupy or use the leased premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purposes
other than as herein limited, nor for any purpose deemed unlawful, disreputable,
or extra hazardous, on account of fire or other casualty.
9th: If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken, under eminent
domain or condemnation proceedings or if suit or other action shall be
instituted for the taking or condenmation thereof, or if in lieu of any formal
condemnation proceedings or actions, the Landlord shall grant an option to
purchase and or shall sell and convey the said premises or any portion thereof,
to the governmental or other public authority, agency, body or public utitlity,
seeking to take said land and premises or any portion thereof, then this lease,
at the option of the Landlord, shall terminate, and the term hereof shall end as
of such date as the Landlord shall fix by notice in writing; and the Tenant
shall have no claim or right to claim or be entitled to any portion of any
amount which may be awarded as damages or paid as the result of such
condemnation proceedings or paid as the purchase price for such option, sale or
conveyance in lieu of formal condemnation Proceedings; and all rights of the
Tenant to damages if any are hereby assigned to the Landlord. The Tenant agrees
to execute and deliver any instruments at the expense of the Landlord, as may be
deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises,
-5-
<PAGE> 6
remove all the Tenant's personal property, therefrom and deliver up peaceable
possession thereof to the Landlord or to such other party designated by the
Landlord in the aforementioned notice. Failure by the Tenant to comply with
any provisions in this clause shall subject the Tenant to such costs, expenses,
damages and losses as the Landlord may incur by reason of the Tenant's breach
hereof.
10th: A. If the demised premises shall be damaged by fire or other
casualty and if Tenant shall give prompt notice to Landlord of such damage,
Landlord, at Landlord's expense, shall repair such damage as soon as reasonably
possible. However, Landlord shall have no obligation to repair any damage to, or
to replace, Tenant's personal property or any other property or effects of
Tenant. Except as otherwise provided, in Section 13C if the entire demised
premises shall be rendered untenantable by reason of any such damage, the rent
shall abate for the period from the date of such damage to the date when such
damage shall have been repaired, and if only a part of the demised premises
shall be so rendered untenantable, the rent shall abate for such period in the
proportion which the area of the part of the demised premises so rendered
untenantable bears to the total area of the demised premises. However, if,
prior to the date when all of such damage shall have been repaired, any part of
the demised premises so damaged shall be rendered tenantable and shall be used
or occupied by Tenant or any person or person claiming through or under Tenant,
then the amount by which the rent shall abate shall be equitably apportioned for
the period from the date of any such use or occupancy to the date when all such
damage shall
-6-
<PAGE> 7
have been repaired. Notwithstanding the foregoing provisions of this Section,
if, prior to or during the Demised Term, the demised premises shall be totally
damaged or rendered wholly untenantable by fire or other casualty, and if
Landlord shall decide not to restore the demised premises, then the Landlord
may give to Tenant within thirty (30) days after such fire or other casualty, a
thirty (30) days' notice of termination of this lease and, in the event such
notice is given, this lease and the Demised Term shall come to an end and expire
(whether or not said term shall have commenced) upon the expiration of said
thirty (30) days with the same effect as if the date of expiration of said
thirty (30) days were the Expiration Date, the rent shall be apportioned as of
such date and any prepaid portion of rent for any period after such date shall
be refunded by Landlord to Tenant. Landlord shall notify the Tenant within
thirty (30) days after such occurrence that Landlord intended to reconstruct the
demised premises and that the same will be accomplished within 180 days
thereafter. Upon the failure of the Landlord to provide Tenant with the
foregoing notice, or to reconstruct the demised premises within said time
period, the Tenant shall have the right and option to cancel and terminate this
lease upon thirty (30) clays notice to Landlord.
B. Landlord. shall attempt to obtain and maintain throughout the
Demised Term, in Landlord's fire insurance policies, provisions to the effect
that such policies shall not be invalidated should the insured waive, in
writing, prior to a loss, any or all right of recovery against any party for
loss occurring to the Building. In the event that at any time Landlord's fire
-7-
<PAGE> 8
insurance carriers shall exact an additional premium for the inclusion of such
or similar provisions, Landlord shall give Tenant notice thereof, In such event,
if Tenant agrees, in writing, to reimburse Landlord for such additional premium
for the remainder of the Demised Term, Landlord shall require the inclusion of
such or similar provisions by Landlord's fire insurance carriers. As long as
such or similar provisions are included in Landlord's fire insurance policies
then in force, Landlord hereby waives (i) any obligation on the part of Tenant
to make repairs to the demised premises necessitated or occasioned by fire or
other casualty that is an assured risk under such and (ii) any right of recovery
against Tenant, any other permitted occupant of the demised premises, and any of
their servants, employees, agents or contractors, for any loss occasioned by
fire or other casualty that is an insured risk under such policies. In the event
that at any time Landlord's fire insurance carriers shall not include such or
similar provisions in Landlord's fire insurance policies, the waivers set forth
in the foregoing sentence shall, upon notice given by Landlord to Tenant, be
deemed of no further force or effect.
C. Tenant shall attempt to obtain and maintain throughout the Demised
Term, in Tenant's fire insurance policies covering Tenant's property in the
demised premises, and Tenant's use and occupancy of the demised premises, and/or
Tenant's profits (and shall cause any other permitted occupants of the demised
premises to attempt to obtain and maintain, in similar policies) provisions to
the effect that such policies shall not be invalidated should the insured
waive, in writing, prior to a loss, all right of recovery against any party for
loss occasioned by
-8-
<PAGE> 9
fire or other casualty which is an insured risk under such policies In the event
at any time the fire insurance carriers issuing such policies shall exact an
additional premium for the inclusion of such or similar provisions, Tenant shall
give Landlord notice thereof. In such event, if Landlord agrees, in writing, to
reimburse tenant or any person claiming through or under Tenant, as the case may
be, for such additional premium for the remainder of the Demised Term, Tenant
shall require the inclusion of such or similar provisions by such fire insurance
carriers. As long as such or similar provisions are included in such fire
insurance policies then in force, Tenant hereby waives (and agrees to cause any
other permitted occupants of the demised premises to execute and deliver to
Landlord written instruments waiving) any right of recovery against Landlord,
any lessors under any ground or underlying leases, any other tenants or
occupants of the Building, and any servants, employees, agents or contractors of
Landlord, or of any such lessor, or of any such other tenants or occupants, for
any loss occasioned by fire or other casualty which is an insured risk under
such policies. In the event that at any time such fire insurance carriers shall
not include such or similar provisions in any such fire insurance policy, the
waiver set forth in the foregoing sentence shall, upon notice given by Tenant to
Landlord, be deemed of no further force or effect with respect to any insured
risks under such policy from and after the giving of such notice. During any
period while the foregoing waiver of right of recovery is in effect, Tenant, or
any other permitted occupant of the demised premises, as the case may be, shall
look solely to the proceeds of such policies to compensate Tenant or such other
permitted occupant for any loss occasioned by fire, or other casualty
-9-
<PAGE> 10
which is an insured risk under such policies.
llth: If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on demand,
or at the option of the Landlord, shall be added to the installment of rent due
immediately thereafter but in no case later than one month after such demand,
whichever occurs, sooner, and shall be due and payable as such. This remedy
shall be in addition to such other remedies as the Landlord may have hereunder
by reason of the breach by the Tenant of any of the covenants and conditions in
this lease contained.
12th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives shall have the right to enter into and upon
the said premises or any part thereof at all reasonable hours, for the purpose
of examining the same, or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs,
13th: Any equipment, fixtures, goods or other property of the Tenant, not
removed by the Tenant upon the termination of this lease, or upon any quitting,
vacating or abandonment of the premises by the Tenant, or upon the Tenant's
eviction, shall be considered as abandoned and the Landlord shall have the
right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable
-10-
<PAGE> 11
- -to the Tenant for any part of the proceeds of such sale, if any.
14th: The Landlord shall not be liable for any damage or injury which may
be sustained by the Tenant or any other person us a consequence of the failure,
breakage, leakage, or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or
of the electrical, gas, power, conveyor, refrigeration, sprinkler, air
conditioning or heating systems, elevators or hoisting equipment or by the
reason of the elements or resulting from carelessness, negligence or improper
conduct on the part of the Tenant unless such damage or injury is caused by the
negligence of the Landlord or the Landlord's agents, employees, guests,
licensees, invitees, subtenants, assignees or successors. Landlord shall not
liable for any damage or injury attributable to any interference with,
interruption of or failure, beyond the control of the Landlord, or any services
to be furnished or supplied by the Landlord.
l5th: The various rights, remedies, options and elections, of the Landlord,
expressed herein, are cumulative, and the failure of the Landlord to enforce
strict performance by the Tenant of the conditions and covenants of this lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future by the
Landlord of any such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
-11-
<PAGE> 12
16th: This lease and the obligation of the Tenant to pay the rent hereunder
and to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired, or excused because Of the Landlord's inability to supply
any service or material called for herein, by reasons by any rule, order,
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of
negotiations for the adjustment of any fire or other casualty loss or because of
strikes or other labor trouble or for any cause beyond the control of the
landlord.
17th: The terms, conditions, covenants and provisions of this lease shall
be deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
l8th: All notice required under the terms of this lease shall be given and
shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
the lease or to such other address as may be designated in writing, which notice
of change of address shall be given in the same manner.
19th: The Landlord covenants and represents that the Landlord is the owner
of the premises herein leased and has the right and authority to enter into,
execute and deliver this lease, and does further covenant that the Tenant on
paying the rent and performing the conditions and covenants herein contained
shall and may peaceably and quietly have, hold and enjoy the
-12-
<PAGE> 13
leased premises.
20th: This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
21st: Any controversy or claim arising out of or relating to this lease, or
the breach thereof shall be settled by arbitration in accordance with the rules,
then obtaining, of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
22nd: If any mechanic's or other liens shall be created or filed against
the leased premises by reason of labor performed or materials furnished for the
Tenant in the erection, construction, completion, alteration, repair or addition
to any building or improvement, the Tenant shall within thirty (30) days
thereafter, at the Tenant's own cost and expense, cause such lien or liens to be
satisfied and discharged of record together with any Notices of Intention that
may have been filed. Failure so to do, shall entitle the Landlord to resort to
such remedies as are Provided herein in the case of any default of this lease,
in addition to such as are permitted by law.
MASCIANDARO, KALPAKJIAN & MASCIANDARO C0.
BY: /s/ JOHN MASCIANDAR0, JR.
----------------------------------------
JOHN MASCIANDAR0, JR., PARTNER
THRIFT PAK FOOD SERVICE, INC.
BY: /s/ GARY KALPAKJIAN, PRES.
----------------------------------------
GARY KALPAKJIAN, PRES.
<PAGE> 14
STATE OF NEW YORK)
COUNTY OF SUFFOLK) ss:,
On the 23rd day of September, 1983, before me personally came JOHN
MASCIANDARO, JR., to me known to be the individual described and who executed
the foregoing instrument, and acknowledged that he executed the same.
/s/ WILLIAM R. KELLY
----------------------------------------
Notary Public
WILLIAM R. KELLY
Notary Public. State of New York
No. 52-2081280
Qualified In Suffolk County
Commission Expires March 30, 1985
STATE OF NEW YORK)
COUNTY OF SUFFOLK) Ss:
On the 23rd day of September, 1983, before me personally came GARY
KALPAKJIAN, to me known, who, being by me duly sworn, did depose and say that he
resides at No. 69 Kendrick Lane, Dix Hills, New York; that he is the President
of THRIFT PAK FOOD SERVICE, INC., 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 it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/ WILLIAM R. KELLY
----------------------------------------
Notary Public
WILLIAM R. KELLY
Notary Public. State of New York
No. 52-2081280
Qualified In Suffolk County
Commission Expires March 30, 1985
<PAGE> 15
SCHEDULE "A"
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereof, if any, erected, situate, lying and being at Farmingdale,
Town of Babylon, County of Suffolk, State of New York, known and designated as
and by lot number 1, on a certain map entitled, "Map of Bi-County Industrial
Plaza" filed on September 24, 1981, in the office of the Clerk of the County of
Suffolk under number 7014.
<PAGE> 16
RENT SCHEDULE
<TABLE>
<S> <C> <C> <C>
10/4/83 - 9/4/84 $ 7,700.00
10/4/84 - 9/4/85 12,700.00
10/4/85 - 9/4/86 12,370.00
10/4/86 - 9/4/87 12,040.00
10/4/87 - 9/4/88 11,710.00
10/4/88 - 9/4/89 16,380.00
10/4/89 - 9/4/90 15,120.00
10/4/90 - 9/4/91 15,060.00
10/4/91 - 9/4/92 14,400.00
10/4/92 - 9/4/93 13,740.00
10/4/93 - 9/4/94 13,080.00
10/4/94 - 9/4/95 12,420.00
10/4/95 - 9/4/96 11,760.00
10/4/96 - 9/4/97 11,100.00
10/4/97 - 9/4/98 7,106.67
</TABLE>
If the rent reserved under the prime lease dated 9/23/83 between Industrial
Development Agency of Babylon, Inc. and Masciandaro, Kalpakjian and Masciandaro
Co., a New York partnership, is increased or decreased pursuant to its terms,
the rent under this sub-lease will be increased or decreased an equal amount.
<PAGE> 17
THIS SUBLEASE AGREEMENT, made this 15th day of October, 1984
BETWEEN MASCIANDARO, KALPAKJIAN & MASCIANDARO CO., a New York general
partnership having an office at One Michael Avenue, Farmingdale, New York 11735,
herein designated as the Landlord,
and COLORADO PRIME, INC., formerly known as THRIFT-PAK FOOD SERVICE, INC.,
a New York Corporation located at One Michael Avenue, Farmingdale, New York
11735, herein designated as the Tenant;
WITNESSETH THAT, the Landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord, the premises described in Schedule A
for a term of fourteen (14) years commencing on October 15, 1984 and ending on
August 31, 1998 to be used and occupied only and for no other purposes
UPON THE FOLLOWING CONDITIONS AND COVENANTS:
lst. The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof an annual rental as provided in Schedule A annexed in
equal monthly installments as provided in said schedule.
2nd. It is the intention of the Landlord and the Tenant that the rent
herein specified shall be net to the Landlord in each Year during the term of
this lease, that all costs, expenses, and obligations of every kind relating to
the leased property (except as otherwise specifically provided in this lease)
which may arise or become due during the term of this lease shall be paid by the
Tenant, and that the Landlord shall be indemnified by the Tenant against such
costs, expenses and obligations.
<PAGE> 18
The net rent shall be paid to the Landlord without notice or demand and
without abatement, deduction, or setoff (except as otherwise specifically
provided in this lease). The net rent shall be paid in equal monthly
installments in advance on the first day of each calendar month during the term
of this lease.
3rd. The Tenant has examined the premises and has entered into this lease
without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenent, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
4th. No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the
-2-
<PAGE> 19
leased premises, shall belong to and become the property of the Landlord and
shall be surrendered with the premises and as part thereof upon the expiration
or sooner termination of this lease, without hindrance, molestation or injury.
5th. The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof, except
of design and structure and in or at such places as may be indicated and
consented to by the Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to remove any such
signs in order to paint or make any repairs, alterations or improvements in or
upon said premises or any part thereof, they may be so removed, but shall be
replaced at the Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by the Landlord
shall at all times conform with all municipal ordinances or other laws and
regulations applicable thereto.
6th. The Tenant shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and all of their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other grievances in, upon or connected with the said premises, during the
term hereof; and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire Underwriters or
-3-
<PAGE> 20
similar authority and of any insurance companies which have issued or are about
to issue policies of insurance covering the said premises and its contents, for
the prevention of fire or other casualty, damage or injury, at the Tenant's own
cost and expense.
7th. The Tenant, at Tenant's own cost and expense, shall obtain or provide
and keep in full force for the benefit of the Landlord, during the term hereof,
general public liability insurance, insuring the Landlord against any and all
liability or claims of liability arising out of, occasioned by or resulting from
any accident or otherwise in or about the leased premises, for injuries to any
person or persons, for limits of not less than $500,000.00; for injuries to one
person and $5OO,000.00 for injuries to more than one person, in any one accident
or occurrence, and for loss or damage to the property of any person or persons
for not less than $5OO,000.00. The policy or policies of insurance shall be of a
company or companies authorized to do business in this State and shall be
delivered to the Landlord, together with evidence of the payment to the
commencement of the term hereof or the date when the Tenant shall enter into
possession whichever occurs sooner. At least fifteen days prior to the
expiration or termination date of any policy, the Tenant shall deliver a renewal
or replacement policy with proof of payment of the premium therefor. The Tenant
also agrees to and shall save, hold and keep harmless and indemnify the Landlord
from and for any and all payments, expenses, costs, attorneys fees and from any
and all claims and liability for losses or damage to property or injuries to
persons
-4-
<PAGE> 21
occasioned wholly or in part by or resulting from any acts or omissions by the
Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, or for any cause or reason whatsoever
arising out of or by reason of the occupancy by the Tenant and the conduct of
the Tenant's business.
8th. The Tenant shall not occupy or use the leased premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purposes
other than as herein limited, nor for any purpose deemed unlawful, disreputable,
or extra hazardous, on account of fire or other casualty.
9th. If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken, under eminent
domain or condemnation proceedings or if suit or other action shall be
instituted for the taking or condemnation thereof, or if in lieu of any formal
condemnation proceedings or shall see and convey the said premises or any
portion thereof, to the governmental or other public authority, agency, body or
public utility, seeking to take said land and premises or any portion thereof,
then this lease, at the option of the Landlord, shall terminate, and the term
hereof shall end as of such date as the Landlord shall fix by notice in writing;
and the Tenant shall have no claim or right to claim or be entitled to any
portion of any amount which may be awarded as damages or paid as the result of
such condemnation proceedings or paid as the purchase price for such option,
sale or conveyance in lieu of formal condemnation proceedings;
-5-
<PAGE> 22
and all rights of the Tenant to damages if any are hereby assigned to the
Landlord. The Tenant agrees to execute and deliver any instruments at the
expense of the Landlord, as may be deemed necessary or required to expedite any
condemnation proceedings or to effectuate a proper transfer of title to such
governmental or other public authority, agency, body or public utility seeking
to take or acquire the said lands and premises or any portion thereof. The
Tenant covenants and agrees to vacate the said premises, remove all the Tenant's
personal property therefrom and deliver up peaceable possession thereof to the
Landlord or to such other party designated by the Landlord in the aforementioned
notice. Failure by the Tenant to comply with any provisions in this clause shall
subject the Tenant to such costs, expenses, damages and losses as the Landlord
may incur by reason of the Tenant's breach hereof.
10th. A. If the demised premises shall be damaged by fire or other casualty
and if Tenant shall give prompt notice to Landlord of such damage, Landlord, at
Landlord's expense, shall repair such damage as soon as reasonably possible.
However, Landlord shall have no obligation to repair any damage to, or to
replace, Tenant's personal property or any other property or effects of Tenant.
Except as otherwise provided in Section 13C, if the entire demised premises
shall be rendered untenantable by reason of any such damage, the rent shall
abate for the period from the date of such damage to the date when such damage
shall have been repaired, and if only a part of the demised premises shall be so
rendered untenantable, the rent shall
-6-
<PAGE> 23
abate for period in the proportion which the area of the part of the demised
premises so rendered untenantable bears to the total area of the demised
premises. However, if, prior to the date when all of such damage shall have been
repaired, any part of the demised premises so damaged shall be rendered
tenantable and shall be used or occupied by Tenant or any person or person
claiming through or under Tenant, then the amount by which the rent shall abate
shall be equitably apportioned for the period from the date of any such use or
occupancy to the date when all such damage shall have been repaired.
Notwithstanding the foregoing provisions of this Section, if, prior to or during
the Demised Term, the demised premises shall be totally damaged or rendered
wholly untenantable by fire or other casualty, and if Landlord shall decide not
to restore the demised premises, then the Landlord may give to Tenant within
thirty (30) days after such fire or other casualty, a thirty (30) days' notice
of termination of this lease and, in the event such notice is given, this lease
and the Demised Term shall come to an end and expire (whether or not said term
shall have commenced) upon the expiration of said thirty (30) days with the same
effect as if the date of expiration of said thirty (30) days were the Expiration
Date, the rent shall be apportioned as of such date and any prepaid portion of
rent for any period after such date shall be refunded by the Landlord to Tenant.
Landlord shall notify the Tenant within thirty (30) days after such occurrence
that Landlord intended to reconstruct the demised premises and that the same
will be accomplished within 180 days thereafter. Upon the
-7-
<PAGE> 24
failure of the Landlord to provide Tenant with the foregoing notice, or to
reconstruct the demised premises within said time period, the Tenant shall have
the right and option to cancel and terminate this lease upon thirty (30) days
notice to Landlord.
B. Landlord shall attempt to obtain and maintain throughout the Demised
Term, in Landlord's fire insurance policies, provisions to the effect that such
policies shall not be invalidated should the insured waive, in writing, prior to
a loss, any or all right of recovery against any party for loss occurring to the
Building. In the event that at any time Landlord's fire insurance carriers
shall exact an additional premium for the inclusion of such or similar
provisions, Landlord shall give Tenant notice thereof. In such event, if Tenant
agrees, in writing, to reimburse Landlord for such additional premium for the
remainder of the Demised Term, Landlord shall require the inclusion of such or
similar provisions by Landlord's fire insurance carriers. As long as such or
similar provisions are included in Landlord's fire insurance policies then in
force, Landlord hereby waives (i) any obligation on the part of Tenant to make
repairs to the demised premises necessitated or occasioned by fire or other
casualty that is an assured risk under such policies and (ii) any right of
recovery against Tenant, any other permitted occupant of the demised premises,
and any of their servants, employees, agents or contractors, for any loss
occasioned by fire or other casualty that is an insured risk under such
policies. In the event that at any time Landlord's fire insurance carriers shall
not include such or similar
-8-
<PAGE> 25
provisions in Landlord's fire insurance policies, the waivers set forth in the
foregoing sentence shall, upon notice given by Landlord to Tenant, be deemed of
no further force or effect.
C. Tenant shall attempt to obtain and maintain throughout the Demised Term,
in Tenant's fire insurance policies covering Tenant's property in the demised
premises, and Tenant's use and occupancy of the demised premises, and/or
Tenant's profits (and shall cause any other permitted occupants of the demised
premises to attempt to obtain and maintain, in similar policies) provisions to
the effect that such policies shall not be invalidated should the insured waive,
in writing, prior to a loss, any or all right of recovery against any party for
loss occasioned by fire or other casualty which is an insured risk under such
policies. In the event at any time the fire insurance carriers issuing such
policies shall exact an additional premium for the inclusion of such or similar
provisions, Tenant shall give Landlord notice thereof. In such event, if
Landlord agrees, in writing, to reimburse tenant or any person claiming through
or under Tenant, as the case may be, for such additional premium for the
remainder of the Demised Term, Tenant shall require the inclusion of such or
similar provisions by such fire insurance carriers. As long as such or similar
provisions are included in such fire insurance policies then in force, Tenant
hereby waives (and agrees to cause any other permitted occupants of the demised
premises to execute and deliver to Landlord written instruments waiving) any
right of recovery against Landlord, any lessors under any ground or underlying
leases,
-9-
<PAGE> 26
any other tenants or occupants of the Building, and any servants, employees,
agents or contractors of Landlord, or of any such lessor, or of any such other
tenants or occupants, for any loss occasioned by fire or other casualty which is
an insured risk under such policies. In the event that at any time such fire
insurance carriers shall not include such or similar provisions in any such fire
insurance policy, the waiver set forth in the foregoing sentence shall, upon
notice given by Tenant to Landlord, be deemed of no further force or effect with
respect to any insured risks under such policy from and after the giving of such
notice. During any period while the foregoing waiver of right of recovery is in
effect, Tenant, or any other permitted occupant of the demised premises, as the
case may be, shall look solely to the proceeds of such policies to compensate
Tenant or such other permitted occupant for any loss occasioned by fire or other
casualty which is an insured risk under such policies,
llth. If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on demand
or at the option of the Landlord, shall be added to the installment of rent due
immediately thereafter but in no case later than one month after such demand,
whichever occurs sooner, and shall be due and payable as such. This
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<PAGE> 27
remedy shall be in addition to such other remedies as the Landlord may have
hereunder by reason of the breach by the Tenant of any of the covenants and
conditions in this lease contained.
12th. The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
l3th. Any equipment, fixtures, goods or other property of the Tenant,
not removed by the Tenant upon the termination of this lease, or upon any
quitting, vacating or abandonment of the premises by the Tenant, or upon the
Tenant's eviction, shall be considered as abandoned and the Landlord shall have
the right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable to the Tenant
for any part of the proceeds of such sale, if any.
14th. The Landlord shall not be liable for any damage or injury which
may be sustained by the Tenant or any other person as a consequence of the
failure, breakage, leakage, or obstruction of the water, plumbing, steam, sewer,
waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the
like or of the electrical, gas, power, conveyor, refrigeration, sprinkler, air
-11-
<PAGE> 28
conditioning or heating systems, elevators or hoisting equipment or by the
reason of the elements or resulting from carelessness, negligence or improper
conduct on the part of the Tenant unless such damage or injury is caused by the
negligence of the Landlord or the Landlord's agents, employees, guests,
licensees, invitees, subtenants, assignees or successors. Landlord shall not be
liable for any damage or injury attributable to any interference with,
interruption of or failure, beyond the control of the Landlord, or any services
to be furnished or supplied by the Landlord.
15th. The various rights, remedies, options and elections of the
Landlord, expressed herein, are cumulative, and the failure of the Landlord to
enforce strict performance by the Tenant of the conditions and covenants of this
lease or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future by the
Landlord of any such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
16th. This lease and the obligation of the Tenant to pay the rent
hereunder and to comply with the covenants and conditions hereof, shall not be
affected, curtailed, impaired, or excused because of the Landlord's inability to
supply any service or material called for herein, by reasons by any rule, order,
regulation or preemption by
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<PAGE> 29
any governmental entity, authority, department, agency or subdivision or for any
delay which may arise by reason of negotiations for the adjustment of any fire
or other casualty loss or because of strikes or other labor trouble or for any
cause beyond the control of the Landlord.
17th. The terms, conditions, covenants and provisions of this lease
shall be deemed to be severable. If any clause or provision herein contained
shall be adjudged to be invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, it shall not affect the
validity of any other clause or provision herein, but such other clauses or
provisions shall remain in full force and effect.
18th. All notice required under the terms of this lease shall be given
and shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
the lease or to such other address as may be designated in writing, which notice
of change of address shall be given in the same manner.
19th. The Landlord covenants and represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this lease, and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premises.
-13-
<PAGE> 30
20th. This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized Lo make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
21st. Any controversy or claim arising out of or relating to this
lease, or the breach thereof shall be settled by arbitration in accordance with
the rules, then obtaining, of the American Arbitration Association, and judgment
upon the award rendered may be entered in any court having jurisdiction thereof.
22nd. If any mechanic's or other liens shall be created or filed
against the leased premises by reason of labor performed or materials furnished
for the Tenant in the erection, construction, completion, alteration, repair or
addition to any building or improvement, the Tenant shall within thirty (30)
days thereafter, at the Tenant's own cost and expense, cause such lien or liens
to be satisfied and discharged of record together with any notices of Intention
that may have been filed. Failure so to do, shall entitle the Landlord to resort
to such remedies as are provided herein in the case of any default of this
lease, in addition to such as are
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<PAGE> 31
permitted by law.
MASCIANDARO, KALPAKJIAN & MASCIANDARO CO.
BY: /s/ John Masciandaro, Jr.
-----------------------------------------
JOHN MASCIANDARO, JR., PARTNER
COLORADO PRIME, INC.
BY: /s/ Gary Kalpakjian PRES.
-----------------------------------------
GARY KALPAKJIAN, PRES.
STATE OF NEW YORK)
COUNTY OF SUFFOLK) SS.:
On the 15th day of October, 1984, before me personally came
JOHN MASCIANDARO, JR., to me known to be the individual described in
and who executed the foregoing instrument, and acknowledged that he
executed the same.
/s/DIANE AMBROSIO
-----------------------------------------
DIANE AMBROSIO
NOTARY PUBLIC, State of New York
No. 4713174
Qualified in Nassau County
Commission Expires March 30, 1986
STATE OF NEW YORK)
COUNTY OF SUFFOLK) SS.:
On the 15th day of October, 1984, before me personally came GARY
KALPAKJIAN, to me known, who, being by me duly sworn, did depose and say that he
resides at No. 69 Kendrick Lane, Dix Hills, New York; that he is the President
of COLORADO PRIME, INC. , the corporation described in and which executed the
foregoing instrument; that he
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<PAGE> 32
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
/s/ DIANE AMBROSIO
----------------------------------
DIANE AMBROSIO
NOTARY PUBLIC, State of New York
No. 4713174
Qualified in Nassau County
Commission Expires March 30, 1986
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<PAGE> 33
SCHEDULE "A"
ALL that certain plot, piece or parcel of land, with the building and
improvements thereof, if any, erected, situate, lying and being at Farmingdale,
Town of Babylon, County of Suffolk, State of New York, known and designated as
and by lot number 1, on a certain map entitled, "Map of Bi-County Industrial
Park" filed on September 24, 1981, in the office of the Clerk of the County of
Suffolk under number 7014.
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<PAGE> 34
RENT SCHEDULE
The annual rental of $300,000.00 is payable in equal monthly
installments of $25,000 per month due on the lst day of each month commencing on
November 1, 1984 and ending on August 31, 1998. For the period of October 15,
1984 to October 31, 1984, Tenant shall be obligated for one-half the usual
month's rent.
To the extent that the average prime rate during each calendar year,
charged by Citibank, N.A. exceeds 12%, the above base rental will be increased
by 60% of said increase over 12%.
If the rent reserved under the prime lease dated 9/23/83 between
Industrial Development Agency of Babylon, Inc. and Masciandaro, Kalpakjian and
Masciandaro Co., a New York partnership, is increased or decreased pursuant to
its terms, the rent under this sublease will be increased or decreased an equal
amount.
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<PAGE> 1
EXHIBIT 10.10
LEASE AGREEMENT
by and between
KALPAKJIAN, MASCIANDAR0 AND MASCIANDARO PARTNERSHIP
and
COLORADO PRIME (FLORIDA), INC.
Dated as of November 1, 1985
Prepared by & Return to
Patricia D. Wheeler
Livermore Klein & Lott, P.A.
701 Fisk Street, #225
Jacksonville, Florida 32204
<PAGE> 2
TABLE OF CONTENTS
BROWARD COUNTY, FLORIDA
(KALPAKJIAN, MASCIANDARO AND MASCIANDARO PROJECT)
LEASE AGREEMENT
ARTICLE I
DEFINITIONS, REPRESENTATIONS AND DEMISING CLAUSE
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Definitions .......................................................... 1
Section 1.2 Representations of the Lessor ........................................ 4
Section 1.3 Representations by the Lessee ........................................ 5
Section 1.3 Demise of the Leased Premises ........................................ 5
ARTICLE II
ACQUISITION OF THE PROJECT
Section 2.1 Agreement to Acquire ................................................. 6
Section 2.2 No Warranty of Suitability by Lessor;
Lessor Required to Complete Project in
Certain Events ....................................................... 6
Section 2.3 Lessor to Pursue Remedies Against Contractors and Subcontractors
and Their Sureties ................................................... 7
ARTICLE III
DURATION OF LEASE TERM; RENTAL PROVISIONS
Section 3.1 Duration of Term ..................................................... 8
Section 3.2 Rent ................................................................. 8
Section 3.3 Obligations of Lessee Unconditional .................................. 8
ARTICLE IV
MANAGEMENT, OPERATION, MAINTENANCE, TAXES AND INSURANCE
Section 4.1 Management, Operation, Maintenance, and Repair of Project ............ 10
Section 4.2 Taxes, Other Governmental Charges and Utility Charges ................ 10
Section 4.3 Insurance and Fidelity Bonds ......................................... 11
Section 4.4 Advances by Lessor or Trustee ........................................ 12
Section 4.5 Indemnity of Lessor .................................................. 12
ARTICLE V
PROVISIONS RESPECTING DAMAGE, DESTRUCTION AND CONDEMNATION
Section 5.1 Damage and Destruction ............................................... 13
Section 5.2 Condemnation ......................................................... 14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.3 Condemnation of Lessee-Owned Property .............................. 14
Section 5.4 Property Substituted in Project .................................... 15
ARTICLE VI
CERTAIN PROVISIONS RELATING TO ASSIGNMENT, SUBLEASING,
MORTGAGING AND THE BONDS
Section 6.1 Assignments and Subleases .......................................... 16
Section 6.2 Pledge of Lease Under Indenture; Trustee's Rights in Event
of Default; Lessee's Right to Remedy Default Under Indenture;
Amendment of Lease and Indenture ................................... 16
Section 6.3 References to Bonds Ineffective after Bonds Paid ................... 16
Section 6.4 Lease Subordinate to Mortgage ...................................... 16
ARTICLE V1I
PARTICULAR COVENANTS OF THE LESSEE
Section 7.1 General Covenants .................................................. 17
Section 7.2 Examination of Project and Books and Records of the Lessee ......... 17
Section 7.3 Special Covenants .................................................. 17
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default Defined .......................................... 18
Section 8.2 Remedies on Default ................................................ 18
Section 8.3 No Remedy Exclusive ................................................ 19
Section 8.4 No Additional Waiver Implied by One Waiver ......................... 19
ARTICLE IX
INTERNAL REVENUE CODE, SECTION 103
Section 9.1 Covenant with Respect to Section 103(c) of the Internal
Revenue Code ....................................................... 20
Section 9.2 Requirements of Tax Exemption ...................................... 20
ARTICLE X
MISCELLANEOUS
Section 10.1 Covenant of Quiet Enjoyment ........................................ 23
Section 10.2 Prior Agreements Cancelled ......................................... 23
Section 10.3 Execution Counterparts ............................................. 23
Section 10.4 Binding Effect ..................................................... 23
Section 10.5 Severability ....................................................... 23
Section 10.6 Article and Section Captions ....................................... 23
Section 10.7 Governing Law ...................................................... 23
Section 10.8 Notices ............................................................ 23
</TABLE>
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THIS LEASE AGREEMENT dated as of November 1, 1985, between KALPAKJIAN,
MASCIANDARO AND MASCIANDARO PARTNERSHIP, a Florida general partnership, party of
the first part (the "Lessor" as hereinafter defined), and COLORAD0 PRIME
(FLORIDA), INC., a Florida corporation, party of the second part (the "Lessee"
as hereinafter defined),
WHEREAS, the Broward County, Florida (the "Issuer") has duly authorized
the financing of the Project (as hereinafter defined) by and at the expense of
the Lessor on the terms and conditions set forth in the Loan Agreement, Mortgage
and Security Agreement dated as of November 1, 1985, between the Lessor and the
Issuer (the "Loan Agreement") and has also authorized the lease of the Project
by the Lessor for operation by the Lessee; and the Issuer has further authorized
the issuance and sale of not exceeding $1,100,000 aggregate principal amount of
its Industrial Development Revenue Bonds, Series 1985 (Kalpakjian, Masciandaro
and Masciandaro Project) (the "Bonds" as hereinafter defined), the proceeds of
the sale of which will be loaned to the Lessor to pay the costs of acquiring,
constructing and equipping the Project as such costs are hereinafter defined;
and
WHEREAS, the Bonds are issued under and secured by a Trust Indenture
dated as of November 1, 1985 (the "Indenture"), by and between the Issuer and
Barnett Banks Trust Company, N.A., as Trustee (the "Trustee" as hereinafter
defined), whereby the Issuer and the Trustee have agreed that the Trustee shall
receive the proceeds from the sale of the Bonds and disburse the same for the
cost of the acquisition, construction, equipping and installation of the
Project; and
WHEREAS, pursuant to the Loan Agreement, the Lessor has conveyed and
assigned to the Issuer all its right to receive payments pursuant to this Lease
as security for the bonds, now therefore,
WITNESSETH:
In consideration of the mutual covenants and agreements hereinafter
contained, the parties hereto hereby covenant, agree and bind themselves as
follows, to-wit:
ARTICLE I
DEFINITIONS, REPRESENTATIONS AND DEMISING CLAUSE
Section 1.1 Definitions. The following words, terms or phrases, when
used in this Lease, have the following meanings, unless the context clearly
indicates a different meaning.
"Bonds" means the Industrial Development Revenue Bonds, Series 1985
(Kalpakjian, Masciandaro and Masciandaro Project) of the Issuer and each series
thereof, issued pursuant to the Indenture, and including any Additional Bonds.
"Bond Fund" means the fund established as a trust fund under the
Indenture for the payment of the principal of and interest on the Bonds.
"Bond Year" shall mean, for each series of Bonds, the one year period
beginning on the day after the expiration of the preceding bond year. The first
bond year begins on the date of delivery of the applicable series of Bonds and
ends one year later.
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"Equipment" shall mean all personal property purchased with proceeds of
the Bonds or proceeds of Additional Bonds as defined in the Indenture or
constituting any portion of the Project, including but not limited to the
furnishings, machinery, equipment, and other tangible personal property more
particularly described in Exhibit "B" hereto.
"Improvements" shall mean the facilities to be constructed, renovated,
improved, and equipped upon the Realty in accordance with the Plans and
Specifications, including, but not limited to, an approximately 20,000 square
foot one story building, including any necessary site preparation, fencing,
paving, structures, piping, fixtures, and all other improvements.
"Indenture" means the Trust Indenture (including any indenture
supplemental thereto) between the Issuer and Barnett Banks Trust Company, N.A.,
as Trustee, dated as of November 1, 1985.
"Independent Architect" shall mean an architect or architectural firm
registered and qualified to practice the profession of architecture under the
laws of the State not unsatisfactory to the Trustee and not in the full-time
employment of either the Issuer or the Lessor.
"Independent Engineer" means an engineer or engineering firm registered
and qualified to practice the profession of engineering under the laws of the
State not unsatisfactory to the Trustee and not in the full-time employment of
either the Lessor or the Lessee.
"Initial Purchaser" shall mean Barnett Bank of South Florida, N.A., a
national banking association with its principal office and place of business in
the City of Pompano Beeach, Florida, the initial purchaser of the Bonds.
"Issuer" means Broward County, Florida.
"Lease" means this Lease by and between the Lessor and the Lessee and
all duly authorized supplements and amendments hereto.
"Lease Term" means the duration of the leasehold estate granted in
Section 3.1 of this Lease.
"Leased Premises" means the Realty, the Equipment, the Project and the
Improvements, less any such real estate, interests in real estate and other
rights as may be taken by the exercise of the power of eminent domain.
"Lessee" means (i) the party of the second part hereto and its
successors and assigns and (ii) any surviving, resulting or transferee entity as
permitted in Section 7.3(e) of this Lease.
"Lessor" means (i) the party of the first part hereto and its
successors and assigns and (ii) any surviving, resulting or transferee
corporation as permitted in Section 6.3 hereof.
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"Loan Agreement" means that Loan Agreement, Mortgage and Security
Agreement dated as of November 1, 1985, between the Issuer and the Lessor.
"Met Proceeds", when used with respect to the sale or other disposition
(including, but not limited to, condemnation or insured loss) of any portion of
the Leased Premises means the gross proceeds received as a result of the sale or
other disposition with respect to which that term is used remaining after
payment of all reasonable expenses (including reasonable attorneys' fees and any
extraordinary fee of the Trustee) incurred in the collection of such gross
proceeds.
"Permitted Encumbrances" means as of any particular time, (i) liens for
ad valorem taxes permitted to exist as provided in this Lease or not then
delinquent, (ii) the Indenture, the Loan Agreement (including the Mortgage
interest and Security Interest created therein) and this Lease, (iii) utility,
access or other easements and rights-of-way, party walls, agreements with
respect to common use of utilities, and restrictions and exceptions that may be
granted or are permitted under this Lease, (iv) any mechanics', laborers',
materialmen's, suppliers' or vendors' lien or right or purchase money security
interest provided that (a) payment is not yet due and payable under the contract
in question or (b) payment has been secured through posting of a bond or other
means acceptable to the Lessee, (v) such subordinate, junior and secondary
encumbrances as are permitted by the Indenture, (vi) such minor defects,
irregularities, encumbrances, easements, rights-of-way and clouds on title as
normally exist with property similar in character to the Leased Premises as do
not materially impair the use of the Leased Premises for the purpose for which
it was acquired or is held by the Lessor, and (vii) any encumbrance expressly
permitted by the Loan Agreement.
"Plans and Specifications" shall mean the plans and specifications
prepared for the Project, certified by a Borrower's Authorized Representative
and filed with the Trustee at the date of issuance of the Bonds, as the same may
be revised from time to time prior to the Completion Date in accordance with
Section 3.2 of the Loan Agreement.
"Project" shall mean industrial facilities to be acquired, constructed
and equipped on the Realty, all to be used as a regional headquarters and
distribution facility of approximately 20,000 square feet. The Project shall
include the Realty, the Improvements and the Equipment.
"Project Costs" means the items defined as "Costs" under the Loan
Agreement.
"Project Fund" means the fund established as a trust fund under the
Indenture, from which funds are to be withdrawn to acquire, construct and equip
the Project pursuant to the Plans and Specifications.
"Project Representative" means the agent of the Lessee who at the time
shall have been designated by the Lessee as Project Representative pursuant to
the provisions hereof.
"Realty" shall mean the real property described in Exhibit "A" attached
hereto.
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"Redemption Account" means the account established under the Indenture
as part of the Bond Fund to provide for the redemption or payment of the Bonds.
"Redemption Date" means the date fixed for redemption of Bonds subject
to redemption in any notice of such redemption published in accordance with the
Indenture.
"Rent" or "Monthly Rent" or "rent" or "monthly rent" each means and
includes all rental payments required by Section 3.2 hereof.
"State" means the State of Florida.
"Trustee" means the trustee at the time serving as such under the
Indenture.
"Unimproved" when used with reference to the Leased Premises means any
part or parts of the Leased Premises upon the surface of which no part of a
building or other structure rests.
Section 1.2 Representations of the Lessor. The Lessor makes the
following representations:
(a) The Lessor, prior to or concurrently with the delivery hereof, has
acquired the Realty, subject to Permitted Encumbrances, and proposes to complete
or to cause to be completed, the Improvements, the Equipment and the Project on
the Realty.
(b) In order to finance the Project, Lessor has entered into the Loan
Agreement with the Issuer, wherein the Issuer will agree to issue its Bonds and
to loan the proceeds thereof to the Lessor. The Lessor has agreed to repay such
Bond proceeds to the Issuer. Lessor has assigned the proceeds to be derived from
the leasing of the Project to the Lessee, as provided herein, to the Issuer as
security for the performance of said agreement.
(c) The Lessor's interest in this Lease is assigned and pledged and the
rents, revenues, receipts and income to be derived by the Lessor from the
leasing of the Project are by the Loan Agreement pledged and assigned to the
payment of the principal of and interest on the Bonds, and the Lessor's interest
in the Project has been by the Lessor mortgaged and conveyed to the Trustee as
security for the payment of the principal of and interest on the Bonds.
(d) The Lessor has found and determined, prior to the leasing of the
Project to the Lessee, that:
(1) The Lessee shall pay to the Trustee on behalf of the Lessor
in Federal or other immediately available funds, rent in the amount equal to the
interest, principal, and premium, if any, which may be due on the Bonds on such
date on the first day of each month during the term hereof, commencing November
1, 1985. The Lessee shall also pay to the Trustee any other amounts which will
become due and payable to the Issuer or the Trustee with respect to the Bonds on
such date.
(2) The Lessor deems it inadvisable to establish any reserve for
the maintenance of the Project or for payment of Rent.
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(3) This Lease provides for the payment to the Lessor of such
rental as, upon the basis of the foregoing determinations and findings, will be
sufficient to pay or redeem the principal of and interest on the Bonds, to pay
the fees of the Trustee for its services under this Lease and the Indenture and
as Bond Registrar and Paying Agent for the Bonds, and to pay other amounts which
will become due and payable to the Issuer or the Trustee with respect to the
Bonds.
(4) This Lease obligates the Lessee to pay for the maintenance,
insurance and taxes levied in connection with the Project as herein provided.
Section 1.3 Representations by the Lessee. The Lessee makes the
following representations:
(a) The Lessee is a duly constituted a Florida corporation and has the
power to enter into this Lease and to perform the obligations it has agreed to
perform hereunder and has duly authorized the execution and delivery of this
Lease.
(b) No capital expenditures as described in Section 103(b)(6)(D) of the
Code ("Capital Expenditures") have been paid or incurred in the three years
preceding the date of the issuance of the Bonds or will be paid or incurred in
the three years after the date of the issuance of the Bonds with respect to the
Project or any facilities which are located within the territorial limits of the
Issuer, and of which the Lessee or any Person related to the Lessee within the
meaning of Section 103(b)(6)(C) of the Code will be a "principal user,' as that
term is used in Section 103(b)(6) of the Code, the amounts of which, when added
to the aggregate amount of the Bonds and the Capital Expenditures of the Lessor
under the Lease, exceeds $10,000,000 or such higher amount as may be authorized
by the Code as applicable to the Bonds; provided, however, that to the extent
and for the purposes allowed by Section 103(b)(6)(F) of the Code, certain
Capital Expenditures shall not be taken into account in determining if such
$10,000,000 amount, as computed in accordance with this subsection (b), has been
exceeded.
(c) There are no outstanding obligations issued by any state, territory
or possession of the United States, or any political subdivision of the
foregoing, or of the District of Columbia, the proceeds of which have been or
are to be used primarily with respect to facilities located within the
territorial limits of the Issuer, and of which the Lessee or any Person related
to the Lessee within the meaning of Section 103(b)(6)(C) of the Code is a
"principal user," as that term is used in Section 103(b)(5)(6) of the Code; and
Section 1.4 Demise of the Leased Premises. The Lessor, for and in
consideration of the rents, covenants and agreements hereinafter reserved,
mentioned and contained on the part of the Lessee to be paid, kept and
performed, does hereby demise and lease to the Lessee, and the Lessee does
hereby lease, take and hire from the Lessor, the Leased Premises.
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ARTICLE II
ACQUISITION OF THE PROJECT
Section 2.1 Agreement to Acquire. From the principal proceeds derived
from the sale of the Bonds, the Lessor will pay the Cost of (a) acquiring the
Realty and (b) acquiring, constructing and installing the Improvements, the
Equipment and the Project on the Realty in accordance with the Plans and
Specifications previously approved as the same may be modified from time to time
by the mutual consent of the parties thereto and notice given to the Lessor.
The Lessor will commence the acquisition, construction and installation
of the Improvements and the Equipment as promptly as practicable, will continue
said construction, acquisition and installation with all reasonable dispatch and
will cause the Project to be substantially complete no later than May 18, 1985.
Neither the Lessor nor the Independent Architect shall make changes in
or amendments to the Plans and Specifications, construction contracts or any of
them without the Lessee's prior written consent, but shall make such changes or
amendments, including additions thereto, as the Lessee may request, provided
such changes or amendments will not change the character of the Project nor
increase the cost thereof above funds available for the completion thereof. The
Trustee shall be given at least five days' prior written notice of any
substantial changes or amendments.
The Lessor shall cause construction and installation of the Equipment
and the Improvements to be performed under a construction contract to be agreed
upon by the Lessor, the Lessee and the purchaser of the Bonds. Such construction
shall be promptly commenced and diligently pursued to substantial completion on
or before the date mentioned above (herein referred to as the "completion
date"). Any and all amounts received by the Lessor from any of the construction
contractors or other suppliers of materials and equipment, by way of damages for
breach of contract, refunds or adjustments, shall become part of and be
deposited in the Project Fund.
The Lessor will enter into, or accept the assignment of, such contracts
as the Lessee may request in order to effectuate the purposes of this Section.
Section 2.2 No Warranty of Suitability by Lessor; Lessor Required to
Complete Project in Certain Events. The Lessee recognizes that the Project will
be constructed in accordance with the Plans and Specifications. The Lessor makes
no warranty, either express or implied, or offers any assurances that the
Project will be suitable for the Lessee's purposes or needs or that the proceeds
derived from the sale of the Bonds will be sufficient to pay in full all Project
Costs. In the event the proceeds derived from the sale of the Bonds are
insufficient to pay in full all Project Costs, the Lessor shall be obligated to
complete the Project at its own expense and the Lessor shall pay any such
deficiency and shall save the Lessee whole and harmless from any obligation to
pay such deficiency. The Lessor shall not by reason of the payment of such
deficiency from its own funds be entitled to any increase in the payment of the
rents hereunder.
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Section 2.3 Lessor to Pursue Remedies Against Contractors and
Subcontractors and Their Sureties. In the event of default of any contractor or
subcontractor under any contract made by it for acquisition, construction or
installation of any part of the Project, the Lessor will promptly proceed
(subject to the Lessee's advice to the contrary), either separately or in
conjunction with others, to exhaust the remedies of the Lessor against the
contractor or subcontractor so in default and against his surety (if any) for
the performance of such contract. The Lessor will advise the Lessee of the steps
it intends to take in connection with any such default. If the Lessee shall so
notify the Lessor, the Lessee may, in its own name or in the name of the Lessor,
prosecute or defend any action or proceeding or take any other action involving
any such contractor, subcontractor or surety which the Lessee deems reasonably
necessary, and in such event the Lessor will cooperate fully with the Lessee and
will take all action necessary to effect the substitution of the Lessee for the
Lessor in any such action or proceeding. Any amounts recovered by way of
damages, refunds, adjustments or otherwise in connection with the foregoing
shall be paid into the Project Fund.
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ARTICLE III
DURATION OF LEASE TERM; RENTAL PROVISIONS
Section 3.1 Duration of Term. The term of this Lease and of the lease
herein made shall begin on November 1, 1985, and, subject to the provisions of
this Lease shall continue until November 1, 2006, but shall not in any event
expire until the term of the Loan Agreement has expired and all sums required to
be paid by the Lessor pursuant thereto have been paid. The Lessor will deliver
to the Lessee possession of the Leased Premises (or such portion or Portions
thereof as are then in existence) on the commencement date of the Lease term,
subject to the inspection and other rights reserved in this Lease, and the
Lessee will accept possession thereof at such time; provided, however, the
Lessor will be permitted such possession of the Leased Premises as shall be
necessary and convenient for it to comply with the provisions of Section 2.1
hereof; and provided further, the Lessor will be permitted such possession of
the Leased Premises as shall be necessary and convenient for it to construct or
install any Equipment, additions or Improvements and to make any repairs or
restorations required or permitted to be constructed, installed or made by the
Lessor pursuant to the provisions hereof.
Section 3.2 Rent. (a) The Lessee shall pay directly to the Trustee on
behalf of the Lessor, in Federal or other immediately available funds, Rent for
the demised premises in an amount equal to $_________ per month, provided,
however, that such Rent shall never be less than an amount equal to the
interest, principal, and premium, if any, which may be due on the Bonds on such
date on the first day of each month during the term hereof, commencing November
1, 1985. The Lessee shall also pay to the Trustee any other amounts which will
become due and payable to the Issuer or the Trustee with respect to the Bonds on
such date. The Lessee shall also pay any applicable State of Florida sales tax
on the amount of such Rent. The Rent shall be adjusted yearly to take into
effect changes in the Consumer Price Index. Such adjustment may, in the sole
discretion of the Lessor, be waived, but any such waiver shall not prevent the
Lessor from subsequently including any amount waived in a subsequent adjustment.
The Rent shall not be reduced in the event of a decline in the Consumer Price
Index. Lessee's obligation to pay Rent shall be adjusted to take into account
funds on deposit in the Bond Fund and available to pay interest on the Bonds.
(b) Rental payments have been calculated on the basis of providing funds
sufficient to pay the principal of, interest on, and premiums, if any, with
respect to the Bonds as the same mature and come due and to pay for any other
amounts which may become due and payable to the Issuer or the Trustee under the
Loan Agreement and the Indenture. The Lessee recognizes, understands and
acknowledges that it is the intention of the parties that all the Rent be
available for the purposes aforesaid. All Rent payments made by the Lessee to
the Trustee in excess of the foregoing amounts shall be considered paid for the
benefit of the Lessor. This Lease shall be construed to effectuate this intent.
The payments in the amounts set forth above shall be made irrespective of any
breach or any failure of compliance by the Lessor with any requirement of this
Lease. Rent shall be promptly made as hereinabove set forth, and any Rent not so
paid promptly on the date when due shall bear interest at the Default Rate as
defined in the Loan Agreement from the due date thereof until paid.
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Section 3.3 Obligations of Lessee Unconditional. The obligation of the
Lessee to pay the sums provided for herein, to make all other payments provided
for herein and to perform and observe the other agreements and covenants on its
part herein contained shall be absolute and unconditional, irrespective of any
rights of set-off, recoupment or counterclaim it might otherwise have against
the Lessor. The Lessee will not suspend or discontinue any such payment or fail
to perform and observe any of its other agreements and covenants contained
herein or terminate this Lease for any cause whatsoever, including, without
limiting the generality of the foregoing, failure of the Lessor to complete the
Project, any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration or commercial frustration of
purpose, or any damage to or destruction of the Project or any part thereof, or
the taking by eminent domain of title to or the right to temporary use of all or
any part of the Project or failure of the Lessor's title to the Leased Premises
or any change in the tax or other laws or administrative rulings, actions or
regulations of the United States of America or of the State or any political or
taxing subdivision of either thereof, or any failure of the Lessor to perform
and observe any agreement or covenant, whether express or implied, or any duty,
liability or obligation arising out of or connected with this Lease.
Notwithstanding the foregoing, the Lessee may, at its own cost and expense and
in its own name or in the name of the Lessor, prosecute or defend any action or
proceeding, or take any other action involving third persons which the Lessee
deems reasonably necessary in order to secure or protect its rights of use and
occupancy and the other rights hereunder. The provisions of the first and second
sentence of this Section shall apply only so long as any part of the principal
of and the interest on the Bonds remains outstanding and unpaid.
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ARTICLE IV
MANAGEMENT, OPERATION, MAINTENANCE
TAXES AND INSURANCE
Section 4.1 Management, Operation, Maintenance and Repair of Project.
(a) The Lessee covenants and agrees to utilize the Project as a
regional headquarters facility and will comply with all applicable laws,
regulations and rules pertaining to the use and occupation of such facilities.
(b) The Lessee shall keep and maintain the Project in good repair and
operating condition and shall keep and maintain the Realty in as reasonably safe
condition as the completion of the Improvements and the operation of the Project
permits, reasonable wear and depreciation excepted, at its own expense in each
instance. The Lessee shall pay all gas, electric light and power, water, sewer
and all other charges for the operation, maintenance, use and upkeep of the
Leased Premises. The Lessee shall from time to time make all needful and proper
repairs, renewals and replacements to the Leased Premises. The Lessee shall have
the right, at its own expense, to make any alterations or improvements in the
Project, provided that neither the value of the Project nor its utility for the
purpose intended is thereby impaired. Any such alterations or improvements may,
at the option of the Lessee, be removed by the Lessee at any time with proper
restoration of the Project.
Section 4.2 Taxes, Other Governmental Charges and Utility Charges. The
Lessee will pay, as the same respectively become due, (i) all ad valorem
taxation by the State or by any political subdivision thereof or special
district therein and all other taxes, assessments and governmental charges of
any kind whatsoever, (other than the Lessor's income taxes) that may at any time
be lawfully assessed or levied against or with respect to the Project or any
personal property installed or brought by the Lessee on the Leased Premises
(including, without limiting the generality of the foregoing, any taxes levied
upon or with respect to the income or profits of the Lessee from the Project and
any other taxes levied upon or with respect to the Project which, if not paid,
will become a lien on the Project prior to or on a parity with the lien of the
Loan Agreement and including any ad valorem taxes assessed upon the Project),
(ii) all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project, and (iii) all assessments and charges
lawfully made by any governmental body for public improvements that may be
secured by a lien on the Project; provided, that with respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Lessee shall be obligated to pay only
such installments as are required to be paid during the Lease Term. The Lessee
may, at its own expense and in its own name and behalf or in the name and behalf
of the Lessor, in good faith contest any such taxes, assessments and other
charges and, in the event of any such contest, may permit the taxes, assessments
or other charges so contested to remain unpaid during the period of such contest
and any appeal therefrom unless by such action the title of the Lessor to any
part of the Project shall be materially endangered or the Project or any part
thereof shall become subject to loss or forfeiture, or unless the Trustee
objects to the withholding of payment, in which event such taxes, assessments or
charges shall be paid forthwith by the Lessee. The Lessor will cooperate fully
with the Lessee in any such contest.
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Section 4.3 Insurance and Fidelity Bonds. The Lessee shall, at its
expense, provide or cause to be provided continuously from the effective date of
this Lease, unless otherwise herein stated, the following insurance coverage:
(a) Insurance against loss and/or damage to the Project under a policy
or policies in form and amount covering such risks as are ordinarily insured
against by owners of similar buildings, including, without limiting the
generality of the foregoing, fire and uniform standard extended coverage and
vandalism and malicious mischief endorsements, limited only as may be provided
in the standard form of such endorsements at the time in use in the State. Such
insurance shall cover the Project even during the construction of the
Improvements to the extent and in the manner provided in the Plans and
Specifications and shall insure the Lessor, Lessee, Issuer and Trustee, as their
interests appear. Such insurance shall be for the amount of (i) the full
replacement value (less the value of the land) of the Project, or (ii) the
amount required by the Trustee to be carried pursuant to the Loan Agreement,
whichever is the greater. No policy of insurance shall be so written that the
proceeds thereof will produce less than the minimum coverage required by the
preceding sentence.
(b) Comprehensive general public liability and landlord's liability
insurance, protecting the Lessor, Lessee, Issuer and Trustee as their interests
may appear, against liability for injuries to persons and/or property, occurring
on the Realty or in or about the Project, in the minimum amount of $1,000,000
liability to any one person for personal injury, $1,000,000 liability to any one
person for property damage and $1,000,000 liability for any one accident. Such
insurance shall cover the Leased Premises to the extent and as provided in the
Loan Agreement.
(c) Worker's compensation insurance respecting all employees of the
Lessee in such amount as is required by law; provided that the Lessee may be
self-insured with respect to all or any part of its liability for worker's
compensation to the extent permitted by law.
Each policy of insurance shall be issued by a recognized, responsible
insurance company, qualified under the laws of the State to assume the risks
covered by such policy or policies and against which neither the Trustee nor the
Lessor nor the Issuer shall make any reasonable objection.
All policies of insurance required under subparagraph (a) above shall
be for the benefit of the Lessor, the Lessee, the Issuer and the Trustee, as
their respective interests may appear, shall be made payable to the Trustee, and
shall be deposited with the Trustee and shall be noncancellable by the insurer
except on thirty (30) days notice to the Trustee. The Trustee shall have the
exclusive right to receive the proceeds from such insurance and receipt for
claims thereunder subject to application thereof pursuant to Article V hereof.
All policies evidencing the insurance required to be carried by this
Section shall be deposited with the Trustee. Evidence of renewal of all such
policies shall be furnished to the Trustee no less than thirty (30) days prior
to the expiration of any such policy.
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Section 4.4 Advances by Lessor or Trustee. In the event that the
Lessee fails to pay the premiums on policies to provide the full insurance
coverage required by this Lease, fails to pay the taxes and other charges
required to be paid by the Lessee at or prior to the time they are required to
be paid, or fails to keep the Project in good order and repair and in as
reasonably safe condition as its operations permit, the Lessor, the Issuer or
the Trustee, after first notifying the Lessee of any such failure on its part,
may (but shall not be obligated to) pay the premiums on such insurance, pay such
taxes or other charges, or make such repairs, renewals and replacements as may
be necessary to maintain the Project in as reasonably safe condition as the
Lessee's operations permit and the Project in good order and repair,
respectively. All amounts so advanced therefor by the Lessor, Issuer or the
Trustee shall become an additional obligation of the Lessee to the Lessor or the
Issuer or the Trustee, as the case may be, which amounts, together with interest
thereon at the Default Rate as defined in the Loan Agreement from the date
thereof, the Lessee will pay. Any remedy herein vested in the Lessor or the
Issuer or the Trustee for the collection of the rental payments shall also be
available to the Lessor, the Issuer and the Trustee for the collection of all
such amounts so advanced.
Section 4.5 Indemnity of Lessor. The Lessor shall not be liable for,
and the Lessee shall defend, indemnify and hold the Lessor harmless against, any
claims arising out of a default by Lessee under this Lease or any loss or damage
to property or any injury to or death of any person that may be occasioned on
account of any defect in the Project even if such defect existed prior to the
delivery of possession of the Project to the Lessee, including any expenses
necessarily incurred by the Lessor in connection with the defense of any claim
against it arising out of any such loss, damage, injury or death, to the extent
permitted by law. The Lessee will provide for and insure in the public liability
policies required in Section 4.3 hereof, not only its own liability in respect
of the matters there mentioned but also the liability herein assumed. The Lessor
will not, without the prior written consent of the Lessee, settle or consent to
the settlement of any prospective or pending litigation for which the Lessee is
obligated under the provisions of this Section to indemnify the Lessor.
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<PAGE> 16
ARTICLE V
PROVISIONS RESPECTING DAMAGE, DESTRUCTION AND CONDEMNATION
Section 5.1 Damage and Destruction. If the Project is destroyed (in
whole or in part) or is damaged by fire or other casualty to such extent that
the claim for loss resulting from such destruction or damage is not greater than
$100,000, the Lessee will continue to pay the Rent required to be paid
hereunder, and will promptly give written notice of such damage and destruction
to the Trustee, the Issuer and the Lessor. The Lessor will cause the Trustee to
release to the Lessee the Net Proceeds of insurance resulting from claims for
such losses, and the Lessee (i) will promptly repair, rebuild or restore the
property damaged or destroyed to substantially the same condition as it existed
prior to the event causing such damage or destruction, with such changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by the Lessee and as will not impair either the
value of the Project or its utility for the purpose for which it is held by the
Lessor, and (ii) will apply for such purpose so much as may be necessary of any
Net Proceeds of insurance resulting from claims for such losses, as well as any
additional moneys of the Lessee necessary therefor. If the cost of such repairs,
rebuilding and restoration are less than the amount of Net Proceeds of the
insurance referable thereto, the excess of such Net Proceeds shall be paid to
the Trustee or if the Bonds are fully paid, shall be paid to the Lessor.
If the Project is destroyed (in whole or in part) or is damaged by
fire or other casualty to such extent that the claim for loss resulting from
such destruction or damage is in excess of $100,000, the Lessee will promptly
give written notice of such damage and destruction to the Trustee and the
Lessor. In such event, the Lessor may terminate this Lease, provided all
outstanding Bonds are redeemed. If the Lessor does not elect to terminate the
Lease then the Lessee will continue to pay the Rent required to be paid
hereunder. All Net Proceeds of insurance resulting from claims for such losses
shall be paid to the Trustee and deposited in the Project Fund, whereupon (i)
the Lessor will proceed promptly to repair, rebuild or restore the property
damaged or destroyed to substantially the same condition as it existed prior to
the event causing such damage or destruction, with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be desired by the Lessee and as will not impair either the value of the Project
or its utility for the purpose for which it is held by the Lessor and (ii) the
Lessor will cause withdrawals to be made from the Project Fund in the manner
provided in the Loan Agreement to pay the costs of such repair, rebuilding or
restoration, either on completion thereof, or as the work progresses. The
balance, if any, of the Net Proceeds in the Project Fund remaining after the
payment of all of the costs of such repair, rebuilding or restoration shall be
paid into the Bond Fund, or if the Bonds are fully paid, shall be paid to the
Lessor.
In the event the Net Proceeds of insurance are not sufficient to pay
in full the costs of repairing, rebuilding and restoring the Project as provided
in this Section, the Lessor will nonetheless complete the work thereof and will
pay that portion of the costs thereof in excess of the amount of said proceeds
or will pay to the Trustee for the account of the Lessor the moneys necessary to
complete said work, in which case the Lessor will proceed so as to complete said
work.
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<PAGE> 17
Section 5.2 Condemnation. In the event that title to, or the temporary
use of, the Project or any part thereof shall be taken under the exercise of the
power of eminent domain, the Lessee shall be obligated to continue to make the
rental payments required to be paid under this Lease, and the entire Net
Proceeds hereinabove referred to shall be applied in one or more of the
following ways as shall be directed in writing by the Lessor:
(a) To the restoration of the remaining Improvements located on the
Realty to substantially the same condition as they existed prior to the exercise
of the said power of eminent domain.
(b) To the acquisition, by construction or otherwise, by the Lessor of
other lands or Improvements suitable for the Lessee's operations at the Project
which land or improvements shall be deemed a part of the Project and available
for use and occupancy by the Lessee without the payment of any Rent other than
herein provided to the same extent as if such land or other Improvements were
specifically described herein and demised hereby and which land or Improvements
shall be acquired by the Lessor subject to no liens or encumbrances prior to the
lien of the Loan Agreement.
(c) To the redemption of Bonds including accrued interest thereon to
the date of redemption and the applicable premium, provided, that no part of any
such Net Proceeds (other than the Net Proceeds awarded to the Lessee for the
taking of all or any part of the leasehold estate of the Lessee created by this
Lease) may be applied to the redemption of Bonds unless (1) all of the Bonds
are to be redeemed or (2) in the event that less than all of the Bonds are to
be redeemed, the Lessee has furnished to the Lessor and the Trustee a
certificate of an Independent Engineer stating (i) that the part of the Project
that was taken by such condemnation proceedings is not essential to the Lessee's
use or occupancy of the Project, or (ii) that the Project has been restored to a
condition substantially equivalent to its condition prior to the taking by such
condemnation proceedings or (iii) that land or other Improvements have been
acquired which are suitable for the Lessee's operations at the Project as
contemplated by the foregoing subsection (b) of this Section.
Any balance of such Net Proceeds remaining after the application
thereof as provided in subsections (a), (b) and (c) of this Section shall be
paid into the Bond Fund or if the Bonds are fully paid, to the Lessor.
The Lessee shall cooperate fully with the Lessor in the handling and
conduct of any prospective or pending condemnation proceeding with respect to
the Project or any part thereof and will, to the extent it may lawfully do so,
permit the Lessor to litigate in any such proceeding in the name and behalf of
the Lessee. In no event will the Lessee settle, or consent to the settlement of,
any prospective or pending condemnation proceeding-without the prior written
consent of the Lessor.
Section 5.3 Condemnation of Lessee-Owned Property. The Lessee shall be
entitled to the Net Proceeds of any award or portion thereof made for damage to
or takings of its own property not included in the Project, provided that any
Net Proceeds resulting from the taking of all or any part of the leasehold
estate of the Lessee created by this Lease shall be paid and applied in the
manner provided in the foregoing Section 5.2 of this Lease.
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<PAGE> 18
Section 5.4 Property Substituted in Project. All property required
by the provisions of this Article V to be substituted and/or added to the
Project for the purpose of restoring the same to a condition substantially
equivalent to its condition prior to any damage, destruction or taking under the
exercise of the power of eminent domain, or to a condition fully adequate for
the Lessee's operation at the Project, shall become a part of the Project. All
such property shall be subject to all the terms and conditions of this Lease and
the Agreement, including the creation of a security interest therein or a
mortgage thereon in favor of the Issuer. Lessee shall execute all documents
reasonably requested by the Trustee or the Lessor for the purpose of continuing
the security contemplated hereby.
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<PAGE> 19
ARTICLE VI
CERTAIN PROVISIONS RELATING TO ASSIGNMENT, SUBLEASING,
MORTGAGING AND THE BONDS
Section 6.1 Assignments and Subleases. The Lessee shall not transfer
or assign this Lease, without the prior written consent of the Lessor and the
Trustee (which shall not be unreasonably withheld). Nor will the Lessee permit
or suffer any lien or encumbrance (other than Permitted Encumbrances) to attach
to the Leased Premises or remain undischarged, without the prior written consent
of the Trustee, at any time when any Bonds are Outstanding (as defined in the
Loan Agreement). Each transfer, assignment, encumbrance and each sublease of the
Project or any part thereof, unless such written consent be first obtained,
shall be null and void, at the option of the Lessor, but no transfer,
assignment, encumbrance or sublease, whether or not consented to, shall operate
to release the Lessee from any liability for Rent or from any other of the
conditions, obligations, agreements and covenants of this Lease.
Section 6.2 Pledge of Lease Under Indenture; Trustee's Rights in
Event of Default; Lessee's Right to Remedy Default Under Indenture; Amendment of
Lease and Indenture. The Lessor shall pledge and assign this Lease to the Issuer
for further assignment to the Trustee as security for the Bonds under and
pursuant to the Indenture and, in the event of a default, the Trustee shall have
all rights and remedies herein accorded to the Lessor as well as those accorded
to the Trustee. The Trustee shall have the right to make any election which the
Lessor has the right to make upon an event of default under this Lease and to
exercise any remedy herein provided for the Lessor in the name and on behalf of
the Lessor, and the decision or action of the Trustee in respect of any such
election upon an event of default shall supersede and control that of the Lessor
so long as the Bonds are outstanding. Whenever the Bonds shall have been paid in
full, all rights and remedies in the event of default shall be exclusively those
of the Lessor. The Lessee shall have the privilege of remedying any default by
the Lessor under the Loan Agreement within the time permitted by the Loan
Agreement. Prior to the payment in full of the Bonds, the Lessor and the Lessee
shall have no power to modify, alter, amend or terminate this Lease without the
prior written consent of the Trustee and then only as provided in the Indenture.
The Lessor will not amend the Indenture or any indenture supplemental thereto
without the prior written consent of the Lessee. Neither the Lessor nor the
Lessee will unreasonably withhold any consent herein or in the Indenture
required of either of them.
Section 6.3 References to Bonds Ineffective after Bonds Paid. Upon
full payment of the Bonds, all references in this Lease to the Bonds, the
Indenture and the Trustee shall be ineffective and neither the Trustee nor the
holders of any of the Bonds shall thereafter have any rights hereunder, saving
and excepting those that shall have theretofore vested.
Section 6.4 Lease Subordinate to Mortgage. This Lease shall be deemed
to be subordinate to the Mortgage of the Leased Premises granted to the Issuer
by the Lessor pursuant to Section 4.6 of the Loan Agreement.
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<PAGE> 20
ARTICLE VII
PARTICULAR COVENANTS OF THE LESSEE
Section 7.1 General Covenants. The Lessee will not do or permit
anything to be done on or about the Leased Premises that will affect, impair or
contravene any policies of insurance that may be carried on the Leased Premises
or any part thereof against loss or damage by fire, casualty or otherwise. The
Lessee will, in the use of the Leased Premises and the public ways abutting the
same, comply with all lawful requirements of all governmental bodies; provided,
however, the Lessee may, at its own expense in good faith contest the validity
or applicability of any such requirement.
Section 7.2 Examination of Project and Books and Records of the Lessee.
The Trustee, the Issuer, the Lessor and their agents and attorneys shall have
the right at their own expense and at all reasonable times to enter upon,
examine, inspect and photograph the Leased Premises; and in the event of default
as hereinafter provided, the Trustee, the Issuer, the Lessor and their
respective agents, attorneys and accountants shall have access to and the right
to inspect, examine and make copies of the books and records, accounts, data,
and all or any other records or information of the Lessee, other than
information required by law to be maintained as confidential or not bearing any
relationship to the obligations assumed under this Lease.
Section 7.3 Special Covenants. So long as any of the Bonds are out-
standing.
(a) The Lessee shall install and maintain proper books of record and
account in which full and correct entries shall be made in accordance with
standard accounting practice, of all business and affairs of the Project. The
Lessee shall furnish to the Lessor and the Trustee the following financial
statements, financial data and certificates:
(i) the financial statements, data and certificates specified in
Section 8.3 of the Loan Agreement.
(ii) With reasonable promptness such other financial data as may
be demonstrated to be necessary to protect the interest of the Lessor,
(iii) Lessee will supply quarterly accounts receivable agings
and inventory listings within 90 days of the end of each quarter of its fiscal
year.
(b) The Lessee will duly pay and discharge all taxes, assessments
and other governmental charges and liens lawfully imposed on the Lessee and upon
the properties of the Lessee, provided, however, the Lessee shall not be
required -to pay any taxes, assessments or other governmental charges so long as
in good faith it shall contest the validity thereof by appropriate legal
proceedings.
(c) Lessee covenants that it will prepare, file or record all
filings and recordings necessary to perfect and maintain the lien herein
granted, and will furnish to the Trustee an opinion of counsel on or before
November 1 of each year, commencing November 1, 1986, indicating that such
recordings and filings have been duly made.
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<PAGE> 21
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default Defined. The following shall be events of
default under this Lease and the terms "event of default" or "default" shall
mean, whenever they are used in this Lease, any one or more of the following
events:
(a) Failure to make any installment of Rent that has become due and
payable by the terms of this Lease.
(b) Failure by the Lessee to observe and perform any covenant,
condition or agreement on its part to be observed or performed, other than as
referred to in subsection (a) of this Section, for a period of thirty (30) days
after written notice, specifying such failure and requesting that it be
remedied, given to the Lessee by the Lessor or the Trustee, unless the Lessor
and the Trustee shall agree in writing to an extension of such time prior to its
expiration, provided, however, if the failure stated in the notice cannot be
corrected within the applicable period, the Lessor and the Trustee will not
unreasonably withhold their consent to an extension of such time if corrective
action is instituted by the Lessee promptly upon receipt of the written notice
and is diligently pursued until the default is corrected.
(c) The dissolution or liquidation of the Lessee or the filing by
the Lessee of a voluntary petition in bankruptcy, or failure by the Lessee
promptly to lift any execution garnishment or attachment of such consequence as
will impair its ability to carry on its operations, the Lessee's seeking of or
consenting to or acquiescing in the appointment of a receiver of all or
substantially all its property or of the Project, or the commission by the
Lessee of any act of bankruptcy, or adjudication of the Lessee as a bankrupt, or
any assignment by the Lessee for the benefit of its creditors, or the entry by
the Lessee into an agreement of composition with its creditors, or the approval
by a court of competent jurisdiction as having been filed in good faith of a
petition applicable to the Lessee in any proceeding for its reorganization
instituted under the provisions of the general bankruptcy act, as amended, or
under any similar act which may hereafter be enacted.
(d) An Event of Default under the Indenture which has the effect of
accelerating payment of the Bonds.
Section 8.2 Remedies on Default. Whenever any such event of default
shall have happened and be continuing, the Lessor or the Trustee may take any of
the following remedial steps:
(a) Terminate this Lease, exclude the Lessee from possession of the
Leased Premises and, if the Lessor or Trustee elect so to do, lease the same for
the account of the Lessee, holding the Lessee liable for all Rent due up to the
date such lease is made for the account of the Lessee and for the difference in
the Rent and other amounts payable by a successor lessee and the Rents and other
amounts payable by the Lessee hereunder;
(b) Take whatever action at law or in equity may appear necessary or
desirable to collect the Rent then due, whether by declaration or otherwise, or
to enforce any obligation or covenant or agreement of the Lessee under this
Lease or by law.
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<PAGE> 22
Section 8.3 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Lessor or the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Lease or now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof but any such right
or power may be exercised from time to time and as often as may be deemed
expedient.
Section 8.4 No Additional Waiver Implied by One Waiver. In the event
any agreement contained in this Lease should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
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<PAGE> 23
ARTICLE IX
INTERNAL REVENUE CODE, SECTION 103
Section 9.1 Covenant with Respect to Section 103(c) of the Internal
Revenue Code. The parties hereto recognize that the Bonds are being sold on the
basis that the interest payable on the Bonds is excludable from gross income of
the holder thereof under Section 103 of the Internal Revenue Code of 1954, as
amended. The Lessor and the Lessee do each hereby covenant and agree for the
benefit of the Trustee and the holders of the Bonds that the proceeds of the
Bonds shall not be used or applied in such manner as to constitute any Bond an
"arbitrage bond" as that term is defined in Section 103(c) of the Internal
Revenue Code.
Section 9.2 Requirements of Tax Exemption. The Issuer has elected that
Section 103(b)(6)(D) of the Internal Revenue Code of 1954, as amended (the
"Code") shall apply to the Bonds. The Lessee covenants and agrees that, unless
no Bonds shall remain outstanding under the terms of the Indenture, it will not
make or permit any capital expenditures to be made or any other action to be
taken by it or a corporation owned by it or in common control with it which will
cause the interest on the Bonds to be included in the gross income of the
holders of the Bonds (other than a holder who is a "substantial user" or
"related person" as defined in Section 103(b)(13) of the Code).
(1) The Lessee shall attach to its income tax return for the current
taxable year a copy of the statement of the Issuer electing to have the
provisions of Section 103(b)(6)(D) of the Code apply to the Bond; and
(2) for each applicable taxable year which includes all or any portion
of the three-year period following issuance and delivery of the Bond, the Lessee
shall file a supplemental statement lising by date and amount any capital
expenditures paid or incurred subsequent to the date of issuance and delivery of
the Bond which are required to be taken into account by Section 103(b)(6)(D) of
the Code. Each statement shall be filed with the respective Internal Revenue
Service district director or director of the regional service center with whom
the federal income tax return of the Borrower and of any other principal user of
the Project, as "principal user" is utilized in Section 103(b)(6)(D) of the
Code, is required to be filed on the due date prescribed for filing such return
(without regard to any extensions of time). A copy of each statement shall also
be filed at the same time with the Trustee.
The Lessee agrees that it will prepare and file, with copies to the
Trustee, any statements required to be filed by it in order to maintain the tax
exempt status of the interest on the Bonds, including, without limiting the
foregoing, the supplemental statements required to be filed by Treasury
Regulations Section 1.103-10(b)(2)(vi)(c), until such requirement is withdrawn
or modified.
The Lessee shall not permit the Bond proceeds to be used in any manner,
nor shall it make any expenditures with respect to the Project or perform or
permit any act, which would cause the Bond to fail to meet the requirements of
Section 103(b)(14) of the Code.
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<PAGE> 24
An event of taxability ("Event") shall mean the incurring of capital
expenditures in excess of those permitted in Section 103(b)(6)(D) of the Code or
the taking of any other action by the Lessee, or a related person (including the
Lessor) which has the effect of causing the interest payable on the Bonds to
become includable in the gross income of the holders of the Bonds (other than a
holder who is a "substantial user" or a "related person" as such terms are used
in Section 103(b)(13) of the Code).
A "Determination of Taxability" shall mean (a) the receipt by the
Borrower of notice of the issuance by the internal Revenue Service of a
technical advice memorandum or a statutory notice of deficiency (which notice
shall include a copy of such statutory notice of deficiency) which holds in
effect that the interest payable on any of the Bonds is includable in the gross
income of the taxpayer named therein (other than a holder who is a "substantial
user" of the Project or a "related person," as such terms are defined in the
Code) as a result of either the limit described in Section 103(b)(6)(D) of the
Code having been exceeded or the Bonds having become arbitrage bonds within the
meaning of Section 103(c)(2) of the Code or (b) the issuance of a public or
private ruling of the Internal Revenue Service to the effect that the interest
payable on the Bonds is includable in the gross income for federal income tax
purposes of the holders thereof (other than the holder who is a "substantial
user" or a "related person" within the meaning of Section 103(b)(13) of the
Code) and for either of the reasons set forth in (a) above, provided that such
ruling or technical advice memorandum shall have been requested by a holder of
the Bonds and the Lessee shall have been afforded an opportunity to participate
in the request for ruling or technical advice or (c) the delivery to the Trustee
of a written statement signed by the Lessee to the effect that the Lessee has
exceeded the maximum amount of capital expenditures permitted under Section
103(b)(6)(D) of the Code or (d) receipt by the Trustee of an opinion of counsel,
to the effect that the interest on such Bond has become includable in the gross
income of the holder thereof for the purposes of federal income taxation by
reason of a final determination by a federal court of competent jurisdiction
that the interest payable on any Bond in the hands of a holder other than a
"substantial user" or a "related person," as such terms are defined in the Code,
has, for any reason, become includable in the gross income of such holder for
the purposes of federal income taxation. For purposes of a Determination of
Taxability under part (a), (b) or (c) of this paragraph, such a Determination
of Taxability shall be deemed for all purposes of this Agreement to have
occurred on the date borne by said statutory notice of deficiency, the date
borne by the public or private ruling or technical advice memorandum, or the
date borne by said statement, as the case may be.
Rent shall be paid by the Lessee to the Trustee to be applied to the
account of the Lessor against payments due under the Loan Agreement upon the
occurrence of a Determination of Taxability in an amount equal to the sum of the
following:
(i) The principal amount of all Bonds then outstanding, plus accrued
interest to the date of redemption, plus a premium equal to the difference in
interest due as stated on the Bonds and the amount which would have been due
during the period between the date of the Event and the Redemption Date had the
Bonds been payable at a rate equal to the Prime Rate plus one percent per annum,
plus an additional amount equal to the interest paid or payable on such Bonds
which is includable in the gross income of a holder of the Bonds, plus all
interest and penalties levied on such holder with respect to the Bonds. If upon
the date of redemption there shall be on deposit in the Bond Fund and other
funds established under the Indenture the total amount required by this
paragraph
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<PAGE> 25
such amount shall constitute total compensation due such outstanding Bonds and
the holders of such Bonds as a result of the occurrence of an Event and in
satisfaction of the Lessee's obligations hereunder.
(ii) An amount equal to the premium (as calculated above) for each of
the Bonds not then outstanding but which was outstanding at the time of the
Event based upon the time elapsed between the date of the Event and the date
that such Bond was paid or redeemed. Such amount shall be held and disbursed by
the Trustee as provided in Section 9.1 of the Indenture and shall constitute
total compensation due such Bonds and the holders of such Bonds as a result of
the occurrence of an Event and in satisfaction of the Lessee's obligations
hereunder.
The obligation of the Lessee to pay the amounts required to be paid in
this Section 9.2 provided herein shall survive the termination of this
Agreement.
The Lessee shall give prompt written notice to the Issuer and the
Trustee of (a) the filing by the Lessee of any supplemental statement and (b)
its receipt of any oral or written advice from the Internal Revenue Service that
an Event shall have occurred.
Provided there has been deposited with the Trustee the total amount as
required, such amount shall constitute the total rent due under this Lease and
the Lessee shall not be deemed to be in default under this Lease by reason of
the occurrence of such Determination of Taxability and Event.
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<PAGE> 26
ARTICLE X
MISCELLANEOUS
Section 10.1 Covenant of Quiet Enjoyment. So long as the Lessee
performs and observes all the covenants and agreements on its part herein
contained, it shall peaceably and quietly have, hold and enjoy the Leased
Premises during the Lease Term subject to the terms and provisions hereof.
Section 10.2 Prior Agreements Cancelled. This Lease shall completely
and fully supersede all other prior agreements, both written and oral, between
the Lessor and the Lessee relating to the acquisition and construction of the
Project and the leasing of the Leased Premises. Neither the Lessor nor the
Lessee shall hereafter have any rights under any such prior agreements but shall
look solely to this Lease for definition and determination of all their
respective rights, liabilities and responsibilities relating to the Project.
Section 10.3 Execution Counterparts. This Lease may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 10.4 Binding Effect. This Lease shall inure to the benefit of,
and shall be binding upon, the Lessor, the Lessee and their respective
successors and assigns.
Section 10.5 Severability. In the event any provision of this Lease
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
Section 10.6 Article and Section Caption. The Article and Section
headings and captions contained herein are included for convenience only and
shall not be considered a part hereof or affect in any manner the construction
or interpretation hereof.
Section 10.7 Governing Law. This Lease is made and entered into under,
and shall be construed in accordance with, the laws of the State.
Section 10.8 Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when delivered
or mailed by registered or certified mail, postage prepaid, addressed as
follows: if to the Lessor __________________________________________; to the
Lessee_______________________________; if to ----------------------- Trustee
at the address the specified in the Indenture.
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<PAGE> 27
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease to
be executed in their respective names, the day and year first above written.
KALPAKJIAN, MASCIANDARO AND
MASCIANDAR0 PARTNERSHIP
By: /s/JOHN MASCIANDARO
------------------------------
Its:
WITNESSES:
/s/LISA G. GENDAL
-------------------------
/s/PATRICIA D. WHEELER
-------------------------
-24-
<PAGE> 28
COLORADO PRIME (FLORIDA), INC.
By: /s/ILLEGIBLE
---------------------------
President
ATTEST:
By:/s/JOHN MASCIANDARO
---------------------------
-25-
<PAGE> 29
STATE OF FLORIDA
COUNTY OF BROWARD
On this l8th day of November, 1985, before me, the undersigned notary
public, personally appeared John Masciandaro who acknowledged himself to be a
partner of Kalpakjian, Masciandaro and Masciandaro Partnership, the Lessor
described in the foregoing Lease Agreement, and that being authorized to do so
executed the foregoing Lease Agreement, on behalf of the Lessor, for the
purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal this 18th
day of November, 1985.
(SEAL) /s/WENDY LOOMIS RIGGS
---------------------------------
Notary Public, State or Florida
My commissions expires:
-26-
<PAGE> 30
STATE OF FLORIDA
COUNTY OF BROWARD
On this 18th day of November, 1985, before me, the undersigned notary
public, personally appeared John Masciandaro, the Secretary of Colorado Prime
(Florida), Inc., the Lessee described in the foregoing Lease Agreement, and that
as such officer being authorized to do so executed the foregoing Lease
Agreement, on behalf of the Lessee, for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal this 18th
day of November, 1985.
(SEAL) /s/WENDY LOOMIS RIGGS
---------------------------------
Notary Public, State or Florida
My commission expires:
---------------------------------
STATE OF NEW YORK
COUNTY OF SUFFOLK
-------
On this 18th day of November, 1985, before me, the undersigned notary
public, personally appeared Gary Kalpakjian, the President of Colorado Prime
(Florida), Inc., the Lessee described in the foregoing Lease Agreement, and that
as such officer being authorized to do so executed the foregoing Lease
Agreement, on behalf of the Lessee, for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal this 18th
day of November, 1985.
(SEAL) /S/KENNETH PAYNE
---------------------------------
Notary Public, State of New York
My commission expires:
---------------------------------
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<PAGE> 31
ASSIGNMENT TO BROWARD COUNTY, FLORIDA
For value received the undersigned hereby Sells, assigns and transfers
unto the Broward County, Florida, the foregoing Lease Agreement and the right to
receive all payments thereunder this 18th day of November, 1985.
KALPAKJIAN, MASCIANDAR0 AND
MASCIANDAR0 PARTNERSHIP
/S/JOHN MASCIANDARO
---------------------------------
Partner
STATE OF FLORIDA
COUNTY OF BROWARD
On this 18th day of November, 1985, before me, the undersigned notary
public personally appeared John Masciandaro , who acknowledged himself to be a
partner of Kalpakjian, Masciandaro and Masciandaro Partnership, the Assignor
described in the foregoing Assignment, and that being authorized to do so
executed the foregoing Assignment, on behalf of the Assignor, for the purposes
therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal this 18th
day of November, 1985.
(SEAL) /s/WENDY LOOMIS RIGGS
---------------------------------
Notary Public, State or Florida
My commission expires:
---------------------------------
-28-
<PAGE> 32
ASSIGNMENT TO TRUSTEE
For value received the undersigned hereby sells, assigns and transfers
unto Barnett Banks Trust Company, N.A., as Trustee, the above Lease Agreement
and all rights thereunder, pursuant to that certain Trust Indenture between
Broward County, Florida and Barnett Banks Trust Company, N.A., dated as of
November 1, 1985.
BROWARD COUNTY, FLORIDA
By:/s/ILLEGIBLE
------------------------------
Vice Chairman, Board of County
Commissioners
-29-
<PAGE> 33
EXHIBIT A
The "Realty"
LEGAL DESCRIPTION
1, 2, 3, 4 and 5 and 10 feet of Lot No. 6 of Pompano Industrial Park, according
to the Plat thereof, recorded at Plat Book 102, Page 5 of the Public Records of
Broward County.
-30-
<PAGE> 34
AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement "First Amendment", dated as of
December 26, 1986 for reference purposes only is made by and between Kalpakjian,
Masciandaro and Masciandaro partnership, a Florida general partnership
("Lessors") and Colorado Prime (Florida), Inc., a Florida corporation
("Lessee").
R E C I T A L S
WHEREAS, Landlord and Tenant previously entered into that certain Lease
Agreement dated as of November 1, 1985 relating to the lease of certain premises
located on Powerhouse Road, Pompano Beach, Florida; and
WHEREAS, Landlord and Tenant wish to amend the Lease Agreement dated as
of November 1, 1985 on the terms and conditions set forth herein:
NOW, THEREFORE, Landlord and Tenant do hereby amend the Lease Agreement
dated as of November 1, 1985 as follows:
<PAGE> 35
1. Section 3.1 The first sentence of Section 3.1 of the Lease Agreement
is deleted in its entirety, and the following sentence inserted in lieu thereof:
The term of this Lease and of the lease herein made shall begin on
November 1, 1985, and, subject to the provisions of this Lease shall
continue until December 31, 1996, but shall not in any event expire
until the term of the Loan Agreement has expired and all sums required
to be paid by the Lessor pursuant thereto have been paid.
2. Section 3. 1 The sum of $165,510.00 is hereby inserted in the blank
line which appears in the third line of Section 3.2 of the Lease Agreement.
3. Except as expressly amended herein, the terms and conditions of the
Lease Agreement dated as of November 1, 1985 remain unchanged and in full force
and effect.
IN WITNESS WHEREOF, this First Amendment to Lease Agreement is executed
by Landlord and Tenant as of the date first appearing above.
KALPAKJIAN, MASCIANDARO and
MASCIANDARO PARTNERSHIP
By: /S/JOHN MASCIANDARO
----------------------------
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<PAGE> 36
COLORADO PRIME INC.
By: /S/ILLEGIBLE
----------------------------
CONSENT TO THE FOREGOING FIRST
AMENDMENT TO LEASE AGREEMENT IS
HEREBY GRANTED:
BROWARD COUNTY, FLORIDA
By:
-------------------------------
CONSENT TO THE FOREGOING FIRST
AMENDMENT TO LEASE AGREEMENT IS
HEREBY GRANTED:
BARNETT BANKS TRUST COMPANY, N.A.,
as Trustee
By:
-------------------------------
-3-
<PAGE> 1
Exhibit 10.11
EXECUTION VERSION
CREDIT AGREEMENT
among
COLORADO PRIME CORPORATION,
as Borrower,
THE INSTITUTIONS PARTY HERETO
FROM TIME TO TIME AS LENDERS,
and
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,
as the Agents
DATED AS OF MAY 9, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS................................................... 1
1.1 Defined Terms................................................... 1
1.2 Other Definitional Provisions................................... 21
ARTICLE 2 LOANS......................................................... 22
2.1 Revolving Credit Commitments.................................... 22
2.2 Procedure for Borrowings........................................ 22
2.3 Disbursement of Loans........................................... 22
2.4 Defaulting Lenders.............................................. 23
ARTICLE 3 LETTERS OF CREDIT............................................. 26
3.1 Issuance of Letters of Credit................................... 26
3.2 Request for Issuance............................................ 26
3.3 Terms of Letters of Credit...................................... 27
3.4 Lenders' Participations......................................... 27
3.5 Payment of Amounts Drawn Under Letters of Credit................ 27
3.6 Payment by Lenders.............................................. 27
3.7 Nature of Issuing Bank's Duties................................. 27
3.8 Obligations Absolute............................................ 28
ARTICLE 4 COMPENSATION, REPAYMENT AND COMMITMENT
REDUCTIONS............................................................... 28
4.1 Interest Rate................................................... 28
4.2 Fees............................................................ 29
4.3 Maintenance of Loan Account..................................... 30
4.4 Commitment Reductions........................................... 31
4.5 Voluntary Prepayments........................................... 31
4.6 Mandatory Payments and Prepayments.............................. 32
4.7 Monitoring and Collection of Accounts........................... 32
4.8 Calculations.................................................... 34
4.9 Special Provisions Relating to Eurodollar Loans................. 34
4.10 Increased Costs; Capital Adequacy............................... 37
4.11 Taxes........................................................... 38
4.12 Sharing of Payments............................................. 40
ARTICLE 5 CONDITIONS PRECEDENT.......................................... 41
5.1 Conditions to Initial Loans and Letters of Credit............... 41
5.2 Conditions Precedent to All Loans and Letters of Credit......... 42
i
<PAGE> 3
ARTICLE 6 REPRESENTATIONS AND WARRANTIES................................ 43
6.1 Organization and Qualification.................................. 43
6.2 Authority....................................................... 43
6.3 Enforceability.................................................. 43
6.4 No Conflict..................................................... 44
6.5 Consents and Filings............................................ 44
6.6 Government Regulation........................................... 44
6.7 Solvency........................................................ 44
6.8 Financial Data.................................................. 44
6.9 Rights in Collateral............................................ 45
6.10 Locations of Offices, Records and other Property................ 45
6.11 Subsidiaries; Ownership of Stock................................ 45
6.12 Litigation...................................................... 46
6.13 No Defaults..................................................... 46
6.14 Labor Matters................................................... 46
6.15 ERISA........................................................... 46
6.16 Compliance with Law............................................. 47
6.17 Taxes and Tax Returns........................................... 48
6.18 Intellectual Property........................................... 48
6.19 Licenses and Permits............................................ 48
6.20 Material Contracts.............................................. 49
6.21 Insurance....................................................... 49
6.22 Merger Agreement; Senior Notes.................................. 49
6.23 Use of Proceeds................................................. 49
6.24 Accuracy and Completeness of Information........................ 49
ARTICLE 7 AFFIRMATIVE COVENANTS......................................... 50
7.1 Financial Reporting............................................. 50
7.2 Collateral Reporting............................................ 51
7.3 Notification Requirements....................................... 52
7.4 Corporate Existence............................................. 53
7.5 Books and Records; Inspections.................................. 53
7.6 Insurance....................................................... 53
7.7 Taxes........................................................... 54
7.8 Compliance With Laws............................................ 54
7.9 Use of Proceeds................................................. 55
7.10 Fiscal Year..................................................... 55
7.11 Maintenance of Property......................................... 55
7.12 ERISA Documents................................................. 55
7.13 Corporate Franchises............................................ 55
7.14 Performance of Obligations...................................... 56
7.15 Further Assurances.............................................. 56
ARTICLE 8 NEGATIVE COVENANTS............................................ 56
8.1 Certain Financial Covenants..................................... 56
8.2 Capital Expenditures............................................ 58
ii
<PAGE> 4
8.3 Additional Indebtedness......................................... 58
8.4 Liens........................................................... 59
8.5 Contingent Obligations.......................................... 60
8.6 Sale of Assets.................................................. 60
8.7 Restricted Payments............................................. 60
8.8 Investments..................................................... 61
8.9 Affiliate Transactions.......................................... 61
8.10 Excess Cash..................................................... 62
8.11 Additional Negative Pledges..................................... 62
8.12 Additional Subsidiaries......................................... 62
8.13 Amendments...................................................... 62
8.14 Trade Payables.................................................. 62
8.15 Credit Policies................................................. 62
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES................................ 63
9.1 Events of Default............................................... 63
9.2 Remedies........................................................ 64
9.3 Right of Setoff................................................. 66
9.4 No Marshalling; Deficiencies; Remedies Cumulative............... 66
9.5 Application of Payments......................................... 66
ARTICLE 10 THE AGENT.................................................... 66
10.1 Appointment of Agent............................................ 66
10.2 Nature of Duties of Agent....................................... 67
10.3 Lack of Reliance on Agent....................................... 67
10.4 Certain Rights of Agent......................................... 67
10.5 Reliance by Agent............................................... 67
10.6 Indemnification of Agents....................................... 67
10.7 Agent in its Individual Capacity................................ 67
10.8 Successor Agents................................................ 68
10.9 Collateral Matters.............................................. 68
10.10 Actions with Respect to Defaults................................ 69
ARTICLE 11 MISCELLANEOUS................................................ 69
11.1 GOVERNING LAW................................................... 69
11.2 SUBMISSION TO JURISDICTION...................................... 69
11.3 JURY TRIAL...................................................... 70
11.4 LIMITATION OF LIABILITY......................................... 70
11.5 Delays.......................................................... 70
11.6 Notices......................................................... 70
11.7 Assignments and Participations.................................. 71
11.8 Confidentiality................................................. 72
11.9 Reimbursement of Expenses; Indemnification...................... 72
11.10 Amendments and Waivers.......................................... 73
11.11 Counterparts and Effectiveness.................................. 74
11.12 Severability.................................................... 74
iii
<PAGE> 5
11.13 Maximum Rate............................................... 74
11.14 Entire Agreement; Successors and Assigns................... 75
11.15 Currency Translation....................................... 75
11.16 Foreign Judgments.......................................... 75
ANNEXES
Annex I - List of Lenders and Commitment Amounts
Annex II - List of Closing Documents
Annex III - Pricing Grid
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Assignment and Assumption Agreement
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Compliance Certificate
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Notice of Continuation/Conversion
SCHEDULES
Schedule A - The Disclosure Schedule
iv
<PAGE> 6
THIS CREDIT AGREEMENT (as amended, modified and supplemented from time
to time, this "AGREEMENT") is entered into as of May 9, 1997, among COLORADO
PRIME CORPORATION, a Delaware corporation ("BORROWER"), each institution
identified as a lender on Annex I (each, together with its successors and
assigns, a "LENDER"), and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,
acting as the Agents for itself and the other Lenders.
RECITALS
WHEREAS, Thayer, its newly-formed subsidiary CPAC, and KPC, which owns
all of the outstanding common stock of Borrower, have entered into the Merger
Agreement, pursuant to which CPAC will be merged with and into KPC, Borrower
intends to issue its Senior Notes and Thayer and the Management Investors have
agreed to make the Equity Contribution;
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1 DEFINITIONS
1.1 Defined Terms.
"ACCOUNTS" means "accounts" as defined in the UCC.
"ACQUIRED PERSON" is defined within the definition of "Permitted
Acquisition" in this Section 1.1.
"ACQUISITION CONSIDERATION" means the gross acquisition price paid by,
plus estimated legal fees and expenses and broker's fees of, the Credit Parties
in connection with the Merger or a Permitted Acquisition, including cash paid,
the amount of any liabilities assumed by or for which Parent or any of its
Subsidiaries becomes liable in connection with such acquisition, and the fair
market value of any stock or other property issued or delivered to or for the
benefit of the seller(s) in connection with such acquisition.
"ADJUSTED EURODOLLAR RATE" means, with respect to the Interest Period
for each Eurodollar Loan, the rate obtained by dividing (a) the Eurodollar Rate
for such Interest Period by (b) a percentage equal to one (1.00) minus the
stated maximum rate (stated as a decimal) of all reserves, if any, required to
be maintained against "Eurocurrency liabilities" of the type then outstanding
hereunder as specified in Regulation D of the Federal Reserve (or against any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-U.S. office of any Lender
to U.S. residents) or, if such reserve rate is no longer specified, a rate
(stated as a decimal) comparable to such rate, as reasonably determined by the
Administrative Agent.
<PAGE> 7
"ADMINISTRATIVE AGENT" means Dresdner Bank AG, New York and Grand
Cayman Branches, acting as administrative agent for itself and the other
Lenders.
"AFFILIATE" of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with, or is a director,
officer or partner of, such Person. A Person shall be deemed to control another
Person if (a) such Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise, or
(b) for purposes of Section 8.9 only, such Person owns or controls the power to
vote, directly or indirectly, more than five percent (5%) of any class of the
Capital Stock of such other Person.
"AGENTS" means the Administrative Agent, the Collateral Agent, the
Disbursing Agent and the Monitoring Agent.
"APPLICABLE MARGIN" means a fluctuating rate of interest per annum
determined based on the Type of Loan and Borrower's Interest Coverage Ratio and
Leverage Ratio calculated in accordance with Sections 8.1(b) and 8.1(d),
respectively, commencing with the Fiscal Quarter ending March 31, 1998, from the
table set forth in Annex III; provided, however, that until the occurrence of
the first Reset Date, the Applicable Margin shall be as set forth in the second
(highlighted) line from the top of such table.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" is defined in Section 11.7.
"AUDITORS" means Arthur Andersen or another nationally recognized firm
of independent public accountants selected by Borrower and satisfactory to
Required Lenders.
"BANKRUPTCY CODE" means Title 11 of the U.S. Code (11 U.S.C.
Sections 101 et seq.), as amended from time to time, and any successor
statute.
"BASE RATE" means a fluctuating rate of interest per annum equal at any
time to the greater at such time of (a) the Federal Funds Rate plus one-half of
one percent (0.50%) and (b) the rate which the Administrative Agent establishes
as its base lending rate from time to time. The Base Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged to
any customer. Each Agent and each of the Lenders may make loans at rates of
interest at, above or below the Base Rate.
"BASE RATE LOAN" means a Loan that is made or being maintained at a
rate of interest based upon the Base Rate.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in Section 3
of ERISA) for which any Credit Party or any ERISA Affiliate has been an
"employer" (as defined in Section 3 of ERISA) within the past six years.
"BLOCKED ACCOUNT AGREEMENT" is defined in Section 4.7(b).
"BLOCKED ACCOUNT BANK" is defined in Section 4.7.
2
<PAGE> 8
"BORROWER" is defined in the first paragraph of this Agreement.
"BORROWER INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the
Intellectual Property Security Agreement executed by Borrower in favor of the
Collateral Agent pursuant to Section 5.1(a) and in form and substance
satisfactory to the Collateral Agent.
"BORROWER PLEDGE AGREEMENT" means the Pledge Agreement executed by
Borrower in favor of the Collateral Agent pursuant to Section 5.1(a) and in form
and substance satisfactory to the Collateral Agent.
"BORROWER SECURITY AGREEMENT" means the Security Agreement executed by
Borrower in favor of the Collateral Agent pursuant to Section 5.1(a) and in form
and substance satisfactory to the Collateral Agent.
"BORROWING" means the incurrence of one Type of Loan from all
Non-Defaulting Lenders on a given day (or resulting from conversions or
continuations on a given date), having in the case of Eurodollar Loans the same
Interest Period.
"BORROWING BASE" means an amount equal to:
(a) eighty percent (80%) of the Eligible Food-Related Accounts; plus
(b) eighty percent (80%) of the Eligible Non-Food Accounts; plus
(c) fifty percent (50%) of the Eligible Inventory;
provided, however, that the Administrative Agent may, in its reasonable
discretion, from time to time (1) increase any or all of such percentages, with
the prior written consent of Required Lenders, and (2) decrease any or all of
such percentages upon or after the occurrence of a change, event or development
reasonably likely to have a Material Adverse Effect on Borrower, Concord or any
other Credit Party contributing Accounts or Inventory to the Borrowing Base or
in the event of a material change in composition of the collateral mix or a
material change in the Borrower's operations, and the Monitoring Agent may, at
any time after the occurrence and during the continuance of an Event of Default
and with the Administrative Agent's consent, further restrict the Borrowing
Base.
"BORROWING BASE CERTIFICATE" means a certificate of Borrower concerning
the Borrowing Base, substantially in the form of Exhibit C.
"BUSINESS" means the lines of business engaged in by Borrower as of the
Closing Date, and any other business based primarily on telemarketing and direct
sales of food, household items or electronics, the financing thereof, or
contract telemarketing services.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day on
which commercial banks in New York, New York are required or permitted by law to
be closed. When used in connection with Eurodollar Loans, this definition also
excludes any day on which commercial banks are not open for dealing in U.S.
dollar deposits in the London interbank market.
3
<PAGE> 9
"CAPITAL EXPENDITURES" for any period means the sum of all expenditures
by Parent and its Subsidiaries (for property, plant and equipment and intangible
assets that are amortized in accordance with GAAP other than such financing
fees, bond discount amortization expense and any additional fees and transaction
costs approved by the Administrative Agent in connection with the Merger and the
Exchange Offer) which would be capitalized for purposes of financial statements
for such period in accordance with GAAP (whether payable in cash or other
property or accrued as a liability), including expenditures for maintenance and
repairs which should be capitalized and the capitalized portion of Capital
Leases.
"CAPITAL LEASE" means, for any Person, any lease of property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is required to be accounted for as a capital lease on the balance sheet of
such Person.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person other than a corporation
(including partnership interests in a partnership, member interests in a limited
liability company and beneficial interests in a trust), and any and all
warrants, options or other rights to purchase any of the foregoing.
"CASH EQUIVALENTS" means any of the following, denominated in Dollars:
(a) securities issued or directly and fully guaranteed or insured by the U.S. or
any agency or instrumentality thereof (provided, that the full faith and credit
of the U.S. is pledged in support thereof) having maturities of not more than
ninety (90) days from the date of acquisition ("GOVERNMENT OBLIGATIONS"), (b)
time deposits and certificates of deposit of any commercial bank either
incorporated in the U.S. or incorporated in a foreign jurisdiction and having a
branch office in the U.S., in each case of recognized standing having capital
and surplus in excess of $500,000,000 and whose short-term commercial paper
rating from Standard & Poor's Rating Group ("S&P") is at least A-1 or the
equivalent thereof or from Moody's Investors Service, Inc. ("MOODY'S") is at
least P-1 or the equivalent thereof (any such bank being an "APPROVED BANK"), in
each case with maturities of not more than ninety (90) days from the date of
acquisition, (c) commercial paper issued by an Approved Bank or the parent
corporation of an Approved Bank (so long as such parent maintains an office in
the U.S. from which it issues such commercial paper) and commercial paper issued
by any Person incorporated in the U.S. rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent thereof) or better by Moody's, and in
each case maturing within ninety (90) days of the date of acquisition, (d)
repurchase obligations of an Approved Bank for Government Obligations and with a
term of not more than seven (7) days, and (e) investments in money market mutual
funds having assets in excess of $2,500,000,000, substantially all of whose
assets are comprised of Government Obligations.
"CHANGE OF CONTROL" means any event, transaction or condition as a
result of which (a) Thayer shall cease to own beneficially and of record with
full voting and dispositive power (1) at least forty percent (40%) of the total
outstanding shares of Capital Stock of Parent which are ordinarily entitled to
vote for its Board of Directors, or (2) a larger percentage of such shares than
the percentage of any other Person or any Group which owns such stock, or (b)
Parent shall cease to own with full voting power one hundred percent (100%) of
the Capital Stock of Borrower, or (c) at any time and for any reason whatsoever,
the members of the board of
4
<PAGE> 10
directors of Parent or of Borrower, the election of whom was controlled by
Thayer, represent less than a majority of the members of either such board, or
any Person (other than Thayer) or Group shall have the right to elect, or shall
for any reason have elected, a majority of the directors of Parent, or Parent
shall not have the right to elect, or shall for any reason not have elected, a
majority of the Board of Directors of Borrower, or (d) at any time a "Change of
Control" as defined in any Senior Notes Document shall have occurred.
"CLOSING DATE" means the date on which this Agreement is executed and
delivered and the initial Loans are made.
"CLOSING DOCUMENTS LIST" means the List of Closing Documents attached
hereto as Annex II.
"CODE" means the Internal Revenue Code of 1986, amendments thereto,
successor statutes, and regulations, rulings and guidance promulgated or issued
thereunder.
"COLLATERAL" means the Accounts, Contracts, Copyright Collateral,
Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Patent
Collateral, Trademark Collateral, Bank Accounts, Fixtures (as each is defined in
the UCC or under any Credit Document) and other property, in each case of the
Credit Parties, identified as collateral for all or any portion of the
Obligations under any Credit Document.
"COLLATERAL AGENT" means Dresdner Bank AG, New York and Grand Cayman
Branches, as collateral agent for the Agents, the Issuing Bank and the Lenders,
and any sub-agent appointed by the Collateral Agent from time to time.
"COLLATERAL DOCUMENTS" means each Security Agreement, each Pledge
Agreement, each Mortgage and all other agreements, instruments and documents
pursuant to which Liens are now or hereafter granted to the Collateral Agent to
secure Obligations.
"COLLECTION ACCOUNT" is defined in Section 4.7(b).
"COLLECTIONS" means all cash, funds, checks, notes, instruments and any
other form of remittance tendered by account debtors in payment of Accounts of
any Credit Party.
"COMMITMENT" of a Lender means its commitment to make Loans and to
issue or participate in Letters of Credit, in an outstanding amount not to
exceed, at any time, the amount set forth opposite its name on Annex I under the
heading "Commitment," plus (without duplication) any amount so described in an
Assignment and Assumption Agreement executed by such Lender, as such aggregate
amount may be reduced from time to time.
"COMMITMENT FEE" is defined in Section 4.2.
"COMMON STOCK" means the common stock of Parent, par value $0.01 per
share.
5
<PAGE> 11
"CONCORD" means Concord Financial Services, Inc., a direct,
wholly-owned Subsidiary of Borrower.
"CONSOLIDATED EBITDA" for a period means (a) Consolidated Net Income
plus (b) all Consolidated Interest Expense, cash dividends on preferred stock
paid during such period to the extent permitted hereunder, income tax expense,
depreciation and amortization (including amortization of any goodwill or other
intangibles), in each case to the extent subtracted in calculating Consolidated
Net Income, minus (c) any non-cash items which have been added in calculating
Consolidated Net Income, and plus (d) any other non-cash charges, including
charges for accrued dividends on Preferred Stock, which have been subtracted in
calculating Consolidated Net Income, in each case of Parent and its Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" for a period means, without duplication,
(a) all cash Consolidated Interest Expense for such period, plus (b) the
scheduled principal amount of all amortization payments on all Indebtedness
(including the principal component of all Capital Leases) of Parent and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED FUNDED DEBT" means all Indebtedness of Parent and its
Subsidiaries determined on a consolidated basis in accordance with GAAP,
excluding Trade Letters of Credit.
"CONSOLIDATED INTEREST EXPENSE" for a period means the total interest
expense (including interest expense attributable to Capital Leases in accordance
with GAAP but excluding deferred financing expense and bond discount
amortization expense of Parent and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for a period means the net after tax income
of Parent and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP and without giving effect to any extraordinary
gains or losses (excluding closing fees and other charges approved by the
Administrative Agent) or gains or losses from sales of assets other than
inventory sold in the ordinary course of business.
"CONSOLIDATED NET WORTH" means, as of any date, the aggregate amount of
equity contributions to Borrower made on or after the Closing Date plus retained
earnings of Borrower since the Closing Date and minus net losses of Borrower
since the Closing Date, in each case on a consolidated basis and as determined
in accordance with GAAP.
"CONTINGENT OBLIGATION" means any direct or indirect, contingent
obligation for, or guaranty of, the Indebtedness of another, except endorsements
in the ordinary course of business. The amount of any Contingent Obligation
shall be equal to the maximum reasonably anticipated liability in respect of the
obligations guarantied or otherwise supported under the applicable instrument or
otherwise, assuming the obligor is required to perform thereunder.
"CPAC" means Colorado Prime Acquisition Corp., a Delaware corporation.
6
<PAGE> 12
"CPH" means Colorado Prime Holdings, Inc., a Delaware corporation
formerly known as KPC Holdings Corporation.
"CREDIT DOCUMENTS" means this Agreement, the Notes, any Letters of
Credit, each Guaranty, each of the Collateral Documents and all other
agreements, instruments and documents, including opinions and certificates, now
or hereafter executed and delivered in connection with any of the foregoing,
each as amended, modified and supplemented from time to time.
"CREDIT PARTIES" means, collectively, Parent, Borrower and each
Subsidiary of either or both of them, and "CREDIT PARTY" means any one of them.
"DEFAULT" means an event or condition which would constitute an Event
of Default with the giving of notice, the passage of time or both.
"DEFAULT RATE" is defined in Section 4.1(d).
"DEFAULTING LENDER" is defined in Section 2.4.
"DISBURSEMENT ACCOUNT" is defined in Section 4.7(b).
"DISBURSING AGENT" means the financial institution, if any, selected by
the Administrative Agent from time to time to manage the Collection Accounts and
the Disbursement Account.
"DISCLOSURE SCHEDULE" means the Schedule to this Agreement labeled as
such, in form and substance satisfactory to the Administrative Agent and the
Lenders as of the Closing Date.
"DOLLARS" and the sign "$" each mean lawful money of the U.S.
"ELIGIBLE ACCOUNTS" means, without duplication, Accounts of Borrower
and Concord (the face amount of which shall be reduced by the amount of all
discounts, deductions, returns, credits, charges, contra accounts or other
allowances but excluding, for purposes of this parenthetical and clause (i)
below, the amount of any and all satisfaction guaranties), except any Account
(or, in the cases of clauses (d) and (i) below, the applicable portion thereof)
if:
(a) it arises out of a sale made by Borrower to an Affiliate; or
(b) for Eligible Non-Food Accounts, (i) its payment terms are longer
than on a one-fortieth (1/40th) term basis at a legal rate of interest, with
monthly payments of principal and interest which are due within 30 days from
each date of invoice with respect to the portion invoiced, or (ii) the debtor on
the Account is a debtor on any ineligible Food Account; or
(c) for Eligible Food Accounts, (i) its payment terms are longer than 8
months from date of incurrence of indebtedness or more than 30 days from each
date of invoice with respect to the portion invoiced, or do not require monthly
payments of either principal only or principal and interest, or (ii) the debtor
on the Account is a debtor on any ineligible Non-Food Account; or
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(d) it is unpaid more than 60 days after the original payment due date
on payment terms of 30 days or less from date of invoice; or
(e) the account debtor for the Account is a creditor of any Credit
Party, has or has asserted a right of setoff, or has disputed its liability or
made any claim against any Credit Party which has not been resolved, to the
extent of the amount owed by any Credit Party to the account debtor, the amount
of such actual or asserted right of setoff, or the amount of such dispute or
claim, as the case may be; or
(f) the account debtor is (or its assets are) the subject of an
Insolvency Event; or
(g) the Account is not payable in Dollars; or
(h) the account debtor for the Account is located outside the U.S.; or
(i) the sale to the account debtor is on a bill-and-hold, guarantied
sale, sale-and-return, sale on approval or consignment basis or made pursuant to
any other agreement providing for repurchase or return; or
(j) the Monitoring Agent determines by its own credit analysis that
collection of the Account is uncertain or the Account may not be paid or the
creditworthiness of the account debtor has deteriorated significantly; or
(k) the account debtor is the U.S. or any department, agency or
instrumentality thereof, or any other Governmental Authority; or
(l) the goods giving rise to such Account have not been shipped and
delivered to and accepted by the account debtor, such goods have been rejected
or returned by the account debtor, the services giving rise to such Account have
not been performed and accepted, such services have been rejected by the account
debtor, or the Account otherwise does not represent a final sale; or
(m) the Account does not comply with all Requirements of Law; or
(n) the Account is subject to any adverse security deposit, progress
payment or other similar advance made by or for the benefit of the applicable
account debtor; or
(o) the Account is not subject to a valid and perfected first priority
Lien in favor of the Collateral Agent or does not otherwise conform to the
representations and warranties contained in the Credit Documents.
"ELIGIBLE FOOD-RELATED ACCOUNTS" means Eligible Accounts arising from
the sale of food.
"ELIGIBLE INVENTORY" means the aggregate amount of Inventory of
Borrower (valued at the lower of cost or market in accordance with GAAP, and
reduced by the amount of all obsolescence reserves), except any item of
Inventory if:
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(a) it is not owned solely by Borrower or Borrower does not have good,
valid and marketable title thereto; or
(b) it is not located on property owned by Borrower, unless:
(1) in the case of Inventory located on leased premises, the
Collateral Agent has received an executed consent and estoppel, in form
and substance reasonably satisfactory to the Collateral Agent, from the
applicable landlord; or
(2) in the case of Inventory in the possession of a warehouseman
or bailee, the Collateral Agent has received an executed bailee letter
in form and substance reasonably satisfactory to the Collateral Agent
from such warehouseman or bailee; or
(c) it is not subject to a valid and perfected first priority Lien in
favor of the Collateral Agent; or
(d) it consists of goods returned or rejected by the applicable Credit
Party's customer or goods in transit to one or more third parties; or
(e) it is not a first-quality finished good which is readily
marketable; or
(f) it is perishable (provided, that frozen food shall not be deemed
perishable so long as it remains frozen in accordance with all applicable
Requirements of Law and policies of Borrower), work-in-process, packaging,
supplies, uniforms or slow moving; or
(g) it is not located in the U.S.; or
(h) it was manufactured in violation of the Fair Labor Standards Act
or any other labor or import laws or regulations of the U.S.; or
(i) it is obsolete (without duplication of any reserve for
obsolescence subtracted from the value of otherwise Eligible Inventory); or
(j) it does not otherwise conform to the representations and
warranties contained in the Credit Documents.
"ELIGIBLE NON-FOOD ACCOUNTS" means all Eligible Accounts other than
Eligible Food-Related Accounts.
"ENVIRONMENTAL AFFILIATE" means any Person whose liability for any
Environmental Claim a Credit Party has or may have retained, assumed or
otherwise become liable for (contingently or otherwise), either contractually or
by operation of law. Notwithstanding anything herein to the contrary, all
representations and warranties made herein with respect to Environmental
Affiliates are made only as to matters relating to any such liability.
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"ENVIRONMENTAL APPROVALS" means any permit, license, approval, ruling,
variance, exemption or other authorization required under applicable
Environmental Laws.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any notice,
claim, demand or similar communication (written or oral) by any other Person
alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(a) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, in each case as have been, are now, or may at any time
hereafter be in effect and as the same may be amended or modified hereafter,
including: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq.; the Toxic
Substance Control Act, 15 U.S.C. Sections 9601 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1802 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.;
the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Clean Air Act,
42 U.S.C. Sections 7401 et seq., and other similar federal and/or state
environmental laws.
"EQUITY CONTRIBUTION" means (a) the contribution on the Closing Date
(1) by Thayer to Parent of at least $22,880,000 in cash in exchange for the
Preferred Stock, the Warrants and 128,800 shares of Parent's Common Stock, and
(2) by the Management Investors to Parent of at least $2,120,000 (valued
pursuant to the Merger Agreement) of shares of KPC common stock and cash in
exchange for 21,200 shares of Parent's Common Stock, and (b) the contribution on
the Closing Date by Parent to Borrower of at least $22,880,000 in cash.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means any entity required to be aggregated with any
Credit Party under Sections 414(b), (c), (m) or (o) of the Code.
"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar
Loan, the rate per annum (rounded upwards to the nearest whole multiple of
one-thirty second (1/32) of one percent) equal to the offered quotation of the
rate for Dollar deposits with maturities comparable to the Interest Period for
which such Eurodollar Rate will apply) which appear on the Telerate Screen Page
3750 (or successor page) as at 11:00 a.m. London time, on the day that is two
Business Days prior to the beginning of such Interest Period (or with respect to
the initial Interest Period, the Closing Date rather than two Business Days
prior to the beginning of the initial Interest
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Period) and in an amount comparable to the amount of the Loan to be outstanding
during such Interest Period or, if such Telerate shall not exist on such
Business Day, an interest rate per annum equal to the rate (rounded upward to
the nearest whole multiple of one-thirty second (1/32) of one percent (1.00%)
per annum, if such rate is not such a multiple) of the offered quotation, if
any, to first class banks in the Eurodollar market by the Administrative Agent
for Dollar deposits of amounts in immediately available funds comparable to the
principal amount of the Eurodollar Loan for which the Eurodollar Rate is being
determined, with maturities comparable to the Interest Period for which such
Eurodollar Rate will apply, as of approximately 11:00 A.M. New York time two (2)
Business Days prior to the commencement of such Interest Period.
"EURODOLLAR LOAN" means a Loan that is made or being maintained at a
rate of interest based upon the Adjusted Eurodollar Rate.
"EVENT OF DEFAULT" is defined in Article 9.
"EXCESS AVAILABILITY" means that portion of the Borrowing Base amount
which is in excess of the sum of the Loans and Letter of Credit Obligations then
outstanding hereunder.
"EXCHANGE OFFER" means the offer by Borrower to exchange Senior Notes
registered under the Securities Act for (and with substantially identical terms
as) the Senior Notes issued on the Closing Date, in accordance with the terms of
the Registration Rights Agreement.
"EXPENSES" means all costs and expenses of each Agent (including
reasonable fees and expenses of counsel) incurred in connection with the Credit
Documents and the transactions contemplated herein and therein, including as to
the Administrative Agent in connection with the preparation, negotiation,
execution, and delivery of this Agreement and the other Credit Documents and any
amendment, waiver or consent relating hereto or thereto and in connection with
the Administrative Agent's initial syndication efforts with respect to this
Agreement, and including in connection with the enforcement of this Agreement
and the other Credit Documents, specifically including (without limiting the
generality of the foregoing) (a) the costs of conducting record searches,
examining collateral, opening bank accounts and lockboxes, depositing checks,
receiving and transferring funds (including charges for checks for which there
are insufficient funds), and other administration costs of such Agent and costs
of enforcement of the rights of such Agent, any other Agent or any Lender under
the Credit Documents, (b) the reasonable fees and expenses of legal counsel and
paralegals (including the allocated cost of internal counsel and paralegals,
which allocation shall be made in accordance with applicable internal policies
of such Agent, if any), accountants, appraisers and other consultants, experts
or advisors retained by such Agent, (c) fees and expenses incurred by the
Administrative Agent in connection with the initial syndication of the
Commitments and the Loans, (d) the cost of title insurance premiums, real estate
survey costs, fees and taxes in connection with the filing of financing
statements, and (e) the costs of preparing and recording Collateral Documents,
releases of Collateral, and waivers, amendments, and terminations of any of the
Credit Documents.
"FACILITY YEAR" means a one-year period commencing (in the case of the
first Facility Year) on the Closing Date and thereafter on each anniversary of
the Closing Date and ending on the day before the next such anniversary.
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"FEDERAL FUNDS RATE" means a fluctuating interest rate per annum equal
on any day to the weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged by Federal
Funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided, that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if such
rate is not so published for any Business Day, the Federal Funds Rate for such
Business Day shall be the average rate charged to the Administrative Agent on
such Business Day on such transactions as determined by the Administrative
Agent.
"FEDERAL RESERVE" means the Board of Governors of the Federal Reserve
System.
"FEES" means, collectively, the Commitment Fee, the Letter of Credit
Fees, the L/C Facing Fees, the Issuing Bank Fees and the Monitoring Fees.
"FINANCIAL STATEMENTS" means the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and statements of
changes in shareholder's equity of Borrower and its Subsidiaries for the period
specified, prepared in accordance with GAAP.
"FISCAL YEAR" means the fiscal year of the applicable Credit Party,
which, for Parent and each of its Subsidiaries as of the Closing Date, begins on
the first Saturday following the last Friday in September in a calendar year and
ends on the last Friday in September of the following calendar year, and "FISCAL
QUARTER" means a corresponding fiscal quarter of such Credit Party.
"GAAP" means generally accepted accounting principles as in effect in
the U.S. on the Closing Date consistently applied by the applicable Person.
"GOVERNING DOCUMENTS" of any Person means the certificate or articles
of incorporation, by-laws, partnership agreement or operating or members
agreement, as the case may be, and any other organizational or governing
documents, of such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any foreign, federal, state or other court or
governmental agency, authority, instrumentality or regulatory body.
"GROUP" is used herein as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended.
"GUARANTOR" means Parent and each Subsidiary of Borrower.
"GUARANTOR INTELLECTUAL PROPERTY SECURITY AGREEMENT" means each
Intellectual Property Security Agreement executed by a Guarantor in favor of the
Collateral Agent, each in form and substance satisfactory to the Collateral
Agent.
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"GUARANTOR PLEDGE AGREEMENT" means each Pledge Agreement executed by a
Guarantor in favor of the Collateral Agent, including pursuant to Section
5.1(a), each in form and substance satisfactory to the Collateral Agent.
"GUARANTOR SECURITY AGREEMENT" means each Security Agreement executed
by a Guarantor in favor of the Collateral Agent, including pursuant to Section
5.1(a), each in form and substance satisfactory to the Collateral Agent.
"GUARANTY" means the Guaranties dated the date hereof executed by each
of the Guarantors in favor of the Collateral Agent and the Lenders.
"HIGHEST LAWFUL RATE" means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Obligations, under the laws of the State of
New York (or the law of any other jurisdiction whose laws are mandatorily
applicable notwithstanding the provisions of this Agreement and the other Credit
Documents), or under applicable federal laws which may presently or hereafter be
in effect and which allow a higher maximum nonusurious interest rate than under
New York (or such other jurisdiction's) law, in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and any other Credit Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions.
"INDEBTEDNESS" of a Person means, without duplication, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), whether on open account or
evidenced by a note, bond, debenture or similar instrument or otherwise, (b)
obligations under Capital Leases, (c) reimbursement obligations for letters of
credit, banker's acceptances or other credit accommodations, (d) liabilities, as
reasonably determined by the Administrative Agent, under any Interest Rate
Agreement, (e) Contingent Obligations and (f) obligations secured by any Lien on
that Person's property, even if that Person has not assumed such obligations.
"INSOLVENCY EVENT" means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law,
or (e) such Person, or a substantial portion of its property, assets or business
shall become the subject of an involuntary proceeding or petition for its
dissolution, reorganization, or the appointment of a receiver, trustee,
custodian or liquidator and any such proceeding or petition shall not be
dismissed within forty-five (45) days after commencement or filing, as the case
may be, or any order for relief shall be entered in any such proceeding.
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"INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means the Borrower
Intellectual Property Security Agreement and the Guarantor Intellectual Property
Security Agreements.
"INTEREST COVERAGE RATIO" is defined in Section 8.1(b).
"INTEREST PERIOD" means, for each Eurodollar Loan, a period of one,
two, three or six months during which the interest rate for such Loan is fixed;
provided, however, that (a) no Interest Period may end after the Maturity Date,
and (b) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, unless such extension
would cause the last day of such Interest Period to occur in the next following
calendar month, in which case the last day of such Interest Period shall occur
on the next preceding Business Day.
"INTEREST RATE AGREEMENT" means any interest rate protection or hedge
agreement, including interest rate future, option, swap, collar and cap
agreements.
"INVENTORY" means "inventory" as defined in the UCC.
"INVESTMENT" means (a) all expenditures made and all liabilities
incurred (including Contingent Obligations) for or in connection with the
acquisition of any beneficial or other interest in, all or substantially all of
the assets of, or any obligations, securities or other Indebtedness of, a
Person, and (b) all direct or indirect loans, advances, capital contributions or
transfers of property to a Person. In determining the aggregate amount of
Investments outstanding at any particular time: (1) a guaranty shall be valued
at not less than the principal amount guarantied and outstanding; (2) returns of
capital (but only by repurchase, redemption, retirement, repayment, liquidating
dividend or liquidating distribution) shall be deducted; (3) earnings, whether
as dividends, interest or otherwise, shall not be deducted; and (4) decreases in
the market value shall not be deducted.
"IRS" means the U.S. Internal Revenue Service and any successor
thereto.
"ISSUING BANK" means Dresdner Bank AG, New York and Grand Cayman
Branches, as the issuer of Letters of Credit hereunder for the account of
Borrower.
"ISSUING BANK FEES" is defined in Section 4.2.
"KALMAR" means KalMar Properties Corp., a direct, wholly-owned
Subsidiary of Borrower.
"KPC" means KPC Holdings Corporation, a Delaware corporation.
"L/C FACING FEES" and "LETTER OF CREDIT FEES" are defined in Section
4.2.
"LETTER OF CREDIT OBLIGATIONS" means the sum of the aggregate undrawn
amount of all Letters of Credit outstanding, plus the aggregate amount of all
drawings under Letters of Credit for which Borrower has not reimbursed the
Issuing Bank.
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"LETTER OF CREDIT REQUEST" is defined in Section 3.2.
"LETTER OF CREDIT" means any letter of credit issued under Article 3
and all amendments, renewals, extensions and replacements thereof.
"LEVERAGE RATIO" is defined in Section 8.1(d).
"LIEN" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
"LOAN ACCOUNT" is defined in Section 4.3.
"LOANS" is defined in Section 2.1.
"LOCKBOX" and "LOCKBOX AGREEMENT" are defined in Section 4.7.
"MANAGEMENT AGREEMENT" means the Management Agreement between Thayer
and Borrower, dated as of the date hereof.
"MANAGEMENT FEE" means a fee payable to any Person other than a direct
employee of the payor for management services rendered to the payor or any of
its Affiliates, including the annual $500,000 fee payable by Borrower to Thayer
pursuant to the Management Agreement.
"MANAGEMENT INVESTORS" means the Persons listed as such in Section 1.1
of the Disclosure Schedule.
"MANDATORY REDEEMABLE OBLIGATION" means an obligation of any Credit
Party (or guarantied by any of them) which must be redeemed or paid (a) at a
fixed or determinable date, whether by operation of sinking fund or otherwise,
(b) at the option of any Person other than the applicable Credit Party, or (c)
upon the occurrence of a condition not solely within the control of the
applicable Credit Party, such as a redemption required to be made out of future
earnings.
"MARGIN STOCK" shall have the meaning provided for such term in
Regulations G, T, U and X of the Federal Reserve.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the
business, operations, results of operations, assets, liabilities, prospects or
condition (financial or otherwise) of any Credit Party, or (b) a material
adverse effect on the ability of a Credit Party to perform its obligations under
the Credit Documents to which it is a party, or (c) the impairment of the
ability of any Agent or any Lender to enforce the Obligations, or (d) any
significant diminution of the amount which any Agent or the Lenders would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of the Collateral.
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"MATERIAL CONTRACT" means any contract, lease or other agreement or
arrangement to which any Credit Party is a party (other than the Credit
Documents) involving aggregate consideration payable to or by any Credit Party
of $100,000 or more or which is otherwise material to the business, operations,
results of operations, assets, liabilities, prospects or condition (financial or
otherwise) of any Credit Party. Without limiting the generality of the
foregoing, the Merger Agreement, each of the Senior Notes Documents and each of
the contracts listed in Section 6.20 of the Disclosure Schedule are Material
Contracts of Borrower.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances, petroleum (including crude
oil and any fraction thereof) and petroleum products and any other gas, liquid
or solid regulated under any Environmental Law.
"MATURITY DATE" means the earlier of April 30, 2002 and the date, if
any, on which the Loans mature by notice of prepayment, acceleration or
otherwise.
"MERGER" means the merger of CPAC with and into Parent on the Closing
Date pursuant to the Merger Agreement.
"MERGER AGREEMENT" means that certain Merger Agreement dated as of
March 25, 1997 among Thayer, CPAC and KPC.
"MONITORED DISBURSEMENT PROCEDURES" means the procedures set forth in
Section 2.5 hereof.
"MONITORING AGENT" means a financial institution selected by Agent at
any time and from time to time to monitor the Borrowing Base and related assets
of the Credit Parties, and to exercise the other powers contemplated for it in
the Credit Documents.
"MONITORING FEES" means the fees referred to in Section 4.2(c).
"MORTGAGE" means each deed of trust, mortgage and leasehold deed of
trust or mortgage made by a Credit Party in favor of the Collateral Agent,
covering a Mortgaged Property, in form and substance satisfactory to the
Collateral Agent, as the same may be amended, modified or otherwise supplemented
from time to time.
"MORTGAGED PROPERTY" means each of the properties listed in the Closing
Documents List as being subject to a Mortgage, all as more fully described in
the Mortgages, and any other real property of a Credit Party as to which the
Administrative Agent requires a Mortgage after the date hereof.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which any Credit Party or any ERISA Affiliate
has contributed within the past six years or with respect to which any Credit
Party may incur any liability.
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"NET SALE PROCEEDS" means all cash proceeds, when and as received, of
each disposition of any asset by Borrower or any of its Subsidiaries (other than
sales of Inventory in the ordinary course of business and sales among Borrower
and its Wholly-Owned Subsidiaries) net of (a) reasonable expenses incurred by
such Person in connection with such disposition (but not including any fees paid
to Affiliates of Borrower), and (b) the taxes payable by the Borrower or the
Credit Party with respect to such sale (after giving effect to all offsets,
credits and similar deductions available to Borrower or such other Credit
Party).
"NON-DEFAULTING LENDER" is defined in Section 2.4(b).
"NOTE" means a promissory note of Borrower substantially in the form of
Exhibit A.
"NOTICE OF BORROWING" is defined in Section 2.2.
"NOTICE OF CONTINUATION" and "NOTICE OF CONVERSION" are defined in
Section 4.9.
"OBLIGATIONS" means the collective reference to the unpaid principal
of, and the accrued and unpaid interest on, the Loans and all other obligations
and liabilities of Borrower to the Agents, the Lenders and the Issuing Bank
(including each Credit Party's liability for all interest that accrues after the
maturity of the Loans and all interest that accrues after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Credit Party, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter incurred, that may arise under, out of, or in connection with, this
Agreement, any other Credit Document, any Interest Rate Agreement entered into
by Borrower with any Lender pursuant to this Agreement or any other document
made, delivered or given in connection with this Agreement, any other Credit
Document or any such Interest Rate Agreement, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the Agents, the
Lenders and the Issuing Bank that are required to be paid by Borrower pursuant
to the terms of any such agreement), and all other obligations and liabilities
of any or all of the Credit Parties to any Agent, the Issuing Bank and/or any
Lender under this Agreement, any Note or any other Credit Document.
"OPERATING LEASE" means, for any Person, any lease of any property of
any kind by such Person as lessee which is not a Capital Lease.
"PARENT" means KPC prior to the Merger and CPH as of and after the
Merger.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"PERMITTED ACQUISITION" shall mean an acquisition by Borrower of all or
substantially all of the assets of, or all of the Capital Stock of, a Person
(each, an "ACQUIRED PERSON") engaged in the Business, provided, that (a) if such
acquisition is of all of the Capital Stock of the Acquired Person, such Acquired
Person is merged with and into Borrower substantially simultaneously with
Borrower's acquisition of such Capital Stock, (b) if the Acquisition
Consideration for such
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acquisition, together with the aggregate Acquisition Consideration for all other
Permitted Acquisitions (excluding the Merger) during any 12 month period, if
any, equals or exceeds Five Million Dollars ($5,000,000), the Administrative
Agent and Required Lenders shall have approved the acquisition in writing, and
(c) if the Acquisition Consideration for such acquisition, together with the
aggregate Acquisition Consideration for all other Permitted Acquisitions
(excluding the Merger) during any 12 month period, if any, is less than Five
Million Dollars ($5,000,000), Borrower shall have (i) demonstrated that,
following such acquisition, Borrower shall comply with the covenants set forth
in this Agreement on a pro forma and prospective basis, (ii) provided to the
Administrative Agent complete and accurate copies of all Financial Statements
prepared in connection with such acquisition, (iii) demonstrated that Borrower
does not have, and will not have as a result of such acquisition, any Contingent
Obligation, contingent liability or liability for taxes, long-term leases or
commitments which is not reflected in such Financial Statements and is required
to be so reported, and (iv) provided to the Administrative Agent a management
discussion and analysis describing the acquisition.
"PERMITTED LIENS" is defined in Section 8.4.
"PERSON" means any individual, sole proprietorship, corporation,
limited liability company, partnership, joint venture, trust, unincorporated
organization, association, institution, entity, party or government (including
any division, agency or department thereof).
"PLAN" means any employee benefit plan, program or arrangement
maintained or contributed to by any Credit Party, or with respect to which any
of them may incur liability.
"PLEDGE AGREEMENTS" means the Borrower Pledge Agreement and the
Guarantor Pledge Agreements.
"PREFERRED STOCK" means the 10,000 shares of 15% preferred stock of
Parent issued to Thayer on the Closing Date, all dividends on which shall be
payable, during the term of this Agreement, only in kind.
"PRIME FOODS" means Prime Foods Development Corp., a direct,
wholly-owned Subsidiary of Borrower.
"PROJECTIONS" means the financial projections regarding Parent and its
Subsidiaries prepared by management of Borrower and delivered to the Agents and
the other Lenders on or prior to the Closing Date, which shall be satisfactory
in form and substance to the Agents and such Lenders.
"PRO RATA SHARE" of a Lender means, as of any time, that Lender's
proportionate interest in the Loan facility at such time, calculated as follows:
divide the amount of that Lender's Commitment by the total amount of all
Commitments at the time, unless there are no Commitments at the time, in which
case divide (a) the sum of the principal amount of that Lender's outstanding
Loans plus the amount of such Lender's participations in Letter of Credit
Obligations by (b) the sum of the total principal amount of all Loans
outstanding at the time plus the total amount of all Letter of Credit
Obligations then outstanding. While any Lender is a
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Defaulting Lender, the amount of its Commitment (or Loans and Letter of Credit
Obligations, as applicable) will be deemed to be zero for purposes of
calculating Required Lenders.
"REGISTER" is defined in Section 11.8(c).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
among Borrower, KalMar, Concord, Prime Foods, J.P. Morgan Securities Inc.,
NatWest Capital Markets Limited, and Dresdner Kleinwort Benson North America
LLC.
"REPORTABLE EVENT" means any of the events described in Section 4043 of
ERISA or the regulations thereunder.
"REQUIRED LENDERS" means Lenders the Pro Rata Shares of which total
more than sixty-six and two-thirds percent (66-2/3%) of the facility taken as a
whole.
"REQUIREMENT OF LAW" means (a) the Governing Documents of a Person, (b)
any law, treaty, rule or regulation or determination of an arbitrator, court or
other Governmental Authority, or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on a Person or any of its property.
"RESET DATE" is defined in Section 4.1(c).
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
"ROLLING FOUR QUARTER BASIS" means for any date of determination the
aggregate results of the four Fiscal Quarters immediately preceding but
including such date of determination; provided, however, that for each of the
periods ending during the first Facility Year, the applicable periods prior to
the Closing Date shall be calculated on a pro forma basis acceptable to the
Administrative Agent.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" means the Borrower Security Agreement, the
Guarantor Security Agreements, the Borrower Intellectual Property Security
Agreement and the Guarantor Intellectual Property Security Agreements.
"SENIOR NOTES" means the 12.5% Senior Notes due 2004 issued by Borrower
on the Closing Date in the aggregate principal amount of $100,000,000 and any
notes exchanged for such Senior Notes pursuant to the Exchange Offer.
"SENIOR NOTES DOCUMENTS" means the Senior Notes, the Senior Notes
Indenture, the Registration Rights Agreement and the Warrants.
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"SENIOR NOTES INDENTURE" means the Indenture dated as of May 9, 1997
between Borrower and the Senior Notes Trustee.
"SENIOR NOTES TRUSTEE" means Bank of New York, as trustee under the
Senior Notes Indenture, and its successors in such capacity.
"SETTLEMENT DATE" means each Wednesday (or, if any such day is not a
Business Day, the next succeeding Business Day), and, in any week, the date, if
any, on which Loans made by the Disbursing Agent since the last Settlement Date
equals or exceeds $________ in the aggregate, or in each case such other date as
is agreed from time to time among the Disbursing Agent and the Lenders.
"SUBORDINATED INDEBTEDNESS" means, with respect to the Borrower,
Indebtedness, (a) the tenor, terms and conditions of which shall have been
approved by Required Lenders, and (b) which is subordinated in right of payment
to the Borrower's obligations under this Agreement, pursuant to a subordination
agreement satisfactory to Required Lenders.
"SUBSIDIARY" of a Person means a corporation, partnership, limited
liability company or other entity (a) in which that Person directly or
indirectly owns or controls shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
governing body of such entity or (b) of which that Person is a general partner
or a managing member or which that Person otherwise controls, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the generality of the foregoing, as of the Closing
Date Borrower is the only direct Subsidiary of Parent and Concord, KalMar and
Prime Foods are the only Subsidiaries of Borrower; provided, that Lexington
Funding, Inc. ("LEXINGTON") and Verdi Funding, Inc. ("VERDI"), the only
Subsidiaries of Concord, will be Subsidiaries of Parent, Borrower and Concord
until dissolved within ninety (90) days of the Closing Date.
"TERMINATION EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (b) the withdrawal of Borrower, any of its
Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA); (c) the provision of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA); (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan; (e) any event or condition (1) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (2) that
may result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (f) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries or any ERISA
Affiliate from a Multiemployer Plan.
"THAYER" means Thayer Equity Investors III, L.P., Thayer Co-Investors,
L.L.C., and the successors of either of them.
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"TOTAL COMMITMENTS" means, at any time, the total Commitments of all
Lenders at such time.
"TRADE LETTERS OF CREDIT" means Letters of Credit, intended to serve as
payment for goods, with an expiry date 120 days or less after issuance.
"TYPE" of Loan refers to whether it is a Eurodollar Loan or a Base Rate
Loan.
"UCC" means the Uniform Commercial Code as in effect in New York from
time to time.
"U.S." means the United States of America.
"WARRANTS" means the warrants to purchase 26,471 shares of Common Stock
of Parent issued to Thayer on the Closing Date.
"WHOLLY-OWNED SUBSIDIARY" means a wholly-owned Subsidiary of Borrower
which has guarantied the Obligations and granted Liens in substantially all of
its assets to the Collateral Agent for the benefit of the Agents, the Issuing
Bank and the Lenders, in each case pursuant to guaranties and agreements in
substantially the form of the Guaranty and Guarantor Security Agreement executed
and delivered on the Closing Date.
1.2 Other Definitional Provisions.
(a) Each term defined in this Agreement shall have the same meaning
when used in any other Credit Document, unless otherwise specified in the
applicable Credit Document.
(b) All accounting terms used in this Agreement or in any other Credit
Document shall be construed in accordance with GAAP, applied on a basis
consistent with the Financial Statements delivered to the Administrative Agent
on or before the Closing Date, unless otherwise specified in the applicable
Credit Document.
(c) The word "including" means "including without limitation." Each of
the words "hereof," "herein," and "hereunder" refer to this Agreement as a
whole, not to any particular portion of this Agreement. References to Articles,
Sections, Annexes, Schedules and Exhibits are internal references to this
Agreement and to its attachments, unless otherwise specified. The headings and
the Table of Contents are for convenience of reference only and shall not affect
the meaning or construction of any provision of this Agreement.
ARTICLE 2 LOANS
2.1 Revolving Credit Commitments. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make loans and advances to
Borrower ("LOANS"), from the Closing Date through the last Business Day before
the Maturity Date, provided, that the outstanding principal amount of such
Lender's Loans, plus its Pro Rata Share of the outstanding Letter of Credit
Obligations, must never exceed its Pro Rata Share of (1) the amount of the Total
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Commitments or (2) the Borrowing Base, whichever is lower at the time. Loans may
be voluntarily prepaid (subject to Section 4.5) and any principal amounts so
prepaid may be reborrowed as set forth above.
2.2 Procedure for Borrowings. To request a Borrowing of Loans, Borrower
shall deliver to the Disbursing Agent a written notice, substantially in the
form of Exhibit E (a "NOTICE OF BORROWING"). In addition to a Notice of
Borrowing, Borrower shall deliver to the Disbursing Agent a written certificate,
substantially in the form of Exhibit C (a "BORROWING BASE CERTIFICATE"), which
shall conform to the requirements of Section 7.2(a) of this Agreement. Each
Notice of Borrowing shall specify (1) whether the requested Borrowing is of Base
Rate Loans or (subject to Section 4.9) Eurodollar Loans, and (2) the Business
Day on which Borrower requests that such Loans be made. Notices of Borrowing for
Base Rate Loans shall be received by the Disbursing Agent before 11:00 A.M. New
York time on the Business Day prior to the date of the proposed Borrowing, and
Notices of Borrowing for Eurodollar Loans shall be received by the Disbursing
Agent not later than 11:00 A.M. New York time on the third Business Day prior to
the date of the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Loans of the same
Type and, if the requested Borrowing is to consist of Eurodollar Loans, shall be
in an aggregate amount for all Lenders of not less than $1,000,000 or an
integral multiple of $1,000,000 in excess thereof. Borrower shall specify in
each Notice of Borrowing whether the conditions for the requested Borrowing are
satisfied. Except as provided in Section 2.5, Borrower may request a Borrowing
of Loans no more than eight (8) times in the first month of the term hereof and
five (5) times per month thereafter (unless the Administrative Agent has
instituted Monitoring Disbursement Procedures). Once given, a Notice of
Borrowing is irrevocable by and binding on Borrower. Borrower shall provide to
the Disbursing Agent a list, with specimen signatures, of officers authorized to
request Loans. Each Agent is entitled to rely upon such list until it is
replaced by Borrower. The Disbursing Agent shall give each Lender prompt notice
by telephone or facsimile transmission of its receipt of a Notice of Borrowing.
2.3 Disbursement of Loans. Subject to the determination by the Agents
and the Lenders that the applicable conditions for borrowing contained in
Article 5 are satisfied or duly waived, each Lender shall make available to the
Disbursing Agent at the Disbursing Agent's address, no later than 1:00 P.M. New
York time on the date of the proposed Borrowing as set forth in the Notice of
Borrowing, an amount in immediately available funds equal to such Lender's Pro
Rata Share of the requested Borrowing, provided, however, that in no event shall
such amount exceed the unutilized amount of such Lender's Commitment. Unless the
Disbursing Agent receives contrary written notice prior to the date of any such
Borrowing of Loans, it is entitled to assume that each Lender will make
available its Pro Rata Share of the Borrowing and in reliance upon that
assumption, but without any obligation to do so, may advance such Pro Rata Share
on behalf of the Lender. The proceeds of Loans shall be transmitted by the
Disbursing Agent (a) in the circumstances described in Section 3.5, directly to
the Issuing Bank and (b) subject to Section 2.5, in all other circumstances, as
reasonably requested by Borrower in its Notice of Borrowing.
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2.4 Defaulting Lenders.
(a) A Lender who fails to pay the Disbursing Agent its Pro Rata Share
of any Loans made available by the Disbursing Agent on such Lender's behalf, or
who fails to pay any other amount owing by it to any Agent under any Credit
Document, is a "DEFAULTING LENDER" until such failure is cured or waived by the
applicable Agent in writing. The applicable Agent may recover all such amounts
owing by a Defaulting Lender on demand. If the Defaulting Lender does not pay
such amounts on such Agent's demand, such Agent shall promptly notify Borrower
and Borrower shall pay such amounts within five Business Days. In addition, the
Defaulting Lender or Borrower shall pay such Agent interest on such amount for
each day from the date it was made available by such Agent to or for the benefit
of Borrower to the date it is recovered by such Agent at a rate per annum equal
to (1) the overnight Federal Funds Rate, if paid by the Defaulting Lender, or
(2) the then applicable rate of interest calculated under Article 4, if paid by
Borrower, plus, in each case, such Agent's costs, losses and expenses, if any,
incurred as a result of the Defaulting Lender's failure to perform its
obligations.
(b) The failure of any Lender to fund its Pro Rata Share of any Loan
shall not relieve any other Lender of its obligation to fund its Pro Rata Share
of such Loan. Conversely, no Lender shall be responsible for the failure of
another Lender to fund its Pro Rata Share of a Loan.
(c) No Agent shall be obligated to transfer to a Defaulting Lender any
payments made by Borrower to Agent for the Defaulting Lender's benefit; nor
shall a Defaulting Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
the Disbursing Agent, but in any event shall be credited against the Obligations
of Borrower hereunder. The Disbursing Agent may hold and, in its discretion,
re-lend to Borrower the amount of all such payments received or retained by it
for the account of such Defaulting Lender. For purposes of voting or consenting
to matters with respect to the Credit Documents and determining Pro Rata Shares
such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero. This section shall remain effective with
respect to such Lender until (1) the Obligations under this Agreement shall have
been declared or shall have become immediately due and payable or (2) Required
Lenders, the applicable Agent and Borrower shall have waived such Lender's
default in writing. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse
the performance by Borrower of its duties and obligations hereunder.
(d) The Lenders which are not Defaulting Lenders (the "NON-DEFAULTING
LENDERS") shall participate in Letters of Credit on the basis of their
respective Pro Rata Shares, determined, however, as if the Commitment of a
Defaulting Lender is zero, and shall receive Letter of Credit Fees on such
basis. A Defaulting Lender shall not be entitled to receive any portion of the
Commitment Fee, the Letter of Credit Fees or any indemnity arising from its
commitment to make Loans and/or participate in Letters of Credit.
(e) Nothing in this Section 2.4 shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, any Agent, the
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Issuing Bank or any Lender may have against any Defaulting Lender as a result of
any default by such Defaulting Lender hereunder.
2.5 Monitoring and Disbursements. Notwithstanding anything herein to
the contrary, in the event the Administrative Agent appoints another Person as a
Monitoring Agent and Disbursing Agent:
(a) Borrower shall establish such accounts with such financial
institutions as the Disbursing Agent shall reasonably request pursuant to one or
more Blocked Account Agreements in form and substance reasonably satisfactory to
the Administrative Agent;
(b) all Collections shall be deposited within one (1) Business Day of
their receipt by any Credit Party in the Collections Account and credited to the
payment of any outstanding Obligations in accordance with Section 4.6(c);
(c) on each Business Day, the Monitoring Agent shall provide
information to Borrower as to the amounts of checks written on the Collections
Account to be cleared as of such Business Day (the "CLEARING AMOUNT");
(d) if required, Borrower shall request (or, in the case of clause (2)
below, shall be deemed to have requested) a Borrowing of Base Rate Loans to pay
(1) the portion of the Clearing Amount in excess of the amount of funds
otherwise on deposit in the Collections Account, and (2) the amount of any other
Obligations then due and owing;
(e) All Loans shall be disbursed from whichever office or other place
the Disbursing Agent may designate from time to time and, together with any and
all other Obligations of any Credit Party to any Agent, the Issuing Bank or any
Lender, shall be charged to Borrower's Account on the Disbursing Agent's books.
The proceeds of each Loan requested or deemed to have been requested by Borrower
under this Section 2.5 shall, with respect to requested Loans to the extent
Lenders make such Loans, be made available to Borrower on the day so requested
by way of credit to Borrower's operating account at the Disbursing Agent, or
such other bank as the Disbursing Agent may designate following notification to
Borrower and the Administrative Agent, in immediately available funds or, with
respect to Loans deemed to have been requested by Borrower, be disbursed to the
Disbursing Agent to be applied to the outstanding Obligations giving rise to
such deemed request;
(f) the number of Borrowings permitted to be made hereunder shall not
be limited as set forth in Section 2.2 (except to once daily);
(g) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by the Disbursing Agent on the date received. In
consideration of the Disbursing Agent's agreement to conditionally credit
Borrower's Account as of the Business Day on which the Disbursing Agent receives
those items of payment, Borrower agrees that, in computing the charges under
this Agreement, all items of payment shall be deemed applied by the Disbursing
Agent on account of the Obligations on the next Business Day after the Business
Day the Disbursing Agent receives
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such payments via wire transfer or electronic depository check. The Disbursing
Agent is not, however, required to credit Borrower's Account for the amount of
any item of payment which is unsatisfactory to the Disbursing Agent and the
Disbursing Agent and may charge Borrower's Account for the amount of any item of
payment which is returned to the Disbursing Agent unpaid;
(h) All payments of principal, interest and other amounts payable
hereunder, or under any of the other Credit Documents, shall be made to the
Disbursing Agent at its designated payment office not later than 1:00 P.M. (New
York time) on the due date therefor in lawful money of the United States of
America in funds immediately available to the Disbursing Agent. The Disbursing
Agent shall have the right to effectuate payment on any and all Obligations due
and owing hereunder by charging Borrower's Account or by making Loans as
provided in this Section 2.5 hereof;
(i) The Disbursing Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Loan made by
Lenders and the date and amount of each payment in respect thereof; provided,
however, the failure by the Disbursing Agent to record the date and amount of
any Loan shall not adversely affect any Agent, the Issuing Bank or any Lender.
Each week, the Disbursing Agent shall send to each Agent, each Lender and
Borrower a statement showing the accounting for the Loans made, payments made or
credited in respect thereof, and other transactions between Lenders, the Issuing
Bank and Borrower, during such week. The weekly statements shall be deemed
correct and binding upon Borrower in the absence of manifest error and shall
constitute an account stated between Lenders, the Issuing Bank and Borrower
unless the Disbursing Agent receives a written statement of Borrower's specific
exceptions thereto within twenty (20) days after such statement is received by
Borrower. The records of the Disbursing Agent with respect to the Borrower's
Account shall be conclusive evidence absent manifest error of the amounts of
Loans and other charges thereto and of payments applicable thereto; and
(j)(1) Commencing with the first Business Day following the appointment
of the Monitoring Agent and Disbursing Agent by the Administrative Agent (the
"MONITORED DISBURSEMENTS DATE"), each Borrowing of the Borrower shall be applied
first to those Loans advanced by the Disbursing Agent. On or before 1:00 P.M.,
New York time, on each Settlement Date commencing with the first Settlement Date
following the Monitored Disbursement Date, the Disbursing Agent and Lenders
shall make certain payments as follows: (A) if the aggregate amount of new Loans
made by the Disbursing Agent during the preceding week (if any) exceeds the
aggregate amount of repayments applied to outstanding Loans during such
preceding week, then each Lender shall provide the Disbursing Agent with funds
in an amount equal to its Pro Rata Share of the difference between (w) such
Loans and (x) such repayments and (B) if the aggregate amount of repayments
applied to outstanding Loans during such week exceeds the aggregate amount of
new Loans made during such week, then the Disbursing Agent shall provide each
Lender with funds in an amount equal to such Lender's Pro Rata Share of the
difference between (y) such repayments and (z) such Loans.
(2) Each Lender shall be entitled to earn interest on outstanding Loans
which it has funded.
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(3) Promptly following each Settlement Date, the Disbursing Agent shall
submit to each Lender a certificate with respect to payments received and Loans
made during the week immediately preceding such Settlement Date. Such
certificate of the Disbursing Agent shall be conclusive in the absence of
manifest error.
ARTICLE 3 LETTERS OF CREDIT
3.1 Issuance of Letters of Credit. Subject to the terms and conditions
of this Agreement, the Issuing Bank shall (with the consent of the
Administrative Agent) issue Letters of Credit hereunder at the request of
Borrower and for its account, as more specifically described below, for credit
enhancement, documentary and other on-going general corporate purposes,
provided, that a requested Letter of Credit will not be available hereunder if:
(a) Issuance of the requested Letter of Credit (1) would cause the
Letter of Credit Obligations then outstanding to exceed $5,000,000 or (2) would
cause the sum of the outstanding Loans plus the Letter of Credit Obligations
then outstanding to exceed the lesser of (A) the Total Commitments then in
effect and (B) the Borrowing Base then in effect; or
(b) Issuance of the Letter of Credit is enjoined, restrained or
prohibited by any Governmental Authority, Requirement of Law or any request or
directive of any Governmental Authority (whether or not having the force of law)
or would impose upon any Agent or the Issuing Bank any material restriction,
reserve, capital requirement, loss, cost or expense (for which such Agent or the
Issuing Bank is not otherwise compensated) not in effect or known as of the
Closing Date.
3.2 Request for Issuance. A request for issuance of a Letter of Credit
(a "LETTER OF CREDIT REQUEST") may be given to the Administrative Agent and the
Issuing Bank in writing or electronically (and, if electronically, promptly
confirmed in writing). A Letter of Credit Request must be received by the
Administrative Agent and the Issuing Bank no later than 1:00 P.M. New York time
at least ten (10) Business Days (or such shorter period as may be agreed to by
the Issuing Bank) in advance of the proposed date of issuance. The Issuing Bank
shall notify the Administrative Agent, and the Administrative Agent shall notify
the Lenders, of such request and of the issuance of the Letter of Credit.
3.3 Terms of Letters of Credit. The proposed terms and conditions and
form of each Letter of Credit (and of any drafts or acceptances thereunder)
shall be subject to approval by the Administrative Agent and the Issuing Bank.
The term of each standby Letter of Credit shall not exceed 360 days, but may be
subject to annual renewal at the option of the Administrative Agent and the
Issuing Bank (so long as the conditions for issuance of such Letter of Credit as
a new Letter of Credit would be met at such time). The term of each Trade Letter
of Credit shall not exceed 120 days. No Letter of Credit shall have an expiry
date later than thirty (30) days prior to the Maturity Date.
3.4 Lenders' Participations. Immediately upon issuance or amendment of
any Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased and
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received from the Issuing Bank, without recourse or warranty, an undivided
interest and participation in all rights and obligations under such Letter of
Credit (other than fees and other amounts owing to the Issuing Bank) in
accordance with such Lender's Pro Rata Share of the Commitments.
3.5 Payment of Amounts Drawn Under Letters of Credit. Upon notice from
the Issuing Bank of any drawing or requested drawing under any Letter of Credit,
the Administrative Agent will notify Borrower and the Disbursing Agent promptly
of such drawing or request and, so long as no Default or Event of Default has
occurred and is continuing hereunder, Borrower will be deemed to have
concurrently given a Notice of Borrowing to the Disbursing Agent for Base Rate
Loans in the amount of and at the time of such drawing. The proceeds of such
Loans shall be applied directly by the Disbursing Agent to reimburse the Issuing
Bank (or the Lenders which have bought participations, if applicable) for the
amount of such drawing. If a Default or Event of Default hereunder has occurred
and is continuing, Borrower shall repay the Issuing Bank the amount of the
drawing in immediately available funds on the Business Day of the drawing.
3.6 Payment by Lenders. If Loans and payments by Borrower are not made
in an amount sufficient to reimburse the Issuing Bank in full for the amount of
any drawing, the Disbursing Agent shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Disbursing Agent,
for the account of the Issuing Bank, its Pro Rata Share of such unreimbursed
amount in immediately available funds not later than 11:00 A.M. New York time on
the next Business Day. If any Lender fails to make available to the Disbursing
Agent the amount of such Lender's participation, the Issuing Bank shall be
entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Rate for the first three Business Days and
thereafter at the Base Rate. For each Letter of Credit, the Disbursing Agent
shall promptly distribute to each Lender which has funded the amount of its
participation its Pro Rata Share of all payments subsequently received by the
Disbursing Agent from Borrower in reimbursement of honored drawings.
3.7 Nature of Issuing Bank's Duties. In determining whether to pay
under any Letter of Credit, the Issuing Bank shall be responsible only to
determine that the documents and certificates required to be delivered under
that Letter of Credit have been delivered and that they are in substantial
compliance on their face with the requirements of that Letter of Credit. As
among Borrower, the Agents, each Lender other than the Issuing Bank and (except
as set forth in the last sentence of this Section 3.7) the Issuing Bank,
Borrower assumes all risks of the acts and omissions of the Issuing Bank, or
misuse of the Letters of Credit by the respective beneficiaries of such Letters
of Credit. Any action taken or omitted to be taken by the Issuing Bank under or
in connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for the Issuing Bank
any liability to Borrower, any Agent or any Lender.
3.8 Obligations Absolute. The obligations of Borrower to reimburse the
Issuing Bank for drawings honored under the Letters of Credit and the
obligations of the Lenders under Section 3.6 hereof shall be unconditional and
irrevocable and shall be paid strictly in accordance
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with the terms of this Agreement under all circumstances, even when a Default or
an Event of Default shall have occurred and be continuing.
ARTICLE 4 COMPENSATION, REPAYMENT AND COMMITMENT REDUCTIONS
4.1 Interest Rate.
(a) Interest on Base Rate Loans. Borrower shall pay to the Disbursing
Agent for the account of the Lenders, quarterly in arrears, on the last Business
Day of each calendar quarter, interest on Base Rate Loans outstanding during
such calendar quarter at an interest rate per annum equal to the Base Rate plus
the Applicable Margin. The rate hereunder shall change each day the Base Rate
changes. After maturity of such Base Rate Loans (whether by acceleration or
otherwise), interest shall be payable upon demand. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(b) Interest on Eurodollar Loans. Interest on each Eurodollar Loan
shall be payable on the last day of the Interest Period for such Eurodollar Loan
(and, in the case of any Eurodollar Loan with an Interest Period of six months,
on the three-month anniversary of the commencement of that Interest Period), at
the date of conversion of such Eurodollar Loan (or a portion thereof) to a Base
Rate Loan and at maturity of such Eurodollar Loan, as applicable, at an interest
rate per annum equal to the Adjusted Eurodollar Rate for the Interest Period for
such Eurodollar Loan plus the Applicable Margin. After maturity of such
Eurodollar Loans (whether by acceleration or otherwise), interest shall be
payable upon demand. Each determination by the Administrative Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(c) Applicable Margin. Within forty-five (45) days after the end of
each Fiscal Quarter, commencing with the Fiscal Quarter ending on March 31,
1998, Borrower shall deliver to the Administrative Agent a certificate executed
by the President or Chief Financial Officer of Borrower showing Borrower's
calculations of the Leverage Ratio and the Interest Coverage Ratio for the
Fiscal Quarter just ended. If Borrower timely delivers such certificate (or if
the Applicable Margin would be increased), the Applicable Margin shall be
adjusted or continued, as the case may be, on the first day of the third month
following the end of the applicable Fiscal Quarter (each, a "RESET DATE") based
on such ratios from the table set forth in Annex III, and the Applicable Margin
as so adjusted or continued shall remain in effect until the next Reset Date.
For purposes of calculating the Leverage Ratio and the Interest Coverage Ratio
to determine the Applicable Margin, Consolidated EBITDA shall be calculated on a
historical combined Rolling Four Quarter Basis.
(d) Interest After Default. Notwithstanding anything to the contrary,
from the date of occurrence of a Default or Event of Default until the earlier
of (i) the date all Obligations have been paid and satisfied in full or (ii) the
date such Default or Event of Default is cured or waived, Borrower shall be
obligated to pay to the Disbursing Agent for the account of the Lenders interest
on the Loans and on the Letter of Credit Obligations calculated at a rate per
annum (the "DEFAULT
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RATE") equal to the higher of (x) the Base Rate plus the Applicable Margin
thereon and (y) the Adjusted Eurodollar Rate plus the Applicable Margin thereon,
plus in each case two percent (2.00%).
(e) Distribution of Interest. Interest on the Loans shall be allocated
by the Disbursing Agent to each Lender in accordance with the Pro Rata Share of
Loans actually advanced by and repaid to each Lender, and shall accrue from and
including the date such Loans are so advanced and to but excluding the date such
Loans are repaid by Borrower. The Disbursing Agent shall distribute interest on
Loans promptly after receiving it.
4.2 Fees.
(a) Commitment Fee. Borrower shall pay in arrears to the Disbursing
Agent for the account of the Lenders, on the last Business Day of each calendar
quarter and on the Maturity Date, a fee (the "COMMITMENT FEE") calculated at a
fluctuating rate per annum, determined based on the Borrower's Leverage Ratio
and Interest Coverage Ratio as of the most recent Reset Date from the table set
forth in Annex III, on the average unused portion of the Total Commitments at
the end of each day during the applicable period; provided, however, that (1)
until the occurrence of the first Reset Date, the per annum rate shall be
three-eighths of one percent (0.375%) and (2) no Commitment Fee shall be payable
for the account of any Defaulting Lender on the Commitment of such Person for
the period of time during which it is a Defaulting Lender. The per annum rate
shall be adjusted or continued, as the case may be, on each Reset Date based on
such ratios from such table, and such rate as so adjusted or continued shall
remain in effect until the next Reset Date. For purposes of calculating the
average unused portion of the Total Commitments to determine the Commitment Fee,
the aggregate undrawn amount of all Letters Credit outstanding at the end of a
day shall constitute use of the Total Commitments on such day to the extent of
such aggregate amount. For purposes of calculating the Leverage Ratio and the
Interest Coverage Ratio to determine the Commitment Fee, Consolidated EBITDA
shall be calculated on a historical combined Rolling Four Quarter Basis.
(b) Letter of Credit Fees.
(1) Borrower shall pay to the Disbursing Agent for the account of
the Non-Defaulting Lenders (pro rata in accordance with Section 2.4(d) hereof),
on the last Business Day of each Fiscal Quarter and upon termination of the
applicable Letter of Credit a fee on each Letter of Credit outstanding at any
time during such Fiscal Quarter or on the applicable Letter of Credit, as the
case may be (each, a "LETTER OF CREDIT FEE"), in an amount equal to (1) in the
case of standby Letters of Credit, a rate per annum equal to the Applicable
Margin payable on a Eurodollar Loan on the date of payment of the fee, or (2) in
the case of documentary Letters of Credit, a rate per annum equal to one and
one-quarter percent (1.25%), in each case multiplied by the daily average of the
amounts available to be drawn under such Letter of Credit during the applicable
Fiscal Quarter or portion thereof.
(2) In addition, Borrower shall pay to the Issuing Bank, for its
own benefit, on the date of issuance of any Letter of Credit, a facing fee equal
to the greater of (i) $500 or
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(ii) 0.25% per annum on the initial face amount and stated duration of each such
Letter of Credit (the "L/C FACING FEE").
(3) Borrower also shall pay the reasonable and customary charges,
fees and expenses of the Issuing Bank for the issuance, administration and
negotiation of each Letter of Credit (the "ISSUING BANK FEES").
(c) Monitoring Fees.
(1) Borrower shall pay to the Monitoring Agent (unless such Person
also is the Administrative Agent), if any, for its own benefit, on such terms as
such Monitoring Agent shall reasonably request, a fee in an amount equal to the
sum of: (i) for periods of monthly monitoring of the Borrowing Base by the
Monitoring Agent pursuant to Section 4.7(a), $40,000 per annum, (ii) for periods
of weekly monitoring of the Borrowing Base by the Monitoring Agent pursuant to
Section 4.7(a), $60,000 per annum, and (iii) for periods of daily monitoring of
the Borrowing Base by the Monitoring Agent pursuant to Section 4.7(a), $75,000
per annum. Borrower also shall pay the reasonable and customary charges, fees
and expenses of any and all auditors employed by the Monitoring Bank to assist
in its monitoring of the Collateral, including without limitation a fee in an
amount equal to $600 per person, per day.
(2) Borrower also shall pay reasonable and customary charges, fees
and expenses of each Blocked Account Bank, if any, pursuant to the applicable
Blocked Account Agreement.
4.3 Maintenance of Loan Account. The Disbursing Agent shall maintain
an account on its books in the name of Borrower (the "LOAN ACCOUNT") in which
Borrower will be charged with all loans and advances made by the Lenders to
Borrower or for Borrower's account and the other Obligations of Borrower under
the Credit Documents, including the Loans, all Letter of Credit Obligations, the
Fees, and any other Obligations. The Loan Account will be credited with all
payments received by the Disbursing Agent from Borrower. Absent manifest error,
books and records of the Disbursing Agent regarding the Loan Account shall be
final, conclusive and binding on Borrower.
4.4 Commitment Reductions.
(a) On the Maturity Date, the Commitment of each Lender shall
automatically reduce to zero and may not be reinstated.
(b) Borrower may reduce or terminate the Commitments at any time and
from time to time in whole or in part; provided, that (1) such reduction shall
be of an identical percentage of each applicable Lender's Commitment, and (2)
Borrower shall not have the right to reduce (or terminate) the Commitments to an
amount which is less than the aggregate amount of Letter of Credit Obligations
then outstanding unless Borrower concurrently pays or cash collateralizes all of
such Letter of Credit Obligations. Each such reduction must be in an aggregate
amount for all Lenders of not less than $1,000,000 (and in increments of
$1,000,000 thereafter). The Commitments may not be reduced to an aggregate
amount less than $20,000,000 unless all of the
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Commitments are reduced to zero. Once reduced, no portion of the Commitments may
be reinstated.
4.5 Voluntary Prepayments. Borrower shall have the right to prepay the
Loans in whole or in part from time to time without charge or penalty (except as
set forth in Section 4.9(d)) on the following terms and conditions:
(a) Borrower shall give the Disbursing Agent written notice (or
telephonic notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay Loans, at least three Business Days prior
to a prepayment of Eurodollar Loans and at least one Business Day prior to a
prepayment of Base Rate Loans, which notice shall specify the amount of such
prepayment and what Types of Loans are to be prepaid and, in the case of
Eurodollar Loans, the specific Borrowing(s) pursuant to which made, which notice
the Disbursing Agent shall promptly transmit to each of the Lenders;
(b) each prepayment of Eurodollar Loans shall be in an aggregate
principal amount for all Lenders of $5,000,000 or any integral multiple of
$1,000,000 in excess thereof (or, if less than $5,000,000 or such integral
multiple of Eurodollar Loans is then outstanding, such lesser amount of
Eurodollar Loans as may then be outstanding) and each prepayment of Base Rate
Loans shall be in an aggregate principal amount for all Lenders of $1,000,000 or
any integral multiple of $500,000 in excess thereof (or, if less than $1,000,000
or such integral multiple of Base Rate Loans is then outstanding, such lesser
amount of Base Rate Loans as may then be outstanding), or in each case such
lower amount as is required to comply with Section 4.6 or Section 8.10;
(c) prepayments of Eurodollar Loans made pursuant to this Section 4.5
may only be made on the last day of the Interest Period applicable thereto,
unless Borrower pays each Lender the breakage costs required under Section
4.9(d); and
(d) partial prepayments of the Loans shall be applied in the same order
as is set forth in Section 4.6(c) for mandatory prepayments.
4.6 Mandatory Payments and Prepayments.
(a) Mandatory Payments.
(1) The aggregate balance of Loans and all Letter of Credit
Obligations outstanding at any time in excess of the lesser of the Total
Commitments then in effect and the Borrowing Base then in effect shall be due
and payable immediately without the necessity of any demand, provided, that to
the extent that there are no outstanding Loans or unreimbursed drawings under
Letters of Credit, Borrower shall cash collateralize that portion of the
remaining Letter of Credit Obligations in excess of the lesser of such amounts.
The entire then remaining principal amount of the Loans and Letter of Credit
Obligations shall be due and payable on the Maturity Date.
(2) Subject to Section 2.4, all repayments of any Loans shall be
paid to the Disbursing Agent for the account of each Lender based upon its Pro
Rata Share of such Loans.
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(b) Mandatory Prepayments With Equity Proceeds. On each date after the
Closing Date on which Parent or any of its Subsidiaries receives any cash
proceeds from any capital contribution or from the issuance of any equity
securities, including any preferred stock (collectively, "EQUITY PROCEEDS"),
Borrower shall prepay either (or a combination of both, at its option) Senior
Notes (if and to the extent permitted under, and otherwise in accordance with
the terms of, the Senior Notes Documents as approved hereunder) or the
outstanding Loans (in accordance with Section 4.6(c)), in any such case in an
aggregate amount equal to 100% of such proceeds (net of any reasonable costs and
expenses directly attributable to such receipt or issuance); provided, however,
that no such prepayment shall be required from the direct proceeds of: (i) the
exercise by directors, officers and employees of Borrower of warrants or options
for Common Stock in an aggregate amount not in excess of $250,000; and (ii)
contributions by Parent to Borrower and by Borrower to its Subsidiaries which
are otherwise permitted hereunder.
(c) Application of Mandatory Prepayments. Other than during the
continuance of an Event of Default, all prepayments of the Loans required by
Section 2.5 or Section 4.6(b) shall be applied, first, to prepay Base Rate Loans
pro rata among such Loans, based on the outstanding amount of each such Loan and
the total outstanding amount of all such Loans, until such Loans shall have been
repaid in full, together with accrued and unpaid interest thereon, second, to
prepay Eurodollar Loans pro rata among such Loans by Borrowing as directed by
the Borrower (provided, that if the Borrower shall not provide any such
direction at the time of such prepayment, the Agent shall determine which
Borrowings shall be prepaid), based on the outstanding amount of each such Loan
and the total outstanding amount of all such Loans, until such Loans shall have
been repaid in full, together with accrued and unpaid interest thereon, third,
to cash collateralize all outstanding Letters of Credit, and fourth, to all
other outstanding Obligations. During the continuance of an Event of Default,
all prepayments of the Loans required by Section 2.5 or Section 4.6(b) shall be
applied in accordance with Section 9.5.
4.7 Monitoring and Collection of Accounts.
(a) Monitoring of Accounts. The Administrative Agent reserves the
right, in its sole discretion, at any time and from time to time to appoint, by
written notice to Borrower (or telephonic notice promptly confirmed in writing),
a Monitoring Agent to monitor the Borrowing Base and related assets of the
Credit Parties. Borrower shall deliver to such Monitoring Agent, if any, and the
Disbursing Agent, a Borrowing Base Certificate (i) on the first Business Day of
each month, if Borrower's Excess Availability equals or exceeds $20,000,000,
(ii) on the first Business Day of each week, if Borrower's Excess Availability
is less than $20,000,000 and equals or exceeds $15,000,000, or (iii) on each
Business Day, if Borrower's Excess Availability is less than $15,000,000 or an
Event of Default shall have occurred and be continuing. On a quarterly basis,
and at such other times as reasonably requested by the Administrative Agent, the
Monitoring Agent shall conduct field exams and appraisals of the Collateral. It
is understood by Borrower and the other Credit Parties that the Monitoring Agent
shall be entitled to check or enquire into the adequacy, accuracy or
completeness of any information provided by or available from each Credit Party
in connection with the Borrowing Base and to assess or keep under review the
Collateral, business affairs and financial condition of any or all of the Credit
Parties. Borrower shall, and shall cause each other Credit Party to, cooperate
with the Monitoring Agent at all times in connection with this Agreement.
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(b) Collection of Accounts. Not later than thirty (30) days after the
Closing Date, or by such other Date as the Administrative Agent, in its
reasonable discretion, may otherwise determine, Borrower shall, and shall cause
each other Credit Party to, enter into and maintain agreements in form and
substance reasonably satisfactory to Administrative Agent (the "BLOCKED ACCOUNT
AGREEMENTS") with one or more Lenders or other financial institutions (each, a
"Blocked Account Bank"), which agreements shall, among other things, provide for
the establishment of a Collection Account maintained by the Disbursing Agent for
the deposit of Collections (each, a "COLLECTION ACCOUNT") and a separate account
for the disbursement of Collections and Loan proceeds (each, a "DISBURSEMENT
ACCOUNT") for each Credit Party. Borrower shall, and shall cause each other
Credit Party to, at all times maintain at least one Collection Account and at
least one Disbursement Account with the Disbursing Agent, and shall, and shall
cause each other Credit Party to (and in the event any such Person fails to do
so, the Administrative Agent may upon the occurrence and during the continuance
of a Default, in the name of such Person or in its own name), instruct all
account debtors on the Accounts of each Credit Party to remit all Collections to
such Collection Accounts. All Collections and other amounts received by any
Credit Party from any account debtor, in addition to all other cash received
from any other source, shall upon receipt be deposited into a Collection
Account. The Disbursing Agent shall apply all funds on deposit in the Collection
Accounts to the outstanding Obligations pursuant to Section 4.6(c) immediately
upon the deposit thereof. Prior to the occurrence of a Default or an Event of
Default, all amounts in the Disbursement Accounts shall be made available to
Borrower for Permitted Acquisitions, working capital and general corporate
purposes or otherwise applied as set forth in Section 2.5. Except for the
accounts identified in Section 4.7 of the Disclosure Schedule, without the prior
written consent of the Administrative Agent, Borrower shall not, and shall not
permit any other Credit Party to, (i) open or maintain any lockbox with any
Person other than the Disbursing Agent, or (ii) open or maintain any account
with a bank or other financial institution (including a broker/dealer) or any
other account where money is or may be deposited or maintained with any Person,
other than a Collection Account or a Disbursement Account.
(c) Cash Dominion. Upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent may (or shall, if directed to do so
by Required Lenders) direct the Disbursing Agent to take control of the
Collection Account of each Credit Party (including by having the proceeds
thereof swept to an account in the Disbursing Agent's or the Collateral Agent's
name and under its sole dominion and control, whether at the Disbursing Agent or
otherwise), apply any and all funds on deposit in any such account on a daily or
other basis in accordance with Section 9.5 and borrow Loans in accordance with
Section 2.2(b) or Section 2.5, as applicable, monitor collections of Accounts
and perform such other duties as are provided for in any Credit Document or
delegated to it from time to time by Agent. Upon the occurrence and during the
continuance of an Event of Default, at the election of the Administrative Agent,
Borrower shall, and shall cause each other Credit Party to, enter into and
maintain agreements (the "Lockbox Agreements") with the Disbursing Agent in form
and substance reasonably satisfactory to the Administrative Agent, which
agreements shall, among other things, provide for the establishment of a lockbox
(each, a "Lockbox") maintained by the Disbursing Agent for the deposit of
Collections.
4.8 Calculations. All calculations of (i) interest hereunder and (ii)
Fees, including, without limitation, Commitment Fees and Letter of Credit Fees,
shall be made by the
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Administrative Agent, on the basis of a year of 360 days (365/366 days for
interest on Base Rate Loans) for the actual number of days elapsed (including
the first day but excluding the last day) occurring in the period for which such
interest or Fees are payable. Each determination by the Administrative Agent of
interest rates, Commitment Fees, Letter of Credit Fees, L/C Facing Fees, Issuing
Bank Fees and other fees, charges, expenses and payments hereunder shall be
conclusive and binding for all purposes, absent manifest error.
4.9 Special Provisions Relating to Eurodollar Loans.
(a) Continuation. With respect to any Borrowing consisting of
Eurodollar Loans, subject to Section 4.9(c) and so long as no Default or Event
of Default has occurred and is continuing, Borrower may elect to maintain such
Borrowing or any portion thereof in excess of $1,000,000 as a Borrowing
consisting of Eurodollar Loans by selecting a new Interest Period for such
Borrowing, which new Interest Period shall commence on the last day of the
immediately preceding Interest Period. Each selection of a new Interest Period
shall be made by notice given by Borrower to the Disbursing Agent not later than
11:00 A.M. New York time on the third Business Day prior to the date of any such
continuation. Such notice by Borrower of a continuation (a "NOTICE OF
CONTINUATION") shall be substantially in the form of Exhibit F and shall specify
(i) the date of such continuation, (ii) the Type of Loans subject to such
continuation, (iii) the aggregate amount of Loans subject to such continuation
(which must be at least $1,000,000) and (iv) the duration of the selected
Interest Period. Borrower may combine Borrowings with Interest Periods which end
on the same Business Day into a single new Borrowing and may split one Borrowing
into two or more Borrowings of at least $1,000,000 each, pursuant to this
Section 4.9(a). If Borrower shall fail to select a new Interest Period for any
Borrowing consisting of Eurodollar Loans in accordance with this Section 4.9(a),
such Loans will automatically, on the last day of the then existing Interest
Period therefore, convert into Base Rate Loans. The Disbursing Agent shall give
each Lender prompt notice by telephone or facsimile transmission of each Notice
of Continuation.
(b) Conversion. Subject to Section 4.9(c) and (in the case of
conversions to Eurodollar Loans) so long as no Default or Event of Default has
occurred and is continuing, Borrower may, on any Business Day upon written
notice (each such notice, a "NOTICE OF CONVERSION") given to the Disbursing
Agent, convert the entire amount of or a portion of all Loans of one Type
comprising the same Borrowing into Loans of another Type; provided, however,
that any conversion of any Eurodollar Loans into Base Rate Loans shall be made
on, and only on, the last day of an Interest Period for such Eurodollar Loans
and, upon conversion of any Base Rate Loans into Eurodollar Loans, Borrower
shall pay accrued interest to the date of conversion on the principal amount of
Base Rate Loans converted. Each such Notice of Conversion shall be given not
later than 11:00 A.M. New York time on the Business Day prior to the date of any
proposed conversion into Base Rate Loans and on the third Business Day prior to
the date of any proposed conversion into Eurodollar Loans. Subject to the
restrictions specified above, each Notice of Conversion shall be substantially
in the form of Exhibit F and shall specify (i) the requested date of such
conversion, (ii) the Type of Loans to be converted, (iii) the portion of such
Type of Loans to be converted, (iv) the Type of Loan such Loans are to be
converted into and (v) if such conversion is into Eurodollar Loans, the duration
of the Interest Period of such Loans. Each conversion into Eurodollar Loans
shall be in an aggregate amount for the Loans of all Lenders
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of not less than $1,000,000 or an integral multiple of $1,000,000 in excess
thereof. Borrower may elect to convert the entire amount of or a portion of all
Loans of one Type comprising more than one Borrowing into Loans of another Type
by combining such Borrowings into one Borrowing, provided, that if the
Borrowings so combined consist of Eurodollar Loans, such Loans shall have
Interest Periods ending on the same date.
(c) Certain Limitations on Eurodollar Loans. The right of Borrower to
maintain, select, continue or convert Eurodollar Loans shall be limited as
follows:
(1) If the Administrative Agent is not offering U.S. dollar
deposits (in the applicable amounts) in the London interbank market, or the
Administrative Agent determines that adequate and fair means do not otherwise
exist for ascertaining the Adjusted Eurodollar Rate for Eurodollar Loans
comprising any requested Borrowing, continuation or conversion, the right of
Borrower to select Eurodollar Loans for such Borrowing, continuation or
conversion or any subsequent Borrowing, continuation or conversion shall be
suspended until the Administrative Agent shall notify Borrower and the Lenders
that the circumstances causing such suspension no longer exist, and each Loan
comprising such requested Borrowing, continuation or conversion shall be made as
a Base Rate Loan.
(2) If Required Lenders shall determine and notify the
Administrative Agent that the Adjusted Eurodollar Rate for Loans comprising a
Borrowing will not adequately reflect the cost to such Lenders of making or
funding their respective Loans for such Borrowing, the right of Borrower to
select Eurodollar Loans for such Borrowing shall be suspended until the
Administrative Agent shall notify Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and each Loan comprising
such Borrowing shall be made as a Base Rate Loan.
(3) If at any time any Lender determines (which determination
shall, absent manifest error, be conclusive and binding on all parties) that the
making, continuation or conversion of any Loan as a Eurodollar Loan has become
unlawful or impermissible by reason of compliance by that Lender with any law,
governmental rule, regulation or order of any Governmental Authority (whether or
not having the force of law and whether or not failure to do so would result in
costs or penalties), then such Lender may give notice of that determination in
writing to Borrower and the Administrative Agent and the Administrative Agent
shall promptly transmit the notice to each other Lender. Until such Lender gives
notice otherwise, the right of Borrower to select Eurodollar Loans from that
Lender shall be suspended and, to the extent required by applicable law, rule,
regulation, or order, each Eurodollar Loan outstanding from that Lender shall
automatically and immediately convert to a Base Rate Loan.
(4) There shall not be outstanding at any one time more than
an aggregate of five (5) Borrowings of Eurodollar Loans.
(d) Compensation.
(1) Each Notice of Continuation and Notice of Conversion shall
be irrevocable by and binding on Borrower. In the case of any Borrowing,
continuation or conversion that the
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related Notice of Borrowing, Notice of Continuation or Notice of Conversion
specifies is to be comprised of Eurodollar Loans, Borrower shall indemnify each
Lender (other than a Defaulting Lender) against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified in such Notice of
Borrowing, Notice of Continuation or Notice of Conversion, the applicable
conditions set forth in Article 5, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds acquired by such
Lender to fund the Loan to be made by such Lender as part of such Borrowing,
continuation or conversion.
(2) If any payment of principal of, or conversion or continuation
of, any Eurodollar Loan is made other than on the last day of the Interest
Period for such Loan for any reason, Borrower shall, within ten (10) Business
Days of written demand by any Lender (a copy of which demand such Lender shall
deliver to the Administrative Agent), pay to the Disbursing Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Loan.
(3) Each Lender which requests compensation under this paragraph
(d) shall use efforts it deems reasonable in the circumstances and not in
violation of its internal policies to minimize the losses, costs and expenses
for which it requests compensation, provided, that such efforts do not cause the
imposition on such Lender of legal or regulatory burdens and that such Lender
shall not be required to incur any expense in connection with such mitigation
efforts which will not be reimbursed by Borrower promptly pursuant to this
paragraph (d).
4.10 Increased Costs; Capital Adequacy.
(a) If after the date of this Agreement the adoption of or any change
in any Requirement of Law or in the interpretation or administration thereof by
any Governmental Authority (whether or not having the force of law) or
compliance by any Agent, the Issuing Bank or any Lender with any direction,
request or requirement (whether or not having the force of law) of any
Governmental Authority or monetary authority, including Regulation D of the
Federal Reserve as from time to time in effect (and any successor thereto), in
each case after the date hereof:
(1) shall change the basis of taxation of payments to any Agent,
the Issuing Bank or any Lender in respect of the principal of or interest on any
Loan made by such Lender (other than taxes imposed on or measured by the overall
net income of such Agent, the Issuing Bank or such Lender, as the case may be,
by the jurisdiction in which such Person is organized or has its principal
office (or lending office) or by any political subdivision or taxing authority
therein);
(2) shall impose, modify or hold applicable any reserve, deposit,
compulsory loan or other similar requirement against assets of, deposits with or
for the account of, or other
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extensions of credit by, any office of any Agent, the Issuing Bank or any Lender
(which requirement, with respect to Loans, is not otherwise included in the
determination of the Adjusted Eurodollar Rate or the Base Rate, as applicable);
or
(3) shall impose on any Agent, the Issuing Bank or any Lender any other
condition or requirement affecting this Agreement, Letters of Credit issued by
the Issuing Bank or participations purchased therein by any Lender or extensions
of credit made by any Agent or any Lender;
and the result of any of the foregoing is to increase the cost to such Person of
making, converting into, continuing or maintaining Loans or issuing or
maintaining any Letter of Credit or of purchasing and maintaining any
participation therein, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, Borrower shall pay to such Agent, the Issuing
Bank or such Lender, as the case may be, any additional amounts necessary to
compensate such Person for such increased cost or reduced receipt, together with
interest on such amount from the date of the required payment until payment in
full thereof at a rate equal at all times to the Base Rate or the Default Rate,
as applicable. If any Person becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower, through the
Administrative Agent, of the event by reason of which it has become so entitled.
This covenant shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
(b) If any Agent, the Issuing Bank or any Lender shall have determined
that the applicability of any law, rule, regulation or guideline adopted after
the date hereof pursuant to or arising out of the July 1988 report of the Basic
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption after the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any such Person or any such Person's
holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Person's or such holding company's capital as a
consequence of its obligations hereunder to a level below that which such Person
or such holding company could have achieved but for such adoption, change or
compliance (taking into consideration such Person's or such holding company's
policies with respect to capital adequacy) by an amount deemed by such Person to
be material, then from time to time, after submission by such Person to Borrower
(with a copy to the Administrative Agent) of a written request therefor,
Borrower shall pay to such Person such additional amount or amounts as will
compensate such Person for any such reduction suffered.
(c) A certificate of the applicable Agent, the Issuing Bank or the
applicable Lender, as the case may be, setting forth such amount or amounts as
shall be necessary to compensate such Person or its holding company as specified
in paragraph (a) or (b) above, as the case may be, shall be delivered to
Borrower (with a copy to the Administrative Agent) and shall be conclusive
absent
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manifest error. Borrower shall pay such Person the amount shown as due on any
such certificate delivered by it within 10 Business Days after its receipt of
the same.
4.11 Taxes.
(a) All payments made by Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future taxes, levies, imposts, charges, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding (i) net income taxes or any other taxes
imposed on or measured by the net income or profits of an Agent, the Issuing
Bank or a Lender, as the case may be, in each case by the jurisdiction under the
laws of which such Person is organized or any political subdivision thereof or
by the jurisdiction in which the principal or applicable lending or issuing
office of such Person is located or any political subdivision thereof and (ii)
U.S. withholding taxes payable with respect to payments hereunder under laws
(including any treaty, ruling, determination or regulation) in effect on, but
not any increase in U.S. withholding tax resulting from any subsequent change in
such laws occurring after, (x) the date hereof in the case of an Agent, the
Issuing Bank and any Person which is a Lender as of the date of this Agreement,
and (y) in the case of any other Lender, the date of the Assignment and
Acceptance Agreement pursuant to which it became a Lender (all such non-excluded
taxes, levies, imposts, charges, deductions and withholdings the "NON-EXCLUDED
TAXES"). In addition, Borrower agrees to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Credit Document ("OTHER TAXES"). If any Non-Excluded Taxes or Other Taxes
are required by law to be withheld from any amounts payable to an Agent, the
Issuing Bank or any Lender hereunder or under the Notes, the amounts so payable
to such Person shall be increased to the extent necessary to yield to such
Person interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the Notes. Whenever any Non-Excluded
Taxes or Other Taxes are payable by Borrower, upon receipt thereof Borrower
shall send to the Disbursing Agent for its own account or for the account of the
Issuing Bank or the applicable Agent or Lender, as the case may be, a certified
copy of any original official receipt received by Borrower showing payment
thereof. Borrower shall indemnify each Agent, the Issuing Bank and the Lenders
for the full amount of Non-Excluded Taxes, Other Taxes and any taxes imposed by
any jurisdiction on amounts payable under this Section 4.11 that are paid by
such indemnified Person (including penalties, interest and expenses arising
therefrom or with respect thereto). If an Agent, the Issuing Bank or a Lender
receives a refund which it determines is in respect of any Non-Excluded Taxes or
Other Taxes for which such Person has received payment from Borrower hereunder,
such Person shall, within 10 days of such determination by such Person, repay
such refund to Borrower, provided that Borrower, upon the request of such
Person, agrees to return such refund (plus any penalties, interest or other
charges) to such Person in the event such Person is required to repay such
refund. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
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(b) Each Lender that is not incorporated under the laws of the U.S. or
a State thereof shall:
(1) in the case of a Lender that is a "bank" under Section
881(c)(3)(A) of the Code:
(A) on or before the date of the first payment to such Lender
pursuant to this Agreement following the Closing Date or on or before
the effective date of the Assignment and Acceptance Agreement pursuant
to which such Person becomes a Lender, deliver to Borrower and the
Disbursing Agent (x) two duly completed copies of U.S. Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as the case
may be, and (y) a U.S. Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be; and
(B) deliver to Borrower and the Disbursing Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and promptly upon the
occurrence of any event requiring a change in the most recent form
previously delivered by it to Borrower; or
(2) in the case of a Lender that is not a "bank" under Section
881(c)(3)(A) of the Code:
(A) on or before the date of the first payment to such Lender
pursuant to this Agreement following the Closing Date or on or before
the effective date of the Assignment and Acceptance Agreement pursuant
to which such Person becomes a Lender, deliver to Borrower and the
Disbursing Agent (i) a statement under penalties of perjury that (to
the extent true) such Lender (x) is not a "bank" under Section
881(c)(3)(A) of the Code, is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated as
a bank for purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any application made to
a rating agency or qualification for any exemption from tax, securities
law or other legal requirements, (y) is not a 10-percent shareholder of
a "bank" within the meaning of Section 881(c)(3)(B) of the Code and (z)
is not a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of the Code
and (ii) an Internal Revenue Service Form W-8; and
(B) deliver to Borrower and the Disbursing Agent a further copy of
said Form W-8, or any successor applicable form or other manner of
certification on or before the date that any such Form W-8 expires or
becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by such Lender;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises Borrower and the Disbursing
Agent, in which case such Lender shall provide substitute or replacement
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forms, if any. Such Lender shall certify (i) in the case of a Form 1001 or 4224,
that it is entitled to receive payments under this Agreement without deduction
or withholding of any U.S. federal income taxes and (ii) in the case of a Form
W-8 or W-9, that it is entitled to an exemption from U.S. backup withholding
tax. Each Person that shall become a Participant pursuant to Section 11.8(d)
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this Section to the Lender
from which the related participation shall have been purchased. Borrower shall
be entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the U.S. (or any political subdivision or
taxing authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Lender which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) to the
extent that such Lender has not provided to Borrower on or prior to the date
required pursuant to this Section 4.11(b) the IRS form or forms, if any, so
required to be provided to Borrower, and Borrower shall not be obligated under
this Section 4.11 to gross-up payments to be made to such a Lender in respect of
income or similar taxes imposed by the U.S. if such Lender has not provided to
Borrower on or prior to the date so required the IRS form or forms required to
be provided to Borrower pursuant to this Section 4.11(b).
(c) Each Lender agrees to use reasonable efforts (including reasonable
efforts to change its lending office), to avoid or to minimize any amounts which
might otherwise be payable pursuant to Section 4.10 and this Section 4.11,
provided, that such efforts do not cause the imposition on such Lender of
additional costs or legal or regulatory burdens.
4.12 Sharing of Payments. If any Lender obtains any payment in excess
of its Pro Rata Share of payments on account of the Loans or Letter of Credit
Obligations, as applicable, it will immediately purchase from the other Lenders
portions of their Loans and Letter of Credit participations, as applicable,
sufficient to cause that Lender to share the excess payment ratably with all the
other Lenders.
ARTICLE 5 CONDITIONS PRECEDENT
5.1 Conditions to Initial Loans and Letters of Credit. The obligation
of each Lender to fund its Pro Rata Share of the initial Borrowing and the
obligation of the Issuing Bank to issue the first Letter of Credit, are subject
to the satisfaction or waiver of the following conditions precedent on the
Closing Date:
(a) Closing Documents List. The Administrative Agent and each Lender
shall have received each of the agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the Closing Documents
List, each duly executed (where applicable) and delivered by all appropriate
Persons and in form and substance satisfactory to the Administrative Agent and
the Lenders.
(b) Existing Indebtedness. The Administrative Agent and each Lender
shall have received evidence satisfactory to it that all Indebtedness of Parent
and each of its Subsidiaries (other than Indebtedness expressly permitted under
Section 8.3) shall have been (or will be,
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concurrently with the funding of the initial Loans, with proceeds thereof)
repaid, forgiven or otherwise extinguished.
(c) Senior Notes. The Administrative Agent and each Lender shall have
received copies of all agreements, instruments and documents relating to the
Senior Notes, including each of the Senior Notes Documents and any amendments or
side letters relating thereto, each certified by the President or Chief
Financial Officer of Borrower to be true, correct and complete copies of all
such agreements, instruments, and documents as in effect on the Closing Date,
and each in form and substance satisfactory to the Administrative Agent and each
Lender, all of the conditions precedent to the issuance and sale of the Senior
Notes shall have been met (without regard to any waivers thereof), and Senior
Notes with an aggregate principal amount of $100,000,000 shall be issued and
sold concurrently with the making of the initial Loans under this Agreement.
(d) Consummation of Merger. The Administrative Agent and each Lender
shall have received copies of all agreements, instruments and documents relating
to the Merger, including the Merger Agreement and any amendments or side letters
relating thereto, each certified by the President or Chief Financial Officer of
Borrower to be true, correct and complete copies of all such agreements,
instruments and documents as in effect on the Closing Date, and each in form and
substance satisfactory to the Administrative Agent and each Lender. All of the
conditions precedent to the consummation of the Merger shall have been met
(without regard to any waivers thereof). The Merger shall be consummated
concurrently with the making of the initial Loans under this Agreement for
aggregate Acquisition Consideration not in excess of $150,000,000.
(e) Equity Contribution. The Administrative Agent and each Lender shall
have received evidence satisfactory to it of the making of the Equity
Contribution by Thayer, the Management Investors and Parent on the Closing Date.
(f) Pro Forma Balance Sheet. The Administrative Agent and each Lender
shall have received a pro forma consolidated and consolidating balance sheet of
Parent and each of its Subsidiaries (including Borrower) as of the Closing Date,
giving effect to the Merger, initial Loans and other transactions contemplated
hereby, which shall be satisfactory in form and substance to the Administrative
Agent and each Lender.
(g) Liquidity. The Administrative Agent and each Lender shall have
received evidence satisfactory to it that Borrower has working capital (defined
for this purpose as cash or Cash Equivalents on hand and availability under the
Commitments taking into account the Borrowing Base), after giving effect to
consummation of the transactions completed herein and the making of the initial
Loans on the Closing Date at least equal to $15,000,000.
(h) Corporate Structure; Due Diligence. The Administrative Agent and
each Lender shall have reviewed and be satisfied with the corporate structure,
prospective liabilities (including environmental and pension liabilities) and
tax and other regulatory compliance of Parent and its Subsidiaries (including
Borrower), including review of a completed due diligence report by Coopers &
Lybrand, a completed environmental audit report by Versar, Inc., and a completed
insurance review report by Aon Risk Services, Inc., copies of which shall have
been provided to the Administrative Agent and each Lender.
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(i) Uses of Proceeds and Fees and Expenses. The Administrative Agent
and each Lender shall have received and approved a written breakdown of all uses
of proceeds of the Loans, the Senior Notes, the equity and all other funds
contemplated herein, and all Fees and Expenses (including reasonable attorneys'
fees and expenses) payable on or before the Closing Date shall have been paid in
full. Counsel to the Administrative Agent, Latham & Watkins, shall have received
payment in full of its fees and expenses then billed for the services provided
by it in connection with the preparation, negotiation, execution, and delivery
of this Agreement and the other Credit Documents and other matters relating
thereto.
(j) No Material Adverse Change. (i) There shall not have been any
material adverse change in the condition (financial or otherwise), assets,
liabilities, operations or prospects of Borrower or any of its significant
Subsidiaries since September 27, 1996, and (ii) there shall not have occurred a
substantial impairment of the financial markets generally that is reasonably
likely to adversely affect the transactions contemplated hereby, in each case as
determined by the Administrative Agent and each Lender in its sole discretion.
(k) Additional Documents. The Credit Parties shall have executed and
delivered (or caused to be executed and delivered) to the Administrative Agent
for distribution to the Lenders any and all other information, agreements,
instruments, certificates, opinions and other documents regarding the Merger,
the Senior Notes, the Equity Contribution and the other transactions
contemplated hereby as the Administrative Agent or any Lender shall request.
5.2 Conditions Precedent to All Loans and Letters of Credit. The
obligation of each Lender to fund its Pro Rata Share of any requested Loan or of
the Issuing Bank to issue any requested Letter of Credit is subject to the
following additional conditions precedent, and each Notice of Borrowing, each
Letter of Credit Request, and each acceptance of the proceeds of a Loan shall
constitute a representation and warranty by Borrower that such conditions are
satisfied:
(a) Representations and Warranties. All representations and warranties
contained in this Agreement and the other Credit Documents shall be true and
correct in all material respects on and as of the date of such Notice of
Borrowing or Letter of Credit Request, and on and as of the date such Loan is
made or such Letter of Credit is issued, as if then made, other than
representations and warranties that expressly relate solely to an earlier date;
and
(b) No Defaults. No Default or Event of Default shall have occurred, or
would result from the making of the requested Loan or the issuance of the
requested Letter of Credit, which has not been waived.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and
to make the Loans and other financial accommodations described herein, and to
induce the Issuing Bank to issue Letters of Credit, Borrower hereby represents
and warrants to the Agents, the Lenders and the Issuing Bank that the following
representations and warranties are true. Such representations and
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warranties, and all other representations and warranties made by any Credit
Party in any other Credit Document, shall survive the execution and delivery of
the Credit Documents.
6.1 Organization and Qualification. Each Credit Party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it is engaged and
(iii) is duly qualified and is authorized to do business and is in good standing
in each jurisdiction where it is engaged in business except, in the case of this
clause (iii), where the failure to be so qualified would not have a Material
Adverse Effect. As of the Closing Date, Section 6.1 of the Disclosure Schedule
lists all jurisdictions in which the Credit Parties are qualified to do business
as foreign corporations, and since that date, all additional such jurisdictions
have been disclosed to the Administrative Agent in writing.
6.2 Authority. Each Credit Party has the requisite corporate power and
authority to execute, deliver and perform each of the Credit Documents to which
it is a party. All corporate action necessary for the execution, delivery and
performance of each of the Credit Documents by each Credit Party which is a
party thereto has been taken.
6.3 Enforceability. This Agreement and each other Credit Document is
the legal, valid and binding obligation of each Credit Party which is a party
thereto, enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
6.4 No Conflict. The execution, delivery and performance of each Credit
Document by each Credit Party which is a party thereto are not in contravention
of any Requirement of Law or any material indenture, contract, lease, agreement,
instrument or other commitment to which any Credit Party is a party or by which
any Credit Party or any of their properties are bound and will not result in the
imposition of any Liens upon any of the property of any Credit Party (other than
Liens in favor of the Collateral Agent).
6.5 Consents and Filings. No authorization, consent, approval, order,
license or permit from, or filing, registration or qualification with, any
Person is required in connection with the execution, delivery and performance of
this Agreement or any other Credit Document, except (a) those that have been
obtained or made, (b) filings necessary to create, perfect or maintain the
perfection of Liens in favor of the Collateral Agent on the Collateral, and (c)
those which the failure to obtain or make would not result in a Material Adverse
Effect.
6.6 Government Regulation. No Credit Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, or
the Investment Company Act of 1940, nor is any Credit Party subject to any other
Requirement of Law which purports to regulate or restrict its ability to borrow
money or grant Liens on its assets in the manner contemplated in the Credit
Documents.
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6.7 Solvency. Both before and after giving effect to the transactions
contemplated in this Agreement: (i) the fair saleable value of the assets of
each Credit Party is not less than the amount that will be required to pay the
probable liabilities of such Credit Party on its existing debts as they become
due; (ii) no Credit Party is engaged in, or about to become engaged in, a
business or transaction for which such Credit Party's property would constitute
unreasonably small capital in relation to such business or transaction; and
(iii) no Credit Party has incurred, intends to incur or believes that it will
incur, debts and liabilities beyond its ability to pay as such debts and
liabilities become absolute and matured.
6.8 Financial Data.
(a) Borrower has provided to the Administrative Agent and each Lender
complete and accurate copies of annual audited Financial Statements for the
Fiscal Years 1994 through 1996 and unaudited Financial Statements for the Fiscal
Quarter ended March 29, 1997. Such Financial Statements have been prepared in
accordance with GAAP throughout the periods involved and fairly present the
respective consolidated financial positions, results of operations and cash
flows of Parent and Borrower as at such dates and for such periods, except as
otherwise specifically described in the notes to any of such Financial
Statements. Since the date of the most recent Financial Statements delivered to
the Administrative Agent and each Lender, neither Borrower nor any of its
Subsidiaries has any material Contingent Obligation, contingent liability or
liability for taxes, long-term leases or commitments which is not reflected in
such Financial Statements or which is not required to be so reflected in
accordance with GAAP.
(b) Borrower has provided to the Administrative Agent and each Lender
complete and accurate copies of the pro forma consolidated and consolidating
balance sheet of Parent as of the Closing Date, giving effect to the Merger and
the other transactions contemplated in this Agreement to occur on the Closing
Date. Such balance sheet fairly presents the pro forma combined financial
condition of Parent and CPAC as of the Closing Date, giving effect to such
transactions.
(c) Borrower has provided to the Administrative Agent and each Lender
complete and accurate copies of the Projections. Such Projections were prepared
by management of Borrower in good faith and based on good faith estimates and
assumptions believed by management of Borrower to be reasonable at the time. As
of the Closing Date, to the best knowledge of Borrower, the assumptions on which
the Projections are based are reasonable and consistent with all facts known to
Borrower and the Projections are reasonably based on such assumptions.
6.9 Rights in Collateral; Priority of Liens; Names. The applicable
Credit Party owns all property purporting to be Collateral, free and clear of
any and all Liens (other than Permitted Liens). The Credit Documents, together
with all necessary recordings thereof and filings with respect thereto or the
possession by the Collateral Agent of the Collateral as provided under the
appropriate Credit Document, create as security for the Obligations valid and
enforceable perfected Liens in and on all of the Collateral in favor of the
Collateral Agent for the benefit of the Agents, the Issuing Bank and the
Lenders, superior and prior to the rights of all third Persons. Upon the proper
filing of the UCC financing statements listed in the Closing Documents List, the
Credit Documents create first, prior and perfected Liens on the Collateral to
the extent such Liens
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can be perfected by the filing of financing statements. As of the Closing Date,
the only names under which each Credit Party has conducted business during the
last five years, are listed in Section 6.9 of the Disclosure Schedule.
6.10 Locations of Offices, Records and other Property. The address of
the principal place of business and chief executive office of each Credit Party
is set forth in Section 6.10 of the Disclosure Schedule (or has changed since
the Closing Date to another location as to which Borrower has complied with the
requirements of Section 7.3(e)). The books and records of each Credit Party, and
all its chattel paper and records of Accounts, are maintained exclusively at
such locations. The location of all real property owned or leased by any Credit
Party is set forth in Section 6.10 of the Disclosure Schedule, except for real
property first owned or leased after the Closing Date, as to all of which
Borrower has complied with the requirements of Section 7.3(e). There is no
jurisdiction in which any Credit Party owns or leases any real property or has
any Collateral other than those jurisdictions identified in Section 6.10 of the
Disclosure Schedule or as to which Borrower has complied with the requirements
of Section 7.3(e). A complete list of the legal name and address of each
warehouse at which Inventory of any Credit Party is stored is set forth in
Section 6.10 of the Disclosure Schedule, except for warehouses first used by the
applicable Credit Party after the Closing Date, as to all of which additional
warehouses Borrower has notified the Collateral Agent and provided to the
Collateral Agent a bailee letter in form and substance reasonably satisfactory
to the Collateral Agent. None of the receipts received by any Credit Party from
any warehouseman state that the Inventory covered thereby is to be delivered to
bearer or to the order of a named person or to a named person and/or such named
person's assigns.
6.11 Subsidiaries; Ownership of Stock. Parent is the record and the
beneficial owner of all of the Capital Stock of Borrower. The only direct or
indirect Subsidiaries of Borrower (after the Closing Date, other than Acquired
Persons and Subsidiaries established in accordance with Section 8.8(c)) are
those listed in Section 6.11 of the Disclosure Schedule. Borrower is the record
and beneficial owner of all of the Capital Stock of each of its Subsidiaries.
Except as set forth in Section 6.11 of the Disclosure Schedule, there are no
proxies, irrevocable or otherwise, with respect to any such Capital Stock, and
no equity securities of Borrower or any of such Subsidiaries are or may become
required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any Capital Stock of
any such Person, and there are no contracts, commitments, understandings or
arrangements by which Borrower or any such Subsidiary is or may become bound to
issue additional Capital Stock or securities convertible into or exchangeable
for such Capital Stock. All of such Capital Stock so owned by Parent, Borrower
and each Subsidiary of either or both of them is owned by such Person free and
clear of any Liens other than Liens in favor of the Collateral Agent pursuant to
the Credit Documents.
6.12 Litigation. Except as set forth in Section 6.12 of the Disclosure
Schedule, no judgments, orders, writs or decrees are outstanding against or
affecting any Credit Party or any of the properties, rights, revenues or assets
of any Credit Party, nor is there now pending or, to the best of Borrower's
knowledge, threatened, any litigation, claim, investigation, arbitration, or
other proceeding against or affecting any Credit Party or any of the properties,
rights, revenues or assets of any Credit Party, which, individually or in the
aggregate, if adversely determined
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would reasonably be expected to have a Material Adverse Effect, including any
counterclaim brought in a litigation or arbitration in which any Credit Party is
the plaintiff.
6.13 No Defaults. No Credit Party is in default in any material respect
under any term of any Material Contract. No Credit Party is in default in any
material respect under any term of any indenture, contract, lease, agreement,
instrument or other commitment to which it is a party or by which it is bound,
and Borrower knows of no dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment, in each case except where the
requisite waivers or consents have been obtained or which defaults or disputes,
individually and in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
6.14 Labor Matters. As of the Closing Date, Section 6.14 of the
Disclosure Schedule accurately sets forth all labor contracts to which any
Credit Party is a party and their dates of expiration. No Credit Party is
engaged in any unfair labor practice that would reasonably be expected to have a
Material Adverse Effect. There is no strike, labor dispute, union organizing
activity, slowdown or stoppage pending or, to the best knowledge of Borrower,
threatened against any Credit Party which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.
6.15 ERISA. No ERISA Affiliate maintains or contributes to any Plan,
other than those listed on Section 6.15 of the Disclosure Schedule or, after the
Closing Date, as otherwise disclosed in writing to the Administrative Agent.
Each Credit Party and each ERISA Affiliate have fulfilled all contribution
obligations for each Plan (including obligations related to the minimum funding
standards of ERISA and the Code). No Termination Event has occurred nor has any
other event occurred that would reasonably be expected to result in a
Termination Event. No Credit Party, any ERISA Affiliate, or any fiduciary of any
Plan is subject to any direct or indirect liability with respect to any Plan
under any Requirement of Law or agreement. No Credit Party or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the Code.
6.16 Compliance with Law.
(a) Generally. No Credit Party has violated or failed to comply with
any Requirement of Law, except such violations or failures to comply which,
individually and in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(b) Compliance with Environmental Laws.
(1) Except as set forth in Section 6.16 of the Disclosure Schedule,
(A) each of the Credit Parties and Environmental Affiliates are in compliance in
all material respects with all applicable Environmental Laws, (B) each of the
Credit Parties and Environmental Affiliates have all Environmental Approvals
required to operate their businesses as presently conducted, (C) none of the
Credit Parties has received and, to the best of Borrower's knowledge, no
Environmental Affiliate has received any written communication from a
Governmental Authority, employee or any other Person or group that alleges that
such Credit Party is not in compliance in all material respects with all
Environmental Laws (which, if first received after the Closing Date, has not
been disclosed to the Lenders if and to the extent required under Section
7.3(c)), and (D) there are no
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circumstances known to Borrower which may prevent or interfere with such
compliance in the future.
(2) Except as set forth in Section 6.16 of the Disclosure Schedule:
there is no Environmental Claim pending or threatened against any Credit Party
or Environmental Affiliate which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect; and there are no past
or present actions, activities, circumstances, conditions, events or incidents,
including the release, emission, discharge or disposal of any Material of
Environmental Concern, that would reasonably be expected to form the basis of
any Environmental Claims against any Credit Party or Environmental Affiliate,
which Environmental Claims, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(3) Without limiting the generality of the foregoing, except as
disclosed in Section 6.16 of the Disclosure Schedule or, after the Closing Date,
as otherwise disclosed in writing to Agent prior to and in connection with a
Permitted Acquisition in which the applicable property is first acquired, to
Borrower's knowledge: (i) there are no on-site or off-site locations at which
any Credit Party or Environmental Affiliate has stored, disposed of or arranged
for the disposal of Materials of Environmental Concern; (ii) there are no
underground storage tanks located on property owned or leased by any Credit
Party or Environmental Affiliate; (iii) there is no asbestos contained in or
forming part of any building, building component, structure or office space
owned or leased by any Credit Party or Environmental Affiliate; and (iv) no
polychlorinated biphenyls (PCB's) are used or stored at any property owned or
leased by any Credit Party or Environmental Affiliate.
6.17 Taxes and Tax Returns. Each Credit Party has timely filed all tax
returns it is required to file and has paid all taxes, penalties, assessments
and other governmental charges payable by it which have become due, other than
those not yet delinquent and those being contested in good faith by appropriate
proceedings and for which adequate reserves have been made in conformity with
GAAP. The information filed in such tax returns is accurate and complete in all
material respects. All deductions taken in such income tax returns are
appropriate and in accordance with applicable laws and regulations in all
material respects. No tax Liens have been filed. No deficiencies for any
material amount of taxes have been claimed, proposed or assessed by any taxing
or other Governmental Authority against any Credit Party. Except as set forth in
Section 6.17 of the Disclosure Schedule, there are no pending or threatened
audits, investigations or claims for or relating to any liability for taxes, and
there are no matters under discussion with any Governmental Authority which
could result in a material additional liability for taxes and which would
reasonably be expected to have a Material Adverse Effect. Either the federal
income tax returns of each Credit Party have been audited by the Internal
Revenue Service and such audits have been closed, or the period during which any
assessments may be made by the Internal Revenue Service has expired without
waiver or extension, for all years up to and including the Fiscal Year of
Borrower ended September 25, 1992. No extension of a statute of limitations
relating to taxes, assessments, fees or other governmental charges is in effect
with respect to any Credit Party. No Credit Party has any obligation under any
written tax sharing agreement or agreement regarding payments in lieu of taxes
with any Person other than another Credit Party.
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<PAGE> 53
6.18 Intellectual Property.
Each Credit Party has obtained and holds in full force and effect all
patents, patent applications, trademarks, servicemarks, trade names, copyrights
and other such rights, or valid licenses thereof (collectively, "INTELLECTUAL
PROPERTY"), free from burdensome restrictions, which are necessary for the
operation of its business as presently conducted (and as proposed to be
conducted immediately following consummation of the Merger). No product,
process, method, substance, part or other material presently sold or employed by
any Credit Party in connection with such business infringes in any material
respect any Intellectual Property owned by any other Person. All of the
Intellectual Property owned or used by any Credit Party as of the Closing Date
is set forth in Section 6.18 of the Disclosure Schedule. Upon the recordation or
filing of the applicable Credit Documents, all Intellectual Property owned,
licensed or used by any Credit Party, other than Intellectual Property that is
in the public domain and Intellectual Property with respect to which a Credit
Party has a license the enforceable terms of which would prohibit the granting
of a Lien by such Credit Party, is or will be subject to a first priority
perfected Lien in favor of the Collateral Agent.
6.19 Licenses and Permits. Each Credit Party has obtained and holds in
full force and effect, free from burdensome restrictions, all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary for
the operation of its business as presently conducted (and as proposed to be
conducted immediately following consummation of the Merger), except where the
failure to obtain such rights and approvals, individually and in the aggregate,
would not be reasonably expected to have a Material Adverse Effect. No Credit
Party is in violation of the terms or conditions of any such right or approval,
which violation would reasonably be expected to have a Material Adverse Effect.
6.20 Material Contracts. Section 6.20 of the Disclosure Schedule
contains a true, correct and complete list of all the Material Contracts in
effect on the Closing Date. Except as described in Section 6.20 of the
Disclosure Schedule and except as would not reasonably be expected to have a
Material Adverse Effect, no Material Contract contains any unusually burdensome
restrictions on any Credit Party or any of their respective properties, all of
the Material Contracts are in full force and effect, and, to Borrower's
knowledge, no defaults currently exist thereunder.
6.21 Insurance. Each Credit Party has obtained all insurance policies
or certificates of insurance, each together with a loss payable endorsement in
form and substance reasonably satisfactory to the Collateral Agent, which such
Credit Party is required under any Credit Agreement to have obtained and all
such policies and certificates are in full force and effect. All of such
policies and certificates which are required to have been obtained as of the
Closing Date are listed in Section 6.21 of the Disclosure Schedule.
6.22 Merger Agreement; Senior Notes. As of the Closing Date, all of the
conditions precedent to the obligations of each of the parties to the Merger
Agreement and the Senior Notes Documents, as applicable, have been satisfied
without any waiver or amendment thereof, except with the prior written consent
of the Administrative Agent and each Lender. On the Closing
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<PAGE> 54
Date, all of the representations and warranties made by Thayer and each of the
Credit Parties in the Merger Agreement and the Senior Notes Documents, as
applicable, are true and correct in all material respects as of the date when
made.
6.23 Use of Proceeds. All proceeds of the Loans have been and will be
used only in compliance with Section 7.9. No part of the proceeds of any Loan
will be used by any Credit Party to purchase or carry any Margin Stock or to
extend credit to any other Person for the purpose of purchasing or carrying any
Margin Stock or for any other purpose in violation of any Requirement of Law or
the terms and conditions of any of the Credit Documents. Neither the making of
any Loan nor the use of the proceeds thereof has been or will be in violation of
or inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve.
6.24 Accuracy and Completeness of Information. All factual information
furnished by or on behalf of Thayer or any Credit Party in writing to any Agent,
the Issuing Bank, any Lender, or the directors, officers, employees, independent
contractors and agents of any of them for purposes of or in connection with this
Agreement or any other Credit Documents, or any transaction contemplated hereby
or thereby is or will be true and accurate in all material respects on the date
as of which such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such information not
misleading at such time.
ARTICLE 7 AFFIRMATIVE COVENANTS
Until termination of the Commitments and this Agreement and full and
final payment and satisfaction of all Obligations due hereunder or under any
other Credit Document:
7.1 Financial Reporting. Borrower shall timely deliver to each Lender
the following information:
(a) Annual Financial Statements. As soon as available, but not later
than ninety (90) days (or one hundred twenty (120) days, in the case of the
Management Letter referred to below) after each Fiscal Year end: (i) Parent's
annual consolidated audited Financial Statements; (ii) a comparison in
reasonable detail to the prior year Financial Statements; (iii) the Auditors'
unqualified opinion, "Management Letter" and statement indicating that the
Auditors have not obtained knowledge of the existence of any Default or Event of
Default during their audit (or, if they have, the nature and duration of such
Default(s) or Event(s) of Default); (iv) a narrative discussion of Parent's and
Borrower's consolidated financial conditions and results of operations and the
consolidated liquidity and capital resources for such Fiscal Year, prepared by
the chief financial officer of Parent and Borrower, respectively; (v) Parent's
annual consolidating unaudited Financial Statements; and (vi) a compliance
certificate substantially in the form of Exhibit D with an attached schedule of
calculations demonstrating compliance with the Article 8 financial covenants;
provided, however, that if and so long as Borrower is required to file Financial
Statements with the Securities and Exchange Commission ("SEC"), then Borrower's
timely delivery of all such Financial Statements to each Lender in the form
filed with the SEC shall constitute compliance with items (i), (ii) and (iv) of
this paragraph (a).
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<PAGE> 55
(b) Projections. Not later than thirty (30) days following the
commencement of each Fiscal Year, projections of Parent's and Borrower's
consolidated financial conditions and results of operations for such Fiscal
Year, containing projected consolidated and consolidating balance sheets,
statements of operations, statements of cash flows and statements of changes in
shareholders equity on a monthly basis.
(c) Quarterly Financial Statements. As soon as available, but not later
than forty-five (45) days after the end of each of the first three Fiscal
Quarters, and ninety (90) days after the end of the last Fiscal Quarter: (i)
Parent's consolidated Financial Statements as of the Fiscal Quarter then ended,
and for the Fiscal Year to date; (ii) a comparison in reasonable detail to the
Financial Statements for the corresponding periods of the prior Fiscal Year;
(iii) the certification of the chief executive officer or chief financial
officer of Parent that such Financial Statements have been prepared in
accordance with GAAP (subject to year-end audit adjustments); (iv) a narrative
discussion of Parent's and Borrower's consolidated financial conditions and
results of operations and the consolidated liquidity and capital resources for
such Fiscal Quarter and Fiscal Year to date, prepared by the chief financial
officer of Parent and Borrower, respectively; (v) Parent's consolidating
Financial Statements as of the Fiscal Quarter then ended and for the Fiscal Year
to date; and (vi) a compliance certificate substantially in the form of Exhibit
D with an attached schedule of calculations demonstrating compliance with the
Article 8 financial covenants; provided, however, that if and so long as
Borrower is required to file Financial Statements with the SEC, then Borrower's
timely delivery of all such Financial Statements to each Lender, in the form
filed with the SEC, shall constitute compliance with items (i), (ii) and (iv) of
this paragraph (c).
(d) Monthly Financial Statements. As soon as available, but not later
than thirty (30) days after the end of each Fiscal Month: (i) Parent's
consolidated and consolidating Financial Statements as of the Fiscal Month then
ended, and for the Fiscal Year to date; (ii) a comparison in reasonable detail
to the Financial Statements for the corresponding periods of the prior Fiscal
Year; (iii) the certification of the chief executive officer or chief financial
officer of Parent that such Financial Statements have been prepared in
accordance with GAAP (subject to year-end audit adjustments).
(e) Changes in GAAP. All accounting determinations for purposes of
determining compliance with Sections 8.1 and 8.2 shall be made in accordance
with GAAP as in effect on the Closing Date and applied on a basis consistent in
all material respects with the audited Financial Statements delivered to the
Administrative Agent on or before the Closing Date. The Financial Statements
required to be delivered hereunder from and after the Closing Date, and all
financial records, shall be maintained in accordance with GAAP. If GAAP shall
change from the basis used in preparing the audited Financial Statements
delivered to the Administrative Agent on or before the Closing Date, Borrower
(with the consent of the Auditor) intends to institute any such change and so
notifies the Administrative Agent, and such change would result in a change in
the method of calculation of any of the covenants, standards or terms in this
Agreement, the parties hereto agree to enter into negotiations to amend such
provisions so as to equitably reflect such change, with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
shall be the same after such change as if such change had not been made and will
only be adjusted to reflect such change in GAAP; provided, however, that no
change in
50
<PAGE> 56
GAAP that would affect the method of calculation of any of the covenants,
standards or terms of this Agreement or of any other Credit Document shall be
given effect for purposes hereof or thereof until the applicable provisions are
amended, in a manner reasonably satisfactory to Required Lenders and Borrower,
to so reflect such change in accounting principles. Until such an amendment is
so agreed, the certificates required to be delivered pursuant to Section 7.1
demonstrating compliance with the covenants contained herein shall include
calculations setting forth the adjustments necessary to demonstrate how Borrower
is in compliance with the financial covenants based upon GAAP as in effect on
the Closing Date.
7.2 Collateral Reporting. Borrower shall timely deliver to Agent the
following certificates and reports, each in reasonable detail:
(a) Monthly Borrowing Base Certificates. On or before each date
required under Section 4.7(a), and at any other time requested by an Agent, a
borrowing base certificate (the "BORROWING BASE CERTIFICATE"), which shall be:
(i) completed substantially in the form of Exhibit C, detailing Borrower's
Eligible Accounts and Eligible Inventory as of the last day of the preceding
month; (ii) prepared by or under the supervision of Borrower's chief executive
officer or chief financial officer and certified by such officer; and (iii)
attached to such additional schedules and other information as such Agent may
reasonably request.
(b) Further Assurances. When requested by any Agent, the Issuing Bank
or any Lender, any further information regarding the Collateral, business
affairs and financial condition of all or any of the Credit Parties, including
one or more field exams and appraisals of the Collateral per calendar year.
7.3 Notification Requirements. Borrower shall timely give the
Administrative Agent and each of the Lenders the following notices, each in
reasonable detail:
(a) Notice of Defaults, Proceedings and Adverse Changes. Promptly, and
in any event within two (2) Business Days after Borrower becomes aware of any of
the following, a certificate of the chief executive officer or chief financial
officer of Borrower specifying the nature thereof and describing the event or
condition and any action taken or planned to be taken with respect thereto by
any Credit Party: (1) the occurrence of a Default or Event of Default; (2) any
proceeding being instituted or threatened to be instituted (including pursuant
to a cross- claim or counterclaim) against any Credit Party in or before any
federal, state, local or foreign court, commission or other regulatory body
which could reasonably be expected to result in (i) liability in excess of
$250,000 for any Credit Party or (ii) a required change in any substantial
respect in the operations, practices or policies of any Credit Party; (3) any
order, judgment or decree being entered against any Credit Party or any of its
properties or assets which could reasonably be expected to result in (i)
liability in excess of $250,000 for any Credit Party or (ii) a required change
in any substantial respect in the operations, practices or policies of any
Credit Party; or (4) any actual change, development or event which has had or
would reasonably be expected to have a Material Adverse Effect.
(b) Environmental. Promptly and in any event within two Business Days
after the occurrence of any of the following events or conditions, a certificate
of the chief executive officer
51
<PAGE> 57
or chief financial officer of Borrower specifying the nature of such condition
and the applicable Credit Party's or Environmental Affiliate's proposed response
thereto: (1) the receipt by any Credit Party or any of its Environmental
Affiliates of any communication from a Governmental Authority, employee or other
Person or group that alleges that a Credit Party or Environmental Affiliate is
not in compliance with applicable Environmental Laws; (2) any Credit Party shall
obtain actual knowledge that there exists any Environmental Claim pending or
threatened against a Credit Party or Environmental Affiliate; or (3) any
release, emission, discharge or disposal of any Material of Environmental
Concern that could form the basis of any Environmental Claim against any Credit
Party or Environmental Affiliate.
(c) ERISA Notices. Promptly, and in any event within five (5) Business
Days after: (i) any Credit Party or ERISA Affiliate knows or would reasonably be
expected to know that a Termination Event has occurred (and for this purpose,
any Credit Party or ERISA Affiliate shall be deemed to know all facts known by
the administrator of any Benefit Plan of which it is the plan sponsor), a
written statement of the chief executive officer or chief financial officer of
Borrower describing such Termination Event and any action that is being taking
with respect thereto by any Credit Party or ERISA Affiliate, and any action
taken or threatened with respect thereto by the IRS, Department of Labor or
PBGC; (ii) promptly, and in any event within five (5) Business Days after the
filing thereof with the Internal Revenue Service, a copy of each funding waiver
request filed with respect to any Benefit Plan and all communications received
by any Credit Party or any ERISA Affiliate with respect to such request; and
(iii) promptly, and in any event within five (5) Business Days after receipt by
any Credit Party or any ERISA Affiliate of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies
of each such notice.
(d) Material Contracts. Promptly, and in any event within ten (10)
Business Days after any Material Contract of any Credit Party is terminated
(except at the maturity thereof) or amended in any material respect or any new
Material Contract is entered into, a written statement describing such event,
with copies of any such amendments or new contracts, and an explanation of any
actions being taken with respect thereto.
(e) Collateral Matters. At least thirty (30) days prior written notice
to the Collateral Agent of any change in (i) the location of any Collateral
(except in-transit Inventory) or in the location of the chief executive office
or any place of business of any Credit Party from the locations specified in
Section 6.10 of the Disclosure Schedule or (ii) its name, identity or corporate
structure from that described herein. Prior to any such change described in (i)
or (ii) above, Borrower shall cause to be executed and delivered to the
Collateral Agent any and all mortgages, deeds of trust, and financing statements
necessary or desirable to maintain the perfected status of the Collateral
Agent's security interest in any and all of the assets of each Credit Party, all
in form and substance satisfactory to the Collateral Agent. Borrower also shall
obtain landlord waivers and bailee letters in form and substance reasonably
satisfactory to the Collateral Agent.
7.4 Corporate Existence. Borrower shall, and shall cause each other
Credit Party to, (i) maintain its corporate existence, (ii) maintain in full
force and effect all licenses, bonds, franchises, leases and qualifications to
do business, and all contracts and other rights necessary to the conduct of
their businesses, except where the failure to maintain such rights would not
52
<PAGE> 58
reasonably be expected to have a Material Adverse Effect, and (iii) continue in,
and limit their operations to, the Business.
7.5 Books and Records; Inspections. Borrower shall maintain, and shall
cause each other Credit Party to maintain, proper books and records in which
entries in conformity, in all material respects, with GAAP and all Requirements
of Law shall be made of, and which entries shall fairly reflect, all
transactions and dealings in relation to its business and activities and books
and records pertaining to the Collateral in such detail, form and scope as is
consistent with good business practice and GAAP. Borrower agrees that any Agent
or its agents and any Lender may enter upon the premises of Borrower and each of
its Subsidiaries at any time and from time to time, during normal business hours
and upon reasonable notice under the circumstances, and at any time at all on
and after the occurrence and during the continuance of a Default or Event of
Default, for the purposes of (i) inspecting and verifying the Collateral, (ii)
inspecting and/or copying (at Borrower's expense) any and all records pertaining
thereto, and (iii) discussing the affairs, finances and business of any Credit
Party with any officers, employees and directors of any Credit Party.
7.6 Insurance. Borrower shall maintain, and shall cause each other
Credit Party to maintain, public liability insurance, third party property
damage insurance and replacement value insurance on the Collateral under such
policies of insurance, with such insurance companies reasonably satisfactory to
the Administrative Agent, and in such amounts and covering such risks as are at
all times satisfactory to the Administrative Agent in its commercially
reasonable judgment. All such policies are to name the Collateral Agent as an
additional insured and as the loss payee in case of loss, contain an endorsement
in form and substance reasonably satisfactory to the Collateral Agent and are to
contain such other provisions as the Collateral Agent may reasonably require to
fully protect the Collateral Agent's interest in the Collateral and to any
payments to be made under such policies.
7.7 Taxes. Borrower agrees to pay, when due, and to cause each other
Credit Party to pay when due, all taxes lawfully levied or assessed against
Borrower or any other Credit Party or any of the Collateral before any penalty
or interest accrues thereon; provided, however, that, unless such taxes have
become a federal tax or ERISA Lien on any of the assets of a Credit Party, no
such tax need be paid if the same is being contested, in good faith, by
appropriate proceedings promptly instituted and diligently conducted and if an
adequate reserve or other appropriate provision shall have been made therefor to
the extent required by GAAP. Borrower shall not, and shall not permit any other
Credit Party to, file or consent to the filing of any consolidated tax return
with any Person other than any other Credit Party.
7.8 Compliance With Laws.
(a) Generally. Borrower shall comply, and cause each other Credit Party
to comply, with all Requirements of Law applicable to the Collateral or any part
thereof, or to the operation of its business or its assets generally, unless, so
long as no tax or ERISA Lien arises as a result thereof or in connection
therewith, (a) the applicable Credit Party is contesting such Requirement of Law
in good faith, by appropriate proceedings promptly instituted and diligently
conducted and if an adequate reserve or other appropriate provision shall have
been made therefor to the extent
53
<PAGE> 59
required by GAAP, or (b) such failure to comply would not reasonably be expected
to have a Material Adverse Effect.
(b) Environmental Laws. Without limiting the generality of the
foregoing, Borrower shall, and shall cause each other Credit Party to:
(1) Comply in all material respects with all Environmental Laws
applicable to it, and obtain, comply in all material respects with and maintain
all Environmental Approvals necessary for its operations as conducted and as
planned to be conducted, and take all reasonable efforts to ensure that all of
its tenants, subtenants, contractors, subcontractors and invitees comply in all
material respects with all Environmental Laws, and obtain, and comply with in
all material respects, any and all Environmental Approvals applicable to them.
Upon learning of any actual or suspected noncompliance, Borrower shall undertake
or cause the applicable Credit Party to undertake promptly all reasonable
efforts to achieve material compliance.
(2) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings would not
reasonably be expected to have a Material Adverse Effect.
7.9 Use of Proceeds. The proceeds of the Loans shall be used only (i)
to repay Indebtedness existing on the Closing Date in such amounts as are
approved by the Administrative Agent, (ii) to fund a portion of the purchase
price for the Merger, (iii) to pay transaction costs incurred by Borrower in
connection with the Merger and approved by the Administrative Agent, in an
aggregate amount not to exceed $10,000,000, and (iv) for Borrower's working
capital and general corporate purposes and to finance all or a portion of the
purchase price of Permitted Acquisitions.
7.10 Fiscal Year. Borrower agrees to maintain its fiscal year, and to
cause each other Credit Party to maintain its fiscal year, as a year ending on
the last Friday in September of each year.
7.11 Maintenance of Property. Borrower agrees to keep, and to cause
each other Credit Party to keep, all property necessary to their respective
businesses in good working order and condition (ordinary wear and tear excepted)
in accordance with their past operating practices and not to commit any waste
with respect to any of their properties.
7.12 ERISA Documents. Borrower will cause to be delivered to the
Administrative Agent, upon Administrative Agent's request, each of the
following: (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of any Credit Party; (ii) the most
recent determination letter issued by the Internal Revenue Service with respect
to each Benefit Plan; (iii) for the three most recent plan
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<PAGE> 60
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Benefit Plan; (iv) all actuarial reports prepared
for the last three plan years for each Benefit Plan; (v) a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by any Credit Party or any ERISA Affiliate to
each such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to any Credit Party
or any ERISA Affiliate regarding withdrawal liability under any Multiemployer
Plan; and (vii) the aggregate amount of the most recent annual payments made to
former employees of any Credit Party or any ERISA Affiliate under any Retiree
Health Plan.
7.13 Corporate Franchises. Borrower shall, and shall cause each other
Credit Party to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence and its patents, trademarks,
servicemarks, tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals, except where the failure to so
preserve any of the foregoing (other than existence) would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
7.14 Performance of Obligations. Borrower shall, and shall cause each
other Credit Party to, perform all of its obligations under the terms of each
mortgage, indenture, security agreement, debt instrument, lease, undertaking and
contract by which it or any of its properties is bound or to which it is a
party, if the failure to so perform, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
7.15 Further Assurances. Borrower shall take, and shall cause each
other Credit Party to take, all such further actions and execute all such
further documents and instruments as any Agent may at any time reasonably
determine in its sole discretion to be necessary or desirable to further carry
out and consummate the transactions contemplated by the Credit Documents, to
cause the execution, delivery and performance of the Credit Documents to be duly
authorized and to perfect or protect the Liens (and the priority status thereof)
of the Collateral Agent on the Collateral.
ARTICLE 8 NEGATIVE COVENANTS
Until termination of the Commitments and this Agreement and full and
final payment and satisfaction of all Obligations due hereunder or under any
other Credit Document, Borrower shall comply with, and, where required, shall
cause each other Credit Party to comply with, the following covenants:
8.1 Certain Financial Covenants.
(a) Minimum Net Worth. Borrower shall not permit Consolidated Net
Worth, as of any date during the Fiscal Years set forth below, to be less than
the amount (in millions of Dollars) set forth for such Fiscal Year below:
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<PAGE> 61
<TABLE>
<CAPTION>
=========================================================================
FISCAL QUARTER ENDING DURING RATIO (___ to 1.00)
- -------------------------------------------------------------------------
FISCAL YEAR 1st 2d 3d 4th
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 25.0 25.0
- -------------------------------------------------------------------------
1998 25.5 25.5 26.0 26.0
- -------------------------------------------------------------------------
1999 27.0 27.0 29.0 29.0
- -------------------------------------------------------------------------
2000 31.0 31.0 33.0 33.0
- -------------------------------------------------------------------------
2001 36.0 36.0 40.0 40.0
- -------------------------------------------------------------------------
2002 44.0 44.0 48.0 48.0
=========================================================================
</TABLE>
(b) Consolidated Interest Coverage Ratio. Borrower shall not permit the
ratio of Consolidated EBITDA to Consolidated Interest Expense, on a Rolling Four
Quarter Basis (the "INTEREST COVERAGE RATIO"), as of the end of each Fiscal
Quarter occurring during the Fiscal Years set forth below, to be less than the
ratio set forth for such Fiscal Quarter below:
<TABLE>
<CAPTION>
=========================================================================
FISCAL QUARTER ENDING DURING RATIO (___ to 1.00)
- -------------------------------------------------------------------------
FISCAL YEAR 1st 2d 3d 4th
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1.25 1.25
- -------------------------------------------------------------------------
1998 1.25 1.25 1.30 1.40
- -------------------------------------------------------------------------
1999 1.45 1.50 1.55 1.60
- -------------------------------------------------------------------------
2000 1.60 1.65 1.70 1.75
- -------------------------------------------------------------------------
2001 1.80 1.85 1.90 1.95
- -------------------------------------------------------------------------
2002 2.0 2.05 2.10 2.15
=========================================================================
</TABLE>
(c) Consolidated EBITDA to Consolidated Fixed Charges Ratio. Borrower
shall not permit the ratio of (a) Consolidated EBITDA minus Capital Expenditures
of Borrower and its Subsidiaries permitted hereunder and minus cash taxes paid
by Parent and its Subsidiaries during the applicable period to (b) Consolidated
Fixed Charges, on a Rolling Four Quarter Basis, as of the end of each Fiscal
Quarter occurring during the Fiscal Years set forth below, to be less than the
ratio set forth for such Fiscal Quarter below:
56
<PAGE> 62
<TABLE>
<CAPTION>
=========================================================================
FISCAL QUARTER ENDING DURING RATIO (___ to 1.00)
- -------------------------------------------------------------------------
FISCAL YEAR 1st 2d 3d 4th
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1.0 1.0
- -------------------------------------------------------------------------
1998 1.0 1.0 1.10 1.15
- -------------------------------------------------------------------------
1999 1.2 1.2 1.25 1.25
- -------------------------------------------------------------------------
2000 1.3 1.3 1.35 1.35
- -------------------------------------------------------------------------
2001 1.4 1.4 1.45 1.45
- -------------------------------------------------------------------------
2002 1.5 1.5 1.55 1.55
=========================================================================
</TABLE>
(d) Leverage Ratio. Borrower shall not permit the ratio of Consolidated
Funded Debt as of the last day of a particular quarter set forth below, to
Consolidated EBITDA for the last four quarters on a Rolling Four Quarter Basis
(the "LEVERAGE RATIO"), as of the end of each Fiscal Quarter set forth below, to
be greater than the ratio set forth for such Fiscal Quarter below:
<TABLE>
<CAPTION>
=========================================================================
FISCAL QUARTER ENDING DURING RATIO (___ to 1.00)
- -------------------------------------------------------------------------
FISCAL YEAR 1st 2d 3d 4th
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 6.5 6.5
- -------------------------------------------------------------------------
1998 6.4 6.3 6.2 6.1
- -------------------------------------------------------------------------
1999 6.0 5.9 5.75 5.6
- -------------------------------------------------------------------------
2000 5.5 5.4 5.25 5.1
- -------------------------------------------------------------------------
2001 5.0 4.9 4.75 4.6
- -------------------------------------------------------------------------
2002 4.5 4.4 4.25 4.0
=========================================================================
</TABLE>
8.2 Capital Expenditures. Borrower shall not, and shall not permit any
other Credit Party to, make Capital Expenditures in any Fiscal Year in the
aggregate in excess of the amount (in millions of Dollars) set forth for such
Fiscal Year below:
57
<PAGE> 63
<TABLE>
<CAPTION>
================================================================
FISCAL YEAR CAPITAL EXPENDITURES
(in millions of Dollars)
- ----------------------------------------------------------------
<S> <C>
1997 2.0
- ----------------------------------------------------------------
1998 2.1
- ----------------------------------------------------------------
1999 2.2
- ----------------------------------------------------------------
2000 2.3
- ----------------------------------------------------------------
2001 2.4
- ----------------------------------------------------------------
2002 2.5
================================================================
</TABLE>
provided, however, that the amount of Capital Expenditures permitted under this
Section for any Fiscal Year shall be increased by an amount, not to exceed
$1,000,000, equal to 100% (or a portion thereof, as applicable) of the excess of
(x) the amount of permitted Capital Expenditures for the immediately preceding
Fiscal Year (without giving effect to this proviso) over (y) the amount of
Capital Expenditures actually made in such immediately preceding Fiscal Year.
8.3 Additional Indebtedness. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly incur, create, assume,
guaranty or suffer to exist any Indebtedness other than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness under Interest Rate Agreements entered into in the
ordinary course of business;
(c) Indebtedness of Borrower pursuant to the Senior Notes in an
aggregate principal amount not to exceed $100,000,000 less the aggregate amount
of all repayments of Senior Notes effected after the Closing Date (other than
repayments made or deemed made pursuant to the Exchange Offer);
(d) Indebtedness permitted under Sections 8.8(a) and (b);
(e) Indebtedness under Trade Letters of Credit entered into in the
ordinary course of business in an aggregate face amount not to exceed $500,000
at any one time outstanding;
(f) Indebtedness listed in Section 8.3 of the Disclosure Schedule and
additional Indebtedness under Capital Leases entered into in the ordinary course
of business in an aggregate principal amount not to exceed $100,000 at any one
time outstanding; and
(g) Subordinated Indebtedness.
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8.4 Liens. Borrower shall not, and shall not permit any other Credit
Party to, directly or indirectly create, incur, assume, or suffer to exist any
Lien on any of its property now owned or hereafter acquired except the following
Liens ("PERMITTED LIENS"):
(a) Liens granted to the Collateral Agent under the Credit Documents;
(b) Liens listed in Section 8.4 of the Disclosure Schedule;
(c) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, or landlords, liens for taxes, assessments or other
governmental charges (other than federal tax and ERISA Liens), and other similar
Liens arising by operation of law, in each case for amounts that are not yet due
and payable or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which an
adequate reserve or other appropriate provision shall have been made to the
extent required by GAAP, so long as the Administrative Agent has been notified
thereof;
(d) any attachment or judgment Liens the existence of which,
individually and in the aggregate, does not constitute an Event of Default under
Section 9.1(k);
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, individually and
in the aggregate, do not detract from the value of the property subject thereto
or interfere with the ordinary conduct of the business of Borrower or any of its
Subsidiaries;
(f) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(g) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(h) the lessor's interest in property leased to Borrower or any of its
Subsidiaries pursuant to a lease permitted by this Agreement;
(i) leases or subleases entered into after the Closing Date by a Credit
Party in the ordinary course of its business which do not interfere in any
material respect with the business of Borrower or any of its Subsidiaries, taken
as a whole, and (in the case of a lease or sublease under which such Credit
Party is the lessor or sublessor, as applicable) in connection with which no
Credit Party incurs a material liability; and
(j) Liens on goods purchased with a Trade Letter of Credit permitted
under Section 8.3 and securing only the applicable Credit Party's reimbursement
obligation with respect to such Trade Letter of Credit.
8.5 Contingent Obligations. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly incur, assume, or suffer to
exist any Contingent Obligation, other
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than (a) the Guaranties and other Contingent Obligations in favor of any Agent,
the Issuing Bank or any Lender under the Credit Documents, and (b) surety bonds
and the like described in Section 8.4(g).
8.6 Sale of Assets. Borrower shall not, and shall not permit any other
Credit Party to, directly or indirectly, sell, lease, assign, transfer or
otherwise dispose of any assets other than (a) Inventory to retail customers in
the ordinary course of business, (b) individual items of Collateral (other than
Accounts and Inventory) with a book value of less than $100,000 in the aggregate
for all Credit Parties during any Fiscal Year, (c) obsolete or worn out property
disposed of in the ordinary course of business, not to exceed $50,000 in any
Fiscal Year, (d) sales of receivables by Borrower to Concord on terms
substantially in accordance with Borrower's past practices, and (e) dissolution
or merger of Lexington or Verdi with any other Credit Party, both of which
dissolutions or mergers shall occur within ninety (90) days after the Closing
Date.
8.7 Restricted Payments. Borrower shall not, and shall not permit any
other Credit Party to, directly or indirectly:
(a) declare or pay any dividend (other than dividends payable on common
stock solely in common stock, or on preferred stock solely in preferred stock,
in each case of Parent or dividends payable to the Borrower by any Subsidiary)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any Capital Stock of any Credit Party, whether now or
hereafter outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of any
Credit Party; or
(b) make any payment or prepayment on or redemption (including, without
limitation, by making payments to a sinking or analogous fund) or repurchase of
any Indebtedness (other than Indebtedness pursuant to this Agreement or
Indebtedness owed to Borrower by one of its Subsidiaries) or of interest or any
other amount owed with respect thereto or of any Mandatory Redeemable
Obligation; or
(c) pay any Management Fee or make any payment on any contingent
earnout right except for payments to redeem management stock in aggregate
amounts not to exceed $3,000,000 upon death, retirement or separation from the
Company;
provided, however, in each case that, so long as no Default or Event of Default
has occurred and is continuing, (1) Borrower may pay a Management Fee to Thayer
in accordance with the terms and conditions of the Management Agreement and in
any event not to exceed $500,000 in any Fiscal Year, (2) Borrower may make
interest payments (in accordance with the terms of the Senior Note Documents as
approved hereunder) on the Senior Notes and may repurchase or redeem Senior
Notes to the extent permitted under Section 4.6(b), (3) Borrower may exchange
Senior Notes pursuant to the Exchange Offer, and (4) Borrower may pay to Thayer
reasonable transaction fees for financial advisory services rendered and
expenses incurred in connection with the transactions contemplated in Section 2
of the Management Agreement and permitted hereunder, which fees shall not exceed
in the aggregate one percent (1%) of the Aggregate Value
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(as defined in the Management Agreement) for each such transaction, in
accordance with the terms of the Management Agreement.
8.8 Investments. Borrower shall not, and shall not permit any other
Credit Party to, directly or indirectly, make any Investment in any Person
(including any director, officer or employee of any Credit Party), whether in
cash, securities, or other property of any kind, other than:
(a) loans, investments and advances between the Credit Parties in
existence as of the date hereof and described in Section 8.8 of the Disclosure
Schedule;
(b) loans and advances by (i) Borrower to any Wholly-Owned Subsidiary
and (ii) any Wholly-Owned Subsidiary to Borrower or any other Wholly-Owned
Subsidiary;
(c) extensions of trade credit in the ordinary course of business to
Persons who are not Affiliates of Borrower or any of its Subsidiaries;
(d) Cash Equivalents; and
(e) Permitted Acquisitions.
8.9 Affiliate Transactions. Borrower shall not, and shall not permit
any other Credit Party to, directly or indirectly, enter into any transaction
with, including, without limitation, the purchase, sale or exchange of property
or the rendering of any service to, any Affiliate of any Credit Party, except in
the ordinary course of and pursuant to the reasonable requirements of the Credit
Party's business, and upon fair and reasonable terms no less favorable to any
Credit Party than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person, except that (a) Borrower may pay a Management Fee
and reasonable transaction fees and expenses pursuant to the Management
Agreement to Thayer, if and to the extent permitted under Section 8.7, and (b)
each Credit Party may make the loans described in Sections 8.8(a) and 8.8(b) if
and to the extent permitted thereunder.
8.10 Excess Cash. Borrower shall not, and shall not permit any other
Credit Party to, directly or indirectly, maintain for more than one (1) Business
Day in the aggregate in all deposit accounts of the Credit Parties total
balances of cash and Cash Equivalents in excess of $2,000,000 in the aggregate
at any time (unless there are no outstanding Loans or unreimbursed drawings
under any Letter of Credit).
8.11 Additional Negative Pledges. Borrower shall not, and shall not
permit any other Credit Party to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective, directly or indirectly, (i) any
prohibition or restriction (including any agreement to provide equal and ratable
security to any Person in the event a Lien is granted to or for the benefit of
any other Person) on the creation or existence of any Lien upon the assets of
any Credit Party or (ii) any contractual obligation which may restrict or
inhibit any Agent's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
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8.12 Additional Subsidiaries. Borrower shall not, and shall not permit
any Credit Party to, directly or indirectly, by operation of law or otherwise,
merge with, consolidate with, acquire all or substantially all of the assets or
Capital Stock of, or otherwise combine with any Person, other than (i) a
Permitted Acquisition, (ii) a Wholly-Owned Subsidiary merging with or
consolidating into, or acquiring the assets of, one or more other Wholly-Owned
Subsidiaries, and (iii) one or more Wholly-Owned Subsidiaries engaged in the
Business merging with or consolidating into Borrower.
8.13 Amendments. Borrower shall not, and shall not permit any other
Credit Party to, without the prior written consent of the Administrative Agent
and Required Lenders, amend, supplement or otherwise modify, or waive or release
any of its rights under or with respect to, (i) the Governing Documents of any
Credit Party, (ii) any agreement, instrument or document (other than a Credit
Document) evidencing or relating to Indebtedness of any Credit Party, including
the Senior Notes Documents, or (iii) the Merger Agreement or any agreement,
instrument or document relating to the Merger or any Permitted Acquisition.
8.14 Trade Payables. Borrower shall not, and shall not permit any other
Credit Party to, permit more than five percent (5%) of such Person's accounts
payable (other than those the subject of a good faith dispute diligently
conducted and for which an adequate reserve or other appropriate provision shall
have been made if and to the extent required by GAAP) to become more than
forty-five (45) days past due.
8.15 Credit Policies. Borrower shall not, and shall not permit any
other Credit Party (including Concord) to, materially change the underwriting
standards it has used historically in determining whether to extend financing to
customers of any Credit Party, in such a manner as to permit the extension of
such credit to a significant number of persons to whom, or in situations in
which, such credit historically would not have been extended for financial
reasons.
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES
9.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) Failure to Pay. Borrower shall fail to pay any principal on any
Loan or any reimbursement obligation with respect to a Letter of Credit or any
interest, fee or other amounts payable under any Credit Document when due.
(b) Breach of Certain Covenants. Any Credit Party shall fail to comply
with any covenant contained in Sections 4.7, 7.2 through 7.4, 7.6 through 7.15
or Article 8 hereof.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed to be made by any Credit Party in this Agreement or in
any other Credit Document (and in any statement or certificate given under this
Agreement or any other Credit Document), shall be false or misleading in any
material respect when made or deemed to be made.
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(d) Other Defaults. Any Credit Party shall fail to comply with any
provisions contained in this Agreement or any other Credit Document, other than
as set forth in Sections 9.1(a) and 9.1(b), and such failure shall continue for
ten (10) days after its occurrence.
(e) Failure to Dissolve Lexington and Verdi. Lexington or Verdi shall
fail to (i) submit certificates of dissolution and all necessary tax information
required in connection with their respective dissolutions to the proper
Governmental Authorities within ninety (90) days after the Closing Date, or (ii)
promptly take all other actions necessary to dissolve, wind up or otherwise
cease to do business; or any Credit Party shall transfer any assets to Lexington
or Verdi or Lexington or Verdi shall engage in any business or assume any
liabilities (other than in favor of the Collateral Agent and the Lenders).
(f) Dissolution. Borrower or any Subsidiary (except Lexington or Verdi
to the extent permitted under Section 8.6) shall dissolve, wind up or otherwise
cease to do business.
(g) Insolvency Event. Borrower or any Subsidiary (except Lexington or
Verdi to the extent permitted under Section 8.6) shall become the subject of an
Insolvency Event.
(h) Change of Control. A Change of Control shall occur.
(i) Cross Default. A default or event of default shall occur (and
continue beyond any applicable grace period) under the Senior Notes Documents or
under any other note, agreement or instrument evidencing any Indebtedness of any
Credit Party (other than the Obligations) in an aggregate principal amount in
excess of $500,000, which default or event of default permits a Person to
accelerate the maturity of such Indebtedness or realize on collateral given as
security therefor.
(j) Failure of Enforceability of Credit Documents; Security. Any
covenant, agreement or obligation of any Credit Party contained in or evidenced
by any of the Credit Documents shall cease to be enforceable, or shall be
determined to be unenforceable, in accordance with its terms; any Credit Party
shall deny or disaffirm in writing its obligations under any of the Credit
Documents or any Liens granted in connection therewith; or, any Liens granted in
Collateral shall be determined to be void, voidable, invalid, subordinated,
unperfected or not given the priority contemplated by this Agreement.
(k) ERISA. (i) Any Termination Event shall occur or (ii) any Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA), whether or not waived, or (iii) any Credit Party or
any ERISA Affiliate shall have engaged in a transaction which is prohibited
under Section 4975 of the Code or Section 406 of ERISA which would reasonably be
expected to result in the imposition of liability in excess of $500,000 on
Borrower or any ERISA Affiliate (iv) any Credit Party or any ERISA Affiliate
shall fail to pay when due an amount in excess of $500,000 which it shall have
become liable to pay to the PBGC, any Plan or a trust established under Title IV
of ERISA, or (v) a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that a Plan must be terminated or have
a trustee appointed to administer any Plan or (vi) any Credit Party or a member
of any ERISA Affiliate suffers a partial or complete withdrawal from a
Multiemployer
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Plan, or is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments in excess of $500,000 to a Multiemployer Plan or (vii) a
proceeding shall be instituted against any Credit Party or any ERISA Affiliate
to enforce Section 515 of ERISA, or (viii) any other event or condition shall
occur or exist with respect to any Plan which would reasonably be expected to
subject any Credit Party or any ERISA Affiliate to any tax, penalty or other
liability in excess of $500,000.
(l) Judgments. One or more judgments, writs, orders or warrants of
attachment or other similar process or decrees in an aggregate amount of
$1,000,000 or more shall be entered by a court or courts of competent
jurisdiction against any or all of the Credit Parties (other than any judgment,
writ, order or warrant of attachment or other similar process which is fully
covered by insurance and as to which the applicable insurance company has
acknowledged coverage thereof in writing) and (i) any such judgments, writs,
orders or warrants of attachment or other similar process or decrees shall not
be stayed, discharged, paid, bonded or vacated within 30 days or (ii)
enforcement proceedings shall be commenced by any creditor on any such
judgments, writs, orders or warrants of attachment or other similar process or
decrees.
(m) Material Adverse Effect. Any event or condition shall exist which
has, or is reasonably likely to have, a Material Adverse Effect.
9.2 Remedies. Upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent may, and upon the direction of
Required Lenders shall, do any or all of the following:
(a) Acceleration. Upon the written request of the Required Lenders, the
Administrative Agent shall declare all Obligations to be immediately due and
payable (except with respect to any Event of Default set forth in Section
9.1(f), in which case all Obligations shall automatically become immediately due
and payable without the necessity of any request of the Required Lenders or
notice or other demand to Borrower) without presentment, demand, protest or any
other action or obligation of any Agent or any Lender.
(b) Termination of Commitments. Upon the written request of the
Required Lenders, the Administrative Agent shall, by written notice to Borrower,
declare all the Commitments to be terminated, whereupon all such Commitments
shall terminate immediately.
(c) Cash Collateralization. On demand of the Administrative Agent or
Required Lenders Borrower shall immediately deposit with the Collateral Agent
for each Letter of Credit then outstanding cash or Cash Equivalents in an amount
equal to one hundred fifteen percent (115%) of the greatest amount drawable
thereunder.
(d) Other Remedies. Cause the Collateral Agent to:
(1) remove all documents, instruments, files and records (including
the copying of any computer records) relating to the Accounts or use (at the
expense of Borrower) such supplies or space of any Credit Party at any Credit
Party's place of business necessary to properly administer and collect the
Accounts of any Credit Party thereon;
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(2) accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Accounts of any Credit Party (in the name of any
Credit Party or the Lenders) and otherwise administer and collect the Accounts;
(3) sell, assign and deliver the Accounts of any Credit Party and
any returned, reclaimed or repossessed merchandise, with or without
advertisement, at public or private sale, for cash, on credit or otherwise;
(4) foreclose the security interests created pursuant to any or all
of the Credit Documents by any available procedure, or take possession of any or
all of the Collateral without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same; and
(5) exercise any other rights or remedies afforded any Agent, the
Issuing Bank or any Lender under any Credit Document or applicable law,
including the rights and remedies of a secured creditor under the UCC.
Any Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by Borrower. If notice of intended
disposition of any Collateral is required by law, it is agreed that five (5)
days' notice shall constitute reasonable notification. Borrower will assemble
the Collateral and make it available to the Collateral Agent at such locations
as the Collateral Agent may specify, whether at the premises of Borrower or
elsewhere, and will make available to the Collateral Agent the premises and
facilities of Borrower for the purpose of the Collateral Agent's taking
possession of, removing or putting the Collateral in saleable form.
9.3 Right of Setoff. In addition to all rights of offset that any
Agent, any Lender, or the Issuing Bank may have under applicable law or
otherwise, upon the occurrence and during the continuance of any Event of
Default, and whether or not any Agent, any Lender, or the Issuing Bank has made
any demand or the Obligations of any Credit Party have matured, each Agent, each
Lender, and the Issuing Bank shall have the right to appropriate and apply to
the payment of the Obligations (in accordance with Section 9.5) all deposits and
other obligations then or thereafter owing by such Agent, such Lender, or the
Issuing Bank to such Credit Party. Each Agent or Lender, or the Issuing Bank
exercising such rights shall notify the Administrative Agent thereof and any
amount received as a result of the exercise of such rights shall be shared in
accordance with Section 4.12.
9.4 No Marshalling; Deficiencies; Remedies Cumulative. The net cash
proceeds resulting from the Collateral Agent's exercise of any of the foregoing
rights to liquidate all or substantially all of the Collateral shall be applied
by the Disbursing Agent to the payment of the Obligations, whether due or to
become due, in accordance with Section 9.5 and the Credit Parties shall remain
liable to each Agent, the Issuing Bank and the Lenders for any deficiencies. The
foregoing remedies are not intended to be exhaustive and the full or partial
exercise of any of them shall not preclude the full or partial exercise of any
other available remedy under this Agreement, under any other Credit Document, at
equity or at law.
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9.5 Application of Payments. Upon the occurrence and during the
continuance of an Event of Default, all amounts received by any Agent from any
Agent, the liquidation of Collateral or otherwise shall be applied in the
following order: first, to the payment of any fees, expenses and other
Obligations due and payable to each Agent, under any of the Credit Documents,
including any amounts advanced by an Agent on behalf of the Lenders; second, to
the payment of any fees, expenses and other Obligations due and payable to the
Issuing Bank under any of the Credit Documents; third, to the ratable payment of
any fees, expenses and other Obligations due and payable to the Lenders under
any of the Credit Documents other than those Obligations specifically referred
to in this Section; fourth, to the ratable payment of interest due on the Loans;
fifth, to the ratable payment of principal due on the Loans; and sixth, to
whomever the balance, if any, is due.
ARTICLE 10 THE AGENT
Other than Borrower's rights under Section 10.8, this Article 10 is for
the benefit of the Agents, the Issuing Bank and the Lenders only.
10.1 Appointment of Agent. Each Lender hereby designates Dresdner Bank
AG, New York and Grand Cayman Branches, as its agent, as the Administrative
Agent, Collateral Agent, Monitoring Agent and Disbursing Agent, and irrevocably
authorizes each such Agent to take action on its behalf under the Credit
Documents, to exercise the powers and perform the duties described therein, and
to exercise such other powers reasonably incidental thereto. Each such Agent may
perform any of its duties through its agents or employees, provided, that only
the Administrative Agent may appoint a successor Collateral Agent, Monitoring
Agent or Disbursing Agent.
10.2 Nature of Duties of Agents. Each Agent has no duties or
responsibilities except those expressly set forth in the Credit Documents. No
Agent nor any of its officers, directors, employees or agents shall be liable
for any action taken or omitted hereunder or in connection herewith, except for
such Person's gross negligence or willful misconduct. The duties of each Agent
shall be mechanical and administrative in nature. Each Agent shall not have a
fiduciary relationship to the Issuing Bank, any Lender or any participant of the
Issuing Bank or any Lender. Each Agent shall act only for the other Agents, the
Issuing Bank and the Lenders and assumes no obligation to or agency or trust
relationship with any Credit Party.
10.3 Lack of Reliance on Agents. Independently and without reliance
upon any Agent, each Lender has made and shall continue to make its own
independent investigation and analysis of the content and validity of the Credit
Documents or of the performance and creditworthiness of the Credit Parties
thereunder. Each Agent assumes no responsibility and undertakes no obligation to
make inquiry with respect to such matters, unless specifically requested to do
so in writing by a Lender.
10.4 Certain Rights of Agent. Each Agent may request instructions from
Required Lenders at any time, provided that an Agent other than the
Administrative Agent shall request instructions only from the Administrative
Agent when the Administrative Agent is responsible
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under the terms hereof for a decision on the applicable issue. If an Agent
requests instructions from Required Lenders at such time with respect to any
action or inaction, such Agent shall be entitled to await instructions from
Required Lenders at such time before such action or inaction. No Lender shall
have any right of action based upon an Agent's action or inaction in response to
instructions from Required Lenders at such time.
10.5 Reliance by Agents. Agent may rely upon written or telephonic
communications it believes to be genuine and to have been signed, sent or made
by the proper person. Each Agent may obtain the advice of legal counsel
(including, for matters concerning Borrower, counsel for Borrower), independent
public accountants and other experts selected by it and shall have no liability
for action or inaction in good faith based upon such advice.
10.6 Indemnification of Agents. To the extent any Agent is not
reimbursed and indemnified by Borrower, each Lender will reimburse and indemnify
such Agent, to the extent of such Lender's Pro Rata Share of all of the
facilities, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including counsel fees
and disbursements) or disbursements of any kind or nature whatsoever (including
all Expenses) which may be imposed on, incurred by or asserted against such
Agent in performing its duties hereunder or otherwise relating to the Credit
Documents, unless resulting from such Agent's gross negligence or willful
misconduct.
10.7 Agent in its Individual Capacity. In its individual capacity, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise them as though it was not performing the duties of an agent for the
Lenders. The terms "Lenders," "Required Lenders," or any similar terms shall,
unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent and its Affiliates may accept deposits from,
lend money to, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory or other business with Borrower or any
Affiliate of Borrower as if it were not performing the duties of an agent for
the Lenders, and may accept fees and other consideration from Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to any Lender.
10.8 Successor Agents.
(a) Any Agent may, upon five Business Days' notice to the other Agents,
the Issuing Bank, the Lenders and Borrower, resign by giving written notice
thereof to the other Agents, the Issuing Bank, the Lenders and Borrower. Such
Agent's resignation shall be effective upon the appointment of the applicable
successor to such Agent.
(b) Upon receipt of the Administrative Agent's resignation, Required
Lenders may appoint a successor Administrative Agent. Unless an Event of Default
shall have occurred and be continuing at the time of such appointment, the
successor Administrative Agent shall be subject to approval by Borrower, which
approval shall not be unreasonably withheld and shall be delivered to the
Lenders within ten (10) Business Days after Borrower's receipt of notice of a
proposed successor Administrative Agent. If a successor Administrative Agent has
not accepted its appointment within fifteen Business Days, then the retiring
Administrative Agent may, on
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behalf of the Lenders, appoint a successor Administrative Agent. Upon receipt of
any other Agent's resignation, the Administrative Agent may appoint a successor
to such Agent or assume the duties and powers of such Agent.
(c) Upon its acceptance of the agency hereunder, a successor Agent
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and such retiring Agent shall be discharged from
its duties and obligations under this Agreement. The retiring Agent shall
continue to have the benefit of this Article 10 for any action or inaction while
it was an Agent.
10.9 Collateral Matters.
(a) Each Lender authorizes and directs the Collateral Agent to enter
into the Collateral Documents for the benefit of the Lenders. Except as
otherwise set forth herein, any action or exercise of powers by Required Lenders
under the Credit Documents, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Lenders.
Prior to an Event of Default, without notice to or consent from any Lender, the
Collateral Agent may take any action necessary or advisable to perfect and
maintain the perfection of Liens upon the Collateral.
(b) The Collateral Agent is authorized to release any Lien granted to
or held by the Collateral Agent upon any Collateral (i) upon termination of the
Total Commitments and payment and satisfaction of all of the Obligations, (ii)
upon receipt of the proceeds of sales of the Collateral permitted hereunder or
(iii) if the release can be and is approved by the Required Lenders. The
Collateral Agent may request and the Lenders will provide confirmation of the
Collateral Agent's authority to release particular types or items of Collateral.
(c) The Collateral Agent shall have no obligation to assure that the
Collateral exists or is owned by Borrower or any of its Subsidiaries, that such
Collateral is cared for, protected or insured, or that the Liens in the
Collateral have been created, perfected, or have any particular priority. With
respect to the Collateral, the Collateral Agent may act in any manner it may
deem appropriate, in its sole discretion, given the Collateral Agent's own
interest in the Collateral as one of the Lenders, and it shall have no duty or
liability whatsoever to the Lenders, except for its gross negligence or willful
misconduct.
10.10 Actions with Respect to Defaults. In addition to each Agent's
right to take actions on its own accord as permitted under this Agreement, each
Agent shall take such action with respect to a Default or Event of Default as
shall be directed by Required Lenders. Until an Agent shall have received such
directions, Agent may act (or not act) as it deems advisable.
ARTICLE 11 MISCELLANEOUS
11.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR
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ANY OF THE OTHER CREDIT DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
11.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG ANY OR ALL OF THE
CREDIT PARTIES AND THE LENDERS, THE ISSUING BANK OR ANY AGENT, WHETHER SOUNDING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND
FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO WHICH AN APPEAL
THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE COLLATERAL AGENT, ON BEHALF
OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TO PROCEED AGAINST ANY OR ALL OF THE CREDIT PARTIES AND/OR THEIR PROPERTY IN ANY
LOCATION REASONABLY SELECTED BY AGENT IN GOOD FAITH TO ENABLE AGENT TO REALIZE
ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
COLLATERAL AGENT. BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE
COLLATERAL AGENT. BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN WHICH THE COLLATERAL AGENT HAS COMMENCED A PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
11.3 JURY TRIAL. EACH OF BORROWER, THE AGENTS, THE ISSUING BANK AND THE
LENDERS HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE
RESOLVED IN A BENCH TRIAL.
11.4 LIMITATION OF LIABILITY. NEITHER ANY AGENT NOR THE ISSUING BANK
NOR ANY LENDER SHALL HAVE ANY LIABILITY TO ANY CREDIT PARTY (WHETHER SOUNDING IN
TORT, CONTRACT, OR OTHERWISE) FOR CONSEQUENTIAL DAMAGES SUFFERED BY ANY CREDIT
PARTY IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH.
11.5 Delays. No delay or omission of any Agent, the Issuing Bank or the
Lenders to exercise any right or remedy hereunder shall impair any such right or
operate as a waiver thereof.
11.6 Notices. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to any Agent or any of the Lenders, then to its
address for notices set forth on Annex I or such other address as such Agent or
Lender may notify the other parties hereto from time to time, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, to the
appropriate telecopier number set forth on Annex I or to such other number as
such Agent or Lender may notify the other parties hereto from time to time, and
if to any Credit Party then to such Credit Party at the following address or
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facsimile number, as applicable, or to such other number as Credit Party may
notify the other parties hereto from time to time:
If to Borrower or any other Credit Party:
Colorado Prime Corporation
One Michael Avenue
Farmingdale, New York 11735
Tel: 516-694-1111
Fax: 516-694-8493
Attn: Thomas S. Taylor
with copies to:
Thayer Capital Partners
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Tel: 202-371-0150
Fax: 202-371-0391
Attn: V. Frank Pottow
and:
Koerner, Silberberg & Weiner
112 Madison Avenue, 3rd Floor
New York, New York 10016
Tel: 212-689-4400
Fax: 212-689-3077
Attn: Carl Seldin Koerner, Esq.
All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business Days after being delivered to the
U.S. Postal Service, (ii) if sent by overnight delivery service for next
Business Day delivery, on the next Business Day after being delivered to such
delivery service, and (iii) if sent by telex or facsimile transmission, when
receipt of such transmission is acknowledged electronically by the receiving
machine.
11.7 Assignments and Participations.
(a) Borrower Assignment. Borrower shall not assign this Agreement, or
any rights or obligations hereunder, without the prior written consent of each
Agent, the Issuing Bank and the Lenders.
(b) Lender Assignments. Each Lender may assign all or a portion of its
rights and obligations under this Agreement, the Notes and the other Credit
Documents, to any of its Affiliates or to any Federal Reserve Bank, or to any
other Person with the consent of (i) the Administrative Agent and (ii) other
than during the continuance of an Event of Default, Borrower
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(Borrower's consent not be withheld or delayed unreasonably), upon execution and
delivery to the Administrative Agent, for its acceptance and recording in the
Register, of an agreement in substantially the form of Exhibit B (an "ASSIGNMENT
AND ASSUMPTION AGREEMENT"), together with surrender of any Note or Notes subject
to such assignment and a processing and recordation fee of $3,000.00. No such
assignment shall be for less than $5,000,000 of the Commitments unless it is to
another Lender or any Affiliate of the Lender making such assignment or a
Federal Reserve Bank or it constitutes the entire remaining Commitment of the
assigning Lender.
(c) The Administrative Agent's Register. The Administrative Agent shall
maintain a register of the names and addresses of the Lenders, their Commitments
and the principal amount of their Loans (the "REGISTER"). The Administrative
Agent shall also maintain a copy of each Assignment and Assumption Agreement
delivered to and accepted by it and modify the Register to give effect to each
Assignment and Assumption Agreement. Upon its receipt of each Assignment and
Assumption Agreement and surrender of the affected Note or Notes, the
Administrative Agent will give prompt notice thereof to Borrower and deliver to
Borrower a copy of the Assignment and Assumption Agreement and the surrendered
Note or Notes. Within five (5) Business Days after its receipt of such notice,
Borrower shall execute and deliver to the Administrative Agent a new Note or
Notes to the order of the assignee in the amount of the Commitments assumed by
it and to the assignor in the amount of the Commitment retained by it, if any.
Such new Note or Notes shall re-evidence the Indebtedness outstanding under the
surrendered Note or Notes and shall be dated as of the Closing Date. The
Administrative Agent shall be entitled to rely exclusively upon the Register for
purposes of identifying the Lenders hereunder.
(d) Lender Participations. Each Lender may sell participations (without
the consent of the Administrative Agent, Borrower or any other Person) to one or
more Persons in or to all or a portion of its rights and obligations under this
Agreement, the Notes and/or the other Credit Documents. Notwithstanding a
Lender's sale of a participation interest, its obligations hereunder shall
remain unchanged. Borrower, each Agent, and the other Lenders shall continue to
deal solely and directly with such Lender. No participant shall have rights to
approve any amendment or waiver of this Agreement except to the extent such
amendment or waiver would (i) increase the Commitment of the Lender from whom
the participant purchased its participation interest; (ii) reduce the principal
of, or rate or amount of interest on the Loans subject to such participation,
(iii) postpone any date fixed for any payment of principal of, or interest on,
the Loans subject to the participation interest, or (iv) release any guarantor
of the Obligations or all or a substantial portion of the Collateral, except
when otherwise permitted hereunder. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Lender had not sold such
participation.
11.8 Confidentiality. Each Lender agrees that it will use reasonable
efforts not to disclose without the prior consent of Borrower any information
with respect to any Credit Party which is furnished pursuant to this Agreement
and which is designated by Borrower to the Lenders in writing as confidential;
provided, however, that any Lender may disclose any such
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information (a) to its Affiliates, employees, auditors, advisors or counsel or
to any Agent, Issuing Bank or another Lender, (b) as has become generally
available to the public other than by means of a breach of this Section by such
Lender, (c) as may be required or appropriate in any report, statement or
testimony submitted to any Governmental Authority having or claiming to have
jurisdiction over such Lender, (d) as may be required or appropriate in response
to any summons or subpoena or in connection with any litigation, (e) in order to
comply with any Requirement of Law, and (f) to any prospective or actual
transferee or participant in connection with any contemplated transfer or
participation of any of the Notes or Commitments or any interest therein by such
Lender, provided, that such transferee or participant agrees to be bound by the
provisions of this Section 11.9 as if it were a Lender.
11.9 Reimbursement of Expenses; Indemnification. Whether or not the
transactions contemplated in this Agreement are consummated:
(a) Borrower shall, upon demand, pay all Expenses of each Agent;
(b) Borrower shall, upon demand, pay to each Agent, the Issuing Bank
and any and all Lenders all costs and expenses (including the reasonable fees
and disbursements of counsel and other professionals) paid or incurred by such
Person in (i) enforcing its rights under or in respect of this Agreement, the
other Credit Documents or any other agreement, instrument or document now or
hereafter executed and delivered in connection herewith or therewith, (ii) in
collecting the Loans or any other Obligations, (iii) in foreclosing or otherwise
collecting upon the Collateral or any part thereof and (iv) obtaining any legal,
accounting or other advice in connection with any of the foregoing; and
(c) Borrower shall indemnify and agree to defend and hold harmless each
Agent, the Issuing Bank and each of the Lenders and their respective
shareholders, directors, officers, employees, agents, advisors, counsel and
Affiliates (each, an "INDEMNIFIED PERSON" and, collectively, the "INDEMNIFIED
PERSONS") from and against any and all losses, claims, damages, liabilities,
deficiencies, judgments or expenses incurred by any of them (except to the
extent that it is finally judicially determined to have resulted from the gross
negligence or willful misconduct of the Indemnified Person seeking
indemnification) arising out of or by reason of (x) any litigation,
investigations, claims or proceedings which arise out of or are in any way
related to (i) this Agreement or any other Credit Document or the transactions
contemplated hereby or thereby, (ii) the issuance of any or all of the Letters
of Credit, (iii) the failure of the Issuing Bank to honor a drawing under any
Letter of Credit, as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority, (iv) any actual or proposed use by Borrower of the
proceeds of the Loans or (v) any such Person's entering into this Agreement, the
other Credit Documents or any other agreements, instruments and documents
relating hereto, including, without limitation, amounts paid in settlement,
court costs and the reasonable fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the foregoing, (y) any remedial or
other action taken by Borrower or any Indemnified Person in connection with
compliance by Borrower or any of its Subsidiaries, or any of their respective
properties, with any foreign, federal, state or local environmental laws, acts,
rules, regulations, orders, directions, ordinances, criteria or guidelines, and
(z) any violation of, noncompliance with
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or liability under any Environmental Law applicable to the operations and/or
conduct of any Credit Party or its properties, whether owned or leased (each, a
"PROPERTY"), it being understood that Borrower shall have an obligation
hereunder to the Indemnified Persons with respect to any indemnified liabilities
incurred by any Indemnified Persons as a result of any Materials of
Environmental Concern that are first manufactured, emitted, generated, treated,
released, spilled, stored or disposed of on, at or from any Property or any
violation of any Environmental Law, which in either case first occurs on or with
respect to such Property (i) after the Property is transferred to any
Indemnified Person or their successors or assigns by foreclosure sale, deed in
lieu of foreclosure or similar transfer and, following such transfer, (ii) in
connection with the sale or re-leasing of such Property by such Indemnified
Persons or their successors and assigns to one or more third parties; provided,
however, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to indemnified liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
11.10 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement, any part of the Disclosure Schedule or any part of any other
Credit Document shall be effective unless in writing and signed by the
Administrative Agent and Required Lenders, except that:
(a) the consent of all Lenders directly affected is required to: (i)
increase a Commitment; (ii) reduce the principal of, or interest on, any or all
of the Notes, any Letter of Credit reimbursement obligations or any Fees
hereunder (other than Fees that are exclusively for the account of an Agent or
the Issuing Bank); (iii) postpone any date fixed for any scheduled payment in
respect of principal of, or interest on, any or all of the Notes, any Letter of
Credit reimbursement obligations or any Fees hereunder; (iv) change the
percentage of the Commitments, or any minimum requirement necessary for the
Lenders or Required Lenders to take any action hereunder; (v) amend or waive
this Section 11.11(a), or change the definition of Required Lenders; or (vi)
except as otherwise expressly provided in this Agreement, and other than in
connection with the financing, refinancing, sale or other disposition of any
asset of Borrower permitted under this Agreement, release any Liens in favor of
the Lenders on any of the Collateral;
(b) the consent of the applicable Agent, or the Issuing Bank, as the
case may be, shall be required for any amendment, waiver or consent directly
affecting the rights or duties of such Person under any Credit Document, in
addition to the consent of the Lenders otherwise required by this section; and
(c) the consent of Borrower shall be required for any amendment, waiver
or consent directly affecting the rights or duties of Borrower under any Credit
Document, in addition to the other consents required by this Section, provided,
that the consent of Borrower shall not be required for any amendment,
modification or waiver of the provisions of Article 10 (other than Section
10.8).
Borrower and the Lenders hereby authorize the Administrative Agent to modify
this Agreement by unilaterally amending or supplementing Annex I to reflect
assignments of the Commitments.
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11.11 Counterparts and Effectiveness. This Agreement and any waiver of
amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to the
Administrative Agent or, in the case of the Lenders, shall have given to the
Administrative Agent written, telecopied or telex notice (actually received) at
such office that the same has been signed and mailed to it.
11.12 Severability. In case any provision in or obligation under this
Agreement, any or all of the Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby.
11.13 Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Credit Document, Borrower, each
Agent and the Lenders hereby agree that all agreements among them under this
Agreement and the other Credit Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
any Agent, the Issuing Bank or any Lender for the use, forbearance, or detention
of the money loaned to Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Agreement or any of the other Credit
Documents at the time performance of such provision shall be due shall exceed
the Highest Lawful Rate, then, automatically, the obligation to be fulfilled
shall be modified or reduced to the extent necessary to limit such interest to
the Highest Lawful Rate, and if from any such circumstance any such Person
should ever receive anything of value deemed interest by applicable law which
would exceed the Highest Lawful Rate, such excessive interest shall be applied
to the reduction of the principal amount then outstanding hereunder or on
account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to Borrower. All sums paid or agreed to be paid to any
such person for the use, forbearance, or detention of the Obligations and other
Indebtedness of Borrower to any such Person, to the extent permitted by
applicable law, shall be amortized, prorated, allocated and spread throughout
the full term of such Indebtedness, until payment in full thereof, so that the
actual rate of interest on account of all such Indebtedness does not exceed the
Highest Lawful Rate throughout the entire term of such Indebtedness. The terms
and provisions of this Section shall control every other provision of this
Agreement and each Note and all other agreements among Borrower, the Agents, the
Issuing Bank and the Lenders.
11.14 Entire Agreement; Successors and Assigns. This Agreement and the
other Credit Documents constitute the entire agreement among the Credit Parties,
the Agents, the Issuing Bank and the Lenders, supersede any prior agreements
among them relating to the subject matter hereof, and shall bind and benefit
each such Person and their respective permitted successors and assigns.
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11.15 Currency Translation. Unless specifically provided otherwise, all
dollar figures and dollar calculations under this Agreement or the other Credit
Documents are denominated in Dollars (unless otherwise specifically stated) and
all loans made hereunder will be made in Dollars. The foreign currency amount of
all totals and subtotals submitted by or on behalf of the Credit Parties to any
Lender, the Issuing Bank or any Agent will be converted into Dollars at the
Prevailing Exchange Rate on the date prior to submission to such Person, or, in
the case of financial statements, in accordance with GAAP. All payments made by
any Credit Party or applied by any Agent, the Issuing Bank or any Lender to the
Obligations shall be first converted into Dollars at the Prevailing Exchange
Rate on the date of payment or application (if not already in Dollars) and then
credited against the Obligations.
11.16 Foreign Judgments. If for the purposes of obtaining or enforcing
a judgment in any court in any jurisdiction it becomes necessary to convert into
the currency of the country giving such judgment (the "JUDGMENT CURRENCY") an
amount due hereunder in Dollars, then the date of such conversion shall be known
as the "CONVERSION DATE." If there is a change in the rate of exchange between
the Judgment Currency and Dollars occurring between the Conversion Date and the
date of actual receipt of the amount due hereunder or under such judgment, the
applicable Credit Party will, notwithstanding such judgment, to the extent
permitted by law, pay all such additional amounts as may be necessary to ensure
the amount paid and received in the Judgment Currency when converted at the rate
of exchange prevailing on the date of such receipt will produce the amount then
due in Dollars. The obligation to make such additional payment shall constitute
a separate and independent obligation of such Credit Party and shall not merge
with any judgment or any partial payment or enforcement of payment. The term
"rate of exchange" used herein shall include any premiums and costs payable in
connection with the conversion being effected.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWER:
COLORADO PRIME CORPORATION,
a Delaware corporation
By: _____________________________________
Title: __________________________________
THE AGENTS:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the Agents
By: _____________________________________
By: _____________________________________
LENDERS:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: _____________________________________
By: _____________________________________
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ANNEX I
LENDERS AND COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Name and Address of Lender Commitment
- -------------------------- ----------
<S> <C>
Dresdner Bank AG, New York and
Grand Cayman Branches $50,000,000
75 Wall Street
New York, New York 10005
Attn.: Richard Conroy & Peter Kay
Telecopy No: (212) 429-2781
Total Commitments: $50,000,000
===========
</TABLE>
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ANNEX III
PRICING GRID
<TABLE>
<CAPTION>
Performance Ratios Revolver Applicable
------------------ -------------------
Margin
------
Funded Total EBITDA to Base Eurodollar Commitment
Debt to EBITDA Interest Rate Rate Fee
-------------- --------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
less than/equal to 5.25x greater than 1.75x 0% 1.50% 0.375%
greater than 5.25x less than/equal to 5.75X greater than 1.50X less than/equal to 1.75x 0% 1.75% 0.375%
greater than 5.75x less than/equal to 6.25x greater than 1.25x less than/equal to 1.50x 0% 2.00% 0.50%
greater than 6.25x less than/equal to 1.25x 0.25% 2.25% 0.50%
</TABLE>
The bold line indicates pricing at closing. Commencing with the first Reset
Date, the Leverage and Interest Coverage Ratios will be calculated and, subject
to the applicable terms and conditions of this Agreement, the pricing will be
increased or decreased or remain the same, as applicable, based upon the row
above indicated by the results of those calculations or, if two rows are
indicated, based upon the row of those two which reflects the highest risk to
the Lenders evidenced by the ratios calculated.
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PROPOSED EXECUTION VERSION
AMENDMENT NO. 1
This Amendment No. 1 (this "AMENDMENT") amends that certain Credit
Agreement dated as of May 9, 1997 (as amended, modified and supplemented from
time to time, including pursuant to this Amendment, the "CREDIT AGREEMENT"),
among COLORADO PRIME CORPORATION, a Delaware corporation ("BORROWER"), each
institution identified as a lender on Annex I thereto (each, together with its
successors and assigns, a "LENDER"), and DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, acting as the Agents for itself and the other Lenders (the
"AGENTS"), and is entered into as of June ___, 1997 among Borrower, the Agents
and Dresdner Bank AG, New York and Grand Cayman Branches ("DRESDNER"), as the
sole Lender as of the date hereof.
RECITALS
WHEREAS, Dresdner is in the process of completing the initial
syndication of the facilities under the Credit Agreement and intends to assign a
portion of its commitments and Loans thereunder to each of Bank Leumi Trust
Company of New York ("BANK LEUMI"), BankBoston, N.A. ("BANKBOSTON") and IBJ
Schroder Bank & Trust Company ("IBJ");
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit
Agreement, and the provisions of Section 1.2 of the Credit
Agreement shall apply hereto as if fully set forth herein.
2. Additional Definitions. The following definitions are hereby
added to Section 1.1 of the Credit Agreement and inserted
therein in alphabetical order with the definitions therein:
a. "PREVAILING EXCHANGE RATE" means, as to any date of
determination, the buy rate of exchange at which the
relevant foreign currency may be converted into
Dollars as quoted in The Wall Street Journal (U.S.
Eastern edition) as of such date and includes any
premiums and costs of exchange payable with the
purchase of, or conversion into, Dollars, provided
that if no such rate is quoted on the date of
determination, the Prevailing Exchange Rate shall be
established on the first date following such date of
determination on which a relevant exchange rate is
quoted in The Wall Street Journal.
<PAGE> 85
3. Definitional Changes. The following changes should be inserted
into the applicable definitions of Section 1.1 of the Credit
Agreement:
a. The definition of "Borrowing Base" is hereby amended
by deleting in subsection (a) "-Related".
b. The definition of "Collateral" is hereby amended by
inserting the phrase "Investment Property," after the
word "Inventory,".
c. The definition of "Eligible Accounts" is hereby
amended as follows: (i) deleting the term "Eligible"
from the first line of subsection (b) and the term
"Eligible" from the first line of subsection (c); and
(ii) inserting in the fourth line of subsection (b)
after the phrase "Food Account" the phrase "or any
ineligible non-Food Account".
d. The definition of "Eligible Food-Related Accounts" is
hereby amended by deleting "-Related" from the
definitional term.
e. The definition of "Eligible Non-Food Accounts" is
hereby amended by deleting the phrase "Eligible
Food-Related Accounts" and inserting in its place the
phrase "Eligible Food Accounts".
f. Deleting the parentheses that follows the word
"apply" in the fourth line of the definition for
"Eurodollar Rate."
g. Deleting the blank in the definition for "Settlement
Date" and inserting in its place "1,000,000".
4. Monitoring and Disbursements. Section 2.5(a) is hereby amended
by inserting in the third line after the phrase
"Administrative Agent" the phrase "and the Disbursing Agent".
5. Cash Dominion. Section 4.7(c) is hereby amended by deleting
the cross-reference to "Section 2.2(b)" and inserting in its
place a cross- reference to "Section 2.2" and by inserting the
word "Administrative" in front of the word "Agent" at the end
of the first sentence.
6. Special Provisions Relating to Eurodollar Loans. Section
4.9(c)(1) is hereby amended by inserting in the first line
after the phrase "Administrative Agent" the phrase "or the
Disbursing Agent"; by inserting in the second line after the
phrase "Administrative Agent" the phrase "or the Disbursing
Agent"; and by inserting in the seventh line after the word
"Agent" the phrase "or the Disbursing Agent". Section
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4.9(c)(2) is hereby amended by inserting in the first line
after the word "Lenders" the phrase "or the Disbursing Agent"
and by inserting in the first line after the word "shall" the
word "reasonably".
7. Insurance. Section 6.21 is hereby amended by inserting the
following after word "Agent" in the third line: "and naming
the Collateral Agent as an additional insured".
8. Notification of Requirements. Section 7.3(e) is hereby amended
by inserting in the eighth line the phrase "first priority
(subject to Permitted Liens)" before the phrase "perfected
status".
9. Liens. Section 8.4(d) is hereby amended by deleting the cross-
reference to "Section 9.1(k)" and inserting in its place a
cross-reference to "Section 9.1(l)".
10. Sale of Assets. Section 8.6 is hereby amended by inserting in
the seventh line after the word "receivables" the phrase
"(subject to the Lien of the Collateral Agent as set forth in
the Collateral Documents)".
11. Operation of Concord. Article 8 is hereby amended by inserting
the following new section after Section 8.6:
"Operation of Concord. Borrower shall not allow
Concord to operate other than for the sole purpose of
purchasing and servicing receivables from Borrower
and performing other activities reasonably related
thereto including customer credit review and approval
and shall not allow Concord to incur any liabilities
(other than in the ordinary course of its business
and in favor of the Collateral Agent and the
Lenders)."
12. Remedies. Section 9.2(a) is hereby amended by deleting the
cross-reference to "Section 9.1(f)" and inserting in its
place a cross-reference to "Section 9.1(g)".
13. Nature of Duties of Agent. Section 10.2 is hereby amended by
inserting in the fourth sentence after the phrase
"relationship to" the phrase "any other Agent,".
14. Reliance by Agents. Section 10.5 is hereby amended by
inserting as the first word in the first sentence after the
heading the word "Each".
15. Indemnification of Agents. Section 10.6 is hereby amended by
inserting an additional sentence at the end of the section
which states as follows:
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"This indemnification obligation shall survive the termination
of this Agreement."
16. Successor Agents. Section 10.8(b) is hereby amended by
deleting the last sentence in the section and inserting in its
place the following sentence: "Upon receipt of any other
Agent's resignation, the Administrative Agent shall appoint a
successor to such Agent, including as one option, at its sole
discretion, by assuming the duties and powers of such Agent."
17. Confidentiality. Section 11.8 is hereby amended by deleting
the cross-reference to "Section 11.9" and inserting in its
place a cross-reference to "Section 11.8".
18. Amendments and Waivers. Section 11.10(a) is hereby amended by
deleting in the first line the phrase "directly affected".
19. Exhibits. The following are amended as follows:
a. Exhibit B to the Credit Agreement is hereby amended
by deleting the cross-reference in paragraph 4 to
"Item 6" and inserting in its place a cross-reference
to "Item 5".
b. Exhibit B to the Credit Agreement is hereby amended
on page B-3 by inserting before the word "Agents" in
the signature block the word "Administrative" and by
deleting the "s" from the word "Agents".
c. Exhibit C to the Credit Agreement is hereby amended
by deleting the exhibit in its entirety and inserting
in its place the Exhibit attached hereto as Exhibit
C.
d. Exhibit D to the Credit Agreement is hereby amended
by deleting in the address block the word "Agents"
and inserting in its place the phrase "Agent for the
Lenders and for each of the Lenders".
e. Exhibit E to the Credit Agreement is hereby amended
by deleting the exhibit in its entirety and inserting
in its place the Exhibit attached hereto as Exhibit
E.
20. Section 4.7 of the Disclosure Schedule. Section 4.7 of the
Disclosure Schedule is hereby amended by deleting the Schedule
in its entirety and inserting in its place the Schedule
attached hereto as Section 4.7 of the Disclosure Schedule.
4
<PAGE> 88
21. Effectiveness of this Amendment. This Amendment shall become
effective upon the latest to occur of (x) the execution and
delivery hereof by Borrower and Required Lenders and (y) the
consummation of the assignments by Dresdner of a portion of
its Loans and Commitments to each of Bank Leumi, BankBoston
and IBJ as contemplated hereby.
22. Borrower Consent. Borrower hereby consents, pursuant to
Section 11.7(b) of the Credit Agreement, to the following
assignments by Dresdner: (a) to Bank Leumi, $7,500,000 of the
Commitment; (b) to BankBoston, $14,000,000 of the Commitment;
and (c) to IBJ, $14,000,000 of the Commitment.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE> 89
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
BORROWER:
COLORADO PRIME CORPORATION,
a Delaware corporation
By: _________________________________
Title: ______________________________
AGENT:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as the Agents
By: _________________________________
By: _________________________________
LENDER:
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Lender
By: _________________________________
By: _________________________________
<PAGE> 90
EXECUTION VERSION
EXHIBIT C
[Form of] BORROWING BASE CERTIFICATE
COLORADO PRIME CORPORATION
Date: __________ __, ____
<TABLE>
<S> <C>
I. Food Accounts $
--------
"Food Accounts" of Borrower reflected on
Borrower's consolidated balance sheet as of
the date set forth above. "Food Accounts"
means, on any date of determination, the
unpaid portion of the obligations as stated
on the respective invoices issued to
customers of Borrower with respect to
food-related inventory sold and shipped or
services performed in the ordinary course of
business, net of any returns, discounts,
deductions, claims, credits, charges, contra
accounts or other allowances or amounts owed
by Borrower or any of its Subsidiaries to
the account obligor.
Less ineligible Food Accounts:
(a) Food Accounts which arise out of a sale made by $
Borrower to an Affiliate -------
(b) Food Accounts the payment terms of which are $
longer than 8 months from date of incurrence of -------
indebtedness or more than 30 days from each date
of invoice with respect to the portion invoiced with
monthly payments of either principal only or
principal and interest
(c) Food Accounts the debtor on which is a debtor on $
any ineligible Non-Food Account (as defined -------
below)
(d) Food Accounts unpaid more than 60 days after the $
original payment due date on payment terms of -------
30 days or less from date of invoice
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
(e) Food Accounts the account debtor for which is a $
creditor of any Credit Party, has or has -------
asserted a right of setoff, has disputed its
liability or made any claim against any Credit
Party which has not been resolved, to the extent
of the amount owed by any Credit Party to the
account debtor, the amount of such actual or
asserted right of setoff, or the amount of such
dispute or claim, as the case may be
(f) Food Accounts the account debtor on which is (or $
its assets are) the subject of an Insolvency -------
Event
(g) Food Accounts not payable in Dollars $
-------
(h) Food Accounts the account debtor for which is $
located outside the U.S. -------
(i) Food Accounts as to which the underlying sale is $
on a bill-and-hold, guarantied sale, -------
sale-and-return, sale on approval or consignment
basis or made pursuant to any other agreement
providing for repurchase or return
(j) Food Accounts as to which Monitoring Agent has $
determined by its own credit analysis that -------
collection is uncertain or the Account may not
be paid or the creditworthiness of the account
debtor has deteriorated significantly
(k) Food Accounts the account debtor for which is $
the U.S. or any department, agency or -------
instrumentality thereof, or any other
Governmental Authority
(l) Food Accounts the goods giving rise to which $
have not been shipped and delivered to and -------
accepted by the account debtor, such goods have
been rejected or returned by the account debtor,
the services giving rise to which have not been
performed and accepted, such services have been
rejected by the account debtor, or which
otherwise do not represent a final sale
(m) Food Accounts which do not comply with all $
Requirements of Law -------
</TABLE>
2
<PAGE> 92
<TABLE>
<S> <C>
(n) Food Accounts subject to any adverse security $
deposit, progress payment or other similar -------
advance made by or for the benefit of the
applicable account debtor
(o) Food Accounts not subject to a valid and $
perfected first priority Lien in favor of the -------
Collateral Agent or which do not otherwise
conform to the representations and warranties
contained in the Credit Documents
Total ineligible Food Accounts $
-------
Eligible Food Accounts (Food Accounts minus Total $
ineligible Food Accounts) -------
Advance Rate X 0.80
-------
Food Accounts-based Availability $
-------
II. Non-Food Accounts $
-------
"Non-Food Accounts" of Borrower reflected on Borrower's
consolidated balance sheet as of the date set forth
above. "Non-Food Accounts" means, on any date of
determination, the unpaid portion of the obligations as
stated on the respective invoices issued to customers
of Borrower with respect to inventory sold and shipped
or services performed in the ordinary course of
business, net of any returns, discounts, deductions,
claims, credits, charges, contra accounts or other
allowances or amounts owed by Borrower or any of its
Subsidiaries to the account obligor, other than Food
Accounts. ("Accounts" means the "Non-Food Accounts"
together with all "Food Accounts.")
Less ineligible Non-Food Accounts:
(a) Non-Food Accounts which arise out of a sale made $
by Borrower to an Affiliate -------
(b) Non-Food Accounts the payment terms are not on a $
one fortieth (1/40) term basis at a legal rate -------
of interest, with monthly payments of principal
and interest which are due within 30 days from
each date of invoice with respect to the portion
invoiced
</TABLE>
3
<PAGE> 93
<TABLE>
<S> <C>
(c) Non-Food Accounts the debtor on which is a $
debtor on an ineligible Food Account, or an -------
ineligible Non-Food Account
(d) Non-Food Accounts unpaid more than 60 days after $
the original payment due date on payment terms -------
of 30 days or less from date of invoice
(e) Non-Food Accounts the account debtor for which $
is a creditor of any Credit Party, has or has -------
asserted a right of setoff, has disputed its
liability or made any claim against any Credit
Party which has not been resolved, to the extent
of the amount owed by any Credit Party to the
account debtor, the amount of such actual or
asserted right of setoff, or the amount of such
dispute or claim, as the case may be
(f) Non-Food Accounts the account debtor for which $
is (or its assets are) the subject of an -------
Insolvency Event
(g) Non-Food Accounts not payable in Dollars $
-------
(h) Non-Food Accounts the account debtor for which $
is located outside the U.S. -------
(i) Non-Food Accounts as to which the underlying $
sale is on a bill-and-hold, guarantied sale, -------
sale-and-return, sale on approval or consignment
basis or made pursuant to any other agreement
providing for repurchase or return
(j) Non-Food Accounts as to which the Monitoring $
Agent has determined by its own credit analysis -------
that collection is uncertain or the Non-Food
Account may not be paid or the creditworthiness
of the account debtor has deteriorated
significantly
(k) Non-Food Accounts the account debtor for which $
is the U.S. or any department, agency or -------
instrumentality thereof, or any other
Governmental Authority
</TABLE>
4
<PAGE> 94
<TABLE>
<S> <C>
(l) Non-Food Accounts the goods giving rise to which $
have not been shipped and delivered to and -------
accepted by the account debtor, such goods have
been rejected or returned by the account debtor,
the services giving rise to which have not been
performed and accepted, such services have been
rejected by the account debtor, or which
otherwise do not represent a final sale
(m) Non-Food Accounts which do not comply with all $
Requirements of Law -------
(n) Non-Food Accounts subject to any adverse $
security deposit, progress payment or other -------
similar advance made by or for the benefit of
the applicable account debtor
(o) Non-Food Accounts not subject to a valid and $
perfected first priority Lien in favor of the -------
Collateral Agent or which do not otherwise
conform to the representations and warranties
contained in the Credit Documents
Total ineligible Non-Food Accounts $
-------
Eligible Non-Food Accounts (Non-Food Accounts minus $
Total ineligible Non-Food Accounts) -------
Advance Rate X 0.8
-------
Non-Food Accounts-based Availability $
-------
III. Inventory $
-------
Inventory of Borrower reflected on Borrower's
consolidated balance sheet as of the date set forth
above, valued at the lower of cost or market in
accordance with GAAP, and reduced by the amount of all
obsolescence reserves.
Less Ineligible Inventory:
(a) Inventory not owned solely by Borrower or to $
which Borrower does not have good, valid and -------
marketable title
</TABLE>
5
<PAGE> 95
<TABLE>
<S> <C>
(b) Inventory not located on property owned (or $
leased, if the Collateral Agent has received an -------
executed consent and estoppel, in form and
substance satisfactory to Collateral Agent, from
the applicable landlord) by Borrower, other than
Inventory in possession of a warehouseman or
bailee from whom Collateral Agent has received
an executed bailee letter in form and substance
satisfactory to Collateral Agent from such
warehouseman or bailee
(c) Inventory not subject to a valid and perfected $
first priority Lien in favor of Collateral Agent -------
(d) Inventory consisting of goods returned or $
rejected by the applicable Credit Party's -------
customers or goods in transit to one or more
third parties
(e) Inventory not a first-quality finished good $
which is readily marketable -------
(f) Inventory which is perishable (provided that $
frozen food shall not be deemed perishable so -------
long as it remains frozen in accordance with all
applicable Requirements of Law and policies of
Borrower), work-in-progress, packaging,
supplies, uniforms or slow moving
(g) Inventory not located in the U.S. $
-------
(h) Inventory manufactured in violation of the Fair $
Labor Standards Act or any other labor or import -------
laws or regulations of the U.S.
(i) Inventory which is obsolete (without duplication $
of any reserve for obsolescence subtracted from -------
the value of otherwise Eligible Inventory)
(j) Inventory which does not otherwise conform to $
the representations and warranties contained in -------
the Credit Documents
Total Ineligible Inventory $
-------
</TABLE>
6
<PAGE> 96
<TABLE>
<S> <C>
Total Eligible Inventory (Inventory less Total $
Ineligible Inventory) -------
Advance Rate X 0.5
Total Inventory-based Availability $
-------
III. Borrowing Base
Total Food Accounts-based Availability $
-------
Total Non-Food Accounts-based Availability $
-------
Total Inventory-based Availability $
-------
Total Availability $
-------
Total Commitments $
-------
Total Amount of Outstanding Loans $
-------
Total Amount of Letter of Credit Obligations $
-------
</TABLE>
7
<PAGE> 97
EXHIBIT E
[Form of] NOTICE OF BORROWING
[DATE]
[____________________], as the Disbursing Agent
1 State Street
New York, NY 10004
Attn.: ____________________
Ladies and Gentlemen:
The undersigned, Colorado Prime Corporation, a Delaware corporation
("Borrower"), refers to the Credit Agreement dated as of May __, 1997 among
Borrower, certain institutions parties thereto as lenders, and Dresdner Bank AG,
New York and Grand Cayman Branches, as Agent (as amended, modified, and
supplemented to date, the "Credit Agreement"). Unless otherwise defined herein,
capitalized terms used in this Notice of Borrowing shall have the meaning given
to them in the Credit Agreement.
Pursuant to Section 2.2 of the Credit Agreement, Borrower hereby gives
you irrevocable notice that it requests a Borrowing under the Credit Agreement,
and sets forth below the required information relating to such Borrowing (the
"Proposed Borrowing"):
(i) The Proposed Borrowing is of [Base Rate] [Eurodollar] Loans.
(ii) The requested date of the Proposed Borrowing is
_________________.
(iii) The aggregate amount of the Proposed Borrowing is $__________
[and, if the Proposed Borrowing is of Eurodollar Loans, the
Interest Period is ___________].
(iv) The account at which the requested funds shall be made
available is _________________.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Agreement and in each other Credit Document are true and correct
in all material respects before and after giving effect to the
Proposed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, except to the
extent that such representations and warranties
<PAGE> 98
expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct on
and as of such earlier date);
(B) no event has occurred and is continuing, or would result from such
Proposed Borrowing or from the application of the proceeds
therefrom, which constitutes or would constitute a Default or an
Event of Default;
(C) all of the other conditions to the Proposed Borrowing set forth in
Article 5 of the Credit Agreement have been fulfilled; and
(D) the amount of the Proposed Borrowing is within the Borrowing Base.
If notice of this Proposed Borrowing has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice.
COLORADO PRIME CORPORATION
By: _______________________________
Name:
Title:
2
<PAGE> 99
SECTION 4.7 OF THE DISCLOSURE SCHEDULE
Borrower may establish an account in the name of Parent, with
_________________, a Lender, provided that: (i) such account is used solely to
pay the sum of $35,000 per year to Bill Dordelman in his capacity as an
independent consultant for Borrower (the "Consultant Fee"); (ii) such account
shall at no time have a balance of more than $35,000; and (iii) there shall be
no funds disbursed to this account by Borrower or any other Credit Party until
such time as the Consulting Fee is due and payable to Dordelman and such funds
shall be paid promptly to Dordelman for such purposes only.
<PAGE> 1
EXHIBIT 12
COLORADO PRIME CORPORATION
CALCULATION OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
FISCAL YEAR ENDED MARCH
------------------------------------------------------------ ---------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- --------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes........................ (14) (9,191) 2,731 5,648 772 1,290 5,140
Fixed charges.................. 12,576 10,646 7,613 8,923 10,143 4,982 5,179
------ ------ ------ ------ ------ ------ ------
Earnings(1).................... 12,562 1,455 10,344 14,571 10,915 6,272 10,319
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest..................... 11,706 9,745 6,783 8,017 9,130 4,486 4,668
Rent......................... 870 901 830 906 1,013 496 511
------ ------ ------ ------ ------ ------ ------
Fixed charges(2)............... 12,576 10,646 7,613 8,923 10,143 4,982 5,179
====== ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed
charges(1)(2)................ 1.0x 0 1.4x 1.6x 1.1x 1.3x 2.0x
====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
1. Kal Mar Properties Corp.
State of Incorporation: New York
2. Concord Financial Services, Inc.
State of Incorporation: New York
3. Prime Foods Development Corporation
State of Incorporation: Delaware
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion
in this Registration Statement of our report dated December 10, 1996 and to all
references to our Firm included in this Registration Statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
June 27, 1997
<PAGE> 1
EXHIBIT 25
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
Colorado Prime Corporation
(Exact name of obligor as specified in its charter)
Delaware 11-2826129
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Kal Mar Properties Corp.
(Exact name of guarantor as specified in its charter)
New York
(State or other jurisdiction of
incorporation or organization)
Concord Financial Services, Inc.
(Exact name of guarantor as specified in its charter)
New York
(State or other jurisdiction of
incorporation or organization)
<PAGE> 2
Prime Foods Development Corporation
(Exact name of guarantor as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
One Michael Avenue
Farmingdale, New York 11735
(Address of principal executive offices) (Zip code)
----------------------
12 1/2% Senior Notes due 2004
(Title of the indenture securities)
================================================================================
-2-
<PAGE> 3
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
-3-
<PAGE> 4
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 25th day of June, 1997.
THE BANK OF NEW YORK
By: /s/ VIVIAN GEORGES
---------------------------------
Name: VIVIAN GEORGES
Title: ASSISTANT VICE PRESIDENT
<PAGE> 6
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street New York NY 10286
And Foreign and Domestic Subsidiaries
a member of the Federal Reserve System, at the close of business December 31,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
- ------ ---------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........... $ 6,024,605
Interest-bearing balances .................................... 808,821
Securities:
Held-to-maturity securities .................................. 1,071,747
Available-for-sale securities ................................ 3,105,207
Federal funds sold in domestic offices of the bank: ........... 4,250,941
Loans and lease financing receivables:
Loans and leases, net of unearned income ...........31,962,915
LESS: Allowance for loan and lease losses .............635,084
LESS: Allocated transfer risk reserve .....................429
Loans and leases, net of unearned income, allowance,
and reserve ................................................. 31,327,402
Assets held in trading accounts ............................... 1,539,612
Premises and fixed assets (including capitalized leases) ...... 692,317
Other real estate owned ....................................... 22,123
Investments in unconsolidated subsidiaries and
associated companies ......................................... 213,512
Customers' liability to this bank on acceptances outstanding .. 985,297
Intangible assets ............................................. 590,973
Other assets .................................................. 1,497,903
-----------
Total assets .............................................. $52,120.450
===========
LIABILITIES
Deposits
In domestic offices .......................................... $25,929,642
Noninterest-bearing ............................... 11,245,050
Interest-bearing .................................. 14,684,592
In foreign offices, Edge and Agreement subsidiaries
and IBFs ..................................................... 12,852,809
Noninterest-bearing ................................... 552,203
Interest-bearing ................................... 12,300,606
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
Federal funds purchased ........................................ 1,360,877
Securities sold under agreements to repurchase ................. 226,158
Demand notes issued to the US Treasury .......................... 204,987
Trading liabilities ............................................. 1,437,445
Other borrowed money
With original maturity of one year or less ..................... 2,312,555
With original maturity of more than one year ................... 20,765
Banks liability on acceptances executed and outstanding ......... 1,014,717
Subordinated notes and debentures ............................... 1,014,400
Other liabilities ............................................... 1,721,291
----------
Total liabilities ........................................... 48,095,648
----------
EQUITY CAPITAL
Common Stock .................................................... 942,284
Surplus ......................................................... 731,319
Undivided profits and capital reserves .......................... 2,354,095
Net unrealized holding gains (losses) on
available-for-sale securities .................................. 7,030
Cumulative foreign currency translation adjustments ............. (9,916)
-----------
Total equity capital ............................................ 4,024,812
-----------
Total liabilities and equity capital ............................ $52,120,460
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief
Robert E. Keilman
We the undersigned directors attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct
J Carter Bacor Director
Thomas A Renyi Director
Alan R Griffin Director
