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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File Number 1-13747
ATLANTIC PREMIUM BRANDS, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 36-3761400
(STATE OF INCORPORATION) (I.R.S. EMPLOYER ID NO.)
650 Dundee Road, Suite 370, Northbrook, Illinois 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(847) 480-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant, based upon the last reported closing price of
the registrant's Common Stock on March 20, 1998: $19,122,321
The number of shares outstanding of the registrant's Common Stock, par
value $.01, as of March 20, 1998: $7,400,174
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's Proxy Statement for its Annual Meeting
of Stockholders to be held on May [13], 1998 are incorporated by reference into
Part III of this report.
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PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
In the first quarter of 1998, Atlantic Premium Brands, Ltd. (the
"Company") and Potter Sausage Co., a newly-formed subsidiary, acquired
substantially all of the assets of J.C. Potter Sausage Company ("J.C. Potter"),
a branded food processing company based in Durant, Oklahoma, in consideration
for $13.0 million cash plus related transaction costs.
J.C. Potter is engaged in the manufacturing, marketing and distribution of
premium, branded breakfast sausage, primarily in Oklahoma, Arkansas and Texas.
Its products are sold under the J.C. Potter brand name and are generally
delivered to the retail grocery trade through its own distribution system. In
addition, J.C. Potter manufactures products for other branded food companies on
a private-label basis. J.C. Potter is presently a supplier to the Company's
Prefco subsidiary and a customer of its Carlton subsidiary. J.C. Potter
presently has approximately 240 employees.
The description of the Company set forth below in this Item 1 is a
description as of December 31, 1997, and does not include the recent acquisition
of J.C. Potter.
GENERAL
The Company, through its subsidiaries' operations in Texas, Louisiana and
Kentucky, manufactures, markets and distributes branded and unbranded food
products for customers in a ten state region, and, through its operations in
Maryland, distributes specialty, non-alcoholic beverages to customers in the
Baltimore and Washington, D.C. metropolitan areas.
Through its Prefco subsidiary, the Company is engaged in the marketing
and wholesale distribution of branded and unbranded meats to the retail grocery
trade. The Company markets and distributes its own branded, processed meat
products under the brand name Bum's Favorite Blue Ribbon(R). These products,
which include smoked sausages, bacon and packaged, sliced luncheon meats,
account for approximately 15% of the sales of the Prefco subsidiary and are
manufactured by the Company's Carlton subsidiary as well as by third party
contract manufacturing companies. Blue Ribbon is currently the best selling
brand of bacon in the Houston market. In addition to marketing its own branded
products, the Company is also a leading regional distributor of unbranded
products including boxed beef, pork, chicken and related items.
Through its Carlton subsidiary, the Company manufactures a variety of
smoked sausage products. Approximately 45% of total volume manufactured
reflects product sold through the Prefco subsidiary under the Blue Ribbon brand
name. Of the balance, approximately 30% of total volume reflects private label
manufacturing for other regional sausage brands and selected chain supermarket
house brands, and approximately 25% of total volume is sold by the Carlton
subsidiary under the brand names Carlton and Country Boy(TM). These branded
products are marketed on a regional basis, principally in south and west Texas.
Through its Richards subsidiary, the Company manufactures, markets and
distributes Cajun-style, cooked, pork sausage products and specialty foods for
customers in Louisiana, under the brand name Richard's(TM).
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Through its Grogan's subsidiary, the Company manufactures, markets and
distributes fresh pork sausage products for customers in a six state region.
These products are sold under the brand names Grogan's Farm(TM) and Partin's
Country Sausage(TM).
In addition to its food businesses, the Company is a leading independent
wholesale distributor of specialty non-alcoholic beverages to over 6,000
retail trade accounts (including independent retail outlets such as
independent grocery stores, delicatessens and restaurants, as well as large
grocery and convenience store chains and their independent franchises) in the
greater Baltimore and Washington, D.C. metropolitan area and surrounding
counties. Under agreements that provide exclusive rights to selected
territories, the Company distributes juice drinks, sodas, bottled waters and
ready-to-drink teas. Brand name products distributed by the Company include
Mistic(R) and AriZona(TM). Sales of Mistic products accounted for approximately
45% of the Company's total beverage case sales in 1997.
CORPORATE HISTORY
In April 1991, MB Acquisition Corp. ("MB Acquisition"), a corporation owned
by a group of individuals including the Company's Chairman of the Board and
certain of the Company's directors and stockholders, acquired the business of
the Company from a company now known as S&B Ventures, Inc. (the "Predecessor")
for a purchase price of $1,158,000 (the "Acquisition"). In connection with the
Acquisition, MB Acquisition also assumed certain obligations to pay the owners
of the Predecessor $2,000,000 pursuant to a non-compete agreement and $829,000
pursuant to consulting agreements. MB Acquisition financed the Acquisition
through a bridge loan provided by nine of its current stockholders, including an
officer and certain directors. In September 1991, Maryland Beverage, L.P. (the
"Partnership") was formed with the Company and Strategic Investment Corporation
("Strategic"), a wholly owned subsidiary of T. Rowe Price Strategic Partners
Fund, L.P., as its sole partners, and MB Acquisition was merged with and into
the Company, and its assets and liabilities were contributed to the Partnership.
In September 1993 the Company was reincorporated in Delaware and adopted the
name "Atlantic Beverage Company, Inc." In November 1993, in connection with the
Company's initial public offering, Strategic (whose only asset was its
partnership interest in the Partnership) merged with and into the Company.
Subsequently, the Partnership was dissolved and the Company succeeded to the
Partnership's assets and liabilities.
On April 27, 1994, the Company entered into and consummated an agreement to
acquire certain assets and marketing rights from Flying Fruit Fantasy, USA, Inc.
("FF") for total consideration of approximately $1.2 million. Under the terms of
this agreement, the Company obtained worldwide marketing and distribution rights
to a frozen beverage served through automated dispensing machines. In December
1995, the Company adopted a plan to discontinue this division of business. As a
result, the Company recognized a one-time charge of approximately $2.4 million
in the fourth quarter of 1995 which reflected the write-off of $1.1 million in
equipment and $0.9 million in intangible assets, and costs of approximately $0.4
million associated with discontinuing the operation.
In the first quarter of 1996, a newly formed, wholly-owned subsidiary of
the Company acquired the outstanding common stock of Prefco, Inc. ("Prefco").
Prefco, based in Houston, Texas, markets and distributes its own branded meat
products as well as unbranded meat products to the retail grocery trade in
Texas. Also in the first quarter of 1996, Carlton Foods, Inc. ("Carlton") was
merged into another newly formed, wholly-owned subsidiary of the Company.
Carlton, based in New Braunfels, Texas, is
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a manufacturer of branded and private label meat products. The combined purchase
price for these entities was approximately $11 million, which included
approximately $3.0 million in Carlton refinanced and assumed debt.
In August 1996, a newly formed, wholly-owned subsidiary of the Company
acquired certain of the assets of Richard's Cajun Country Food Processors
("Richards"). Richards, based in Church Point, Louisiana, is engaged in the
manufacturing, marketing and distribution of Cajun-style processed meat and
specialty food products. The consideration for these assets was $2.5 million
cash and a subordinated promissory note in the amount of $0.875 million (the
"Richards Note").
In October 1996, Grogan's Merger Corp. ("GMC"), a newly formed,
wholly-owned subsidiary of the Company, acquired and merged with the
distribution and manufacturing business of Grogan's Sausage, Inc. and Grogan's
Farm, Inc. respectively (collectively "Grogan's"), based in Arlington, Kentucky
for total consideration of approximately $3.8 million, consisting of $1.9
million cash, $0.2 million in a note (the "Grogan's Note") and 573,810 shares
of common stock of the Company.
In November 1996, GMC acquired the assets of Partin's Sausage ("Partin's")
in consideration for $0.4 million cash, $0.225 million in a note (the "Partin's
Note"), and 78,310 shares of common stock of the Company. Partin's, based in
Cunningham, Kentucky, is engaged in the manufacturing, marketing and
distribution of pork sausage products.
INDUSTRY
The Company's operations are classified into three business segments: food
processing, food distribution and beverage distribution. Note 17 to the
Company's Consolidated Financial Statements provides summarized financial
information by business segment for continuing operations for the last three
fiscal years.
FOOD INDUSTRY
Through its Carlton, Prefco, Richards and Grogan's subsidiaries, the
Company participates in three general segments of the food industry: processing,
distribution, and branded product marketing.
The meat processing segment, which includes cooking, slicing, mixing,
grinding and similar functions is generally capital intensive. Unbranded raw
material typically comes from packing companies. In some instances, packing and
processing are vertically integrated. In other instances, as is the case with
the Company, processing and marketing are vertically integrated. The Company's
Carlton subsidiary manufactures the Company's own branded products as well as
those of other branded meat companies and supermarkets on a private label basis.
Because of the cost of transportation and shelf life of product, processing
facilities tend to serve a regional clientele. Large, integrated national meat
companies therefore tend to establish strategically located processing
facilities in different geographic regions.
The meat distribution segment which serves several different classes of
trade including retail, restaurant and institutional customers is generally not
capital intensive but features very low gross margins and is subject to intense
price competition. Product is invoiced and priced according to weight.
Successful distributors typically distinguish themselves through customer
service and low cost position.
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Price, product selection, reliability, in-stock rate, promptness of delivery and
weekend delivery options are among the benefits which are most highly valued. It
is not uncommon for a grocery retailer to have one primary supplier in addition
to one or more secondary suppliers. Meat distribution companies typically serve
a local or regional clientele.
The branded meat product business is generally not capital intensive.
Strong retail brands exist at local, regional and national levels and
include bacon, hot dogs, cooked and uncooked sausage, cooked hams, chicken and
turkey products. Advertising and promotion is generally critical to the
maintenance of brand equity. Companies which market branded meat products can
exist on a stand-alone basis as well as vertically integrated with processing
and/or distribution. The Company reflects, to a limited extent, both forms of
vertical integration.
BEVERAGE INDUSTRY
The beverage distribution industry is divided generally into two different
types of distributors: bottler/distributors and independent distributors. The
largest soft drink manufacturers generally have a network of companies (which
include both independent and company-owned businesses) that serve as
bottler/distributors for their products. Smaller beverage companies, however,
typically engage contract bottlers to produce their products, and rely on
independent companies that function solely as distributors to distribute their
products to consumers.
The Company offers suppliers the ability to distribute their products to
over 6,000 actively serviced customers. Both bottler/distributors and
distributors maintain inventory in their own warehouses, sell products using
their own sales force and deliver products using their own trucks. However,
subject to restrictions contained in distribution contracts, independent
distributors like the Company have the flexibility to select a mix of products
to carry without being primarily dedicated to the large, traditional soft drink
brands that bottler/distributors must support.
Specialty beverage products and branded bottled water products have been
well received not only by the consumer but also by the retail trade. In general,
these products sell at a premium to traditional soft drinks, generating higher
gross profits per transaction for the retail trade. By contrast, traditional
soft drinks compete largely on the basis of pricing and promotion and generate
relatively lower unit profits.
Although the domestic beverage distribution industry is characterized by
the relative absence of technological risk and relatively minor initial capital
investment requirements, there exist significant barriers to entry primarily due
to geographic exclusivity agreements with suppliers and established
relationships with customers. In addition, because of the relatively substantial
weight of bottled beverages and resulting expense of transportation, competition
at the distribution level occurs primarily on a regional basis.
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STRATEGY
FOOD STRATEGY
Operating Strategy. The Company's operating strategy with respect to its
newly acquired food businesses will be to grow these businesses profitably,
while identifying and exploiting synergy among them. Key elements of this
operating strategy include increasing sales to existing customers, adding new
customers, and identifying opportunities to add new products.
Corporate Growth Strategy. The Company has identified potential strategies
that will use the combination of its food subsidiaries as a platform for
additional corporate growth. These potential strategies may include acquisition
opportunities that complement the subsidiaries' businesses.
BEVERAGE STRATEGY
The Company's success in the beverage distribution business has been based
in large part on its ability to serve independent grocery stores, delicatessens
and restaurants, as well as institutional buyers, such as cafeterias and
universities, which traditionally sell cold, single-serve, bottled beverages to
consumers. These customers represented approximately 60% of the Company's
total beverage sales in 1997. The significant exposure that results from so
many smaller customers carrying the Company's line of beverages helps to create
the broad-based demand necessary for larger retail outlets to consider stocking
those beverages.
Operating Strategy. The Company's operating strategy in its current
territory is to continue to focus on the distribution of non-alcoholic
beverages, with primary emphasis on specialty beverages, and to maximize market
penetration for the products it carries. Key elements of the Company's operating
strategy include: (i) increasing distribution to existing customers, in both the
variety of brands carried and the number of cases sold; (ii) adding new
customers each year within the Company's geographic territory; and (iii)
identifying and acquiring exclusive distribution rights to products not
currently distributed by the Company.
PRODUCTS
Through its Prefco subsidiary, the Company distributes a wide variety of
unbranded, boxed meat products. The Company maintains an inventory of over 200
different stock keeping units of unbranded product, which include beef, turkey,
pork and chicken. Product is stored in the Company's two refrigerated warehouses
in Houston and delivered on refrigerated vehicles to several hundred customers
including chain and independent supermarkets and discount clubs. The Company
purchases product from approximately one dozen meat packing companies.
Purchases of the same product may be spread among several suppliers over the
course of a year, and purchasing decisions are frequently driven by price and
availability, both of which are likely to vary. Three suppliers accounted for
approximately 9%, 8% and 8% of the Company's boxed meat purchases during
1997 and 20%, 13% and 10% of such purchases during 1996. No other supplier
accounted for more than 10% of such purchases during either year.
Also through its Prefco subsidiary, the Company markets and distributes its
own branded sausage, bacon and packaged, sliced luncheon meats. These products
are stored in the Company's two refrigerated warehouses. Product is delivered on
the Company's refrigerated trucks, and customers typically include the same
retail establishments that purchase the Company's unbranded meat products. The
majority of Blue Ribbon (R) sausage product is manufactured by the Company's
Carlton and Grogan's subsidiaries. The
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balance of the sausage product as well as the bacon and luncheon meats are
purchased from four other contract food processing companies.
In addition to manufacturing product for the Prefco subsidiary, the
Company's Carlton subsidiary manufactures and markets its own branded smoked
sausage products for the retail grocery trade. The Carlton subsidiary
manufactures similar products on a private label for other branded food
companies.
Through its Richards subsidiary, the Company manufactures, markets and
distributes Cajun-style, cooked pork sausage products and specialty foods for
customers in the state of Louisiana under the brand name Richards(TM).
Through its Grogan's subsidiary, the Company manufactures, markets and
distributes fresh pork sausage products for customers in a six state region.
These products are sold under the brand names Grogan's(TM) and Partin's(TM).
The Company distributes a wide variety of beverages, including
ready-to-drink teas, natural sodas, sparkling waters with juice, fruit
juices, juice drinks, still and sparkling waters and sports drinks. Brand name
products distributed by the Company include Mistic(R), AriZona(TM), Clearly
Canadian(R), Hires(R), Crush(R), Vernor's(R), Elliott's Amazing(TM), Crystal
Geyser(R), Stewart's(R), Jolt Cola(R), and Sunlike Juices. The Company reviews
hundreds of products each year, and continuously evaluates the mix of products
it distributes. The Company actively seeks to acquire distribution rights for
products it believes show strong growth potential. For 1996 and 1997,
approximately 58% and 45%, respectively, of the Company's total beverage case
sales represented Mistic(R) products, and in 1996 7% represented Elliott's(TM)
products while in 1997 16% represented AriZona(TM) products. None of the
Company's other suppliers accounted for more than 10% of the Company's total
beverage case sales during such periods.
SUPPLIER CONTRACTS
The Company does not currently have contracts with any of its food
suppliers. Many of the Company's major beverage brands, however, are distributed
on an exclusive basis under distribution contracts within the Company's
territory. The terms of the contracts, including their lengths, vary by
supplier. The Company has approximately 20 beverage suppliers.
The Company's contract with Mistic Brands, Inc. ("MBI"), supplier of
Mistic(R), expires on December 31, 2000. The Company has been the exclusive
distributor of Mistic(R) in the greater Baltimore and Washington, D.C.
metropolitan area since the product was first introduced in this territory in
1990. Under the terms of the Mistic(R) contract, the Company is obligated to
distribute Mistic(R) products to 80% of the retail accounts that would carry on
a regular basis cold, single-serve, bottled specialty beverage products,
excluding the restaurant and bar trade. Unless such percentage is obtained by
the Company to MBI's satisfaction, MBI has the right to suspend shipments or
cancel the contract. MBI also retains the right to sell to certain national
buying chains that require servicing by one national vendor. The contract also
provides that, unless MBI agrees in writing to the sale of a product that MBI
considers, in its sole discretion, to be a direct competitor of its products,
the Company cannot, without MBI's consent, sell to anyone within its territory
any product that would, in the sole discretion of MBI, compete with Mistic(R) or
be likely to cause confusion in the minds of the public as to the Mistic(R)
products. The Company specifically cannot sell Snapple(R). The Company believes
that it is in compliance in all material respects with the terms of the
Mistic(R) contract.
Other beverage distribution contracts place similar restrictions and
requirements on the Company. The Company believes that the terms of its
distribution contracts are similar to those employed throughout
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the industry. In addition, the Company has oral distribution agreements for
other beverage products.
SALES, MARKETING AND DISTRIBUTION
The Company's Prefco subsidiary distributes unbranded boxed beef, pork, and
poultry to chain and independent retail grocery customers, most of whom are
located in the Houston metropolitan area, and all of whom are within a 400-mile
radius of the Company's distribution facilities. The Company serves several
hundred such customers as either their primary or secondary fresh meat supplier.
Prefco's direct sales force contacts its customers on a daily basis. The Company
delivers product using refrigerated trucks, generally within one to three
days of receiving an order.
The Company's Prefco subsidiary also markets and distributes its own Blue
Ribbon(R) bacon, sausage and sliced luncheon meats to the retail grocery trade.
Orders are received on a pre-sell basis by the direct sales force mentioned
above as well as on a route-sales basis by a separate group of sales people,
each of whom is responsible for a route sales vehicle. The business has
historically engaged in significant radio and television advertising in the
Houston market.
The Company's Carlton subsidiary solicits and receives customer orders for
branded product through direct salespeople as well as through third-party
food brokers and by telephone and facsimile transmission. The Company engages in
a limited amount of advertising for such products, primarily through weekly
chain supermarket flyers. Relationships with private label customers are
generally established at the senior management level, although recurring orders
from such customers are normally received over the telephone or facsimile
machine by clerical staff. Branded and private label orders are generally filled
within one to seven days and are either delivered on one of the Carlton
subsidiary's three refrigerated vehicles or by common carrier, or are picked up
by customers.
The Company's Richards subsidiary employs a route delivery sales force.
Orders are taken by the route salespeople and filled immediately from stock on
the route sales trucks. The subsidiary engages in promotions, including
in-store sampling, as well as in print advertising. All customers are located
within the state of Louisiana.
The Company's Grogan's subsidiary also employs a route sales force.
Orders are taken by the route salespeople and filled immediately from
stock onboard the route sales trucks. In addition, the subsidiary sells
approximately 30% of its product to third party distributors. The Company
engages in promotions, including in-store sampling, as well as in print, radio
and television advertising. Customers are located in Kentucky, Illinois,
Indiana, Mississippi, Tennessee, and Arkansas.
One food distribution customer accounted for approximately 40% of the
Company's total food sales during both 1996 and 1997. No other customer
accounted for more than 10% of total food sales during either year.
The Company has a beverage distribution sales force that services
existing customers and pursues new customers. The Company periodically sets
sales quotas for its salespersons, and promotes fulfillment of these quotas
through sales contests and specific monetary incentives. Demand for the
Company's beverage products tends to be greater during warmer months.
Accordingly, sales are generally highest in the second and third calendar
quarters.
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Most beverage distribution customers are visited on a weekly or biweekly
basis by a salesperson from the Company. When a customer orders a product, the
salesperson enters all information into a hand-held computer terminal. At the
end of the day the salesperson is responsible for transmitting this information
by telephone to the Company's computer system. Invoicing, loading and routing
are then handled by the warehouse in preparation for delivery the following day.
The Company's computer system generates invoices and assists in managing the
loading and routing functions. The majority of orders are filled from the
Company's warehouse within 24 hours. The Company generally delivers products
directly to the retail outlets, where Company drivers usually stock displays and
collect payments. Deliveries are made by the Company's fleet of leased vehicles,
which includes beverage delivery trucks and vans.
A variety of methods are used by the Company's beverage suppliers to
promote their products directly to the consumer, including advertising based on
product features such as ingredients, quality and taste as well as a variety of
themes including health, lifestyle, convenience, and physical fitness. Price
promotions, taste tests and event sponsorship are also common. The cost of these
promotional activities is typically shared with the Company's suppliers. In some
instances, under promotional arrangements with suppliers, the Company may place
refrigerated coolers with retail customers to display the Company's product
lines.
Two beverage customers accounted for approximately 7% and 7% of total
beverage case sales during 1996 and approximately 7% and 6% in 1997. No other
customer accounted for more than 5% of the Company's beverage sales during
either year.
ASSET MANAGEMENT
Accounts Receivable. Food sales are made almost exclusively on account, and
food accounts receivable typically average 15 to 20 days.
Approximately 40% of the Company's beverage sales are made on a cash
basis. Beverage accounts receivable typically average approximately 20 to 25
days of total sales or 30 to 40 days of sales made on account.
Inventory. The Company maintains its food inventory at the manufacturing
facilities operated by its Carlton subsidiary in New Braunfels, Texas, by its
Richards subsidiary in Church Point, Louisiana, by its Grogan's facility in
Arlington, Kentucky, and at two distribution facilities operated by its Prefco
subsidiary in Houston, Texas. The Company generally maintains an average of
eight to ten days of food inventory on hand which reflects approximately six
to eight days of inventory at its Prefco subsidiary and approximately 30 days
of inventory at its Carlton, Richards and Grogan's subsidiaries. The Company
typically places purchase orders to its suppliers by telephone and by facsimile
on a daily basis. Orders are placed both on an as-needed basis and on a
scheduled basis in anticipation of future demand. Orders are usually filled
within one to ten days, and products are transported to the Company's
warehouse by common carrier.
The Company maintains all of its beverage inventory at the Company's
warehouse in Jessup, Maryland. The Company generally maintains an average of
approximately 20 days of beverage inventory on hand. The Company performs a
physical count of its beverage inventory twice a month. On an annual basis,
cumulative adjustments to such inventory have been less than 1% of total
purchases during each of the last three years. The Company turns its beverage
inventory approximately 18 times per year. The Company typically places
purchase orders to its suppliers by telephone and by facsimile
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on a daily basis. Once placed, these orders are usually filled within three
to five days for most brands, and the products are transported to the Company's
warehouse by common carrier.
COMPETITION
COMPETITION IN THE FOOD BUSINESS
Boxed Meat Distribution. Through its Prefco subsidiary, the Company
believes that it is the second largest of four major boxed meat distributors
in the Houston market. Although this segment of the food industry is extremely
competitive, the Company has generally succeeded in distinguishing itself
through a high level of customer service.
Branded Meat Products. Through its Prefco, Carlton, Richards and
Grogan's subsidiaries, the Company competes with dozens of branded meat
companies, and its brands compete with a wide variety of both regional and
national trademarks. Among the competitive brands are Decker, J. Bar B.,
Hilshire Farms, Hormel and Bryan. The Company's Carlton(TM) and Country Boy(TM)
brands of smoked sausage are sold principally in the Dallas, San Antonio and
Austin markets and currently have limited market share. The Company's Blue
Ribbon(R) brand currently represents the best selling brand of bacon
in the Houston market. The Company's packaged, sliced luncheon meats, also
sold under the Blue Ribbon trademark, were introduced to the Houston market in
1995 and have limited market share. The Company's Richards(TM), Grogan's(TM)
and Partin's(TM) brands enjoy a strong regional share within their respective
markets.
Private Label Manufacturing. Through its Carlton subsidiary, the Company
manufactures smoked sausage and meat products on a private label basis for other
branded food companies and, on a limited basis, for supermarkets and
restaurants. The Company believes that it enjoys a strong reputation for
innovation and responsiveness in creating original recipes for such customers.
The Company competes with a wide variety of manufacturers, many of whom are
significantly larger and may have greater manufacturing capacity and capital.
COMPETITION IN THE BEVERAGE INDUSTRY
In the greater Baltimore and Washington, D.C. metropolitan area, beverage
suppliers have limited choices in securing distribution of their products in the
entire territory by a single distributor. The two largest bottler/distributors,
Mid Atlantic Coca-Cola Bottling Co., Inc. and Pepsi-Cola Company, are affiliated
with The Coca-Cola Company and PepsiCo Inc., respectively, and the Company
believes that they do not carry products from other sources. The other major
bottler/distributor, Canada Dry - Potomac Corporation, distributes a variety of
specialty beverage brands and competes directly with the Company. Mid Atlantic
Coca-Cola, Pepsi-Cola and Canada Dry are larger and have greater financial
resources than the Company. The Company also competes with specialty grocery
distributors, beer and wine distributors and other independent beverage
distributors. In general, the major bottlers in the Company's territory are
focused on distributing their own brands, while beer and wine distributors are
fragmented and service fewer non-alcoholic customers.
The Company believes that it is the largest distributor to focus primarily
on specialty beverage products and branded bottled water within its territory. A
principal component of the Company's success is its willingness to service
smaller retailers as well as large customers, which the Company believes helps
develop a broad-based consumer interest in the products it carries. The Company
competes primarily on the basis of its product line and service. The product
line includes highly visible, exclusive, niche products. The principal methods
of competition in the premium beverage industry include product quality and
taste, packaging, brand advertising, trade and consumer promotions, pricing, and
the development
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of new products, while traditional soft-drink products compete on the basis of
all of the foregoing factors but with a greater emphasis on pricing and
advertising.
Competitors may have a significant competitive advantage over the Company
if consumer choice favors products not distributed by the Company, and the
Company is unable to secure distribution rights to the favored products. A
significant shift in consumer demand away from specialty beverage products
generally would have a material adverse effect on the Company's beverage
business. There can be no assurance that the Company will be able to compete
successfully with other distributors to obtain new product distribution
agreements or that the Company's current distribution agreements will be renewed
on terms acceptable to the Company.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local statutes,
including federal, Maryland, and Texas occupational safety and health laws.
Furthermore, the Company and its suppliers may be subject to various rules and
regulations including those of the United States Department of Agriculture, the
United States Food and Drug Administration and similar state agencies that
relate to manufacturing, nutritional disclosure, labeling requirements and
product names.
While the Company presently does not sell products in any state that
requires deposits on containers, federal and state proposals for container
deposit laws could significantly affect the company's operating costs if any
such proposal were to be implemented. Although the Company would seek to pass on
any additional costs to its customers, there can be no assurance that the
Company would be able to do so.
PRODUCT LIABILITY AND INSURANCE
The Company believes that its present insurance coverage is sufficient
for its current level of business operations, although there is no assurance
that the present level of coverage will be available in the future or at a
reasonable cost. Further, there can be no assurance that such insurance will be
available in the future as the Company expands its operations, that insurance,
if available, will be sufficient to cover one or more large claims, or that the
applicable insurer will be solvent at the time of any covered loss.
EMPLOYEES
The Company currently has approximately 80 full-time employees in its
beverage distribution business, approximately 80 full-time employees in its
Prefco subsidiary, approximately 50 full-time employees in its Carlton
subsidiary, approximately 36 full-time employees in its Richards subsidiary
and approximately 50 full-time employees in its Grogan's subsidiary. The
Company uses temporary employees from time to time.
The Company believes that its relations with employees are good. The
Company has never suffered a material work stoppage or slow down.
10
<PAGE> 12
ITEM 2. PROPERTIES
Beverage Operations. The Company operates from a 70,000 square foot leased
facility in Jessup, Maryland. The Company's lease expires in April 2002.
Prefco Subsidiary. The Company leases a 30,000 square foot refrigerated
warehouse in Houston. The lease for this facility expires July 31, 1998, with a
16 month renewal option. In addition to the foregoing, the subsidiary also
leases a 5,000 square foot office facility, the lease for which expires
September 30, 2000, with a three-year renewal option.
Carlton Subsidiary. The Company leases a 20,000 square foot manufacturing
facility and a 2,000 square foot office facility in New Braunfels, Texas. The
lease on the manufacturing facility expires in September 2000, with two
five-year renewal options, and the lease on the office facility expires in
October 1999.
Richards Subsidiary. The Company owns a 12,500 square foot manufacturing
facility in Church Point, Louisiana.
Grogan's Subsidiary. The Company owns an 11,000 square foot manufacturing
facility in Arlington, Kentucky.
Potter Subsidiary. The Company owns a 119,467 square foot rendering,
processing, distribution, warehouse and administrative facility in Durant,
Oklahoma. In addition, the Company owns a 6,800 square foot distribution
facility in Malvern, Arkansas.
ITEM 3. LEGAL PROCEEDINGS
None.
11
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE OF
NAME OF OFFICER OFFICER OFFICES HELD AND BUSINESS EXPERIENCE FOR LAST FIVE YEARS
- ----------------------- --------- ------------------------------------------------------------------------------
<S> <C> <C>
Merrick M. Elfman 40 Chairman since July 1996 and Director since 1991. Mr. Elfman is the
founder of Elfman Venture Partners, Inc., a private investment firm,
and Chairman of Gray Supply Company, Inc., a privately-held
distributor of specialty lighting products.
Alan F. Sussna 41 Director, President and Chief Executive Officer since March 1996. Prior
to his employment with the Company, Mr. Sussna was a director of Bain &
Company.
John Izzo 47 Vice President since 1990. In addition, Mr. Izzo is the Company's
principal financial officer.
</TABLE>
12
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since December 31, 1997, the Company's Common Stock has been principally
traded on the American Stock Exchange ("AMEX") under the symbol "ABR." Prior to
December 31, 1997, the Company's Common Stock was principally traded on the
NASDAQ SmallCap Market under the symbol "ABEV." The following table sets forth,
for the periods indicated, the high and low sales prices of the Company's Common
Stock as reported by AMEX or NASDAQ, as applicable.
<TABLE>
<CAPTION>
===================================================================================================
STOCK PRICES STOCK PRICES
- ---------------------------------------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------------------------------------
1996 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st Quarter 2 1/8 1st Quarter 4 1/8 2 7/8
- ---------------------------------------------------------------------------------------------------
2nd Quarter 4 1/8 1 5/8 2nd Quarter 4 3 3/8
- ---------------------------------------------------------------------------------------------------
3rd Quarter 4 3 3rd Quarter 3 3/4 2 1/2
- ---------------------------------------------------------------------------------------------------
4th Quarter 3 1/2 2 7/8 4th Quarter 4 1/2 3 1/8
===================================================================================================
</TABLE>
As of March 20, 1998, there were approximately 159 shareholders of
record of the Company's Common Stock. The Company has not paid any cash
dividends since its initial public offering. The Company anticipates that
earnings, if any, will be retained for use in the business or for other
corporate purposes, and it is not anticipated that any cash dividends on the
Common Stock will be paid in the foreseeable future.
13
<PAGE> 15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the Company are based on the
consolidated financial statements of the Company. The amounts provided as
statement of operations data and balance sheet data for the periods prior to
the merger on November 29, 1993 of Strategic Investment Corporation into the
Company (the "Reorganization") have not been adjusted to give effect to the
Reorganization. The Company's financial statements as of December 31, 1996 and
1997 and for each of the three years in the period ended December 31, 1997,
including the notes thereto and the related report of Arthur Andersen LLP,
independent public accounts, are included elsewhere in this Form 10-K.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company contained elsewhere in
this Form 10-K.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
YEARS ENDED DECEMBER 31,
1993 1994 1995 1996 1997
------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Net Sales $26,296 $24,152 $20,596 $153,280 $ 172,198
Gross profit, exclusive of depreciation 6,782 6,365 5,853 17,128 19,590
Income (Loss) from operations 1,216 278 (138) 1,638 1,718
Interest expense 765 8 25 1,197 1,693
Other income (expense), net (1,305) (20) 12 476 381
Income (Loss) before minority interest, income
tax (provision) benefit (853) 249 (152) 918 407
Minority interest in income (loss) before income
tax (provision) benefit 108 -- -- -- --
Income (Loss) before income tax (provision)
benefit (961) 249 (152) 918 407
Income tax (provision) benefit 350 15 -- (22) (50)
Net income (loss from continuing operations (611) 264 (152) 896 357
Loss from discontinued operations -- (302) (528) -- --
Loss on disposal of discontinued operations -- -- (2,410) -- --
Net income (loss) $ (611) $ (38) $(3,091) $ 896 $ 357
Net income (loss) per share (.48) (.02) (1.22) .17 .05
BALANCE SHEET DATA
Cash $ 1,065 $ 142 $ -- $ 1,249 $ 1,263
Working capital (deficit) 2,590 963 (758) (4,185) (3,671)
Total assets 4,940 5,175 2,921 34,653 34,954
Long-term debt 15 -- -- 7,779 6,297
Deferred compensation -- -- -- -- --
Other liabilities -- -- -- -- --
Minority interest -- -- -- -- --
Accumulated earnings (deficit) (934) (979) (4,079) (3,183) (2,826)
Total stockholders' equity (deficit) $ 3,886 $ 4,073 $ 562 $ 6,604 $ 9,388
</TABLE>
14
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
In 1996 the Company implemented a new corporate strategy that resulted in the
acquisition of five food businesses. Each of these businesses represents a
preeminent local or regional branded processed meat company. In addition to
significantly increasing the Company's size, the newly acquired businesses have
created a broader platform for future growth.
In order to acquire and operate its food businesses, the Company formed
four new subsidiaries during 1996: Prefco Corp., Carlton Foods Corp., Richards
Cajun Foods Corp., and Grogan's Farm, Inc. In 1998, the Company formed a fifth
new subsidiary to acquire the business of J.C. Potter Sausage Company and
affiliates.
The Company continues to operate as a distributor of non-alcoholic
beverages in the Baltimore and Washington D.C. metropolitan areas. This business
represents the Company's Beverage Division, while the five subsidiaries
collectively represent the Company's Food Division.
RESULTS OF OPERATIONS
All of the acquisitions completed during 1996 were recorded utilizing the
purchase method of accounting. Therefore results of the acquired businesses
prior to the effective date of such acquisitions are not included in the
Company's Results of Operations.
During 1996 and 1997, the Company's Carlton subsidiary and the Company's
Grogan's subsidiary both sold product to the Company's Prefco subsidiary. The
Company's financial statements do not reflect this activity, as it is eliminated
on a consolidated basis.
15
<PAGE> 17
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales increased by approximately $18.9 million or 12.3% from
approximately $153.3 million for the year ended December 31, 1996 to
approximately $172.2 million for the year ended December 31, 1997. Sales of the
Company's Food Division increased by approximately 13%, while sales of the
Company's Beverage Division increased by approximately 9%.
The increase in food sales reflected increases in the sales of both Carlton
and Prefco. In addition, approximately $8 million of the sales increase was
attributable to a full year of operations for Richards, which the Company
acquired in August 1996, and Grogan's and Partin's, which the Company acquired
during the fourth quarter of 1996. The increase in beverage sales reflected the
addition of several new brands.
Gross Profit. Gross profit increased by approximately $2.5 million or 14.4%
from approximately $17.1 million for the year ended December 31, 1996 to
approximately $19.6 million for the year ended December 31, 1997. This increase
reflects the factors discussed above in Net Sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $2.4 million or 15.4% from
approximately $15.5 million for the year ended December 31, 1996 to
approximately $17.9 million for the year ended December 31, 1997. This increase
is attributable primarily to the factors discussed above in Net Sales.
As a percentage of net sales, selling, general and administrative expenses
increased from 10.1% to 10.4%. This increase is primarily attributable to an
increasing proportion of branded product sales, which generally require higher
selling, general and administrative expenses per sales dollar.
Income from Operations. Income from operations increased approximately $0.1
million from approximately $1.6 million for the year ended December 31, 1996 to
approximately $1.7 million for the year ended December 31, 1997. This increase
is attributable to factors discussed above in Net Sales.
Interest Expense. Interest expense increased approximately $0.5 million
from approximately $1.2 million for the year ended December 31, 1996 to
approximately $1.7 million for the year ended December 31, 1997. This increase
was primarily attributable to debt that the Company incurred (and the related
amortization of deferred financing costs and note discounts) in connection with
the acquisitions of Richards, Grogan's and Partin's, as well as the acquisition
of the rights to distribute AriZona(TM) beverage products.
Other Income. Other income decreased approximately $0.1 million from $0.5
million for the year ended December 31, 1996 to approximately $0.4 million for
the year ended December 31, 1997. This decrease reflects the impact of a
one-time settlement payment of approximately $0.3 million that the Company
received during the 1996 period from a former beverage supplier . Other amounts
include,
16
<PAGE> 18
during both years, sale of food by-products as well as income generated by the
Prefco subsidiary from product sold at special events.
Net Income. Net income decreased approximately $0.5 million from
approximately $0.9 million for the year ended December 31, 1996 to approximately
$0.4 million for the year ended December 31, 1997. This decrease is attributable
to factors discussed in Interest Expense and Other Income.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales. Net sales increased by approximately $132.7 million or 644% from
approximately $20.6 million for the year ended December 31, 1995 to
approximately $153.3 million for the year ended December 31, 1996. This increase
reflects the acquisition of Carlton, Prefco, Richards, Grogan's and Partin's.
Gross Profit. Gross profit increased by approximately $11.2 million or 193%
from approximately $5.9 million for the year ended December 31, 1995 to
approximately $17.1 million for the year ended December 31, 1996. This increase
reflects the acquisition of Carlton, Prefco, Richards, Grogan's and Partin's.
Gross profit as a percentage of net sales decreased from 28.4% to 11.2%
reflecting the lower gross profit margin associated with the Company's food
operations. Gross profit from beverage sales did increase, however, from 28.4%
of sales to 30.2% of sale reflecting lower product costs and higher selling
prices.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $9.5 million or 159% from
approximately $6.0 million for the year ended December 31, 1995 to approximately
$15.5 million for the year ended December 31, 1996. This increase reflects the
acquisition of Carlton, Prefco, Richards, Grogan's and Partin's. As a percentage
of net sales, selling, general and administrative expenses decreased from 29.1%
to 10.1%. This decrease reflects the fact that expenses as percentage of sales
ar significantly lower in the Company's food operations than in its beverage
operations, in addition to the fact that the Company is realizing economies
through spreading certain administrative expenses over several business units.
Income from Operations. Income from operations increased approximately $1.7
million from a loss of approximately $0.1 million for the year ended December
31, 1995 to approximately $1.6 million for the year ended December 31, 1996.
This increase is attributable to income from the Company's newly acquired food
businesses as well as to the improvement in gross margin in the Company's
beverage business.
Interest Expense. Interest expense increased approximately $1.2 million
from approximately $25,000 for the year ended December 31, 1995 to approximately
$1.2 million for the year ended December 31, 1996. This increase was
attributable to debt that the Company incurred (and the related amortization of
deferred financing costs and not discounts) in connection with the acquisitions
of Carlton, Prefco, Richards, Grogan's and Partin's, including bank term debt,
borrowings under the Company's line of credit, and amounts owed to former owners
of the acquired businesses.
Other Income. Other income increased approximately $0.5 million from zero
for the year ended December 31, 1995 to approximately $0.5 million for the year
ended December 31, 1996. This increase was primarily the result of a one-time
settlement payment of $0.25 million that the Company received from a former
beverage supplier. Other amounts include approximately $0.1 million of income
generated by the Prefco subsidiary from product sold at special events.
17
<PAGE> 19
Net Income from Continuing Operations. Net income from continuing
operations increased approximately $1.0 million from a loss of approximately
$0.1 million for the year ended December 31, 1995 to approximately $0.9 million
for the year ended December 31, 1996. This increase reflects factors discussed
above in income from operations, interest expense, and other income.
Loss from Discontinued Operations. Loss from discontinued operations
decreased approximately $0.5 million from approximately $0.5 million for the
year ended December 31, 1995 to zero for the year ended December 31, 1996. The
loss in 1995 represents the results of the Company's discontinued frozen
beverage division.
Net Income (Loss). Net income (loss) increased approximately $4.0 million
from a loss of approximately $3.1 million for the year ended December 31, 1995
to income of approximately $0.9 million for the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the year ended December 31, 1997
was approximately $3.4 million. This amount was principally affected by net
income, the add-back of depreciation, amortization and non-cash interest,
increases in inventory, prepaid expenses and accounts payable, and decreases in
accounts receivable and accrued expenses. Cash used in investing activities for
the year ended December 31, 1997 was approximately $1.6 million and reflected
the acquisition of equipment, the purchase of beverage distribution rights and
the payment of cash in connection with business combinations. Cash used in
financing activities was approximately $1.8 million and was principally affected
by the proceeds of a $2.4 million private equity placement, offset by payments
on the Company's term debt and line of credit and a decrease in the bank
overdraft balance. Net cash increase during the period was approximately
$14,000.
As of December 31, 1997, the Company had outstanding under the LaSalle
Facility approximately $12 million in term debt and line-of-credit borrowings
and approximately $2.7 million of subordinated debt owed to former owners of
Prefco, Richards, Grogan's and Partin's. Principal on these notes is due in
2001. Monthly interest payments, currently reflecting an average rate of
approximately 7.7%, are being made on the subordinated debt.
In the first quarter of 1998, the Company acquired substantially all of the
assets of J.C. Potter, a branded food processing company based in Durant,
Oklahoma in consideration for approximately $13.0 million cash plus related
transaction costs. In connection with this acquisition, the Company borrowed
approximately $6.5 million in subordinated debt from Banc One Capital
Corporation. The subordinated debt included detachable common stock warrants.
The Company also refinanced its senior revolver and term debt through Fleet
Capital. The new senior debt facility (the "Fleet Facility") provided a term
loan of $11 million, which was approximately $6.0 million greater than the
balance previously outstanding under the LaSalle Facility.
The Company believes that cash generated from operations and bank
borrowings will be sufficient to fund its debt service, working capital
requirements and capital expenditures as currently contemplated for the next
year. This is a forward-looking statement and is inherently uncertain. Actual
results may differ materially. The Company's ability to fund its working capital
requirements and capital expenditures will depend in large part on the Company's
compliance with covenants in the Fleet Facility. No assurance can be given that
the Company will remain in compliance with such covenants throughout the term of
the Fleet Facility.
18
<PAGE> 20
The Company's balance sheet as of December 31, 1997 reflected a net
deferred tax asset of approximately $0.1 million. A valuation allowance exists
because, based on the weight of all available evidence, management believes it
is more likely than not that the remaining deferred tax asset will not be fully
realized.
During July 1997, the Company raised approximately $2.4 million cash, net
of issuance costs, through the private sale of approximately one million shares
of its common stock. These shares are subject to certain restrictions regarding
their resale.
The Company, from time to time, reviews the possible acquisition of other
products or businesses. The Company's ability to expand successfully through
acquisition depends on many factors, including the successful identification and
acquisition of products or businesses and the Company's ability to integrate and
operate the acquired products or businesses successfully. There can be no
assurance that the Company will be successful in acquiring or integrating any
such products or businesses.
SEASONALITY
Consumer demand for beverage products distributed by the Company tends to
be greater during warmer months. Accordingly, the Company's beverage sales and
profits are generally highest in the second and third calendar quarters.
Management believes that this effect will be mitigated by the results of its
food operations which are less dependent on seasonal factors.
FORWARD-LOOKING STATEMENTS
The Company wants to provide stockholders and investors with more
meaningful and useful information. Therefore, this Form 10-K Company's belief
concerning future business conditions and the outlook for the Company based on
currently available information. Whenever possible, the Company has identified
these "forward looking" statements by words such as "believes," "estimates,"
"preparing to introduce," and similar expressions. These forward looking
statements are subject to risks and uncertainties which would cause the
Company's actual results or performance to differ materially from those
expressed in these statements. These risks and uncertainties include the
following: risks associated with acquisitions including integration of acquired
businesses; new product development and other aspects of the Company's business
strategy; uncertainty as to evolving consumer preferences; seasonality of demand
for certain products; customer and supplier concentration; the impact of
competition; and sensitivity to such factors as weather and raw material costs.
Readers are encouraged to review the Company's Annual Report on Form 10-K and
its Report on Form 8-K dated June 4, 1997 filed with the Securities and Exchange
Commission for a more complete description of these factors. The Company assumes
no obligation to update the information contained in this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's 1997 Financial Statements and the related Report of
Independent Auditors are set forth on pages F-1 through F-25 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
19
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
its Annual Meeting of Stockholders to be held on May 13, 1998 (the "1998 Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to "Compensation" in the 1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference to "Beneficial Ownership of Common Stock" in the
1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to "Certain Transactions with Management and
Others" in the 1998 Proxy Statement.
20
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) The following documents are filed as part of this Form 10-K:
1. The consolidated financial statements of the Company and
its subsidiaries, together with the applicable report of
independent public accountants:
Page
Report of Independent Public Accountants F-2
Consolidated Balance Sheets - as of December 31, 1996 and 1997 F-3
Consolidated Statements of Operations - for the years ended
December 31, 1995, 1996 and 1997 F-4
Consolidated Statements of Stockholders' Equity - for the years
ended December 31, 1995, 1996 and 1997 F-5
Consolidated Statements of Cash Flows - for the years ended
December 31, 1995, 1996 and 1997 F-6
Notes to Consolidated Financial Statements F-8
2. The following financial statement schedule:
Schedule I - Valuation and Qualify Accounts S-1
3. The following exhibits are filed with this report or
incorporated by reference as set forth below:
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
2 Asset Purchase Agreement dated as of March 6, 1998 among Potter's
Acquisition Corp., J.C. Potter Sausage Company, Potter's Farm, Inc., Potter
Rendering Co. and Potter Leasing Company, Ltd. (*)
3.1 Certificate of Incorporation of the Company, including all amendments
thereto (*)
3.2 By-Laws of the Company (1)
3.3 Certificate of Designation of the Series A Non-Voting Convertible Preferred
Stock of the Company (2)
4.1 Specimen Stock Certificate (1)
4.2 Certificate of Designation of the Series A
Non-Voting Convertible Preferred Stock of the
Company (see Exhibit 3.3)
4.3 Stock Option Plan (1)
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C> <C>
4.4 Atlantic Premium Brands, Ltd. Employee Stock Purchase Plan dated
November 1, 1997 (3)
4.5 $1.4 Million Subordinated Note made by ABEV
Acquisition Corp. in favor of Franklin Roth and Allen
Pauly (6)
4.6 6.35% Subordinated Non-Negotiable Promissory Note Due
July 31, 2001 made by Richards Cajun Foods Corp. and
the Company in favor of J.L. Richard in the original
principal amount of $850,000 (*)
4.7 8% Subordinated Non-Negotiable Promissory Note Due
September 30, 2001 made by Grogan's Merger Corp. in
favor of Bobby L. Grogan and Betty R. Grogan in the
original principal amount of $219,593 (*)
4.8 8% Subordinated Non-Negotiable Promissory Note Due
December 31, 2003 made by Grogan's Farm, Inc. in favor
of Jefferson Davis and Roger Davis in the original
principal amount of $219,593 (*)
4.9 Secured Promissory Note dated as of March 20, 1998
of the Company and certain of its subsidiaries
payable to Fleet Capital Corporation in the
original principal amount of $11,000,000 (*)
4.10 Loan and Security Agreement dated as of March 20,
1998 among Fleet Capital Corporation, the Company
and certain of its subsidiaries (*)
4.11 Stock Pledge Agreement dated as of March 20, 1998
between the Company and Fleet Capital Corporation (*)
4.12 Atlantic Premium Brands, Ltd. and Subsidiaries
Senior Subordinated Note and Warrant Purchase
Agreement dated as of March 20, 1998 among the
Company, certain of its subsidiaries and Banc One
Capital Partners, LLC ("Banc One") (*)
4.13 Senior Subordinated Note due March 31, 2005 of the
Company payable to Banc One dated as of March 20,
1998 in the original principal amount of
$6,500,000 (*)
4.14 Atlantic Premium Brands, Ltd. Warrant Certificate Common Stock Purchase
Warrant of Banc One dated as of March 20, 1998 (*)
4.15 Atlantic Premium Brands, Ltd. Warrant Certificate Contingent Common Stock
Purchase Warrant of Banc One dated as of March 20, 1998 (*)
4.16 Put Option Agreement dated as of March 20, 1998 between the Company and
Banc One (*)
4.17 Registration Rights Agreement dated as of March 20, 1998 between the
Company and Banc One (*)
4.18 Shareholders Agreement dated as of March 20, 1998
among the Company, certain of its Shareholders and
Banc One (*)
4.19 Preemptive Rights Agreement dated as of March 20, 1998 between the
Company and Banc One (*)
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C> <C>
4.20 Debt Subordination Agreement dated as of March 20,
1998 among Banc One Capital Partners, LLC, the
Company, certain of its subsidiaries and Fleet
Capital Corporation (*)
4.21 Lien Subordination Agreement dated as of March 20, 1998 between Fleet
Capital Corporation and Banc One Capital Partners, LLC (*)
10.1 Distribution Agreement dated as of November 25,
1992 between Joseph Victori Wines, Inc. and
Maryland Beverage, L.P., as amended. (**) (1)
10.2 Non-Compete and Non-Disclosure Agreement dated September 24, 1993
among the Company, Sterling Group, Inc., Eric D. Becker, Steven M.
Taslitz, Douglas L. Becker and R. Christopher Hoehn-Saric (1)
10.3 Consulting Agreement dated March 15, 1996 by and between the Company,
Sterling Advisors, L.P. and Elfman Venture Partners, Inc. (4)
10.4 Amendment to Consulting Agreement dated as of October
16, 1996 among the Company, Sterling Advisors, L.P. and
Elfman Venture Partners, Inc. (*)
10.5 Second Amendment to Consulting Agreement dated as of
September 7, 1997 among the Company, Sterling Advisors,
L.P. and Elfman Venture Partners, Inc. (*)
10.6 Form of Tax Indemnification Agreement (1)
10.7 Stock Purchase Agreement dated as of January 23,
1996 among the Company, ABEV Acquisition Corp.,
Franklin Roth and Allen Pauly (6)
10.8 Employment Agreement dated March 15, 1996 between ABEV Acquisition
Corp. and Franklin Roth (6)
10.9 Agreement and Plan of Merger dated as of January 25, 1996 among the
Company, Carlton Foods Corp. and Carlton Foods, Inc. (6)
10.10 $1.4 million Subordinated Note made by ABEV Acquisition Corp. in favor of
Franklin Roth and Allen Pauly (6)
10.11 Stock Purchase Agreement dated as of March 15,
1996 among the Company and Purchasers under the
$2.8 million Private Placement (6)
</TABLE>
23
<PAGE> 25
<TABLE>
<S> <C> <C>
10.12 Employment Agreement dated October 29, 1996
between the Company and Alan F. Sussna (7)
10.13 Asset Purchase Agreement dated as of March 6, 1998 among Potter's
Acquisition Corp., J.C. Potter Sausage Company, Potter's Farm, Inc., Potter
Rendering Co. and Potter Leasing Company, Ltd. (See Exhibit 2)
11 Statement regarding computation of per share earnings (*)
21 Subsidiaries of the Company (*)
23 Consent of Independent Public Accountants (*)
27 Financial Data Schedule (*)
</TABLE>
- ------------------
* Filed herewith.
** Confidential treatment was afforded for certain portions of these
agreements.
(1) Filed as an exhibit to the Company's Registration Statement No. 33-69438 or
the amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Form S-8 Registration Statement No.
333-39561 and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K dated April
27, 1994, filed with the Securities and Exchange Commission on July 11,
1994, and incorporated herein by reference.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K dated March
15, 1996, filed with the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
(b) Reports on Form 8-K:
None.
24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ JOHN IZZO
------------------------------------
John Izzo
Principal Accounting Officer
Date: March 31, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ERIC D. BECKER Director March 31, 1998
- ----------------------------------------
Eric D. Becker
/s/ MERRICK M. ELFMAN Director March 26, 1998
- ----------------------------------------
Merrick M. Elfman
/s/ BRIAN FLEMING Director March 26, 1998
- ----------------------------------------
Brian Fleming
/s/ JOHN T. HANES Director March 26, 1998
- ----------------------------------------
John T. Hanes
Director March __, 1998
- ----------------------------------------
Rick Inatome
Director March __, 1998
- ----------------------------------------
G. Cook Jordan, Jr.
Director March 31, 1998
- ----------------------------------------
John A. Miller
/s/ ALAN F. SUSSNA Chief Executive Officer and Director March 31, 1998
- ----------------------------------------
Alan F. Sussna
/s/ STEVEN M. TASLITZ Director March 31, 1998
- ----------------------------------------
Steven M. Taslitz
</TABLE>
25
<PAGE> 27
ATLANTIC PREMIUM BRANDS, LTD.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants F-2
Consolidated Balance Sheets - as of December 31, 1996
and 1997 F-3
Consolidated Statements of Operations -
for the years ended December 31, 1995, 1996 and 1997 F-4
Consolidated Statements of Stockholders' Equity -
for the years ended December 31, 1995, 1996 and 1997 F-5
Consolidated Statements of Cash Flows -
for the years ended December 31, 1995, 1996 and 1997 F-6
Notes to Consolidated Financial Statements F-8
F-1
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Atlantic Premium Brands, Ltd.:
We have audited the accompanying consolidated balance sheets of Atlantic Premium
Brands, Ltd. (a Delaware corporation), and subsidiaries as of December 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. 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 audits 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 Atlantic Premium Brands, Ltd.
and subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Baltimore, Maryland,
March 20, 1998
F-2
<PAGE> 29
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1997
--------------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,248,963 $ 1,262,805
Accounts receivable, net of allowance for doubtful accounts
of $118,000 and $117,000, respectively 10,160,891 9,448,489
Inventory 3,629,647 4,213,026
Prepaid expenses and other 794,938 672,386
-------------- --------------
Total current assets 15,834,439 15,596,706
PROPERTY, PLANT AND EQUIPMENT, net 4,820,900 4,939,536
GOODWILL, net 13,175,918 12,790,619
OTHER ASSETS, net 821,834 1,626,831
-------------- --------------
Total Assets $ 34,653,091 $ 34,953,692
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 2,672,630 $ 1,491,557
Line of credit 7,255,984 6,839,323
Current portion of long-term debt 2,324,267 1,659,310
Accounts payable 6,120,435 8,216,422
Accrued expenses 1,083,884 1,061,338
Net current liabilities of discontinued operations 562,283 -
-------------- --------------
Total current liabilities 20,019,483 19,267,950
LONG-TERM DEBT, net of current portion 7,778,934 6,297,288
DEFERRED TAX LIABILITY 250,900 -
-------------- --------------
Total liabilities 28,049,317 25,565,238
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued - -
Common stock, $.01 par value; 30,000,000 shares authorized;
6,396,610 and 7,373,574 shares issued in 1996 and 1997,
respectively 64,000 73,770
Additional paid-in capital 9,723,123 12,141,176
Accumulated deficit (3,183,349) (2,826,492)
-------------- --------------
Total Stockholders' Equity 6,603,774 9,388,454
-------------- --------------
Total Liabilities and Stockholders' Equity $ 34,653,091 $ 34,953,692
============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
F-3
<PAGE> 30
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1995 1996 1997
--------------- --------------- --------------
<S> <C> <C> <C>
NET SALES $ 20,596,436 $ 153,279,993 $ 172,198,494
COST OF GOODS SOLD, exclusive of depreciation
shown below 14,743,435 136,151,779 152,608,121
-------------- -------------- --------------
Gross profit 5,853,001 17,128,214 19,590,373
-------------- -------------- --------------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Salaries and benefits 3,087,421 7,406,525 7,997,062
Other operating expenses 2,515,439 7,089,913 8,493,832
Depreciation and amortization 388,321 993,513 1,381,221
-------------- -------------- --------------
Total selling, general and administrative
expenses 5,991,181 15,489,951 17,872,115
-------------- -------------- --------------
(Loss) income from operations (138,180) 1,638,263 1,718,258
INTEREST EXPENSE 25,394 1,196,888 1,692,610
OTHER INCOME, net 11,654 476,384 381,209
-------------- -------------- --------------
(Loss) income before income tax provision (151,920) 917,759 406,857
INCOME TAX PROVISION - (22,000) (50,000)
-------------- --------------- --------------
Net (loss) income from continuing operations (151,920) 895,759 356,857
LOSS FROM DISCONTINUED OPERATIONS (528,466) - -
LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS (2,410,200) - -
-------------- -------------- --------------
NET (LOSS) INCOME $ (3,090,586) $ 895,759 $ 356,857
============== ============== ==============
(LOSS) INCOME PER COMMON SHARE DATA:
BASIC EPS:
Net (loss) income from continuing operations
after accretion of preferred stock $ (.06) $ .17 $ .05
Loss from discontinued operations, including
loss on disposal (1.17) - -
-------------- -------------- --------------
NET (LOSS) INCOME $ (1.23) $ .17 $ .05
============== ============== ==============
DILUTED EPS:
Net (loss) income from continuing operations
after accretion of preferred stock $ (.06) $ .17 $ .05
Loss from discontinued operations, including
loss on disposal (1.16) - -
-------------- -------------- --------------
NET (LOSS) INCOME $ (1.22) $ .17 $ .05
============== ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic calculation 2,522,890 5,199,171 6,846,013
============== ============== ==============
Diluted calculation 2,528,532 5,349,539 7,102,850
============== ============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated statements.
F-4
<PAGE> 31
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Nonvoting
Convertible
Preferred Stock Common Stock
--------------------------------- --------------------------------
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 1 $ 140,357 2,692,146 $ 26,955
Accretion of preferred stock - 9,643 - -
Purchase of treasury stock - - (402,032) (4,020)
Conversion of preferred stock to common stock (1) (150,000) 30,000 300
Net loss - - - -
-------------- -------------- -------------- --------------
BALANCE, December 31, 1995 - - 2,320,114 23,235
Issuance of common stock through private placement, net - - 2,765,549 27,656
Issuance of common stock in connection with business
combinations - - 1,105,430 11,054
Issuance of common stock to former noteholders - - 205,517 2,055
Net income - - - -
-------------- -------------- -------------- --------------
BALANCE, December 31, 1996 - - 6,396,610 64,000
Issuance of common stock through private placement, net - - 976,964 9,770
Issuance of stock options - - - -
Net income - - - -
-------------- -------------- -------------- --------------
BALANCE, December 31, 1997 - $ - 7,373,574 $ 73,770
============== ============== ============== ==============
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------------- --------------- ---------------
<S> <C> <C> <C>
BALANCE, December 31, 1994 $ 4,884,077 $ (978,879) $ 4,072,510
Accretion of preferred stock - (9,643) -
Purchase of treasury stock (415,550) - (419,570)
Conversion of preferred stock to common stock 149,700 - -
Net loss - (3,090,586) (3,090,586)
---------------- --------------- ---------------
BALANCE, December 31, 1995 4,618,227 (4,079,108) 562,354
Issuance of common stock through private placement, net 2,754,727 - 2,782,383
Issuance of common stock in connection with business
combinations 2,043,949 - 2,055,003
Issuance of common stock to former noteholders 306,220 - 308,275
Net income - 895,759 895,759
---------------- --------------- ---------------
BALANCE, December 31, 1996 9,723,123 (3,183,349) 6,603,774
Issuance of common stock through private placement, net 2,378,053 - 2,387,823
Issuance of stock options 40,000 - 40,000
Net income - 356,857 356,857
---------------- --------------- ---------------
BALANCE, December 31, 1997 $ 12,141,176 $ (2,826,492) $ 9,388,454
================ =============== ===============
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
F-5
<PAGE> 32
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1995 1996 1997
--------------- --------------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (3,090,586) $ 895,759 $ 356,857
Adjustments to reconcile net (loss) income to net
cash flows provided by operating activities, net
of assets and liabilities acquired through
business combinations-
Loss on disposal of discontinued operations 2,410,200 - -
Loss from discontinued operations 528,466 - -
Depreciation and amortization 388,321 993,513 1,381,221
Amortization of debt discount and deferred
financing cost 10,120 102,217 213,580
Deferred income tax benefit - (60,000) -
Decrease (increase) in accounts receivable, net 201,944 (3,337,143) 712,402
Decrease (increase) in inventory 62,001 (296,724) (583,379)
Decrease (increase) in prepaid expenses and
other assets 57,784 (109,899) (171,146)
Increase (decrease) in accounts payable 197,707 (30,436) 2,095,987
(Decrease) increase in accrued expenses (41,184) 414,587 (22,546)
-------------- -------------- --------------
Net cash flows provided by (used in)
operating activities of-
Continuing operations 724,773 (1,428,126) 3,982,976
Discontinued operations (597,626) (159,890) (522,283)
-------------- -------------- --------------
Net cash flows from operating activities 127,147 (1,588,016) 3,460,693
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (493,272) (584,869) (767,873)
Cash paid in connection with business
combinations, including deferred acquisition fees (88,014) (9,417,351) (499,770)
Cash paid for distribution agreements and
exclusivity rights - (50,000) (379,626)
-------------- -------------- --------------
Net cash flows from investing activities (581,286) (10,052,220) (1,647,269)
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of
these consolidated statements.
F-6
<PAGE> 33
ATLANTIC PREMIUM BRANDS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1995 1996 1997
--------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank overdraft $ 297,458 $ (708,527) $ (1,181,073)
Borrowings (payments) under line of credit, net 440,000 6,815,984 (416,661)
(Payments) borrowings under term debt and
notes payable, net (6,144) 4,705,779 (2,454,693)
Payments of deferred financing costs - (706,420) (134,978)
Issuance of common stock through private
placement, net - 2,782,383 2,387,823
Purchase of treasury stock (419,570) - -
-------------- -------------- -------------
Net cash flows from financing activities 311,744 12,889,199 (1,799,582)
-------------- -------------- --------------
NET (DECREASE) INCREASE IN CASH (142,395) 1,248,963 13,842
CASH, beginning of period 142,395 - 1,248,963
-------------- -------------- --------------
CASH, end of period $ - $ 1,248,963 $ 1,262,805
============== ============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated statements.
F-7
<PAGE> 34
ATLANTIC PREMIUM BRANDS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY:
The accompanying consolidated financial statements present the accounts of
Atlantic Premium Brands, Ltd. (formerly Atlantic Beverage Company, Inc.) and
subsidiaries (the "Company"). All significant intercompany transactions have
been eliminated in consolidation.
The Company is engaged in the distribution of specialty nonalcoholic beverages
to the retail trade in the Baltimore and Washington, D.C. metropolitan areas
and, as a result of business combinations consummated during 1996, is engaged in
the manufacturing, marketing and distribution of meat products in Texas,
Louisiana, Kentucky and surrounding states. The operating results of the
Company's food division are impacted by changes in commodity markets.
The Company, from time to time, reviews the possible acquisition of other
products or businesses. The Company's ability to expand successfully through
acquisition depends on many factors, including the successful identification and
acquisition of products or businesses and the Company's ability to integrate and
operate the acquired products or businesses successfully. There can be no
assurance that the Company will be successful in acquiring or integrating any
such products or businesses.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records sales when product is delivered to the customers. Discounts
provided, principally volume, are accrued at the time of the sale.
Cash
Cash consists of cash held in various deposit accounts with financial
institutions. As of December 31, 1997, $175,000 was restricted to meet minimum
balance funding requirements.
Inventory
Inventory is stated at the lower of cost or market and is comprised of raw
materials, finished goods and packaging supplies. Cost is determined using the
first-in, first-out method.
F-8
<PAGE> 35
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of applicable
depreciation. Depreciation is provided using the straight-line method over the
following useful lives.
Buildings and building improvements 5-30 years
Machinery, equipment and furniture 5-10 years
Leasehold improvements 2- 5 years
Vehicles 5-10 years
Reclassifications
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform to the current year's presentation.
Other Assets
Other assets consist of noncompete agreements, deferred acquisition costs, cash
surrender value of life insurance, distribution, exclusivity and license
agreements and deferred financing costs. Noncompete agreements and distribution,
exclusivity and license agreements are being amortized over 2-5 years using the
straight-line method, while the deferred financing costs are being amortized
over 5 years, representing the term of the related debt, using the effective
interest method.
Goodwill
Goodwill recorded in connection with business combinations is being amortized
using the straight-line method over 5 to 40 years. Amortization expense for each
of the years ended December 31, 1995, 1996 and 1997 was $115,699, $290,807 and
$363,210, respectively. Accumulated amortization as of December 31, 1996 and
1997 was $260,141 and $624,383, respectively.
Income Taxes
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," requires deferred income taxes to be recorded under the liability method
and restricts the conditions under which a deferred asset may be recorded.
F-9
<PAGE> 36
Accounting Pronouncements
During 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 128 (SFAS No. 128), "Earnings Per Share," which establishes new standards
for computing and presenting earnings per share. The Company adopted SFAS No.
128 during 1997 and has restated earnings per share data presented to reflect
the new standard. SFAS No. 128 requires presentation of basic earnings per share
and diluted earnings per share. The weighted average shares used to calculate
basic and diluted earnings per share for 1995, 1996 and 1997, in accordance with
SFAS No. 128 are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1995 1996 1997
--------------- --------------- --------------
<S> <C> <C> <C>
Common stock outstanding 2,522,890 5,199,171 6,846,013
---------- ---------- ----------
Weighted average shares
outstanding for basic EPS 2,522,890 5,199,171 6,846,013
Dilutive effect of common stock
equivalents 5,642 150,368 256,837
---------- ---------- ----------
Weighted average shares
outstanding for dilutive EPS 2,528,532 5,349,539 7,102,850
========== ========== ==========
</TABLE>
Options to purchase 25,000 shares of common stock at $4 per share were
outstanding during the years ended December 31, 1996 and 1997, but were not
included in the computation of diluted EPS because the options exercise price
was greater than the average market price of common shares during those years.
During June 1997, the FASB issued Statement No. 130 (SFAS No. 130), "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the implementation
of SFAS No. 130 will have any impact on the Company's financial statements.
During July 1997, the FASB issued Statement No. 131 (SFAS No. 131), "Disclosures
About Segments of an Enterprise and Related Information," which establishes a
new approach for determining segments within a company and reporting information
on those segments. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. Management has not yet determined whether the implementation
of SFAS No. 131 will have any impact on the Company's current method of
disclosing business segment information.
F-10
<PAGE> 37
Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Cash Paid Cash Paid
for Taxes for Interest
--------- ------------
<S> <C> <C>
Year ended December 31, 1995
Related parties $ - $ 4,026
Other - 15,274
Year ended December 31, 1996
Related parties - 103,642
Other - 1,012,307
Year ended December 31, 1997
Related parties - 291,752
Other 112,000 1,170,648
</TABLE>
Unregistered Shares
During 1996, the Company issued 655,429 unregistered shares of its common stock
as part of the consideration paid in connection with the acquisitions of
Grogan's and Partin's (see Note 5). In July 1997, the Company sold approximately
1,000,000 unregistered shares of its common stock at a price of $2.55 per share
through a private placement (see Note 20). These shares were issued under and
are subject to Regulation Section 230.144.
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 as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVENTORY:
Inventory consisted of the following as of December 31:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Raw materials $ 100,619 $ 297,297
Finished goods 3,077,431 3,380,766
Packaging supplies 451,597 534,963
-------------- --------------
Total $ 3,629,647 $ 4,213,026
============== ==============
</TABLE>
F-11
<PAGE> 38
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment as of December 31, 1996 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
-------------- ---------------
<S> <C> <C>
Land $ 85,000 $ 85,000
Buildings and building improvements 1,567,368 1,567,368
Machinery, equipment and furniture 3,534,307 4,385,006
Leasehold improvements 498,218 625,747
Vehicles 448,977 531,520
-------------- --------------
6,133,870 7,194,641
Less - Accumulated depreciation (1,312,970) (2,255,105)
-------------- --------------
Property, plant and equipment, net $ 4,820,900 $ 4,939,536
============== ==============
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996 and 1997 was
$224,930, $655,014 and $941,382, respectively.
5. BUSINESS COMBINATIONS:
As of January 1, 1996, a newly formed wholly-owned subsidiary of the Company
acquired the outstanding common stock of Prefco, Inc. (Prefco). Also as of
January 1, 1996, Carlton Foods, Inc. (Carlton Foods) was merged into another
newly formed, wholly-owned subsidiary of the Company. In addition, as of August
1, 1996, a subsidiary of the Company acquired the assets of Richard's Cajun
Country Food Processors (Richard's). As of October 1, 1996, a subsidiary of the
Company merged with Grogan's Farm, Inc. and Grogan's Sausage, Inc. (collectively
referred to as "Grogan's") and acquired certain real property previously held by
the sellers. As of November 15, 1996, the Company obtained certain operating
assets from Partin's Country Sausage (Partin's). In connection with these
business combinations, the Company entered into a loan agreement with a
commercial bank which provided a $7.45 million term loan and a $8.5 million
revolving line of credit (see Notes 9 and 10). The business combinations were
accounted for using the purchase method of accounting, whereby the purchase
price is allocated to the assets acquired and liabilities assumed based upon
fair value. The resulting goodwill was determined as follows:
<TABLE>
<S> <C>
Cash paid $ 10,850,728
Issuance of notes to the Sellers, at fair value 2,472,150
Issuance of the Company's common stock 2,055,003
Debt assumed by the Company 2,945,180
Acquisition costs 1,121,799
--------------
Total purchase price 19,444,860
--------------
Current assets acquired 11,364,230
Noncurrent assets acquired 4,107,775
Current liabilities assumed (9,060,539)
Noncurrent liabilities assumed (381,608)
--------------
Net assets acquired 6,029,858
--------------
Goodwill $ 13,415,002
==============
</TABLE>
F-12
<PAGE> 39
Prefco and Carlton Foods
In connection with the Prefco and Carlton Foods transactions, the Company paid
approximately $3.6 million, net of cash acquired, issued approximately 650,000
shares of common stock to the former shareholders. The Company also issued a
subordinated promissory note to the former shareholders of Prefco with a face
amount of $1.4 million (see Note 10). In addition, a former shareholder of
Prefco signed an employment agreement with the Company for five years, with an
automatic one-year extension. If, at the end of each of the first four years,
the shareholder is still employed by the Company and Prefco meets predetermined
operating income growth from the previous year, the Company will grant to the
former shareholders, options to acquire additional shares of the Company's
stock. The effect of these contingent options has not been reflected in the
accompanying financial statements.
Richard's
In connection with the Richard's transaction, the Company paid cash in the
amount of $2,500,000 and issued a subordinated promissory note to the former
shareholder with a face amount of $874,786 (see Note 10). In addition, the
former shareholder signed an employment agreement with the Company for three
years. If, at the end of three years, the former shareholder is still employed
by the Company and Richard's meets certain cumulative operating income targets,
the Company will deliver a pre-determined amount of shares to the former
shareholder. The effect of these contingent shares has not been reflected in the
accompanying financial statements.
Grogan's
In connection with the Grogan's transaction, the Company issued 573,810 shares
of its common stock to the former shareholders, paid approximately $1,900,000 in
cash and issued a subordinated promissory note to the former shareholders with a
face amount of $200,000 (see Note 10). In addition, the former shareholder
signed an employment agreement with the Company for one year.
Partin's
In connection with the Partin's transaction, the Company issued 78,310 shares of
its common stock to the former shareholders, paid $419,891 in cash and issued a
subordinated promissory note to the former shareholders in the amount of
$224,891 (see Note 10).
F-13
<PAGE> 40
6. OTHER ASSETS:
Other assets are comprised of the following as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------------- ---------------
<S> <C> <C>
Noncompete agreement $ 200,000 $ 200,000
Distribution agreements and exclusivity rights 50,000 441,681
Deferred financing costs 706,420 841,398
Cash surrender value of life insurance and other 64,443 80,141
Deferred tax asset - 27,100
Deferred acquisition costs - 499,770
-------------- --------------
1,020,863 2,090,090
Less - Accumulated amortization (199,029) (463,259)
-------------- --------------
Other assets, net $ 821,834 $ 1,626,831
============== ==============
</TABLE>
Amortization expense applicable to distribution, exclusivity, license and
consulting agreements for years ended December 31, 1995, 1996 and 1997, was
$7,692, $7,692, and $37,142, respectively, and is included within depreciation
and amortization expenses in the accompanying consolidated statements of
operations. Amortization of deferred financing costs of $10,120, $81,466 and
$175,546, respectively, has been included within interest expense in the
accompanying consolidated statements of operations for the years ended December
31, 1995, 1996 and 1997, respectively.
The Company, Sterling Group, Inc. (Sterling Group) and Sterling Group's
principals have entered into a noncompete and nondisclosure agreement, effective
November 29, 1993 (the closing date of the Company's initial public offering),
containing certain noncompetition and confidentiality provisions. The agreement
provides that Sterling Group and its principals agree not to compete with the
Company for a period of five years from the closing date, nor will they solicit
for employment any director, stockholder or certain employees of the Company.
Such agreement also provides that Sterling Group and its principals will not
disclose any confidential information concerning the Company and its business to
any other person or entity except as may be required by law. The Company paid
Sterling Group a fee of $200,000 at closing in consideration of such agreement.
Amortization expense for the years ended December 31, 1995, 1996 and 1997, was
$40,000, $40,000 and $39,487, respectively. Accumulated amortization as of
December 31, 1996 and 1997 was $124,000 and $163,487, respectively.
7. SIGNIFICANT SUPPLIERS AND CUSTOMERS:
For the year ended December 31, 1995, two suppliers supplied approximately 62%
and 13%, respectively, of the Company's total product purchases. No single
customer accounted for more than 10% of the Company's total sales.
For the year ended December 31, 1996, two suppliers supplied approximately 17%
and 11%, respectively, of the Company's total product purchases. In addition, a
single customer accounted for approximately 41% of the Company's total sales.
For the year ended December 31, 1997, no single supplier accounted for more than
10% of the Company's total product purchases. In addition, a single customer
accounted for approximately 41% of the Company's total sales.
F-14
<PAGE> 41
8. INCOME TAXES:
The Company has incurred significant tax losses and has generated timing
differences which would give rise to deferred taxes. Based upon available
evidence, management believes that, it is more likely than not, that a portion
of these losses and future deductions will be realized in future periods and has
recorded a tax benefit and deferred tax asset, net of an applicable valuation
allowance as required by Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." In connection with the loss on disposal of
discontinued operations, no benefit for income taxes was recorded.
The benefit (provision) from income taxes on continuing operations for the years
ended December 31, 1995, 1996 and 1997, included amounts summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
Current:
Federal $ - $ (60,000) $ (10,000)
State - (22,000) (40,000)
Deferred:
Federal 180,000 (353,000) (199,400)
State 24,000 (47,000) (26,600)
-------------- -------------- --------------
204,000 (482,000) (276,000)
Valuation allowance (204,000) 460,000 226,000
-------------- -------------- --------------
Total tax benefit (provision) $ - $ (22,000) $ (50,000)
============== ============== ==============
</TABLE>
F-15
<PAGE> 42
In connection with certain business combinations consummated during 1996, the
Company recorded a deferred tax liability of $285,400 through the allocation of
the related purchase price. Gross deferred tax assets and liabilities are
comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1997
--------------- ----------------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards $ 633,800 $ 636,800
Net liabilities of discontinued operations 442,800 368,400
Inventory 59,800 41,700
Accrued expenses 44,100 31,800
Accounts receivable 39,300 39,000
Other 97,200 37,000
-------------- --------------
1,317,000 1,154,700
Valuation allowance (688,500) (462,500)
-------------- --------------
Deferred tax assets 628,500 692,200
-------------- --------------
Deferred Tax Liabilities:
Property, plant and equipment 222,200 442,200
Other 266,700 110,400
-------------- --------------
Deferred tax liabilities 488,900 552,600
-------------- --------------
$ 139,600 $ 139,600
============== ==============
</TABLE>
As of December 31, 1997, the Company has approximately $1.9 million of net
operating loss carryforwards for tax purposes, expiring through 2010.
The statutory federal income tax rate, reconciled to the effective income tax
rate benefit (provision) is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% (34.0)% (34.0)%
State income taxes, net of federal income
tax effect 4.6 (5.0) (10.8)
Nondeductible amortization of goodwill (75.6) (9.6) (21.5)
Valuation allowance 37.0 50.1 55.5
Other - (3.9) (1.5)
------ ------- -------
Total -% (2.4)% (12.3)%
====== ======= =======
</TABLE>
F-16
<PAGE> 43
9. BORROWINGS UNDER LINE OF CREDIT:
In March 1996, the Company entered into a new line of credit agreement with a
bank through March 2001. Under the terms of the agreement, the Company is
permitted to borrow up to $8,500,000, subject to advance formulas based on
accounts receivable and inventory. Amounts borrowed are due on demand and bear
interest at either the bank's prime rate plus an additional rate of 1% or LIBOR
plus an additional 3%. Amounts borrowed are payable monthly and are secured by
all assets of the Company.
Information related to the line of credit for the years ended December 31, 1995,
1996 and 1997 is as follows:
<TABLE>
<CAPTION>
Weighted Average
--------------------------
Maximum
Month-end Interest Amount
Balance Rate Outstanding
------- ---- -----------
<S> <C> <C> <C>
1995 $ 88,417 8.75% $ 575,000
1996 3,895,000 9.00 7,255,984
1997 6,929,683 8.96 8,442,372
</TABLE>
As of December 31, 1997, approximately $875,000 of standby letters of credit
were outstanding under the line of credit facility.
F-17
<PAGE> 44
10. LONG-TERM DEBT:
Long-term debt as of December 31, 1996 and 1997, consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------------- -------------
<S> <C> <C>
Note payable, bearing interest at either prime plus 1.5% or LIBOR
plus 3.5%, due in varying amounts monthly through March 2001 $ 7,117,308 $ 5,067,482
Subordinated promissory note, bearing interest at 9% annually,
payable throughout 1997 300,000 -
Subordinated promissory note to former shareholders of Prefco,
bearing interest at 9% annually, payable in quarterly
installments of interest, with all outstanding principal and
interest due March 2001 1,400,000 1,400,000
Subordinated promissory note to former shareholder of Richard's,
bearing interest at 6.35% annually, payable in quarterly
installments of interest, with all outstanding principal and
interest due July 2001 874,786 874,786
Subordinated promissory note to former shareholders of Grogan's,
effective October 1998, bearing interest at 8% annually, payable
in quarterly installments of interest, with all outstanding
principal and interest due September 2001 200,000 200,000
Subordinated promissory note to former shareholders of Partin's,
bearing interest at 8% annually, payable in quarterly
installments, with all outstanding principal and interest due
December 2003 224,891 224,891
Capital lease obligations and other 192,992 358,181
-------------- --------------
Total 10,309,977 8,125,340
Less: Current portion (2,324,267) (1,659,310)
Unamortized discount (206,776) (168,742)
-------------- --------------
Long-term debt, net of current portion and
unamortized debt discount $ 7,778,934 $ 6,297,288
============== ==============
</TABLE>
The future maturities of the notes payable as of December 31, 1997, are as
follows:
1998 $ 1,659,310
1999 1,776,502
2000 1,800,088
2001 2,642,809
2002 21,740
2003 and thereafter 224,891
--------------
$ 8,125,340
==============
F-18
<PAGE> 45
In connection with the Company's line of credit (see Note 9) and note payable,
the Company is required to meet certain financial and nonfinancial covenants.
In March 1998, the Company refinanced its outstanding note payable and line of
credit (see Note 21).
11. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts reported in the balance sheet for cash, accounts payable
and accrued expenses approximate fair value because of the short maturity of
those instruments.
Fair value of the Company's long-term debt is estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
The aggregate face amounts and fair values of the Company's long-term debt as of
December 31, 1997, were $8,125,340 and $7,956,598, respectively. The aggregate
face amounts and fair values of the Company's long-term debt as of December 31,
1996, were $10,309,977 and $10,103,201, respectively. The face amount of the
Company's long-term debt approximated the fair value as of December 31, 1995.
12. STOCK OPTIONS:
The Company has a non-incentive stock option plan (the Non-Incentive Plan) and a
Director's stock option plan (the Directors' Plan), which authorize the Company
to grant, to eligible individuals, options for the purchase of shares of the
Company's $.01 par value common stock.
Under the terms of the Non-Incentive Plan, the Company may issue up to 1,100,000
options to officers, advisors, full-time employees and other eligible
individuals. In addition, the Company may issue up to 150,000 options to outside
directors. In general, the option exercise price equals the stock's market price
on the date of grant and vest up to three years. Under the terms of the
Directors' Plan, the Company may issue up to 500,000 options to eligible outside
Directors. Each eligible Director was granted an initial option to purchase
1,500 shares of stock. Each eligible Director is granted additional options to
purchase 10,000 shares of stock at the beginning of each year of service. The
option exercise price equals the stock's market price on the date of grant and
vest after one year. The issuance of options under the Non-Incentive and
Directors' Plans during 1995, 1996 and 1997, had no impact on the accompanying
consolidated financial statements.
In connection with the employment agreement with the Chief Executive Officer
(see Note 13), the Company issued 250,000 stock options with an exercise price
of $1.50, representing the fair market value at March 15, 1996. The options vest
over a five year period and provide for accelerated vesting if certain financial
performance thresholds are met. As of December 31, 1997, 40% of these options
had vested.
F-19
<PAGE> 46
The Company has elected to account for its stock-based compensation plans in
accordance with APB No. 25, under which no compensation expense has been
recognized. The Company has computed for pro forma disclosure purposes the value
of all options granted during 1995 and 1996, using the Black-Scholes option
pricing model as prescribed by SFAS No. 123 and the following assumptions used
for option grants:
<TABLE>
<CAPTION>
1996 1997
-------------------- ---------------
<S> <C> <C>
Risk-free interest rate (range) 5.44% - 6.81% 5.23 - 5.31%
Expected dividend yield 0.00% 0.00%
Expected lives 5-6 years 5-6 years
Expected volatility 36% 32%
</TABLE>
Adjustments were made for options forfeited prior to vesting. Had compensation
expense for these plans been determined in accordance with SFAS No. 123, the
Company's net income and earnings per share reflected on the accompanying
statement of operations would have been reduced to the following "pro forma"
amounts:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net (Loss) Income:
As reported $ (3,090,586) $ 895,760 $ 356,857
Pro forma (3,153,437) 715,067 254,657
Basic Earnings Per Share:
As reported (1.23) .17 .05
Pro forma (1.25) .14 .04
Diluted Earnings Per Share:
As reported (1.23) .17 .05
Pro forma (1.25) .13 .04
</TABLE>
Because the FASB Statement No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
expense may not be representative of that to be expected in future years.
<TABLE>
<CAPTION>
1995 1996 1997
--------------------------- ----------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 170,036 $ 6.31 233,136 $ 5.47 693,236 $ 3.00
Granted 67,700 2.75 464,200 1.76 178,400 2.89
Exercised - - - - - -
Forfeited (4,600) 3.49 (4,100) 3.24 (5,400) 3.21
Expired - - - - - -
---------- ---------- ----------
Outstanding, end of year 233,136 5.47 693,236 3.00 866,236 $ 2.98
========== ========== ==========
Exercisable, end of year 142,552 5.45 410,044 3.51 552,344 3.34
Weighted average fair value
of options granted $ 1.40 $ .81 $ .88
</TABLE>
F-20
<PAGE> 47
The Company has a Retirement Savings Plan (401(k) plan) whereby employees may
contribute up to the limits established by the Internal Revenue Service.
Matching contributions are made by the Company equal to 25% of employee
contributions, subject to certain limitations. The Company's matching expense
during 1995, 1996 and 1997 was $17,207, $22,645 and $57,663, respectively.
During 1997, the Company approved an Employee Stock Purchase Plan (the "Stock
Purchase Plan"). The Stock Purchase Plan qualified as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. All regular
full-time employees of the Company (including officers) and all other employees
whose customary employment is for more than 20 hours per week are eligible to
participate in the Stock Purchase Plan. Directors who are not employees are not
eligible. A maximum of 250,000 shares of the Company's common stock is reserved
for issuance under the Stock Purchase Plan.
13. COMMITMENTS:
Executive Employment Agreement
Effective March 15, 1996, the Company entered into a five-year employment
agreement with its Chief Executive Officer which provides for base compensation
and an incentive bonus.
Operating Leases
The Company leases warehouses, office buildings and most of its delivery
vehicles under operating leases. These leases have remaining terms ranging from
one to five years. Rental expense under these leases for the years ended
December 31, 1995, 1996 and 1997 was $594,010, $1,223,271 and $2,183,808,
respectively. The delivery vehicle leases include options to cancel up to three
of the leases in the event of an economic slowdown. As of December 31, 1997,
future minimum lease payments under these operating leases are as follows:
<TABLE>
<S> <C>
1998 $ 1,342,736
1999 804,374
2000 651,259
2001 470,556
2002 212,072
2003 and thereafter 118,800
--------------
$ 3,599,797
==============
</TABLE>
14. REPURCHASE OF COMMON STOCK:
Throughout 1995, the Company repurchased 402,032 shares of its outstanding
common stock at an average per share cost of $1.03. Shares repurchased are
considered retired and, therefore, are reflected on the accompanying balance
sheets as reductions to common stock and additional paid-in capital.
F-21
<PAGE> 48
15. RELATED PARTY TRANSACTIONS:
The accompanying consolidated statements of operations include interest related
to certain notes payable to related parties (including amortization of deferred
financing costs) and other liabilities to stockholders of approximately $4,026,
$171,159 and $396,674 for the years ended December 31, 1995, 1996 and 1997,
respectively.
The Company has a consulting agreement (the Agreement) with Elfman Venture
Partners, Inc. and Sterling Advisors, L.P., a partnership owned by certain
stockholders of the Company (the Managers). The term of the Agreement is through
December 31, 2001. The Agreement provides that the Company shall pay a base fee
of $300,000 per year, which shall increase 5% for each year the Agreement
remains in effect. The Agreement also stipulates adjustments to the base fee for
future acquisitions or sales. During each year the Agreement is in effect, the
Company is also required to grant options to purchase 25,000 shares of the
Company's $.01 par value common stock. Such options vest on each December 31 at
an exercise price equal to the market price on the preceding January 1 (see Note
12).
This Agreement was amended effective July 1, 1997, in connection with the
Potter's acquisition (see Note 21). The Amendment, covering the period July 1,
1997, through December 31, 1998, provides for an aggregate payment to the
Managers of $750,000 for services provided in connection with the Potter's
acquisition and the related financing, in lieu of all other fees payable under
the Agreement.
The accompanying consolidated statements of operations include approximately
$148,000, $340,000 and $175,000 for the years ended December 31, 1995, 1996 and
1997, respectively, for management and consulting services that were paid to the
Managers. As of December 31, 1997, $194,000 of fees related to this amended
Agreement were included in other assets in the accompanying consolidated balance
sheet.
16. OTHER (EXPENSE) INCOME:
During the first quarter of 1996, the Company and one of its former suppliers
agreed to terminate their distribution agreement. As part of the settlement, the
former supplier agreed to pay the Company $250,000 in consideration. The
consideration received is included in other income on the consolidated
statements of operations. During 1995, approximately 4% of the total cases sold
represented cases supplied by this former supplier.
17. BUSINESS SEGMENT INFORMATION:
The Company's operations have been classified into three business segments:
beverage distribution, food processing and food distribution. The beverage
distribution segment includes purchasing, marketing and distribution of
nonalcoholic beverages to the retail trade in the greater Baltimore and
Washington, D.C. metropolitan area and surrounding counties. The food processing
segment includes the processing and sales of sausage and related products to
distributors and retailers in the Louisiana, Texas, Kentucky and other
surrounding states. The food distribution segment includes the purchasing,
marketing and distribution of packaged meat products to retailers and
restaurants, primarily in Texas.
F-22
<PAGE> 49
Summarized financial information, by business segment, for continuing operations
in 1995, 1996 and 1997 is as follows (corporate overhead not specifically
associated with a segment has been presented separately):
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales:
Beverage distribution $ 20,596,436 $ 19,401,759 $ 21,149,844
Food processing - 12,864,437 22,940,688
Food distribution - 125,610,141 133,763,274
--------------- --------------- ---------------
$ 20,596,436 $ 157,876,337 $ 177,853,806
=============== =============== ===============
Operating income (loss):
Beverage distribution $ (138,180) $ 631,108 $ 77,598
Food processing - 934,691 1,400,752
Food distribution - 1,075,395 1,402,761
Corporate - (972,931) (1,177,187)
--------------- --------------- ---------------
$ (138,180) $ 1,668,263 $ 1,703,924
=============== =============== ===============
Total assets:
Beverage distribution $ 2,921,147 $ 5,700,876 $ 12,019,992
Food processing - 14,170,199 15,295,068
Food distribution - 17,317,461 15,808,920
--------------- --------------- ---------------
$ 2,921,147 $ 37,188,536 $ 43,123,980
=============== =============== ===============
Depreciation and amortization:
Beverage distribution $ 388,321 $ 344,399 $ 387,084
Food processing - 447,651 752,620
Food distribution - 201,463 241,517
--------------- --------------- ---------------
$ 388,321 $ 993,513 $ 1,381,221
=============== =============== ===============
Capital expenditures:
Beverage distribution $ 493,272 $ 374,235 $ 420,308
Food processing - 76,853 321,309
Food distribution - 133,781 26,256
--------------- --------------- ---------------
$ 493,272 $ 584,869 $ 767,873
=============== =============== ===============
</TABLE>
There were no significant intersegment sales or transfers during 1995.
Intersegment sales and related receivables and payables among the segments
during 1996 and 1997, for the purpose of this presentation, have not been
eliminated. In 1997, there were intersegment sales of $5,655,312 by the food
processing segment. Operating income, by business segment excludes interest
income, interest expense and net unallocated corporate expenses.
18. DISCONTINUATION OF THE FLYING FRUIT FANTASY DIVISION:
On April 27, 1994, the Company acquired substantially all of the assets and
assumed certain liabilities of Flying Fruit Fantasy, USA, Inc. for approximately
$580,000 in cash and 23,077 shares of common stock of the Company with a market
value of approximately $104,000 at closing, one share of Series A nonvoting
preferred stock convertible into $150,000 worth of common stock on October 18,
1995, and $5,000 in cash per month for 24 months after closing. The convertible
preferred stock on April 27, 1994, was valued at $133,091 and was accreted
through the conversion
F-23
<PAGE> 50
date up to the estimated fair value at conversion. On October 18, 1995, the
preferred stock was converted into 30,000 shares of common stock.
In December 1995, the Company adopted a plan to dispose of its Flying Fruit
Fantasy division. As a result, the Company recognized a one-time charge of
$2,410,200, which was determined as follows:
<TABLE>
<S> <C>
Write-off of equipment $ 1,085,112
Write-off of goodwill 744,310
Write-off of noncompete agreements and other assets 215,703
Other costs to discontinue operations 365,075
--------------
$ 2,410,200
==============
</TABLE>
This net loss has been reflected in the accompanying consolidated statements of
operations under Loss on Disposal of Discontinued Operations.
The results of the Flying Fruit Fantasy division have been reported separately
as discontinued operations in the consolidated statements of operations for the
year ended December 31, 1995. Revenues from the Flying Fruit Fantasy division
were $549,500 for the year ended December 31, 1995. No benefit for income taxes
has been recorded in connection with these losses due to the uncertainty that
the Company will be able to offset the losses against future taxable income.
The remaining liabilities as of December 31, 1996, have been presented
separately in the accompanying consolidated balance sheets. During 1997, the
Company settled all of the remaining outstanding legal proceedings associated
with the discontinued Flying Fruit Fantasy division. As of December 31, 1997,
management believes that the Company is not subject to any additional
liabilities associated with this division.
19. CONTINGENCIES:
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages,
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.
20. PRIVATE PLACEMENT:
During March 1996, the Company raised approximately $2.8 million in cash, net of
expenses, through the private sale of approximately 2.8 million shares of its
common stock. These shares are subject to certain restrictions regarding their
resale.
During July 1997, the Company raised approximately $2.4 million in cash, net of
expenses, through the private sale of approximately one million shares of its
common stock. These shares are subject to certain restrictions regarding their
resale.
F-24
<PAGE> 51
21. SUBSEQUENT EVENTS:
In March 1998, the Company acquired substantially all of the assets of J.C.
Potter Sausage Company, a food processing business based in Durant, Oklahoma, in
consideration for approximately $13.0 million in cash, plus related transaction
costs. In connection with this acquisition, the Company borrowed approximately
$6.5 million in subordinated debt from Banc One Capital Corporation. The
subordinated debt included nonvoting detachable common stock warrants which have
an exercise price equal to the market price of 3 3/8 on the date of closing. The
Company also refinanced its senior revolver and term debt through Fleet Capital
Corporation. The new senior debt facility (the "Fleet Facility") provided a term
loan of $11 million, or approximately $6.0 million greater than the balance
previously outstanding under the LaSalle Facility. The senior revolver provides
for a line of credit up to $15 million, subject to certain borrowing base
requirements.
F-25
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Atlantic Premium Brands, Ltd.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Atlantic Premium Brands, Ltd. and
subsidiaries included in this Form 10-K and have issued our reports thereon
dated March 20, 1998. Our audits were made for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole. This schedule
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic consolidated
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 consolidated financial statements taken as a whole.
/s/ Arthur Anderson LLP
Baltimore, Maryland,
March 20, 1998
S-1
<PAGE> 53
SCHEDULE I
ATLANTIC PREMIUM BRANDS, LTD. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
---------------------------------------------------
Reserve
Balance at Established Charged to Charged Balance
Beginning with Business Costs and to Other at End
Classifications of Period Combinations Expenses(1) Accounts(2) Deductions(3) of Period
- ------------------------ ----------------------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended
December 31, 1997 $ 118,000 $ - $ 103,000 $ - $ 104,000 $ 117,000
Year ended
December 31, 1996 $ 35,000 $ 69,000 $ 61,000 $ 9,000 $ 56,000 $ 118,000
Year ended
December 31, 1995 $ 71,000 $ - $ 83,000 $ - $ 119,000 $ 35,000
</TABLE>
(1) Current year provision for doubtful accounts.
(2) Includes recoveries on accounts previously written off.
(3) Accounts written off.
S-2
<PAGE> 54
INDEX TO EXHIBITS
Exhibit
Number Description
2 Asset Purchase Agreement dated as of March 6, 1998 among Potter's
Acquisition Corp., J.C. Potter Sausage Company, Potter's Farm, Inc.,
Potter Rendering Co. and Potter Leasing Company, Ltd. (*)
3.1 Certificate of Incorporation of the Company, including all amendments
thereto (*) 3.2 By-Laws of the Company (1) 3.3 Certificate of
Designation of the Series A Non-Voting Convertible Preferred Stock of
the Company (2)
4.1 Specimen Stock Certificate (1)
4.2 Certificate of Designation of the Series A Non-Voting Convertible
Preferred Stock of the Company (see Exhibit 3.3)
4.3 Stock Option Plan (1)
4.4 Atlantic Premium Brands, Ltd. Employee Stock Purchase Plan dated
November 1, 1997 (3)
4.5 $1.4 Million Subordinated Note made by ABEV Acquisition Corp. in favor
of Franklin Roth and Allen Pauly (6)
4.6 6.35% Subordinated Non-Negotiable Promissory Note Due July 31, 2001
made by Richards Cajun Foods Corp. and the Company in favor of J.L.
Richard in the original principal amount of $850,000 (*)
4.7 8% Subordinated Non-Negotiable Promissory Note Due September 30, 2001
made by Grogan's Merger Corp. in favor of Bobby L. Grogan and Betty R.
Grogan in the original principal amount of $219,593 (*)
4.8 8% Subordinated Non-Negotiable Promissory Note Due December 31, 2003
made by Grogan's Farm, Inc. in favor of Jefferson Davis and Roger
Davis in the original principal amount of $219,593 (*)
4.9 Secured Promissory Note dated as of March 20, 1998 of the Company and
certain of its subsidiaries payable to Fleet Capital Corporation in
the original principal amount of $11,000,000 (*)
4.10 Loan and Security Agreement dated as of March 20, 1998 among Fleet
Capital Corporation, the Company and certain of its subsidiaries (*)
4.11 Stock Pledge Agreement dated as of March 20, 1998 between the Company
and Fleet Capital Corporation (*)
4.12 Atlantic Premium Brands, Ltd. and Subsidiaries Senior Subordinated
Note and Warrant Purchase Agreement dated as of March 20, 1998 among
the Company, certain of its subsidiaries and Banc One Capital
Partners, LLC ("Banc One") (*)
4.13 Senior Subordinated Note due March 31, 2005 of the Company payable to
Banc One dated as of March 20, 1998 in the original principal amount
of $6,500,000 (*)
4.14 Atlantic Premium Brands, Ltd. Warrant Certificate Common Stock
Purchase Warrant of Banc One dated as of March 20, 1998 (*)
4.15 Atlantic Premium Brands, Ltd. Warrant Certificate Contingent Common
Stock Purchase Warrant of Banc One dated as of March 20, 1998 (*)
4.16 Put Option Agreement dated as of March 20, 1998 between the Company
and Banc One (*)
4.17 Registration Rights Agreement dated as of March 20, 1998 between the
Company and Banc One (*)
4.18 Shareholders Agreement dated as of March 20, 1998 among the Company,
certain of its Shareholders and Banc One (*)
4.19 Preemptive Rights Agreement dated as of March 20, 1998 between the
Company and Banc One (*)
<PAGE> 55
4.20 Debt Subordination Agreement dated as of March 20, 1998 among Banc One
Capital Partners, LLC, the Company, certain of its subsidiaries and
Fleet Capital Corporation (*)
4.21 Lien Subordination Agreement dated as of March 20, 1998 between Fleet
Capital Corporation and Banc One Capital Partners, LLC (*)
10.1 Distribution Agreement dated as of November 25, 1992 between Joseph
Victori Wines, Inc. and Maryland Beverage, L.P., as amended. (**) (1)
10.2 Non-Compete and Non-Disclosure Agreement dated September 24, 1993
among the Company, Sterling Group, Inc., Eric D. Becker, Steven M.
Taslitz, Douglas L. Becker and R. Christopher Hoehn-Saric (1)
10.3 Consulting Agreement dated March 15, 1996 by and between the Company,
Sterling Advisors, L.P. and Elfman Venture Partners, Inc. (4)
10.4 Amendment to Consulting Agreement dated as of October 16, 1996 among
the Company, Sterling Advisors, L.P. and Elfman Venture Partners, Inc.
(*)
10.5 Second Amendment to Consulting Agreement dated as of September 7, 1997
among the Company, Sterling Advisors, L.P. and Elfman Venture
Partners, Inc. (*)
10.6 Form of Tax Indemnification Agreement (1)
10.7 Stock Purchase Agreement dated as of January 23, 1996 among the
Company, ABEV Acquisition Corp., Franklin Roth and Allen Pauly (6)
10.8 Employment Agreement dated March 15, 1996 between ABEV Acquisition
Corp. and Franklin Roth (6)
10.9 Agreement and Plan of Merger dated as of January 25, 1996 among the
Company, Carlton Foods Corp. and Carlton Foods, Inc. (6)
10.10 $1.4 million Subordinated Note made by ABEV Acquisition Corp. in favor
of Franklin Roth and Allen Pauly (6)
<PAGE> 56
10.11 Stock Purchase Agreement dated as of March 15, 1996 among the Company
and Purchasers under the $2.8 million Private Placement (6)
10.12 Employment Agreement dated October 29, 1996 between the Company and
Alan F. Sussna (7)
10.13 Asset Purchase Agreement dated as of March 6, 1998 among Potter's
Acquisition Corp., J.C. Potter Sausage Company, Potter's Farm, Inc.,
Potter Rendering Co. and Potter Leasing Company, Ltd. (See Exhibit 2)
11 Statement regarding computation of per share earnings (*)
21 Subsidiaries of the Company (*)
23 Consent of Independent Public Accountants (*)
27 Financial Data Schedule (*)
- ------------------
* Filed herewith.
** Confidential treatment was afforded for certain portions of these
agreements.
(1) Filed as an exhibit to the Company's Registration Statement No. 33-69438 or
the amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Form S-8 Registration Statement No.
333-39561 and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated herein by reference.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K dated April
27, 1994, filed with the Securities and Exchange Commission on July 11,
1994, and incorporated herein by reference.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K dated March
15, 1996, filed with the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
<PAGE> 1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated this 6th day of
March, 1998, by and among POTTER'S ACQUISITION CORP., a Delaware corporation
("PURCHASER"), J. C. POTTER SAUSAGE COMPANY, an Oklahoma corporation
("SAUSAGE"), POTTER'S FARM, INC., an Oklahoma corporation ("FARM"), POTTER
RENDERING CO., an Oklahoma corporation ("RENDERING") and POTTER LEASING COMPANY,
LTD., an Oklahoma limited partnership ("LEASING"; and collectively with Sausage,
Farm and Rendering, the "SELLERS", and each, individually, a "SELLER"), and Ms.
Donnis Potter, in her capacity as "REPRESENTATIVE" of all of the Sellers.
R E C I T A L S:
WHEREAS, collectively, Sellers are engaged in the business (the "BUSINESS")
of manufacturing, marketing, selling and distributing prepared food products and
related products and services; and
WHEREAS, Purchaser desires to acquire, and Sellers desire to sell, the
Purchased Assets (as described on Schedule A, attached hereto) , and which, for
purposes hereof, shall include the "INTANGIBLES" (as defined in Section 5H(iii)
hereof), for a purchase price which is established herein, all upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, and in consideration of the sum of $100.00 and the mutual
premises and representations, warranties and covenants and other good and
valuable consideration, the receipt and sufficiency of which being acknowledged,
the parties agree as follows:
1. SALE AND PURCHASE. On the Closing Date (as defined in Section 4
hereof), in reliance on the mutual representations, warranties, covenants
and agreements of the parties, and on the terms and subject to the
conditions set forth herein, Sellers shall sell, convey, transfer, assign
and deliver to Purchaser, the Purchased Assets, free and clear of all
Encumbrances (as defined in Section 5B hereof), except as permitted hereby.
The Purchased Assets shall include all property or interests in property
(real, personal or mixed; tangible or intangible) described on Schedule A
and shall specifically exclude only those assets identified on SCHEDULE B,
attached hereto (the "EXCLUDED ASSETS"), all of which shall be retained by
Sellers. Purchaser is not assuming any liability or obligation of the
Sellers of any nature whatsoever, except as expressly set forth in SCHEDULE
C hereto (each, an "ASSUMED LIABILITY", and collectively, the "ASSUMED
LIABILITIES"). Except for the Assumed Liabilities, the Sellers shall remain
liable and responsible for all obligations and liabilities not expressly
assumed by Purchaser hereunder, and the Sellers shall discharge all of
their lawful and legally enforceable obligations, regardless of any
agreement relating to indemnification of the parties pursuant hereto.
2. PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Purchased Assets shall be a cash amount equal to the sum of (i) THIRTEEN
MILLION DOLLARS ($13,000,000.00) (the "CASH"), (ii) plus the Income Tax
Adjustment (as defined, determined and settled in accordance with
SCHEDULE A1, attached hereto), (iii) plus or minus proratable items
("PRORATIONS") with respect to the Real Estate (as defined in Section
5B(ix) hereof), and (iv) interest ("INTEREST") on the Cash at the rate of
seven per cent (7%) per annum, accruing from September 1, 1997 through the
Closing Date (as defined in Section 4 hereof), all payable as set forth
below in Section 3 hereof. The Purchase Price shall be allocated for
Federal Income Tax purposes among the Purchased Assets as set forth on
<PAGE> 2
SCHEDULE A2, attached hereto, and the parties agree that, to the extent
permitted by law, they shall account for the sale thereof in a manner
consistent with such allocation.
Each of the Sellers hereby irrevocably appoints Representative as the
sole representative and agent of each, with the full and exclusive power
and authority to represent and bind each with respect to all matters
arising under and pursuant to this Agreement and the transactions
contemplated hereby. All actions taken by Representative hereunder shall be
binding upon each of the Sellers as if expressly confirmed and ratified in
writing by each. Representative will not resign unless a successor
Representative shall have been appointed. The Sellers shall communicate
with Purchaser exclusively by and through Representative or authorized
legal counsel (F. H. Wright) on all matters, and agree to be bound by such
communications.
3. PAYMENT OF PURCHASE PRICE. On the terms and subject to the conditions
herein, Purchaser shall pay and deliver to Sellers on the Closing Date, the
Purchase Price, as follows:
3.A. The sum of the Cash, plus the Income Tax Adjustment, plus the
Interest, less the "Escrow Deposit" (as defined in Section 13F
hereof); and
3.B. plus or minus the Prorations, at Closing;
all in immediately available funds. The Escrow Deposit shall not be deemed
delivered to the Sellers until all of the conditions set forth in the
"Escrow" (as defined below) are satisfied.
4. CLOSING. The consummation of the transactions contemplated hereby (the
"CLOSING") shall take place on the second business day after all conditions
precedent have been satisfied, but not earlier than March 15, 1998, and not
later than March 20, 1998, at 9:00 A.M. (the "CLOSING DATE") at the law
offices of the Sellers' counsel in Oklahoma City, Oklahoma, or otherwise,
on such other date or place as the parties hereto may mutually agree. The
transactions shall be effective for financial accounting purposes as if
they had taken place immediately following the close of regular business on
August 31, 1997 (the "Effective Date").
5. EACH SELLER'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS, WITH
RESPECT TO ITSELF (ONLY). Each of the Sellers hereby represents and
warrants to, covenants and agrees with, Purchaser, now and as of the
Closing Date, as follows:
5.A. Organization, Standing and Power. Each Seller other than Leasing
is a corporation duly organized, validly existing and in good
standing under the laws of Oklahoma. Leasing is a limited
partnership duly organized, validly existing and in good standing
under the laws of Oklahoma. The federal employer identification
number, state identification number for sales and tax purposes
and all similar identification numbers for each Seller are set
forth on PART A OF EXHIBIT 5A, attached hereto. Each Seller has
all requisite power and authority to own, lease and operate those
Purchased Assets owned, leased or operated by such Seller, and to
carry on the Business as now being conducted in the manner that
the Business is now being conducted. Neither the nature of the
Business nor the ownership, operation or leasing of real estate
or personal property by Sellers requires any to qualify as a
foreign entity in any jurisdiction other than jurisdictions in
which the failure to so qualify would not materially and
adversely affect the Business or any of the Purchased Assets,
including the Intangibles. No Seller conducts any business or
owns or leases any asset or property of any nature
2
<PAGE> 3
outside of the United States. Each of the Sellers has the full
power and authority and legal capacity to enter into and deliver
this Agreement, sell, transfer and deliver the Purchased Assets
and perform all other acts necessary or appropriate to consummate
all of the transactions contemplated hereby.
5.B. Capital Structure; Ownership of Purchased Assets and Related
Matters.
5.B.(i) The capital structure of each Seller, including the
number of authorized, issued and outstanding shares,
and ownership of such shares is listed on PART A OF
EXHIBIT 5B(i), attached hereto. Except as set forth on
PART B OF EXHIBIT 5B(i), there are no outstanding
options, warrants or other rights, contracts,
commitments, agreements, understandings, arrangements
or restrictions relating to the purchase or acquisition
of any shares of capital stock or other equity
securities or interests of any Seller. No shareholder
or holder of any equity interest of any nature has had
such equity interests redeemed by any Seller since
March 30, 1997.
5.B.(ii) Except as listed on EXHIBIT 5B(ii), Sellers have
and will have, at Closing, good and marketable title
to, or a valid and transferable leasehold interest in,
all of the Purchased Assets, except for those of the
Purchased Assets as may be sold or otherwise disposed
of between the date hereof and the Closing Date in the
ordinary course of business. No other "PERSON" (as
defined in Section 15M hereof) has any fee, leasehold
or equitable interest in and to any of the Purchased
Assets, except as set forth on EXHIBIT 5B(ii). Except
as set forth on EXHIBIT 5B(ii), when sold and delivered
to Purchaser, the Purchased Assets will be free and
clear of all the following (hereinafter collectively
referred to as "ENCUMBRANCES"): security interests,
liens, pledges, claims, charges, escrows, encumbrances,
options, rights of first refusal, mortgages,
indentures, security agreements or other agreements,
arrangements, contracts, commitments, understandings or
obligations, whether written or oral, encumbering title
in any way, other than the Encumbrances created hereby.
5.B.(iii) Except as listed on EXHIBIT 5B(iii), no Seller
owns,and none has ever owned, shares of any class of
capital stock of any other Person, none has or has ever
had any interest in any other Person, and there are no
contracts, commitments, agreements, understandings or
arrangements relating to such.
5.B.(iv) Except as listed on EXHIBIT 5B(iv), no Seller has
ever assumed or succeeded to the liabilities of any
Person, whether by operation of law or otherwise. No
Seller is contingently liable for any obligation of any
other Person. No Seller has ever been known by any
other name, and none does or has ever done business
under any other name.
5.B.(v) Except as listed on EXHIBIT 5B(v), none of the
Sellers has any direct or indirect financial stake in
any Person which has an interest in any assets used in
conducting the Business.
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<PAGE> 4
5.B.(vi) Except as listed on EXHIBIT 5B(vi), there are no
contracts, commitments, agreements, understandings,
arrangements or restrictions relating to the
ownership or operation of any of the Purchased
Assets.
5.B.(vii) Other than the Excluded Assets, the Purchased
Assets constitute all of the property used or
useful in the Business as currently conducted by
Sellers, and are generally located at the locations
set forth on EXHIBIT 5B(vii).
5.B.(viii) The Purchased Assets are in good working or
reasonably repairable condition, have been
maintained in accordance with industry standards,
and are generally sufficient to conduct the
Business in a manner consistent with past
practices. The Sellers know of no unrepairable
condition which, either alone or with other
conditions, materially interferes with the economic
value of any of the Purchased Assets or the use
thereof in the manner used by Sellers in the
Business.
5.B.(ix) The Purchased Assets do not include any interest of
any nature in any parcel of real property, except
for the fee title interest in the real estate
legally and commonly identified on PART A OF
EXHIBIT 5H(i) (the "REAL ESTATE"), and no Seller
has any understandings, agreements or commitments
to purchase any other real property.
5.C. Authorization. This Agreement and all writings relating hereto to
be executed and delivered by each of the Sellers have been duly
authorized by all necessary action and constitute the valid and
binding obligations of each of the Sellers, enforceable against
each such Selling Party in accordance with their respective
terms. The individuals executing this Agreement and the other
documents executed in connection herewith individually and on
behalf of Sellers have been duly authorized and have the legal
capacity to execute all of such documents in such capacities.
Neither the execution and delivery hereof nor any writing
relating hereto nor the consummation by any of the Sellers of the
transactions contemplated hereby or thereby, nor compliance with
any of the provisions hereof or thereof, will: (i) conflict with
or result in a material breach of any of the Sellers' Articles or
Certificates of Incorporation, By-Laws or other charter
documents; (ii) violate any statute, law, rule or regulation or
any order, writ, injunction or decree of any court or
governmental authority; (iii) violate or conflict with or
constitute a default under (or give rise to any right of
termination, modification, cancellation or acceleration under),
any agreement or writing of any nature to which any of the
Sellers is a party or by which any of the Purchased Assets may be
bound or affected, or result in the creation of any Encumbrance
against or upon any of the Purchased Assets under any agreement
or writing to which any Seller is a party or by which any Seller
or any Seller's assets may be bound or affected, or (iv) impair
or in any way limit any governmental or official license,
approval, permit or authorization of any Seller, to the extent
that any of the foregoing would materially and adversely affect
the Business or any of the Purchased Assets. Other than as set
forth on EXHIBIT 5C, attached hereto, no consent or approval of
or notification to any Person is necessary or required in
connection with the execution and delivery by any of the Sellers
of this Agreement or any writing relating hereto or the
consummation of the transactions contemplated hereby or thereby.
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<PAGE> 5
5.D. Financial Statements.
5.D.(i) EXHIBIT 5D hereto consists of the balance sheets
and the related statements of income, changes in
shareholders' equity and changes in financial
position of each Seller, and the notes thereto and
the auditor's report thereon, if applicable, as at
and for the calendar year or fiscal years ending
within or at the close of 1995 and 1996, and all
interim statements prepared to date for 1997
(collectively, the "HISTORICAL FINANCIALS").
EXHIBIT 5D shall be updated as interim statements
are prepared. To the best of Sellers' knowledge,
the Historical Financials are true, correct and
complete and present fairly the financial position
of each Seller and the results of each Seller's
operations, retained earnings and changes in
financial positions as at the dates thereof and for
the periods covered thereby, are consistent with
the books and records of Sellers, do not include or
omit to state any material fact which renders them
misleading, and have been prepared in conformity
with generally accepted accounting principles
applied on a consistent basis, except as may be
disclosed in the reports relating thereto. At the
Closing, the Sellers shall deliver to Purchaser a
consolidated balance sheet dated as of the end of
the month before the Closing Date (the "CLOSING
BALANCE SHEET") based on the best knowledge and
good faith of all of the Sellers, which shall be
prepared on a basis consistent with the Historical
Financials and in accordance with the provisions
hereof.
5.D.(ii) Except as disclosed therein, or otherwise listed on
EXHIBIT 5D(ii), the statements of income included
in the Historical Financials do not contain any
items of special or nonrecurring income, and the
balance sheets included in the Historical
Financials do not, and the Closing Balance Sheet
will not, reflect any write-up or revaluation
increasing the book value of any asset.
5.D.(iii) All pro forma adjustments made by Sellers or on
Sellers' behalf in any sales brochure or other
document or literature used for purposes of
determining an adjusted earnings number are
reasonable, appropriate and adequate and are based
on the good faith belief of the Sellers.
5.E. Liabilities.
5.E.(i) Except as listed on EXHIBIT 5E(i), the liabilities
of Sellers on the Historical Financials consisted,
and the liabilities on the Closing Balance Sheet
will consist, solely of obligations and liabilities
incurred in the ordinary and regular course of
Business to Persons which are not affiliated with
any of the Sellers. Items listed on EXHIBIT 5E(i)
are not Assumed Liabilities.
5.E.(ii) As of the Closing, no Seller will have any material
and adverse liabilities or obligations of any
nature whatsoever, including, without limitation,
known or unknown, fixed or contingent, accrued,
absolute, matured or unmatured, or any "LOSS
CONTINGENCIES" considered "PROBABLE" or "REASONABLY
POSSIBLE" within the meaning of the Financial
Accounting Standards Board's Statement of Financial
Accounting Standards No. 5, which were not or will
not be recorded
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<PAGE> 6
on the Historical Financials, the Closing Balance
Sheet or on EXHIBIT 5E(i) hereof, it being the
intent of the parties that every liability of every
nature (including those liabilities or obligations
commonly referred to as "off-balance sheet"
liabilities) be specifically, accurately and
properly disclosed to Purchaser, and properly
accrued on either the Historical Financials or the
Closing Balance Sheet or herein, as the case may
be. All contingent liabilities, either not
disclosed, or disclosed on EXHIBIT 5E(i) shall be
for the account of the Sellers in all respects
(including indemnification hereunder), and, if any
such undisclosed or contingent liability is paid by
Purchaser, then such payment shall be deemed
accrued on the books of the Business immediately
prior to the Effective Date.
5.E.(iii) All reserves and allowances to be included in the
Closing Balance Sheet are, and will be, adequate,
appropriate and reasonable (in accordance with
generally accepted accounting principles).
5.E.(iv) EXHIBIT 5E(iv) is a complete list (the "PAYABLES'
LIST"), as sworn to by the Sellers, of every
material business creditor of each Seller,
including taxing authorities (whether the liability
to such creditor is accrued, absolute, contingent
or otherwise), listed by name, address, amount of
liability to such creditor, and whether such
liability is disputed. The Payables' List shall be
updated as of the Closing Date.
5.F. Absence of Changes. Except as otherwise listed on EXHIBIT 5F
hereto, the Business has been operated only in the ordinary
and regular course, and there has not been, since January 1,
1997, and through the Closing Date there will not be, with
respect to any Seller:
5.F.(i) any material and adverse change in its condition,
financial or otherwise, other than that resulting
in the ordinary and regular course of business;
5.F.(ii) any material and adverse damage, destruction or
loss of any of the Purchased Assets, whether or not
covered by insurance;
5.F.(iii) the incurring of any obligation or liability
(whether absolute, accrued, contingent or otherwise
and whether due or to become due) in excess of
$10,000.00, except for:
5.F.(iii)(a) purchases in the ordinary course of
business, and
5.F.(iii)(b) the payment in the full and complete
satisfaction of the litigation
described on EXHIBIT 5K hereof;
5.F.(iv) any transfer or application of any assets outside
the regular course of financing and conducting the
business to the payment of any amount payable,
directly or indirectly, to or for the benefit of
any Seller;
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<PAGE> 7
5.F.(v) any declaration, setting aside or payment of any
dividend or other distribution in respect of any
shares of capital stock of any Seller (other than
for the distribution of current earnings due to a
Seller's status as an "S" corporation), or any
direct or indirect redemption, purchase or other
acquisition of any such stock or any distribution
in excess of current profits or loan repayment
obligations to a partner in a Seller's partnership;
5.F.(vi) any organized labor negotiations, strike or work
stoppage affecting the Business or any threat of
the foregoing;
5.F.(vii) any sale, transfer or other disposition of any
tangible or intangible asset of any Seller to any
Person, except for:
5.F.(vii)(a) payments of third party obligations
incurred in the ordinary and regular
course of business, in accordance with
the regular payment practices of
Sellers;
5.F.(vii)(b) sales, exchanges and dispositions of
inventory and other property
in the ordinary and regular course of
business; and
5.F.(vii)(c) those items set forth in
section 5F(v).
5.F.(viii) any termination or waiver of any rights of
material value to the Business;
5.F.(ix) to the knowledge of the Sellers, the adoption of
any statute, rule, regulation or order which
materially and adversely affects the Business;
5.F.(x) any increase in the compensation of, or benefits
for, directors, officers or employees performing
services for any Seller (including, without
limitation, any increase pursuant to any bonus,
pension, profit-sharing or other plan or
commitment), having annual remuneration in excess
of $40,000.00, except for increases in accordance
with the Sellers' normal salary administration
policies;
5.F.(xi) any capital expenditure or commitment in excess of
$20,000.00 for property other than vehicles, plant
or equipment;
5.F.(xii) any forward purchase commitments not completed by
the Closing Date involving more than $20,000.00 per
item;
5.F.(xiii) any material change in the accounting methods or
practices followed any Seller or any change in
depreciation or amortization policies or rates
theretofore adopted;
5.F.(xiv) any commitment or understanding to lease or
acquire any interest of any nature in any real
estate;
5.F.(xv) any payment of any liability or obligation of any
Seller in excess of $5,000.00 sooner than in
accordance with its usual or customary practices;
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<PAGE> 8
5.F.(xvi) any sale of goods or services to any customer
where the payment for such goods or services
allows for the payment therefor more than thirty
(30) days after the goods or services have been
provided to such customer; or
5.F.(xvii) any change in the recipes or manufacturing
process of any product;
5.F.(xviii) any material decrease in marketing, advertising,
promotional or similar expenses; or
5.F.(xix) any commitment, obligation or understanding to do
any of the foregoing.
5.G. Tax Matters. Each Seller has filed, and will timely file,
all tax returns and reports required to be filed and, in
respect of any period ending prior to or which includes the
Closing Date, has paid, or has set up an adequate reserve for
the payment of, all taxes required to be paid or anticipated
to be payable, which reserve either is reflected in the
Historical Financials or will be reflected in the Closing
Balance Sheet, as the case may be. All tax returns of each
Seller for the last three (3) years have been delivered to
Purchaser, and there have been no tax audits of such returns,
in process or threatened, except as listed on EXHIBIT 5G.
None of the Sellers has any liability for any taxes in excess
of the amounts so paid or reserves so established. Each
Seller has properly withheld and paid, and will properly
withhold and pay, all payroll or similar taxes. No Seller is
delinquent in the payment of any tax, assessment, penalties
or interest, and except as listed on EXHIBIT 5G, none has
requested any extension of time within which to file any tax
returns in respect of any fiscal year which have not since
been filed. All tax returns filed or to be filed are, or will
be, true, complete and correct. There are no tax liens on any
of the Purchased Assets. No deficiencies for any tax,
assessment, penalties or interest have been proposed,
asserted, assessed or, to the knowledge of the Sellers,
threatened against any Seller which would not be covered by
existing reserves and, as of the date hereof, no requests for
waiver of the time to assess any such tax are pending. None
of the Sellers has given or been requested to give waivers of
any statute of limitations relating to the assessment or
payment of any taxes for any taxable period. As of the
Closing Date, all taxes collected under color of law will
have been remitted to the proper taxing jurisdiction. For
purposes hereof, the term "TAX" shall include all Federal,
state, local and foreign taxes, assessments, and all
franchise, income, sales, use, occupation, payroll, property,
excise or other taxes of any nature whatsoever, and
governmental charges, including penalties and interest
relating to the foregoing. Provisions hereof notwithstanding,
taxes arising by reason of the closing shall thereafter be
timely returned and paid by all parties hereto.
5.H. Property Owned, Leased or Licensed.
5.H.(i) PART A OF EXHIBIT 5H(i) contains a list of all
real estate owned or leased by any Seller
(collectively, the "REAL ESTATE") and with respect
to that Real estate which is leased, the
termination date or notice requirement with
respect to termination, annual rental and renewal
or purchase options). Except as set forth on PART
A OF EXHIBIT 5H(i), none of the Sellers own any
fee interest in any real property used by Sellers
in connection with the Business and none has any
understandings, agreements or commitments to
purchase any. With
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respect to the Real Estate and except as listed on
EXHIBITS 5H(i)(a) through EXHIBIT 5H(i)(f), both
inclusive:
5.H.(i)(a) there are no interior or exterior
structural defects or other defects
in the buildings or improvements
thereon or in the plumbing, gas,
electrical, mechanical, heating,
ventilating, air-conditioning,
sprinkler or other systems
(collectively, the "SYSTEMS") thereof.
PART B OF EXHIBIT 5H(i), or an
environmental assessment (or an update
thereof) to be delivered to Purchaser
(with the update, the "ENVIRONMENTAL
REPORT"), sets forth the location of
all underground or below grade storage
tanks, pumps, piping, dispensers, or
any retention pits located on any part
thereof, along with a list of all
documents, notices, test reports or
other information relating thereto
including a description of substances
stored therein. In addition, at the
Closing, each of the Sellers will
deliver a Certificate (the
"ENVIRONMENTAL CERTIFICATE") which
details all known or suspected
environmental concerns with respect to
the Real Estate and the operation of
the Business not expressly detailed in
the Environmental Report. The
Environmental Certificate shall also
detail the sources of information
utilized by the Sellers therein. When
delivered to Purchaser, the Real
Estate will be free of all material
environmental risks and hazards (other
than those arising out of the
operation of the Business in the
ordinary course); \ 5.H.(i)(b) there
are no unrecorded leases,
Encumbrances, restrictions or other
matters materially affecting title or
the current use thereof; no Person has
the right to impose or claim any
interest whatsoever thereon; and,
there are no covenants, conditions,
restrictions or other title exceptions
applicable thereto which are presently
violated or which adversely affect the
marketability thereof and there are no
defects therein or thereon;
5.H.(i)(c) to the Sellers' knowledge, it is not
subject to or threatened with any
requests, applications or proceedings
to condemn, rezone or demolish all or
any portion thereof. Sellers have
obtained all permits and certificates
necessary for the use and occupancy
thereof and the improvements thereon
and such use and occupancy is and has
been in full compliance with all
Federal, state and local laws, rules
and regulations. To the knowledge of
the Sellers: (i) all water, sewer,
gas, electric, telephone, drainage and
other utility equipment, air
conditioning, heating, ventilation and
all other facilities and services
(collectively, the "SERVICES")
required by law or necessary for the
operation of the Real Estate as it is
now being operated are installed and
connected pursuant to valid permits,
are adequate to service the Real
Estate and the Business, and are in
good operating condition and repair,
and (ii) to Sellers' knowledge, no
material fact or condition exists
which would result in the
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termination or impairment in the
furnishing of any Service or System.
All reports related to the Real
Estate, including those related to the
Systems and Services, which have been
prepared by any Person and delivered
to any of the Sellers since 1994 and
which are in Sellers' possession, have
been delivered to Purchaser;
5.H.(i)(d) none of the Sellers has received
notice of and has no awareness of any
currently due, pending or threatened
general or special assessments, taxes,
litigation or governmental proceedings
against or affecting or which may
affect the Real Estate. No Seller pays
any taxes or assessments with respect
to the Real Estate, except as set
forth in PART C OF EXHIBIT 5H(i). PART
C OF EXHIBIT 5H(iii) also details the
water charges of Seller on a monthly
and yearly basis, and lists if any
increases are pending or contemplated;
5.H.(i)(e) it consists of one contiguous parcel,
abuts on and has direct vehicular
access to a dedicated thoroughfare;
and it is not located in an area
designated as being subject to flood
hazards or risks;
5.H.(i)(f) with respect to the leases covering
the Real Estate, such leases are in
full force and effect, are valid and
binding obligations of the parties
thereto, have not been amended and are
enforceable against its parties in
accordance with the terms thereof.
There are no defaults (alleged or
actual) by either party to such leases
and no event has occurred which with
due notice or lapse of time or both
would constitute a default. Sellers
have no obligation to pay brokerage
commissions or other compensation in
connection with such leases.
5.H.(ii) PART A OF EXHIBIT 5H(ii) contains a list of each
item of machinery, equipment, tooling, office
furniture, automobiles, trucks and other fixed
assets owned or leased by any Seller
(collectively, the "FIXED ASSETS"), and all
general locations thereof. PART B OF EXHIBIT
5H(II) contains a list and brief description of
each lease or other agreement under which any
Seller pays in excess of $5,000.00 annually to
lease, license, hold or operate any Fixed Asset.
Copies of all leases relating to any Fixed Asset
have been delivered to Purchaser. The Fixed Assets
will, individually or in the aggregate, be fit, or
reasonably repairable, for such assets' intended
use as of the Closing Date.
5.H.(iii) To the extent pertinent to the Business and the
Purchased Assets, PART A OF EXHIBIT 5H(iii)
contains a list of all unexpired non-governmental
licenses, franchises, distribution rights and the
like held by each Seller (including, as to each,
the names of the parties thereto, a description of
the subject matter of the license, etc., the
termination date or notice requirement with
respect to termination, the basis of royalties
calculation and renewal options, if applicable)
and all unexpired trademarks, trade names
(including each Seller's name and trade names),
service marks, copyrights, know-how, software,
written, magnetic and storage media, inventions,
designs, recipes, models,
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processes, patents or any other proprietary rights
and applications for any of the foregoing owned by
or registered in the name of or used by any Seller
(collectively, the "INTANGIBLES") and those
Intangibles expired within the last two (2) years.
Each Seller has a valid fee or licensee interest
in, all Intangibles held by such Seller, and,
except as set forth on PART B OF EXHIBIT 5H(III),
pays no royalty with respect to any of them, has
the exclusive right to bring actions for the
infringement thereof and has not granted any
rights of any nature in any of the Intangibles to
any Person. No product made or sold by any Seller
or for any Seller's benefit violates any license,
franchise or distribution agreement or infringes
any trademark, trade name, service mark,
copyright, know-how or patent of another Person.
Except as set forth on PART C OF EXHIBIT 5H(iii),
all Intangibles described in this paragraph
5H(iii) are assignable to Purchaser without the
consent of any Person.
5.I. Insurance. Each Seller has maintained and presently
maintains in effect insurance covering the Purchased Assets
and the Business from reasonably foreseeable losses and any
liabilities or risks relating thereto and such insurance
coverage shall be maintained by each Seller through the
Closing Date. EXHIBIT 5I hereto sets forth a complete and
accurate schedule (including the type of policy, the policy
number, the limits of coverage, the carrier, the insurance
agent or broker and the expiration date) of all insurance
policies, letters of credit or performance bonds held or
issued by or on behalf of each Seller and now in force and
those contemplated (including, without limitation,
comprehensive general liability, personal liability,
comprehensive general casualty and extended coverage,
automobile, machinery, fire and lightning, title, endowment,
life, workers' compensation and fidelity bond coverage)
(collectively, the "INSURANCE POLICIES") and insurance agents
and/or brokers providing such insurance coverage. Except as
disclosed on EXHIBIT 5I, such coverage fully complies with
all contractual requirements of the Business, and no Seller
has forfeited or waived any claim under any Insurance
Policies and no Seller has failed to comply in all material
respects with the terms and conditions thereof. Unless
otherwise set forth on EXHIBIT 5I, the products liability,
personal injury and property damage insurance maintained has
been on an "OCCURRENCE" basis during the five-year period
prior to the Closing Date. EXHIBIT 5K sets forth all
significant property damage or personal injury claims
asserted against any Seller during the past three years, or
otherwise still pending. All of such claims have been and are
being defended by insurance carriers or indemnitors without
reservation and are or will be completely covered by the
Insurance Policies. Except as listed on EXHIBIT 5I, none of
the Sellers has received notification, either directly or
indirectly, from any insurance carrier, denying or disputing
any claim made by any Seller, denying or disputing any
coverage for any such claim, denying or disputing the amount
of any claim, or regarding the possible termination,
cancellation or amendment of, or premium increase with
respect to, any Insurance Policies during the term currently
in force; and no Seller has any pending or anticipated claim
against any of the insurance carriers under any of such
policies, and there has been no, to the knowledge of the
Sellers, actual or alleged occurrence of any kind which may
give rise to any such claim.
5.J. Agreements, Etc. EXHIBIT 5J contains a list of all written,
and brief description of all legally enforceable oral
contracts, agreements, leases, understandings, commitments,
licenses, letters of credit, instruments and obligations, the
open purchase and sales orders
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journals as of the beginning of business on August 31, 1997
(which journals shall be updated as of the Closing Date), and
other instruments and obligations not listed on another
Exhibit or schedule hereto (unless excluded therefrom due to
the dollar amount involved) materially affecting the Business
in any manner whatsoever (collectively, the "CONTRACTS"). With
respect to the Contracts, except as otherwise set forth on
such EXHIBIT 5J: (i) all are in full force and effect, have
not been modified or amended, and constitute legal, valid and
binding obligations of the respective parties thereto; (ii)
each Seller has, in all material respects, performed all of
the obligations required to be performed by it to date and is
not in default or, to the knowledge of the Sellers, alleged,
to be in default in any respect thereunder, no party has been
released from any material obligation thereto and there exists
no event, condition or occurrence which, with or without
notice, lapse of time or the occurrence of any other event,
would constitute a default thereunder by any Seller or, to the
Sellers' knowledge, would constitute a default on the part of
any other party thereto; (iii) the continuation, validity and
effectiveness under the current terms thereof (including the
current rentals under any leases or licenses) will in no way
be affected by the transactions contemplated hereby, or, if
any would be affected without a consent or waiver, the Sellers
shall cause an appropriate consent or waiver respecting such
transfer to be delivered to Purchaser prior to the Closing
Date at no cost to Purchaser or other adverse consequences to
any Seller or Purchaser; and (iv) none require the payment or
performance of material considerations by any Seller on or
after the Closing Date without the receipt of consideration of
commensurate value, within the meaning of applicable
fraudulent conveyance laws or decisions. The Sellers have
furnished to Purchaser complete copies of all written
Contracts and complete written summaries of all oral Contracts
described on any Exhibit hereto. No Seller is restricted by
any agreement to which it is a party from carrying on the
Business anywhere in the world. The Contracts confer on
Sellers all rights necessary to enable them to conduct the
Business as now being conducted (as well as any expansion
thereof now contemplated) and none imposes upon any Seller any
unduly or extraordinary burdensome obligation.
5.K. Litigation and Claims, Etc. Except as set forth on EXHIBIT
5K, there are no personal injury, product liability or other
actions, suits, claims, investigations or legal or
administrative or arbitration proceedings of any nature
pending or, to the knowledge of the Sellers, threatened,
against or involving any of the Sellers, the Purchased
Assets, the Intangibles, the Business or products, whether at
law or in equity, or before or by any foreign, federal,
state, municipal or other governmental or quasi-governmental
instrumentality. Attached to EXHIBIT 5K are (i) all current
service bulletins or similar notices to customers, vendors or
the public at-large and other Persons which discusses or
notifies such Persons about existing problems with any
Sellers' products, and (ii) all current notes from technical
or engineering meetings (or the like) which relate to
problems or potential problems with respect to such products.
There is no basis for any action, suit, claim, investigation
or proceeding, and except as set forth on EXHIBIT 5K, none of
the foregoing has been pending during the last three years.
There are no outstanding orders, decrees or stipulations
issued by any foreign, local, state or federal judicial or
governmental or quasi-governmental authority to which any of
the Sellers is or was a party or by which any is or was
bound. EXHIBIT 5K also details all "RECALLS" or similar
measures or public notices which occurred on or after January
1, 1995 with respect to the Business, Sellers' products, and
Sellers' system for handling claims,
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whether under warranties or otherwise, and also lists all such
claims made in the last three years.
5.L. Compliance; Governmental Authorizations; OSHA.
5.L.(i) Each Seller is in compliance, in all material
respects, with all federal, state and local laws,
ordinances, regulations, permits, licenses,
decrees, judgments and orders applicable to the
Business, and has all foreign and federal, state
and local governmental licenses and permits
necessary for the conduct of the Business as
presently conducted or contemplated and sold to
Purchaser in accordance herewith; such licenses
and permits are legally valid and in full force
and effect; no violations are or have been
recorded in respect of any thereof; and no
proceeding is pending or, to the knowledge of the
Sellers, threatened, to revoke or limit any
thereof. EXHIBIT 5L contains a list and
description (including subject matter and
termination information) of: (a) all such
governmental licenses and permits (none of which
will be adversely affected by the transactions
contemplated hereby, unless otherwise indicated on
said Exhibit); and, (b) all consents, orders,
decrees and other compliance agreements under
which any Seller is operating or bound, copies of
all of which have been furnished to Purchaser.
5.L.(ii) The Sellers have furnished to Purchaser copies of
all written reports in their control or possession
of inspections relating to the Business and
properties from January 1, 1996 through the date
hereof under the Occupational Safety and Health
Administration Act, as amended, or comparable
state legislation and all other applicable foreign
and United States federal, state and local health
and safety laws and regulations or any other law,
rule or regulation to which Sellers or the
Business is subject. To the knowledge of the
Sellers, there have been no other similar
inspections. The deficiencies, if any, noted on
such reports or any deficiencies noted by
inspection through the Closing Date have been
corrected, or will be corrected by the Closing. To
the knowledge of the Sellers, there is no other
safety, health, environmental or other material
problem or concern relating to the Business.
5.M. Inventories. The inventories of Sellers included on the
Historical Financials and included on the Closing Balance
Sheet are and will be valued with respect to each category of
inventory at cost. Such inventories are all usable in the
ordinary and regular course of the Business, and are fit and
sufficient for the purpose for which they were purchased or
manufactured. Excess and obsolete items are included as
Purchased Assets, but no representations or warranties are
made by Sellers with respect thereto. The inventories which
were in transit on the date hereof, and the inventories which
are in transit on the Closing Date, do not and will not
include any items which are damaged, spoiled or below standard
quality (except items for which Sellers will receive credit or
replacement from the manufacturer or shipper thereof). Sellers
have exercised, and through the Closing Date will exercise,
their best efforts to have the proper amount of inventories to
conduct the Business consistent with past practices. EXHIBIT
5M lists the general locations of all inventories of Sellers.
The inventories of each do not have any allocation of overhead
except as required for income tax purposes or as specifically
disclosed on EXHIBIT 5M.
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Except as specifically disclosed on EXHIBIT 5M, the inventory
consists of items of quality and quantity usable in the normal
course of the Business. The Sellers will provide to Purchaser
a list of all inventory (the "INVENTORY LIST") on hand as of
the end of the monthly accounting period ending closest to the
Closing Date.
5.N. Employee Matters. Each Seller has generally enjoyed a good
employer-employee relationship with its employees. Each Seller
has included (in accordance with its accounting method) on the
Historical Financials, in accordance with historical
practices, and if applicable for its accounting method, will
accrue adequate reserves on the Closing Balance Sheet, all
wages, salaries, contractual bonuses, vacation pay and other
direct and indirect compensation earned by, or accrued for the
benefit of, all employees (whether or not vested or payable by
such date). EXHIBIT 5N (cash basis) or the Closing Balance
Sheet will include accruals for year end bonuses, pension and
profit sharing contributions, and any other adjustments which
might normally be made only at year end. Upon termination of
the employment of any employee of any Seller, Purchaser will
not incur any liability for any severance or termination pay,
pension or profit-sharing benefit or other similar payment
under or pursuant to Sellers' practices or policies in effect
on or prior to the Closing Date. Except as set forth on
EXHIBIT 5K, there are no controversies pending or, to the
knowledge of the Sellers, threatened by any of Sellers'
employees, former employees, job applicants or any
association, group or other Person or Persons regarding any of
the Sellers' employment practices or policies.
No Seller is a party to or bound by any employment or
consulting agreement which will continue after the Closing
Date at the expense of Purchaser or any collective bargaining
agreement or any other agreement with a labor union. There is
not pending or, to the knowledge of the Sellers, threatened
any labor dispute, strike or work stoppage (whether by their
own employees or another Person's employees) which may affect
the Business or which may interfere with its continued
operation. Each Seller has complied with all laws, rules and
regulations in connection with all employment matters,
including without limitation, hiring and firing of employees,
wage matters, collective bargaining matters, and matters
relating to the National Labor Relations Act and the Workers
Adjustment and Retraining Notification Act, and there are no
activities or proceedings of any labor union to organize any
employees of any Seller. During the twelve-month period
preceding the date hereof, there have not been any significant
labor troubles involving employees of Sellers and there are no
significant threats of work stoppages by employees of Sellers.
EXHIBIT 5N contains a list of all directors, officers,
managers and employees rendering any service to any Seller
who, during the 1997 calendar year, are expected to receive
remuneration in excess of $30,000, together with the current
job title and aggregate remuneration rate (bonus and salary)
for each such person, as well as the total remuneration paid
to date and expected amount of remuneration in 1997. To the
knowledge of the Sellers, no such Person has any plans to
terminate employment with Sellers, and no such Person has any
plans to refuse an offer of employment from Purchaser if such
offer is made.
5.O. Employee Benefit Plans. Other than a plan conforming with
Internal Revenue Code ss.401(k), no Seller now maintains,
nor has any Seller ever maintained at any time in the
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past, any "employee pension benefit plan" or "employee welfare
benefit plan," as such terms are defined in Sections 3(1) and
3(2) of the Employee Retirement Security Act of 1974, as
amended which will adversely affect Purchaser on or after the
Closing Date, and other provisions hereof to the contrary
notwithstanding, each Seller will hold harmless and indemnify
Purchaser in these premises. Purchaser will not assume,
succeed to or continue Sellers' ss.401(k) plan.
5.P. Transactions with Related Parties. Except for (i) salaries
at the per year rate of $140,000 to Thomas Glenn Potter,
$27,300 to Donnis Potter and $32,600 to Dena Potter (which
salaries were paid in the ordinary course of business), (ii)
amounts paid from one Seller to another Seller, and (iii)
distributions and/or dividends paid to any of the
shareholders or partners of any Seller based on the ownership
of such entity, EXHIBIT 5P lists all amounts directly or
indirectly paid (or deemed for accounting purposes to have
been paid) or to be paid by any of the Sellers to, or
received by any of the Sellers from, any one Person not a
party hereto which is controlled by, who individually
controls, or who/which is under common control with, directly
or indirectly, any of the Sellers during the current and the
last fiscal year for products or services (including any
charge for management, interest, capital employed,
administrative, purchasing, financial or other services)
related in any way to the Business. For purposes of this
Section, the term "Sellers" shall include any and all of the
Sellers' Affiliates."
5.Q. Accounts and Notes Receivable. EXHIBIT 5Q contains an aged
list of unpaid accounts and notes receivable (the
"RECEIVABLES") owing to each Seller as of a date not more than
four (4) business days prior to the date hereof, with the
address of Sellers' trade debtors. Purchaser shall be
furnished with an updated schedule of Receivables and any
other information relating thereto as Purchaser shall
reasonably request on reasonable advance notice. All of the
Receivables reflected on the Historical Financials and to be
reflected on updated Receivables Schedules and the Closing
Balance Sheet constituted and will constitute only valid
claims against third parties not affiliated with any of the
Sellers. The Business has no trade debtors of any Seller with
principal places of business outside of the continental United
States. The Receivables arose or will arise from bona fide
transactions in the ordinary and regular course of Business
and all (subject to a reasonable reserve for bad debt) are due
and collectible within thirty (30) days after they arose or
will arise, and are not subject to any known defenses,
set-offs or counterclaims. The Historical Financials do, and
the Closing Balance Sheet will, include reserves for bad debt
reasonably based on past customer performance. Except as
listed on EXHIBIT 5Q, no Seller sells, and none contemplates
selling, products directly to the United States of America or
any branch, agency or subdivision thereof.
EXHIBIT 5Q also highlights those customers of Sellers
whose accounts have been more than thirty (30) days past due
repeatedly over the past six (6) months or which Sellers
believe may be uncollectible.
5.R. Customers and Suppliers. EXHIBIT 5R is a list of the ten (10)
largest customers and suppliers (measured by U.S. dollar
volume in each case) of each Seller during the 1996 and 1997
(to date) fiscal years and the last twelve (12) months
showing, with respect to each, the name, address and dollar
volume involved. No Seller is required to provide any bonding,
guaranty or other financial security arrangements in
connection with any
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transactions with any of its customers or suppliers. The
Sellers have no knowledge or reason to believe that as a
result of the transactions contemplated hereby or otherwise,
any customer or supplier listed on EXHIBIT 5R intends to cease
or substantially reduce, the purchase or sale, respectively,
of goods or services from or to Purchaser on terms and
conditions similar to those imposed on purchases and sales
from and to Sellers prior to the date hereof. The Sellers do
not know of any claims or disputes pending, contemplated or
threatened with respect to any of the parties referred to in
EXHIBIT 5R, and none know of any fact or condition which would
cause a reasonable person to be concerned about the financial
viability of any of such parties, except as listed on EXHIBIT
5R.
5.S. Miscellaneous Assets. The Purchased Assets do not and will not
include (i) any contracts for future services or prepaid items
or deferred charges, the substantial value or benefit of which
will not be usable by Purchaser after the Closing Date, and
(ii) other than the Intangibles, any goodwill, organization
expense or other intangible asset.
5.T. Bank Accounts; Officers; Directors; Credit Cards. EXHIBIT 5T
is a list of all bank accounts, safe deposit and post office
boxes and the like in the name of or controlled by any Seller
and details about the Persons having access thereto. EXHIBIT
5T also lists all officers, directors and managers of each
Seller and all credit or debit cards under which any Seller
has or may have current or future liability and the names of
the Persons holding such cards.
5.U. Business Generally. Except as listed on EXHIBIT 5U, since
January 1, 1997, to the knowledge of the Sellers, other than
the economy in general and items which would affect the entire
industry in which Sellers operate, there have been no events,
transactions or information affecting or relating to any
Seller or the Business which could be reasonably expected to
have a material and adverse effect on the Business.
5.V. Reports and Studies. EXHIBIT 5V lists all significant and
material reports and studies relating to the Business or the
sale thereof in the possession or control of any of the
Sellers not previously furnished to Purchaser prepared for the
officers, directors, management, stockholders and agents of
the Sellers since January 1, 1996 by investment bankers,
investment advisors, accountants, engineers, environmental
consultants, management consultants or any other Persons.
Items listed on EXHIBIT 5V will be delivered to Purchaser
concurrently with each applicable Seller's signature hereto.
5.W. Environmental Matters. Except as listed on EXHIBIT 5W:
5.W.(i) No Seller has transported, stored, treated or
disposed, and has not allowed or arranged for any
other Person to transport, store, treat or
dispose, waste to or at: (a) any location other
than a site lawfully permitted to receive such
waste for such purposes or (b) any location
designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"),
the Resource Conservation and Recovery Act, as
amended ("RCRA"), or any similar federal, state or
local statute; nor has it performed, arranged for
or allowed by any method or procedure such
transportation or disposal in contravention of any
laws or regulations or in any other manner which
may result in liability for
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contamination of the environment. No Seller has
disposed of or allowed or arranged for any other
Person to dispose, of waste upon property owned,
leased or used by any Seller;
5.W.(ii) (a) No generation, use, handling, storage,
treatment, Release (as defined below), discharge,
spillage or disposal of any Hazardous Waste,
Hazardous Substance or Hazardous Chemical (as
defined below) has occurred or is occurring at any
site or Facility (as defined below) now owned,
leased or operated, directly or indirectly, by any
Seller, (b) no Hazardous Waste or waste containing
any Hazardous Substance or Hazardous Chemical
generated, used, handled, stored or treated by any
Seller has been stored, Released, discharged,
spilled or disposed of at any site or Facility now
owned, leased or operated, directly or indirectly,
by any Seller, and (c) no site or Facility owned,
leased or operated, directly or indirectly, by any
Seller is or has been the site of any industrial
facility, dump or landfill;
5.W.(iii) No soil or water in, upon, under or adjacent to
any site or Facility now owned, leased, or
operated, directly or indirectly, by any Seller
has been contaminated by any Hazardous Waste,
Hazardous Substance or Hazardous Chemical, and no
such site constitutes a nuisance of any kind or
nature;
5.W.(iv) None of the Sellers has received notification of
any past or present failure by any Seller to
comply with any laws, regulations, permits,
franchises, licenses or orders applicable to them
or the Business, which have not been remedied,
cured or complied with, or, as disclosed on
EXHIBIT 5W(iv), are in the process of being fully
remedied, cured or complied with. Without limiting
the generality of the foregoing, none of the
Sellers has received any notification (including
requests for information directed to any) from any
governmental or quasi-governmental agency or
Person asserting that any Seller is or may be a
"potentially responsible party" for a remedial
action at any Facility, pursuant to the provisions
of CERCLA, RCRA or any similar federal, state or
local statute assigning responsibility for the
costs of investigating or remediation of Releases
of contaminants into the environment;
5.W.(v) For purposes of this Agreement, the terms
"Hazardous Waste", "Hazardous Substance",
"Hazardous Chemical", "pollutant", "contaminant",
"Release" and "Facility" include any "hazardous
waste", "hazardous substance", "pollutant",
"contaminant" and "facility", respectively, within
the meaning of RCRA, CERCLA, the Emergency
Planning and Community Rights to Know Act of 1986,
as amended, or any other federal, state or local
law, rule or regulation adopted pursuant thereto
or otherwise relating to the disposal of Hazardous
Wastes or the cleanup of sites at which Hazardous
Substances have been released or the environment
in general; and
5.W.(vi) EXHIBIT 5W(VI) is a list of (i) locations
(identified by address, owner/operator, type of
facility, type of waste (including waste water),
and period of time the Facility was used) to which
any Seller has, during the past three (3) years,
transported, or caused to be transported, or
allowed or arranged for any other
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Person to transport, any type of waste material,
generated by any Seller or its customers, for
storage, treatment, burning, recycling or disposal
and (ii) storage, treatment, burning, recycling or
disposal activities which any Seller has
undertaken, during the past three (3) years, at
locations then or now owned or occupied by any
Seller together with such other relevant
information concerning such locations as would
enable Purchaser to determine whether any Seller
has any liability for such locations and the
activities thereon, including, but not limited to,
property address, nature of such Seller's interest
in the property, current owner of the property,
nature of the activity conducted at such location,
type and form of waste, estimated volume of waste
disposal on or in ground, and period of time the
activity was conducted.
5.X. Securities' Issues. Listed on EXHIBIT 5X, if any.
5.Y. Illegal Payments; Other Competitors. None of the Sellers knows
that, and none has any reason to believe that, any agent or
representative of any Seller has made any illegal payments,
gifts or the like in the procurement of any of the contracts
or purchase orders being assigned hereunder or under any
contract procured at any time after January 1, 1995.
5.Z. Brokers and Finders. None of the Sellers nor any officer,
director or employee thereof, has employed any broker or
finder or incurred any liability for any financial advisory
fees, brokerage fees, commissions or finders' fees, and no
broker or finder has acted directly or indirectly for any of
the Sellers in connection with this Agreement and the
transactions contemplated hereby. Obligations to attorneys and
accountants are expressly excluded herefrom.
5.AA. Material Disclosures. Unless otherwise provided herein, no
representation, warranty, covenant or agreement by the Sellers
contained herein, and no statement contained in any
certificate, Schedule, Exhibit, list or other writing
furnished to Purchaser in connection with the transactions
contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not
misleading; all Schedules and Exhibits hereto and all writings
furnished to Purchaser hereunder or in connection with the
transactions contemplated hereby are accurate, true and
complete; all representations, warranties, covenants and
agreements made by the Sellers herein and all other agreements
and instruments delivered in connection herewith or pursuant
hereto and facts and information contained in the Exhibits and
Schedules shall be true and correct as of the Closing Date
with the same effect as if they had been made at and as of the
Closing Date; there are no facts, conditions, or aspects
relating to the past or present operations of Sellers and the
Business which are not set forth herein which would have a
material adverse affect upon the operation of the Business
after the Closing Date or Purchaser's investment decision in
acquiring the Purchased Assets, and none of the Sellers know
of any fact, event or action which could result in a material
adverse change in the Business, prospects, financial condition
or results of operations of Seller and the Business or the
operation or ownership of the Purchased Assets by Purchaser
following the Closing; the records of Sellers relating to the
Business are accurate and complete in all material respects
and there are no matters as to which appropriate entries have
not been made in such records.
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6. PURCHASER'S REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
Purchaser represents and warrants to, and agrees and covenants with,
the Sellers, now and as of the Closing Date, as follows:
6.A. Organization, Standing and Power. Purchaser is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware. Purchaser has all requisite
power and authority to own, lease and operate the Purchased
Assets and to carry on the Business after the transactions
contemplated hereby. Purchaser has the full power and
authority to enter into this Agreement and perform all acts
necessary or appropriate to consummate all of the transactions
contemplated hereby.
6.B. Authorization. This Agreement and all writings relating
hereto to be executed and delivered by Purchaser have been
duly authorized by all necessary action and constitute the
valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms.
The individuals executing this Agreement and the other
documents executed in connection herewith on behalf of
Purchaser have been duly authorized to execute all of such
documents on behalf thereof. Neither the execution and
delivery hereof nor any writing relating hereto nor the
consummation by Purchaser of the transactions contemplated
hereby or thereby, nor compliance with any of the provisions
hereof or thereof, will: (i) conflict with or result in a
material breach of the Certificate of Incorporation, bylaws or
other formation or charter documents of Purchaser; (ii)
violate any statute, law, rule or regulation or any order,
writ, injunction or decree of any court or governmental
authority; (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination,
modification, cancellation or acceleration under), any
agreement or writing of any nature to which Purchaser is a
party or by which its assets may be bound or affected, or
result in the creation of any Encumbrance against or upon any
of its assets under any agreement or writing to which it is a
party or by which it or its assets may be bound or affected;
or (iv) impair or in any way limit any governmental or
official license, approval, permit or authorization of
Purchaser. Other than the consents required in Section 9
hereof, no consent or approval of or notification to any
Person is necessary or required in connection with the
execution and delivery by Purchaser hereof or any writing
relating hereto or the consummation of the transactions
contemplated hereby or thereby.
6.C. Brokers and Finders. Neither Purchaser nor any officer,
director or employee thereof, has employed any broker or
finder or incurred any liability for any financial advisory
fees (other than amounts due to Sterling Advisors, L.P., and
Elfman Venture Partners, Inc., which will be paid by Purchaser
or an affiliate of Purchaser), brokerage fees, commissions or
finders' fees, and except as stated above, no broker or finder
has acted directly or indirectly for Purchaser, in connection
with this Agreement and the transactions contemplated hereby.
6.D. Material Disclosures. No representation, warranty, covenant or
agreement by Purchaser contained herein, and no statement
contained in any certificate, Schedule, Exhibit, list or other
writing furnished to any of the Sellers in connection with the
transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or
therein not misleading. All Schedules and Exhibits hereto and
all copies of all writings furnished to
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the Sellers hereunder or in connection with the transactions
contemplated hereby are accurate, true and complete. All
representations, warranties, covenants and agreements made by
Purchaser herein and facts and information contained in the
Exhibits and Schedules shall be true and correct as of the
Closing Date with the same effect as if they had been made at
and as of the Closing Date. There are no facts, conditions, or
aspects relating to the past or present operations of
Purchaser which are not set forth herein which would have a
material adverse affect upon the operation of the Business.
7. CLOSING TRANSACTIONS. On the Closing Date (or on a date otherwise indicated
herein):
7.A. The Sellers shall deliver or cause to be delivered to Purchaser:
7.A.(i) Such warranty bills of sale, warranty deeds,
endorsements, assignments(including assignments
from all Sellers as to Intangibles and the like),
receipts and other instruments, in such form as
are reasonably satisfactory to Purchaser as shall
be sufficient to vest in Purchaser good and
marketable title to the Purchased Assets, free and
clear of all Encumbrances (except those
Encumbrances arising pursuant to Assumed
Liabilities).
7.A.(ii) Such keys, lock and safe combinations, and new
bank signature cards and other similar items as
Purchaser shall require to obtain full and
exclusive occupation and control of the Purchased
Assets, including the Business' post office
box(es).
7.A.(iii) The Certificates required by Sections 9A and 9B
hereof.
7.A.(iv) The legal opinion of counsel to the Sellers, in
substantially the form as SCHEDULE D attached
hereto, to be addressed to Purchaser and
Purchaser's lenders.
7.A.(v) Applicable certificates of good standing of
Sellers certified by the Secretary of State of
Oklahoma and all other states in which any Seller
is qualified to transact business as a foreign
entity, dated no more than thirty (30) days prior
to the Closing Date.
7.A.(vi) A copy of the Articles (or Certificate) of
Incorporation or other formation document of each
Seller, certified by the Secretary of State of
Oklahoma no more than thirty (30) days prior to
the Closing Date.
7.A.(vii) As between Sellers and Purchaser, exclusive
possession of the Real Estate.
7.A.(viii) Such estoppel letters, not inconsistent with the
terms hereof, as are reasonably requested by
Purchaser or Purchaser's lenders, including those
to be executed and delivered by the landlords of
any Real Estate, in form and substance acceptable
to Purchaser's and lenders' counsel.
7.A.(ix) Such bailment letters, not inconsistent with the
terms hereof, as are reasonably requested by
Purchaser, including those to be executed and
delivered by the
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owners of real estate or warehouses, if any, where
inventory is located, in form and substance
acceptable to Purchaser's counsel.
7.A.(x) All consents, waivers and releases necessary,
required or appropriate to consummate the
transactions contemplated hereby.
7.A.(xi) No later than February 28, 1998, Uniform
Commercial Code Tax, Lien and Judgement Search
results showing all Encumbrances, if any, on the
Purchased Assets, which Encumbrances (other than
those expressly assumed by Purchaser) will be
released or terminated at or prior to the Closing.
7.A.(xii) An Authorization of Inspection of records related
to the Business, in form and substance acceptable
to Purchaser.
7.A.(xiii) Certificates of Title, as appropriate, evidencing
Sellers' ownership of the Purchased Assets and the
Intangibles.
7.A.(xiv) Commitment and Survey:
7.A.(xiv)(a) As soon as possible after signature
and execution of this Agreement and
on or before February 28, 1998, with
respect to the Real Estate which is
owned by any Seller, a commitment
("COMMITMENT") for an ALTA Owners
Policy of Chicago Title Insurance
Company, Form B (or other applicable
policy) of a current date, that
indicates that Purchaser will be
issued a title policy, with extended
coverage over general exceptions,
subject only to those exceptions
expressly approved by Purchaser, full
survey coverage, no mechanic's lien
exceptions and with those special
endorsements which Purchaser, at
Purchaser's cost, deems necessary or
desirable, including, but not limited
to, non- imputation, location,
access, ALTA Zoning Endorsement 3.1
(including parking lots and loading
docks, if any), contiguity, and a
special endorsement that the bills
for real estate taxes do not include
taxes pertaining to any other real
estate. Such title insurance policy
shall be issued in the approximate
amount of the fair market value of
the Real Estate as agreed between the
parties. The title insurance cost,
except special endorsements
referenced in this section 7A(xiv)(a)
shall be paid one half by Sellers and
one half by Purchaser.
7.A.(xiv)(b) As soon as possible after signature
and execution of this Agreement and
on or before February 28, 1998, with
respect to the Real Estate which is
owned by any Seller, at Sellers'
cost, a current plat of survey of
such parcel, made by a surveyor
registered in the state in which the
parcel is located, certified in favor
of the parties to be insured,
including Purchaser, Purchaser's
lenders, and Chicago Title Insurance
Company, and made in accordance with
the American Land Title Association
Survey
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Standards (or other customary state
standards) so as to induce the title
insurance company to remove without
subsequent addition any exception as
to matters which would be disclosed
by an accurate and complete survey or
inspection of the Real Estate. Such
survey shall, in addition, accurately
locate all improvements, building
lines, parking areas, curb cuts, any
encroachments of the improvements on
the subject parcel over easements,
setback lines or onto adjoining
properties, or encroachments of the
improvements on adjoining properties
onto the subject parcel, recorded
easements, lines and rights of way,
all roadways, include a metes and
bounds description, shall state the
calculation of the square footage and
the acreage thereof, shall state
whether and what portion of the Real
Estate is located in an area
designated by an agency of the United
States as being subject to flood
hazards or risks, and shall locate
all storm sewers, sanitary sewers,
water lines and other utility lines
located upon the subject real estate
and the service lines thereof from
their respective main lines.
Specifications of this section
7A(xiv)(b) notwithstanding, any
survey accepted by Purchaser shall be
deemed to meet the requirements
hereof.
7.A.(xiv)(c) If the Commitment or plat of survey
discloses either unpermitted
exceptions or survey matters that
adversely affect the marketability of
such real estate, the Sellers shall
have ten (10) days from the date of
delivery thereof to have such
exceptions removed from the
Commitment or to correct such defects
or to have the title insurer commit
to insure against loss or damage that
may be occasioned by such exceptions.
If the Sellers fail to have the
exceptions removed, or in the
alternative, to obtain the Commitment
specified above as to such survey
defects within the specified time,
Purchaser may elect, upon notice to
Sellers within five (5) days after
the expiration of the foregoing
10-day period, to accept title as it
then is with the right to deduct from
the Purchase Price the value of liens
or encumbrances of a definite or
ascertainable amount. If Purchaser
does not so elect, this Agreement
shall become null and void without
further action of the parties.
7.A.(xv) The Closing Balance Sheet, and, as updated to the
end of the month ended closest to the Closing, the
Inventory List, an updated Payables' List and an
updated schedule of Receivables.
7.A.(xvi) Certified copies of resolutions duly and
unanimously adopted by applicable Sellers' Board of
Directors and Shareholders unanimously approving
the transactions contemplated by, and authorizing
the execution, delivery and performance by Sellers
of, this Agreement, and a certificate as to the
incumbency of officers of each executing any
instrument or other document delivered in
connection with such transactions; certified copy
of Certificate of Limited Partnership and current
Certificate of Fictitious Name of Leasing;
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certificate of general partner approving the
transactions and authorizing execution, delivery
and performance of this agreement by Leasing.
7.A.(xvii) Evidence that J. C. Potter Sausage Company
has changed, or will immediately change,
its name to a name completely dissimilar
to its present name.
7.A.(xviii) On or before February 28, 1998, a document
sufficient to allow Purchaser to use the
name "Potter" as a foreign corporation in
the State of Oklahoma.
7.A.(xix) Such documents and instruments as are necessary to
grant Purchaser, and no other Person, the
exclusive right to use the Intangibles.
7.A.(xx) Such documents and instruments as are necessary to
assign and transfer to Purchaser all transferable
licenses and permits issued to Sellers.
7.A.(xxi) On or before December 31, 1997, at Sellers' cost,
results of a Phase I environmental assessment
evidencing and indicating no material
environmental risk with respect to the Real
Estate. If such report recommends one or more
Phase II inspections and/or one or more Phase III
remediations are eventually required or necessary,
Sellers shall undertake, at their own cost and
outside of the Escrow, to make such remediation.
7.A.(xxii) Such other applicable documents as Purchaser or
Purchaser's lenders may reasonably request.
7.B. Purchaser shall deliver or cause to be delivered to the
Sellers:
7.B.(i) The Cash, the Prorations and the Interest, less
the Escrow Deposit. The Income Tax Adjustment
shall be paid on or before ten days after Closing.
7.B.(ii) The Escrow Deposit, wired to the bank or other
deposit account designated in the Escrow.
7.B.(iii) The Certificates required by Sections 10A and 10B
hereof.
7.B.(iv) Certified copies of resolutions duly adopted by
Purchaser's Board of Directors approving the
transactions contemplated by, and authorizing the
execution, delivery and performance by Purchaser
of, this Agreement, and a certificate as to the
incumbency of the authorized agents of Purchaser
executing any instrument or other document
delivered in connection with such transactions.
7.B.(v) Certificate of good standing of Purchaser
certified by the Secretary of State of the State
of Delaware, dated no more than thirty (30) days
prior to the Closing Date and evidence certified
by the Secretary of State of Oklahoma that
Purchaser is duly qualified to transact business
in the State of Oklahoma.
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7.B.(vi) A copy of the Certificate of Incorporation of
Purchaser, certified by the Secretary of State of
the State of Delaware, dated no more than thirty
(30) days prior to the Closing Date and a
Certificate of Domestication similarly certified
by the Secretary of State of Oklahoma.
7.B.(vii) The legal opinion of Tom D. Wippman, P.C., counsel
to Purchaser, in the form of SCHEDULE E, attached
hereto.
7.B.(viii) Such other applicable documents as the Sellers may
reasonably request.
7.C. Purchaser and each of Thomas Glenn Potter, Donnis Potter, Dena
Potter, Bill Oliver, Don Holloway, Ken Foster, Stan Burgess
and such other persons as Purchaser deems reasonably necessary
will execute and deliver a Noncompetition Agreement in the
forms attached hereto as SCHEDULE F.
7.D. Purchaser and each of the Sellers will execute and deliver an
Escrow Agreement ("Escrow") in the form attached hereto as
SCHEDULE G.
8. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
8.A. Access to Records and Properties of Sellers. From and after
the date hereof until the Closing Date, the Sellers shall
afford (i) to all representatives of Purchaser and Purchaser's
lenders, free and full access at all reasonable times to the
assets, properties, books and records of Sellers in order that
Purchaser may have full opportunity to make investigations of
the assets and affairs of Sellers, and to such additional data
and other information about the Business and properties of
Sellers as Purchaser shall reasonably request or that the
Sellers believe in good faith Purchaser would want to see in
making its investment decision hereunder, and (ii) to the
accountants of Purchaser or other Persons conducting financial
due diligence, free and full access at all times to work
papers and other records of Sellers' accountants relating to
the Business. Any such investigation made pursuant to clause
(i) or (ii) shall not affect or otherwise diminish any of the
representations, warranties, covenants or agreements of the
Sellers hereunder or Purchaser's rights to indemnification or
otherwise. All information to which Purchaser is given access
shall be kept strictly confidential except as required by law,
statute, rule or regulation and, should the transactions
contemplated hereby fail to be consummated, all such
information shall be returned to the Sellers, or destroyed.
8.B. Operation of Business of Sellers. From the date hereof to the
Closing Date, Sellers shall operate the businesses only in the
ordinary and regular course of business, consistent with past
practices, and will:
8.B.(i) consult with Purchaser on a regular basis with
respect to all decisions outside of the ordinary
and regular course of business involving or
otherwise which may have a material affect on the
Business;
8.B.(ii) maintain the Purchased Assets in good repair,
order and condition (irreparable condition,
reasonable wear and use excepted) and cause its
the Insurance
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Policies not to be canceled or terminated and
all coverages thereunder to stay in effect;
8.B.(iii) maintain and keep in full force and effect the
Intangibles, without amending or modifying the
same;
8.B.(iv) not, except as permitted under Section 5F: (a)
enter into any contract or agreement binding upon
any which is to be assumed by Purchaser hereunder
and which is not immediately terminable upon
thirty (30) days notice without cost; (b) extend
credit in the sale of the products or services
other than in accordance with prior credit
practices; (c) lease, buy or otherwise acquire any
real estate or any interest therein; (d) increase
any type of compensation payable or to become
payable to any of employees, directors, agents or
representatives; (e) make any change in their
capital structure; (f) do any other thing or act
described in Section 5F hereof; or (g) enter into
any agreement, commitment or understanding to do
any of the foregoing;
8.B.(v) not do anything outside of the ordinary course of
business which has the intent or effect of
changing the Purchase Price;
8.B.(vi) use their best efforts to preserve intact their
business organizations, and to keep available to
Purchaser the services of all present officers,
employees and agents and use their best efforts to
preserve for Purchaser the goodwill of suppliers,
customers and others having business relations
with Sellers; and
8.B.(vii) maintain their books, accounts and records in a
proper manner and in the usual, regular and
ordinary manner on a basis consistent with prior
years, and deliver all regularly prepared
financial statements to Purchaser.
8.C. Supplements. From time to time prior to the Closing Date,
the Sellers shall furnish to Purchaser supplemental
information with respect to any matters or events arising or
discovered subsequent to the date hereof which, if existing
or known on the date hereof, would have rendered any
statement, representation or warranty made by the Sellers or
any information contained in any Exhibit or Schedule hereto
then inaccurate, or incomplete or misleading; the furnishing
of such supplemental information shall not, however, affect
or otherwise diminish any of the representations, warranties,
covenants or agreements of the Sellers hereunder. To the
extent that a supplemental disclosure materially affects the
representations and warranties made prior to the time of the
supplemental disclosure, Purchaser shall have the right to
terminate this Agreement and all of its duties and
obligations hereunder.
Notwithstanding the foregoing, Purchaser acknowledges
that the open purchase orders journals and open sales orders
journals change in the ordinary and regular course of
business; therefore, the Sellers shall only be obligated to
provide Purchaser with an updated list of such journals as of
the end of the month preceding the Closing Date.
8.D. Risk of Loss. With respect to any material loss, damage,
condemnation or destruction of any of the Purchased Assets,
upon any such loss, damage, condemnation or destruction,
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Purchaser may, at its option, cancel and terminate this
Agreement or proceed as follows: if, in the event of any such
material loss, damage or destruction prior to the Closing,
Purchaser elects not to terminate, the parties shall promptly
attempt to agree on a mutually satisfactory reduction in the
total price to be paid for the Purchased Assets, and the
transaction shall be closed on the basis of such reduced
price. If the parties are unable to agree on such reduced
value within seven (7) days after notice to Purchaser of such
loss, damage, destruction or taking and Purchaser is not
willing to conclude the transaction by payment of the full
price, then any party hereto may terminate this Agreement. In
the event the parties agree to a mutually satisfactory
reduction of the price and the transaction is closed on that
basis, any insurance or condemnation proceeds shall be paid to
and retained by Sellers. In the event the parties do not agree
to a mutually satisfactory reduction of the price, and
Purchaser elects to conclude the transaction by payment of the
full price, any insurance or condemnation proceeds shall be
paid to and retained by Purchaser. Only for purposes of this
Section 8.D., a material loss, damage or destruction shall be
deemed to be a loss, damage or destruction which, if measured
in terms of dollars, exceeds $100,000.
8.E. Consents, Waivers and Releases. The Sellers shall, at their
own cost and expense, use all reasonable efforts to:
8.E.(i) Provide all necessary or appropriate consents and
comply with all provisions arguably relating to
the transactions contemplated hereby, if any, and
all other federal, state or local laws, rules and
regulations;
8.E.(ii) Procure consents to the transactions contemplated
hereby, waivers of rights from, or releases from:
8.E.(ii)(a) all parties holding security interests
on any of the Purchased Assets; and
8.E.(ii)(b) all other third parties deemed
reasonably necessary or appropriate
by Purchaser.
All of such approvals, waivers, consents and releases shall be
in form and substance satisfactory to Purchaser and
Purchaser's counsel, in their sole discretion.
8.F. Distributions to Owners from Sellers. After the Effective
Date and until the Closing Date or until this Agreement has
been terminated, no Seller shall make, directly or indirectly,
distributions or dividends of any kind or nature from any
Seller to any shareholder or partner other than the following
(collectively, the "ALLOWED DISTRIBUTIONS"): (i) salaries at
the annual rate of (a) $27,300 per year to Donnis Potter, (b)
$140,000 per year to Thomas Glenn Potter, and (c) $32,600 per
year to Dena Potter; and, (ii) an amount equal to the cash of
the Business on hand as of the Effective Date. If and to the
extent amounts in excess of Allowed Distributions are or have
been distributed, the Purchase Price shall be decreased, and
if and to the extent amounts less than the Allowed
Distributions are or have been distributed, the Purchase Price
shall be increased.
8.G. No Shop Provisions.
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8.G.(i) To induce Purchaser to enter into this Agreement,
each of the Sellers agrees that it shall not, from
and after the date hereof, and through the date
which is the later of (a) the Closing Date or (b)
three months after the date this Agreement is
terminated: (I) solicit, initiate or encourage
submission of proposals or offers from any person
relating to any acquisition or purchase of all or
(other than in the ordinary course of business) a
substantial portion of the Purchased Assets, or
any equity interest in any Seller, or any business
combination involving any Seller, or (II)
participate in any negotiations regarding, or
furnish to any other person any information with
respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The
Sellers shall promptly advise Purchaser if any of
the activities specified in clause (II) of the
preceding sentence occur, and shall promptly
inform Purchaser of all the terms and conditions
of any proposal or offer, and shall furnish to
Purchaser copies of any such written proposal or
offer and the contents of any communications by
any of the Sellers in response thereto.
8.G.(ii) Each of the Sellers further agrees that each will
not, pursuant to negotiations or discussions that
commence or continue between the date hereof and
the later to occur of (a) the Closing Date or (b)
three months after the date this Agreement is
terminated: (I) dispose of all or (other than in
the ordinary course of business) a substantial
portion of the Purchased Assets, (II) participate
in any business combination involving any of the
Sellers, (III) issue additional debt or equity
securities, or (IV) declare or pay any dividend or
make any other distribution with respect to its
capital stock or repurchase any capital stock
(except consistent with prior practices).
8.H. Closing. The parties shall otherwise use their best efforts
and good faith to consummate the transactions contemplated
hereby.
9. CONDITIONS OF OBLIGATIONS OF PURCHASER. The obligations of Purchaser to
perform this Agreement are subject to the satisfaction of the following
conditions on or prior to the Closing Date:
9.A. Representations and Warranties. The representations and
warranties of the Sellers in this Agreement or in any
Schedule, Exhibit, certificate or document delivered in
connection herewith shall be true and correct in all material
respects on the Closing Date, and Purchaser shall have
received a Certificate signed by the Sellers to that effect.
9.B. Performance of Obligations of the Sellers. The Sellers shall
have performed and observed all agreements, covenants and
obligations required to be performed by them on or prior to
the Closing Date, and Purchaser shall have received a
Certificate signed by the Sellers to that effect.
9.C. Consents, Waivers and Releases. The Sellers shall have
obtained, or to the reasonable satisfaction of Purchaser
obviated the need to obtain, all consents, waivers and
releases (including those described in Section 8E) from third
parties necessary (or, in the sole discretion of Purchaser,
desirable) to execute and deliver this Agreement and
consummate
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the transactions contemplated hereby. Also, Purchaser shall
have obtained the consent of Purchaser's Board of Directors to
execute and deliver this Agreement and consummate the
transactions contemplated hereby and provided written evidence
thereof to the Sellers.
9.D. No Litigation. No action, suit or other proceeding shall be
pending before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the
consummation of the transactions contemplated hereby, or
seeking to obtain substantial damages in respect thereof, or
involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any
governmental authority having appropriate jurisdiction.
9.E. Absence of Changes. Except as otherwise listed on EXHIBIT 5F
hereto, since August 31, 1997, the Business has been operated
only in the ordinary and regular course and there has not
been, and through the Closing Date there will not be, with
respect to any Seller, any thing or act described in Section
5F hereof, and there shall not have been, with respect to the
Business, any adverse changes.
9.F. Completion of Review by Purchaser. Purchaser and its agents
and representatives shall have completed their business,
accounting, financial, tax, environmental and legal review of
the Business and Purchased Assets, including the completion by
Arthur Andersen & Co. of audits specified by Purchaser, which
review and audits' results shall be satisfactory to Purchaser
and its agents and representatives, in their sole and absolute
discretion.
9.G. Financing and Additional Financial Matters. Purchaser shall
have procured financing in an amount and on terms and
conditions that are satisfactory to Purchaser, in its sole
discretion. In addition, as of the Closing Date, Purchaser
shall be reasonably satisfied that Sellers shall have paid all
liabilities in the ordinary course of business. In addition,
Purchaser shall be satisfied that except for the Allowed
Distributions, none of Sellers' earnings between the Effective
Date and the Closing Date shall have been distributed.
9.H. Closing Documents. The Sellers shall have delivered, or shall
have caused the delivery of, all appropriate documents and
instruments described in Section 7 hereof.
10. CONDITIONS OF OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to perform this Agreement are subject to the satisfaction, on
or prior to the Closing Date, of the following conditions:
10.A. Representations and Warranties. The representations and
warranties of Purchaser herein or in any Schedule, Exhibit,
certificate or document delivered in connection herewith shall
be true and correct in all material respects on the Closing
Date, and the Sellers shall have received a Certificate signed
by Purchaser to that effect.
10.B. Performance of Obligations of Purchaser. Purchaser shall have
performed and observed all agreements, covenants and
obligations required to be performed by it on or prior to the
Closing Date, and the Sellers shall have received a
Certificate signed by Purchaser to that effect.
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10.C. Consents, Waivers and Releases. Purchaser shall have obtained,
or to the reasonable satisfaction of the Sellers obviated the
need to obtain, all consents, waivers and releases from third
parties necessary for Purchaser to execute and deliver this
Agreement and consummate the transactions contemplated hereby.
10.D. No Litigation. No action, suit or other proceeding shall be
pending before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the
consummation of the transactions contemplated hereby, or
seeking to obtain damages in respect thereof, or involving a
claim that consummation thereof would result in the violation
of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
10.E. Closing Documents. Purchaser shall have delivered, or shall
have caused the delivery of, all appropriate documents and
instruments described in Section 7 hereof.
11. CLOSING NOT A WAIVER. Except as a party may expressly agree in
writing, the consummation of the transactions contemplated by this
Agreement shall not be deemed to constitute a waiver by any of the parties
of any of the covenants or conditions herein set forth (whether the same is
by its terms to be performed or satisfied before, as of, or after the
Closing Date) or in any way be deemed to limit or impair any party's rights
or remedies (by way of indemnification or otherwise) on account of any
misrepresentation, breach of warranty or other breach of or default under
this Agreement, regardless of whether such party is aware of the existence
of such misrepresentation, breach, or default.
12. POST-CLOSING COVENANTS.
12.A. Restrictive Covenants.
12.A.(i) Non-disclosure. Each of the Sellers acknowledges
that each has been and may be entrusted with trade
secrets, marketing, operating and strategic plans,
customer and supplier lists, proprietary
information and other confidential or specialized
data and/or information relative to the Business,
whether now existing or to be developed or created
after the Closing Date (collectively, "TRADE
SECRETS"). Each of the Sellers covenants and
agrees that each shall at all times after the date
hereof hold in strictest confidence any and all
Trade Secrets that may have come or may come into
its possession or within its knowledge concerning
or related to the products, services, processes,
businesses, suppliers, customers and clients of
Sellers and the Business and also that the Trade
Secrets constitute Purchased Assets being
transferred pursuant hereto. Each of the Sellers
covenants and agrees that neither it/he nor any
Person controlled by it/him will for any reason,
directly or indirectly, for itself/himself or for
the benefit of any other Person, use, copy,
divulge or otherwise disseminate or disclose any
of the Trade Secrets owned or used by, or licensed
to, any Seller or any of their affiliates or
otherwise relating to Sellers or the Business;
provided that each of the Sellers may disclose
Trade Secrets pursuant to an order by a court of
competent jurisdiction, provided, further, that
the Sellers shall give Purchaser prompt notice of
such order and any court pleading requesting such
disclosure, in order to provide Purchaser
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with an opportunity to prevent such disclosure or
procure an appropriate protective order.
12.A.(ii) Customers and Trade Secrets. Each of the Sellers
acknowledges that the Intangibles, customers and
customer accounts and the Trade Secrets of Sellers
will, after the Closing, at all times be the sole
and separate property of Purchaser, in which the
Sellers have no rights whatsoever, and all
activities of or work performed by any of the
Sellers for or on behalf of Purchaser in the
future will be performed solely for the benefit of
Purchaser, and the goodwill resulting from such
efforts by any of the Sellers is and at all times
will be the sole and separate property of
Purchaser, which goodwill is intended to be
protected, in part, by this Section.
12.A.(iii) Non-Solicitation; Non-Hire. Each of the Sellers
agrees that from the Closing Date and continuing
for a period (the "NON-COMPETE PERIOD") of three
(3) years from the Closing Date, neither he/it nor
any Person or enterprise controlled by him/it will
solicit or hire or contract with, for employment,
consulting or any other reason, any person who was
employed by Purchaser or any Seller or any of
Purchaser's affiliates as a manager, sales person,
officer, office head, buyer, accountant/controller
or other key employee at any time within one (1)
year prior to the time of the act of solicitation,
or hire. The Non-Compete Period shall be extended
with respect to a particular Selling Party for
that period of time during which such Selling
Party is in violation of the covenants contained
in this Section 12A. The provisions of this
section shall not apply to family relationships
between the Sellers and the shareholders or
partners of any Selling Party.
12.A.(iv) Non-Competition by Sellers. During the
Non-Compete Period, each of the Sellers agrees
that each of them nor any Person or enterprise
controlled by each will become a stockholder,
partner, stake holder, member, director, officer,
agent, employee or representative of or consultant
or lender to any other Person, engage as a sole
proprietor in any business, act as a consultant to
any of the foregoing or otherwise engage, directly
or indirectly, in any enterprise which competes
with the Business in any geographic area in which
the Sellers now carry on the Business or any other
geographic area in which the Business is carried
on as of the Closing Date, including the
geographic areas set forth in Exhibit; provided,
however, that the foregoing shall not prohibit the
ownership of less than two percent (2%) of the
outstanding shares of the stock of any corporation
engaged in any business, which shares are
regularly traded on a national securities exchange
or in any over-the-counter market. Each Selling
Party acknowledges that notwithstanding the
ability to compete outside of the geographic
territories described above, each is strictly
prohibited from using any of the Trade Secrets or
Intangibles or any other intangible asset used in
the Business or otherwise trade on the good will
of Sellers in any respect anywhere in the world,
it being acknowledged that such assets will be,
after the Closing, strictly assets and properties
of Purchaser. The Non-Compete Period shall be
extended with respect to a particular Selling
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Party for that period of time during which such
Selling Party is in violation of the covenants
contained in this Section 12A.
12.A.(v) Relief, Reformation; Severability. The parties
agree that the covenants contained in this Section
12A are separate and are reasonable in their scope
and duration and may be enforced by specific
performance or otherwise. The parties shall not
raise any issue of reasonableness as a defense in
any proceeding to enforce any of the covenants
herein. Notwithstanding the foregoing, in the
event that a covenant included in this Section 12A
shall be deemed by any court to be unreasonably
broad in any respect, then, to the extent
permitted by law, the court which makes such
finding shall modify such covenant for the purpose
of making such covenant reasonable in scope and
duration. The validity, legality or enforceability
of the remaining provisions of this Agreement
shall not be affected by any such modification.
12.A.(vi) Remedies. The parties acknowledge that any
breach of the restrictive covenants contained
in this Section 12A will cause irreparable harm
to the other, and that such harm will be
difficult if not impossible to ascertain.
Therefore, if any action or proceeding is
commenced by or on behalf of any party to enforce
the provisions hereof, such party shall be
entitled to equitable relief, including
injunction, against any actual or threatened
breach hereof, and any damages arising therefrom
including, without limitation, reasonable fees of
its attorneys and their support staff and all
other costs and expenses incurred by the other
party in good faith in connection therewith,
without bond and without liability should such
relief be denied, modified or vacated. Neither
the right to obtain such relief nor the obtaining
of such relief shall be exclusive of or preclude
any party from any other remedy. Each party
hereby waives the claim or defense to an action
for equitable relief by the other that the other
has an adequate remedy at law or has not been or
is not being irreparably injured by such breach.
12.B. Inventions. The Sellers shall, and hereby do, assign to
Purchaser their entire right, title and interest in all
discoveries, computer programs, recipes, processes and
improvements, patentable or otherwise, trade secrets and
ideas, writings and copyrightable material, which have been,
prior to the Closing Date, or may be conceived by any of the
Sellers or developed or acquired by them during the
Non-Compete Period, which may pertain directly or indirectly
to the Business. The Sellers agree to promptly and fully
disclose in writing all such developments. The Sellers
acknowledge that all Trade Secrets and other ideas relating to
the Business which were or will be conceived by any of them
before the date hereof or during the Non-Compete Period have
been, or shall promptly be, assigned by each to Purchaser.
Each of the Sellers will, upon Purchaser's request, execute,
acknowledge and deliver to Purchaser all instruments and do
all other acts which are necessary or desirable to enable
Purchaser to file and prosecute applications for, and to
acquire, maintain and enforce all letters, patents, trademark
registrations, or copyrights or enforce all rights in any
intangible or intellectual property in all countries.
12.C. Collection of Receivables. From and after the Closing,
Purchaser shall have the right and authority to collect, for
its own account, all of the Receivables and other items
intended
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<PAGE> 32
to be transferred to it pursuant hereto, and to endorse in any
Seller's name any checks or drafts received on account of any
such Receivables or such other items. Each Seller agrees that
it will transfer or deliver to Purchaser, promptly after the
receipt thereof, any cash or other property which any Seller
receives after the Closing in respect of any claims,
contracts, licenses, leases, commitments, sales orders,
purchase orders, Receivables of any character intended to be
transferred to Purchaser pursuant hereto.
12.D. Cooperation. From and after the Closing, each of the Sellers
will cooperate, for no additional cost, with Purchaser, in the
event Purchaser is required to: (i) institute and prosecute
proceedings which Purchaser may deem proper in order to
collect, assert or enforce any claim, right or title of any
kind in or to the Purchased Assets; (ii) subject to Section
13C hereof, defend or compromise any and all actions, suits or
proceedings in respect of any of the Purchased Assets, and do
all such acts and things in relation thereto as Purchaser
shall deem necessary or advisable; and (iii) take all action
which Purchaser may reasonably deem proper in order to provide
Purchaser with all of the benefits relating to the Purchased
Assets where any required consent of another party to the sale
or assignment thereof to Purchaser shall not have been
obtained.
12.E. Subrogation of Purchaser. Subject to the priority rights of
each Seller, in the event that Purchaser shall become liable
for or suffer any damage with respect to any matter which was
covered by insurance maintained by any Seller on or prior to
the Closing, Purchaser shall be and hereby is subrogated to
any rights of each Seller under such insurance coverage, and,
in addition, each Seller agrees to promptly remit to Purchaser
any insurance proceeds which it may receive on account of any
such liability or damage which exceed any liability of or
damage suffered by any Seller.
12.F. No Adverse Action. None of the Sellers nor any of their agents
or representatives shall take any action, directly or
indirectly, that would in any way adversely affect Purchaser's
efforts to obtain all proper permits and authorizations
necessary or appropriate to operate the Business in any manner
deemed reasonable by Purchaser.
12.G. Cooperation with Litigation, Claims, Etc. The Sellers will
fully cooperate with Purchaser after the Closing in connection
with any pending litigation, investigation or arbitration or
other legal proceeding which arises out of facts or
circumstances which pre-date the Closing.
13. INDEMNIFICATION. Payment of any financial obligation of Sellers which
may at any time become owing to Purchaser and/or Purchaser's
subsidiaries and affiliates, particularly including (but not limited
to) any obligation of Sellers arising from matters included in Section
5 and subsections thereof, shall be provided by indemnification
pursuant to this Section 13. Indemnification pursuant to this Section
13 shall, in the entirety, be absolutely limited to the escrow and the
escrow amount set forth in Section 13F and subject to the terms
thereof. In the event the escrow amount shall be exhausted by payment
of indemnified Losses, Sellers shall thereupon, thereby and thereafter
be fully and absolutely released and discharged of and from any and
all financial obligation and/or liability to Purchaser's Indemnified
Parties. Strictly subject to the foregoing:
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<PAGE> 33
13.A. Subject to the last sentence of this Section 13A, each of the
Sellers jointly and severally agrees to indemnify and hold
harmless Purchaser and Purchaser's subsidiaries and affiliates
(collectively, "PURCHASER'S INDEMNIFIED PARTIES") against any
and all Unassumed Liabilities, regardless of Purchaser's
knowledge, and all damages, losses, settlement payments,
obligations, liabilities, claims, actions, causes of action,
suits, proceedings, costs of investigations, demands,
assessments, judgments, Encumbrances and costs and expenses
(including, without limitation, attorneys' fees, interest,
penalties and all costs associated therewith incurred by such
party in good faith) (collectively, "LOSSES") suffered,
sustained, incurred or paid by any of Purchaser's Indemnified
Parties, to which such indemnified party may become subject
under any federal, state or local law, rule or regulation, at
common law or otherwise (including in settlement of any
litigation), insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue or
inaccurate statement or alleged untrue or inaccurate statement
or misrepresentation or breach of representation or warranty
made by any of the Sellers herein, including the information
included in any Exhibit hereto, or arise out of or are based
upon any of the Sellers' omission to state herein a material
fact required to be stated herein or necessary to make the
statements herein not misleading; (ii) the claims of any
broker or finder engaged by any of the Sellers; (iii) the
nonfulfillment or breach or alleged nonfulfillment or breach
of any agreement or covenant of any of the Sellers, including
but not limited to those covenants and agreements in Section
12 hereof; (iv) the assertion against any of Purchaser's
Indemnified Parties or any of their assets of any liability or
obligation of any of the Sellers (except an Assumed
Liability), including Litigation Matters (as defined below)
and those obligations or liabilities which are or should be
disclosed in EXHIBIT 5E(II) or those relating to the operation
of the Business and not accurately disclosed herein for any
reason whatsoever (regardless of whether such liability or
obligation is known or unknown, fixed or contingent, accrued,
absolute, matured or unmatured or otherwise), and regardless
of any compliance with any applicable bulk sales' laws; and
(v) any personal injury, death, property damage or other claim
(whether covered by warranties or otherwise) attributable to
services or products designed, manufactured, processed,
administrated, serviced or sold by any Seller, including all
items that are or should have been or should be listed on
EXHIBIT 5K (collectively, "LITIGATION MATTERS"); and will
reimburse each indemnified party for any legal or other cost
or expense incurred by such party in good faith in connection
with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in
addition to any liability which any of the Sellers may
otherwise have and to any remedy which Purchaser may otherwise
have. To the extent that any matter gives rise to
indemnification hereunder, such matter shall be deemed to have
been accrued on the books of Sellers as of the day before the
Effective Date, for the purposes of calculating the Purchase
Price. The Sellers agree and acknowledge that Purchaser's
Indemnified Parties shall be entitled to indemnification for
all matters of any nature, other than Assumed Liabilities (and
those liabilities for which adequate reserves are accrued as
of the Effective Date), including those matters of which the
Sellers do not have knowledge or notice at the time of
Closing; provided, however, that the lack of indemnification
as a remedy shall in no way be deemed to have such matter
included as an Assumed Liability. Purchaser's actual knowledge
will not be limited to the information contained in the
Exhibits hereto, but will include other information learned by
Purchaser in its due diligence. If, prior to the Closing Date,
Purchaser has knowledge and Sellers do not have knowledge of a
matter which would give rise to indemnity hereunder, Purchaser
shall not be entitled to seek or
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receive indemnification hereunder unless Purchaser informs
Sellers of such matter prior to Closing.
13.B. Subject to the last sentence of Section 13B, Purchaser will
indemnify and hold harmless each of the Sellers and each of
the Sellers' affiliates and subsidiaries (collectively,
"SELLERS' INDEMNIFIED PARTIES") against any and all Losses
suffered, sustained, incurred or paid by any of Sellers'
Indemnified Parties, to which such indemnified party may
become subject under any federal, state or local law, rule or
regulation, at common law or otherwise (including in
settlement of any litigation), insofar as such Losses (or
actions in respect thereof) arise out of, relate to or are
based upon (i) any untrue or inaccurate statement or alleged
untrue or inaccurate statement of any material fact or
misrepresentation or breach of representation or warranty made
by Purchaser herein, including the information included in any
Exhibit hereto, or arise out of or are based upon Purchaser's
omission to state herein a material fact required to be stated
herein or necessary to make the statements herein not
misleading; (ii) the claims of any broker or finder engaged by
Purchaser; (iii) the nonfulfillment or breach or alleged
nonfulfillment or breach of any agreement or covenant of
Purchaser; (iv) any Assumed Liability; (v) to the extent not
indemnified pursuant to Section 13A above, the assertion
against any Sellers' Indemnified Parties or any of their
assets of any liability or obligation of Purchaser, or
relating to Purchaser's operations or any of its assets,
whether absolute or contingent, matured or unmatured, known or
unknown; and (v) to the extent not indemnified pursuant to
Section 13A above, any personal injury, death or property
damage attributable to products manufactured and sold by
Purchaser; and will reimburse each indemnified party for any
legal or other expenses reasonably incurred by such party in
connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement
will be in addition to any liability which Purchaser may
otherwise have and to any remedy which the Sellers may
otherwise have. Notwithstanding anything herein to the
contrary, in any proceeding to enforce any of the provisions
herein, all of the Sellers shall be required to act jointly
through Representative, and not individually or singly.
Notwithstanding the foregoing, none of Seller's Indemnified
Parties shall be entitled to indemnification remedies
hereunder if, and only if, any of the Sellers has knowledge
(only as defined in section (i) of the second sentence of
Section 15J hereof) of such matter at the time of Closing.
13.C. Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section, notify
the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified
party except to the extent that the indemnifying party was
prejudiced by such failure to notify. In case any such action
in which any Person seeks only the recovery of money for which
indemnification is or may be provided hereunder, is brought
against any indemnified party, and such indemnified party
notifies any indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate in and,
to the extent that it may wish and at its cost and expense, to
assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however,
that (i) if (A) the indemnified party or parties reasonably
believe that an adverse determination of such action could be
detrimental to or injure the indemnified party's reputation or
future
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business prospects, or (B) the defendants in any such action
include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to
those available to the indemnifying party, or the indemnified
and indemnifying parties may have conflicting interests which
would make it inappropriate for the same counsel to represent
both of them, then the indemnified party or parties shall have
the right to select separate counsel as set forth below, at
the indemnified parties' cost (but subject to
indemnification), to assume such legal defense (in which case
the indemnified parties' counsel shall be the lead counsel in
such defense) and otherwise to participate in the defense of
such action on behalf of such indemnified party or parties,
and (ii) an indemnifying party shall be able to assume the
defense of an action only if (A) it can reasonably demonstrate
its financial soundness and wherewithal (which may include
bonding over a reasonable reserve) necessary for a lengthy
defense and possible judgement and (B) it enters into an
agreement with the indemnified party or parties (in form and
substance reasonably satisfactory to such party or parties)
pursuant to which the indemnifying party agrees to be fully
responsible for all Losses related to such action. Upon
receipt of notice from the indemnifying party to such
indemnified party of its election so to assume defense of such
action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party
shall have employed such counsel in connection with the
assumption of legal defense in accordance with the proviso to
the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the
expenses of more than one separate counsel representing all
indemnified parties not having different or additional
defenses or potential conflicting interests among themselves
who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all
liability arising out of such proceeding. Notwithstanding
anything contained herein to the contrary, an indemnified
party shall have no obligation to bring a third party action
or an action for indemnification or contribution
simultaneously or in connection with a third party action
which may give rise to rights of indemnification or
contribution or similar remedies.
13.D. All amounts that may become due from any of the Sellers to
Purchaser after the determination that such amount has become
payable pursuant to this Agreement, shall be paid by the
Sellers immediately upon demand by Purchaser, and if not so
paid within five (5) business days of such demand, such
amounts may be offset by Purchaser against any amounts then
owing to any of the Sellers under any document, instrument,
agreement or understanding, and if the amount to be offset is
greater than the amount which is then currently owing to any
of the Sellers, then (i) such amounts which are not then able
to be immediately offset or are not then immediately paid
shall bear interest at the rate of
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fifteen percent (15%) per annum, accruing from the date such
amount is demanded until paid or later offset, and (ii)
Purchaser may pursue all other remedies available to it in
order to collect such amount. The foregoing remedies shall not
be mutually exclusive.
13.E. All amounts that may become due from Purchaser to any of the
Sellers after the determination that such amount has become
payable pursuant to this Agreement, shall be paid by Purchaser
immediately upon demand by Representative, and if not so paid
within five (5) business days of such demand, such amounts may
be offset by the Sellers against any amounts then owing to
Purchaser under any document, instrument, agreement or
understanding, and if the amount to be offset is greater than
the amount which is then currently owing to Purchaser, then
(i) such amounts which are not then able to be immediately
offset or are not then immediately paid shall bear interest at
the rate of fifteen percent (15%) per annum, accruing from the
date such amount is demanded until paid or later offset, and
(ii) the Sellers may pursue all other remedies available to
them in order to collect such amount. The foregoing remedies
shall not be mutually exclusive.
13.F. Indemnification by the Sellers is limited to the total sum of
One Millions Dollars ($1,000,000) of the Purchase Price (with
interest earned thereon), irrespective of the number of Losses
subject to indemnification which may be claimed in accordance
herewith. As security for the Sellers' obligations, One
Million Dollars ($1,000,000) of the Purchase Price will be
deposited at the time of Closing with an escrow agent for a
term not exceeding three years from and after the Closing
Date, the same to be held, invested, managed and disbursed in
accordance with an escrow agreement conforming in form and
substance with SCHEDULE G.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
14.A. All representations, warranties, agreements and covenants made
by any party hereto in this Agreement shall survive the
Closing of the transactions hereunder.
15. MISCELLANEOUS.
15.A. Manner of Closing. At the Closing, all transactions shall be
conducted substantially concurrently and no transaction shall
be deemed to be completed until all are completed.
15.B. Access to Records. At the Closing, Purchaser shall receive
possession of and thereafter afford to the Representative and
her agents and successors in interest, the opportunity, upon
reasonable advance notice, to examine and make copies of the
books and records of Sellers having an effect on all periods
through the Closing Date, in connection with tax and financial
reporting matters and other bona fide business purposes, and
Purchaser shall use reasonable efforts to retain such books
and records for a period of six (6) years from the date of
such books and records.
15.C. Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the parties and
their respective executors, successors and assigns.
Notwithstanding the foregoing, the Sellers are prohibited from
assigning their respective obligations hereunder, by operation
of law or otherwise. The Sellers hereby consent to a
collateral assignment of Purchaser's rights hereunder to a
lender or lenders,
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understanding that such lender(s) shall have the ability to
enforce the rights of Purchaser granted herein.
15.D. Entire Agreement; Amendments. This Agreement, the Exhibits
and Schedules attached hereto, and the other writings referred
to herein or delivered in connection herewith contain the
entire understanding of the parties with respect to its
subject matter, and supersede all prior understandings and
agreements. This Agreement may be amended only by a written
instrument duly signed and executed by the parties. Any
reference herein to this Agreement shall be deemed to include
the Exhibits and Schedules attached hereto. If any provision
of this Agreement is determined to be illegal or
unenforceable, such provision will be deemed amended to the
extent necessary to conform to applicable law or, if it cannot
be so amended without materially altering the intention of the
parties, it will be deemed stricken and the remainder of the
Agreement will remain in full force and effect.
15.E. Headings. The section and subsection headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
15.F. Notices. All notices, claims, certificates, requests, demands
and other communications ("COMMUNICATIONS") hereunder shall be
in writing and shall be deemed to have been duly given when
personally delivered, mailed (by registered or certified mail,
postage prepaid) or sent by overnight courier service or
facsimile addressed as follows:
<TABLE>
<S> <C>
If to any of the Sellers,
in care of Representative, at: Ms. Donnis Potter
2021 West Locust
Durant, Oklahoma 74701
With a copy to: F. H. WRIGHT LAW OFFICE
Suite 450, Citizens Tower Building
2200 Classen Boulevard
Oklahoma City, Oklahoma 73106-5812
Attention: F. H. Wright, Esq.
Facsimile: (405)524-6633
If to Purchaser: c/o Sterling Capital, Ltd.
650 Dundee Road, Suite 370
Northbrook, IL 60062
Facsimile: (847)480-0199
With a copy to: Tom D. Wippman, P.C.
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
Facsimile: (847)480-0199
</TABLE>
or to such other address as the person to whom a communication
is to be given may have furnished to the others in writing in
accordance herewith. A communication given by any
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other means shall be deemed duly given on the earlier of when
actually received by the addressee or three (3) days after
sending such communication. Notice hereunder to Representative
shall be deemed to be notice to each of the Sellers.
15.G. Public Announcements. All public announcements relating to
this Agreement or the transactions contemplated hereby,
including announcements to employees, will be made only as may
be agreed upon jointly by the parties hereto, or as Purchaser
considers required or appropriate to comply with applicable
law. Any governmental, public or private inquiries or requests
for information shall be promptly referred to Purchaser.
15.H. Further Assurances. After the Closing Date, without further
consideration, the parties shall execute and deliver such
further instruments and documents as either party shall
reasonably request to consummate the transactions contemplated
hereby and to perfect Purchaser's title to the Purchased
Assets.
15.I. Waivers. Any party to this Agreement may, by written notice to
the other party hereto, or by written endorsement to or
limitation on any Exhibit or Schedule, waive any provision of
this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent, same or different
breach.
15.J. Materiality and Knowledge. The terms "MATERIAL" or
"MATERIALLY" or "MATERIALITY" shall mean either (i) the
existence of a fact or condition or facts or conditions which,
if a dollar amount is readily ascertainable with respect to
such, has a value, either individually or in the aggregate, of
more than $5,000.00, or (ii) the determination by a lender, in
such lender's sole and absolute discretion, that such fact or
condition is, or, if known to such lender would be, material
for purposes of its making a loan to Purchaser in order to
consummate the transactions hereunder or to avoid any
acceleration of such loan, or (iii) any fact or condition
which gives rise to any right of termination, cancellation,
acceleration or modification of any agreement or understanding
to which any of the Sellers is a party and such right has been
exercised. The term "KNOWLEDGE" shall mean (i) actual
knowledge or notice, (ii) that knowledge which a party should
know after having made all reasonable inquiries and (iii) that
an individual or individuals making a statement as to its, his
or her "KNOWLEDGE" has made all reasonable inquiries regarding
the facts and circumstances relating to such statement. For
purposes of this Agreement, the knowledge of any of the
Sellers shall be deemed to be the knowledge of all of the
Sellers (i.e., the knowledge of one of the Sellers shall be
imputed to all other Sellers), and the receipt of a notice by
any Selling Party shall be deemed to be receipt by all
Sellers. Purchaser has knowledge of all information, facts and
circumstances disclosed by Sellers or otherwise discovered by
Purchaser incident to, in conjunction with, or arising from
Purchaser's due diligence. The knowledge of any of the
officers, directors or employees of Purchaser shall be deemed
to be the knowledge of Purchaser (i.e., the knowledge of such
persons shall be imputed to Purchaser), and the receipt of a
notice by any of such persons shall be deemed to be receipt by
Purchaser. The knowledge of any of the officers, directors or
employees of Sellers shall be deemed to be the knowledge of
Sellers (i.e., the knowledge of such persons shall be imputed
to Sellers), and the receipt of a notice by any of such
persons shall be deemed to be receipt by Sellers.
38
<PAGE> 39
15.K. Counterparts. The Agreement may be executed in one or more
counterparts, but all such counterparts shall constitute one
and the same instrument.
15.L. Certificate. A "Certificate" shall mean a certificate signed
by the individual stating that (i) such individual who is
signing the certificate has made or has caused to be made such
investigations as are necessary in order to permit him to
verify the accuracy of the information set forth in such
certificate and (ii) to the individual's knowledge, after due
inquiry, such certificate does not misstate any material fact
and does not omit any fact necessary to make the certificate
not misleading.
15.M. Use of Certain Terms. The term "Seller(s)" shall also
include all predecessors thereof and businesses acquired by
or merged therewith, or businesses whose liabilities (some or
all) have been assumed by any of Sellers to the extent
necessary to consummate the Transactions in accordance with
this Agreement. The term "each of the Sellers", "none of the
Sellers" "any of the Sellers" or any other similar term or
references shall mean any or all thereof, whichever has the
broadest meaning given the particular context. The term
"Person" shall mean an individual, a partnership, a joint
venture, a joint stock company, a corporation, a trust, an
unincorporated organization, a limited liability company, any
other legal entity and a government, governmental body or
quasi-governmental body, or any department, agency or
political subdivision thereof.
15.N. Applicable Law. The terms and conditions of this Agreement
shall be governed by and construed in accordance with the laws
of the State of Oklahoma applicable to agreements between
Oklahoma residents entered into and to be performed entirely
within Oklahoma.
15.O. Consent to Jurisdiction. For those matters or disputes of any
nature arising out of, connected with, related or incidental
to this Agreement, the parties hereto hereby irrevocably
submit themselves to the exclusive jurisdiction of the courts
of the State of Oklahoma located in the City of Oklahoma City
and to the jurisdiction of the United States District Court
for the Western District of Oklahoma for the purpose of
bringing any action that may be brought in connection with the
provisions hereof. The parties hereto hereby individually
agree that they shall not assert any claim that they are not
subject to the exclusive jurisdiction of such courts, that the
venue is improper, that the forum is inconvenient or any
similar objection, claim or argument. Service of process on
any of the parties hereto with regard to any such action may
be made by mailing the process to such Persons by regular or
certified mail to the address of such Person set forth herein
or to any subsequent address to which notices shall be sent.
Any action by any of the Sellers which seeks to rescind the
transactions contemplated hereby shall be preceded by the
tendering of the entire gross Purchase Price to Purchaser.
15.P. Exceptions to Exclusive Jurisdiction. Notwithstanding the
provisions of Section 15O hereof, in the event that there is a
third party action which may give rise to rights of
indemnification or contribution from one party(ies) to
another, the parties hereto irrevocably submit themselves to
the jurisdiction of the court in which such third party action
is brought, and the party to be indemnified may, but shall not
be obligated to, bring a third party action or other
appropriate proceeding to enforce such rights of
indemnification or contribution. The foregoing is not intended
to confer any rights upon any other party other than the
parties hereto.
39
<PAGE> 40
15.Q. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, singular and
plural as the identity of that person referred to requires.
15.R. Several Obligations. The duties and obligations of each of the
Sellers are several, and the Purchaser and each of the Sellers
hereby acknowledge the same; however, the escrow is joint and
several as to the Sellers.
15.S. Effect of Disputes. Notwithstanding the fact that there may
from time to time be disputes among the parties concerning the
terms and conditions hereof, the parties agree not to under
any circumstances, disparage, criticize or denigrate the
talents, skills, products, prospects, abilities, integrity or
character of the other parties hereto, or such parties'
management, directors, employees, agents or representatives
(including those of Purchaser's affiliates). Each of the
Sellers further agrees that each will not, at any time after
the date hereof and without Purchaser's written consent,
contact any past, present or prospective customer, supplier,
employee or agent or representative of either Sellers or
Purchaser with the intent, purpose or effect of injuring the
reputation, business or business relationships of Purchaser.
The provisions of this Section shall survive the execution and
termination hereof, irrespective of the reason for such
termination.
15.T. Mutual Drafting. This Agreement is the joint product of
Purchaser and Sellers and their respective counsel, and each
provision hereof has been subject to the mutual consultation,
negotiation and agreement of such parties and counsel, and
shall not be construed for or against any party hereto.
15.U. Binding Effect. This Agreement shall be binding upon the
parties hereto when the Agreement has been signed by the
Purchaser and the Sellers and all schedules have been signed
by the Purchaser and the Sellers or their Representative.
40
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PURCHASER:
POTTER'S ACQUISITION CORP.
By /s/ MERRICK M. ELFMAN
-----------------------------
Merrick M. Elfman, Chairman
SELLERS:
J.C. POTTER SAUSAGE COMPANY
By /s/ DONNIS POTTER
-----------------------------
Donnis Potter, President
POTTER'S FARM, INC.
By /s/ DONNIS POTTER
-----------------------------
Donnis Potter, President
POTTER RENDERING CO.
By /s/ DONNIS POTTER
-----------------------------
Donnis Potter, President
POTTER LEASING COMPANY, LTD.
By /s/ THOMAS GLENN POTTER
-----------------------------
Thomas Glenn Potter, General Partner
SELLERS' REPRESENTATIVE:
/s/ DONNIS POTTER
- -----------------------------
Donnis Potter
41
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ATLANTIC BEVERAGE COMPANY, INC.
1. NAME
The name of this corporation is Atlantic Beverage Company,
Inc. (the "Corporation").
2. REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at
1013 Centre Road, Wilmington, Delaware 19805 in the County of New Castle. The
registered agent of the Corporation at such address shall be Corporation
Service Company.
3. PURPOSE AND POWERS
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 the State of Delaware (the "Delaware General Corporation
Law"). The Corporation shall have all power necessary or helpful to engage in
such acts and activities.
4. CAPITAL STOCK
4.1. AUTHORIZED SHARES
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 35,000,000, of which 5,000,000
shares shall be Preferred Stock, having a par value of $.01 per share
("Preferred Stock") and 30,000,000 shares shall be Common Stock having a par
value of $.01 per share ("Common Stock"). The Board of Directors is expressly
authorized to provide for the classification and reclassification of any
unissued shares of Preferred Stock or Common Stock and the unissued shares of
Preferred Stock or Common Stock and the issuance thereof in one or more classes
or series without the approval of the stockholders of the Corporation.
4.2. COMMON STOCK
4.2.1. RELATIVE RIGHTS
The Common Stock shall be subject to all of the rights,
privileges, preferences and priorities of the Preferred Stock as set forth in
the certificate of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative
rights as and be identical in all respects to all the other shares of Common
Stock.
<PAGE> 2
4.2.2. DIVIDENDS
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of shares of any class of stock having preference
over the Common Stock as to the payment of dividends, the full amount of
dividends and of sinking fund or retirment payments, if any, to which such
holders are respectively entitled in preference to the Common Stock, then
dividends may be paid on the Common Stock and on any class or series of stock
entitled to participate therewith as to dividends, out of any assets legally
available for the payment of dividends thereon, but only when and as declared
by the Board of Directors of the Corporation.
4.2.3. DISSOLUTION, LIQUIDATION, WINDING UP
In the event of any dissolution, liquidation, or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall become entitled to participate in the distribution of any assets of
the Corporation remaining after the Corporation shall have paid, or set aside
for payment, to the holders of any class of stock having preference over the
Common Stock in the event of dissolution, liquidation or winding up the full
preferential amounts (if any) to which they are entitled.
4.2.4. VOTING RIGHTS
Each holder of shares of Common Stock shall be entitled to
attend all special and annual meetings of the stockholders of the Corporation
and, share for share and without regard to class, together with the holders of
all other classes of stock entitled to attend such meetings and to vote (except
any class or series of stock having special voting rights), to cast one vote
for each outstanding share of Common Stock so held upon any matter or thing
(including, without limitation, the election of one or more directors) properly
considered an act upon by the stockholders.
4.3. PREFERRED STOCK
4.3.1. ESTABLISHMENT OF SERIES
The Board of Directors is expressly authorized, subject to
limitations prescribed by the Delaware General Corporation Law and the
provisions of this Certificate of Incorporation, to provide, by resolution and
by filing a certificate of designations pursuant to the Delaware General
Corporation Law, for the issuance of the shares of Preferred Stock in series,
to establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and other rights of the
shares of each such series and to fix the qualifications, limitations and
restrictions thereon. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination of the
following:
(i) the number of shares constituting that series
and the distinctive designation of that series;
-2-
<PAGE> 3
(ii) the dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(iii) whether that series shall have voting rights,
in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(iv) whether that series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provisions for adjustment of the
conversion rate in such events as the Board of Directors shall
determine;
(v) whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such
redemption, including the dates upon or after which they shall
be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions
and at different redemption dates;
(vi) whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and,
if so, the terms and amount of such sinking fund;
(vii) the rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and
(viii) any other relative powers, preferences, and
rights of that series, and qualifications, limitations or
restrictions on that series.
4.3.2. ADJUSTMENTS IN NUMBER OF SHARES AUTHORIZED
Except as provided to the contrary in the provisions
establishing a series of Preferred Stock, the number of shares of any such
series may be increased (but not above the total number of authorized shares of
Preferred Stock) or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the directors.
5. INCORPORATOR
The name and mailing address of the incorporator (the
"Incorporator") is Ann E. Flowers, Hogan & Hartson, 555 Thirteenth Street, NW,
Washington, DC 20004.
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<PAGE> 4
6. BOARD OF DIRECTORS
6.1. NUMBER AND ELECTION
The number of directors of the corporation shall be such
number as from time to time shall be fixed by, or in the manner provided in,
the Bylaws of the corporation. The directors shall be divided into three
classes, as nearly equal in number as possible, to be designated as Class I,
Class II and Class III. The initial term of office of the Class I directors
shall expire at the annual meeting of stockholders to be held in 1994; the
initial term of office of the Class II directors shall expire at the annual
meeting of stockholders to be held in 1995; and the initial term of office of
the Class III directors shall expire at the annual meeting of stockholders to
be held in 1996. At each annual meeting of stockholders, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
6.2. INITIAL DIRECTORS
The powers of the Incorporator shall terminate upon the filing
of this Certificate of Incorporation, and the following persons, having the
indicated mailing address, shall serve as the directors of the Corporation
until their successor or successors are elected and qualify, as set forth in
the Section 6.1. above:
<TABLE>
<CAPTION>
Name Mailing Address
CLASS I DIRECTORS
-----------------
<S> <C>
Eric D. Becker One South Street, Suite 800
Baltimore, Maryland 21202
William E. O'Leary 1587 Sulphur Spring Road
Baltimore, Maryland 21227
CLASS II DIRECTORS
------------------
Merrick M. Elfman 111 North Canal Street, Suite 933
Chicago, Illinois 60606
Steven M. Taslitz 111 North Canal Street, Suite 933
Chicago, Illinois 60606
CLASS III DIRECTORS
-------------------
Rudolph C. Hoehn-Saric 9135 Guilford Road
Columbia, Maryland 21046
</TABLE>
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<PAGE> 5
6.3. REMOVAL
(a) Except as otherwise provided pursuant to the
provisions of this Certificate of Incorporation or a certificate of
designations relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office
at any time, but only for cause (as defined in Section 6.3(b) hereof) and only
by the affirmative vote, at a special meeting of the stockholders called for
such a purpose, of not less than a majority of the total number of votes of the
then outstanding shares of stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class, but only if
notice of such proposal was contained in the notice of such meeting. At least
30 days prior to such special meeting of stockholders, written notice shall be
sent to the director or directors whose removal will be considered at such
meeting. Any vacancy in the Board of Directors resulting from any such removal
or otherwise shall be filled only by vote of a majority of the directors then
in office, although less than a quorum, and any director so chosen shall hold
office until the next election of the class for which such director shall have
been chosen and until such director's successor shall be elected and qualified
or until any such director's earlier death, resignation or removal.
(b) For the purposes of this Section 6.8, "cause" shall
mean only (i) conduct as a director of the Corporation or any subsidiary
involving dishonest of a material nature that relates to the performance of the
director's duties as a director of the Corporation or any subsidiary or (ii)
criminal conduct (other than minor infractions and traffic violations) that
relates to the performance of the director's duties as a director of the
Corporation or any subsidiary.
6.4. CHANGE OF AUTHORIZED NUMBER
In the event of any increase or decrease in the authorized
number of directors, the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to maintain such classes as nearly
equal as possible. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
6.5. DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation or a certificate of
designations applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 6 unless expressly provided by
the certificate of designations.
-5-
<PAGE> 6
6.6. LIMITATION OF LIABILITY
No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provisions shall not eliminate or limit
the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (c) for the types of liability set forth in Section 174 of the Delaware
General Corporation Law; or (d) for any transaction from which the director
received any improper personal benefit.
7. INDEMNIFICATION
To the extent permitted by law, the Corporation shall fully
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
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees and all related costs
and expenses of such threatened, pending or completed action, suit or
proceeding), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
To the extent permitted by law, the Corporation shall fully
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
such person is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees and all related costs
and expenses of such threatened, pending or completed action, suit or
proceeding), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
The Corporation shall advance expenses (including attorneys'
fees and all related costs and expenses of such threatened, pending or
completed action, suit or proceeding) incurred by a director or officer in
advance of the final disposition of such action, suit or proceeding upon the
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that such director or officer
is not entitled to indemnification. The Corporation may advance expenses
(including attorneys' fees and all related costs and expenses of such
threatened, pending or completed action, suit or proceeding) incurred by an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
Notwithstanding anything in this Article to the contrary, the
Corporation will not have the obligation of indemnifying any person with
respect to proceedings, claims, suits or actions initiated or brought
voluntarily by such person and not by way of defense.
-6-
<PAGE> 7
8. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred
by the Delaware General Corporation Law, the Board of Directors is expressly
authorized and empowered to adopt, amend and repeal the Bylaws of the
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to amend or repeal Bylaws adopted by the Board of Directors as
provided for in this Certificate of Incorporation or in the Bylaws of the
Corporation.
9. ACTION BY STOCKHOLDERS
Any action required or permitted to be taken by the
stockholders of the Corporation may be effected at a duly called annual or
special meeting of stockholders, and, except as provided below, may be effected
without a meeting, without prior notice and without a vote, by a consent in
writing in accordance with the Bylaws of the Corporation. At any time that a
class of the equity securities of the Corporation is registered pursuant to
Section 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended,
action shall be taken by the stockholders only at a duly called annual or
special meeting, and action without a meeting shall be prohibited.
10. SPECIAL MEETINGS
Special meetings of the stockholders may be called at any time
but only by (a) the chairman of the board of the Corporation, (b) a majority of
the directors in office, although less than a quorum, or (c) the holders of not
less than 20% of the total number of votes of the then outstanding shares of
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
11. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Corporation elects not to be governed by the provisions of
Section 203 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned, being the Incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
Delaware General Corporation Law, hereby certifies that the facts hereinabove
stated are truly set forth, and accordingly executes this Certificate of
Incorporation this 13th day of September, 1993.
/s/ ANN E. FLOWERS
----------------------
Ann E. Flowers
Incorporator
-7-
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Atlantic Beverage Company, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting
duly held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Atlantic Beverage
Company, Inc. be amended by changing Article I thereof so that, as
amended, said Article shall be and read as follows:
"The name of the corporation is Atlantic Premium Brands, Ltd."
SECOND: That the majority of the stockholders voted in favor of the
amendment at a meeting duly held.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective on June 1, 1997.
IN WITNESS WHEREOF, said Atlantic Beverage Company, Inc. has caused
this certificate to be signed by Merrick M. Elfman, its Chairman of the Board
of Directors, and attested by Tom D. Wippman, its Secretary this 29th day of
May 1997.
ATLANTIC BEVERAGE COMPANY, INC.
By: /S/ MERRICK M. ELFMAN
---------------------------
Merrick M. Elfman, Chairman
ATTEST:
By: /s/ TOM D. WIPPMAN
--------------------------
Tom D. Wippman, Secretary
<PAGE> 1
EXHIBIT 4.6
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED TO
CERTAIN INDEBTEDNESS (INCLUDING INTEREST AND FEES) OWED BY THE MAKERS HEREOF,
IN THE MANNER AND TO THE EXTENT SET FORTH IN A SUBORDINATION AGREEMENT DATED AS
OF AUGUST 1, 1996 IN FAVOR OF LASALLE NATIONAL BANK, ITS SUCCESSORS AND ASSIGNS
("LENDER"). THE HOLDER OF THIS NOTE, BY HIS ACCEPTANCE HEREOF, SHALL BE BOUND
BY THE TERMS AND CONDITIONS OF ALL OF THE TERMS AND CONDITIONS OF SUCH
SUBORDINATION AGREEMENT. FURTHERMORE, THIS NOTE AND THE INDEBTEDNESS EVIDENCED
HEREBY SHALL BE SUBORDINATED TO (I) ANY REPLACEMENT, SUBSTITUTION OR
REFINANCING OF ANY OR ALL OF THE DEBT TO LENDER, AND (II) ANY DEBT (OTHER THAN
OTHER SUBORDINATED SELLER DEBT) FROM ANY SOURCE TO FINANCE STRATEGIC
ACQUISITIONS BY MAKERS. PAYEE, BY HIS ACCEPTANCE HEREOF, SHALL SIGN SUCH
DOCUMENTS AS ARE NECESSARY OR APPROPRIATE TO DOCUMENT SUCH FURTHER
SUBORDINATION, AND ALL PAYMENTS HEREUNDER SHALL BE SUSPENDED UNTIL ALL OF SUCH
DOCUMENTS HAVE BEEN EXECUTED AND DELIVERED, AS APPROPRIATE.
BY PAYEE'S ACCEPTANCE HEREOF, PAYEE ACKNOWLEDGES THAT RICHARDS CAJUN
FOODS CORP. IS A NEWLY FORMED DELAWARE CORPORATION FORMED FOR THE PURPOSE OF
ACQUIRING CERTAIN OF PAYEE'S ASSETS, AND FURTHER ACKNOWLEDGES THAT THERE SHALL
BE NO ACTUAL OR ALLEGED LIABILITY ON THE PART OF ANY OFFICER, DIRECTOR, AGENT
OR REPRESENTATIVE OF RICHARDS CAJUN FOODS CORP. OR ATLANTIC BEVERAGE COMPANY,
INC. SHOULD MAKERS FAIL TO PAY ANY AMOUNTS HEREUNDER.
BY PAYEE'S ACCEPTANCE HEREOF, PAYEE ACKNOWLEDGES AND AGREES THAT,
SUBJECT TO MAKERS PROCURING THE NECESSARY CONSENTS FROM LENDER, MAKERS MAY
PREPAY ANY OR ALL OF THE PRINCIPAL (AND INTEREST THEREON) UNDER THIS NOTE
WITHOUT PREMIUM OR PENALTY.
6.35% SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
DUE JULY 31, 2001
$850,000.00, subject to adjustment August 1, 1996
Baltimore, Maryland
PAYMENTS OF PRINCIPAL AND INTEREST
<PAGE> 2
FOR VALUE RECEIVED, RICHARDS CAJUN FOODS CORP., a Delaware corporation
and ATLANTIC BEVERAGE COMPANY, INC, a Delaware corporation (together,
"MAKERS"), hereby jointly and severally promise to pay J.L. RICHARD ("PAYEE"),
the principal sum of Eight Hundred Fifty Thousand and 00/100 Dollars
($850,000.00), in lawful money of the United States of America, together with
interest on the balance of principal from time to time outstanding and unpaid
hereon from the date of disbursement hereof until the maturity hereof (whether
by lapse of time, acceleration or otherwise) at the rate per annum equal to six
and 35/100ths per cent (6.35%) per annum ("INTEREST RATE").
THE PRINCIPAL BALANCE HEREUNDER IS SUBJECT TO ADJUSTMENT PURSUANT TO
SCHEDULE D TO THE ASSET PURCHASE AGREEMENT DATED AS OF AUGUST 1, 1996 AMONG
MAKERS AND PAYEE.
Interest only at the Interest Rate shall be paid quarterly in arrears
commencing on September 30, 1996 and on each December 31, March 31, June 30 and
September 30 thereafter through and including March 31, 2001. A final payment
of all accrued, unpaid interest and the remaining principal balance of the
indebtedness evidenced hereby shall be due and payable on July 31, 2001 (the
"MATURITY DATE").
After an Event of Default hereunder, any principal sums remaining
unpaid hereunder shall bear interest at the "Default Rate" until such Event of
Default is cured unless the Payee has commenced any of the remedies of Payee
described herein, in which case the Interest Rate shall remain in effect. The
"DEFAULT RATE" shall mean two percent (2%) per annum in excess of the Interest
Rate.
Interest shall be computed on the basis of a three hundred sixty-five
(365) day year for actual days elapsed. All payments on account of the
indebtedness evidencing this Note shall first be applied to late charges and
costs and fees incurred by Payee in enforcing its rights hereunder, second to
interest due on the unpaid principal balance hereunder and third to reduce the
unpaid principal of the hereunder.
Payment of all amounts due under this Note shall be made at the office
of Payee, or such other place as Payee may from time to time designate in
writing.
Notwithstanding any provisions of this Note, it is the intent of
Makers and Payee that Payee shall never be entitled to receive, collect or
apply, as interest on principal of the indebtedness, any amount in excess of
the maximum rate of interest permitted to be charged by applicable law; and if
under any circumstance whatsoever, fulfillment of any provision of this Note,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable law, then, ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity; and in the event Payee ever receives, collects or applies as interest
any such excess, such amount which would be excess interest shall be deemed a
permitted partial prepayment of principal without penalty or premium and
treated hereunder as
2
<PAGE> 3
such; and if the principal of the indebtedness secured hereby is paid in full,
any remaining excess funds shall forthwith be paid to Makers.
If payment hereunder becomes due and payable on a Saturday, Sunday or
legal holiday, the due date thereof shall be extended to the next succeeding
business day and interest shall be payable thereon at the rate specified during
such extension.
PREPAYMENT
This Note may be prepaid in whole or in part at any time without
premium or penalty.
DEFAULT AND REMEDIES
(a) In the event that:
(i) default is made in a payment of principal or interest
due hereunder;
(ii) default is made with respect to any indebtedness of
Maker which is senior in priority to the indebtedness
evidenced hereby ("SENIOR DEBT");
(iii) the filing by Makers of a voluntary petition in
bankruptcy or for arrangement, reorganization or
other relief under a chapter of the Bankruptcy Code
of 1978, as amended (the "BANKRUPTCY CODE") or any
similar law, state or federal, now or hereafter in
effect;
(iv) the filing by Makers of an answer or other pleading
in any proceeding admitting insolvency, bankruptcy,
or the inability to pay their debts as they mature;
(v) the non-dismissal, within sixty (60) days after the
filing against Makers, of any involuntary proceeding
under the Bankruptcy Code or similar law, state or
federal, now or hereafter in effect;
(vi) the adjudication of Makers as bankrupt or the entry
of an order for relief in respect of Makers by any
bankruptcy court;
(vii) an assignment by Makers for the benefit of creditors
or the admission by Makers in writing of their
inability to pay their debts generally as they become
due or the consent of Makers to the appointment of a
custodian, receiver, trustee or liquidator of all or
the major part of their property; and
(viii) the entry of an order appointing a custodian,
receiver, trustee or liquidator of all or a major
part of Makers' property which is not vacated within
sixty (60) days following the entry hereof,
and such default shall continue for ten (10) days after written notice thereof,
then in the case of the defaults set forth above (collectively "EVENTS OF
DEFAULT"), Payee shall have the option, subject to Lender's rights under the
Subordination Agreement, without demand or notice, to
3
<PAGE> 4
declare the accrual of the Default Rate, and declare the unpaid principal
hereof, together with all accrued interest, prepayment premium, if any, and all
other sums due hereunder, at once due and payable to the extent permitted by
law, and to exercise any and all other rights and remedies available at law or
in equity to Payee. Within three (3) days after receiving a default notice
with respect to any Senior Debt, Maker shall forward such notice to the
attention of Payee.
(b) The remedies of Payee, as provided herein shall be
cumulative and concurrent, and may be pursued singularly, successively or
together, at the sole discretion of Payee, and may be exercised as often as
occasion therefor shall arise. No act of omission or commission of Payee,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or release
to be effected only through a written document executed by Payee and then only
to the extent specifically recited therein. A waiver or release with reference
to any one event shall not be construed as continuing, as a bar to, or as a
waiver or release of, any subsequent right, remedy or recourse as to a
subsequent event. Payee acknowledges that Makers are third party beneficiaries
of Payee's duties, obligations and covenants under the Subordination Agreement.
(c) If any Event of Default hereunder shall occur or if
suit is filed herein or if proceedings are held in bankruptcy, receivership,
reorganization or other legal or judicial proceedings for the collection
hereof, Makers shall pay all costs of collection of every kind, including but
not limited to all appraisal costs, reasonable attorneys' fees, court costs,
and expenses of every kind, incurred by Payee in connection with such
collection or the protection or enforcement of any or all of the security for
this Note, whether or not any lawsuit is filed with respect thereto.
WAIVER
Except as otherwise expressly provided herein, Makers hereby waive
grace, notice, notice of intent to accelerate, notice of default, protest,
demand, presentment for payment and diligence in the collection of this Note,
and in the filing of suit hereon, and agrees that their liability and the
liability of their successors and assigns for the payment hereof shall not be
affected or impaired by any increase, modification, renewal or extension of the
indebtedness or mode and time of payment. It is specifically agreed by the
undersigned that except as provided below, the Payee shall have the right at
all times to decline to make any such increase, modification, renewal or
extension of the indebtedness or its mode and time of payment.
MISCELLANEOUS
The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment; provided that a check will be deemed sufficient payment so
long as it clears when presented for payment. Except as otherwise provided
herein, all payments (whether of principal, interest or other amounts) which
are applied at any time by Payee to indebtedness evidenced by this Note may be
allocated by Payee to principal, interest or other amounts as Payee may
determine in Payee's sole discretion.
This Note shall be governed by and construed under the laws of the
State of Louisiana.
4
<PAGE> 5
If any provision of this Note or any payments pursuant to the terms
hereof shall be invalid or unenforceable to any extent, the remainder of this
Note and any other payments hereunder shall not be affected thereby and shall
be enforceable to the greatest extent permitted by law.
SET-OFF, ETC.
THIS NOTE IS DELIVERED PURSUANT TO SECTION 3 OF THE ASSET PURCHASE
AGREEMENT DATED AS OF AUGUST 1, 1996 AMONG MAKERS AND PAYEE, AND IS SUBJECT TO
ALL OF THE PROVISIONS THEREOF, INCLUDING MAKER'S RIGHTS OF SET-OFF AS CONTAINED
IN SECTION 13 THEREOF.
MUTUAL DRAFTING
THIS NOTE IS THE JOINT PRODUCT OF MAKERS AND PAYEE AND THEIR
RESPECTIVE COUNSEL, AND EACH PROVISION HEREOF HAS BEEN SUBJECT TO THE MUTUAL
CONSULTATION, NEGOTIATION AND AGREEMENT OF SUCH PARTIES AND COUNSEL, AND SHALL
NOT BE CONSTRUED FOR OR AGAINST ANY PARTY HERETO.
****************************
5
<PAGE> 6
IN WITNESS WHEREOF, Makers have executed and delivered this Note as of
the date and year first above written.
RICHARDS CAJUN FOODS CORP.
By /s/ MERRICK M. ELFMAN
----------------------
Merrick M. Elfman, Chairman
ATLANTIC BEVERAGE COMPANY, INC.
By /s/ MERRICK M. ELFMAN
----------------------
Merrick M. Elfman, Vice Chairman
6
<PAGE> 7
ACKNOWLEDGMENT
THE UNDERSIGNED ACKNOWLEDGES THAT THE PRINCIPAL AMOUNT OUTSTANDING
UNDER AND PURSUANT TO THE CERTAIN 6.35% SUBORDINATED NON-NEGOTIABLE PROMISSORY
NOTE DUE JULY 31, 2001 IN THE ORIGINAL PRINCIPAL AMOUNT OF $850,000.00, SUBJECT
TO ADJUSTMENT, IS EIGHT HUNDRED SEVENTY FOUR THOUSAND ONE HUNDRED EIGHTY-SIX
AND 31/100THS DOLLARS ($874,186.31).
THIS ACKNOWLEDGMENT WILL NOT BE EFFECTIVE UNLESS AND UNTIL THIS IS
ATTACHED TO AND MADE A PART OF THE ORIGINAL NOTE DESCRIBED ABOVE, AND
INCORPORATES ALL OF THE TERMS AND CONDITIONS CONTAINED THEREIN.
ATLANTIC BEVERAGE COMPANY, INC.
By /s/ MERRICK M. ELFMAN
----------------------
Merrick M. Elfman, Chairman
RICHARDS CAJUN FOODS CORP.
By /s/ MERRICK M. ELFMAN
----------------------
Merrick M. Elfman, Chairman
<PAGE> 1
EXHIBIT 4.7
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED TO
CERTAIN INDEBTEDNESS (INCLUDING INTEREST AND FEES) OWED BY THE MAKER HEREOF, IN
THE MANNER AND TO THE EXTENT SET FORTH IN A SUBORDINATION AGREEMENT DATED AS OF
OCTOBER 17, 1996 IN FAVOR OF LASALLE NATIONAL BANK, ITS SUCCESSORS AND ASSIGNS
("LENDER"). THE HOLDERS OF THIS NOTE, BY THEIR ACCEPTANCE HEREOF, SHALL BE
BOUND BY OF ALL OF THE TERMS AND CONDITIONS OF SUCH SUBORDINATION AGREEMENT.
FURTHERMORE, THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE
SUBORDINATED TO (I) ANY REPLACEMENT, SUBSTITUTION, REFINANCING OR EXTENSION OF,
OR ADDITION TO, ANY OR ALL OF THE DEBT TO LENDER, AND (II) ANY DEBT FROM ANY
SOURCE TO FINANCE STRATEGIC ACQUISITIONS BY MAKER. PAYEES, BY THEIR ACCEPTANCE
HEREOF, SHALL SIGN SUCH DOCUMENTS AS ARE NECESSARY OR APPROPRIATE TO DOCUMENT
SUCH FURTHER SUBORDINATION, AND ALL PAYMENTS TO BE MADE HEREUNDER SHALL BE
SUSPENDED UNTIL SUCH APPROPRIATE DOCUMENTATION HAS BEEN EXECUTED AND DELIVERED
BY PAYEES.
BY PAYEES' ACCEPTANCE HEREOF, PAYEES ACKNOWLEDGE THAT MAKER IS A NEWLY
FORMED DELAWARE CORPORATION FORMED FOR THE PURPOSE OF BEING THE SURVIVOR BY
MERGER OF GROGAN'S FARM, INC., AND FURTHER ACKNOWLEDGES THAT THERE SHALL BE NO
ACTUAL OR ALLEGED LIABILITY ON THE PART OF ANY OFFICER, DIRECTOR, STOCKHOLDER,
AGENT OR REPRESENTATIVE OF MAKER SHOULD MAKER FAIL TO PAY ANY AMOUNTS
HEREUNDER.
BY PAYEES' ACCEPTANCE HEREOF, PAYEES ACKNOWLEDGE AND AGREE THAT,
SUBJECT TO MAKER PROCURING THE NECESSARY CONSENTS FROM LENDER, MAKER MAY PREPAY
ANY OR ALL OF THE PRINCIPAL (AND INTEREST THEREON) UNDER THIS NOTE WITHOUT
PREMIUM OR PENALTY.
8% SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
DUE SEPTEMBER 30, 2001
$200,000.00
As of October 1, 1998
Paducah, Kentucky
PAYMENTS OF PRINCIPAL AND INTEREST
FOR VALUE RECEIVED, GROGAN'S MERGER CORP., a Delaware corporation
("MAKER"), hereby promises to pay BOBBY L. GROGAN and BETTY R. GROGAN, husband
and wife (together, "PAYEES"), the principal sum of Two Hundred Thousand and
00/100 Dollars ($200,000.00), in lawful money of the United States of America,
together with interest on the
<PAGE> 2
balance of principal from time to time outstanding and unpaid hereon commencing
on October 1, 1998 until the maturity hereof (whether by lapse of time,
acceleration or otherwise) at the rate per annum equal to eight percent (8%)
per annum ("INTEREST RATE").
Interest only at the Interest Rate shall be paid quarterly in arrears
commencing on December 31, 1998 and on each March 31, June 30, September 30,
and December 31 thereafter through and including June 30, 2001. A final
payment of all accrued, unpaid interest and the remaining principal balance of
the indebtedness evidenced hereby, due and payable on September 30, 2001 (the
"MATURITY DATE").
After an Event of Default (defined below) hereunder, any principal
sums remaining unpaid hereunder shall bear interest at the "Default Rate" until
such Event of Default is cured unless the Payees have commenced any of the
remedies of Payees described herein, in which case the Interest Rate shall
remain in effect. The "DEFAULT RATE" shall mean two percent (2%) per annum in
excess of the Interest Rate.
Interest shall be computed on the basis of a three hundred sixty-five
(365) day year for actual days elapsed. All payments on account of the
indebtedness evidencing this Note shall first be applied to late charges and
costs and fees incurred by Payees in enforcing their rights hereunder, second
to interest due on the unpaid principal balance hereunder and third to reduce
the unpaid principal of the hereunder.
Payment of all amounts due under this Note shall be made at the home
of Payees, or such other place as Payees may from time to time designate in
writing.
Notwithstanding any provisions of this Note or any instrument securing
payment of the indebtedness evidenced by this Note to the contrary, it is the
intent of Maker and Payee that Payee shall never be entitled to receive,
collect or apply, as interest on principal of the indebtedness, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law; and if under any circumstance whatsoever, fulfillment of any provision of
this Note, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable law, then,
ipso facto, the obligation to be fulfilled shall be reduced to the limit of
such validity; and in the event Payee ever receives, collects or applies as
interest any such excess, such amount which would be excess interest shall be
deemed a permitted partial prepayment of principal without penalty or premium
and treated hereunder as such; and if the principal of the indebtedness secured
hereby is paid in full, any remaining excess funds shall forthwith be paid to
Makers.
If payment hereunder becomes due and payable on a Saturday, Sunday or
legal holiday, the due date thereof shall be extended to the next succeeding
business day and interest shall be payable thereon at the rate specified during
such extension.
2
<PAGE> 3
PREPAYMENT
This Note may be prepaid in whole or in part at any time without
premium or penalty.
DEFAULT AND REMEDIES
(a) In the event of
(i) default is made in a payment of principal or interest
due hereunder,
(ii) the filing by Maker of a voluntary petition in
bankruptcy or for arrangement, reorganization or
other relief under a chapter of the Bankruptcy Code
of 1978, as amended (the "BANKRUPTCY CODE") or any
similar law, state or federal, now or hereafter in
effect;
(iii) the filing by Maker of an answer or other pleading in
any proceeding admitting insolvency, bankruptcy, or
the inability to pay its debts as they mature;
(iv) the non-dismissal, within sixty (60) days after the
filing against Maker, of any involuntary proceeding
under the Bankruptcy Code or similar law, state or
federal, now or hereafter in effect;
(v) the adjudication of Maker as a bankrupt or the entry
of an order for relief in respect of Maker by any
bankruptcy court;
(vi) an assignment by Maker for the benefit of creditors
or the admission by Maker in writing of its inability
to pay its debts generally as they become due or the
consent of either to the appointment of a custodian,
receiver, trustee or liquidator of all or the major
part of its property; or
(vii) the entry of an order appointing a custodian,
receiver, trustee or liquidator of all or a major
part of Maker's property which is not vacated within
sixty (60) days following the entry hereof,
and such event shall continue for ten (10) days after written notice thereof,
then in the case of the events set forth above (collectively "EVENTS OF
DEFAULT"), Payees shall have the option, subject to Lender's rights under the
Subordination Agreement described above, without demand or notice, to declare
the unpaid principal hereof, together with all accrued interest, and all other
sums due hereunder, at once due and payable to the extent permitted by law, and
to exercise any and all other rights and remedies available at law or in equity
to Payee.
(b) Subject to Lender's rights under the Subordination
Agreement described above, the remedies of Payees, as provided herein shall be
cumulative and concurrent, and may be pursued singularly, successively or
together, at the sole discretion of Payees, and may be exercised as often as
occasion therefor shall arise. No act of omission or commission of Payees,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or release
to be effected only through a written document executed by Payees and then only
to the extent specifically recited therein. A waiver
3
<PAGE> 4
or release with reference to any one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event. Payees acknowledge that Maker is
a third party beneficiary of Payees', and Payees' beneficiaries, duties,
obligations and covenants under the Subordination Agreement.
(c) If any Event of Default hereunder shall occur or if
suit is filed herein or if proceedings are held in bankruptcy, receivership,
reorganization or other legal or judicial proceedings for the collection
hereof, Maker shall pay all costs of collection of every kind, including but
not limited to all appraisal costs, reasonable attorneys' fees, court costs,
and expenses of every kind, incurred by Payee in connection with such
collection or the protection or enforcement of any or all of the security for
this Note, whether or not any lawsuit is filed with respect thereto.
WAIVER
Except as otherwise expressly provided herein, Maker hereby waives
grace, notice, notice of intent to accelerate, notice of default, protest,
demand, presentment for payment and diligence in the collection of this Note,
and in the filing of suit hereon, and agrees that its liability and the
liability of its successors and assigns for the payment hereof shall not be
affected or impaired by any increase, modification, renewal or extension of the
indebtedness or mode and time of payment. It is specifically agreed by the
undersigned that except as provided below, Payees shall have the right at all
times to decline to make any such increase, modification, renewal or extension
of the indebtedness or its mode and time of payment.
MISCELLANEOUS
The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment; provided that a check will be deemed sufficient payment so
long as it clears when presented for payment. Except as otherwise provided
herein, all payments (whether of principal, interest or other amounts) which
are applied at any time by Payees to indebtedness evidenced by this Note may be
allocated by Payees to principal, interest or other amounts as Payees may
determine in Payees' sole discretion.
This Note shall be governed by and construed under the laws of the
State of Delaware.
If any provision of this Note or any payments pursuant to the terms
hereof shall be invalid or unenforceable to any extent, the remainder of this
Note and any other payments hereunder shall not be affected thereby and shall
be enforceable to the greatest extent permitted by law.
(text continues on next page)
**************************************
4
<PAGE> 5
SET-OFF
THIS NOTE IS DELIVERED PURSUANT TO SECTION 2 OF THE AGREEMENT AND PLAN
OF REORGANIZATION DATED AS OF OCTOBER 1, 1996 AMONG MAKER, PAYEES AND GROGAN'S
FARM, INC., AND IS SUBJECT TO ALL OF THE PROVISIONS THEREOF, INCLUDING MAKER'S
RIGHTS OF SET-OFF AS CONTAINED IN SECTION 13 THEREOF, AS WELL AS MAKER'S RIGHTS
OF SET-OFF IN ALL OTHER DOCUMENTS BETWEEN MAKER AND PAYEES.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date and year first above written.
GROGAN'S MERGER CORP.
By /s/ MERRICK M. ELFMAN
-----------------------------
Merrick M. Elfman, Chairman
5
<PAGE> 1
EXHIBIT 4.8
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED TO
CERTAIN INDEBTEDNESS (INCLUDING INTEREST AND FEES) OWED BY THE MAKER HEREOF, IN
THE MANNER AND TO THE EXTENT SET FORTH IN A SUBORDINATION AGREEMENT DATED AS OF
NOVEMBER 15, 1996 IN FAVOR OF LASALLE NATIONAL BANK, ITS SUCCESSORS AND ASSIGNS
("LENDER"). THE HOLDERS OF THIS NOTE, BY THEIR ACCEPTANCE HEREOF, SHALL BE
BOUND BY OF ALL OF THE TERMS AND CONDITIONS OF SUCH SUBORDINATION AGREEMENT.
FURTHERMORE, THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE
SUBORDINATED TO (I) ANY REPLACEMENT, SUBSTITUTION, REFINANCING OR EXTENSION OF,
OR ADDITION TO, ANY OR ALL OF THE DEBT TO LENDER, AND (II) ANY DEBT FROM ANY
SOURCE TO FINANCE STRATEGIC ACQUISITIONS BY MAKER. PAYEES, BY THEIR ACCEPTANCE
HEREOF, SHALL SIGN SUCH DOCUMENTS AS ARE NECESSARY OR APPROPRIATE TO DOCUMENT
SUCH FURTHER SUBORDINATION, AND ALL PAYMENTS TO BE MADE HEREUNDER SHALL BE
SUSPENDED UNTIL SUCH APPROPRIATE DOCUMENTATION HAS BEEN EXECUTED AND DELIVERED
BY PAYEES.
BY PAYEES' ACCEPTANCE HEREOF, PAYEES ACKNOWLEDGE THAT MAKER IS A NEWLY
FORMED DELAWARE CORPORATION AND FURTHER ACKNOWLEDGES THAT THERE SHALL BE NO
ACTUAL OR ALLEGED LIABILITY ON THE PART OF ANY OFFICER, DIRECTOR, STOCKHOLDER,
AGENT OR REPRESENTATIVE OF MAKER SHOULD MAKER FAIL TO PAY ANY AMOUNTS
HEREUNDER.
BY PAYEES' ACCEPTANCE HEREOF, PAYEES ACKNOWLEDGE AND AGREE THAT,
SUBJECT TO MAKER PROCURING THE NECESSARY CONSENTS FROM LENDER, MAKER MAY PREPAY
ANY OR ALL OF THE PRINCIPAL (AND INTEREST THEREON) UNDER THIS NOTE WITHOUT
PREMIUM OR PENALTY.
8% SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
DUE DECEMBER 31, 2003
$219,593.00 As of November 15, 1996
Paducah, Kentucky
PAYMENTS OF PRINCIPAL AND INTEREST
FOR VALUE RECEIVED, GROGAN'S FARM, INC., a Delaware corporation
("MAKER"), hereby promises to pay JEFFERSON DAVIS and ROGER DAVIS, jointly
(together, "PAYEES"), the principal sum of Two Hundred Nineteen Thousand Five
Hundred Ninety-three and 00/100 Dollars ($219,593.00), in lawful money of the
United States of America, together with interest on the balance of principal
from time to time outstanding and unpaid hereon commencing on March 31, 1997
until the maturity hereof
<PAGE> 2
(whether by lapse of time, acceleration or otherwise) at the rate per annum
equal to eight percent (8%) per annum ("INTEREST RATE").
Interest only at the Interest Rate shall be paid quarterly in arrears
commencing on March 31, 1997 and on each June 30, September 30, December 31 and
March 31 thereafter through and including September 30, 2003. A final payment
of all accrued, unpaid interest and the remaining principal balance of the
indebtedness evidenced hereby, due and payable on December 31, 2003 (the
"MATURITY DATE").
After an Event of Default (defined below) hereunder, any principal
sums remaining unpaid hereunder shall bear interest at the "Default Rate" until
such Event of Default is cured unless the Payees have commenced any of the
remedies of Payees described herein, in which case the Interest Rate shall
remain in effect. The "DEFAULT RATE" shall mean two percent (2%) per annum in
excess of the Interest Rate.
Interest shall be computed on the basis of a three hundred sixty-five
(365) day year for actual days elapsed. All payments on account of the
indebtedness evidencing this Note shall first be applied to late charges and
costs and fees incurred by Payees in enforcing their rights hereunder, second
to interest due on the unpaid principal balance hereunder and third to reduce
the unpaid principal of the hereunder.
Payment of all amounts due under this Note shall be made at the home
of Payees, or such other place as Payees may from time to time designate in
writing.
Notwithstanding any provisions of this Note or any instrument securing
payment of the indebtedness evidenced by this Note to the contrary, it is the
intent of Maker and Payees that Payees shall never be entitled to receive,
collect or apply, as interest on principal of the indebtedness, any amount in
excess of the maximum rate of interest permitted to be charged by applicable
law; and if under any circumstance whatsoever, fulfillment of any provision of
this Note, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable law, then,
ipso facto, the obligation to be fulfilled shall be reduced to the limit of
such validity; and in the event Payees ever receives, collects or applies as
interest any such excess, such amount which would be excess interest shall be
deemed a permitted partial prepayment of principal without penalty or premium
and treated hereunder as such; and if the principal of the indebtedness secured
hereby is paid in full, any remaining excess funds shall forthwith be paid to
Makers.
If payment hereunder becomes due and payable on a Saturday, Sunday or
legal holiday, the due date thereof shall be extended to the next succeeding
business day and interest shall be payable thereon at the rate specified during
such extension.
PREPAYMENT. This Note may be prepaid in whole or in part at any time
without premium or penalty.
DEFAULT AND REMEDIES
(a) In the event of
(i) default is made in a payment of principal or interest
due hereunder;
2
<PAGE> 3
(ii) the filing by Maker of a voluntary petition in
bankruptcy or for arrangement, reorganization or other relief under a chapter
of the Bankruptcy Code of 1978, as amended (the "BANKRUPTCY CODE") or any
similar law, state or federal, now or hereafter in effect;
(iii) the filing by Maker of an answer or other pleading in
any proceeding admitting insolvency, bankruptcy, or the inability to pay its
debts as they mature;
(iv) the non-dismissal, within sixty (60) days after the
filing against Maker, of any involuntary proceeding under the Bankruptcy Code
or similar law, state or federal, now or hereafter in effect;
(v) the adjudication of Maker as a bankrupt or the entry
of an order for relief in respect of Maker by any bankruptcy court;
(vi) an assignment by Maker for the benefit of creditors
or the admission by Maker in writing of its inability to pay its debts
generally as they become due or the consent of either to the appointment of a
custodian, receiver, trustee or liquidator of all or the major part of its
property; or
(vii) the entry of an order appointing a custodian,
receiver, trustee or liquidator of all or a major part of Maker's property
which is not vacated within sixty (60) days following the entry hereof;
and such event shall continue for ten (10) days after written notice thereof,
then in the case of the events set forth above (collectively "EVENTS OF
DEFAULT"), Payees shall have the option, subject to Lender's rights under the
Subordination Agreement described above, without demand or notice, to declare
the unpaid principal hereof, together with all accrued interest, and all other
sums due hereunder, at once due and payable to the extent permitted by law, and
to exercise any and all other rights and remedies available at law or in equity
to Payees.
(b) Subject to Lender's rights under the Subordination Agreement
described above, the remedies of Payees, as provided herein shall be cumulative
and concurrent, and may be pursued singularly, successively or together, at the
sole discretion of Payees, and may be exercised as often as occasion therefor
shall arise. No act of omission or commission of Payees, including
specifically any failure to exercise any right, remedy or recourse, shall be
deemed to be a waiver or release of the same, such waiver or release to be
effected only through a written document executed by Payees and then only to
the extent specifically recited therein. A waiver or release with reference to
any one event shall not be construed as continuing, as a bar to, or as a waiver
or release of, any subsequent right, remedy or recourse as to a subsequent
event. Payees acknowledge that Maker is a third party beneficiary of Payees',
and Payees' beneficiaries, duties, obligations and covenants under the
Subordination Agreement.
(c) If any Event of Default hereunder shall occur or if suit is
filed herein or if proceedings are held in bankruptcy, receivership,
reorganization or other legal or judicial proceedings for the collection
hereof, Maker shall pay all costs of collection of every kind, including but
not limited to all appraisal costs, reasonable attorneys' fees, court costs,
and expenses of every kind, incurred by Payees in connection with such
collection or the protection or enforcement of any or all of the security for
this Note, whether or not any lawsuit is filed with respect thereto.
WAIVER
Except as otherwise expressly provided herein, Maker hereby waives
grace, notice, notice of intent to accelerate, notice of default, protest,
demand, presentment for payment and diligence in the collection of this Note,
and in the filing of suit hereon, and agrees that its liability and the
liability of its successors and assigns for the payment hereof shall not be
affected or impaired by any increase, modification, renewal or extension of the
indebtedness or mode and time of payment. It is specifically agreed by the
3
<PAGE> 4
undersigned that except as provided below, Payees shall have the right at all
times to decline to make any such increase, modification, renewal or extension
of the indebtedness or its mode and time of payment.
MISCELLANEOUS
The headings of the paragraphs of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
All payments under this Note shall be payable in lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment; provided that a check will be deemed sufficient payment so
long as it clears when presented for payment. Except as otherwise provided
herein, all payments (whether of principal, interest or other amounts) which
are applied at any time by Payees to indebtedness evidenced by this Note may be
allocated by Payees to principal, interest or other amounts as Payees may
determine in Payees' sole discretion.
This Note shall be governed by and construed under the laws of the
State of Delaware.
If any provision of this Note or any payments pursuant to the terms
hereof shall be invalid or unenforceable to any extent, the remainder of this
Note and any other payments hereunder shall not be affected thereby and shall
be enforceable to the greatest extent permitted by law.
(text continues on next page)
**************************************
4
<PAGE> 5
SET-OFF
THIS NOTE IS DELIVERED PURSUANT TO SECTION 2 OF THE ASSET PURCHASE
AGREEMENT ("APA") DATED AS OF NOVEMBER 12, 1996 AMONG MAKER, PAYEES AND
ATLANTIC BEVERAGE COMPANY, INC., AND IS SUBJECT TO ALL OF THE PROVISIONS
THEREOF, INCLUDING MAKER'S RIGHTS OF SET-OFF AS CONTAINED IN SECTION 13
THEREOF, AS WELL AS MAKER'S RIGHTS OF SET-OFF IN ALL OTHER DOCUMENTS BETWEEN
MAKER AND PAYEES.
MUTUAL DRAFTING
THIS NOTE IS THE JOINT PRODUCT OF MAKER AND PAYEES AND THEIR
RESPECTIVE COUNSEL, AND EACH PROVISION HEREOF HAS BEEN SUBJECT TO THE MUTUAL
CONSULTATION, NEGOTIATION AND AGREEMENT OF SUCH PARTIES AND COUNSEL, AND SHALL
NOT BE CONSTRUED FOR OR AGAINST ANY PARTY HERETO.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date and year first above written.
GROGAN'S FARM, INC.
By /s/ MERRICK M. ELFMAN
---------------------
Merrick M. Elfman, Chairma
5
<PAGE> 1
EXHIBIT 4.9
SECURED PROMISSORY NOTE
(Term Note)
$11,000,000.00
March 20, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned (hereinafter referred to
collectively as "Borrowers" and individually as a "Borrower"), hereby jointly
and severally promise to pay to the order of FLEET CAPITAL CORPORATION, a Rhode
Island corporation (hereinafter "Lender"), in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of $11,000,000,
together with interest from and after the date hereof on the unpaid principal
balance outstanding at a variable rate per annum as set forth in Section 2.1 of
the Loan Agreement (as such term is defined below) and computed as set forth in
Section 2.3 of the Loan Agreement.
This Secured Promissory Note (the "Note") is the Term Note referred to
in, and is issued pursuant to, that certain Loan and Security Agreement dated
March 20, 1998, among Borrowers and Lender (hereinafter, as amended from time
to time, the "Loan Agreement"), and is entitled to all of the benefits and
security of the Loan Agreement. All of the terms, covenants and conditions of
the Loan Agreement and the Security Documents are hereby made a part of this
Note and are deemed incorporated herein in full. All capitalized terms used
herein, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.
The principal amount and accrued interest of this Note shall be due
and payable on the dates and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on April 1, 1998, and
continuing until such time as the full principal balance, together
with all other amounts owing hereunder, shall have been paid in full;
(b) Principal shall be due and payable monthly commencing on
April 1, 1998, and continuing on the first day of each month
thereafter to and including the first day of February, 2003, in
installments in the amounts set forth on Schedule 1 attached hereto;
and
(c) The entire remaining principal amount then outstanding,
together with any and all other amounts due hereunder, shall be due
and payable on March 1, 2003.
<PAGE> 2
If, prior to the date on which this Note is required to be paid in full in
accordance with the foregoing provisions, the Loan Agreement is terminated
pursuant to Section 5.2 of the Loan Agreement, then the entire unpaid principal
balance and accrued interest on this Note shall be immediately due and payable
in full and shall be paid on the effective date of such termination.
Borrowers shall prepay this Note as provided in Section 4.3.4 of the
Loan Agreement without any prepayment premium. Borrowers may prepay this Note
in whole at any time or in part from time to time in accordance with the
provisions of Section 4.3.5 of the Loan Agreement, provided that each such
prepayment shall be made together with accrued interest on the principal amount
so prepaid at the prepayment date plus a premium at the applicable percentage
set forth below:
If Prepayment is Made: The Premium Shall Be:
--------------------- --------------------
During the first Loan Year 2% of the principal amount paid
During the second Loan Year 1% of the principal amount paid
During the third Loan Year .5% of the principal amount paid
All partial prepayments, whether mandatory or voluntary, shall be
applied to installments of principal in the inverse order of their maturities.
Notwithstanding the foregoing, no prepayment premium shall be payable by
Borrowers to the extent such partial prepayment is made from proceeds of APB's
sale of the assets of its beverage division, provided, that such prepayment is
made not more than 3 days after the closing date of such sale.
Upon or after the occurrence of an Event of Default, Lender shall have
all of the rights and remedies set forth in Section 11 of the Loan Agreement,
including the right to declare the then outstanding principal balance and
accrued interest hereof to be and the same shall thereupon become, immediately
due and payable without notice to or demand upon any Borrower, all of which
each Borrower hereby expressly waives.
Time is of the essence of this Note. To the fullest extent permitted
by Applicable Law, each Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under Applicable Law, but if any
provision of this Note shall be prohibited or invalid under Applicable Law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor as an acquiescence in any default,
- 2 -
<PAGE> 3
nor shall any single or partial exercise by Lender of any right or remedy
preclude any other right or remedy. Lender, at its option, may enforce its
rights against any collateral securing this Note without enforcing its rights
against any Borrower, any guarantor of the indebtedness evidenced hereby or any
other property or indebtedness due or to become due to any Borrower. Each
Borrower agrees that, without releasing or impairing such Borrower's liability
hereunder, Lender may at any time release, surrender, substitute or exchange
any collateral securing this Note and may at any time release any party
primarily or secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Georgia and is intended to take
effect as an instrument under seal.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, each Borrower has caused this Note to be duly
executed and delivered in Atlanta, Georgia, on the date first above written.
ATLANTIC PREMIUM BRANDS, LTD.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
CARLTON FOODS CORP.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
PREFCO CORP.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
[Signatures continued on the following page]
- 4 -
<PAGE> 5
GROGAN'S FARM, INC.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
RICHARDS CAJUN FOODS CORP.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
POTTER'S ACQUISITION CORP.,
ATTEST: a Delaware corporation ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ---------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
- 5 -
<PAGE> 6
SCHEDULE 1
<TABLE>
<CAPTION>
Period Installment Amount
------ ------------------
<S> <C>
April 1, 1998 through $76,400.00
March 1, 1999, inclusive
April 1, 1999 through $114,500.00
March 1, 2000, inclusive
April 1, 2000 through $152,800.00
February 1, 2001, inclusive
April 1, 2001 through $191,000.00
March 1, 2003, inclusive
</TABLE>
- 6 -
<PAGE> 1
EXHIBIT 4.10
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 20th day of March, 1998,
by and among FLEET CAPITAL CORPORATION (together with its successors and
assigns, "Lender"), a Rhode Island corporation with an office at 300 Galleria
Parkway, N.W., Suite 800, Atlanta, Georgia 30339; ATLANTIC PREMIUM BRANDS, LTD.
(individually and in its capacity as the representative of the other Borrowers
pursuant to Section 3.3 hereof, "APB"), a Delaware corporation with its chief
executive office and principal place of business at 650 Dundee Road, Suite 370,
Northbrook, Illinois 60062; CARLTON FOODS CORP. ("Carlton"), a Delaware
corporation with its chief executive office and principal place of business at
650 Dundee Road, Suite 370, Northbrook, Illinois 60062; PREFCO CORP. ("Prefco"),
a Delaware corporation with its chief executive office, and principal place of
business at 650 Dundee Road, Suite 370, Northbook, Illinois 60062; GROGAN'S
FARM, INC. ("Grogan's"), a Delaware corporation with its chief executive office
and principal place of business at 650 Dundee Road, Suite 370, Northbrook,
Illinois 60062; RICHARDS CAJUN FOODS CORP. ("Richards"), a Delaware corporation
with its chief executive office and principal place of business at 650 Dundee
Road, Suite 370, Northbrook, Illinois 60062; AND POTTER'S ACQUISITION CORP.
("Potter's"), a Delaware corporation with its chief executive office and
principal place of business at 650 Dundee Road, Suite 370, Northbrook, Illinois
60062 (APB, Carlton, Prefco, Grogan's, Richards and Potter's are referred to
collectively as "Borrowers" and individually as a "Borrower"). Capitalized terms
used in this Agreement have the meanings assigned to them in Appendix A, General
Definitions.
R E C I T A L S:
Each Borrower has requested that Lender make available a revolving
credit and term loan facility to Borrowers, which facility shall be used by
Borrowers to finance their mutual and collective enterprise of manufacturing and
distributing pork, beef and other meat products and distributing beverage
products. In order to utilize the financial powers of each Borrower in the most
efficient and economical manner, and in order to facilitate the financing of
each Borrower's needs, Lender will, at the request of any Borrower, make loans
to all Borrowers under the revolving credit facility on a combined basis and in
accordance with the provisions hereinafter set forth. Borrowers' business is a
mutual and collective enterprise, and Borrowers believe that the consolidation
of all revolving credit loans under this Agreement will enhance the aggregate
borrowing powers of each Borrower and ease the administration of their revolving
credit loan relationship with Lender, all to the mutual advantage of Borrowers.
Lender's willingness to extend credit to Borrowers and to administer each
Borrower's collateral security therefor, on a combined basis as more fully set
forth in this Agreement, is done solely as an accommodation to Borrowers and at
Borrowers' request in furtherance of Borrowers' mutual and collective
enterprise.
Each Borrower has agreed to guarantee the obligations of each of the
other Borrowers under this Agreement and each of the other Loan Documents.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1 CREDIT FACILITY..................................................................... -2-
1.2. Term Loan Facility.......................................................... -2-
1.4. Letters of Credit........................................................... -3-
1.5. Indemnification............................................................. -5-
SECTION 2 INTEREST, FEES AND CHARGES........................................................ -5-
2.1. Interest.................................................................... -5-
2.2. Fees........................................................................ -8-
2.4. Reimbursement of Expenses................................................... -9-
2.5. Bank Charges................................................................ -9-
2.6. Maximum Interest............................................................ -9-
2.7. Illegality.................................................................. -10-
2.8. Increased Costs............................................................. -10-
2.9. Capital Adequacy............................................................ -11-
2.10. Funding Losses.............................................................. -12-
SECTION 3 LOAN ADMINISTRATION................................................................. -13-
3.1. Manner of Borrowing Revolver Loans.......................................... -13-
3.2. Special Provisions Governing LIBOR Loans.................................... -14-
3.3. Borrowers' Representative................................................... -14-
3.4. All Loans to Constitute One Obligation...................................... -15-
SECTION 4 PAYMENTS; NATURE OF EACH BORROWER'S LIABILITY........................................ -15-
4.1. General Payment Provisions.................................................. -15-
4.2. Repayment of Revolver Loans................................................. -15-
4.3. Repayment of Term and Equipment Loans....................................... -16-
4.4. Payment of Other Obligations................................................ -17-
4.5. Marshalling; Payments Set Aside............................................. -18-
4.6. Application of Payments and Collections..................................... -18-
4.7. Loan Account................................................................ -18-
4.8. Statements of Account....................................................... -18-
4.9. Nature and Extent of Each Borrower's Liability.............................. -18-
SECTION 5 TERM AND TERMINATION............................................................... -20-
5.1. Term of Agreement........................................................... -20-
5.2. Termination................................................................. -20-
SECTION 6 COLLATERAL SECURITY.................................................................. -21-
6.1. Grant of Security Interest.................................................. -21-
6.2. Lien on Deposit Accounts.................................................... -22-
6.3. Lien on Real Estate......................................................... -22-
6.4. Other Collateral............................................................ -23-
6.5. Lien Perfection; Further Assurances......................................... -23-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7 COLLATERAL ADMINISTRATION........................................................... -23-
7.1. General.................................................................... -23-
7.2. Administration of Accounts................................................. -24-
7.3. Administration of Inventory................................................ -25-
7.4. Administration of Equipment................................................ -26-
7.5. Payment of Charges......................................................... -26-
SECTION 8 REPRESENTATIONS AND WARRANTIES...................................................... -26-
8.1. General Representations and Warranties..................................... -27-
8.2. Reaffirmation of Representations and Warranties............................ -31-
8.3. Survival of Representations and Warranties................................. -32-
SECTION 9 COVENANTS AND CONTINUING AGREEMENTS................................................. -32-
9.1. Affirmative Covenants...................................................... -32-
9.2. Negative Covenants......................................................... -35-
9.3. Specific Financial Covenants............................................... -37-
SECTION 10 CONDITIONS PRECEDENT.............................................................. -40-
10.1. Conditions Precedent to Initial Loans...................................... -40-
10.2. Conditions Precedent to Procurement of Letters of Credit................... -42-
10.3. Conditions Precedent to all Loans.......................................... -42-
10.4. Limited Waiver of Conditions Precedent..................................... -43-
SECTION 11 EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT................................. -43-
11.1. Events of Default.......................................................... -43-
11.2. Acceleration of the Obligations............................................ -45-
11.3. Other Remedies............................................................. -45-
11.4. Setoff..................................................................... -48-
11.5. Remedies Cumulative; No Waiver............................................. -48-
SECTION 12 MISCELLANEOUS..................................................................... -48-
12.1. Power of Attorney.......................................................... -48-
12.2. Indemnity.................................................................. -49-
12.3. Modification of Agreement; Sale of Interest................................ -49-
12.4. Severability............................................................... -50-
12.5. Successors and Assigns..................................................... -50-
12.6. Cumulative Effect; Conflict of Terms....................................... -50-
12.7. Execution in Counterparts.................................................. -50-
12.8. Notice..................................................................... -50-
12.9. Lender's Consent........................................................... -51-
12.10. Credit Inquiries........................................................... -51-
12.11. Time of Essence............................................................ -51-
12.12. Entire Agreement; Appendix A and Exhibits.................................. -51-
12.14. Governing Law; Consent To Forum............................................ -52-
12.15. Waivers by Borrower........................................................ -52-
</TABLE>
-ii-
<PAGE> 4
LIST OF EXHIBITS
Exhibits
- --------
Exhibit A Form of Term Note
Exhibit B Form of Equipment Note
Exhibit C Notice of Conversion/Continuation
Exhibit D Notice of Borrowing
Exhibit E Compliance Certificate
Exhibit F Opinion Letter Requirements
Exhibit G Form of LC Request
Schedules
- ---------
7.1.1 Borrowers' and their Subsidiaries' Business Locations
8.1.1 Jurisdictions in which Borrowers and their Subsidiaries are
Authorized to do Business
8.1.4 Capital Structure of Borrowers
8.1.5 Corporate Names
8.1.8 Restrictions
8.1.13 Tax Identification Numbers of Subsidiaries
8.1.15 Patents, Trademarks, Copyrights and Licenses
8.1.18 Contracts Restricting Borrowers' Rights to Incur Debts
8.1.19 Litigation
8.1.21 Capitalized and Operating Leases
8.1.22 Pension Plans
8.1.24 Labor Contracts
9.2.5 Permitted Liens
-iii-
<PAGE> 5
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the parties hereto hereby agree as follows:
SECTION 1 CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $26,000,000
available to Borrowers as follows:
1.1. REVOLVER FACILITY
1.1.1. Revolver Loans. Lender agrees, upon the terms and
subject to the conditions set forth herein, to make Revolver Loans to Borrowers
from time to time on any Business Day, up to a maximum principal amount at any
time outstanding equal to the Borrowing Base at such time. The Revolver Loans
shall be repaid and may be reborrowed in accordance with the provisions of this
Agreement and shall bear interest as set forth in Section 2.1 hereof. Each
Revolver Loan shall, at the option of Borrowers, be made or continued as, or
converted into, a Base Rate Loan or a LIBOR Loan. The initial Revolver Loan
hereunder shall be a Base Rate Loan and shall be in a principal amount in excess
of $250,000. If the unpaid balance of Revolver Loans outstanding at any time
should exceed the Borrowing Base at such time (an "Out-of-Formula Condition"),
such Revolver Loans shall nevertheless constitute Obligations that are secured
by the Collateral and entitled to all of the benefits of the Loan Documents. If
Lender is willing in its sole and absolute discretion to make Out-of-Formula
Loans, such Out-of-Formula Loans shall be payable ON DEMAND and shall bear
interest as provided in this Agreement for Revolver Loans generally or at such
higher rate of interest as Lender may require as a condition to making any such
Out-of-Formula Loans. Borrowers and Lender agree that, if any event shall occur
or any condition shall exist that Lender determines is likely to have a Material
Adverse Effect, or if a Default or Event of Default exists, Lender shall have
the right (exercisable at such time or times as Lender deems appropriate) to
require that separate Borrowing Base calculations be made for each Borrower, as
well as the right to limit the use of proceeds of the Loans by each Borrower to
an amount that does not exceed at any time such Borrower's Borrowing Base at
such time.
1.1.2. Use of Proceeds. The proceeds of the Revolver Loans
shall be used by Borrowers solely for one or more of the following purposes: (i)
to finance Borrowers' payment of the purchase price in the Acquisition; (ii) to
pay the fees and transaction expenses associated with the Acquisition and the
closing of the transactions described herein; (iii) to pay any of the
Obligations; and (iv) to make expenditures for other lawful corporate purposes
of Borrowers to the extent such expenditures are not prohibited by this
Agreement or Applicable Law. In no event may any Revolver Loan proceeds be used
by any Borrower to make a contribution to the equity of any Subsidiary, or to
purchase or to carry, or to reduce, retire or refinance any Debt incurred to
purchase or carry, any Margin Stock or for any related purpose that violates the
provisions of Regulations G, T, U or X of the Board of Governors.
1.2. TERM LOAN FACILITY.
1.2.1. Term Loan. Subject to and upon the terms and conditions
herein set forth, Lender agrees to make a term loan to Borrowers on the Closing
Date in the principal amount of $11,000,000, which loan shall bear interest as
provided in Section 2.1.1 hereof, shall be repayable in accordance with the
terms of the Term Note and shall be secured by all of the Collateral. The
proceeds of the Term Loan shall be used by Borrowers solely for purposes
permitted by Section 1.1.2 hereof.
-2-
<PAGE> 6
Borrowers may not reborrow any amount repaid with respect to the Term Loan. The
Term Loan shall initially be a Base Rate Loan.
1.2.2. Term Note. Borrowers shall execute and deliver to
Lender on the Closing Date the Term Note to evidence the Term Loan, which shall
incorporate by reference the repayment terms set forth in Section 4.3 hereof,
shall be secured by the Collateral and shall bear interest at the variable rate
per annum as provided in Section 2.1.1 hereof.
1.3. EQUIPMENT LOAN FACILITY.
1.3.1. Equipment Loans. Lender agrees, during the term of this
Agreement, to make Equipment Loans to Borrowers, in an aggregate amount not to
exceed $2,500,000, to finance Borrowers' purchase of Eligible Equipment. In no
event shall Lender have any obligation (i) to honor a request of any Borrower
for an Equipment Loan unless at the time of such request each of the Equipment
Loan Conditions is satisfied or (ii) to make more than 2 Equipment Loans during
any Fiscal Quarter. The proceeds of each Equipment Loan shall be used solely to
purchase Eligible Equipment and the amount of each Equipment Loan shall not
exceed 100% of the Equipment Purchase Price of the Eligible Equipment so
purchased. Each Equipment Loan shall be in an amount of not less than $250,000.
All Equipment Loans shall be secured by the Collateral and shall be evidenced by
the Equipment Note. Borrowers shall not be permitted to reborrow any amount
repaid with respect to any of the Equipment Loans. Each Equipment Loan shall, at
the option of Borrowers, be made or continued as, or converted into, part of one
or more Borrowings that, unless otherwise specifically provided herein, shall
consist entirely of Base Rate Loans or LIBOR Loans.
1.3.2. Equipment Note. Each Equipment Loan and Borrowers'
obligation to repay the same shall be evidenced by the Equipment Note, which
shall incorporate by reference the repayment terms set forth in Section 4.3
hereof, shall be secured by the Collateral and shall bear interest at the
variable rate per annum as provided in Section 2.1.1 hereof.
1.4. LETTERS OF CREDIT. During the period from the date hereof to (but
excluding) the 30th day prior to the last day of the Original Term or any
applicable Renewal Term, and provided no Default or Event of Default exists,
Fleet agrees to procure from Bank one or more Letters of Credit on any
Borrower's request therefor from time to time, subject to the following terms
and conditions:
(i) Each Borrower acknowledges that Bank's
willingness to issue any Letter of Credit is conditioned upon Bank's receipt of
(A) the LC Guaranty duly executed and delivered to Bank by Lender, (B) an LC
Application with respect to the requested Letter of Credit and (C) such other
instruments and agreements as Bank may customarily require for the issuance of a
letter of credit of equivalent type and amount as the requested Letter of
Credit. Lender shall have no obligation to execute any LC Guaranty or to join
with any Borrower in executing an LC Application unless (x) Lender receives from
such Borrower, at least 3 Business Days prior to the date on which such Borrower
desires to submit such LC Application to Bank, an LC Request, and (y) each of
the LC Conditions is satisfied on the date of Lender's receipt of the LC Request
and at the time of the requested execution of the LC Application. In no event
shall Lender have any liability or obligation to any Borrower for any failure or
refusal by Bank to issue, for Bank's delay in issuing, or for any error of Bank
in issuing any Letter of Credit.
(ii) Letters of Credit may be requested hereunder
by any Borrower only if they are to be used (i) to support obligations of such
Borrower incurred in the ordinary course of its
-3-
<PAGE> 7
business, as presently conducted, on a standby basis, or (ii) for such other
purposes as Lender may approve from time to time.
(iii) Borrowers shall comply with all of the terms
and conditions imposed on Borrowers by Bank, whether such terms and conditions
are contained in an LC Application or in any agreement with respect thereto, and
subject to the rights of Bank, Lender shall have the same rights and remedies
that Bank has under any agreements that any or all Borrowers may have with Bank
in addition to any rights and remedies contained in any of the Loan Documents.
Borrowers jointly and severally agree to reimburse Bank for any draw under any
Letter of Credit immediately upon demand, and to pay Bank the amount of all
other liabilities and obligations payable to Bank under or in connection with
any Letter of Credit immediately when due, irrespective of any claim, setoff,
defense or other right that any or all Borrowers may have at any time against
Bank or any other Person. If Lender shall pay any amount under the LC Guaranty
with respect to any Letter of Credit, then Borrowers shall be jointly and
severally obligated to pay to Lender, in Dollars on the first Business Day
following the date on which payment was made by Lender under such LC Guaranty,
an amount equal to the amount paid by Lender under such LC Guaranty together
with interest from and after the date of Lender's payment under such LC Guaranty
until payment in full is made by Borrowers at a variable rate per annum in
effect from time to time hereunder for Revolver Loans constituting Base Rate
Loans. Borrowers agree that any claim made upon Lender by Bank under an LC
Guaranty shall be conclusive on Lender and Borrowers shall forthwith satisfy and
discharge any such claim, ON DEMAND, failing which Borrowers shall be jointly
and severally obligated to reimburse Lender for any payment made by Lender under
an LC Guaranty in connection with such claim as hereinabove provided.
(iv) Borrowers assume all risks of the acts,
omissions or misuses of any Letter of Credit by the beneficiary thereof.
The obligation of Borrowers to reimburse Lender for any payment made
by Lender under an LC Guaranty shall be absolute, unconditional, irrevocable
and joint and several, and shall be paid without regard to any lack of validity
or enforceability of any Letter of Credit, the existence of any claim, setoff,
defense or other right which any or all Borrowers may have at any time against
a beneficiary of any Letter of Credit, or untimely or improper honor by Bank of
any draw request under a Letter of Credit. Without limiting the generality of
the foregoing, if presentation of a demand, draft or certificate or other
document does not comply with the terms of a Letter of Credit and a Borrower
contends that, as a consequence of such noncompliance it has no obligation to
reimburse Bank for any payment made with respect thereto, Borrowers shall
nevertheless be jointly and severally obligated to reimburse Lender for any
payment made under the LC Guaranty with respect to such Letter of Credit, but
without waiving any claim a Borrower may have against Bank in connection
therewith.
(v) If any LC Obligations (other than LC Obligations
fully secured by Cash Collateral at the time in question), whether or not
then due or payable, shall for any reason be outstanding (i) at any time
that an Event of Default exists, (ii) on any date that Availability is less
than zero, or (iii) on the effective date of termination of this Agreement
pursuant to Section 5 hereof, then Borrowers shall, upon demand, forthwith
deposit with Lender, in cash, an amount equal to the maximum aggregate amount
of all LC Obligations then outstanding. If Borrowers fail to make such deposit
on Lender's demand therefor, Lender may advance such amount as a Revolver Loan
(whether or not an Out-of-Formula Condition is created thereby). Such cash
(together with any interest accrued thereon) shall be held by Lender in the
Cash Collateral Account and may be invested, in Lender's discretion, in Cash
Equivalents. Each Borrower hereby pledges, and grants to Lender a security
interest in, all of such Borrower's right, title and interest in the Cash
Collateral Account and all Cash Collateral held in the Cash Collateral Account
from time to time and all proceeds thereof, as security for the payment of the
LC
-4-
<PAGE> 8
Obligations, whether or not then due or payable. From time to time after cash is
deposited in the Cash Collateral Account, Lender may apply any Cash Collateral
then held in the Cash Collateral Account to the payment of any amounts, in such
order as Lender may elect, as shall be or shall become due and payable by
Borrowers to Lender with respect to the Obligations which may then be
outstanding. Neither any Borrower nor any other Person claiming by, through or
under or on behalf of any Borrower shall have any right to withdraw any of the
funds held in the Cash Collateral Account, including any accrued interest,
provided that upon termination of all Letters of Credit and the payment and
satisfaction in full of the LC Obligations, any Cash Collateral remaining in the
Cash Collateral Account shall be returned to Borrowers unless an Event of
Default then exists (in which event Lender may apply such funds to the payment
of any other Obligations outstanding).
(vi) No Letter of Credit shall be extended or amended
in any respect that is not solely ministerial, unless all of the LC Conditions
are met as though a new Letter of Credit were being requested and issued.
(vii) In addition to and without limiting any other
right or remedy of Lender contained in this Agreement or in any of the other
Loan Documents, Lender shall be fully subrogated to the rights and remedies
of Bank under any agreement made between any or all Borrowers and Bank,
including each LC Application, relating to the issuance of any Letter of
Credit, each such agreement being incorporated herein by reference, and
Lender shall be entitled to exercise all such rights and remedies thereunder
and under Applicable Law in such regard as fully as if it were Bank. If any
Letter of Credit is drawn upon to discharge any obligation of any Borrower
to the beneficiary of such Letter of Credit, in whole or in part, Lender
shall be fully subrogated to the rights of such beneficiary with
respect to the obligation of such Borrower to such beneficiary discharged with
the proceeds of such Letter of Credit.
1.5. INDEMNIFICATION. In addition to any other indemnity which
Borrowers may have to Lender under this Agreement or any of the other Loan
Documents, and without limiting such other indemnification provisions, each
Borrower hereby agrees to indemnify Lender from and to defend and hold Lender
harmless against any and all Claims that Lender may (other than as the result of
its own gross negligence or willful misconduct) incur or be subject to as a
consequence, directly or indirectly, of (i) the issuance of, payment or failure
to pay or any performance or failure to perform under any Letter of Credit or LC
Guaranty or (ii) any suit, investigation or proceeding as to which Lender is or
may become a party to as a consequence, directly or indirectly, of the issuance
of any Letter of Credit, any LC Guaranty or the payment or failure to pay
thereunder. This indemnity shall survive payment in full of the Obligations and
termination of this Agreement.
SECTION 2 INTEREST, FEES AND CHARGES
2.1. INTEREST.
2.1.1. Rates of Interest.
(i) Borrowers jointly and severally agree to pay
interest in respect of all unpaid principal amounts of the Loans from the
respective dates such principal amounts are advanced until paid (whether at
stated maturity, on acceleration or otherwise) at a rate per annum equal to
the following applicable rate: (a) for Loans outstanding as Base Rate Loans,
the Applicable Margins plus the Base Rate in effect from time to time; or
(b) for Loans outstanding as LIBOR Loans, the Applicable
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<PAGE> 9
Margin plus the relevant Adjusted LIBOR Rate for the applicable Interest Period
selected by a Borrower in conformity with this Agreement.
(ii) Upon determining the Adjusted LIBOR Rate for
any Interest Period requested by Borrowers, Lender shall promptly notify
Borrowers thereof by telephone and, if so requested by Borrowers, confirm the
same in writing. Such determination shall, absent manifest error, be final,
conclusive and binding on all parties and for all purposes. The applicable
rate of interest for all Loans (or portions thereof) bearing interest based
upon the Base Rate shall be increased or decreased, as the case may be, by
an amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the day that
any such change in the Base Rate becomes effective. Interest on each Loan
shall accrue from and including the date on which such Loan is made,
converted to a Loan of another Type or continued as a LIBOR Loan to (but
excluding) the date of any repayment thereof; provided, however, that, if a
Loan is repaid on the same day made, one day's interest shall be paid on
such Loan. The Base Rate on the date hereof is 8.5% per annum and, therefore,
the rate of interest in effect hereunder on the date hereof, expressed in
simple interest terms, is 9.5% per annum with respect to any portion of the
Loans bearing interest as a Base Rate Loan.
2.1.2. Conversions and Continuations.
(i) Borrowers may on any Business Day, subject
to the giving of a proper Notice of Conversion/Continuation as hereinafter
described, elect (A) to continue all or any part of a LIBOR Loan by selecting
a new Interest Period therefor, to commence on the last day of the
immediately preceding Interest Period, or (B) to convert all or any part of a
Loan of one Type into a Loan of another Type; provided, however, that no
outstanding Loans may be converted into or continued as LIBOR Loans when any
Default or Event of Default exists. Any conversion of a LIBOR Loan into a Base
Rate Loan shall be made on the last day of the Interest Period for such LIBOR
Loan.
(ii) Whenever Borrowers desire to convert or continue
Loans under Section 2.1.2(i), a Borrower shall give Lender written notice
(or telephonic notice promptly confirmed in writing) substantially in the form
of EXHIBIT D, signed by an authorized officer of such Borrower, on the requested
conversion date by 11:00 a.m., in the case of a conversion into Base Rate Loans,
and by 11:00 a.m. at least 3 Business Days before the requested conversion or
continuation date, in the case of a conversion into or continuation of LIBOR
Loans. Each such Notice of Conversion/Continuation shall be irrevocable and
shall specify the aggregate principal amount of the Loans to be converted or
continued, the date of such conversion or continuation (which shall be a
Business Day) and whether the Loans are being converted into or continued as
LIBOR Loans (and, if so, the duration of the Interest Period to be applicable
thereto) or Base Rate Loans. If, upon the expiration of any Interest Period in
respect of any LIBOR Loans, Borrowers shall have failed to deliver the Notice of
Conversion/Continuation, Borrowers shall be deemed to have elected to convert
such LIBOR Loans to Base Rate Loans.
2.1.3. Interest Periods. In connection with the making or
continuation of, or conversion into, each Borrowing of LIBOR Loans, Borrowers
shall select an interest period (each an "Interest Period") to be applicable to
such LIBOR Loan, which interest period shall commence on the date such LIBOR
Loan is made and shall end on a numerically corresponding day in the first,
second or third month thereafter; provided, however, that:
(i) the initial Interest Period for a LIBOR Loan
shall commence on the date such Loan is made (including the date of any
conversion from a Loan of another Type) and each Interest
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<PAGE> 10
Period occurring thereafter in respect of such Loan shall commence on the date
on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day, provided that if any Interest Period
in respect of LIBOR Loans would otherwise expire on a day that is not a Business
Day but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period that begins on a day for
which there is no numerically corresponding day in the calendar month at the
end of such Interest Period shall expire on the last Business Day of such
calendar month;
(iv) no Interest Period with respect to any portion
of principal of a Loan shall extend beyond a date on which a Borrower is
required to make a scheduled payment of such portion of principal;
(v) no Interest Period shall extend beyond the
last day of the Original Term; and
(vi) there shall be no more than 5 Interest Periods
in effect at any one time.
2.1.4. Interest Rate Not Ascertainable. If Lender shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) that on any date for determining the
Adjusted LIBOR for any Interest Period, by reason of any changes arising after
the date of this Agreement affecting the London interbank market or Lender's or
Bank's position in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in the
definition of Adjusted LIBOR Rate, then, and in any such event, Lender shall
forthwith give notice (by telephone confirmed in writing) to APB of such
determination. Until Lender notifies Borrowers that the circumstances giving
rise to the suspension described herein no longer exist, the obligation of
Lender to make LIBOR Loans shall be suspended, and such affected Loans then
outstanding shall, at the end of the then applicable Interest Period or at such
earlier time as may be required by Applicable Law, bear the same interest as
Base Rate Loans.
2.1.5. Default Rate of Interest. Interest shall accrue at the
Default Rate (i) with respect to the principal amount of any portion of the
Obligations (and, to the extent permitted by Applicable Law, all past due
interest) that is not paid on the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise) until paid in full, and
(ii) with respect to the principal amount of all of the Obligations (and, to the
extent permitted by Applicable Law, all past due interest) upon the earlier to
occur of (x) a Borrower's receipt of notice of Lender's election to charge the
Default Rate based upon the existence of any Event of Default or (y) the
commencement by or against any Borrower of an Insolvency Proceeding, whether or
not under the circumstances described in either clause (i) or (ii) hereof Lender
elects to accelerate the maturity or demand payment of any of the Obligations.
To the fullest extent permitted by Applicable Law, the Default Rate shall apply
and accrue on any judgment entered with respect to any of the Obligations and to
the unpaid principal amount of the Obligations during any Insolvency Proceeding
of a Borrower. Each Borrower acknowledges that the cost and expense to Lender
attendant upon the occurrence of an Event of Default are difficult to ascertain
or estimate and that the Default Rate is a fair and reasonable estimate to
compensate Lender for such added cost and expense.
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2.2. FEES.
2.2.1. Origination Fee. Borrowers shall be jointly and
severally obligated to pay to Lender an origination fee of $130,000, which fee
shall be paid concurrently with the funding of the initial Loan hereunder.
2.2.2. Unused Revolver Line Fee. Borrowers shall be jointly
and severally obligated to pay to Lender a monthly fee equal to .5% per annum of
the amount by which the sum of the Average Revolver Loan Balance for any month
(or portion thereof that this Agreement is in effect) plus the Average LC
Obligations for such month (or portion thereof that this Agreement is in effect)
is less than $15,000,000, such fee to be paid on the first day of the following
month; but if the Agreement is terminated on a day other than the first day of a
month, then such fee payable for the month in which termination shall occur
shall be paid on the effective date of such termination.
2.2.3. Minimum Loan Charges. Each Borrower acknowledges that
the administrative costs associated with the Loans and other financing provided
to Borrowers under this Agreement are such that Lender cannot finance Borrowers
profitably at the interest rates provided for herein in the event that the
Average Monthly Loan Balance is less than $5,000,000 (the "Minimum Loan
Amount"). Accordingly, Borrowers shall be jointly and severally obligated to pay
to Lender each month interest on the greater of the Minimum Loan Amount or the
Average Monthly Loan Balance for such month (or portion thereof that this
Agreement is in effect). In no event, however, shall Borrowers be obligated to
pay interest on the Minimum Loan Amount if the Average Monthly Loan Balance is
less than the Minimum Loan Amount solely by reason of Lender's refusal to make
available to Borrowers on such date, at Borrowers' request, Loans that would
cause the Average Monthly Loan Balance to equal the Minimum Loan Amount or if
the assessment or collection of such interest, together with all other amounts
deemed interest under this Agreement and the other Loan Documents, would exceed
the Maximum Rate.
2.2.4. Audit and Appraisal Fees. Borrowers shall be jointly
and severally obligated to reimburse Lender for all reasonable costs and
expenses incurred in connection with audits and appraisals of Borrowers' books
and records and such other matters as Lender shall reasonably deem appropriate.
2.2.5. LC Guaranty Fees. In addition to each Borrower's
obligation to pay to Bank all fees and normal and customary charges associated
with the issuance and administration of each Letter of Credit, Borrowers shall
be jointly and severally obligated to pay to Lender, for Lender's LC Guaranty of
each standby Letter of Credit, a fee equal to 2.5% per annum of the face amount
of each such Letter of Credit outstanding from time to time during the term of
this Agreement which shall be due and payable on the first Business Day of each
month, and an additional fee equal to 2.5% per annum of the face amount of such
Letter of Credit payable upon each renewal and each extension thereof, all of
which fees and charges shall be deemed fully earned upon issuance, renewal or
extension (as the case may be) of each such Letter of Credit.
2.2.6. General Provisions. All fees shall be fully earned by
Lender when due and payable and, except as otherwise set forth herein or
required by Applicable Law, shall not be subject to refund, rebate or proration.
All fees provided for in this Section 2.2 are and shall be deemed to be for
compensation for services and are not, and shall not be deemed to be, interest
or any other charge for the use, forbearance or detention of money.
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<PAGE> 12
2.3. COMPUTATION OF INTEREST AND FEES. All fees and other charges
provided for in this Agreement that are calculated as a per annum percentage of
any amount and all interest shall be calculated daily and shall be computed on
the actual number of days elapsed over a year of 360 days. For the purpose of
computing interest and other charges hereunder, all Payment Items received by
Lender shall be deemed applied by Lender on account of the Obligations (subject
to final payment of such items) on the first Business Day after Lender receives
such items in immediately available funds in the Payment Account, and Lender
shall be deemed to have received such Payment Item on the date specified in
Section 4.6 hereof.
2.4. REIMBURSEMENT OF EXPENSES. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (i) the negotiation and preparation of this Agreement or any of the other
Loan Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents, (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, any Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or any Borrower's
affairs; (iv) any attempt to enforce any rights of Lender against any Borrower
or any other Person which may be obligated to Lender by virtue of this Agreement
or any of the other Loan Documents, including the Account Debtors; or (v) any
attempt to inspect, verify, protect, preserve, perfect or continue the
perfection of Lender's Liens upon, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then all such legal and
accounting expenses, other costs and out of pocket expenses of Lender shall be
charged jointly and severally to Borrowers. All amounts chargeable to Borrowers
under this Section 2.4 shall be Obligations secured by all of the Collateral,
shall be payable on demand to Lender. Borrowers shall also be jointly and
severally obligated to reimburse Lender for expenses incurred by Lender in its
administration of the Collateral to the extent and in the manner provided in
Section 7 hereof.
2.5. BANK CHARGES. Borrowers shall be jointly and severally obligated
to pay to Lender, ON DEMAND, any and all fees, costs or expenses which Lender
pays to a bank or other similar institution (including any fees paid by Lender
to any Participant) arising out of or in connection with (i) the forwarding to
any Borrower or any other Person on behalf of any Borrower, by Lender or any
Participant, of proceeds of Loans made by Lender to Borrowers pursuant to this
Agreement and (ii) the depositing for collection, by Lender or any Participant,
of any Payment Item received or delivered to Lender or any Participant on
account of the Obligations. Each Borrower acknowledges and agrees that Lender
may charge such costs, fees and expenses as they are incurred by Lender, subject
to later adjustment for the amount actually incurred.
2.6. MAXIMUM INTEREST. Regardless of any provision contained in any of
the Loan Documents, in no contingency or event whatsoever shall the aggregate of
all amounts that are contracted for, charged or received by Lender pursuant to
the terms of any of the Loan Documents and that are deemed interest under
Applicable Law exceed the highest rate permissible under any Applicable Law. No
agreements, conditions, provisions or stipulations contained in any of the Loan
Documents or the exercise by Lender of the right to accelerate the payment or
the maturity of all or any portion of the Obligations, or the exercise of any
option whatsoever contained in any of the Loan Documents, or the prepayment by
Borrower of any of the Obligations, or the occurrence of any contingency
whatsoever, shall entitle Lender to charge or receive in any event, interest or
any charges, amounts, premiums or fees deemed interest by Applicable Law (such
interest, charges, amounts, premiums and fees referred to herein collectively as
"Interest") in excess of the Maximum Rate and in no event shall Borrowers be
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<PAGE> 13
obligated to pay Interest exceeding such Maximum Rate, and all agreements,
conditions or stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel Borrowers to pay Interest
exceeding the Maximum Rate shall be without binding force or effect, at law or
in equity, to the extent only of the excess of Interest over such Maximum Rate.
If any Interest is charged or received in excess of the Maximum Rate ("Excess"),
each Borrower acknowledges and stipulates that any such charge or receipt shall
be the result of an accident and bona fide error, and such Excess, to the extent
received, shall be applied first to reduce the principal Obligations and the
balance, if any, returned to Borrowers, it being the intent of the parties
hereto not to enter into a usurious or otherwise illegal relationship. The right
to accelerate the maturity of any of the Obligations does not include the right
to accelerate any Interest that has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned Interest in the
event of any such acceleration. Each Borrower recognizes that, with fluctuations
in the rates of interest set forth in Section 2.1.1 of this Agreement or in the
Notes and the Maximum Rate, such an unintentional result could inadvertently
occur. All monies paid to Lender hereunder or under any of the other Loan
Documents, whether at maturity or by prepayment, shall be subject to any rebate
of unearned Interest as and to the extent required by Applicable Law. By the
execution of this Agreement, each Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by Borrowers of such
Excess, and (ii) no Borrower shall seek or pursue any other remedy, legal or
equitable, against Lender, based in whole or in part upon contracting for,
charging or receiving any Interest in excess of the Maximum Rate. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all Interest at any time contracted for, charged
or received from Borrowers in connection with any of the Loan Documents shall,
to the extent permitted by Applicable Law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the Obligations. Borrowers and
Lender shall, to the maximum extent permitted under Applicable Law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as Interest and (ii) exclude voluntary prepayments and the effects thereof. The
provisions of this Section shall be deemed to be incorporated into every Loan
Document (whether or not any provision of this Section is referred to therein).
All such Loan Documents and communications relating to any Interest owed by
Borrowers and all figures set forth therein shall, for the sole purpose of
computing the extent of Obligations, be automatically recomputed by Borrowers,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section 2.6.
2.7. ILLEGALITY. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful for Lender to make or maintain a
LIBOR Loan or to give effect to its obligations as contemplated hereby with
respect to a LIBOR Loan or (ii) at any time Lender determines that the making or
continuance of any LIBOR Loan has become impracticable as a result of a
contingency occurring after the date hereof which adversely affects the London
interbank market or the position of Lender or Bank in such market, then, by
written notice to any Borrower, Lender may (1) declare that LIBOR Loans will not
thereafter be made by Lender, whereupon any request by a Borrower for a LIBOR
Loan shall be deemed a request for a Base Rate Loan unless Lender's declaration
shall be subsequently withdrawn; and (2) require that all outstanding LIBOR
Loans made by Lender be converted to Base Rate Loans, under the circumstances of
clause (i) or (ii) of this Section 2.7 insofar as Lender determines the
continuance of LIBOR Loans to be impracticable, in which event all such LIBOR
Loans shall be converted automatically to Base Rate Loans as of the date of any
Borrower's receipt of the aforesaid notice from Lender.
2.8. INCREASED COSTS. If, by reason of (a) the introduction of or any
change (including any change by way of imposition or increase of Statutory
Reserves or other reserve requirements) in or in
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<PAGE> 14
the interpretation of any law or regulation, or (b) the compliance with any
guideline or request from any central bank or other governmental authority or
quasi-governmental authority exercising control over banks or financial
institutions generally (whether or not having the force of law):
(i) Lender shall be subject after the date hereof to any
Taxes, duty or other charge with respect to any LIBOR Loan or its
obligation to make LIBOR Loans, or a change shall result in the basis
of taxation of payment to Lender of the principal of or interest on its
LIBOR Loans or its obligation to make LIBOR Loans (except for changes
in the rate of tax on the overall net income of Lender imposed by the
jurisdiction in which Lender's principal executive office is located);
or
(ii) any reserve (including any imposed by the Board
of Governors), special deposits or similar requirement against assets
of, deposits with or for the account of, or credit extended by, Lender
shall be imposed or deemed applicable or any other condition affecting
its LIBOR Loans or its obligation to make LIBOR Loans shall be imposed
on Lender or the London interbank market;
and as a result thereof there shall be any increase in the cost to Lender of
agreeing to make or making, funding or maintaining LIBOR Loans (except to the
extent already included in the determination of the applicable Adjusted LIBOR
Rate for LIBOR Loans), or there shall be a reduction in the amount received or
receivable by Lender, then Borrowers shall from time to time, upon written
notice from and demand by Lender (with a copy of such notice and demand to
Lender), pay to Lender, within 5 Business Days after the date specified in such
notice and demand, an additional amount sufficient to indemnify Lender against
such increased cost. A certificate as to the amount of such increased cost,
submitted to Borrowers by Lender, shall be final, conclusive and binding for all
purposes.
If Lender shall advise APB at any time that, because of the
circumstances described hereinabove in this Section 2.8 or any other
circumstances arising after the date of this Agreement affecting Lender or the
London interbank market or Lender's or Bank's position in such market, the
Adjusted LIBOR Rate, as determined by Lender, will not adequately and fairly
reflect the cost to Lender of funding LIBOR Loans, then, and in any such event:
(i) Lender shall forthwith give notice (by
telephone confirmed in writing) to APB of such event;
(ii) Borrowers' right to request and Lender's
obligation to make LIBOR Loans shall be immediately suspended and
Borrowers' right to continue a LIBOR Loan as such beyond the then
applicable Interest Period shall also be suspended; and
(iii) Lender shall make a Base Rate Loan as part of
the requested Borrowing of LIBOR Loans, which Base Rate Loan shall, for
all purposes, be considered part of such Borrowing.
For purposes of this Section 2.8, all references to Lender shall be
deemed to include any bank holding company or bank parent of Lender.
2.9. CAPITAL ADEQUACY. If after the date hereof Lender determines that
(a) the adoption of any Applicable Law regarding capital requirements for banks
or bank holding companies or the
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<PAGE> 15
subsidiaries thereof, (b) any change in the interpretation or administration of
any such Applicable Law, any governmental authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or (c)
compliance by Lender or its holding company with any request or directive of any
such governmental authority, central bank or comparable agency regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the return on Lender's capital to a level below that which Lender could have
achieved (taking into consideration Lender's and its holding company's policies
with respect to capital adequacy immediately before such adoption, change or
compliance and assuming that Lender's capital was fully utilized prior to such
adoption, change or compliance) but for such adoption, change or compliance as a
consequence of Lender's commitment to make the Loans pursuant hereto by any
amount deemed by Lender to be material, Borrowers shall pay to Lender, as an
additional fee from time to time, on demand, such amount as Lender certifies to
be the amount that will compensate Lender for such reduction. A certificate of
Lender claiming entitlement to compensation as set forth above will be
conclusive in the absence of manifest error. Such certificate will set forth the
nature of the occurrence giving rise to such compensation, the additional amount
or amounts to be paid to Lender (including the basis for Lender's determination
of such amount), and the method by which such amounts were determined. In
determining such amount, Lender may use any reasonable averaging and attribution
method. For purposes of this Section 2.9, all references to Lender shall be
deemed to include any bank holding company or bank parent of Lender.
2.10. FUNDING LOSSES. If for any reason (other than due to a default by
Lender or as a result of Lender's refusal to honor a LIBOR Loan request due to
circumstances described in Section 2.6 or 2.7 hereof) a Borrowing of, or
conversion to or continuation of, LIBOR Loans does not occur on the date
specified therefor in a Notice of Borrowing or Notice of Conversion/
Continuation (whether or not withdrawn), or if any repayment (including any
conversions pursuant to Section 2.1.2 hereof) of any of its LIBOR Loans occurs
on a date that is not the last day of an Interest Period applicable thereto, or
if for any reason Borrower defaults in its obligation to repay LIBOR Loans when
required by the terms of this Agreement, then Borrowers shall pay to Lender, in
addition to any amounts that may be due hereunder, an amount (if a positive
number) computed pursuant to the following formula:
L = (R- T) x P x D
--------------
360
where
L = amount payable
R = interest rate applicable to the LIBOR Loan
unborrowed or prepaid
T = effective interest rate per annum at which any
readily marketable bond or other obligations of
the United States, selected at Lender's sole
discretion, maturing on or near the last day of
the then applicable or requested Interest Period
for such LIBOR Loan and in approximately the
same amount as such LIBOR Loan, can be
purchased by Lender on the day of such
payment of principal or failure to borrow
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P = the amount of principal
paid or the amount of the
LIBOR Loan requested or to
have been converted or continued
D = the number of days
remaining in the Interest
Period as of the date of
such prepayment or the
number of days in the
requested Interest Period
Borrowers shall pay such amount upon presentation by Lender of a statement
setting forth the amount and Lender's calculation thereof pursuant hereto, which
statement shall be deemed true and correct absent manifest error. For purposes
of this Section 2.10, all references to Lender shall be deemed to include any
bank holding company or bank parent of such Lender. The calculations of all
amounts payable to Lender under this Section 2.10 shall be made as though Lender
had actually funded or committed to fund its LIBOR Loan through the purchase for
an underlying deposit in an amount equal to the amount of such LIBOR Loan and
having a maturity comparable to the relevant Interest Period for such LIBOR
Loan; provided, however, Lender may fund its LIBOR Loans in any manner it deems
fit and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this Section 2.10.
SECTION 3 LOAN ADMINISTRATION
3.1. MANNER OF BORROWING REVOLVER LOANS. Revolver Loans available to
Borrowers pursuant to Section 1.1 hereof shall be made and funded as follows:
3.1.1. Notice of Borrowing.
(i) Whenever Borrowers desire to obtain a
Revolver Loan under Section 1.1 of this Agreement (other than a Borrowing
resulting from a conversion or continuation pursuant to Section 2.1.2),
Borrowers shall give Lender prior written notice (or telephonic notice promptly
confirmed in writing) of such Borrowing request (a "Notice of Borrowing"), which
shall be in the form of EXHIBIT C annexed hereto and signed by an authorized
officer of APB. Such Notice of Borrowing shall be given by Borrowers to Lender
no later than 11:00 a.m. (a) on the Business Day of the requested funding date
of such Borrowing, in the case of a Base Rate Loan, and (b) at least 2 Business
Days prior to the requested funding date of such Borrowing, in the case of a
LIBOR Loan. Notices received after 11:00 a.m. shall be deemed received on the
next Business Day. Revolver Loans made by Lender on the Closing Date shall be in
the principal amount of not less than $250,000 and shall be made as Base Rate
Loans and thereafter may be made or continued as, or converted into, Base Rate
Loans or LIBOR Loans. Each Notice of Borrowing (or telephonic notice thereof)
shall be irrevocable and shall specify (a) the principal amount of the
Borrowing, (b) the date of Borrowing (which shall be a Business Day), (c)
whether the Borrowing is to consist of Base Rate Loans or LIBOR Loans, and (d)
in the case of LIBOR Loans, the duration of the Interest Period to be applicable
thereto. Borrowers may not request any LIBOR Loans if a Default or Event of
Default exists.
(ii) Unless payment is otherwise timely made by
Borrowers, the becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents as principal, accrued interest,
fees or other charges shall be deemed irrevocably to be a request for Revolver
Loans on the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the proceeds of such
Revolver Loans may be disbursed by way of direct payment of the relevant
Obligation and shall bear interest as Base Rate Loans. Lender shall have no
obligation to Borrowers to honor any deemed request for a Revolver Loan, but may
do so in its discretion
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without regard to the existence or creation of, and without being deemed to have
waived, any Default, Event of Default or Out-of-Formula Condition.
(iii) As an accommodation to Borrowers, Lender may
permit telephonic requests for Borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrowers;
provided, however, that Borrowers shall confirm each such telephonic request for
a Borrowing of LIBOR Loans by delivery of the required Notice of Borrowing to
Lender by facsimile transmission promptly, but in no event later than 5:00 p.m.
on the same day. Unless Borrowers specifically direct Lender in writing not to
accept or act upon telephonic or electronic communications from Borrowers,
Lender shall not have any liability to Borrowers for any loss or damage suffered
by Borrowers as a result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by a Borrower and Lender shall not have any duty to verify the
origin of any such communication or the identity or authority of the Person
sending it.
3.1.2. Disbursement Authorization. Each Borrower hereby
irrevocably authorizes Lender to disburse the proceeds of each Revolver Loan
requested by any Borrower, or deemed to be requested pursuant to Section 3.1.1,
as follows: (i) the proceeds of each Revolver Loan requested under Section
3.1.1(i) shall be disbursed by Lender in accordance with the terms of the
written disbursement letter from Borrowers in the case of the initial Borrowing,
and, in the case of each subsequent Borrowing, by wire transfer to the Funding
Account; and (ii) the proceeds of each Revolver Loan requested under Section
3.1.1(ii) shall be disbursed by Lender by way of direct payment of the relevant
interest or other Obligation. APB shall have the authority and responsibility to
transfer Loan proceeds deposited in the Funding Account to the other Borrowers
according to their borrowing needs. Any Loan proceeds received by any Borrower
or in payment of any of the Obligations shall be deemed to have been received by
all Borrowers.
3.2. SPECIAL PROVISIONS GOVERNING LIBOR LOANS.
3.2.1. Number of LIBOR Loans. In no event may the number of
LIBOR Loans outstanding at any time to Lender exceed 5.
3.2.2. Minimum Amounts. Each election of LIBOR Loans pursuant
to Section 3.1.1(i), and each continuation of or conversion to LIBOR Loans
pursuant to Section 2.1.2 hereof, shall be in a minimum amount of $500,000 with
respect to any portion of the Loans that bear interest as a LIBOR Loan and
integral multiples of $100,000 in excess of that amount.
3.2.3. LIBOR Lending Office. Lender's initial LIBOR Lending
Office is set forth opposite its name on the signature pages hereof. Lender
shall have the right at any time and from time to time to designate a different
office of itself or of any Affiliate as Lender's LIBOR Lending Office, and to
transfer any outstanding LIBOR Loans to such LIBOR Lending Office. No such
designation or transfer shall result in any liability on the part of a Borrower
for increased costs or expenses resulting solely from such designation or
transfer; provided, that increased costs for expenses resulting from a change in
Applicable Law occurring subsequent to any such designation or transfer shall
not be deemed to result solely from such designation or transfer.
3.3. BORROWERS' REPRESENTATIVE. Each Borrower hereby irrevocably
appoints APB as, and APB shall act under this Agreement as, the agent and
representative of itself and each other Borrower
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for all purposes under this Agreement, including requesting Borrowings,
selecting whether any Loan or portion thereof is to bear interest as a Base Rate
Loan or a LIBOR Loan, and receiving account statements and other notices and
communications to Borrowers (or any of them) from Lender. Lender may rely, and
shall be fully protected in relying, on any Notice of Borrowing, Notice of
Conversion/Continuation, disbursement instructions, reports, information or any
other notice or communication made or given by APB, whether in its own name, on
behalf of any Borrower or on behalf of "the Borrowers," and Lender shall have no
obligation to make any inquiry or request any confirmation from or on behalf of
any other Borrower as to the binding effect on such Borrower of any such
request, instruction, report, information, notice or communication, nor shall
the joint and several character of Borrowers' liability for the Revolver Loans
be affected, provided that the provisions of this Section 3.3 shall not be
construed so as to preclude any Borrower from directly requesting Borrowings or
taking other actions permitted to be taken by "a Borrower" hereunder. Lender may
to maintain a single Loan Account in the name of "APB" hereunder, and each
Borrower expressly agrees to such arrangement and confirms that such arrangement
shall have no effect on the joint and several character of such Borrower's
liability for the Revolver Loans.
3.4. ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall constitute
one general Obligation of Borrowers and (unless otherwise expressly provided in
the Security Documents) shall be secured by Lender's Lien upon all of the
Collateral.
SECTION 4 PAYMENTS; NATURE OF EACH BORROWER'S LIABILITY
4.1. GENERAL PAYMENT PROVISIONS. All payments (including all
prepayments) of principal of and interest on the Loans, LC Obligations and other
Obligations shall be made to Lender in Dollars without any offset or
counterclaim and free and clear of (and without deduction for) any present or
future Taxes, and, with respect to payments made other than by application of
balances in the Payment Account, in immediately available funds not later than
12:00 noon on the due date (and payment made after such time on the due date to
be deemed to have been made on the next succeeding Business Day).
4.2. REPAYMENT OF REVOLVER LOANS.
4.2.1. Payment of Principal. The outstanding principal amounts
with respect to the Revolver Loans shall be repaid as follows:
(i) Any portion of the Revolver Loans consisting
of the principal amount of Base Rate Loans shall be paid by Borrowers to
Lender, unless timely converted to a LIBOR Loan in accordance with this
Agreement, immediately upon (a) each receipt by a Borrower or Lender of any
proceeds of any of the Accounts or Inventory, to the extent of such proceeds,
and (b) the Termination Date.
(ii) Any portion of the Revolver Loans consisting
of the principal amount of LIBOR Loans shall be paid by Borrowers to
Lender, unless converted to a Base Rate Loan or continued as a LIBOR Loan in
accordance with the terms of this Agreement, upon (a) the last day of the
Interest Period applicable thereto and (b) the Termination Date. In no event
shall Borrowers be authorized to pay any LIBOR Loan prior to the last day of the
Interest Period applicable thereto unless (x) otherwise agreed in writing by
Lender or Borrowers are otherwise expressly authorized or required by any other
provision of this Agreement to pay any LIBOR Loan outstanding on a date other
than the last day of the Interest
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<PAGE> 19
Period applicable thereto, and (y) Borrowers pay to Lender concurrently with any
prepayment of a LIBOR Loan any amount due Lender under Section 2.10 hereof as a
result of such prepayment.
(iii) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if an Out-of-Formula Condition shall
exist, Borrowers shall, on the sooner to occur of Lender's demand or the first
Business Day after a Borrower has obtained knowledge of such Out-of- Formula
Condition, repay the outstanding Revolver Loans that are Base Rate Loans in an
amount sufficient to reduce the aggregate unpaid principal amount of all
Revolver Loans by an amount equal to such excess; and, if such payment of Base
Rate Loans is not sufficient to eliminate the Out-of-Formula Condition, then
Borrowers shall immediately either (a) deposit with Lender, for application to
any outstanding Revolver Loans bearing interest as LIBOR Loans as the same
become due and payable (whether at the end of the applicable Interest Periods or
on the Termination Date), cash in an amount sufficient to eliminate such
Out-of-Formula Condition, subject to Lender's Lien thereon and rights of offset
with respect thereto, pending Lender's application of same to LIBOR Loans, or
(b) pay the Revolver Loans outstanding as LIBOR Loans to the extent necessary to
eliminate such Out-of-Formula Condition and also pay to Lender any and all
amounts required by Section 2.10 hereof to be paid by reason of the prepayment
of a LIBOR Loan prior to the last day of the Interest Period applicable thereto.
4.2.2. Payment of Interest. Interest accrued on the Revolver
Loans shall be due and payable on (i) the first calendar day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, with respect to any Revolver Loan (whether a Base Rate Loan or
LIBOR Loan) and (ii) the last day of the applicable Interest Period in the case
of a LIBOR Loan. Accrued and unpaid interest shall also be paid by Borrowers on
the Termination Date. With respect to any Base Rate Loan converted into a LIBOR
Loan pursuant to Section 2.1.2 on a day when interest would not otherwise have
been payable with respect to such Base Rate Loan, accrued interest to the date
of such conversion on the amount of such Base Rate Loan so converted shall be
paid on the conversion date.
4.3. REPAYMENT OF TERM AND EQUIPMENT LOANS.
4.3.1. Payment of Principal of Term Loan. The principal amount
of the Term Loan shall be repaid in accordance with the terms of the Term Note.
4.3.2. Payment of Principal of Equipment Loans. The unpaid
principal amount of the Equipment Loans outstanding from time to time shall be
paid in consecutive monthly installments on the first day of each month
hereafter, commencing on the first day of the month following the month in which
the first such Equipment Loan is made, with the entire unpaid principal balance
and all accrued and unpaid interest thereon to be paid in full on the last day
of the Original Term; provided, however, that the aggregate unpaid principal
amount of and all accrued but unpaid interest with respect to the Equipment
Loans shall be forthwith due and payable upon any termination of this Agreement
in accordance with Section 5.2 hereof. The amount of each monthly installment of
principal to be paid with respect to the Equipment Loans outstanding on the due
date for such installment shall be equal to 1/60th of the aggregate principal
amount of all Equipment Loans made by Lender to Borrowers prior to the date on
which such installment is due.
4.3.3. Payment of Interest. Interest accrued on the Term Loan
and the Equipment Loans shall be due and payable on (i) the first calendar day
of each month for the immediately preceding month, computed through the last
calendar day of the preceding month, whether all or any portion of the Term Loan
or any Equipment Loans bears interest as a Base Rate Loan or a LIBOR Loan, (ii)
the last day of
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the applicable Interest Period in the case of any portion of the Term Loan or
any Equipment Loans that is a LIBOR Loan and (iii) the Termination Date.
4.3.4. Mandatory Prepayment of Term and Equipment Loans.
Borrowers shall prepay the entire unpaid principal balance of the Term Loan and
all Equipment Loans, and all accrued but unpaid interest thereon, upon the
Termination Date. Borrowers shall also be required to prepay the Term Loan and
all Equipment Loans as follows:
(i) Borrowers shall prepay the Term Loan and
Equipment Loans in connection with dispositions of Equipment by any
Borrower, as and when required by Section 7.4.2 hereof; and
(ii) Borrowers shall prepay the Term Loan and
Equipment Loans from the Net Proceeds of insurance or condemnation awards
paid in respect of any Equipment or Real Estate, unless to the extent Borrowers
are authorized to use such Net Proceeds in accordance with the provisions of
Section 7.1.2(ii) hereof.
Each mandatory prepayment pursuant to this Section 4.3.4 shall be applied first
to Base Rate Loans to the full extent thereof before application to any LIBOR
Loans; provided, however, that, so long as no Default or Event of Default
exists, in lieu of application of such prepayment to LIBOR Loans prior to the
expiration of the respective Interest Periods applicable thereto and any
resulting requirement to pay the charges provided for in Section 2.10 hereof,
Borrowers, at their option, may deposit with Lender cash funds equal to such
prepayments to be held by Lender in the Cash Collateral Account for application
to the Term Loan or Equipment Loans on the sooner to occur of the expiration of
the Interest Period applicable thereto or the Termination Date. No prepayment
premium shall be payable by Borrowers with respect to prepayments required by
this Section 4.3.4.
4.3.5. Optional Prepayments of Term Loans. Borrowers may, at
their option, prepay any portion of the Term Loans or Equipment Loans bearing
interest as a Base Rate Loan in whole at any time or in part from time to time,
in amounts aggregating $250,000 or any greater integral multiple of $100,000, by
paying the principal amount to be prepaid together with interest accrued and
unpaid thereon to the date of prepayment and a prepayment premium as set forth
in the Term Note or the Equipment Note, as applicable. Any portion of the Term
Loan or Equipment Loans bearing interest as a LIBOR Loan may be prepaid, at
Borrowers' option, as applicable, at any time in whole or from time to time in
part, in amounts aggregating $250,000 or any greater integral multiple thereof,
by paying the principal amount to be prepaid, interest accrued and unpaid
thereon to the date of prepayment and a prepayment premium as set forth in the
Term Note or the Equipment Note, as applicable, and any applicable charges
pursuant to Section 2.10 hereof if such prepayment is made on a date other than
the last day of an applicable Interest Period. Each such optional prepayment may
be applied against scheduled amortization payments in the inverse order of the
occurrence thereof. Borrowers shall give written notice (or telephonic notice
confirmed in writing) to Lender of any intended prepayment not less than 1
Business Day prior to any prepayment of Term Loan or any Equipment Loans bearing
interest as Base Rate Loans and not less than 2 Business Days prior to any
prepayment of Term Loans or any Equipment Loans bearing interest as LIBOR Loans.
4.4. PAYMENT OF OTHER OBLIGATIONS. The balance of the Obligations
requiring the payment of money shall be repaid by Borrowers to Lender as and
when provided in the Loan Documents, or, if no date of payment is otherwise
specified in the Loan Documents, ON DEMAND.
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4.5. MARSHALLING; PAYMENTS SET ASIDE. Lender shall be under no
obligation to marshall any assets in favor of any Borrower or any other Obligor
or against or in payment of any or all of the Obligations. To the extent that
any Borrower makes a payment to Lender or Lender receives payment from the
proceeds of any Collateral or exercises its right of setoff, and such payment or
the proceeds of such enforcement or setoff (or any part thereof) are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other Person, then to the
extent of any such recovery, the obligation or part thereof originally intended
to be satisfied, and all Liens, rights and remedies therefor, shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred. The provisions of the immediately
preceding sentence of this Section 4.5 shall survive any termination of this
Agreement and payment in full of the Obligations.
4.6. APPLICATION OF PAYMENTS AND COLLECTIONS. Payment Items received by
Lender by 12:00 noon, Chicago, Illinois time on any Business Day shall be deemed
received on that Business Day. All Payment Items received by Lender after 12:00
noon, Chicago, Illinois time on any Business Day shall be deemed received on the
following Business Day. Each prepayment of the Term Loan or any Equipment Loan
shall be applied first to accrued but unpaid interest and then to installments
of principal in the inverse order of their maturities. Except to the extent that
the manner of application to the Obligations of payments or proceeds of
Collateral is expressly governed by other provisions of this Agreement, each
Borrower irrevocably waives the right to direct the application of any and all
payments and collections at any time or times hereafter received by Lender from
or on behalf of such Borrower, and each Borrower does hereby irrevocably agree
that Lender shall have the continuing exclusive right to apply and reapply any
and all such payments and collections received at any time or times hereafter by
Lender or its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records.
4.7. LOAN ACCOUNT. Lender shall establish an account on its books (the
"Loan Account") and shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrowers on any
Obligations and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrowers.
4.8. STATEMENTS OF ACCOUNT. Lender will account to Borrowers monthly
with a statement of Loans, charges and payments made pursuant to this Agreement,
and such accounting rendered by Lender shall be deemed final, binding and
conclusive upon Borrowers unless Lender is notified by Borrowers in writing to
the contrary within 30 days after the date each accounting is deemed to have
been sent pursuant to Section 12.8. Such notice shall only be deemed an
objection to those items specifically objected to therein.
4.9. NATURE AND EXTENT OF EACH BORROWER'S LIABILITY.
(i) Joint and Several Liability. Each
Borrower shall be liable for, on a joint and several basis, and hereby
guarantees the timely payment by all other Borrowers of, all of the Loans, and
other Obligations, regardless of which Borrower actually may have received the
proceeds of any Loans or other extensions of credit hereunder or the amount of
such Loans received or the manner in which Lender accounts for such Loans or
other extensions of credit on its books and records, it being acknowledged and
agreed that Loans to any Borrower inure to the mutual benefit of all Borrowers
and that Lenders is relying on the joint and several liability of Borrowers in
extending the Loans and other financial accommodations hereunder. Each Borrower
hereby unconditionally and irrevocably agrees that upon default in the payment
when due (whether at stated maturity, by acceleration or otherwise) of any
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<PAGE> 22
principal of, or interest owed on, any of the Loans or other Obligations, such
Borrower shall forthwith pay the same, without notice or demand.
(ii) Unconditional Nature of Liability.
Each Borrower's joint and several liability hereunder with respect to, and
guaranty of, the Loans and other Obligations shall, to the fullest extent
permitted by Applicable Law, be unconditional irrespective of (i) the validity,
enforceability, avoidance or subordination of any of the Obligations or of any
promissory note or other document evidencing all or any part of the Obligations,
(ii) the absence of any attempt to collect any of the Obligations from any other
Obligor or any Collateral or other security therefor, or the absence of any
other action to enforce the same, (iii) the waiver, consent, extension,
forbearance or granting of any indulgence by Lender with respect to any
provision of any Instrument evidencing or securing the payment of any of the
Obligations, or any other agreement now or hereafter executed by any other
Borrower and delivered to Lender, (iv) the failure by Lender to take any steps
to perfect or maintain the perfected status of its security interest in or Lien
upon, or to preserve its rights to, any of the Collateral or other security for
the payment or performance of any of the Obligations, or Lender's release of any
Collateral or release or subordination of its Liens upon any Collateral, (v)
Lenders' election, in any proceeding instituted under the Bankruptcy Code, for
the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing
or grant of a security interest by any other Borrower, as debtor-in-possession
under Section 364 of the Bankruptcy Code, (vii) the release or compromise, in
whole or in part, of the liability of any Obligor for the payment of any of the
Obligations, (ix) any amendment or modification of any of the Loan Documents or
waiver of any Default or Event of Default thereunder, (x) any increase in the
amount of the Obligations beyond any limits imposed herein or in the amount of
any interest, fees or other charges payable in connection therewith, or any
decrease in the same, (xi) the disallowance of all or any portion of Lender's
claims for the repayment of any of the Obligations under Section 502 of the
Bankruptcy Code, (xii) Lender's release of any Obligor, (xiii) any delay,
extension of time, renewal, compromise or other indulgence granted by Lender
with respect to any Obligations, and (xiv) any other circumstance that might
constitute a legal or equitable discharge or defense of any Borrower. Each
Borrower expressly waives any requirement that Lender exhausts any right or take
any action against any Obligor or any Collateral, including any rights any
Borrower might otherwise have under O.C.G.A. Section 10- 7-24 or any similar
statute. At any time an Event of Default exists, Lender may proceed directly
and at once, without notice to any Obligor, against any or all of Obligors to
collect and recover all or any part of the Obligations, without first
proceeding against any other Obligor or against any Collateral or other
security for the payment or performance of any of the Obligations, and each
Borrower waives any provision that might otherwise require Lender under
Applicable Law to pursue or exhaust its remedies against any Collateral or
Obligor before pursuing such Borrower or another Obligor. Each Borrower
consents and agrees that Lender shall be under no obligation to marshall any
assets in favor of any Obligor or against or in payment of any or all of the
Obligations.
(iii) No Reduction in Liability for
Obligations. No payment or payments made by an Obligor or received or
collected by Lender from any Collateral or any other Person by virtue of any
action or proceeding or any setoff or appropriation or application at any time
or from time to time in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Borrower under this Agreement, each of which shall remain jointly and severally
liable for the payment and performance of all Loans and other Obligations until
the Obligations are paid in full and this Agreement is terminated.
(iv) Contribution and Indemnity Among
Borrowers. Each Borrower is obligated to repay the Obligations as a joint
and several obligor under this Agreement. To the extent that any Borrower shall,
under this Agreement, as a joint and several obligor, repay any of the
Obligations constituting Loans made to another Borrower hereunder or other
Obligations incurred directly
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and primarily by any other Borrower (an "Accommodation Payment"), then the
Borrower making such Accommodation Payment shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Borrowers in an
amount, for each of such other Borrower, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower's
"Allocable Amount" (as defined below) and the denominator of which is the sum of
the Allocable Amounts of all of the Borrowers. As of any date of determination,
the Allocable Amount of each Borrower shall be equal to the maximum amount of
liability for Accommodation Payments which could be asserted against such
Borrower hereunder without (a) rendering such Borrower "insolvent" within the
meaning of Section 101(31) of the Bankruptcy Code, Section 2 of the Uniform
Fraudulent Transfer Act (the "UFTA") or Section 2 of the Uniform Fraudulent
Conveyance Act (the "UFCA"), (b) leaving such Borrower with unreasonably small
capital or assets within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA or Section 5 of the UFCA, or (c) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA. The
provisions of this section shall, to the extent expressly inconsistent with any
provision in any of the Loan Documents, supersede such inconsistent provision.
(v) Subordination. Each Borrower hereby
subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have from or against any other Obligor,
and any successor or assign of any other Obligor, including any trustee,
receiver or debtor-in-possession, howsoever arising, due or owing or whether
heretofore, now or hereafter existing, to the payment in full of all of the
Obligations.
SECTION 5 TERM AND TERMINATION
5.1. TERM OF AGREEMENT. Subject to Lender's right to cease making Loans
to Borrowers when any Default or Event of Default exists, this Agreement shall
be in effect for a period of 5 years from the date hereof, through March ___,
2003 (the "Original Term"), and this Agreement shall automatically renew itself
for one-year periods thereafter (each a "Renewal Term"), unless terminated as
provided in Section 5.2 hereof.
5.2. TERMINATION.
5.2.1. Termination by Lender. Upon at least 90 days prior
written notice to APB, Lender may terminate this Agreement as of the last day of
the Original Term or the then current Renewal Term, and Lender may terminate
this Agreement without notice upon or after the occurrence of an Event of
Default. This Agreement shall automatically terminate as provided herein.
5.2.2. Termination by Borrowers. Upon at least 90 days prior
written notice to Lender, Borrowres may, at their option, terminate this
Agreement in its entirety; provided, however, no such termination by Borrowers
shall be effective until Borrowers have satisfied all of the Obligations and
executed in favor of and delivered to Lender a general release of all Claims
that Borrowers may have against Lender. For purposes of this Agreement, the
Obligations shall not be deemed to have been satisfied until all Obligations for
the payment of money have been paid to Lender in same day funds and all
Obligations that are at the time in question contingent (including any LC
Obligations) have been fully cash collateralized in favor and to the
satisfaction of Lender or Lender has received as beneficiary a direct pay letter
of credit in form and from an issuing bank acceptable to Lender and providing
for direct payment to Lender of all such contingent Obligations at the time they
become fixed. Any notice of termination given by Borrowers shall be irrevocable
unless Lender otherwise agrees in writing. Borrowers may elect to terminate this
Agreement in its entirety only; no section of this Agreement or Type of Loan
available hereunder may be terminated singly.
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<PAGE> 24
5.2.3. Termination Charges. On the effective date of
termination of this Agreement for any reason, Borrowers shall jointly and
severally pay to Lender (in addition to the then outstanding principal, accrued
interest, fees and other charges owing under the terms of this Agreement and any
of the other Loan Documents), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to 2% of the highest of the Average
Monthly Loan Balances prior to the effective date of termination if termination
occurs during the first Loan Year; 1% of the highest of the Average Monthly Loan
Balances prior to the effective date of termination if termination occurs during
the second Loan Year; and .5% of the highest of the Average Monthly Loan
Balances prior to the effective date of termination if termination occurs during
the third Loan Year. Notwithstanding anything to the contrary contained in this
Section 5.2.3, no termination charges shall be payable by Borrowers if APB shall
terminate this Agreement prior to the end of the first or second Loan Year and
the reason for APB's termination is that (i) Lender has refused to give its
consent to a Restrictive Investment consisting of a Borrower's acquisition of
all or substantially all of the capital stock (or other Equity Interests) or
assets of another Person which requires financing by Lender of not less than
$1,000,000, (ii) Lender consented to such Restricted Investment but declined to
finance such Restricted Investment, or (iii) Lender was unwilling to provide
such financing on terms at least as competitive with respect to amount, pricing
and repayment as those proposed in writing to be provided, and actually
provided, by another financial institution.
5.2.4. Effect of Termination. All of the Obligations shall be
immediately due and payable upon the effective date of termination by Lender or,
in the case of a termination by a Borrower, upon the date specified in such
Borrower's notice of termination of this Agreement as the effective date of such
termination. On the effective date of any termination (whether by Lender or a
Borrower), Lender shall have no obligation to make any Loans, join in any LC
Application or issue any LC Guaranty or otherwise to extend credit to or for the
direct or indirect benefit of any Borrower. All undertakings, agreements,
covenants, warranties and representations of each Borrower contained in the Loan
Documents shall survive any such termination, and Lender shall retain its Liens
in the Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination, until Borrowers have satisfied all of the
Obligations in the manner described in Section 5.2.2. Notwithstanding the
payment in full of the Obligations, Lender shall not be required to terminate
its security interests in the Collateral unless, with respect to any loss or
damage Lender may incur as a result of dishonored Payment Items received by
Lender from any Borrower or any Account Debtor and applied to the Obligations,
Lender has either (at its option) (i) received a written agreement, executed by
Borrowers and by any Person whose loans or other advances to Borrowers are used
in whole or in part to satisfy the Obligations, indemnifying Lender from any
such loss or damage; or (ii) retained such monetary reserves and Liens on the
Collateral for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage. The provisions of
Section 4.5 hereof and all obligations of Borrowers to this Agreement to
indemnify Lender shall be joint and several and shall in all events survive any
termination of this Agreement.
SECTION 6 COLLATERAL SECURITY
6.1. GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance to Lender of all of the Obligations, each Borrower hereby grants to
Lender a continuing security interest in and Lien upon all of such Borrower's
assets, including all of the following Property and interests in Property of
such Borrower, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located:
(i) All Accounts;
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(ii) All Inventory;
(iii) All Equipment;
(iv) All Instruments;
(v) All Chattel Paper;
(vi) All Documents;
(vii) All General Intangibles;
(viii) All Investment Property, including Securities,
whether certificated or uncertificated (but excluding any portion thereof that
constitutes Margin Stock), and all securities entitlements;
(ix) All monies now or at any time or times
hereafter in the possession or under the control of Lender or a bailee or
Affiliate of Lender, including any Cash Collateral in the Cash Collateral
Account;
(x) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through (ix) above,
including proceeds of and unearned premiums with respect to insurance policies
insuring any of the Collateral and claims against any Person for loss of, damage
to or destruction of any of the Collateral; and
(xi) All books and records (including customer lists,
files, correspondence, tapes, computer programs, print-outs, and other
computer materials and records) of such Borrower pertaining to any of (i)
through (x) above.
6.2. LIEN ON DEPOSIT ACCOUNTS. As additional security for the payment
and performance of the Obligations, each Borrower grants to Lender a security
interest in and assigns to Lender all of such Borrower's right, title and
interest in and to each Deposit Account of Borrower and in and to any deposits
or other sums at any time credited to each such Deposit Account, including any
sums in any blocked account or any special lockbox account and in the accounts
in which sums are deposited and such blocked accounts and special lockbox
accounts. In connection with the foregoing, each Borrower hereby authorizes and
directs each such bank or other depository to pay or deliver to Lender upon its
written demand therefor made at any time upon the occurrence and during the
continuation of an Event of Default and without further notice to such Borrower
(such notice being hereby expressly waived), all balances in each Deposit
Account maintained by Borrower with such depository for application to the
Obligations then outstanding, and the rights given Lender in this Section shall
be cumulative with and in addition to Lender's other rights and remedies in
regard to the foregoing Property as proceeds of Collateral. Each Borrower hereby
irrevocably appoints Lender as its attorney to collect any and all such balances
to the extent any such payment is not made to Lender by such bank or other
depository after demand thereon is made by Lender pursuant hereto.
6.3. LIEN ON REAL ESTATE. The due and punctual payment and performance
of the Obligations shall also be secured by the Lien created by the Mortgages
upon the Real Estate described therein. The Mortgages shall be executed on or
about the Closing Date and shall be duly recorded, at Borrowers' expense, in
each office where such recording is required to constitute a fully perfected
Lien on the Real Estate covered thereby.
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6.4. OTHER COLLATERAL. In addition to the items of Property referred to
above, the obligations shall also be secured by the Cash Collateral to the
extent provided herein and all of the other items of Property from time to time
described in any of the Security Documents as security for the payment of the
Obligations.
6.5. LIEN PERFECTION; FURTHER ASSURANCES. Promptly after Lender's
request therefor, Borrowers shall execute and deliver to Lender such
instruments, assignments or documents as are necessary under the UCC or other
Applicable Law to perfect (or continue the perfection of) Lender's Lien upon the
Collateral and shall take such other action as may be requested by Lender to
give effect to or carry out the intent and purposes of this Agreement. Unless
prohibited by Applicable Law, each Borrower hereby authorizes Lender to execute
and file any such financing statement on such Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof.
SECTION 7 COLLATERAL ADMINISTRATION
7.1. GENERAL
7.1.1. Location of Collateral. All tangible items of
Collateral, other than Inventory in transit and motor vehicles, shall at all
times be kept by Borrowers and their Subsidiaries at one or more of the business
locations set forth in SCHEDULE 7.1.1 hereto and shall not be moved therefrom,
without the prior written approval of Lender, except that prior to an Event of
Default and Lender's acceleration of the maturity of the Obligations in
consequence thereof, (i) Borrowers may make sales of Inventory in the ordinary
course of business and (ii) dispose of Equipment to the extent authorized by
Section 7.4.2 hereof.
7.1.2. Insurance of Collateral; Condemnation Proceeds.
(i) Each Borrower shall maintain and pay for
insurance upon all Collateral, wherever located, covering casualty, hazard,
public liability, theft, malicious mischief, and such other risks in such
amounts and with such insurance companies as are reasonably satisfactory to
Lender. All proceeds payable under each such policy shall be payable to Lender
for application to the Obligations. Each Borrower shall deliver the originals or
certified copies of such policies to Lender with satisfactory lender's loss
payable endorsements reasonably satisfactory to Lender, naming Lender as sole
loss payee, assignee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Lender shall not be impaired or invalidated by any act or
neglect of any Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If any
Borrower fails to provide and pay for such insurance, Lender may, at its option,
but shall not be required to, procure the same and charge each Borrower
therefor. Each Borrower agrees to deliver to Lender, promptly as rendered, true
copies of all reports made in any reporting forms to insurance companies. For so
long as no Event of Default exists, each Borrower shall have the right to
settle, adjust and compromise any claim with respect to any insurance maintained
by each Borrower provided that all proceeds thereof are applied in the manner
specified in this Agreement, and Lender agrees promptly to provide any necessary
endorsement to any checks or drafts issued in payment of any such claim. At any
time that an Event of Default exists, only Lender shall be authorized to settle,
adjust and compromise such claims. Lender shall have all rights and remedies
with respect to such policies of insurance as are provided for in this Agreement
and the other Loan Documents.
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(ii) Any proceeds of insurance referred to in
this Section 7.1.2 and any condemnation awards that are paid to Lender in
connection with a condemnation of any of the Collateral shall be paid to Lender
and (a) in the case of proceeds that relate to Inventory, applied first to the
payment of the Revolver Loans and then to any other Obligations outstanding, and
(b) in the case of proceeds of Equipment or real Property applied first to the
Term Loan or Equipment Loans, as specified by Lender, and then to any other
Obligations outstanding, provided that if requested by any Borrower in writing
within 5 days after Lender's receipt of such proceeds and if no Default or Event
of Default exists, each Borrower may apply such proceeds to repair or replace
the damaged or destroyed Equipment or Real Estate so long as (1) such repair or
replacement is promptly undertaken and concluded, (2) replacements of buildings
are constructed on the sites of the original casualties and are of comparable
size, and quality and utility to the destroyed buildings, (3) the repaired or
replaced Property is at all times free and clear of Liens other than Permitted
Liens, (4) each Borrower complies with such disbursement procedures for such
proceeds as Lender may reasonably impose for repair or replacement and (5) the
amount of proceeds from any single casualty affecting Equipment or Real Estate
does not exceed $100,000.
7.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, all Taxes imposed by any Applicable Law on any of the Collateral or
in respect of the sale thereof, and all other payments required to be made by
Lender to any Person to realize upon any Collateral shall be borne and paid by
Borrowers. If Borrowers fail to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and charge
Borrowers therefor. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever, but the same shall be at Borrowers' sole risk.
7.1.4. Defense of Title to Collateral. Borrowers shall at all
times defend their title to the Collateral and Lender's Liens therein against
all Persons and all claims and demands whatsoever other than Permitted Liens.
7.2. ADMINISTRATION OF ACCOUNTS.
7.2.1. Records, Schedules and Assignments of Accounts. Each
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and Borrowers shall submit to Lender on such
periodic basis as Lender shall request a Borrowing Base Certificate for the
preceding period. Each Borrower shall also provide to Lender on or before the
20th day of each month, a detailed aged trial balance of all of its Accounts
existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each Account Debtor
obligated on an Account so listed ("Schedule of Accounts"), and, upon Lender's
request therefor, copies of proof of delivery and the original copy of all
documents, including repayment histories and present status reports relating to
the Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of $100,000 cease to
be Eligible Accounts in whole or in part, Borrowers shall notify Lender of such
occurrence promptly (and in any event within 2 Business Days) after any
Borrower's having obtained knowledge of such occurrence and the Borrowing Base
shall thereupon be adjusted to reflect such occurrence. Upon Lender's request,
each Borrower shall deliver to Lender copies of invoices or invoice registers
related to all of its Accounts.
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7.2.2. Discounts, Allowances, Disputes. If any Borrower grants
any discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrowers shall report such discounts,
allowances or credits, as the case may be, to Lender as part of the next
required Schedule of Accounts. If any amounts due and owing in excess of $50,000
are in dispute between any Borrower and any Account Debtor, Borrowers shall
provide Lender with written notice thereof at the time of submission of the next
Schedule of Accounts, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default, Lender shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorneys' fees, to
Borrowers.
7.2.3. Taxes. If an Account of any Borrower includes a charge
for any Taxes payable to any governmental taxing authority, Lender is
authorized, in its sole discretion, to pay the amount thereof to the proper
taxing authority for the account of such Borrower and to charge Borrowers
therefor; provided, however, that Lender shall not be liable for any Taxes that
may be due by any Borrower.
7.2.4. Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or any Borrower, to verify the validity, amount or any other
matter relating to any Accounts of any Borrower by mail, telephone, telegraph or
otherwise. Borrowers shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
7.2.5. Maintenance of Dominion Account. Each Borrower, jointly
with APB, shall maintain a Dominion Account pursuant to a lockbox or other
arrangement acceptable to Lender and with such banks as may be selected by
Borrowers and be acceptable to Lender. Each Borrower shall issue to each such
bank an irrevocable letter of instruction directing such banks to deposit all
payments or other remittances received in the lockbox to the Dominion Account
for application on account of the Obligations. All funds deposited in a Dominion
Account shall immediately become the property of Lender and each Borrower shall
obtain the agreement by such banks in favor of Lender to waive any offset rights
against the funds so deposited. Lender assumes no responsibility for any such
lockbox arrangement, including any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
7.2.6. Collection of Accounts; Proceeds of Collateral. To
expedite collection, Borrowers shall endeavor in the first instance to make
collection of their Accounts for Lender. All Payment Items received by any
Borrower in respect of its Accounts, together with the proceeds of any other
Collateral, shall be held as Lender's property by such Borrower as trustee of an
express trust for Lender's benefit, and such Borrower shall immediately deposit
same in kind in a Dominion Account. Lender retains the right at all times after
the occurrence of a Default or an Event of Default to notify Account Debtors
that Accounts have been assigned to Lender and to collect Accounts directly in
its own name and to charge to Borrowers the collection costs and expenses,
including attorneys' fees.
7.3. Administration of Inventory.
7.3.1. Records and Reports of Inventory. Each Borrower shall
keep accurate and complete records of its Inventory. Borrowers shall furnish
Lender Inventory reports in form and detail satisfactory to Lender at such times
as Lender may request, but at least once each month, not later than the 20th day
of such month. Borrowers shall conduct a physical inventory no less frequently
than
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annually and shall provide to Lender a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Lender shall request.
7.3.2. Returns of Inventory. No Borrower shall return any of
its Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless (i) such return is in the ordinary course of business of such Borrower
and such Person, (ii) no Default or Event of Default exists or would result
therefrom, (iii) the return of such Inventory will not result in an
Out-of-Formula Condition, (iv) if the aggregate Value of all Inventory returned
in any month exceeds $50,000, Borrowers promptly notifies Lender thereof, and
(v) any payment received by any Borrower in connection with any such return is
promptly turned over to Lender for application to the Obligations.
7.4. ADMINISTRATION OF EQUIPMENT.
7.4.1. Records and Schedules of Equipment. Each Borrower shall
keep accurate records itemizing and describing the kind, type, quality, quantity
and value of its Equipment and all dispositions made in accordance with Section
7.4.2 hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrowers shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
7.4.2. Dispositions of Equipment. No Borrower will sell, lease
or otherwise dispose of or transfer any of its Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate as to
all Borrowers during any consecutive 12-month period, has a fair market value or
book value, whichever is more, of $50,000 or less, provided that all Net
Proceeds thereof are remitted to Lender for application to the Loans (which
application shall be first to the Term Loan or Equipment Loans in accordance
with Section 4.3.4 hereof,, to the extent of the Net Proceeds thereof, and the
balance, if any, to any other Obligations outstanding), or (ii) replacements of
Equipment that is substantially worn, damaged or obsolete with Equipment of like
kind, function and value, provided that the replacement Equipment shall be
acquired prior to or concurrently with any disposition of the Equipment that is
to be replaced, the replacement Equipment shall be free and clear of Liens other
than Permitted Liens that are not Purchase Money Liens. Borrowers shall give
Lender prior written notice of any disposition of Equipment that is authorized
pursuant to this Section 7.4.2 at least 5 Business Days prior to the date of
such disposition.
7.4.3. Condition of Equipment. The Equipment is in good
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved, reasonable wear and tear excepted.
No Borrower will permit any of the Equipment to become affixed to any real
Property leased to such Borrower so that an interest arises therein under the
real estate laws of the applicable jurisdiction unless the landlord of such real
Property has executed a landlord waiver or leasehold mortgage in favor of and in
form acceptable to Lender, and no Borrower will permit any of the Equipment to
become an accession to any personal Property that is subject to a Lien unless
the Lien is a Permitted Lien (other than a Purchase Money Lien).
7.5. PAYMENT OF CHARGES. All amounts chargeable to Borrowers under this
Section 7 shall be Obligations secured by all of the Collateral and shall be
payable ON DEMAND.
SECTION 8 REPRESENTATIONS AND WARRANTIES
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8.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make advances hereunder, each Borrower warrants and
represents to Lender and covenants with Lender that:
8.1.1. Organization and Qualification. Each Borrower and each
of its Subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each Borrower
and each of its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on SCHEDULE 8.1.1 hereto and in all other states and jurisdictions where
the character of its Properties or the nature of its activities make such
qualification necessary unless failure to so qualify could not reasonably be
expected to have a Material Adverse Effect.
8.1.2. Corporate Power and Authority. Each Borrower and each
of its Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents to which
it is a party. The execution, delivery and performance of this Agreement and
each of the other Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the shareholders of any Borrower or any of its Subsidiaries; (ii) contravene any
Borrower's or any of its Subsidiaries' charter, articles or certificate of
incorporation or by-laws; (iii) violate, or cause any Borrower or any of its
Subsidiaries to be in default under, any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to such Borrower or any of its Subsidiaries; (iv) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which any
Borrower or any of its Subsidiaries is a party or by which it or its Properties
may be bound or affected; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any
of the Properties now owned or hereafter acquired by any Borrower or any of its
Subsidiaries.
8.1.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each Borrower and each of its
Subsidiaries enforceable against it in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights.
8.1.4. Capital Structure. As of the date hereof, SCHEDULE
8.1.4 hereto states (i) the correct name of each Subsidiary of each Borrower,
its jurisdiction of incorporation and the percentage of its Voting Stock owned
by such Borrower, (ii) the name of each Borrower's corporate or joint venture
Affiliates and the nature of the affiliation, (iii) the number, nature and
holder of all outstanding Equity Interests of each Borrower (other than APB) and
each of its Subsidiaries, (iv) each shareholder of APB that owns more than 5% of
the issued and outstanding shares of stock of APB, and (v) the number of
authorized and issued Equity Interests (and treasury shares) of each Borrower
and each of its Subsidiaries. Each Borrower has good title to all of the shares
it purports to own of the Equity Interests of each of its Subsidiaries, free and
clear in each case of any Lien other than Permitted Liens. All such Equity
Interests have been duly issued and are fully paid and non-assessable. Except as
set forth on SCHEDULE 8.1.4 hereto, there are no outstanding options to
purchase, or any rights or warrants to subscribe for, or any commitments or
agreements to issue or sell, or any Equity Interests or obligations convertible
into, or any powers of attorney relating to, shares of the capital stock of any
Borrower or any of its Subsidiaries. Except as set forth on SCHEDULE 8.1.4
hereto, there are no outstanding agreements or instruments binding upon any
Borrower's shareholders relating to the ownership of its shares of capital
stock.
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8.1.5. Corporate Names. No Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on SCHEDULE 8.1.5 hereto. Except as set forth on SCHEDULE
8.1.5, no Borrower nor any of its Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person.
8.1.6. Business Locations. As of the date hereof, each
Borrower's and each of its Subsidiaries' chief executive office and other places
of business are as listed on SCHEDULE 7.1.1 hereto. During the preceding
five-year period, no Borrower nor any of its Subsidiaries has had an office or
place of business other than as listed on SCHEDULE 7.1.1. Except as shown on
SCHEDULE 7.1.1, no Inventory is stored with a bailee, warehouseman or similar
Person, nor is any Inventory consigned to any Person.
8.1.7. Title to Properties; Priority of Liens. Each Borrower
and each of its Subsidiaries has good, indefeasible and marketable title to and
fee simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its other
Property, in each case free and clear of all Liens except Permitted Liens. Each
Borrower has paid or discharged all lawful claims when due which, if unpaid when
due, might become a Lien against such Borrower's Properties that is not a
Permitted Lien. The Liens granted to Lender under Section 6 hereof are first
priority Liens, subject only to those Permitted Liens which are expressly stated
to have priority over the Liens of Lender.
8.1.8. Accounts. Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
a Borrower with respect to any Account. Unless otherwise indicated in writing
to Lender, with respect to each Account:
(i) It is genuine and in all respects what it
purports to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by a Borrower in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts or other documents relating thereto and forming a
part of the contract between a Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as
stated in the duplicate invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest
therein, is not, and will not (by voluntary act or omission of a Borrower)
be in the future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for disputes resulting in
returned goods where the amount in controversy is reasonably deemed by Lender to
be immaterial, and each such Account is absolutely owing to a Borrower and is
not contingent in any respect or for any reason;
(v) Such Borrower has made no agreement with any
Account Debtor for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or allowances
which are granted by a Borrower in the ordinary course of its business for
prompt payment and which are reflected in the calculation of the net amount of
each respective invoice related thereto and are reflected in the Schedules of
Accounts submitted to Lender pursuant to Section 7.2.1 hereof;
(vi) To the best of such Borrower's knowledge, there
are no facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the
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<PAGE> 32
amount payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of such Borrower's knowledge, the
Account Debtor thereunder (1) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and (2)
such Account Debtor is Solvent;
(viii) To the best of such Borrower's knowledge,
there are no proceedings or actions which are threatened or pending against any
Account Debtor which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account;
(ix) Except as set forth on SCHEDULE 8.1.8
hereto, there are no restrictions on such Borrower's right to assign to Lender
the right to payment represented by the Account or any Lien upon the Account.
8.1.9. Financial Statements; Fiscal Year. The Consolidated and
consolidating balance sheets of Borrowers (other than Potter's) as of December
31, 1997, and the related statements of income, changes in stockholder's equity,
and changes in financial position for the periods ended on such dates, have been
prepared in accordance with GAAP, and present fairly the financial positions of
Borrowers (other than Potter's) at such dates and the results of Borrowers'
operations (other than the operations of Potter's) for such periods. Since
December 31, 1997, there has been no material change in the condition, financial
or otherwise, of any Borrower whose financial position was included in the
Consolidated and consolidating financial statements as of December 31, 1997, and
no change in the aggregate value of Equipment and real Property owned by any
such Borrower, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse. The Pro Forma
presents fairly and accurately in all material respects Borrowers' financial
condition as of such date as if the transactions contemplated by the Acquisition
Documents and this Agreement have occurred on such date and the Closing Date had
been such date.
8.1.10. Full Disclosure. The financial statements referred to
in Section 8.1.9 hereof do not, nor does this Agreement or any other written
statement of any Borrower to Lender, contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. There is no fact or circumstances which any Borrower
has failed to disclose to Lender in writing and which may reasonably be expected
to have a Material Adverse Effect.
8.1.11. Solvent Financial Condition. Each Borrower and each of
its Subsidiaries is now and, after giving effect to the Acquisition, the Loans
to be made hereunder and all Letters of Credit to be issued on the Closing Date,
at all times will be, Solvent.
8.1.12. Surety Obligations. No Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person, except that APB is a guarantor of certain obligations of its
Subsidiaries under certain Equipment leases.
8.1.13. Taxes. The federal tax identification numbers of each
Borrower and each of its Subsidiaries are shown on SCHEDULE 8.1.13 hereto. Each
Borrower and each of its Subsidiaries has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid,
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or made provision for the payment of, all Taxes upon it, its income and
Properties as and when such Taxes are due and payable, except to the extent
being Properly Contested. The provision for Taxes on the books of Borrowers and
their Subsidiaries are adequate for all years not closed by applicable statutes,
and for their current Fiscal Year.
8.1.14. Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement, except ABN AMRO.
8.1.15. Patents, Trademarks, Copyrights and Licenses. Each
Borrower and each of its Subsidiaries owns or possesses all Intellectual
Property necessary for the present and planned future conduct of its business
without any conflict with the rights of others; there is no objection to or
pending Intellectual Property Claim with respect to any Borrower's right to use
any such Intellectual Property and no Borrower is aware of any grounds for
challenge or objection thereto; and, except as may be described on SCHEDULE
8.1.15, no Borrower pays any royalty or other compensation to any Person for the
right to use any Intellectual Property. All such Intellectual Property and other
similar rights are listed on SCHEDULE 8.1.15 hereto.
8.1.16. Governmental Approvals. Each Borrower and each of its
Subsidiaries has, and is in good standing with respect to all material
Governmental Approvals necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it.
8.1.17. Compliance with Laws. Each Borrower and each of its
Subsidiaries has duly complied with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions of
all Applicable Law (except to the extent that any such noncompliance with
Applicable Law would not reasonably be expected to have a Material Adverse
Effect) and there have been no citations, notices or orders of noncompliance
issued to any Borrower or any of its Subsidiaries under any such law, rule or
regulation. No Inventory has been produced in violation of the Fair Labor
Standards Act (29 U.S.C. Section 201 et seq.). With respect to matters arising
under any Environmental Laws, the representations and warranties contained in
the Environmental Certificate are true and correct on the date hereof.
8.1.18. Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which has or could be reasonably expected to have a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries is a party
or subject to any contract or agreement which restricts its right or ability to
incur the Obligations, other than as set forth on SCHEDULE 8.1.18 hereto, none
of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by Borrower or any of its Subsidiaries, as applicable.
8.1.19. Litigation. Except as set forth on SCHEDULE 8.1.19
hereto, there are no actions, suits, proceedings or investigations pending, or
to the knowledge of any Borrower, threatened, against or affecting any Borrower
or any of its Subsidiaries, or the business, operations, Properties, prospects,
profits or condition of any Borrower or any of its Subsidiaries, which if
resolved adversely to any Borrower or its Subsidiaries would have Material
Adverse Effect. No Borrower or any of its Subsidiaries is in default with
respect to any order, writ, injunction, judgment, decree or rule of any court,
governmental authority or arbitration board or tribunal.
8.1.20. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or Borrowers' performance hereunder,
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<PAGE> 34
constitute a Default or an Event of Default. No Borrower or any of its
Subsidiaries is in default, and no event has occurred and no condition exists
which constitutes or which with the passage of time or the giving of notice or
both would constitute a default, under any Material Contract or in the payment
of any Debt to any Person for Money Borrowed. No default exists int the
performance by any Borrower of any of its obligations under any of the
Acquisition Documents.
8.1.21. Leases. SCHEDULE 8.1.21 hereto is a complete listing
of all capitalized and operating leases of each Borrower and each of its
Subsidiaries on the date hereof. Each Borrower and each of its Subsidiaries is
in full compliance with all of the terms of each of its respective capitalized
and operating leases.
8.1.22. Pension Plans. Except as disclosed on SCHEDULE 8.1.22
hereto, no Borrower nor any of its Subsidiaries has any Plan on the date hereof.
Each Borrower and each of its Subsidiaries is in full compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect to
each Plan. No fact or situation that could result in a Material Adverse Effect
on the financial condition of any Borrower or any of its Subsidiaries exists in
connection with any Plan. No Borrower nor any of its Subsidiaries has any
withdrawal liability in connection with a Multiemployer Plan.
8.1.23. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower or any of its Subsidiaries and
any Person or any group of Persons whose accounts individually or in the
aggregate are material to the business of any Borrower or any of its
Subsidiaries, or with any material supplier, and there exists no condition or
state of facts or circumstances which would have a Material Adverse Effect upon
any Borrower or any of its Subsidiaries or prevent any Borrower or any of its
Subsidiaries from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
8.1.24. Labor Relations. Except as described on SCHEDULE
8.1.24 hereto, no Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement on the date hereof. On the date hereof, there
are no material grievances, disputes or controversies with any union or any
other organization of any Borrower's or any of its Subsidiaries' employees, or
threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization.
8.1.25. Investment Company Act; Public Utility Holding Company
Act. No Obligor is an "investment company" or a "person directly or indirectly
controlled by or acting on behalf of an investment company" within the meaning
of the Investment Company Act of 1940, or a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935.
8.1.26. Margin Stock. No Borrower nor any Subsidiary of a
Borrower is engaged, principally or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
Margin Stock.
8.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be deemed to be reaffirmed by each Borrower upon each delivery
of a Notice of Borrowing to Lender in accordance with Section 3.1 of this
Agreement, except for changes in the nature of a Borrower's or, if applicable,
any of its Subsidiaries' business or operations that may occur after the date
hereof in the ordinary course of business so long as
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<PAGE> 35
Lender has consented to such changes or such changes are not violative of any
provision of this Agreement. Notwithstanding the foregoing, representations and
warranties which by their terms are applicable only to a specific date shall be
deemed made only at and as of such date.
8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 9 COVENANTS AND CONTINUING AGREEMENTS
9.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall and
shall cause each of its Subsidiaries to:
9.1.1. Visits and Inspections. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect its Properties and the
Properties of each of its Subsidiaries, inspect, audit and make extracts from
such Borrower's books and records, and discuss with such Borrower's officers,
employees and independent accountant, such Borrower's and each of its
Subsidiary's business, assets, liabilities, financial condition, business
prospects and results of operations.
9.1.2. Notices. Notify Lender in writing promptly after
Borrower's obtaining knowledge thereof (i) of the occurrence of any event or the
existence of any fact which renders any representation or warranty in this
Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading; (ii) of the commencement of any litigation affecting any Borrower or
any of its Properties, whether or not the claim is considered by Borrowers to be
covered by insurance, and of the institution of any administrative proceeding
which, if determined adversely to any Borrower, would have a Material Adverse
Effect; (iii) at least sixty (60) days prior thereto, of any Borrower's opening
of any new office or place of business or any Borrower's closing of any existing
office or place of business; (iv) of any labor dispute to which any Borrower may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (v) of any default by any Obligor under or termination of
any Material Contract or any note, indenture, loan agreement, mortgage, lease,
deed, guaranty or other similar agreement relating to any Debt of any Borrower
exceeding $$100,000; (vi) of the existence of any Default or Event of Default;
(vii) of any default by any Person under any note or other evidence of Debt
payable to any Borrower; (viii) of any judgment rendered against any Obligor in
an amount exceeding $100,000; (ix) of the receipt by any Borrower of a notice
from a seller of "livestock" (as defined in PASA) that such Borrower has not
made timely payment therefor or that any instrument of payment therefor has been
dishonored, delivered by such unpaid seller to such Borrower pursuant to PASA,
or the receipt by any Borrower of any complaint, citation or order from the
Secretary of Agriculture alleging violations by such Borrower of the provisions
of PASA; and (x) of the receipt of any notice of default or termination or
threat of termination with respect to any material Distribution Agreement, and
of the commencement of any Insolvency Proceeding against any distributor who is
a party to any Distribution Agreement.
9.1.3. Financial Statements and Other Information. Keep
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrowers'
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<PAGE> 36
certified public accountants concur in any change therein and such change is
disclosed to Lender and is consistent with GAAP):
(i) not later than 90 days after the close of
each Fiscal Year of Borrowers, unqualified audited financial statements
of Borrowers and their Subsidiaries as of the end of such year, on a
Consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by Borrowers but
acceptable to Lender (except for a qualification for a change in accounting
principles with which the accountant concurs);
(ii) not later than 30 days after the end of each
month hereafter (except the months of March, June, September and December),
and 45 days after the end of the months of March, June, September and December,
unaudited interim financial statements of Borrowers and their Subsidiaries as of
the end of such month and of the portion of Borrowers' fiscal year then elapsed,
on a Consolidated and consolidating basis, certified by the principal financial
officer of Borrowers as prepared in accordance with GAAP and fairly presenting
the Consolidated financial position and results of operations of Borrowers and
their Subsidiaries for such month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes;
provided, that, such statements need not include cash flow statements except for
the months coinciding with the end of a Fiscal Quarter.
(iii) promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements, financial statements or
reports which any Borrower has made available to its shareholders and copies of
any regular, periodic and special reports or registration statements which any
Borrower files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange;
(iv) promptly after the filing thereof, copies of any
annual report to be filed in accordance with ERISA in connection with each Plan;
(v) not later than 30 days after the end of each
month hereafter, a detailed report of all accounts payable of each Borrower
for the purchase of "livestock" (as defined in PASA) that have been outstanding
more than 48 hours, as of the last day of the preceding month, specifying the
name, address and amount of each such account payable; and
(vi) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or any Borrower's and any of its Subsidiaries'
financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
clause (i) of this Section 9.1.3, Borrowers shall forward to Lender a copy of
the accountants' letter to Borrowers' management that is prepared in connection
with such financial statements and shall also cause to be prepared a certificate
of the aforesaid certified public accountants prepared by such accountants that
states, based upon their examination of the financial statements of Borrowers
and their Subsidiaries performed in connection with their examination of said
financial statements, they are not aware of any Default or Event of Default, or,
if they are aware of such Default or Event of Default, specifying the nature
thereof, and acknowledging that they are aware that Lender is relying on such
financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(i) and (ii) of this Section 9.1.3, or more frequently if requested by Lender,
Borrowers shall cause to be prepared and furnished to Lender a Compliance
Certificate executed by the chief financial officer of Borrowers.
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<PAGE> 37
9.1.4. Landlord and Storage Agreements. Provide Lender with
copies of all agreements between any Borrower or any of its Subsidiaries and any
landlord or warehouseman which owns any premises at which any Inventory may,
from time to time, be kept.
9.1.5. Projections. No later than 30 days after the end of
each Fiscal Year of Borrowers, deliver to Lender Projections of Borrowers for
the forthcoming Fiscal Year, month by month.
9.1.6. Taxes. Pay and discharge all Taxes prior to the date on
which such Taxes become delinquent or penalties attach thereto, except and to
the extent only that such Taxes are being Properly Contested.
9.1.7. Compliance with Laws. Comply with all Applicable Law,
including all laws, statutes, regulations and ordinances regarding the
collection, payment and deposit of Taxes, and all ERISA and Environmental Laws,
and obtain and keep in force any and all Governmental Approvals necessary to the
ownership of its Properties or to the conduct of its business, which violation
or failure to obtain might have a Material Adverse Effect. Without limiting the
generality of the foregoing, if any Environmental Release shall occur at or on
any of the Properties of Borrower or any Subsidiary, Borrower shall, or shall
cause the applicable Subsidiary to, act immediately to investigate and report to
Lender and, to the extent required by Applicable Law, all appropriate
governmental authorities, the extent of, and to make appropriate remedial action
to eliminate, such Environmental Release, whether or not ordered or otherwise
directed to do so by any governmental authority.
9.1.8. Insurance. In addition to the insurance required herein
with respect to the Collateral, maintain with financially sound and reputable
insurers, insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability, business
interruption, larceny, embezzlement, or other criminal misappropriation
insurance) and in such amounts as is customary in the business of Borrowers or
as otherwise required by Lender.
9.1.9. Potter's Inventory. Implement a perpetual inventory
system that enables Potter's to generate daily Inventory reports on or before
September 20, 1998.
9.1.10. Distribution Agreements. Provide Lender with copies of
all material Distribution Agreements, comply with all terms of each such
Distribution Agreement, and keep all such Distribution Agreements in full force
and effect.
9.1.11. Year 2000 Compatibility. Each Borrower shall (i)
promptly and in no event later than December 31, 1998, take all action necessary
to ensure that all computer based systems of Borrowers and their Subsidiaries
are capable of the following: (a) handling date information involving all and
any dates before, during and/or after January 1, 2000, including accepting
input, providing output and performing date calculations in whole or in part;
(b) operating, accurately without interruption on and in respect of any and all
dates before, during and/or after January 1, 2000, and without any change in
performance; (c) responding to and processing two digit year input without
creating any ambiguity as to the century; (d) storing and providing date input
information without creating any ambiguity as to the century; and (ii) promptly
and in no event later than December 31, 1998, take all action necessary to
ensure that all computer based systems of each of their vendors, suppliers and
customers are capable of (a) through (d) above, where noncompliance could have a
Material Adverse Effect. In addition, at the request of Lender, Borrowers shall
provide Lender assurances in form and substance satisfactory to Lender of the
Borrowers' and each of their Subsidiaries' year 2000 compatibility.
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<PAGE> 38
9.1.12. Survey. On or before April 3, 1998, Borrowers shall
deliver to Lender a survey with respect to Borrowers' Real Estate located in
Durant, Oklahoma which complies with the requirements of Section 10.1.7 hereof.
9.2. NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless Lender has first consented thereto in writing, it shall
not and shall not permit any Subsidiary to:
9.2.1. Fundamental Changes. Except as may be contemplated by
the Acquisition Documents, enter into any transaction to merge, reorganize,
consolidate or amalgamate with any Person, or liquidate, wind up or dissolve
itself, except for mergers or consolidations of any Subsidiary with another
Subsidiary.
9.2.2. Loans. Make any loans or other advances of money to any
Person other than to an officer or employee of such Borrower or a Subsidiary for
salary, travel advances, advances against commissions and other similar advances
in the ordinary course of business.
9.2.3. Total Debt. Create, incur, assume, or suffer to exist
any Debt, except: (i) the Obligations; (ii) Subordinated Debt existing on the
Closing Date; (iii) Debt of any Subsidiary of such Borrower to such Borrower;
(iv) accounts payable to trade creditors and current operating expenses (other
than for Money Borrowed), in each case incurred in the ordinary course of
business; (v) obligations to pay Rentals permitted by Section 9.2.12; (vi)
Permitted Purchase Money Debt; (vii) contingent letter of credit obligations
owing to LaSalle National Bank for so long as such letter of credit obligations
are fully secured by Cash Collateral; (viii) Debt not included in paragraphs (i)
through (vii) above which does not exceed at any time, in the aggregate, the sum
of $50,000.
9.2.4. Affiliate Transactions. Enter into, or be a party to
any transaction with any Affiliate or stockholder, except: (i) the transactions
contemplated by the Loan Documents; (ii) payment of customary directors' fees
and indemnities; (iii) transactions with Affiliates that were consummated prior
to the date hereof and have been disclosed to Lender prior to the Closing Date;
(iv) in the ordinary course of and pursuant to the reasonable requirements of
such Borrower's or such Subsidiary's business and upon fair and reasonable terms
which are fully disclosed to Lender and are no less favorable to such Borrower
or such Subsidiary than would obtain in a comparable arm's length transaction
with a Person not an Affiliate or stockholder of such Borrower or such
Subsidiary; (v) management fees payable to Sterling Advisors and Elfman pursuant
to the Consulting Agreement up to $425,000 in the aggregate (as the same may be
increased in accordance with the terms of such Consulting Agreement as in effect
on the date hereof) during each Fiscal Year, provided that no Default or Event
of Default exists at the time of or immediately after giving effect to any such
payment; and (vi) any payments due from any Borrower to another Borrower in
accordance with the terms of the Tax Sharing Agreement as in effect on the date
hereof.
9.2.5. Limitation on Liens. Create or suffer to exist any Lien
upon any of its Property, income or profits, whether now owned or hereafter
acquired, except:
(i) Liens at any time granted in favor of
Lender;
(ii) Liens for Taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) incurred in the ordinary course
of such Borrower's business and not yet due or being Properly Contested;
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<PAGE> 39
(iii) Liens arising in the ordinary course of such
Borrower's business by operation of law or regulation, but only if payment
in respect of any such Lien is not at the time required or the Debt secured by
any such Lien is being Properly Contested and such Liens do not materially
detract from the value of the Property of such Borrower or materially impair the
use thereof in the operation of such Borrower's business;
(iv) Purchase Money Liens securing Permitted
Purchase Money Debt;
(v) Liens securing Debt of a Subsidiary of any
Borrower to such Borrower or to another such Subsidiary;
(vi) Liens arising by virtue of the rendition, entry
or issuance against such Borrower or any of its Subsidiaries, or any
Property of such Borrower or any of its Subsidiaries, of any judgment, writ,
order, or decree for so long as each such Lien (a) is either in existence for
less than 20 consecutive days after it first arises or is being Properly
Contested and (b) is at all times junior in priority to the Liens in favor of
Lender;
(vii) Liens in existence immediately prior to the
Closing Date that are satisfied in full and released on the Closing Date as
a result of the application of Borrower's cash on hand at the Closing Date or
the proceeds of the Loans to be made on the Closing Date;
(viii) Easements, rights-of-way, restrictions,
covenants or other agreements of record and other similar charges and
encumbrances on Real Estate of Borrower or a Subsidiary that do not interfere
with the ordinary conduct of the business of Borrower or such Subsidiary;
(ix) such other Liens as appear on SCHEDULE
9.2.5 hereto; and
(x) such other Liens as Lender may hereafter approve
in writing.
9.2.6. Subordinated Debt. Make any principal payment of all or
any part of any Subordinated Debt, unless at the time of, and after giving
effect to, any such payment, Availability is not less than $1,000,000; or make
any payment of all or any part of any Subordinated Debt, or take any other
action or omit to take any other action in respect of any Subordinated Debt,
except in accordance with the Debt Subordination relative thereto.
9.2.7. Distributions. Declare or make any Distributions.
9.2.8. Capital Expenditures. Make Capital Expenditures
(including, expenditures by way of capitalized leases) which, in the aggregate,
as to all Borrowers and their Subsidiaries, exceed $1,300,000 during any Fiscal
Year of Borrowers.
9.2.9. Disposition of Assets. Sell, lease or otherwise dispose
of any of its Properties, including any disposition of Property as part of a
sale and leaseback transaction, to or in favor of any Person, except (i) sales
of Inventory in the ordinary course of business for so long as no Event of
Default exists hereunder, (ii) dispositions of Equipment to the extent
authorized by Section 7.4.2 hereof, (iii) a transfer of Property to such
Borrower by its Subsidiary or (iv) other dispositions expressly authorized by
other provisions of the Loan Documents.
9.2.10. Equity Interests of Subsidiaries. Permit any of its
Subsidiaries to issue any additional Equity Interests except director's
qualifying shares.
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9.2.11. Restricted Investment. Make or have any Restricted
Investment.
9.2.12. Tax Consolidation. File or consent to the filing of
any consolidated income tax return with any Person other than a Borrower or a
Subsidiary of a Borrower.
9.2.13. Fiscal Year. Establish a fiscal year different from
the Fiscal Year.
9.2.14. Organization Documents. Amend, modify or otherwise
change any of the terms or provisions and any of its corporate charter, Articles
or Certificate of Incorporation, Bylaws, or other governing documents as in
effect on the date hereof, (i) except that (A) Potter's may make such amendments
and changes as necessary to reflect the change in its corporate name from
Potter's Acquisition Corp. to Potter's Sausage Co. and (B) APB may make such
amendments as are necessary to authorize the distribution of non-voting stock
and (ii) except for changes that do not affect in any way such Borrower's or any
of its Subsidiaries' rights and obligations to enter into and to perform the
Loan Documents to which it is a party and to pay all of the Obligations and that
do not otherwise have a Material Adverse Effect.
9.2.15. Conduct of Business. Engage in any business other than
the business engaged in by it on the Closing Date and any business or activities
which are substantially similar, related or incidental thereto.
9.2.16. Purchases of Certain Inventory. Purchase inventory
consisting of "livestock" (as defined in PASA) for cash, unless payment is made
therefor by such Borrower before the close of the Business Day following the day
on which the purchase of livestock and transfer of possession thereof occurred,
or on credit unless in connection therewith the seller of such livestock has
executed and delivered in favor of such Borrower a written waiver of the
benefits of the statutory trust provided for in Section 196(a) of PASA.
9.3. SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement,
and thereafter for so long as there are any Obligations outstanding, Borrowers
covenant that, unless otherwise consented to by Lender in writing, they shall:
9.3.1. Minimum Fixed Charge Coverage Ratio. Borrowers shall
maintain a Fixed Charge Coverage Ratio of not less than the ratio set forth
below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Closing Date through the
end of 1st Fiscal Quarter of 1998 1.30 to 1
From the Closing Date through the
end of 1st two Fiscal Quarters of 1998 1.30 to 1
From the Closing Date through the
end of 1st three Fiscal Quarters of 1998 1.30 to 1
From the Closing Date through
Fiscal Year End 1998 1.35 to 1
</TABLE>
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<PAGE> 41
On a four Fiscal Quarter rolling basis, 1.35 to 1
tested at the end of each Fiscal Quarter
after Fiscal Year 1998
9.3.2. Minimum Senior Fixed Charge Coverage Ratio.
Borrowers shall maintain a Senior Fixed Charge Coverage Ratio of not less
than the ratio set forth below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Closing Date through the
end of 1st Fiscal Quarter of 1998 1.65 to 1
From the Closing Date through the
end of 1st two Fiscal Quarters of 1998 1.65 to 1
From the Closing Date through the
end of 1st three Fiscal Quarters of 1998 1.70 to 1
From the Closing Date through
Fiscal Year End 1998 1.75 to 1
On a four Fiscal Quarter rolling basis, 1.75 to 1
tested at the end of each Fiscal Quarter
after Fiscal Year 1998
</TABLE>
9.3.3. Minimum Consolidated Interest Coverage
Ratio. Borrowers and their Subsidiaries on a combined and Consolidated
basis, shall maintain an Interest Coverage Ratio of not less than the ratio set
forth below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Closing Date through the
end of 1st Fiscal Quarter of 1998 2.25 to 1
From the Closing Date through the
end of 1st two Fiscal Quarters of 1998 2.25 to 1
From the Closing Date through the
end of 1st three Fiscal Quarters of 1998 2.30 to 1
From the Closing Date through
Fiscal Year End 1998 2.40 to 1
On a four Fiscal Quarter rolling basis, 2.40 to 1
tested at the end of each Fiscal Quarter
after Fiscal Year 1998
</TABLE>
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<PAGE> 42
9.3.4. Senior Debt EBITDA Ratio. Borrowers and
their Subsidiaries, on a combined and Consolidated basis, shall maintain a
Senior/Debt EBITDA Ratio of not less than the ratio set forth below for the
period corresponding thereto:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Closing Date through the
end of 1st Fiscal Quarter of 1998 14.50 to 1
From the Closing Date through the
end of 1st two Fiscal Quarters of 1998 6.85 to 1
From the Closing Date through the
end of 1st three Fiscal Quarters of 1998 4.60 to 1
From the Closing Date through the
Fiscal Year End 1998 3.15 to 1
On a four Fiscal Quarter rolling basis, 3.15 to 1
tested at the end of each Fiscal Quarter
after Fiscal Year 1998
</TABLE>
9.3.5. Minimum Effective Net Worth. Borrowers and
their Subsidiaries, on a combined and consolidated basis, shall achieve a
level of Effective Net Worth of not less than the amount set forth below for the
period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
First Fiscal Quarter of 1998 $16,361,000
Second Fiscal Quarter of 1998 $16,757,000
Third Fiscal Quarter of 1998 $17,119,000
Fourth Fiscal Quarter of 1998 $17,585,000
First Fiscal Quarter of 1999 $17,966,000
Second Fiscal Quarter of 1999 $18,362,000
Third Fiscal Quarter of 1999 $18,724,000
Fourth Fiscal Quarter of 1999 $19,191,000
First Fiscal Quarter of 2000 $19,572,000
Second Fiscal Quarter of 2000 $19,968,000
Third Fiscal Quarter of 2000 $20,330,000
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Fourth Fiscal Quarter of 2000 $20,795,000
First Fiscal Quarter of 2001 $19,887,000
Second Fiscal Quarter of 2001 $20,272,000
Third Fiscal Quarter of 2001 $19,813,000
Fourth Fiscal Quarter of 2001 $20,267,000
First Fiscal Quarter of 2002 $20,714,000
Second Fiscal Quarter of 2002 $21,099,000
Third Fiscal Quarter of 2002 $21,450,000
Fourth Fiscal Quarter of 2002 $21,904,000
First Fiscal Quarter of 2003 $22,273,000
Second Fiscal Quarter of 2003 $22,658,000
Third Fiscal Quarter of 2003 $23,010,000
Fourth Fiscal Quarter of 2003 $23,463,000
</TABLE>
SECTION 10 CONDITIONS PRECEDENT
10.1. CONDITIONS PRECEDENT TO INITIAL LOANS. Notwithstanding any other
provision of this Agreement or any of the other Loan Documents, and without
affecting in any manner the rights of Lender under the other sections of this
Agreement, Lender shall not be required to fund any Loan requested by Borrowers
unless, on or before March 20, 1998, each of the following conditions has been
and continues to be satisfied:
10.1.1. Documentation. Lender shall have received, in form and
substance satisfactory to Lender and its counsel, a duly executed counterpart of
this Agreement and the other Loan Documents, together with such additional
documents, instruments and certificates as Lender and its counsel shall require
in connection therewith from time to time, all in form and substance
satisfactory to Lender and its counsel.
10.1.2. Availability. Lender shall have determined that
immediately after Lender has made the initial Loans and Bank has issued the
Letters of Credit to be issued on the Closing Date, contemplated hereby or
requested by Borrowers hereunder, and paid (or made provision for payment of)
all closing costs incurred in connection with the transactions contemplated
hereby, Availability shall not be less than $2,000,000.
10.1.3. Evidence of Perfection and Priority of Liens in
Collateral. Lender shall have received copies of all filing receipts or
acknowledgments issued by any governmental authority to evidence any filing or
recordation necessary to perfect the Liens of Lender in the Collateral and
evidence in form satisfactory to Lender that such Liens constitute valid and
perfected security interests and Liens, and that there are no other Liens upon
any Collateral except for Permitted Liens.
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10.1.4. Organization Documents. Lender shall have received a
copy of the Articles or Certificate of Incorporation of each Borrower, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of the jurisdiction of such Borrower's incorporation.
10.1.5. Good Standing Certificates. Lender shall have received
good standing certificates for each Borrower, issued by the Secretary of State
or other appropriate official of such Borrower's jurisdiction of organization
and each jurisdiction where the conduct of such Borrower's business activities
or ownership of its Property necessitates qualification.
10.1.6. Title Insurance Policies. Lender shall have received,
had at least 3 days to review and found acceptable fully paid mortgagee title
insurance policies (or binding commitments to issue title insurance policies,
marked to Lender's satisfaction to evidence the form of such policies to be
delivered after the Closing Date), in standard ALTA form, issued by a title
insurance company satisfactory to Lender, each in an amount equal to not less
than the fair market value of the real Property or leasehold interest, as the
case may be, subject to the Mortgages, insuring each of the Mortgages to create
a valid Lien on all real Property and valid Liens on the leasehold interest
described therein with no exceptions which Lender shall not have approved in
writing and no survey exceptions.
10.1.7. Survey. Lender shall have received, had at least 3
days to review and, found acceptable an as-built survey with respect to each
parcel of real Property comprising a part of the Collateral, which survey shall
indicate the following: (i) an accurate metes and bounds or lot, block and
parcel description of such Property; (ii) the correct location of all buildings,
structures and other improvements on such Property, including all streets,
easements, rights of way and utility lines; (iii) the location of ingress and
egress from such Property, and the location of any set-back or other building
lines affecting such Property; and (iv) a certification by a registered land
surveyor in form and substance acceptable to Lender, certifying to the accuracy
and completeness of such survey and to such other matters relating to such real
Property and survey as Lender shall require.
10.1.8. Dominion Accounts. Lender shall have received the duly
executed agreements establishing each Dominion Account with a financial
institution acceptable to Lender for the collection or servicing of the
Accounts.
10.1.9. Opinion Letters. Lender shall have received favorable,
written opinions of Tom D. Wippman, P.C., counsel to Borrowers, as to the
transactions contemplated by this Agreement and the matters set forth in EXHIBIT
G attached hereto, together with written opinions or reliance letters from
counsel to Seller in connection with the transactions contemplated by the
Acquisition Documents.
10.1.10. Insurance. Lender shall have received copies of the
casualty insurance policies of Borrowers, together with loss payable
endorsements on Lender's standard form of loss payee endorsement naming Lender
as loss payee and copies of each Borrower's liability insurance policies,
including product liability policies, together with endorsements naming Lender
as a co-insured.
10.1.11. Disbursement Letter. Lender shall have received
written instructions from Borrowers directing application of proceeds of the
initial Loans made pursuant to this Agreement.
10.1.12. Landlord Agreements. Lender shall have received all
landlord or warehouseman agreements with respect to all premises leased by any
Borrower and which are disclosed on SCHEDULE 7.1.1 hereto.
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10.1.13. Acquisition. Lender shall have reviewed and found
acceptable the Acquisition Documents and obtained Seller's consent to an
assignment of all of Borrower's rights under the Acquisition Documents, and the
Acquisition shall have been consummated substantially in accordance with the
terms of the Acquisition Documents.
10.1.14. Environmental Matters. Lender shall have received,
reviewed and found satisfactory the Environmental Certificate and a phase 1
study of the Real Estate conducted by an environmental consulting firm
acceptable to Lender.
10.1.15. Banc One Subordinated Debt. Borrower and Banc One
shall have executed and delivered the Banc One Documents evidencing the Banc One
Subordinated Debt, and consummated all of the transactions contemplated thereby.
10.1.16. Intercreditor Agreements. Lender shall have
received the Intercreditor Agreements signed by Banc One, in form and substance
satisfactory to Lender.
10.1.17. Debt Subordinations. Lender shall have
received all Debt Subordinations, in form and substance satisfactory to Lender.
10.1.18. Appraisals. Lender shall have received and found
acceptable in all respects appraisals of the value of the Equipment, the Real
Estate, the Intellectual Property and certain other Property of Borrowers,
including Equipment, Real Estate and Intellectual Property to be acquired in
connection with the Acquisition.
10.2. CONDITIONS PRECEDENT TO PROCUREMENT OF LETTERS OF CREDIT.
Notwithstanding any other provision of this Agreement or any of the other Loan
Documents, and without affecting in any manner the rights of Lender under other
sections of this Agreement, Lender shall not be required to procure any Letter
of Credit requested by any Borrower, unless and until each of the following
conditions has been and continues to be satisfied:
10.2.1. Letter of Credit Documentation. Bank shall have
received, in form and substance satisfactory to Bank and its counsel, duly
executed LC Documents with respect to the Letters of Credit requested to be
issued by Bank and an LC Guaranty with respect to each such Letter of Credit.
10.2.2. LC Request. Lender shall have received an LC Request
from a Borrower.
10.2.3. LC Conditions. Each of the LC Conditions shall have
been satisfied.
10.2.4. Satisfaction of Other Conditions. Each of the
conditions set forth in Section 10.1 hereof shall have been satisfied.
10.3. CONDITIONS PRECEDENT TO ALL LOANS. Notwithstanding any other
provision of this Agreement or any of the other Loan Documents, and without
affecting in any manner the rights of Lender under the other sections of this
Agreement, Lender shall not be required to make any Loan or otherwise extend any
credit or other financial accommodations to or for the benefit of any Borrower,
unless and until each of the following conditions has been and continues to be
satisfied:
10.3.1. No Default. No Default or Event of Default shall exist
at the time of, or shall result from, the funding of any such Loan or other
extension.
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10.3.2. Satisfaction of Conditions in Other Loan Documents.
Each of the conditions precedent set forth in any other Loan Document shall have
been and shall remain satisfied.
10.3.3. No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of this Agreement or any of the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
10.3.4. No Material Adverse Effect. No event shall have
occurred and no condition shall exist which has or may be reasonably likely to
have a Material Adverse Effect.
10.4. LIMITED WAIVER OF CONDITIONS PRECEDENT. If Lender shall make any
Loans or otherwise extend any credit to Borrowers under this Agreement at a time
when any of the foregoing conditions precedent are not satisfied (regardless of
whether the failure of satisfaction of any such conditions precedent was known
or unknown to Lender), the funding of such Loans or the extension of such credit
shall not operate as a waiver of the right of Lender to insist upon the
satisfaction of all conditions precedent with respect to each subsequent
Borrowing requested by Borrowers or a waiver of any Default or Event of Default
as a consequence of the failure of any such conditions to be satisfied, unless
Lender, in writing waives the satisfaction of any condition precedent in which
event such waiver shall only be applicable for the specific instance given and
only to the extent and for the period of time expressly stated in such written
waiver.
SECTION 11 EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events or conditions shall constitute an "Event of Default" (each of
which Events of Default shall be deemed to exist and be continuing unless and
until waived by Lender in writing):
11.1.1. Payment of Notes. Borrowers shall fail to pay any
installment of principal, interest or premium, if any, owing on the Term Note or
the Equipment Note on the due date of such installment
11.1.2. Payment of Other Obligations. Borrowers shall fail to
pay on the due date thereof any of the Revolver Loans or any other Obligations
that are not evidenced by the Term Notes or the Equipment Note (whether due at
stated maturity, on demand, upon acceleration or otherwise).
11.1.3. Misrepresentations. Any representation, warranty or
other statement made or furnished to Lender by or on behalf of any Borrower in
this Agreement, any of the other Loan Documents or any instrument, certificate
or financial statement furnished in compliance with or in reference thereto
proves to have been false or misleading in any material respect when made or
furnished or when reaffirmed pursuant to Section 8.2 hereof.
11.1.4. Breach of Specific Covenants. Any Borrower shall fail
or neglect to perform, keep or observe any covenant contained in Sections 6.2,
6.3, 7.1.1, 7.2, 9.1.1, 9.1.3, 9.2 or 9.3 hereof on the date that such Borrower
is required to perform, keep or observe such covenant.
11.1.5. Breach of Other Covenants. Any Borrower shall fail or
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
11.1 hereof) and the breach of such other covenant is not cured to
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Lender's satisfaction within 30 days after the sooner to occur of such
Borrower's receipt of notice of such breach from Lender or the date on which
such failure or neglect first becomes known to any officer of such Borrower;
provided, however, that such notice and opportunity to cure shall not apply in
the case of any failure to perform, keep or observe any covenant which is not
capable of being cured at all or within such 30 day period, or which has been
the subject of a prior failure within the preceding 180 days, or which is a
willful and knowing breach by a Borrower.
11.1.6. Default Under Security Documents/Other
Agreements/Acquisition Documents. Any event of default shall occur under, or any
Borrower shall default in the performance or observance of any term, covenant,
condition or agreement contained in, any of the Security Documents or any of the
Other Agreements or any of the Acquisition Documents and such default shall
continue beyond any applicable grace period.
11.1.7. Banc One Default. Any default or event of default
shall occur under the Bank One Documents.
11.1.8. Other Defaults. There shall occur any default or event
of default on the part of any Borrower under any agreement, document or
instrument to which a Borrower is a party or by which a Borrower or any of its
Property is bound, creating or relating to any Debt for Money Borrowed in an
outstanding principal amount in excess of $100,000 (other than the Obligations)
if (i) such Debt is Subordinated Debt or (ii) the payment or maturity of such
Debt is accelerated in consequence of such event of default or demand for
payment of such Debt is made.
11.1.9. Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
11.1.10. Solvency. Any Borrower shall cease to be Solvent.
11.1.11. Insolvency Proceedings. Any Insolvency Proceeding
shall be commenced by or against any Borrower (and, if against a Borrower, the
continuation of such Insolvency Proceeding for more than 60 days), or any
Borrower shall make an offer of settlement, extension or composition to its
unsecured creditors generally.
11.1.12. Business Disruption; Condemnation. There shall occur
a cessation of a substantial part of the business of any Borrower, any
Subsidiary of a Borrower or any Guarantor for a period which may be reasonably
expected to have a Material Adverse Effect; or Borrower, any Subsidiary of a
Borrower or any Guarantor shall suffer the loss or revocation of any license or
permit now held or hereafter acquired by such Borrower or such Guarantor which
is necessary to the continued or lawful operation of its business; or any
Borrower or any Guarantor shall be enjoined, restrained or in any way prevented
by court, governmental or administrative order from conducting all or any
material part of its business affairs; or any material lease or agreement
pursuant to which any Borrower or any Guarantor leases, uses or occupies any
Property shall be canceled or terminated prior to the expiration of its stated
term; or any part of the Collateral shall be taken through condemnation or the
value of such Property shall be materially impaired through condemnation.
11.1.13. Change of Ownership. APB shall cease to own and
control, beneficially and of record all of the issued and outstanding capital
stock of each of the other Borrowers.
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11.1.14. ERISA. A Reportable Event shall occur which Lender,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if any Obligor is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from such Obligor's complete or partial withdrawal from such Plan.
11.1.15. Challenge to Loan Documents. Any Borrower, or any
Affiliate of any Borrower, shall challenge or contest in any action, suit or
proceeding the validity or enforceability of this Agreement or any of the other
Loan Documents, the legality or enforceability of any of the Obligations or the
perfection or priority of any Lien granted to Lender.
11.1.16. Repudiation of or Default Under Guaranty Agreement.
Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, shall repudiate such Guarantor's liability thereunder, or shall
be in default under the terms thereof, or shall fail to confirm in writing,
promptly after receipt of Lender's written request therefor, such Guarantor's
ongoing liability under the Guaranty Agreement in accordance with the terms
thereof.
11.1.17. Criminal Forfeiture. Any Obligor shall be
criminally indicted or convicted under any law that could lead to a forfeiture
of any Property of any Obligor.
11.1.18. Judgments. One or more judgments or orders for the
payment of money totaling an amount that exceeds the uncontested insurance
available therefor by $100,000 or more shall be entered against any Borrower by
any court and such judgment or order shall result in the creation of a Lien upon
any asset of any Borrower that is not a Permitted Lien.
11.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with this Agreement, upon or at any time after the
occurrence of an Event of Default and for so long as such Event of Default shall
exist, Lender may in its discretion declare the principal of and any accrued
interest on the Loans and all other Obligations to be, whereupon the same shall
become without further notice or demand (all of which further notice and demand
Borrowers expressly waive), forthwith due and payable and Borrowers shall
forthwith pay to Lender the entire principal of and accrued and unpaid interest
on the Loans and other Obligations plus reasonable attorneys' fees and expenses
if such principal and interest are collected by or through an attorney-at-law.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
specified in Section 11.1.10 hereof all of the Obligations shall become
automatically due and payable without declaration, notice or demand by Lender
and this Agreement shall automatically terminate as if terminated by Lender
pursuant to Section 5.2.1 and with the effect set forth in Section 5.2.4 hereof.
11.3. OTHER REMEDIES. Upon and after the occurrence of an Event of
Default, and for so long as such Event of Default shall exist, Lender shall have
and may exercise from time to time the following rights and remedies:
11.3.1. General Remedies.
All of the rights and remedies of a secured party under the
UCC or under other Applicable Law, and all other legal and equitable rights to
which Lender may be entitled under any of the Loan Documents, all of which
rights and remedies shall be cumulative and shall be in addition to any
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other rights or remedies contained in this Agreement or any of the other Loan
Documents, and none of which shall be exclusive.
(i) The right to collect all amounts at any time
payable to any Borrower from any Account Debtor or other Person at any time
indebted to any Borrower.
(ii) The right to take immediate possession of
the Collateral, and to (i) require Borrowers to assemble the Collateral, at
Borrowers' expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
a Borrower, then such Borrower agrees not to charge Lender for storage thereof).
(iii) The right to sell or otherwise dispose of
all or any Collateral in its then condition, or after any further manufacturing
or processing thereof, at public or private sale or sales, with such notice as
may be required by Applicable Law, in lots or in bulk, for cash or on credit,
all as Lender, in its sole discretion, may deem advisable. Borrowers agree that
any requirement of notice to Borrowers or any other Obligor of any proposed
public or private sale or other disposition of Collateral by Lender shall be
deemed reasonable notice thereof if given at least 10 days prior thereto, and
such sale may be at such locations as Lender may designate in said notice.
Lender shall have the right to conduct such sales on any Borrower's premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with Applicable Law. Lender shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. If Lender shall dispose of any Inventory by foreclosure
sale to any supplier having repurchase rights with respect thereto under any
Distribution Agreement for an amount that is equal (or approximately equal) to
the repurchase price set forth in such Distribution Agreement, then such
foreclosure sale shall be deemed to be commercially reasonable as between Lender
and all Obligors. The proceeds realized from the sale or other disposition of
any Collateral may be applied, after allowing 2 Business Days for collection,
first to the costs, expenses and attorneys' fees incurred by Lender in
collecting the Obligations, in enforcing the rights of Lender under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivering any Collateral, second to
interest accrued with respect to any of the Obligations; and third, to the
principal of the Obligations. If any deficiency shall arise, each Borrower and
each Guarantor shall remain jointly and severally liable to Lender therefor.
(iv) The right to exercise all of Lender's rights
and remedies under the Mortgages with respect to any Real Estate.
11.3.2. Louisiana Remedies. Certain of the
Collateral described in this Agreement is located in the State of Louisiana or
may be subject to the laws of the State of Louisiana (provided, however, the
parties by this Section in no way intend to derogate from the choice of law
contained in Section 12.15 hereof). With respect to such Collateral, the
following shall apply:
(i) Each Borrower confesses judgment in favor
of Lender for the full amount of the Obligations. Each Borrower agrees
that, during the existence of an Event of Default, Lender may, without making
further demand and without further notice or putting in default (which are
hereby expressly waived), cause the Collateral, or any portion of it, to be
seized and sold with or without appraisal (at Lender's option) by executory
process issued by any competent court or enforce this
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Agreement in any other manner provided by law. Lender may exercise the rights
and remedies set forth in this Section in addition to (and whether or not) it
also exercises its rights under any other provision of this Agreement or any
other agreements among Borrowers and Lender with respect to the Obligations. If
any proceedings (by executory process or otherwise) are commenced, all
declarations of fact made by authentic act by a person declaring that he or she
has personal knowledge of the facts shall constitute authentic evidence of the
facts for all purposes.
(ii) Each Borrower recognizes that Lender shall have
the right to cause the Collateral to be seized and sold by executory
process without any prior court hearing at which any or all of the Borrowers
could appear and make objection. Each Borrower specifically waives any right
that it may have to a court hearing prior to the seizure and sale of the
Collateral.
(iii) Each Borrower expressly waives: (a) the
benefit of appraisement, as provided in articles 2332, 2336, 2723 and 2724
of the Louisiana Code of Civil Procedure, and all other Applicable Laws
conferring the same; (b) the demand and 3 days' delay provided by articles 2331,
2639, 2721 and 2722 of the Louisiana Code of Civil Procedure and all other
Applicable Laws conferring the same; (c) the notice of seizure as provided in
articles 2293 and 2721 of the Louisiana Code of Civil Procedure. Each Borrower
expressly agrees to the immediate seizure of the Collateral in the event of suit
to enforce this Agreement. Lender shall not be obligated to take advantage of
the waiver of appraisal or any other waiver set forth herein but may at its
option cause the Collateral to be appraised upon foreclosure in accordance with
law and observe the statutory provisions referred to in this Section.
(iv) Each Borrower and Lender designate Lender
or any agent or nominee of Lender as keeper of the Collateral and also
authorize Lender to name another keeper of the Collateral or any portion thereof
at the time of seizure in any action for the recognition or enforcement of this
Agreement, but Lender shall not be required to seek the appointment of a keeper.
This agreement is made pursuant to La. R.S. 9: Section 5136 et seq., the
provisions of which shall govern the powers and duties of the keeper. The
keeper shall be paid as compensation for its services an amount equal to $500
per day. All sums paid by Lender as keeper's fees and related costs and
expenses, with interest thereon at the Default Rate, shall be Obligations
secured by this Agreement.
(v) If it becomes necessary for Lender to search
for all or any of the Collateral at the time of foreclosure, Lender may do
so and Borrowers shall be jointly and severally obligated to Lender, ON DEMAND,
for the reasonable expenses incurred by Lender in doing so with interest at the
Default Rate, and this amount shall be obligations secured by this Agreement.
(vi) Each Borrower waives in favor of Lender all
homestead exemptions and other exemptions from seizure to which it may be
entitled.
(vii) The grant of authority contained in this
Section 11.3.2 is intended by each Borrower to be an irrevocable power of
attorney, coupled with an interest, as permitted by Louisiana law, including,
but not limited to, the provisions of La. R.S. 9:Section 5388.
Lender is hereby granted a license or other right to use, without charge, each
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and each Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit.
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11.4. SETOFF. In addition to any Liens granted under any of the Loan
Documents and any rights now or hereafter available under Applicable Law, Lender
is hereby authorized by Borrowers at any time that an Event of Default exists,
without notice to Borrowers or any other Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits, general or special (including Debt evidenced by certificates of
deposit whether matured or unmatured (but not including trust accounts)) and any
other Debt at any time held or owing by Lender or its Affiliates to or for the
credit or the account of any Borrower against and on account of the Obligations
of Borrowers arising under the Loan Documents to Lender, including all Loans and
all claims of any nature or description arising out of or in connection with
this Agreement, irrespective of whether or not (i) Lender shall have made any
demand hereunder, (ii) Lender shall have declared the principal of and interest
on the Loans and other amounts due hereunder to be due and payable as permitted
by this Agreement and even though such Obligations may be contingent or
unmatured or (iii) the Collateral for the Obligations is adequate.
11.5. REMEDIES CUMULATIVE; NO WAIVER.
11.5.1. All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of Borrowers contained in this
Agreement and the other Loan Documents, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule or in any
Guaranty Agreement given to Lender or contained in any other agreement between
Lender and any or all Borrowers, heretofore, concurrently, or hereafter entered
into, shall be deemed cumulative to and not in derogation or substitution of any
of the terms, covenants, conditions, or agreements of Borrowers herein
contained.
11.5.2. The failure or delay of Lender to require strict
performance by Borrowers of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies, but
all such requirements, Liens, rights, powers, and remedies shall continue in
full force and effect until all Loans and all other Obligations owing or to
become owing from Borrowers to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrowers contained in this Agreement or any of the other Loan Documents and no
Event of Default by any Borrower under this Agreement or any other Loan
Documents shall be deemed to have been suspended or waived by Lender, unless
such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrowers.
11.5.3. If Lender shall accept performance by a Borrower, in
whole or in part, of any obligation that a Borrower is required by any of the
Loan Documents to perform only when a Default or Event of Default exists, or if
Lender shall exercise any right or remedy under any of the Loan Documents that
may not be exercised other than when a Default or Event of Default exists,
Lender's acceptance of such performance by a Borrower or Lender's exercise of
any such right or remedy shall not operate to waive any such Event of Default or
to preclude the exercise by Lender of any other right or remedy, unless
otherwise expressly agreed in writing by Lender.
SECTION 12 MISCELLANEOUS
12.1. POWER OF ATTORNEY. Each Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender) as
such Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to such Borrower and in either such
Borrower's or Lender's name, but at the cost and expense of Borrowers:
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12.1.1. At such time or times as Lender or said agent, in its
sole discretion, may determine, endorse such Borrower's name on any checks,
notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Lender or under
Lender's control.
12.1.2. At such time or times upon or after the occurrence of
an Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
such Borrower's rights and remedies with respect to the collection of the
Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral or any legal proceedings brought to collect any of
the Accounts or other Collateral; (iii) sell or assign any of the Accounts and
other Collateral upon such terms, for such amounts and at such time or times as
Lender deems advisable; (iv) take control, in any manner, of any item of payment
or proceeds relating to any Collateral; (v) prepare, file and sign such
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) receive, open
and dispose of all mail addressed to such Borrower and to notify postal
authorities to change the address for delivery thereof to such address as Lender
may designate; (vii) endorse the name of such Borrower upon any of the items of
payment or proceeds relating to any Collateral and deposit the same to the
account of Lender on account of the Obligations; (viii) endorse the name of such
Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to the Accounts,
Inventory and any other Collateral; (ix) use such Borrower's stationery and sign
the name of such Borrower to verifications of the Accounts and notices thereof
to Account Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, Equipment and any other Collateral; (xi) make and adjust
claims under policies of insurance; and (xii) do all other acts and things
necessary, in Lender's determination, to fulfill Borrowers' obligations under
this Agreement.
12.2. INDEMNITY. Each Borrower hereby agrees to indemnify and defend
Lender and hold Lender harmless from and against any Claims against Lender as
the result of any Borrower's failure to observe, perform or discharge any of
such Borrower's duties hereunder. In addition, each Borrower shall indemnify and
defend Lender against and save Lender harmless from all Claims of any Person
arising out of, related to or with respect to, any of the transactions entered
into pursuant to this Agreement or any of the other Loan Documents or Lender's
Liens upon the Collateral. Without limiting the generality of the foregoing,
this indemnity shall extend to any Claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of a Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Additionally, if any Taxes (excluding
Taxes imposed upon or measured solely by the net income of Lender, but including
any intangibles tax, stamp tax, recording tax or franchise tax) shall be payable
by Lender or any Obligor on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the other
Loan Documents, or the creation of any of the Obligations hereunder, by reason
of any existing or hereafter enacted federal, state, foreign or local statute,
rule or regulation, Borrowers will pay (or will promptly reimburse Lender for
the payment of) all such Taxes, including any interest and penalties thereon,
and will indemnify and hold Lender harmless from and against all liability in
connection therewith. Notwithstanding any contrary provision in this Agreement,
the obligation of Borrowers under this Section 12.2 shall survive the payment in
full of the Obligations and the termination of this Agreement.
12.3. MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement
may not be modified, altered or amended, except by an agreement in writing
signed by Borrowers and Lender. No Borrower
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may sell, assign or transfer any interest in this Agreement, any of the other
Loan Documents, or any of the Obligations, or any portion thereof, including
such Borrower's rights, title, interests, remedies, powers, and duties hereunder
or thereunder. Each Borrower hereby consents to Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
the Obligations, this Agreement and any of the other Loan Documents, or of any
portion hereof or thereof, including Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder and
Lender shall be relieved of all obligations hereunder upon any such assignment.
Each Borrower further agrees that Lender may disclose credit information
regarding such Borrower and its Subsidiaries to any potential participant or
assignee.
12.4. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.5. SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Borrower and Lender permitted under Section 12.3
hereof.
12.6. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
12.7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so 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.
12.8. NOTICE. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, personal delivery against receipt or by telecopier or
other facsimile transmission and shall be deemed to have been validly served,
given or delivered when delivered against receipt or 3 Business Days after
deposit in the U.S. mail, postage prepaid, or, in the case of facsimile
transmission, when received at the office where the noticed party's telecopier
is located, in each case, addressed as follows:
If to Lender: Fleet Capital Corporation
300 Galleria Parkway, N.W.
Suite 800
Atlanta, Georgia 30339
Attention: Loan Administration Manager
Facsimile No.: (770) 859-2483
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<PAGE> 54
With a copy to: Parker, Hudson, Rainer & Dobbs
1500 Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: C. Edward Dobbs, Esq.
Facsimile No.: (404) 522-8409
If to Borrowers: Atlantic Premium Brands, Ltd.
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
Attention: President
Facsimile No.: (847) 480-0199
With a copy to: Tom D. Wippman, P.C.
650 Dundee Road, Suite 370
Northbrook, Illinois 60062
Facsimile No.: (847) 480-0199
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to Section 3.1.1 or 5.2.2 hereof
shall not be effective until received by Lender. Any notice to APB shall be
deemed to constitute notice to all Borrowers and any notice (including a Notice
of Borrowing) from APB shall be deemed to constitute a notice from all
Borrowers. Any written notice or demand that is not sent in conformity with the
provisions hereof shall nevertheless be effective on the date that such notice
is actually received by the noticed party.
12.9. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
12.10. CREDIT INQUIRIES. Each Borrower hereby authorizes and permits
Lender (but Lender shall have no obligation) to respond to usual and customary
credit inquiries from third parties concerning such Borrower or any of its
Subsidiaries.
12.11. TIME OF ESSENCE. Time is of the essence of this Agreement,
the Other Agreements and the Security Documents.
12.12. ENTIRE AGREEMENT; APPENDIX A AND EXHIBITS. This Agreement and
the other Loan Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or with reference
thereto, embody the entire understanding and agreement between the parties
hereto and thereto with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and inducements, whether express
or implied, oral or written. Appendix A and each of the Exhibits attached hereto
are incorporated into this Agreement and by this reference made a part hereof.
12.13. INTERPRETATION. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other
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<PAGE> 55
governmental or judicial authority by reason of such party having or being
deemed to have structured, drafted or dictated such provision.
12.14. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
ATLANTA, GEORGIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA: PROVIDED, HOWEVER, THAT IF ANY
OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN GEORGIA, THE
LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
GEORGIA. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF A BORROWER OR
LENDER, EACH BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF
FULTON COUNTY, GEORGIA, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, SHALL HAVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS AND LENDER
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
BORROWER HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF APB'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.15. WAIVERS BY BORROWER. EACH BORROWER WAIVES (i) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH SUCH BORROWER MAY IN ANY WAY BE LIABLE AND
HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE
PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY
WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
12.16. WAIVER OF DTPA. EACH BORROWER WAIVES ALL PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, TEXAS BUSINESS AND COMMERCE
CODE SECTIONS 17.41, ET SEQ. ("DTPA") OTHER THAN SECTION 17.555 (PERTAINING TO
CONTRIBUTION AND INDEMNITY) OF THE DPTA, AND WARRANTS AND
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<PAGE> 56
REPRESENTS THAT IT (i) HAS ASSETS HAVING A VALUE OF $5,000,000 OR MORE, (ii) HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, (iii) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION RELATIVE TO LENDER AND (iv) HAS BEEN REPRESENTED BY LEGAL
COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
12.17. CONFIDENTIALITY. Lender agrees to exercise reasonable efforts
(and, in any event, with at least the same degree of care as it ordinarily
exercises with respect to confidential information of its other customers) to
keep confidential any information delivered or made available by Borrower to it,
including confidential information obtained by Lender by reason of a visit or
investigation by any Person contemplated in Section 9.1.1 hereof or confidential
information from any Person other than individuals employed or retained by
Lender who are or are expected to become engaged in evaluating, approving,
structuring, administering or otherwise giving professional advice with respect
to any of the Loans or Collateral; provided, however, that nothing herein shall
prevent Lender from disclosing such confidential information (i) to any party to
this Agreement from time to time, (ii) pursuant to an order of any court or
administrative agency (subject to Borrower's right to seek a protected order to
bar any disclosure of such information), (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over Lender (subject to
Borrower's right to seek a protected order to bar any disclosure of such
information), (iv) which has been publicly disclosed other than by an act or
omission of Lender except as permitted herein, (v) to the extent reasonably
required in connection with any litigation with respect to any of the Loan
Documents or any of the transactions contemplated thereby to which Lender or its
respective Affiliates may be a party, (vi) to the extent reasonably required in
connection with the exercise of any remedies hereunder, (vii) to Lender's legal
counsel and independent auditors, and (viii) to any actual or proposed
Participant, assignee or other transferee of all or part of a Lender's rights
hereunder so long as such transferee has agreed in writing to be bound by the
provisions of this Section 12.17.
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<PAGE> 57
IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning of this Agreement.
ATLANTIC PREMIUM BRANDS, LTD.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
CARLTON FOODS CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
PREFCO CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
[Signatures continued on following page]
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<PAGE> 58
GROGAN'S FARM, INC.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
RICHARDS CAJUN FOODS CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
POTTER'S ACQUISITION CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------
Secretary Title: Chairman
[CORPORATE SEAL]
ACCEPTED IN ATLANTA, GEORGIA:
FLEET CAPITAL CORPORATION
("Lender")
By:
----------------------------
Title:
----------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated March 20, 1998, by
and among FLEET CAPITAL CORPORATION, ATLANTIC PREMIUM BRANDS, LTD., CARLTON
FOODS CORP., PREFCO CORP., GROGAN'S FARM, INC., RICHARDS CAJUN FOODS CORP. AND
POTTER'S ACQUISITION CORP., the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account - shall have the meaning given to "account" in the
UCC.
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Accounts Formula Amount - on any date of determination
thereof, an amount equal to 85% of the net amount of Eligible Accounts
on such date. As used herein, the phrase "net amount of Eligible
Accounts" shall mean the face amount of such Accounts on any date less
any and all returns, rebates, discounts (which may, at Lender's option,
be calculated on shortest terms), credits, allowances or Taxes
(including sales, excise or other taxes) at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in
connection with, or any interest accrued on the amount of, such
Accounts at such date.
Acquisition - the purchase by Potter's of substantially all of
the assets of Sellers, pursuant to the Acquisition Documents.
Acquisition Agreement - the Asset Purchase Agreement dated
March 6, 1998, among Potter's and Seller.
Acquisition Documents - the Acquisition Agreement and any and
all other documents, agreements or instruments executed by in
connection with the Acquisition.
Adjusted LIBOR Rate - with respect to each Interest Period for
a LIBOR Loan, an interest rate per annum (rounded upwards, to the next
1/16th of 1%) equal to the quotient of (a) the LIBOR Rate in effect for
such Interest Period divided by (b) a percentage (expressed as a
decimal) equal to 100% minus Statutory Reserves.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, another Person; (ii)
which beneficially owns or holds 10% or more of any class of the Equity
Interest of a Person; or (iii) 10% or more of the Equity Interests with
power to vote of which is beneficially owned or held by another Person
or a Subsidiary of another Person.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits and Schedules thereto
and this Appendix A.
Applicable Law - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in
question, including all applicable common law and equitable principles;
all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; and
orders, judgments and decrees of all courts and arbitrators.
<PAGE> 60
Applicable Margin - a percentage equal to 2.5% with respect to
LIBOR Loans and 1% with respect to Base Rate Loans; provided that,
commencing December 31, 1998, if there exists no Default or Event of
Default, then the Applicable Margin shall be increased or decreased,
based upon the Leverage Ratio, as follows:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Leverage Ratio for Base Rate Loans for LIBOR Loans
-------------- ------------------- -----------------
<S> <C> <C> <C>
(i) If the Leverage Ratio
is equal to or greater
than 5 to 1 1.25% 2.75%
(ii) If the Leverage Ratio
is less than 5 to 1
but is equal to or greater
than 4 to 1 1.00% 2.50%
(iii) If the Leverage Ratio
is less than 4 to 1
but is equal to or greater
than 3.5 to 1 1.00% 2.375%
(iv) If the Leverage Ratio
is less than 3.5 to 1
but is equal to or greater
than 3 to 1 1.00% 2.25%
(v) If the Leverage Ratio
is less than 3 to 1
but is equal to or greater
than 2.5 to 1 .75% 2.125%
(vi) If the Leverage Ratio
is less than 2.5 to 1
but is equal to or greater
than 2 to 1 .75% 2.0%
(vii) If the Leverage Ratio
is less than 2 to 1 .50% 1.75%
</TABLE>
The Applicable Margin shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis
according to the performance of Borrowers as measured by the Leverage
Ratio for the immediately preceding 4 Fiscal Quarters of Borrowers.
Except as set forth in the last sentence hereof, any such increase or
reduction in the Applicable Margin provided for herein shall be
effective 3 Business Days after receipt by Lender of the applicable
financial statements and corresponding Compliance Certificate,
beginning with the final quarter of 1998; provided, however, that any
reduction in the Applicable Margin shall not apply to any LIBOR Loans
outstanding on the effective date of such reduction that have an
Interest Period commencing prior to the effective date of such
reduction. If the financial statements and the Compliance Certificate
of Borrowers setting forth the Leverage Ratio are not received by
Lender by the date required pursuant to Section 9.1.3 of the Agreement,
the Applicable Margin shall be
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determined as if the Leverage Ratio exceeds 5 to 1 until such time as
such financial statements and Compliance Certificate are received and
any Event of Default resulting from a failure timely to deliver such
financial statements or Compliance Certificate is waived in writing by
Lender; provided, however, that nothing herein shall be deemed to
prohibit Lender from changing interest at the Default Rate for so long
as any Event of Default exists. For the final quarter of any fiscal
year of Borrowers, Borrowers may provide the unaudited financial
statements of Borrowers, subject only to year-end adjustments, for the
purpose of determining the Applicable Margin; provided, however, that
if, upon delivery of the annual audited financial statements required
to be submitted by Borrowers to Lender pursuant to Section 9.1.3(i) of
the Agreement, Borrowers have not met the criteria for reduction of the
Applicable Margin pursuant to the terms hereinabove for the final
Fiscal Quarter of the Fiscal Year of Borrowers then ended, then (a)
such Applicable Margin reduction shall be terminated and, effective on
the first day of the month following receipt by Lender of such audited
financial statements, the Applicable Margin shall be the Applicable
Margin that would have been in effect if such reduction had not been
implemented based upon the unaudited financial statements of Borrowers
for the final Fiscal Quarter of the Fiscal Year of Borrowers then
ended, and (b) Borrower shall pay to Lender, on the first day of the
month following receipt by Lender of such audited financial statements,
an amount equal to the difference between the amount of interest that
would have been paid on the principal amount of the Obligations using
the Applicable Margin determined based upon such audited financial
statements and the amount of interest actually paid during the period
in which the reduction of the Applicable Margin was in effect based
upon the unaudited financial statements for the final Fiscal Quarter of
the Fiscal Year of Borrowers then ended.
Availability - the amount that Borrowers are entitled to
borrow from time to time as Revolver Loans, such amount being the
difference derived when the sum of the principal amount of Revolver
Loans then outstanding (including any amounts which Lender may have
paid for the account of Borrowers pursuant to any of the Loan Documents
and which have not been reimbursed by Borrowers) is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater than
the Borrowing Base, Availability is 0.
Availability Reserve - on any date of determination thereof,
an amount equal to the sum of the following on such date: (i) a reserve
for general inventory shrinkage, whether as a result of theft or
otherwise, that is determined by Lender from time to time in its
reasonable credit judgment based upon Borrowers' historical losses due
to such shrinkage; (ii) all amounts of past due rent or other charges
owing by Borrowers to any landlord of any premises where any of the
Collateral is located; (iii) any amounts which any Borrower is
obligated to pay pursuant to the provisions of the Loan Documents but
does not pay when due and which Lender elects to pay pursuant to any of
the Loan Documents for the account of Borrowers; (iv) $140,000, for
advertising rebates granted to Account Debtors; (v) $500,000, until
such time as Borrowers deliver to Lender a satisfactory real estate
survey that satisfies the requirements set forth in Section 10.1.7 of
the Agreement and which indicates no items which could reasonably be
expected to have a Material Adverse Effect; (vi) the LC Reserve; (vii)
any amounts received by Lender from the Business Interruption Insurance
Assignment; and (viii) such additional reserves as Lender in its sole
and absolute discretion may elect to impose from time to time.
Average Monthly Loan Balance - for any period, the amount
obtained by adding the unpaid balance of Loans outstanding at the end
of each day for the period in question and by dividing such sum by the
number of days in such period.
Average Revolver Loan Balance - for any period, the amount
obtained by adding the aggregate of the unpaid balance of Revolver
Loans outstanding, at the end of each day during the
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period in question and by dividing such sum by the number of days in
such period that the Agreement is in effect.
Average LC Obligations - for any period, the amount obtained
by adding the LC Obligations outstanding at the end of each day during
the period in question and by dividing such sum by the number of days
in such period that the Agreement is in effect.
Banc One - Banc One Partners II, LLC, a Delaware limited
liability company..
Banc One Documents - that certain Senior Subordinated Note and
Warrant Purchase Agreement to be executed on or about the Closing Date
between Banc One and Borrowers, that certain Senior Subordinated Note
due March 31, 2005, payable to Banc One in the original principal
amount of $6,500,000, and any and all other documents, agreements and
instruments executed in connection with or related thereto.
Banc One Debt Subordination - the Debt Subordination Agreement
dated on or about the date hereof between Banc One and Lender
Banc One Lien Subordination - the Lien Subordination Agreement
to be executed on or about the Closing Date by Banc One and Lender.
Banc One Subordinated Debt - the Debt of Borrowers to Banc One
under and pursuant to the Banc One Documents.
Bank - Fleet National Bank and its successors.
Bankruptcy Code - title 11 of the United States Code.
Base Rate - the rate of interest announced or quoted by Bank
from time to time as its prime rate, which rate might not be the lowest
rate charged by Bank; and, if such prime rate for commercial loans is
discontinued by Bank as a standard, a comparable reference rate
designated by Bank as a substitute therefor shall be the Base Rate.
Base Rate Loan - a Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the Base Rate.
Board of Governors - the Board of Governors of the Federal
Reserve Board.
Borrowing - a borrowing consisting of Loans of one Type made
on the same day by Lender or a conversion of a Loan or Loans of one
Type from Lender on the same day.
Borrowing Base - on any date of determination thereof, an
amount equal to the lesser of: (a) $15,000,000 minus the sum of (i) all
LC Obligations outstanding on such date and (ii) the amount by which
the aggregate unpaid principal balance of the Term Loan and all
Equipment Loans outstanding on such date exceed $11,000,000, or (b) an
amount equal to (i) the sum of the Accounts Formula Amount plus the
Inventory Formula Amount on such date minus (ii) the Availability
Reserve on such date.
Borrowing Base Certificate - with respect to any date, a
certificate of Borrowers in form and substance satisfactory to Lender
setting forth (i) a schedule of the net amount of Eligible Accounts of
Borrowers, (ii) a schedule of all Eligible Inventory of Borrowers and
(iii)
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calculations of the Borrowing Base, all as of the close of business on
the preceding Business Day and in such detail as shall be reasonably
satisfactory to Lender.
Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Georgia or is a
day on which banking institutions located in such state are closed;
provided, however, that when used with reference to a LIBOR Loan
(including the making, continuing, prepaying or repaying of any LIBOR
Loan), the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits on the London
interbank market.
Capital Expenditures - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful
life of more than one year, including the total principal portion of
Capitalized Lease Obligations.
Capitalized Lease Obligation - any Debt represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and any interest
earned thereon, that is deposited with Lender in accordance with the
Agreement as security for any of the Obligations to the extent provided
in the Agreement.
Cash Collateral Account - a demand deposit, money market or
other account established by Lender at such financial institution as
Lender may select in its discretion, which account shall be in Lender's
name and subject to Lender's Lien.
Cash Equivalents - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed
by the full faith and credit of the United States government having
maturities of not more than 12 months from the date of acquisition;
(ii) domestic certificates of deposit and time deposits having
maturities of not more than 12 months from the date of acquisition,
bankers' acceptances having maturities of not more than 12 months from
the date of acquisition and overnight bank deposits, in each case
issued by any commercial bank organized under the laws of the United
States, any state thereof or the District of Columbia, which at the
time of acquisition are rated A-1 (or better) by Standard & Poor's
Corporation or P-1 (or better) by Moody's Investors Services, Inc., and
(unless issued by a Lender) not subject to offset rights in favor of
such bank arising from any banking relationship with such bank; (iii)
repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (i) and (ii)
entered into with any financial institution meeting the qualifications
specified in clause (ii) above; and (iv) commercial paper having at the
time of investment therein or a contractual commitment to invest
therein a rating of A-1 (or better) by Standard & Poor's Corporation or
P-1 (or better) by Moody's Investors Services, Inc., and having a
maturity within 9 months after the date of acquisition thereof.
Cash Interest Expense - with respect to any Person, for any
period, total interest expense, whether paid or accrued (including the
interest component of Capital Leases), of such Person, including all
commissions, discounts and other fees and charges owed with respect to
letters of credit, but excluding, however, interest expense not payable
in cash (including amortization of discount), all as determined in
accordance with GAAP.
Chattel Paper - shall have the meaning ascribed to the term
"chattel paper" in the UCC.
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Claims - any and all claims, demands, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
awards, remedial response, costs, expenses or disbursements of any kind
or nature whatsoever (including reasonable attorneys', accountants' or
consultants' fees and expenses), whether arising under or in connection
with the Loan Documents, under any Applicable Law (including any
Environmental Law) or otherwise, that may now or hereafter be suffered
or incurred by a Person.
Closing Date - the date on which all of the conditions
precedent in Section 10 of the Agreement are satisfied and the initial
Loan is made under the Agreement.
Collateral - all of the Property and interests in Property
described in Section 6 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Compliance Certificate - a Compliance Certificate to be
provided by Borrower to Lender in accordance with, and in the form
annexed as EXHIBIT E to, the Agreement.
Consolidated - the consolidation in accordance with GAAP of
the accounts or other items as to which such term applies.
Consulting Agreement - the Consulting Agreement dated
March 15, 1996, among Borrowers, Sterling Advisors and Elfman, as
amended.
Current Assets - at any date, the amount at which all of the
current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP
except that amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom.
Debt - as applied to a Person means, without duplication: (i)
all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Debt is to be
determined, including Capitalized Lease Obligations; (ii) all
obligations of other Persons which such Person has guaranteed; (iii)
all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person; and
(iv) in the case of Borrowers (without duplication), the Obligations.
Debt Subordinations - collectively, the Banc One Debt
Subordination, the Seller Debt Subordinations and any other Debt
Subordination Agreement executed in favor of Lender by the holder of
Subordinated Debt.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an
Event of Default.
Default Rate - a fluctuating rate per annum which, on any
date, is equal to 2% plus the otherwise applicable interest rate.
Deposit Accounts - all of a Person's demand, time, savings,
passbook, money market or other depository accounts, and all
certificates of deposit, maintained by such Person with any bank,
savings and loan association, credit union or other depository
institution.
Deposit Account Assignment - the Collateral Assignments of
Deposit Accounts to be executed by Borrowers on the Closing Date in
favor of Lender as security for the Obligations.
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Distribution - in respect of any entity, (i) any payment of
any dividends or other distributions on Equity Interests of the entity
(except distributions in such Equity Interests) and (ii) any purchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the entity or any Affiliate of the entity unless made
contemporaneously from the net proceeds of the sale of Equity
Interests.
Distribution Agreements - all distribution agreements between
APB and any other Person, pursuant to which APB is granted distribution
rights with respect to goods subject to, and licenses for the use of,
trademarks (or other Intellectual Property) of such Person.
Document - shall have the meaning ascribed to the term
"document" in the UCC.
Dollars and the sign "$" - lawful money of the United States
of America.
Dominion Account - a special account of Lender that may be
established by a Borrower pursuant to the Agreement at a bank selected
by a Borrower, but acceptable to Lender, and over which Lender shall
have sole and exclusive access and control for withdrawal purposes.
DTPA - as defined in Section 12.17 of the Agreement.
EBITDA - with respect to any Person, for any period, the sum
of the amounts for such period, of (i) Net Income, plus (ii)
depreciation and amortization expense, plus (iii) Cash Interest
Expense, plus (iv) federal and state income taxes actually payable,
plus (v) extraordinary losses (determined in accordance with GAAP which
have been included in the determination of Net Income), plus (vi)
without duplication, interior expense deducted in determining Net
Income in respect of the "Warrants" and the "Put Option" (as such terms
are defined in the Bank One Documents), minus (vii) extraordinary gains
(determined in accordance with GAAP which have been included in the
determination of Net Income).
Effective Net Worth - on any date, the sum of the
stockholders' equity plus Subordinated Debt of Borrowers and their
Subsidiaries on such date, on a combined and Consolidated basis.
Elfman - Elfman Venture Partners, Inc., an Illinois
corporation.
Eligible Account - an Account arising in the ordinary course
of a Borrower's business from the sale of goods which is payable in
Dollars and which Lender, in its reasonable and customary credit
judgment, deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account shall be an Eligible Account
if: (i) it arises out of a sale made by a Borrower to a Subsidiary or
an Affiliate of such Borrower or to a Person controlled by an Affiliate
of such Borrower; (ii) in the case of APB, it is unpaid for more than
60 days after the original due date shown on the invoice, or it is due
or unpaid more than 90 days after the original invoice date; (iii) in
the case of all Borrowers other than APB, it is unpaid for more than 14
days after the original due date shown on the invoice, or it is due and
unpaid more than 28 days after the original invoice date; (iv) 25% or
more of the Accounts from the Account Debtor are not deemed Eligible
Accounts hereunder; (v) the total unpaid Accounts of the Account Debtor
exceed 20% of the net amount of all Eligible Accounts or exceeds a
credit limit established by Lender for such Account Debtor, in each
case, to the extent of such excess; (vi) any covenant, representation
or warranty contained in the Agreement with respect to such Account has
been breached; (vii) the Account Debtor is also a Borrower's creditor
or supplier, or the Account Debtor has disputed liability with respect
to such Account, or the Account Debtor has made any claim with respect
to any other Account due from such Account Debtor to a Borrower, or the
Account otherwise is or may become subject to any right of setoff,
counterclaim, reserve or
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chargeback, provided that, the Accounts of such Account Debtor
shall be ineligible only to the extent of such offset, counterclaim,
disputed amount, reserve or chargeback; (viii) an Insolvency
Proceeding has been commenced by or against the Account Debtor or the
Account Debtor has failed, suspended business or ceased to be Solvent;
(ix) it arises from a sale to an Account Debtor with its principal
office, assets or place of business outside the United States, unless
the sale is backed by an irrevocable letter of credit that is issued
or confirmed by a bank acceptable to Lender and that is in form and
substance acceptable to Lender and payable in the full amount of the
Account in freely convertible Dollars at a place of payment within the
United States; (x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; (xi) the Account
Debtor is the United States of America or any department, agency or
instrumentality thereof, unless such Borrower assigns its right to
payment of such Account to Lender, in a manner satisfactory to Lender,
so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C.
Section 3727 and 41 U.S.C. Section 15), or is a state, county or
municipality, or a political subdivision or agency thereof and
Applicable Law disallows or restricts an assignment of Accounts on
which it is the Account Debtor; (xii) the Account Debtor is located in
New Jersey, Minnesota or any other state imposing similar conditions
on the right of a creditor to collect accounts receivable unless such
Borrower has either qualified to transact business in such state as a
foreign entity or filed a Notice of Business Activities Report or
other required report with the appropriate officials in those states
for the then current year; (xiii) the Account Debtor is located in a
state in which such Borrower is deemed to be doing business under the
laws of such state and which denies creditors access to its courts in
the absence of qualification to transact business in such state or of
the filing of any reports with such state, unless such Borrower has
qualified as a foreign entity authorized to transact business in such
state or has filed all required reports; (xiv) the Account is subject
to a Lien other than a Permitted Lien; (xv) the goods giving rise to
such Account have not been delivered to and accepted by the Account
Debtor or the services giving rise to such Account have not been
performed by such Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; (xvi) the Account
is evidenced by Chattel Paper or an Instrument of any kind, or has
been reduced to judgment; (xvii) such Borrower has made any agreement
with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course of
business for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each invoice related
to such Account; (xviii) the Account arises out of a contract or order
which, by its terms, purports to forbid, restrict or make void or
unenforceable the assignment by such Borrower to Lender of such
Account; or (xix) such Borrower has made an agreement with the Account
Debtor to extend the time of payment thereof.
Eligible Equipment - new manufacturing equipment which has
been purchased by a Borrower from the manufacturer or a representative
or distributor thereof; has been delivered to and accepted by a
Borrower and installed at premises owned or leased by such Borrower, is
subject to Lender's duly perfected Lien and no other Lien that is not a
Permitted Lien; does not and will not, after delivery to and
installation at a Borrower's premises, constitute a fixture under
applicable law unless each landlord and mortgagee in respect of such
premises has executed in favor or Lender a landlord or mortgagee waiver
in form and content satisfactory to Lender; and does not and will not,
after delivery to and installation at a Borrower's premises, constitute
an accession to other equipment that is subject to any Lien (whether or
not a Permitted Lien) in favor of any Person other than Lender unless
the holder of any such Lien agrees in writing to disclaim any interest
in the Eligible Equipment.
Eligible Inventory - such Inventory of a Borrower (other than
packaging materials, labels and supplies) which Lender, in its credit
judgment, deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory
unless: (i) it is
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raw materials or finished goods; (ii) it is in good, new and saleable
condition; (iii) it is not slow-moving, obsolete or unmerchantable;
(iv) it meets all standards imposed by any governmental agency or
authority; (v) it conforms in all respects to the warranties and
representations set forth in the Agreement; (vi) it is at all times
subject to Lender's duly perfected, first priority security interest
and no other Lien except a Permitted Lien; (vii) it is in Borrower's
possession and control, situated at a location in compliance with the
Agreement and is not in transit or outside the continental United
States; and (viii) it is not subject to any license or other agreement
(including a Distribution Agreement) that limits, conditions or
restricts such Borrower's or Lender's right to sell or otherwise
dispose of such Inventory; and (ix) it is not the subject of an
Intellectual Property Claim.
Eligible Licensed Inventory - Inventory which, except for the
fact that it is sold under and subject to the terms of a Distribution
Agreement, would constitute Eligible Inventory, but such Inventory
shall cease to be Eligible Licensed Inventory during any period that a
Borrower is in default in the performance of its obligations under such
Distribution Agreement or any other party thereto has sent to such
Borrower notice of claimed default thereunder or notice of cancellation
or termination thereof.
Environmental Laws - all federal, state and local laws, rules,
regulations, codes, ordinances, programs, permits, guidances, orders
and consent decrees, now or hereafter in effect and relating to health,
safety or environmental matters, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA").
Environmental Certificate - the Certificate Regarding
Environmental Matters to be executed by Borrowers in favor of Lender on
or about the Closing Date.
Environmental Release - a release as defined in CERCLA or
under any applicable Environmental Laws.
Equipment - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description used in a
Borrower's operations or owned by a Borrower or in which a Borrower has
an interest, whether now owned or hereafter acquired by a Borrower and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
Equipment Loan - the Loans to be made by Lender to Borrowers
pursuant to Section 1.3 of the Agreement.
Equipment Loan Conditions - with respect to each Equipment
Loan requested by Borrowers pursuant to Section 1.3 hereof, the
following conditions: (i) Borrowers have given to Lender written notice
of a request for such Equipment Loan at least 5 days prior to the date
on which such Borrowers desire for such Equipment Loan to be funded, in
which notice such Borrowers have described in detail the Eligible
Equipment, the amount of the purchase price, the identity, address and
phone number of the seller, and the expected delivery date;(ii) the
amount of the Equipment Loan that is requested, together with all other
Equipment Loans previously made to Borrowers by Lender during such
Fiscal Year, shall not exceed the limitation on Capital Expenditures
for such Fiscal Year as set forth in Section 9.2.8 of the Agreement;
and (iii) no Out-of-Formula Condition exists at the time of the funding
of such Equipment Loan nor after giving effect thereto.
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Equipment Note - the Master Equipment Note to be executed by
Borrowers in favor of Lender on or about the Closing Date as provided
in Section 1.3 of the Agreement, which shall be in the form of EXHIBIT
A-2 to the Agreement.
Equipment Purchase Price - the invoice price, exclusive of any
applicable sales tax, inspection, installation, transportation or
freight costs, of Eligible Equipment purchased by a Borrower after the
Closing Date and separate from the Acquisition.
Equity Interest - the interest of a (i) shareholder in a
corporation, (ii) a partner (whether general or limited) in a
partnership (whether general, limited or limited liability), (iii) a
member in a limited liability company, or (iv) any other Person having
any other form of equity security.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended, and all rules and regulations from time to time promulgated
thereunder.
Eurocurrency Liabilities - as defined in Regulation D.
Event of Default - as defined in Section 11.1 of the
Agreement.
Fiscal Quarter - each quarter of a Fiscal Year, ending
March 31, June 30, September 30 and December 31 of each year.
Fiscal Year - the fiscal year of Borrowers and their
Subsidiaries for accounting and tax purposes, which ends on December 31
of each year.
Fixed Charge Coverage Ratio - for any period, the ratio of (i)
EBITDA minus federal and state income taxes actually payable during
such period, minus Capital Expenditures of Borrowers on a combined and
consolidated basis net of Purchase Money Debt and Capitalized Lease
Obligations with respect thereto, to the extent permitted hereunder and
made during the period for which the Fixed Charge Coverage Ratio is to
be calculated, to (ii) Fixed Charges during the period for which the
Fixed Charge Coverage Ratio is to be calculated.
Fixed Charges - with respect to any Person, for any period,
the amount for such period of (i) Cash Interest Expense, plus (ii)
payments of principal due on the Term Loan and any Equipment Loan and
other Debt (including the principal component of Capitalized Lease
Obligations).
Funded Debt - all Debt which would, in accordance with GAAP,
constitute long term Debt, including (i) any Debt with a maturity more
than 1 year after the creation thereof and (ii) any Debt that is
renewable or extendable at the option of a Borrower for a period of
more than 1 year from the date of creation of such Debt.
Funding Account - a bank account established by APB at a bank
acceptable to Lender to which Lender shall remit the proceeds of all
Loans, unless otherwise instructed by APB.
GAAP - generally accepted account principles in the United
States of America in effect from time to time.
General Intangibles - all general intangibles of a Borrower,
whether now owned or hereafter created or acquired by a Borrower,
including all choses in action, causes of action, company or other
business records, deposit accounts, inventions, blueprints, designs,
patents,
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patent applications, trademarks, trademark applications, trade names,
trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims,
computer programs, operational manuals, all claims under guaranties,
security interests or other security held by or granted to a Borrower
to secure payment of any of the Accounts by an Account Debtor, all
rights to indemnification and all other intangible property of every
kind and nature (other than Accounts).
Governmental Approvals - means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and reports to, all national state or local government (whether
domestic or foreign) and any political subdivisions thereof in any
other governmental, quasi-governmental, judicial, administrative,
public or statutory instrumentality, authority, body, agency, bureau or
entity.
Guarantors - each Borrower and any other Person who may
hereafter guarantee payment or performance of the whole or any part of
the Obligations.
Guaranty Agreement - a guaranty that is at any time executed
by a Guarantor in favor of Lender.
Insolvency Proceeding - any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for
(a) the entry of an order for relief under any chapter of the
Bankruptcy Code or other insolvency or debt adjustment law (whether
state, federal or foreign), (b) the appointment of a receiver, trustee,
liquidator or other custodian for such Person or any part of its
Property, (c) an assignment or trust mortgage for the benefit of
creditors of such Person, or (d) the liquidation, dissolution or
winding up of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term
"instrument" in the UCC.
Intellectual Property - Property constituting under any
Applicable Law a patent, patent application, copyright, trademark,
service mark, tradename or mask work, or license or other right to use
any of the foregoing.
Intellectual Property Claim - the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or by
other means) that a Borrower's ownership, use, marketing, sale or
distribution of any Inventory, Equipment, Intellectual Property or
other Property is violative of any ownership, patent, copyright,
trademark or other rights of such Person.
Intercreditor Agreements - collectively, the Banc One Debt
Subordination and Banc One Lien Subordination.
Interest Coverage Ratio - for any period, the ratio of (i)
EBITDA for such period to (ii) Cash Interest Expense for such period.
Interest Period - shall have the meaning ascribed to it in
Section 2.1.3 of the Agreement.
Inventory - all of a Borrower's inventory, whether now owned
or hereafter acquired, including all goods intended for sale or lease
by a Borrower, or for display or demonstration; all work in process;
all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing
or furnishing of such goods or otherwise used or consumed
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<PAGE> 70
in Borrower's business; and all documents evidencing and General
Intangibles relating to any of the foregoing, whether now owned or
hereafter acquired by a Borrower.
Inventory Formula Amount - on any date of determination
thereof, an amount equal to the lesser of (i) $6,000,000 or (ii) the
sum of (a) 65% of the Value of Eligible Inventory on such date, plus
(b) the Licensed Inventory Formula Amount.
Investment Property - all Securities (whether certificated or
uncertificated), security entitlements, securities, accounts, commodity
contracts and commodity accounts.
LC Application - an application to Bank, in the form approved
by Bank and duly executed by a Borrower and Lender as co-applicants,
for the issuance of a Letter of Credit.
LC Conditions - the following conditions, the satisfaction of
each of which is required before Lender shall be obligated to execute
any LC Application in connection with a request to Bank for the
issuance of a Letter of Credit: (i) no Default or Event of Default
exists; (ii) after giving effect to the issuance of the requested
Letter of Credit and each Letter of Credit to be issued and for which
an LC Application has been signed by Lender, the LC Obligations would
not exceed $2,000,000, no Out-of-Formula Condition would exist, and, if
no Revolver Loans are outstanding, the LC Obligations do not exceed the
Borrowing Base; (iii) the expiry date of the Letter of Credit does not
extend beyond the earlier to occur of 365 days from the date of
issuance or 10 days prior to the last day of the Original Term or of
any effective Renewal Term; and (iv) the currency in which payment is
to be made under the Letter of Credit is Dollars.
LC Documents - any and all agreements, instruments and
documents (other than an LC Application or an LC Guaranty) required by
Bank to be executed by a Borrower or any other Person and delivered to
Bank for the issuance of a Letter of Credit.
LC Guaranty - a guaranty executed by Lender in favor of Bank
pursuant to which Lender shall guarantee the payment or performance by
Borrowers of Borrowers' reimbursement obligation under each Letter of
Credit in respect of which Lender has joined with one or more of the
Borrowers in executing an LC Application.
LC Obligations - on any date of determination thereof, an
amount (in Dollars) equal to the sum of (i) all amounts then due and
payable by any Obligor on such date by reason of any payment made on or
before such date by Lender under any LC Guaranty, plus (ii) the
aggregate undrawn amount of all Letters of Credit then outstanding or
to be issued by Bank under an LC Application theretofore submitted to
Bank.
LC Request - a written request from Borrower to Lender for
Lender to join with one or more of the Borrowers in the execution of an
LC Application for the issuance of a Letter of Credit, which shall be
in the form of EXHIBIT G to the Agreement.
LC Reserve - on any date of determination thereof, an amount
equal to the aggregate LC Obligations at such time with respect to
Letters of Credit, exclusive of any LC Obligations that are fully
secured by Cash Collateral.
Letter of Credit - a standby letter of credit issued by Bank
for the account of a Borrower.
Leverage Ratio - with respect to any fiscal period of
Borrowers, the ratio of Borrowers' total Funded Debt as of the last day
of such period to EBITDA for such period.
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LIBOR Loan - a Loan, or portion thereof, during any period in
which it bears interest at a rate based upon the applicable Adjusted
LIBOR Rate.
LIBOR Rate - with respect to an Interest Period, the rate per
annum determined by Lender at which deposits of Dollars approximately
equal in principal amount to or comparable to the amount of the LIBOR
Loan to which such Interest Period relates and for a term comparable to
such Interest Period are offered to Bank by prime banks in the London
interbank foreign currency deposits market at approximately 11:00 a.m.,
London time, 2 Business Days prior to the commencement of such Interest
Period. Each determination by Lender of any LIBOR Rate, in the absence
of any manifest error, shall be conclusive.
Licensed Inventory Formula Amount - on any date of
determination thereof, an amount equal to the lesser of (i) $1,000,000
or (ii) 65% of the Value of Eligible Licensed Inventory on such date.
Lien - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on common law, statute or contract. The
term "Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, a Borrower shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of
Lender pursuant to Section 4.7 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loans - all loans and advances of any kind made by Lender
pursuant to the Agreement, including all Revolver Loans, the Term Loan
and the Equipment Loans.
Loan Year - a period commencing each calendar year on the same
month and day as the date of the Agreement and ending on the same month
and day in the immediately succeeding calendar year, with the first
such period (i.e., the first Loan Year) to commence on the date of this
Agreement.
Margin Stock - as such term is defined in Regulation U and
Regulation G of the Board of Governors.
Material Adverse Effect - the effect of any event or condition
which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (a) has a material
adverse effect upon the business, operations, Properties, condition
(financial or otherwise) or business prospects of any Borrower, any
Guarantor or any Subsidiary; (b) has any material adverse effect
whatsoever upon the validity or enforceability of the Agreement or any
of the other Loan Documents; (c) has or may be reasonably expected to
have any material adverse effect upon the value of the whole or any
part of the Collateral, the Liens of Lender with respect to the
Collateral or any part thereof or the priority of such Liens; (d)
materially impairs the ability of any Borrower or other Obligor to
perform its obligations under this Agreement, any Guaranty Agreement or
any of the other Loan Documents, including repayment of the Obligations
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when due; or (e) materially impairs the ability of Lender to enforce or
collect the Obligations or realize upon any of the Collateral in
accordance with the Loan Documents and Applicable Law.
Material Contract - an agreement to which an Obligor is a
party (other than the Loan Documents) for which breach, termination,
cancellation, nonperformance or failure to renew could reasonably be
expected to have a Material Adverse Effect.
Maximum Rate - the maximum non-usurious rate of interest
permitted by Applicable Law that at any time, or from time to time, may
be contracted for, taken, reserved, charged or received on the Debt in
question or, to the extent that at any time Applicable Law may
thereafter permit a higher maximum non-usurious rate of interest, then
such higher rate. Notwithstanding any other provision hereof, the
Maximum Rate shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of 365 or 366 days, as the
case may be).
Minimum Loan Amount - as defined in Section 2.2.3 of the
Agreement.
Money Borrowed - means (i) Debt arising from the lending of
money by any Person to a Borrower; (ii) Debt, whether or not in any
such case arising from the lending by any Person of money to a
Borrower, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for
Property; (iii) Debt that constitutes a Capitalized Lease Obligation;
(iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit, and (v) Debt of a Borrower under any
guaranty of obligations that would constitute Debt for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by a Borrower.
Mortgages - collectively, the (i) mortgage to be executed by
Richards on or about the Closing Date in favor of Lender and by which
Richards shall grant and convey to Lender, as security for the
Obligations, a Lien upon the real Property of Richards located in
Acadia Parish, Louisiana, (ii) the mortgage to be executed by Grogan's
on or about the Closing Date in favor of Lender and by which Grogan's
shall grant and convey to Lender, as security for the Obligations, a
Lien upon the real Property of Grogan's located in Carlisle County,
Kentucky, and (iii) the mortgages to be executed by Potter's on or
about the Closing Date in favor of Lender and by which Potter's shall
grant and convey to Lender, as security for the Obligations, a lien
upon the real Property of Potter's located in each of Bryan County,
Oklahoma and Hot Spring County, Arkansas.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Net Income - with respect to any Person, for any period, the
net earnings (or loss) after taxes of such Person for such period taken
as a single accounting period determined in accordance with GAAP.
Net Proceeds - proceeds (including cash receivable (when
received) by way of deferred payment) received by a Borrower from the
sale, lease, transfer or other disposition of any Property, including
insurance proceeds and awards of compensation received with respect to
the destruction or condemnation of all or part of such Property, net
of: (i) the reasonable and customary costs of such sale, lease,
transfer or other disposition; and (ii) amounts applied to repayment of
Debt (other than the Obligations) secured by a Permitted Lien on the
Property disposed of that is senior in priority to Lender's Liens.
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Notes - collectively, the Term Note, the Equipment Note and
any other promissory note executed by a Borrower at Lender's request to
evidence any of the Obligations.
Notice of Borrowing - as defined in Section 3.1.1(i) of the
Agreement.
Notice of Conversion/Continuation - as defined in Section
2.1.2(ii) of the Agreement.
Obligations - all debts, liabilities, obligations, covenants
and duties now or at any time or times hereafter owing by any or all of
the Borrowers to Lender, howsoever evidenced or arising, and whether
direct or indirect, absolute or contingent, due or to become due,
primary or secondary, or joint or several, including all of the Loans,
and all interest payable in connection therewith and all other sums
chargeable to or payable by any Borrower under the Loan Documents, any
other agreement heretofore or hereafter entered into by any Borrower
with or executed by any Borrower in favor of Lender, or Applicable Law.
Obligor - each Borrower, each Guarantor and each other Person
who is at any time liable for the payment of the whole or any part of
the Obligations.
Original Term - as defined in Section 5.1 of the Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by any Borrower, any Subsidiary
of a Borrower or any other Person and delivered to Lender in respect of
the transactions contemplated by the Agreement, including the Debt
Subordinations, and the Intercreditor Agreements.
Out-of-Formula Condition - as defined in Section 1.1.2 of the
Agreement.
Out-of-Formula Loan - a Revolver Loan made when an
Out-of-Formula Condition exists or the amount of any Revolver Loan
which, when funded, results in an Out-of-Formula Condition.
Participant - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement
and who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
PASA - the Packers and Stockyards Act of 1921, 7 U.S.C.
Section 181 et seq (1995).
Payment Account - an account maintained by Lender (currently
at Harris Bank & Trust in Chicago, Illinois) to which all monies from
time to time deposited to a Dominion Account shall be transferred and
all other payments shall be sent in immediately available federal
funds.
Payment Items - all checks, drafts, or other items of payment
payable to a Borrower, including proceeds of any of the Collateral.
Pending Loans - at any time, the aggregate principal amount of
all Revolving Loans requested in any Notice(s) of Borrowing previously
received by the Lender but not yet advanced at such time.
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Permitted Lien - a Lien of a kind specified in Section 9.2.5
of the Agreement.
Permitted Purchase Money Debt - Purchase Money Debt of a
Borrower which is incurred after the date of the Agreement which is
secured by no Lien or only by a Purchase Money Lien and which, when
aggregated with the principal amount of all other such Debt and
Capitalized Lease Obligations of all Borrowers at the time outstanding,
does not exceed $100,000. For the purposes of this definition, the
principal amount of any Purchase Money Debt consisting of capitalized
leases shall be computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company,
land trust, business trust, unincorporated organization or other form
of business entity, or a government or agency or political subdivision
thereof.
Plan - an employee benefit plan now or hereafter maintained
for employees of a Borrower that is covered by Title IV of ERISA.
Pro Forma - the pro forma Consolidated and consolidating
balance sheet of Borrowers as of March __, 1998, which gives effect to
the transactions contemplated by the Acquisition Documents and the
Agreement.
Projections - Borrowers' forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c)
cash flow statements, and (d) capitalization statements, all prepared
on a consistent basis with Borrowers' historical financial statements,
together with appropriate supporting details and a statement of
underlying assumptions.
Properly Contested - in the case of any Debt of an Obligor
(including any Tax) that is not paid as and when due or payable by
reason of such Obligor's bona fide dispute concerning its liability to
pay same or concerning the amount thereof, (i) such Debt and any Liens
securing same are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (ii) such
Obligor has established appropriate reserves as shall be required in
conformity with GAAP; (iii) the non-payment of such Debt during the
period being contested by such Obligor will not have a Material Adverse
Effect and does not and will not result in a forfeiture of, foreclosure
upon or loss of any assets of such Obligor; (iv) no Lien is imposed
upon any of such Obligor's assets with respect to such Debt unless such
Lien is at all times junior and subordinate in priority to the Liens in
favor of Lender (except only with respect to property taxes that have
priority as a matter of applicable state law) and enforcement of such
Lien is stayed during the period prior to the final resolution or
disposition of such dispute; (v) if the Debt results from or is
determined by the entry, rendition or issuance against a Obligor or any
of its assets of a judgment, writ, order or decree, such judgment,
writ, order or decree is stayed pending a timely appeal or other
judicial review and such Obligor shall have established adequate
reserves in accordance with GAAP for such judgment, writ, order or
decree or the same is either fully insured against by an insurer that
has not denied or reserved rights with respect to coverage or has been
bonded to Lender's satisfaction; and (vi) if such dispute or contest is
abandoned, settled or determined adversely to such Obligor, such
Obligor forthwith pays such Debt and all penalties and interest in
connection therewith.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
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Purchase Money Debt - means and includes (i) Debt (other than
the Obligations) for the payment of all or any part of the purchase
price of any fixed assets, (ii) any Debt (other than the Obligations)
incurred at the time of or within 10 days prior to or after the
acquisition of any fixed assets for the purpose of financing all or any
part of the purchase price thereof, and (iii) any renewals, extensions
or refinancings thereof, but not any increases in the principal amounts
thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Debt, but only if such Lien shall at all times be
confined solely to the fixed assets acquired through the incurrence of
the Purchase Money Debt secured by such Lien.
Regulation D - Regulation D of the Board of Governors.
Real Estate - all parcels or tracts of real Property of a
Borrower, including the real Property of Richards located in Acadia
Parish, Louisiana, the real Property of Grogan's located in Carlisle
County, Kentucky and the real Property of Potter's located in Bryan
County, Oklahoma and in Hot Spring County, Arkansas.
Rentals - as defined in Section 9.2.13 of the Agreement.
Renewal Term - as defined in Section 5.1 of the Agreement.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Restricted Investment - any acquisition of Property by a
Borrower or any of its Subsidiaries in exchange for cash or other
Property, whether in the form of an acquisition of Equity Interests or
Debt, or the purchase or acquisition by a Borrower or any of its
Subsidiaries of any other Property, or a loan, advance, capital
contribution or subscription, except acquisitions of the following: (a)
fixed assets to be used in the business of a Borrower or any of its
Subsidiaries so long as the acquisition costs thereof constitute
Capital Expenditures permitted hereunder; (b) goods held for sale or
lease or to be used in the manufacture of goods or the provision of
services by a Borrower or any of its Subsidiaries in the ordinary
course of business; (c) Current Assets arising from the sale or lease
of goods or the rendition of services in the ordinary course of
business of a Borrower or any of its Subsidiaries; (d) investments in
Subsidiaries to the extent existing on the Closing Date; and (e) Cash
Equivalents.
Revolver Loan - a Loan made by Lender as provided in Section
1.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933.
Security Documents - each Guaranty Agreement, the Mortgages,
the Deposit Account Assignments, the Stock Pledge Agreements, the
Trademark Security Agreements and all other instruments and agreements
now or at any time hereafter securing the whole or any part of the
Obligations.
Seller- collectively, J.P. Potter Sausage Co., Potter's Farm,
Inc., Potter Rendering Co., each an Oklahoma corporation, and Potter
Leasing Co., Ltd., an Oklahoma limited partnership.
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Seller Debt Subordination - each of the Debt Subordination
Agreements dated the date hereof, between each holder of the Seller
Notes and Lender.
Seller Notes - collectively, that certain (i) 9% Subordinated
Non-Negotiable Promissory Note dated as of January 1, 1996, in the
original principal amount of $1,400,000, executed by APB and payable to
and for the benefit of Franklin Roth, in his capacity as representative
for himself and Allen Pauly, as replaced by the 9% Subordinated
Non-Negotiable Promissory Note dated as of August ___, 1996, in the
original principal amount of $700,000 executed by APB and payable to
and for the benefit of Franklin Roth, and the 9% Subordinated
Non-Negotiable Promissory Note dated as of August ___, 1996, in the
original principal amount of $700,000 executed by APB and payable to
and for the benefit of Allen Pauly; (ii) 6.35% Subordinated
Non-Negotiable Promissory Note due July 31, 2001, dated August 1, 1996,
made by Richards and APB to J.L. Richard in the original principal
amount of $850,000; (iii) 8% Subordinated Non-Negotiable Promissory
Note dated as of October 1, 1998, made by Grogans to Bobby L. Grogan
and Betty R. Grogan in the original principal amount of $200,000; and
(iv) 8% Subordinated Non-Negotiable Promissory Note dated as of
November 15, 1996, made by Grogans in favor of Jefferson Davis and
Roger Davis, in the original principal amount of $219,593.
Senior Debt - at any time, with respect to any Borrower and
its Subsidiaries, (i) combined and consolidated total Debt (including
the Term Loan, any outstanding Equipment Loans, the outstanding
Revolving Loans, the LC Obligations, and any Capitalized Lease
Obligations), minus (ii) combined and consolidated current liabilities,
minus (iii) Subordinated Debt, minus (iv) noncurrent Debt (determined
in accordance with such Borrower's practice as to such items on the
Closing Date) for income taxes, plus (v) any unamortized debt expense.
Senior Debt/EBITDA Ratio - the ratio of Senior Debt
outstanding at the end of any period to EBITDA for such period.
Senior Fixed Charge Coverage Ratio - for any period, the ratio
of (i) EBITDA minus actual state and federal income taxes payable
during such period, minus Capital Expenditures of the Borrowers on a
combined and consolidated basis net of Purchase Money Debt and
Capitalized Lease Obligations with respect thereto, to the extent
permitted hereunder and made during the period for which the Senior
Fixed Charge Coverage Ratio is to be calculated, to (ii) the sum of (a)
Cash Interest Expense attributable to Senior Debt, plus (b) payments of
principal due on the Term Loan or any Equipment Loan and other Senior
Indebtedness (including the principal component of Capitalized Lease
Obligations) for the period for which the Senior Fixed Charge Coverage
Ratio is to be calculated.
Senior Officer - the chairman of the board of directors, the
president or the chief financial officer of, or in-house legal counsel
to, Borrower.
Solvent - as to any Person, such Person (i) owns Property
whose fair saleable value is greater than the amount required to pay
all of such Person's probable liability with respect to its Debts
(including contingent debts), (ii) is able to pay all of its Debts as
such Debts mature, (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it
is about to engage; and (iv) is not "insolvent" within the meaning of
Section 101(32) of the Bankruptcy Code.
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Statutory Reserves - on any date, the percentage (expressed as
a decimal) established by the Board of Governors which is the then
stated maximum rate for all reserves (including, any emergency,
supplemental or other marginal reserve requirements) applicable to any
member bank of the Federal Reserve System in respect to Eurocurrency
Liabilities (or any successor category of liabilities under Regulation
D). Such reserve percentage shall include, without limitation, those
imposed pursuant to said Regulation D. The Statutory Reserve shall be
adjusted automatically on and as of the effective date of any change in
such percentage.
Sterling Advisors - Sterling Advisors L.P., a Delaware limited
partnership.
Stock Pledge Agreements - the Stock Pledge Agreements to be
executed by APB on or about the Closing Date in favor of Lender by
which APB shall pledge to Lender all of the issued and outstanding
shares of capital stock of Carlton, Prefco, Grogans, Richards, Potter's
and Snack Foods as security for the Obligations.
Subordinated Debt - Debt of Borrowers evidenced by the Seller
Notes, the Banc One Subordinated Debt and any other Debt of a Borrower
that is subordinated to the Obligations in a manner satisfactory to
Lender.
Subsidiary - any Person a majority of the Equity Interests of
which is at the time owned, directly or indirectly, by a Borrower or by
one or more other Subsidiaries or by a Borrower and one or more other
Subsidiaries.
Tax Sharing Agreement - the Tax Sharing Agreement dated as of
February 1, by and among all Borrowers.
Taxes - any present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of
whatever nature, including income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise
taxes now or hereafter imposed or levied by the United States, or any
state, local or foreign government or by any department, agency or
other political subdivision or taxing authority thereof or therein and
all interest, penalties, additions to tax and similar liabilities with
respect thereto.
Term Loan - the Loan described in Section 1.2.1 of the
Agreement.
Term Note - the Secured Promissory Note to be executed by
Borrowers on or about the Closing Date in favor of Lender to evidence
the Term Loan, which shall be in the form of EXHIBIT A-1 to the
Agreement.
Termination Date - the date on which the Agreement is
terminated pursuant to Section 5.2 of the Agreement.
Trademark Security Agreements - the Trademark Security
Agreements to be executed by Borrowers on or about the Closing Date in
favor of Lender and by which each Borrower shall grant and convey, as
security for the Obligations, a Lien upon the trademarks, and other
rights relating thereto, described therein.
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Type - any type of a Loan determined with respect to the
interest option applicable thereto, which shall be either a LIBOR Loan
or a Base Rate Loan.
UCC - the Uniform Commercial Code (or any successor statute)
as adopted and in force in the State of Georgia or, when the laws of
any other state govern the method or manner of the creation or
perfection of any security interest in any of the Collateral, the
Uniform Commercial Code (or any successor statute) of such state.
Value - with reference to the value of Eligible Inventory,
value determined on the basis of the lower of cost or market of such
Eligible Inventory, with the cost thereof calculated on a first-in,
first-out basis, determined in accordance with GAAP.
Voting Stock - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
ACCOUNTING TERMS. Unless otherwise specified herein, all terms of an
accounting character used in the Agreement shall be interpreted, all accounting
determinations under the Agreement shall be made, and all financial statements
required to be delivered under the Agreement shall be prepared, in accordance
with GAAP, applied on a basis consistent with the most recent audited
Consolidated financial statements of Borrowers and their Subsidiaries heretofore
delivered to Lender and using the same method for inventory valuation as used in
such audited financial statements, except for any change in which Borrowers'
independent public accountants concur or as required by GAAP unless (i)
Borrowers shall have objected to determining such compliance on such basis at
the time of delivery of such financial statements or (ii) Lender shall so object
in writing within 30 days after the delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made. In the event of any change in
GAAP that occurs after the date of the Agreement and that is material to
Borrowers, Lender shall the right to require either that conforming adjustments
be made to any financial covenants set forth in the Agreement, or the components
thereof, that are affected by such change or that Borrowers report their
financial condition based on GAAP as in effect immediately prior to the
occurrence of such change.
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any Person
shall mean and include the successors and permitted assigns of such Person. All
references to any of the Loan Documents shall include any and all amendments or
modifications thereto and any and all restatements, extensions or renewals
thereof. Wherever the phrase "including" shall appear in the Agreement, such
word shall be understood to mean "including, without limitation." All references
to the time of day shall mean the time
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<PAGE> 79
of day on the day in question in Atlanta, Georgia, unless otherwise expressly
provided in the Agreement. A Default or an Event of Default shall be deemed to
exist at all times during the period commencing on the date that such Default or
Event of Default occurs to the date on which such Default or Event of Default is
waived in writing by Lender pursuant to this Agreement or, in the case of a
Default, is cured within any period of cure expressly provided in this
Agreement; and an Event of Default shall "continue" or be "continuing" until
such Event of Default has been waived in writing by Lender. Whenever the phrase
"to the best of any Borrower's knowledge" or words of similar import relating to
the knowledge or the awareness of any Borrower are used herein, such phrase
shall mean and refer to (i) the actual knowledge of a Senior Officer of a
Borrower or (ii) the knowledge that a Senior Officer would have obtained if they
had engaged in good faith and the diligent performance of their duties,
including the making of such reasonable specific inquiries as may be necessary
of the officers, employees or agents of any Borrower and a good faith attempt to
ascertain the existence or accuracy of the matter to which such phrase relates.
Wherever in the Agreement and the other Loan Documents reference is made to
attorneys' fees and expenses that are incurred by Lender and that are to be
reimbursed to Lender by Borrowers, such reference shall be understood to mean
the reasonable attorneys' fees and expenses which are incurred by Lender for
services actually rendered by attorneys selected by Lender on Lender's behalf.
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IN WITNESS WHEREOF, this Appendix has been duly executed in Atlanta,
Georgia, on March 20, 1998.
ATLANTIC PREMIUM BRANDS, LTD.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
CARLTON FOODS CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
PREFCO CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
GROGAN'S FARM, INC.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
RICHARDS CAJUN FOODS CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
[Signatures continued on the following page]
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<PAGE> 81
POTTER'S ACQUISITION CORP.
ATTEST: ("Borrower")
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- ------------------------------
Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
ACCEPTED IN ATLANTA, GEORGIA:
----------------------------
FLEET CAPITAL CORPORATION
("Lender")
By: /s/ ROLAND ROBINSON
------------------------------
Title: Vice President
----------------------
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<PAGE> 1
EXHIBIT 4.11
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into this 20th day of
March, 1998, by and between ATLANTIC PREMIUM BRANDS, LTD., a Delaware
corporation (hereinafter referred to as "Pledgor"), and FLEET CAPITAL
CORPORATION, a Rhode Island corporation (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Pledgor and Lender have entered into a certain Loan and
Security Agreement dated March 20, 1998 (hereinafter, together with all
amendments thereto, the "Loan Agreement"), pursuant to which Lender may make
loans or extend financial accommodations to or for the benefit of Pledgor
("Loans"); and
WHEREAS, to secure the Loans, Pledgor has granted a security interest
in and lien upon all or substantially all of its property; and
WHEREAS, a condition to the making of the Loans is Pledgor's pledge to
Lender of all of the capital stock of CARLTON FOODS CORP., a Delaware
corporation (hereinafter the "Company") as security for the Loans and all other
liabilities and obligations of Pledgor and Company to Lender of every kind and
description, whether arising under the Loan Agreement or under any other
instrument or agreement evidencing or securing all or any part of the Loans or
other liabilities (hereinafter jointly called, together with all amendments
thereto, the "Loan Documents");
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to secure the timely payment and performance
of the Loans and all other liabilities of Pledgor and Company to Lender, Pledgor
agrees as follows:
1. PLEDGE. Pledgor hereby pledges, mortgages, assigns,
transfers, sets over and delivers to Lender, and grants to Lender a security
interest in, 100 shares of the capital stock of Company, evidenced by stock
certificate number(s) 1 and all options for the purchase of shares of the
capital stock of Company (such shares of capital stock being hereinafter called
"Stock"), herewith delivered to Lender accompanied by stock powers ("Powers")
duly executed in blank, with signatures properly guaranteed, and the proceeds
thereof (said Stock and Powers hereinafter collectively called the "Collateral")
as security for the payment of all liabilities and obligations of Pledgor to
Lender of every kind and description, whether now existing or hereafter arising
and whether fixed or contingent, secured or unsecured, joint or several, due
<PAGE> 2
or to become due and whether arising under the Loan Agreement or otherwise
(jointly hereinafter called the "Obligations").
Lender shall have no duty with respect to any of the Collateral other
than the duty to use reasonable care in the safe custody of the Collateral in
its possession. Without limiting the generality of the foregoing, Lender shall
be under no obligation to take any steps necessary to preserve the value of any
of the Collateral or to preserve rights in the Collateral against any other
parties, but may do so at its option, and all expenses incurred in connection
therewith shall be for the sole account of Pledgor.
2. VOTING RIGHTS. During the term of this Agreement, and so
long as there shall not occur any event of default under any of the Loan
Documents (any such event of default being herein referred to as "Event of
Default"), Pledgor shall have the right to vote all or any portion of the Stock
on all corporate questions for all purposes not inconsistent with the terms of
this Agreement or the Loan Documents. Upon and after the occurrence of any Event
of Default and Lender's acceleration of the maturity of the Obligations in
consequence thereof, Lender shall be entitled to exercise all voting powers
pertaining to the Collateral, and any and all proxies theretofore executed by
Lender shall terminate and thereafter be null and void and of no effect
whatsoever. To that end, if Lender transfers all or any portion of the
Collateral into its name or the name of its nominee, Lender shall, upon the
request of Pledgor, unless an Event of Default shall have occurred, execute and
deliver or cause to be executed and delivered to Pledgor, proxies with respect
to the Collateral.
3. COLLECTION OF DIVIDEND PAYMENTS. During the term of this
Agreement, and so long as there shall not occur or exist any Event of Default,
Pledgor shall have the right to receive and retain any and all sums payable by
Company on account of any of the Collateral except as otherwise provided in the
Loan Documents. Upon and after the occurrence of any Event of Default and
Lender's acceleration of the Obligations in consequence thereof, all sums
payable by Company on account of any of the Collateral shall be paid to Lender
and any such sum received by Pledgor shall be deemed to be held by Pledgor in
trust for the benefit of Lender and shall be forthwith turned over to Lender for
application by it to the Obligations in such order of application as Lender in
its sole discretion elects.
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor warrants
and represents that: Pledgor is the legal and beneficial owner of the
Collateral; all of the shares of the Stock have been duly and validly issued,
are fully paid and nonassessable, and are owned by Pledgor free of any liens,
charges or encumbrances except for Lender's security interest hereunder and such
security interests as Lender has heretofore consented to in writing; the Stock
constitutes all of the issued and outstanding capital stock of the Company;
there are no restrictions upon the voting rights or upon the transfer of any of
the Collateral other than as may appear on the face of the certificates
evidencing the Stock; Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Collateral without the consent of any
other party and free of any encumbrances and applicable restrictions imposed by
any governmental agency or regulation; and the execution, delivery and
performance by Pledgor
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<PAGE> 3
of this Agreement and the exercise by Lender of its rights and remedies
hereunder do not and will not result in the violation of any agreement,
indenture or instrument or any license, judgement, decree, order, law, statute
or other governmental rule or regulation, including, without limitation, any
federal or state laws or regulations governing the sale or exchange of
securities.
5. AFFIRMATIVE COVENANTS OF PLEDGOR. Until all of the
Obligations have been satisfied in full and the Loan Documents terminated,
Pledgor covenants that it will: warrant and defend at its own expense Lender's
right, title, special property and security interest in and to the Collateral
against the claims of any person or entity; promptly deliver to Lender all
written notices, and will promptly give written notice to Lender of any other
notices, received by Pledgor with respect to the Collateral; and deliver to
Lender promptly to hold under this Agreement any shares of the capital stock of
the Company acquired by Pledgor by virtue of the exercise of any stock options
included within the Collateral.
6. NEGATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will not sell, convey or otherwise dispose of any of the Collateral or
any interest therein; incur or permit to be incurred any pledge, lien, charge,
or encumbrance or any security interest whatsoever in or with respect to any of
the Collateral or the proceeds thereof, other than the security interest created
hereby and such security interests as Lender has heretofore consented to in
writing; or permit the Company to issue any new stock.
7. SUBSEQUENT CHANGES AFFECTING COLLATERAL. Pledgor represents
to Lender that Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
agrees that Lender shall have no responsibility or liability for informing
Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto. Lender may, at any time that
an Event of Default exists, at its option and without notice to Pledgor,
transfer or register the Collateral or any portion thereof into its or its
nominee's name with or without any indication that such Collateral is subject to
the security interest hereunder.
8. STOCK ADJUSTMENTS. If during the term of this Agreement any
stock dividend, reclassification, readjustment or other change is declared or
made in the capital structure of Company, or any option included within the
Collateral is exercised, or both, all new, substituted and additional shares, or
other securities, issued by reason of any such change or exercise shall be
delivered to and held by Lender under the terms of this Agreement in the same
manner as the Collateral originally pledged hereunder.
9. WARRANTS, OPTIONS AND RIGHTS. If during the term of this
Agreement subscription warrants or any other rights or options shall be issued
or exercised in connection with the Collateral, then such warrants, rights and
options shall be immediately assigned by
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<PAGE> 4
Pledgor to Lender and all new stock or other securities so acquired by Pledgor
shall be immediately assigned to Lender to be held under the terms of this
Agreement in the same manner as the Collateral originally pledged hereunder.
10. REGISTRATION. If Lender is required to register under or
otherwise comply in any way with the Securities Act of 1933 or any similar
Federal or State Law with respect to the securities included in the Collateral
prior to sale thereof by Lender, then upon or at any time after the occurrence
of an Event of Default, Pledgor will use its best efforts to cause any such
registration to be effectively made, at no expense to Lender, and to continue
such registration effective for such time as may be reasonably necessary in the
opinion of Lender, and will reimburse Lender for any expense incurred by Lender,
including reasonable attorney's fees and accountant's fees and expenses, in
connection therewith.
11. CONSENT. Pledgor hereby consents that from time to time,
before or after the occurrence or existence of any Event of Default, with or
without notice to or assent from Pledgor, any other security at any time held by
or available to Lender for any of the Obligations may be exchanged, surrendered,
or released, and any of the Obligations may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released, in whole or
in part, as Lender may see fit, and Pledgor shall remain bound under this
Agreement and under the Loan Agreement notwithstanding any such exchange,
surrender, release, alteration, renewal, extension, continuance, compromise,
waiver or inaction, extension of further credit or other dealing.
12. REMEDIES UPON DEFAULT. Upon and after the occurrence of
any Event of Default, Lender shall have, in addition any other rights given by
law or the rights given hereunder or under the Loan Documents, all of the rights
and remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia. In addition,
with respect to the Collateral, or any part thereof, which shall then be or
shall thereafter come into Lender's possession or custody, Lender may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price as Lender may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, and
the purchaser of any or all of the Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless the Collateral threatens to decline speedily in value or is
or becomes of a type sold on a recognized market, Lender will give Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to Pledgor, as provided in paragraph 18 below, at least
ten (10) days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted by law,
waived. Lender may, in its own name, or in the name of a designee or nominee,
buy at any public sale of the Collateral and, if permitted by applicable law,
buy at any private sale thereof.
- 4 -
<PAGE> 5
Pledgor will pay to Lender on demand all expenses (including court costs and
reasonable attorneys' fees and expenses) of, or incident to, the enforcement of
any of the provisions hereof and all other charges due against the Collateral,
including, without limitation, taxes, assessments, security interests, liens or
encumbrances upon the Collateral and any expenses, including transfer or other
taxes, arising in connection with any sale, transfer or other disposition of
Collateral. In connection with any sale of Collateral by Lender, Lender shall
have the right to execute any document or form, in its name or in the name of
Pledgor, which may be necessary or desirable in connection with such sale,
including, if required, Form 144 promulgated by the Securities and Exchange
Commission. In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Collateral may
be effected after an Event of Default, Pledgor agrees that Lender may, from time
to time, attempt to sell all or any part of the Collateral by means of a private
placement restricting the bidders and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution. In so doing, Lender may solicit offers to buy the Collateral, or
any part of it, for cash, from a limited number of investors deemed by Lender,
in its reasonable judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if Lender solicits such offers from not less than
four (4) such investors, then the acceptance by Lender of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposing of the Collateral.
13. TERM. This Agreement shall become effective only when
accepted by Lender and, when so accepted, shall constitute a continuing
agreement and shall remain in full force and effect until the Loan Documents are
terminated and all of the Obligations have been fully paid and satisfied, at
which time this Agreement shall terminate and Lender shall deliver to Pledgor,
at Pledgor's expense, such of the Collateral as shall not have been sold or
otherwise applied pursuant to this Agreement.
14. DEFINITIONS. The singular shall include the plural and
vice versa, and any gender shall include any other gender as the text shall
indicate.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon Pledgor and its administrators, executors, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
16. CONSTRUCTION AND APPLICABLE LAW. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but, if any provision of this
Agreement shall be held to be prohibited or invalid under any applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. This Agreement shall be governed by,
construed under, and enforced in accordance with, the internal laws of the State
of Georgia.
17. FURTHER ASSURANCES. Pledgor agrees that it will cooperate
with Lender and will upon Lender's request execute and deliver, or cause to be
executed and delivered, all such other stock powers, instruments, and documents,
and will take all such other action as Lender may reasonably request from time
to time in order to carry out the provisions and
- 5 -
<PAGE> 6
purposes hereof, including, without limitation, delivering to Lender, if
requested by Lender upon or after the occurrence of an Event of Default and
Lender's acceleration of the Obligations in consequence thereof, irrevocable
proxies with respect to the Stock in form satisfactory to Lender. Until receipt
thereof, this Agreement shall constitute Pledgor's proxy to Lender or its
nominee to vote all shares of the Stock then registered in Pledgor's name.
18. NOTICES. Except as otherwise provided herein, all notices,
requests, demands and other communications required or permitted under this
Agreement or applicable law shall be in writing and shall be deemed to have been
validly served, given, delivered, made and received when delivered against
receipt or four (4) business days after deposit in the mail, postage prepaid, or
in the case of a telecopy notice, when received at that office of the noticed
party as follows:
If to Pledgor: Atlantic Premium Brands, Ltd.
Suite 370
650 Dundee Road
Northbrook, Illinois 60062
Attention: President
With a copy to:
Tom D. Wippman, P.C.
c/o Sterling Capital, Ltd.
Suite 370
650 Dundee Road
Northbrook, Illinois 60062
Attention: Tom D. Wippman, Esq.
If to Lender: Fleet Capital Corporation
Suite 800
300 Galleria Parkway
Atlanta, Georgia 30339
Attention: Loan Administration
With a copy to:
Parker, Hudson, Rainer & Dobbs
1500 Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: C. Edward Dobbs, Esq.
Either party may change the address to which notices are to be sent to
it by giving written notice of such changed address to the other party in the
manner prescribed by this Section. Notice given in any other manner shall
nevertheless be effective as to the noticed party on the date actually received
by such notice party.
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<PAGE> 7
19. PARAGRAPH HEADINGS. The paragraph headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
20. LENDER APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
constitutes and appoints Lender, with full power of substitution, Pledgor's
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which Lender may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is coupled with an interest and is irrevocable. Without limiting the generality
of the foregoing, Lender shall have the power to arrange for the transfer, upon
or at any time after the occurrence of an Event of Default, of the Collateral on
the books of the Company to the name of and Lender's acceleration of the
Obligations in consequence thereof, Lender or Lender's nominee. Pledgor agrees
to indemnify and save Lender harmless from and against any liability or damage
which Lender may incur, in good faith and without gross negligence, in the
exercise or performance of any of Lender's powers and duties specifically set
forth herein.
21. USE OF LOAN PROCEEDS. Pledgor hereby represents and
warrants that the loan proceeds heretofore and hereafter received by it under
the Loan Agreement are not for the purpose of purchasing, or enabling any other
person or entity to reduce or retire indebtedness which was originally incurred
to purchase, any "margin security" as that term is defined in Regulation G
promulgated by the Board of Governors of the Federal Reserve System.
22. WAIVERS. PLEDGOR HEREBY WAIVES: NOTICE OF ACCEPTANCE OF
THIS AGREEMENT; NOTICE OF EXTENSIONS OF CREDIT, LOANS, ADVANCES OR OTHER
FINANCIAL ASSISTANCE BY LENDER TO COMPANY; THE RIGHT TO TRIAL BY JURY (WHICH
LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING
THIS AGREEMENT; PRESENTMENT AND DEMAND FOR PAYMENT OF ANY OF THE OBLIGATIONS;
PROTEST AND NOTICE OF DISHONOR OR DEFAULT WITH RESPECT TO ANY OF THE
OBLIGATIONS; AND ALL OTHER NOTICES TO WHICH THE PLEDGOR MIGHT OTHERWISE BE
ENTITLED EXCEPT AS HEREIN OTHERWISE EXPRESSLY PROVIDED.
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<PAGE> 8
IN WITNESS WHEREOF, Pledgor has signed, sealed and delivered this
Agreement, on the day and year first above written.
PLEDGOR:
--------
ATTEST: ATLANTIC PREMIUM BRANDS, LTD.
/s/ TOM D. WIPPMAN By: /s/ MERRICK M. ELFMAN
- ------------------------- -----------------------
Tom D. Wippman, Secretary Merrick M. Elfman, Chairman
[CORPORATE SEAL]
(Signatures continued on following page)
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<PAGE> 9
Accepted and agreed to
in Atlanta, Georgia, this
20th day of March, 1998
LENDER:
FLEET CAPITAL CORPORATION
By: /s/ ROLAND ROBINSON
----------------------
Title: Vice President
-------------------
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<PAGE> 1
EXHIBIT 4.12
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
AND SUBSIDIARIES
SENIOR SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT
--------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
BACKGROUND...................................................................1
Section A. Acquisition Transaction....................................1
Section B. Senior Loan................................................1
Section C. Purchase and Sale of the Securities........................2
Section D. Security for Payment of the Note...........................2
STATEMENT OF PURCHASE AGREEMENT..............................................2
Section 1 DEFINED TERMS..............................................2
Section 2 PURCHASE AND SALE OF THE SECURITIES........................3
Section 3 CONDITIONS TO CLOSING......................................3
3.1 Senior Loan Agreement. ..........................3
3.2 Acquisition Transaction...........................3
3.3 Execution and Delivery of Related Documents.......4
3.4 Certificates, Opinions, and Other Documents.......4
3.5 Disbursements and Deliveries......................5
3.6 Other.............................................6
3.7 Post-Closing Items................................6
Section 4 REPRESENTATIONS AND WARRANTIES
OF SELLERS................................................6
4.1 Organization and Good Standing....................6
4.2 Corporate Power. .................................7
4.3 Subsidiaries and Joint Ventures...................7
4.4 Capitalization....................................7
4.5 Authorization; Enforceability.....................8
4.6 No Conflict. ....................................8
4.7 Consents. .......................................9
4.8 Title to and Condition of Properties and Assets. .9
4.9 Books and Records................................10
4.10 Financial Statements.............................11
4.11 Undisclosed Liabilities..........................10
4.12 Material Adverse Change; Material Events.........10
4.13 Taxes............................................11
4.14 Intellectual Property............................11
4.15 Material Contracts...............................11
4.16 Legal Proceedings................................12
4.17 Insurance........................................12
4.18 Compliance with Laws.............................12
4.19 Licenses and Permits.............................12
i
<PAGE> 3
4.20 Specific Environmental Warranties......................12
4.21 Labor Relations........................................14
4.22 Deferred, ERISA and Pension Plans......................14
4.23 Customers and Suppliers................................14
4.24 Brokerage Fee..........................................14
4.25 Certain Payments.......................................14
Section 5 REPRESENTATIONS AND WARRANTIES OF
PURCHASER.......................................................15
5.1 Organization...........................................15
5.2 Authorization; Enforceability..........................15
5.3 No Conflicts...........................................15
5.4 Consents...............................................15
5.5 Experience.............................................16
5.6 Investment Intent......................................16
5.7 Rule 144...............................................16
5.8 Knowledge of Purchaser.................................16
5.9 Plan Assets............................................16
Section 6 FINANCIAL REPORTING.............................................17
6.1 Financial and Corporate Reports........................17
6.2 Other Information......................................17
6.3 Rule 144A. ...........................................17
6.4 Preparation of Financial Statements in Accordance
with GAAP..............................................18
6.5 Changes in Practices, Policies and Procedures..........18
6.6 Notice of Certain Events...............................19
6.7 Books, Records, Audits and Inspections.................20
Section 7 AFFIRMATIVE COVENANTS...........................................20
7.1 Insurance. ...........................................20
7.2 Payment of Taxes and Claims............................20
7.3 Compliance with Laws. ................................20
7.4 Preservation of Existence and Licenses.................20
7.5 Maintenance of Assets..................................21
7.6 Performance of Contracts...............................21
7.7 Employee Benefit Plans.................................21
Section 8 NEGATIVE COVENANTS..............................................21
8.1 Other Indebtedness.....................................21
8.2 Prepayments............................................21
8.3 Liens. ...............................................22
ii
<PAGE> 4
8.4 Investments..........................................22
8.5 Merger and Consolidation.............................22
8.6 Subsidiaries.........................................22
8.7 Transfers, Liquidations and Dispositions of
Substantial Assets...................................22
8.8 Restricted Payments..................................23
8.9 Organizational and Business Activities...............23
8.10 Transactions with Affiliates.........................23
8.11 Employee Benefit Plans...............................23
8.12 Change in Principal Office...........................23
8.13 Reporting Company....................................16
Section 9 FINANCIAL TESTS...............................................23
9.1 Minimum Fixed Charge Coverage Ratio..................23
9.2 Minimum Consolidated Interest Coverage...............23
9.3 Maximum Indebtedness to EBITDA Ratio.................24
9.4 Minimum Stockholders' Equity.........................24
Section 10 EVENTS OF DEFAULT.............................................24
Section 11 MISCELLANEOUS.................................................24
11.1 Related Documents....................................24
11.2 Amendment, Modification or Restatement...............24
11.3 Waiver of Compliance.................................25
11.4 Consent or Approval of Purchaser.....................26
11.5 Forbearance..........................................27
11.6 No Implied Rights or Waivers.........................27
11.7 Payment of Fees and Expenses.........................27
11.8 Entire Agreement. ..................................28
11.9 Severability.........................................28
11.10 Third Party Beneficiaries. .........................28
11.11 Legal Representation.................................28
11.12 Rules of Construction. .............................29
11.13 Notice...............................................30
11.14 Assignment...........................................31
11.15 Further Assurances. ................................32
11.16 Confidentiality......................................32
11.17 Closing of the Transaction...........................32
11.18 Counterparts.........................................33
11.19 Governing Law. .....................................33
11.20 Waiver of Jury Trial.................................33
11.21 Consent to Jurisdiction, Venue and Service
of Process...........................................33
iii
<PAGE> 5
SENIOR SUBORDINATED NOTE
AND WARRANT PURCHASE AGREEMENT
This is a SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE
AGREEMENT dated as of March 20, 1998 ("Purchase Agreement") by and among
ATLANTIC PREMIUM BRANDS, LTD. ("Atlantic"), a Delaware corporation, PREFCO CORP.
("Prefco"), a Delaware corporation, Carlton Foods Corp. ("Carlton"), a Delaware
corporation, RICHARDS CAJUN FOODS CORP. ("Richards"), a Delaware corporation,
GROGAN'S FARM, INC. ("Grogan's), a Delaware corporation, and POTTER'S
ACQUISITION CORP. ("Potter"), a Delaware corporation, as sellers, and BANC ONE
CAPITAL PARTNERS, LLC, ("BOCP") a Delaware limited liability company and Small
Business Investment Company, as purchaser.
Prefco, Carlton, Richards, and Grogan's are referred to collectively as
the "Existing Subsidiaries." The Existing Subsidiaries and Potter are referred
to collectively as the "Subsidiaries" and individually as a "Subsidiary."
Atlantic and the Subsidiaries, together with their respective successors and
assigns, are referred to collectively as the "Sellers" and individually as a
"Seller." BOCP, together with its successors and permitted assigns, is referred
to as the "Purchaser." The term "Company" refers (i) prior to the consummation
of the Acquisition Transaction (as defined herein), to Atlantic and the Existing
Subsidiaries, as a consolidated entity for financial reporting purposes, and
(ii) thereafter, to Atlantic, the Existing Subsidiaries, Potter and Permitted
Subsidiaries (as defined herein), as a consolidated entity for financial
reporting purposes.
The Sellers and the Purchaser are referred to collectively as the
"Parties", and individually as a "Party".
BACKGROUND
SECTION A. ACQUISITION TRANSACTION.
Pursuant to an Asset Purchase Agreement dated as of March 6, 1998
("Acquisition Agreement") by and among Potter's Farm, Inc., Potter Rendering
Co., Potter Leasing Company, Ltd. (collectively, "JCPSC") and Potter, Potter has
agreed to purchase substantially all of the assets of JCPSC ("Acquisition
Transaction").
SECTION B. SENIOR LOAN.
Pursuant to Loan and Security Agreement dated as of March 20, 1998 (as
more particularly described in the Glossary of Terms and as the same may be
amended or modified from time to time,
<PAGE> 6
the "Senior Loan Agreement") by and between Fleet Capital Corporation and the
Sellers, the Senior Lender (as defined in the Glossary of Terms) has agreed to
provide to the Sellers on a revolving credit basis up to a maximum aggregate
principal amount of $15,000,000 at any one time outstanding, and a term loan in
the principal amount of $11,000,000 and a $2,500,000 equipment loan facility (as
more particularly described in the Glossary of Terms, the "Senior Loan"). The
Senior Loan is secured by, among other things, a first priority security
interest in the Collateral (as defined herein). The Purchaser and the Senior
Lender are parties to the Intercreditor Agreement (as defined in the Glossary).
SECTION C. PURCHASE AND SALE OF THE SECURITIES.
Upon the terms and subject to the conditions set forth in this Purchase
Agreement,(i) the Sellers shall issue and sell to the Purchaser a Senior
Subordinated Note dated as of the date hereof in the aggregate principal amount
of $6,500,00 due March 31, 2005 ("Note"), and (ii) Atlantic shall issue and sell
to the Purchaser (A) a warrant ("Warrant") to purchase 666,947 shares of
Nonvoting Common Stock of Atlantic (subject to adjustment as provided therein)
("Fixed Warrant"), and (B) a Warrant to purchase up to 428,753 shares of
Nonvoting Common Stock of Atlantic (subject to adjustment as provided therein)
("Contingent Warrant"). The Note, the Fixed Warrant and Contingent Warrant are
referred to collectively as the "Securities" and individually as a "Security"
and the Fixed Warrant and Contingent Warrant are referred to collectively as the
"Warrants."
SECTION D. SECURITY FOR PAYMENT OF THE NOTE.
As security for payment of the Note and the payment and performance of
other obligations under this Purchase Agreement and the Related Documents (as
defined herein), the Sellers have granted to the Purchaser a second priority
security interest in the Collateral, which security interest is, as provided for
in the Intercreditor Agreement, second only to the Senior Lender's security
interest in such assets and other Permitted Liens.
STATEMENT OF PURCHASE AGREEMENT
In consideration of the premises and the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as follows:
SECTION 1 DEFINED TERMS.
Certain terms used in this Purchase Agreement and the Related Documents
are defined in the Glossary of Defined Terms attached as Exhibit A. Unless
otherwise expressly provided or unless the context otherwise requires, such
defined terms shall have the meaning specified in the Glossary of Defined Terms
when used in this Purchase Agreement and the Related Documents and in any other
document related to this transaction which expressly incorporates such Glossary
by reference.
2
<PAGE> 7
SECTION 2 PURCHASE AND SALE OF THE SECURITIES.
Upon the terms and subject to the conditions set forth in this Purchase
Agreement, (i) the Sellers shall issue and sell to the Purchaser and the
Purchaser shall purchase from the Sellers the Note for an aggregate purchase
price of $6,500,000, and (ii) Atlantic shall issue and sell to the Purchaser and
the Purchaser shall purchase from Atlantic the Warrants for an aggregate
purchase price of $100.
Such purchase and sale shall be consummated on the Closing Date as
provided for in this Purchase Agreement, and on such date the Purchaser shall
make payment of the purchase price of the Securities being purchased by wire
transfer to one or more accounts designated by Atlantic, including those
contemplated by Section 3.5.
SECTION 3 CONDITIONS TO CLOSING.
The obligations of the Purchaser to purchase the Securities on the
Closing Date is subject to the fulfillment, in a manner reasonably satisfactory
to the Purchaser and its counsel, of each of the conditions precedent set forth
in Section 3.1 through 3.6, inclusive.
3.1 SENIOR LOAN AGREEMENT. The Senior Loan Agreement shall be in
full force and effect, and:
(i) no event of default or event which with
notice, lapse of time or both would
constitute an event of default under the
Senior Loan Agreement shall have occurred
and be continuing;
(ii) the Senior Lender shall not have waived
compliance with any covenant or the breach
of any representation or warranty set forth
in the Senior Loan Agreement as of the
Closing Date;
(iii) the Senior Lender and the Purchaser shall
have executed and delivered the
Intercreditor Agreement;
(iv) all payment obligations of the Sellers to
LaSalle National Bank under the Credit
Agreement dated as of March 15, 1996 (as
amended)] shall have been paid in full, such
Purchase Agreement shall have been
terminated and LaSalle National Bank shall
agree to release all liens securing such
obligations.
3.2 ACQUISITION TRANSACTION. The Acquisition Agreement shall have
been duly executed and delivered by the parties thereto, and:
3
<PAGE> 8
(i) the Acquisition Transaction shall have been
consummated prior to, or simultaneously
with, the purchase of the Securities upon
the terms and subject to the conditions set
forth in the Acquisition Agreement;
(ii) proceeds of the Senior Loan and the Note
shall have been applied to the payment of
the purchase price as provided for in the
Acquisition Agreement simultaneously with
the payment of the purchase price for the
Securities;
(iii) to the best knowledge of the Sellers after
reasonable investigation, each of the
representations and warranties set forth in
the Acquisition Agreement is true and
correct in all material respects as of the
Closing Date, except to the extent any
representation or warranty is given as of a
specific date other than the Closing Date;
and
(iv) the Sellers have not waived compliance with
any covenant or the breach of any
representation or warranty set forth in the
Acquisition Agreement.
3.3 EXECUTION AND DELIVERY OF RELATED DOCUMENTS. Each of the following
Related Documents, each dated and effective as of the Closing Date, shall have
been duly executed and delivered by the Parties:
(i) the Note;
(ii) the Warrant Certificate;
(iii) the Security Agreement;
(iv) the Put Option Agreement;
(v) the Registration Rights Agreement;
(vi) the Shareholders' Agreement;
(vii) the Preemptive Rights Agreement; and
(viii) the Pledge Agreements.
3.4 CERTIFICATES, OPINIONS, AND OTHER DOCUMENTS. The following
certificates, opinions and other documents shall be delivered by or on behalf
of the Sellers:
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(i) a certificate of each Seller, executed by
its Chairman, on behalf of such Sellers
certifying compliance with the closing
conditions set forth in this Section;
(ii) certified copies of the resolutions of each
Seller authorizing the execution, delivery
and performance of its obligations under
this Purchase Agreement, the Related
Documents and any other documents to be
delivered by such Seller pursuant hereto and
thereto;
(iii) certified copies of each Seller's Charter
Documents, including any and all amendments
thereto, as in effect on the Closing Date,
together with good standing certificates;
(iv) a certificate of the Secretary of each
Sellers on behalf of such Seller, certifying
the names of the officers of the Seller
authorized to sign this Purchase Agreement,
the Related Documents and any other
documents or certificates to be delivered
pursuant hereto and thereto by the Seller,
together with the true signatures of such
officers;
(v) an opinion of counsel for the Sellers, in a
form reasonably acceptable to the
Purchaser's counsel;
(vi) Forms UCC-1 with respect to the Collateral;
and
(vii) such other opinions, certificates,
affidavits, documents and filings as the
Purchaser may deem reasonably necessary or
appropriate.
3.5 DISBURSEMENTS AND DELIVERIES. The following disbursements shall
have been made out of the proceeds of the sale of the Securities:
(i) $60,000 paid to the Purchaser as a closing
fee ($100,000 fee net of $40,000 due
diligence fee credit);
(ii) $29,524 paid to the Purchaser as
reimbursement of legal fees and other
expenses as provided for herein (which
amount includes the fee referred to in
Section 11.7 hereof); and
(iii) $6,410,576 disbursed in payment of the
purchase price with respect to the Potter
Transaction.
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3.6 OTHER. The following shall be true:
(i) each of the Sellers' representations and
warranties set forth in this Purchase
Agreement and the Related Documents shall be
accurate in all material respects as of the
Closing Date, except as to the extent any
representation or warranty is given as of a
specific date other than the Closing Date;
and
(ii) no material adverse change shall have
occurred in the financial condition of the
Company or its operations since the date of
the most recent Financial Statements.
3.7 POST-CLOSING ITEMS. The following actions shall be taken
after the closing:
(i) the Sellers shall make any required
governmental or regulatory filings with
respect to the issuance and sale of the
Securities; and
(ii) within 10 Business Days after the Closing
Date, the Sellers shall furnish or cause to
be furnished all post-closing items required
to be delivered pursuant to this Purchase
Agreement.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS.
The representations and warranties of the Sellers set forth below shall
survive the closing of the purchase transaction contemplated in this Purchase
Agreement, and any investigation made by the Purchaser shall not diminish the
right of the Purchaser to rely upon such representations and warranties;
however, the Purchaser shall have no right to assert breach of any
representation or warranty where the Purchaser had actual knowledge that the
representation or warranty was not true. Except as otherwise specified, such
representations and warranties are made as of the date hereof, after giving
effect to the Acquisition Transaction. Exceptions to the representations and
warranties are set forth on the Schedule of Exceptions to Representations and
Warranties attached hereto. The Sellers, jointly and severally, represent and
warrant to the Purchaser as follows.
4.1 ORGANIZATION AND GOOD STANDING.
Each Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation. Each Seller is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the character
of its properties or the nature of its activities makes such qualification
necessary, except to the extent that the failure to be so qualified and in good
standing would not have a Material Adverse Effect on such Seller. Each Seller
has furnished to the Purchaser true and complete copies
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of its Charter Documents and any other agreements to which it is a party
affecting its governance in any material respect, all as in effect on the date
of this Purchase Agreement.
4.2 CORPORATE POWER.
Each Seller has full corporate and other power and authority (i) to
own, lease and operate its properties and assets, (ii) to carry on its business
as presently conducted, (iii) to execute and deliver this Purchase Agreement,
the Related Documents and any other instruments or documents provided for herein
or therein, and (iv) to carry out and perform its obligations under the terms of
this Purchase Agreement and the Related Documents.
4.3 SUBSIDIARIES AND JOINT VENTURES.
Except for the Subsidiaries, no Seller has any subsidiaries and does
not otherwise own or control, directly or indirectly, or have any other equity
investment in or other ownership interest in, any other Person. No Seller is a
member, partner or participant in any partnership, joint venture, limited
liability company or similar entity.
4.4 CAPITALIZATION.
(a) The authorized Capital Stock of Atlantic consists of
30,000,000 shares of Common Stock, $.01 par value, of which, as of March 19,
1998, 7,400,174 shares are issued and outstanding, and 5,000,000 shares of
preferred stock, of which no shares are issued and outstanding. The number of
Common Shares authorized is sufficient to cover the conversion of outstanding
Convertible Securities and the Warrants (in the event that the Warrants are
exchangeable for shares of Voting Stock). The Seller has reserved 1,095,700
shares for issuance upon exercise of the Warrants and as soon as practicable,
will authorize, designate and reserve shares of Nonvoting Stock.
(b) The outstanding Capital Stock of Atlantic has been and
upon exercise of the Warrants and payment of the exercise price therefore in
accordance with its terms, the Warrant Shares will have been (i) duly
authorized, validly issued, fully paid and non-assessable, (ii) issued in
compliance with Applicable Law, and (iii) issued in compliance with applicable
preemptive, preferential or contractual rights.
(c) Except as provided in this Purchase Agreement and the
Related Documents, there are no outstanding options, subscriptions, warrants,
calls, preemptive rights, conversion rights, exchange rights, redemption rights,
registration rights, co-sale rights, buy-sell rights, rights of first refusal or
similar rights, agreements or undertakings in effect or committed to by Atlantic
or to Atlantic's knowledge, its stockholders with respect to the Capital Stock
of Atlantic.
(d) Except with respect to the proxy issued to the Senior
Lender in connection with the Senior Loan, to the knowledge of Sellers, there is
no irrevocable proxy, voting trust,
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shareholders Agreement, close corporation Purchase Agreement or similar
Agreement or arrangement with respect to the exercise of the Voting Power of
Atlantic.
(e) The authorized capital stock and outstanding capital stock
of each of the Subsidiaries is set forth below:
Description Authorized Outstanding
----------- ---------- -----------
Prefco Common Stock 100 100
Carlton Common Stock 100 100
Richards Common Stock 100 100
Grogan's Common Stock 100 100
Potter Common Stock 100 100
Except as provided in the Senior Loan Agreement, all of such outstanding shares
of the capital stock of each Subsidiary is owned by Atlantic free and clear of
all advance claims, and there are no outstanding options, subscriptions,
warrants, calls, preemptive rights, conversion rights, exchange rights,
redemptions rights, registration rights, co-sale rights, buy-sell rights, rights
of first refusal or similar rights, agreements or undertakings in effect or
committed to by Atlantic or any Subsidiary with respect to such capital stock
4.5 AUTHORIZATION; ENFORCEABILITY.
The execution and delivery of this Purchase Agreement and the Related
Documents by each Seller, and the performance of its obligations hereunder and
thereunder, have been duly authorized by all requisite corporate action. This
Purchase Agreement and each Related Document, when executed and delivered by
each Seller, will constitute valid and legally binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium
or similar laws affecting creditors' rights generally, and to general principles
of equity.
4.6 NO CONFLICT.
The execution, delivery and performance of this Purchase Agreement and
the Related Documents by each Seller do not and will not (a) conflict with or
violate any Applicable Law or any judgment, order, decree, stipulation or
injunction to which such Seller is subject, (b) violate or conflict with the
provisions of its Charter Documents, (c) result in the breach of, or constitute
a
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default under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Lien on any of
its assets or properties pursuant to any Material Contract.
4.7 CONSENTS.
No consent, approval, authorization, license, order or permit of, or
declaration, registration or filing with, or notification to, any governmental
authority or any other Person is required in connection with the execution,
delivery and performance of this Purchase Agreement and the Related Documents by
the Sellers, or the consummation of any transaction contemplated hereby or
thereby, other than those that have been obtained and certain filings of uniform
commercial code financing statements.
4.8 TITLE TO AND CONDITION OF PROPERTIES AND ASSETS.
Each Seller owns, has a valid leasehold interest in, or has legal right
to use all of the material assets, properties and tangible personal property
necessary for the conduct of its business, free and clear of any mortgage,
pledge, Lien, lease, conditional sale agreement, security interest, encumbrance,
or charge (except for Permitted Liens). The personal property owned and leased
by each Seller is in good operating condition and repair, ordinary wear and tear
excepted, except to the extent that the failure to be in good condition would
not have a Material Adverse Effect. The real estate owned and leased by such
Seller is in good condition and repair, ordinary wear and tear excepted, except
to the extent that the failure to be in good operating condition and repair
would not have a Material Adverse Effect.
4.9 BOOKS AND RECORDS.
The books of account, asset ledgers, inventory ledgers, minute books
and stock record books of the Company, all of which have been made available to
the Purchaser, are complete and correct in all material respects, and have been
maintained on a consistent basis in accordance with sound business practices.
4.10 FINANCIAL STATEMENTS.
The Financial Statements of the Company for fiscal year 1996 audited by
the Accountants, and the unaudited Financial Statements of the Company for the
nine months ended September 30, 1997, copies of which have been previously made
available to the Purchaser, (a) are correct and complete in all material
respects, (b) are consistent with, and have been prepared from, the books and
records of the applicable Seller (c) have been prepared in accordance with GAAP
except for such deviations as are referred to in the notes thereto, and (d)
fairly present in all material respects the financial position and results of
operations, changes in stockholders' equity and cash flows of the Company as of
each date and for the respective periods covered by the Financial Statements.
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4.11 UNDISCLOSED LIABILITIES.
The Company has no indebtedness, liability, claim, loss, deficiency or
obligation of any nature (whether known or unknown, absolute or contingent,
liquidated or unliquidated and whether due or to become due) required to be
shown or disclosed in Financial Statements prepared in accordance with GAAP,
except (a) as reflected or reserved against on the most recent Financial
Statements and (b) incurred since that date in the ordinary course of business
or in connection with the Acquisition Transaction. No Seller is liable upon or
with respect to, or obligated in any other way to provide funds in respect of,
or to guaranty or assume in any manner any debt or obligation of any other
Person, except to the extent such obligations arise in the ordinary course of
business and, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. The Sellers have no knowledge of any circumstance,
condition, event or arrangement that may hereafter give rise to any such
liability on behalf of any other Person other than in the ordinary course of
business.
4.12 MATERIAL ADVERSE CHANGE; MATERIAL EVENTS.
Since the date of the most recent Financial Statements, (i) there has
not been any material adverse change in the Company's business, operations,
properties, assets or financial condition and, to the Company's best knowledge,
no event has occurred or circumstance exists that may result in such a material
adverse change, and (ii) there has not been:
(a) any material damage, destruction or loss of any of
its properties or assets;
(b) any Indebtedness for borrowed money incurred other than
Indebtedness incurred to the Purchaser and Indebtedness incurred under the
Senior Loan Agreement;
(c) any material change in any accounting policies, procedures
or practices other than changes required by GAAP or accounting rules of the
Commission;
(d) any sale, assignment, lease or other disposition of any of
its assets other than sales of inventory in the ordinary course of business;
(e) any Capital Expenditures paid or incurred other than (i)
as contemplated in the most recent Financial Statements, or (ii) in the ordinary
course of business and, or (iii) pursuant to the Acquisition;
(f) any acceleration, termination, cancellation or adverse
modification of any Material Contract to which it is a party or by which it is
bound;
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(g) any payment or setting aside for payment of any Dividend
or other distribution with respect to, or any redemption, retirement or other
purchase of, any of the Capital Stock, other than a Dividend or distribution by
a Subsidiary of Atlantic to Atlantic; or
(h) any other material transaction other than in the ordinary
course of business consistent with past practices.
4.13 TAXES.
The Sellers file consolidated tax returns for federal income tax
purposes. The Sellers have timely filed or caused to be filed all material Tax
returns required under Applicable Law and such returns are true, correct and
complete in all material respects. No audit of any Seller's Tax returns is in
progress, or to its knowledge, is being proposed, threatened or discussed. The
Sellers have paid or made provision for payment of all Taxes and assessments
that have been or are accrued, due or levied, except those being contested in
good faith, and there are no assessed Tax deficiencies against the Sellers. All
Taxes that the Sellers are required to withhold or collect have been duly
withheld or collected, and, to the extent required by Applicable Law, have been
paid to appropriate governmental authorities or Persons. No Seller has waived,
or been requested to waive or extend, any statute of limitations relating to the
payment or assessment of Taxes or deficiencies. No Seller has made any election
to be treated as an S Corporation or equivalent pass-through entity under the
Code.
4.14 INTELLECTUAL PROPERTY.
(a) Each Seller owns or is licensed to use all material
Intellectual Property necessary for the operation of its business free and clear
of any Liens, other than Permitted Liens.
(b) There are no interference, opposition or cancellation
proceedings or infringement suits pending or, to the knowledge of any Seller,
threatened against any Seller with respect to any of the Intellectual Property.
To the knowledge of each Seller, no Person is interfering with, infringing upon
or misappropriating any of its Intellectual Property. To the Company's best
knowledge, no Seller has interfered with, infringed upon or misappropriated any
Intellectual Property rights of any Person, and no Seller has received any claim
alleging such action.
4.15 MATERIAL CONTRACTS.
Prior to the date hereof, the Purchaser has been furnished with the
opportunity to review such Material Contracts as it deems appropriate in
connection herewith. With respect to each Material Contract, (i) such agreement
is in full force and effect and constitutes the legal, valid and binding
obligation of each Seller that is a party thereto and, to its knowledge, the
other parties thereto, enforceable in accordance with its terms, (ii) such
agreement will not terminate as a result of this Purchase Agreement, (iii) each
Seller that is a party thereto is not in default in any material respect
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under such agreement and no event has occurred which, with the passage of time,
would constitute such a default, and (iv) to the Sellers' knowledge, no other
party is in default in any material respect under such agreement.
4.16 LEGAL PROCEEDINGS.
No Seller is (i) subject to any outstanding injunction, judgment,
order, decree or ruling, whether or not subject to appeal, which would
reasonably be expected to have a Material Adverse Effect, or (ii) a party or, to
its knowledge, threatened to be made a party, to any action, suit, proceeding,
hearing, audit or investigation, of or before any court, quasi-judicial agency,
administrative agency or arbitrator, which would reasonably be expected to have
a Material Adverse Effect.
4.17 INSURANCE.
The Sellers maintain and have maintained such insurance as is required
by Applicable Law and such other insurance, in amounts and insuring against
hazards and other liabilities, as is customarily maintained by companies
similarly situated.
4.18 COMPLIANCE WITH LAWS.
Each Seller has complied and is currently in compliance with all
Applicable Laws where the failure so to comply would have a Material Adverse
Effect, and no written notice has been received by such Seller alleging
non-compliance which remains uncured as of the date hereof where such
non-compliance would have a Material Adverse Effect.
4.19 LICENSES AND PERMITS.
Each Seller has obtained all licenses, permits and other governmental
authorizations required in order for it to own its assets and conduct its
business as presently conducted, except where the failure to do so would not
have a Material Adverse Effect. All of such licenses, permits and authorizations
are in full force and effect, except where the failure to be in full force and
effect would not have a Material Adverse Effect. No material violation or
remedial obligation exists in respect of any such license or permit. No
proceeding is pending, or to the knowledge of the Sellers, threatened to revoke
or limit any such license, permit or authorization where such proceeding would
have a Material Adverse Effect.
4.20 SPECIFIC ENVIRONMENTAL WARRANTIES.
(a) ENVIRONMENTAL AUDITS. No environmental audits,
assessments or occupational health analyses of any groundwater, soil, air or
asbestos samples from any facility now
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or previously leased or owned by any Seller have been undertaken by, or at the
direction of, any Seller, any of its employees or agents or, to its knowledge,
any governmental agency.
(b) HAZARDOUS MATERIALS. Except in the normal course of the
Sellers' business and in compliance with Environmental Laws: (i) no Hazardous
Materials are, or to their knowledge have been, located in or about any real
properties leased or owned by any Seller, (ii) have been released by any Seller
into the environment, (iii) have been discharged, treated, managed, recycled,
placed or disposed of by any Seller or, to their knowledge, anyone else in each
instance, at, on or under any real properties leased or owned by it, and (iv) to
the Sellers' knowledge, no Hazardous Materials formerly located on the real
properties leased or owned by any Seller have been disposed of at any off-site
waste disposal in violation of applicable Environmental Laws.
(c) DISPOSAL, STORAGE, RECYCLING, TREATMENT, ETC. Except in
the normal course of the Sellers' business and in compliance with Environmental
Laws, no portion of any real properties leased or owned by any Seller is being
used, or to its knowledge, has been used, for the disposal, storage, recycling,
treatment, processing or other handling of Hazardous Materials. To the knowledge
of the Sellers, no storage tanks (whether above the ground or underground) are
located on or under any real properties currently or previously owned or leased
by any Seller.
(d) PLUMBING OR SEPTIC TANKS. Except in the normal course of
the Sellers' business and in compliance with Environmental Laws, no Seller is
disposing of, and has not in the past disposed of, any Hazardous Materials into
the plumbing or septic tank on property which any Seller currently or previously
owned or leased.
(e) ENVIRONMENTAL LAWS. Each Seller is and at all times has
been operating in compliance with all applicable Environmental Laws where the
failure so to comply would reasonably be expected to have a Material Adverse
Effect.
(f) LEGAL PROCEEDINGS AND INVESTIGATIONS. To the knowledge of
the Sellers, no investigation, administrative order or notice, consent order,
litigation, settlement or environmental claim or lien with respect to Hazardous
Materials is proposed, threatened or in existence with respect to any real
properties now or previously owned or leased by any Seller, or with respect to
any off-site waste disposal to which waste of such Seller has been taken which
would reasonably be expected to result in a Material Adverse Effect. The Sellers
have no basis to expect, and have not received, any summons, citation,
directive, inquiry, order, written notice or written communication from any
Person concerning any actual, alleged or potential violation of or failure to
comply with any Environmental Laws or the unpermitted or illegal storage,
dumping or discharge of any Hazardous Materials arising out of or with respect
to any real properties now or previously owned or leased by any Seller or the
operation of its business.
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4.21 LABOR RELATIONS.
No Seller is a party to or bound by any collective bargaining or other
labor Purchase Agreement, and, to the best of Seller's knowledge, there are no
organizational efforts affecting its employees. There are no unremedied material
violations of any federal, state or local labor or employment laws or
regulations, including wages, hours, collective bargaining, Taxes and the like
which would reasonably be expected to result in a Material Adverse Effect, and
no Seller has any knowledge of the existence of any grounds for any such claims.
4.22 DEFERRED, ERISA AND PENSION PLANS.
Schedule 4.22 sets forth and describes all Deferred Plans, ERISA Plans
and Pension Plans to or in which any Seller or any ERISA Affiliate contributes,
has contributed, is obligated or committed to contribute, or otherwise
participates or has participated. The Sellers (i) have made all payments or
contributions due to date under each Benefit Plan, and has recorded on its books
amounts accrued to date as liabilities with respect to each Benefit Plan, (ii)
has performed all material obligations required to be performed under, and is
not in default under or violation of, any Benefit Plan, (iii) are in compliance
in all material respects with requirements of ERISA, the Code and Applicable Law
with respect to the Benefit Plans, (iv) are aware of no existing or threatened
material actions, suits or claims pending (other than routine claims for
benefits) with respect to any Benefit Plan, (v) have not completely or partially
terminated any Benefit Plan that is or was subject to ERISA, (vi) have not
incurred, nor reasonably expects to incur, any liability to the Pension Benefit
Guaranty Corporation, and (vii) has no liability in respect of any
Multi-employer Plan (as defined under ERISA).
4.23 CUSTOMERS AND SUPPLIERS.
The Sellers have not been advised, and have no knowledge, that any of
its customers or suppliers intends to cease doing business with it or to reduce
the amount of goods or services purchased or sold on a regular on-going basis
from it, which cessation or reduction in the aggregate could have a Material
Adverse Effect.
4.24 BROKERAGE FEE.
The Sellers have not engaged any investment banker, finder, broker or
similar agent which may give rise to any brokerage fee, finder's fee, commission
or similar liability in connection with the transactions contemplated hereby,
other than an Affiliate of the Purchaser.
4.25 CERTAIN PAYMENTS
No Seller has directly or indirectly (a) made any unlawful
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment to any Person, private or public,
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regardless of form (i) for favorable treatment for business secured, (ii) for
favorable treatment in securing business, or (iii) for special concessions, or
(b) established or maintained any fund or asset that has not been recorded in
its books and records.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The representations and warranties of the Purchaser set forth below
shall survive the closing of the purchase transaction contemplated in this
Purchase Agreement, and any investigation made by the Sellers shall not diminish
the right of the Sellers to rely upon such representations and warranties. The
Purchaser represents and warrants to the Sellers as follows.
5.1 ORGANIZATION.
The Purchaser is a limited liability company duly organized and validly
existing under the laws of the state of its formation.
5.2 AUTHORIZATION; ENFORCEABILITY.
The execution and delivery of this Purchase Agreement and the Related
Documents by the Purchaser, and the performance of its obligations hereunder and
thereunder are within its powers and have been duly authorized by appropriate
action. This Purchase Agreement and each Related Document, when executed and
delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally,
and to general principles of equity.
5.3 NO CONFLICTS.
The execution, delivery and performance of this Purchase Agreement and
the Related Documents by the Purchaser do not and will not (a) conflict with or
violate any Applicable Law or any judgment, order, decree, stipulation or
injunction to which the Purchaser is subject, (b) violate or conflict with the
provisions of the Purchaser's Charter Documents, (c) result in the breach of, or
constitute a default under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Lien on any of the assets or properties of the Purchaser pursuant to, any note,
bond, contract, lease, license, permit, indenture, mortgage, or any other
instrument or Purchase Agreement to which the Purchaser is a party or by which
any property of the Purchaser is bound.
5.4 CONSENTS.
No consent, approval, authorization, license, order or permit of, or
declaration, registration or filing with, or notification to, any governmental
authority or any other Person is required in
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connection with the execution, delivery and performance of this Purchase
Agreement and the Related Documents, or the consummation of any transaction
contemplated hereby or thereby.
5.5 EXPERIENCE.
The Purchaser is an Accredited Investor and has substantial experience
in evaluating and investing in securities of companies similar to the Sellers
and has made investments in companies other than the Sellers. The Purchaser
acknowledges that by reason of its business or financial experience and
financial condition, it has the ability to analyze and bear the entire risk of
its investment pursuant to this Purchase Agreement.
5.6 INVESTMENT INTENT.
The Purchaser is acquiring the Securities for investment for its own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution thereof. The Purchaser understands that the
issuance and sale of the Securities have not been, and will not be, subject to a
registration statement filed under the Securities Act or any applicable state
securities laws by reason of a specific exemption from such registration, which
exemption depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of the Purchaser's representation as
expressed herein.
5.7 RULE 144.
The Purchaser acknowledges that the Securities are restricted
securities within the meaning of Rule 144 promulgated under the Securities Act
and must be held indefinitely unless subsequently registered under the
Securities Act and applicable state securities laws or unless an exemption from
such registration is available. The Purchaser is aware of and understands the
provisions of Rule 144.
5.8 KNOWLEDGE OF PURCHASER.
The Purchaser is aware of and has investigated the Sellers' business,
management and financial condition, has had the opportunity to inspect the
Sellers' facilities and has had access to such other information about the
Sellers as the Purchaser has deemed necessary and desirable to reach an informed
and knowledgeable decision to acquire the Securities. The purchase of such
Securities is not a result of an advertisement of an offering.
5.9 PLAN ASSETS
The Purchaser represents and warrants that (1) no portion of the funds
to be used by the Purchaser to purchase the Securities, as of the Closing Date,
are "plan assets", within the meaning of 29 CFR Section 2510.3-101, of an
employee benefit plan.
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SECTION 6 FINANCIAL REPORTING.
The obligations of the Sellers set forth in this Section 6 shall
terminate upon the Note being paid in full.
6.1 FINANCIAL AND CORPORATE REPORTS. Atlantic shall deliver or shall
cause to be delivered to the Purchaser the following reports within the
applicable time periods specified in this Section.
(a) Annual Financial Statements. The Annual Financial
Statements shall be delivered within ninety (90) days after the end of each
Fiscal Year, and shall be accompanied by the Audit Report, CFO Certificate and
Compliance Certificate.
(b) Quarterly Financial Statements. The Quarterly Financial
Statements shall be delivered within forty-five (45) days after the end of each
fiscal Quarter (other than the fourth Quarter), and shall be accompanied by a
CFO Certificate and Compliance Certificate.
(c) Monthly Financial Statements. The Monthly Financial
Statements shall be delivered promptly upon their dissemination to the Seller's
management, but in no event later than 30 days after the end of each calendar
Month (other than the last Month of each fiscal Quarter).
(d) Internally Generated Budgets. The internally prepared
budgets of Atlantic with respect to each Fiscal Year shall be delivered within
ninety (90) days after the end of the preceding Fiscal Year.
(e) Securities Reports. Any Securities Reports shall be
delivered promptly upon the filing or submission thereof.
(f) Lender Reports. Any Lender Reports shall be delivered
promptly upon their delivery to Senior Lender upon written request therefor.
(g) Management Letters. Any Management Letters shall be
delivered promptly after receipt thereof.
6.2 OTHER INFORMATION. Promptly upon written request therefor, the
Sellers shall furnish (or cause to be furnished) to the Purchaser financial or
other information available in its books, records and files; provided, however,
that if such information cannot be furnished without undue expense, the Sellers
may require the Purchaser to reimburse it for all reasonable out-of-pocket
expenses incurred in connection with furnishing such information.
6.3 RULE 144A. Atlantic shall, upon the written request of the
Purchaser, furnish to any Qualified Institutional Buyer (as such term is defined
in Rule 144A under the Securities Act)
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designated by the Purchaser, such financial or other information as the
Purchaser reasonably determines is necessary in order to afford compliance with
Rule 144A under the Securities Act in connection with any proposed sale of the
Securities, except at such times as Atlantic is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.
6.4 PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP. The
Company shall prepare all Financial Statements in compliance with the
regulations of any regulatory body having jurisdiction over the Company or its
business and in accordance with GAAP in a manner consistent with the practices,
policies and procedures applied in connection with the preparation of the
Financial Statements initially delivered to the Purchaser, except for any
changes permitted or required under GAAP or applicable accounting rules of the
Commission or approved in the manner provided for herein.
6.5 CHANGES IN PRACTICES, POLICIES AND PROCEDURES.
(a) Notice of Proposed Change. In the event that the Company
proposes to make any material change in any of the practices, policies or
procedures applied in connection with the preparation of its Financial
Statements, the Company shall, to the extent not violative of Applicable Law:
(i) notify the Purchaser in writing of such
proposed change at least forty-five (45)
days prior to the required delivery date of
the first Financial Statement that will be
affected by such proposed change; provided,
if the Company becomes aware of such change
less than 60 days prior to the required
delivery date of the first Financial
Statement that will be so affected, then the
Company shall notify the Purchaser as soon
as practicable thereafter;
(ii) state in reasonable detail in such notice
the reason for such change, including, if
applicable, a description of any change in
GAAP that occasioned such change;
(iii) submit a written statement by the chief
financial officer of the Company and the
Accountant describing the anticipated
effect, if any, of the proposed change to
the computation of the Financial Tests, or
stating that such proposed change will have
no material effect on the computation of the
Financial Tests; and
(iv) in the event such proposed change will have
a material effect on the computation of such
Financial Tests, submit with each Compliance
Certificate a written reconciliation in
reasonable detail demonstrating
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the computation of the Financial Tests as if
such change had not been made.
(b) Effect of Change on Financial Tests. In the event that any
such change in policies, practice or procedures would materially affect the
computation of any Financial Test, the Sellers shall propose to the Purchaser an
equitable amendment to this Purchase Agreement adjusting such Financial Tests so
as to give effect to such change in GAAP so that such amended Financial Tests
are materially unchanged as a criteria for evaluating the financial condition of
the Company, and the Purchaser shall not unreasonably withhold its consent to
such amendment.
6.6 NOTICE OF CERTAIN EVENTS. The Sellers shall give prompt written
notice to the Purchaser of the occurrence of any of the following events:
(a) a Default or Event of Default;
(b) the occurrence of any event which with notice, lapse of
time or both would constitute an event of default under any Senior Indebtedness;
(c) all suits, actions or other proceedings commenced or
threatened against a Seller of which a responsible officer of Atlantic is aware
which would reasonably be expected to result in a Material Adverse Effect;
(d) any substantial dispute which may exist between a Seller
and any governmental regulatory body or law enforcement authority which would
reasonably be expected to result in a Material Adverse Effect;
(e) any matter which has resulted in a Material Adverse
Effect;
(f) the loss or destruction of any material asset of a Seller;
(g) the occurrence of a Put Trigger Event, or an agreement in
principle with respect to a Put Trigger Event;
(h) the receipt by any Seller of any written complaint or
order from the U.S. Secretary of Agriculture alleging violations by such Seller
of the provisions of the Packers and Stock Yards Act of 1921, 7 U.S.C.
Section 181 et. seq., or
(i) the receipt by any Seller of any notice of default or
termination or threat of termination with respect to any Distribution Agreement
or of the commencement of any Insolvency Proceeding with respect to any Person
that is a party to any such Distribution Agreement.
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6.7 BOOKS, RECORDS, AUDITS AND INSPECTIONS. The Sellers shall maintain
accurate and complete books, accounts and records and shall permit employees or
agents of the Purchaser at any reasonable time to inspect its properties and to
examine or audit its books, accounts and records and make copies and memoranda
thereof. In the event any properties, books, accounts or records are in the
possession of or under the control of a third party, the Sellers shall direct
and hereby authorize such third party to permit access thereof to the
Purchaser's employees or agents for the purpose of performing the inspections,
appraisals, examinations or audits permitted under this Section 6.7 to respond
to any reasonable requests from the Purchaser for information concerning the
amount, status or condition of any assets in the third party's possession or
control.
SECTION 7 AFFIRMATIVE COVENANTS.
Until payment of the Note in full, the Sellers shall, unless the
Purchaser waives compliance therewith in writing:
7.1 INSURANCE. Maintain casualty insurance upon all of their assets and
business properties and liability insurance with responsible and reputable
insurers of such character and in such amounts as are usually maintained by
companies engaged in like businesses. Unless replaced with comparable coverage,
no such insurance may be canceled without the prior written consent of the
Purchaser, which consent shall not unreasonably be withheld.
7.2 PAYMENT OF TAXES AND CLAIMS. Pay all Taxes, assessments and other
governmental charges levied or imposed upon its properties or assets or in
respect of their franchises, business, income or profits before any penalty or
interest accrues thereon, and all claims for sums which have become due and
payable and which by law have or might become a Lien or charge upon their
properties or assets, provided that (unless any material item of property would
be lost, forfeited or materially damaged as a result thereof) no such charge,
Tax, assessment or claim need be paid if the amount, applicability or validity
thereof is currently being contested in good faith by appropriate proceedings
and if reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor.
7.3 COMPLIANCE WITH LAWS. Comply in all material respects with all
Applicable Law if noncompliance therewith would reasonably be expected to result
in a Material Adverse Effect.
7.4 PRESERVATION OF EXISTENCE AND LICENSES. Except as permitted by
Section 8.7, preserve and maintain each Seller's existence and its rights,
franchises and privileges in the jurisdiction of its formation and qualify and
remain qualified as a foreign entity in each jurisdiction in which the failure
to do so would have a material adverse affect on its financial condition or
operations; and obtain, preserve and maintain all material permits, licenses,
approvals and authorizations necessary for the conduct of its business, except
those with respect to which the failure to obtain, preserve or maintain would
not have a Material Adverse Effect. Notwithstanding
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the foregoing, nothing in this Section 7.4 shall prevent one or more Sellers
merging with or into another Seller.
7.5 MAINTENANCE OF ASSETS. Except for dispositions permitted by Section
8.7, maintain each Seller's material tangible assets in good condition and
repair in accordance with the requirements of its business, normal wear and tear
and damage by fire and other casualty excepted. Maintain each Seller's
Intellectual Property and any exclusive rights to use and exploit or license the
Intellectual Property, and defend all interferences or infringements therewith,
except where the failure to do so would not have a Material Adverse Effect.
7.6 PERFORMANCE OF CONTRACTS. Perform and comply with, in accordance
with its terms, all material provisions of each Material Contract, except to the
extent the Sellers may contest the provisions thereof in good faith and by
appropriate proceedings.
7.7 EMPLOYEE BENEFIT PLANS. Cause each of the Sellers' Benefit Plans to
be administered in all material respects in compliance with the requirements of
ERISA, the Code and Applicable Law, and cause each of its Benefit Plans to be
administered in all material respects in compliance with the terms and
conditions of such plans.
SECTION 8 NEGATIVE COVENANTS.
Until payment of the Note in full, unless the prior written consent of
the Purchaser is obtained, Atlantic shall not and shall not permit any
Subsidiary to:
8.1 OTHER INDEBTEDNESS. Create, incur, contract, assume, have
outstanding, guarantee or otherwise be or become directly or indirectly liable
in respect of any Indebtedness; provided, however, that this Section shall not
be deemed to prohibit:
(a) the Senior Indebtedness;
(b) lease financing or purchase money financing for equipment
which is secured by the equipment so leased or purchased;
(c) existing Indebtedness identified in Schedule 8.1;
(d) loans or advances by Atlantic to any Permitted Subsidiary
or Potter; and
(e) other indebtedness specifically permitted under the Senior
Loan Agreement.
8.2 PREPAYMENTS. Pay any Indebtedness prior to its scheduled maturity
other than the Note or the Senior Indebtedness.
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8.3 LIENS. Grant, create, incur, assume, permit or suffer to exist any
Lien upon any of its properties or assets, whether now owned or hereafter
acquired, except Permitted Liens.
8.4 INVESTMENTS. Make any Investment in, or otherwise acquire any
interest in, or control of, another Person, except for the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness
of others when acquired in settlement of accounts receivable or other debts
arising in the ordinary course of business, so long as the aggregate amount of
any such securities or evidences of indebtedness is not material to the business
or condition (financial or otherwise) of the Sellers;
(c) travel and other advances to officers and employees of the
Sellers in the ordinary course of business;
(d) Investments permitted under the Senior Loan Agreement or
consented to by the Senior Lender; and
(e) Investments in Existing Subsidiaries, Permitted
Subsidiaries or Potter.
8.5 MERGER AND CONSOLIDATION. Enter into a merger or consolidation with
or into any Person wherein any Seller is not the surviving entity, unless
permitted under the Senior Loan Agreement or consented to by the Senior Lender;
provided, however, that the Purchaser must consent to any merger or
consolidation with respect to Atlantic, wherein Atlantic is not the surviving
entity (other than a reincorporation merger) unless the Note is being paid in
full in connection therewith.
8.6 SUBSIDIARIES. Create any Subsidiaries (other than Permitted
Subsidiaries) or enter into joint ventures not in existence on the date of this
Purchase Agreement or make any loans or advances to its joint ventures, unless
permitted under the Senior Loan Agreement or consented to by the Senior Lender.
8.7 TRANSFERS, LIQUIDATIONS AND DISPOSITIONS OF SUBSTANTIAL ASSETS.
Dissolve or liquidate, or sell, transfer, lease or otherwise dispose of any
material portion of its property or assets or business, other than sales of
inventory or obsolete equipment in the ordinary course of business, unless
permitted under the Senior Loan Agreement or consented to by the Senior Lender;
provided, however, that the Purchaser must consent to the sale or other
disposition of (i) any Existing Subsidiary or Potter or (ii) substantially all
of the assets of any Existing Subsidiary or Potter, unless the Note is being
paid in full in connection therewith.
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8.8 RESTRICTED PAYMENTS. Make, pay or declare, or commit to make, pay
or declare, directly or indirectly, any Restricted Payment, except that a
Subsidiary may make Restricted Payments to Atlantic and to other Subsidiaries.
8.9 ORGANIZATIONAL AND BUSINESS ACTIVITIES. Amend its Charter
Documents or change its capital structure in a manner that would have a
material adverse effect on Purchaser's rights hereunder, effect any
reorganization or recapitalization or engage in any business activities or
operations substantially different from or unrelated to its present business
without the consent of the Purchaser, which consent shall not be unreasonably
withheld.
8.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction with any
Affiliate (or any partner, officer or director thereof), or enter into, assume
or suffer to exist any employment or consulting contract with any Affiliate (or
any partner, officer or director thereof) or any former or current officer or
director of any Seller, except any transaction or contract which is in the
ordinary course of the Seller's business and which is upon fair and reasonable
terms no less favorable to the Sellers than it would obtain in a comparable
arms-length transaction with a Person not an Affiliate.
8.11 EMPLOYEE BENEFIT PLANS. Create, enter into or provide or make any
direct or indirect commitment to create, enter into or provide any Deferred
Plan, ERISA Plan or Pension Plan (other than those identified on Schedule 4.22
or any replacements thereof) or terminate or materially amend any of such plans
without the consent of the Purchaser, which consent shall not be unreasonably
withheld; or incur any material liability, directly or indirectly, (i) for any
funding deficiency, (ii)for any post-retirement medical or life insurance
benefits, except pursuant to the COBRA Requirements, or (iii) to the Pension
Benefit Guaranty Corporation.
8.12 CHANGE IN PRINCIPAL OFFICE. Move its principal office, executive
office or principal place of business without 30 days prior Notice to the
Purchaser.
8.13 REPORTING COMPANY. Atlantic ceases to be a "reporting
company" under the Securities Exchange Act of 1934.
SECTION 9 FINANCIAL TESTS.
Until payment in full of the Note, the Seller shall, unless the
Purchaser waives compliance therewith in writing, meet the following Financial
Tests.
9.1 MINIMUM FIXED CHARGE COVERAGE RATIO. The Company shall maintain a
Fixed Charge Coverage Ratio of not less than 1.15 to 1.00 as of the end of each
Quarter.
9.2 MINIMUM CONSOLIDATED INTEREST COVERAGE. The Company shall maintain
an Interest Coverage Ratio of not less than 1.75 to 1.00 as of the end of each
Quarter.
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9.3 MAXIMUM INDEBTEDNESS TO EBITDA RATIO. The Company shall maintain
as of the end of each Quarter a ratio of Consolidated Indebtedness outstanding
as of the end of such Quarter to EBITDA for the period of four consecutive
Quarter ending as of the end of such Quarter of not greater than 5.00 to 1.00.
9.4 MINIMUM STOCKHOLDERS' EQUITY. As of the end of each Quarter,
commencing with the Quarter ending September 30, 1998, the consolidated
stockholders' equity of the Company shall not be less than $10,000,000.
SECTION 10 EVENTS OF DEFAULT.
Events of Default are stated in the Note, a form of which is attached
as Exhibit B.
SECTION 11 MISCELLANEOUS.
11.1 RELATED DOCUMENTS.
The definitions set forth in the Glossary are incorporated by reference
in each Related Document. The miscellaneous provisions set forth in this Section
are incorporated by reference in each of the Related Documents. Each Exhibit and
Schedule to this Purchase Agreement is incorporated by reference in each Related
Document and shall be deemed to be an Exhibit or Schedule to each Related
Document.
11.2 AMENDMENT, MODIFICATION OR RESTATEMENT.
(a) The Parties may, by mutual agreement, amend, modify or
restate any provision or the entirety of this Purchase Agreement or any Related
Document, provided that each such amendment, modification or restatement shall
be in writing and shall be executed and delivered by each Party.
(b) Unless otherwise specified in such a written amendment,
modification or restatement:
(i) the amended or modified provisions shall be
effective as of the date of such amendment;
(ii) such amendment shall not be deemed to constitute a
waiver of any Default that has occurred and is
continuing as of the effective date thereof;
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(iii) all terms defined herein shall have the same
definition in such amendment;
(iv) such amendment shall be deemed to be a Related
Document and the provisions of this Section 11 shall
be applicable to such amendment; and
(v) this Purchase Agreement and each Related Document
shall be deemed to remain in full force and effect,
as so amended, modified or restated.
(c) Unless otherwise specified, an amendment, modification or
restatement of the Note shall for all purposes be deemed to be a novation
thereof, and all Related Documents concerning security therefor shall remain in
full force and effect.
(d) At any time after the execution and delivery of any
amendment or modification of this Purchase Agreement or any Related Document,
the Purchaser may, in the exercise of its discretion, cause this Purchase
Agreement or any Related Document to be restated in its entirety to reflect such
amendment or modification.
(e) Except in those instances in which Purchaser's consent is
not to be unreasonably withheld, the Purchaser may, in its sole discretion,
condition its agreement to any amendment, modification or restatement upon the
payment of money, the granting of additional security, the providing additional
guarantees or other acts or concessions by the Seller or any other Person.
(f) The Sellers shall reimburse the Purchaser for its
reasonable legal fees and expenses (including the BOCP Legal Department) in
connection with the preparation and review of any such amendment, modification
or restatement.
11.3 WAIVER OF COMPLIANCE.
(a) The Parties may, by mutual Purchase Agreement, waive
compliance with any provision of this Purchase Agreement or any Related Document
or any Default or Event of Default; provided that each such waiver shall be in
writing and be shall executed and delivered by the party against whom
enforcement is sought. Each such waiver shall be effective only in the specific
instance and for the specific purpose for which it is given.
(b) The Purchaser may, in its sole discretion, refuse to grant
any such waiver or condition any such waiver upon the payment of money, the
granting of additional security, the providing of additional guarantees or other
acts or concessions by the Seller, or any other Person.
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11.4 CONSENT OR APPROVAL OF PURCHASER.
(a) Whenever this Purchase Agreement or any Related Document
provides that an action may be taken with the "consent" or "approval" of the
Purchaser, such consent or approval must be in writing signed by the Purchaser.
Each such consent or approval shall be effective only in the specific instance
and for the specific purpose for which it is given.
(b) Unless this Purchase Agreement or the Related Documents
specifically provides that the Purchaser shall not "unreasonably withhold" such
consent or approval, the Purchaser may, in its sole discretion, refuse to grant
any such consent or approval, or condition any such consent or approval upon the
payment of money, the granting of additional security, the providing of
additional guarantees or other acts or concessions by the Sellers or any other
Person.
(c) Where this Purchase Agreement or any Related Document
provides that the Purchaser shall not "unreasonably withhold" any consent or
approval, any of the following shall by way of example and not limitation,
constitute an appropriate reason to withhold such consent or approval:
(i) imposing additional unreimbursed cost, expense or
liability upon the Purchaser or its Affiliates;
(ii) releasing any Person liable for any obligation under
this Purchase Agreement or any Related Document;
(iii) limiting in any material respect the practical
ability of the Purchaser to enforce any of its
rights or remedies under this Purchase Agreement or
any Related Document;
(iv) diminishing the value of the Warrant Shares as
determinable for purposes of the Put Option Purchase
Agreement;
(v) causing the Purchaser or its Affiliates to violate
or breach any Material Contract by which they are
bound, the terms of their Charter Documents or any
Applicable Law;
(vi) releasing any security for any of the obligations
under this Purchase Agreement or any Related
Document;
(vii) subordinating or further subordination of any of the
rights of the Purchaser under this Purchase
Agreement or any Related Document to the rights of
any other Person; or
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(viii) permitting any transaction between the Sellers and
any of its Affiliates which is otherwise not
permitted hereunder.
(d) The Sellers shall reimburse the Purchaser for any
reasonable fees or expenses (including the BOCP Legal Department) incurred in
connection with the grant or denial of any request for any consent or approval.
11.5 FORBEARANCE.
(a) The Purchaser may, in the sole exercise of its discretion,
with or without Notice to the Sellers, forbear from declaring an Event of
Default under this Purchase Agreement or any Related Document, or exercising or
enforcing any right or remedy hereunder or thereunder.
(b) Unless the Purchaser otherwise agrees in writing, no such
forbearance shall be deemed to toll the passage of any time period, waive the
Purchaser's right to declare such Event of Default or exercise or enforce any
such right or remedy at any time, suspend the accrual of Interest or waive any
Assessment that would otherwise accrue or become due, constitute a basis for
laches or estoppel, or preclude the exercise or enforcement of any other right
or remedy or declaration of any other Event of Default under this Purchase
Agreement or any Related Document.
(c) The Purchaser may, in the sole exercise of its discretion,
condition any forbearance upon the payment of money, the granting of additional
security, the providing of additional guarantees or other acts or concessions by
the Sellers or any other Person.
(d) The Sellers shall reimburse the Purchaser for any
reasonable fees or expenses (including the BOCP Legal Department) incurred in
connection with the grant or denial of any request for forbearance.
11.6 NO IMPLIED RIGHTS OR WAIVERS.
No Notice to or demand on the Sellers in any case shall
entitle the Sellers to any other or further Notice or demand in the same,
similar and other circumstances. Neither any failure nor any delay on the part
of the Purchaser in exercising any right, power or privilege under this Purchase
Agreement or any Related Document shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of the
same or the exercise of any other right, power or privilege.
11.7 PAYMENT OF FEES AND EXPENSES.
The Sellers shall pay to the BOCP Legal Department, as counsel for the
Purchaser, a non-accountable fee of $20,000 in lieu of reimbursing the Purchaser
for legal fees incurred in connection with the negotiation, preparation and
closing of the purchase transaction. The Sellers shall bear all
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of their own expenses, including legal and accounting fees. The Sellers shall
reimburse the Purchaser for all expenses incurred in connection with the
reasonable investigation and determination of an Event of Default, the
enforcement of this Purchase Agreement and the Related Documents and the
collection of amounts due under this Purchase Agreement and the Related
Documents, including the reasonable fees and expenses of the BOCP Legal
Department or other legal counsel.
11.8 ENTIRE AGREEMENT.
This Purchase Agreement and the Related Documents constitute the entire
agreement and understanding relating to the subject matter hereof among the
Parties and supersede all prior or contemporaneous agreements between the
Parties. The Parties have not relied upon any representations, inducements,
promises, undertakings or Purchase Agreements other than those expressly set
forth in this Purchase Agreement or the Related Documents.
11.9 SEVERABILITY.
If any provision of this Purchase Agreement or any Related
Document is held to be invalid, void or unenforceable for any reason, the
remaining provisions shall nevertheless continue in full force and effect,
provided that nothing in this Section 11.9 shall be construed to limit or waive
the breach of any representation with respect to enforceability of this Purchase
Agreement. Any determination of invalidity, voidness or unenforceability which
would, in the aggregate, materially reduce the principal benefits of any breach
or security provided by the Purchase Agreement or any Related Document to the
Purchaser, or make the remedies generally afforded thereby inadequate for the
practical realization of such benefits or security, shall constitute an Event of
Default.
11.10 THIRD PARTY BENEFICIARIES.
The obligations of each Party under this Purchase Agreement
and the Related Documents shall inure solely to the benefit of the other
Parties, and no other Person shall have any legal or equitable right, remedy or
claim under or with respect to this Purchase Agreement or the Related Documents.
11.11 LEGAL REPRESENTATION.
Each of the Parties has been represented by independent legal counsel
in connection with the negotiation, drafting and execution of this Purchase
Agreement and the Related Documents, and each Party expressly waives to the
fullest extent permitted by Applicable Law any claim that this Purchase
Agreement or any Related Document constitutes a contract of adhesion; the
protection of any Applicable Law designed to protect individual or consumers in
credit transactions; any usury or similar law limiting interest or other fees or
compensation in a credit transaction; any claim that this Purchase Agreement or
any Related Document constitutes a partnership, joint venture, trust or similar
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arrangement among any of the Parties; any claim that this Purchase Agreement or
any Related Document imposes any fiduciary or agency duty upon the Purchaser or
any of its agents; and any implied representation, warranty or covenant,
including representation, warranty or covenant of "good faith" or "fair dealing"
by any Party.
11.12 RULES OF CONSTRUCTION.
Unless otherwise specified, the following rules shall be
applied in construing the provisions of this Purchase Agreement and the Related
Documents.
(a) All accounting terms not specifically defined shall be
construed in accordance with GAAP.
(b) Terms that imply gender shall apply to all genders.
(c) When the context so requires, the singular shall include
the plural.
(d) Headings are included solely for purposes of reference and
shall be ignored in construing the provisions of this Purchase Agreement or the
Related Documents.
(e) The Exhibits, Schedules and Glossary of Defined Terms
attached to this Purchase Agreement or any Related Document are incorporated
herein and in each Related Document by reference.
(f) "Herein", "hereto", "hereof" and words of similar import
refer to this Purchase Agreement or any Related Document (as applicable).
(g) The word "and" connotes "each and every," and the word
"or" connotes "any one or more".
(h) The word "including" is deemed to be followed by the words
"without limitation".
(i) When used in connection with a specific date or time, (A)
the word "from" connotes "from and including," (B) the word "through" connotes
"through and including," (C) the word "before" connotes "on or before," (D) the
word "after" connotes "on or after," (E) "next" day or Business Day connotes the
"first day or Business Day immediately succeeding" such date, and (F) "prior" or
"preceding" day or Business Day connotes the "first day or Business Day
immediately proceeding" such date.
(j) In counting a number of days or Business Days (A) "after"
or "following" a specified date, counting commences with the first day or
Business Day (as applicable) following such
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date and ends on and includes the last day or Business Day (as applicable)
counted, and (B) "before" or "prior to" a specified date, counting commences
with the first day or Business Day (as applicable) preceding such date and ends
on and includes the last day or Business Day (as applicable) counted.
(k) An event or act is deemed to occur on a specified day or
Business Day only if it occurs before 4:00 p.m. New York time on that day or
Business Day (as applicable) and, if it occurs after that time, is deemed to
occur on the next day or Business Day (as applicable).
(l) Any reference to any law or regulation refers to that law
or regulation as amended from time to time and to the corresponding provision of
any successor law or regulation.
(m) Any reference to any Purchase Agreement or other document
refers to that Purchase Agreement or other document as amended from time to
time.
(n) The recitals are the mutual representations of the Parties
and are a part of the document in which they appear.
(o) Any reference to any Person shall be construed as a
reference to that Person's successors, assigns, heirs or estate or personal
representative.
(p) No consideration or evidentiary weight shall be given to
any prior draft or mark-up of any document, the identity of the Party (or its
counsel) drafting or proposing any provision of a document, any summary or
description of any proposed term or provision set forth in any term sheet,
commitment letter or written presentation produced prior to the date hereof, or
perceived or alleged differences among the Parties with respect to bargaining
advantage, sophistication in financial affairs or access to information.
(q) With regard to all dates and time periods set forth or
referred to in this Purchase Agreement or the Related Documents, time is of the
essence.
11.13 NOTICE.
(a) Any Notice or other communication required or permitted to
be given or made under this Purchase Agreement or any Related Document (i) shall
be in writing, (ii) shall be delivered by hand delivery, First Class U.S. Mail
(certified, registered or expedited delivery), FedEx, UPS Overnight, Airborne or
other nationally recognized delivery service or fax, and (iii) shall be
delivered or transmitted to the appropriate address as set forth below.
(b) Each Notice or other communication shall be delivered or
addressed to a Party at its address set forth below. A Party's address for
Notice may be changed from time to time only by Notice given to each of the
other Parties.
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SELLERS:
Atlantic Premium Brands, Ltd.
650 West Dundee, Suite 370
Northbrook, IL 60062
Attention: Merrick M. Elfman
With a copy to: Tom D. Wippman
Telephone No. (847) 480-4000
Fax No. (847) 480-0199
PURCHASER:
Banc One Capital Partners, LLC
150 East Gay Street, 24th Floor
Columbus, OH 43215
Attention: General Counsel
Telephone No. (614) 217-1100
Fax No. (614) 217-1217
(c) Absent fraud or manifest error, a receipt signed by the
addressee or its authorized representative, a certified or registered mail
receipt, a signed delivery service confirmation or a fax confirmation of
transmission shall constitute proof of delivery. Any Notice actually received by
the addressee shall constitute delivery notwithstanding the failure to comply
with any provisions of this Section 11.13.
(d) A Notice delivered by regular First Class U.S. Mail shall
be deemed to have been delivered on the third Business Day after its post-mark.
Any other Notice shall be deemed to have been received on the date and time of
the signed receipt or confirmation of delivery or transmission thereof, unless
that receipt or confirmation date and time is not a Business Day or is after
5:00 p.m. local time on a Business Day, in which case such Notice shall be
deemed to have been received on the next succeeding Business Day.
11.14 ASSIGNMENT.
(a) The Sellers shall not, and shall not attempt or purport,
to assign or transfer to any Person or permit any other Person to assume or
undertake any of its rights, duties or obligations under this Purchase Agreement
or any Related Document without the prior written consent of the Purchaser,
which consent may be granted in its sole discretion.
(b) The Purchaser may, in the sole exercise of its discretion,
(A) assign (with or without recourse) all of its rights, duties and obligations
under this Purchase Agreement and the
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Related Documents to any BOC Entity; (B) sell or transfer all or any part of the
Securities to any BOC Entity; (C) sell a participation in the Securities to any
BOC Entity, any member of the Purchaser or any Accredited Institutional
Investor; or (D) distribute all or any part of the Securities to the members of
the Purchaser as an in-kind distribution. The Purchaser shall not be required to
notify the Sellers of any of the foregoing assignments, participations or
distributions; provided, however, that until the Sellers receive such Notice,
the Sellers shall be entitled to treat the Purchaser as the sole owner of the
Securities. With the consent of the Sellers, which consent shall not be
unreasonably withheld, the Purchaser may (A) assign (with or without recourse)
all of its rights, duties and obligations under this Purchase Agreement and the
Related Documents to any Accredited Institutional Investor, or (B) sell or
assign (with or without recourse) all or any part of the Securities to any
Person.
Notwithstanding the foregoing, the Purchaser may not sell, transfer, assign (i)
the Note to more than three Persons unless the Purchaser agrees to act as, and
is appointed by these Persons as, their agent pursuant to documentation
reasonably satisfactory to Atlantic for purposes of giving and receiving
notices, granting consents and waivers and all other correspondence, covenants
and matters between the Sellers and these Persons as holders of the Securities;
or (ii) any of the Securities to any Person who is engaged in, or who
beneficially owns (as defined in Section 13d-3 of the Securities Exchange Act)
or has the right to acquire in the future 10% or more of the outstanding shares
of any class or series of Capital Stock of any Person that is engaged in, the
food and beverage manufacturing, processing or distribution business.
11.15 FURTHER ASSURANCES.
Each Party agrees to execute and deliver such further
documents and instruments and to do such further acts and things as may be
necessary or desirable to carry out the intent and purposes of this Purchase
Agreement and the Related Documents.
11.16 CONFIDENTIALITY.
The Purchaser agrees to keep any non-public information
delivered pursuant to the Purchase Agreement and the Related Documents
confidential from Persons other than those employed by or engaged by the
Purchaser and those employed by the Purchaser's assignees or participants.
11.17 CLOSING OF THE TRANSACTION.
(a) It is anticipated that the transactions contemplated by
this Purchase Agreement may be closed and consummated by the transmission of
documents, signature pages of documents and funds by mail, delivery service, fax
or other electronic transmission.
(b) Each Party agrees that the faxed delivery of a counterpart
signature page to the other Parties or their representatives shall constitute
such Party's execution and delivery thereof.
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(c) The Parties agree that the attachment of original or faxed
signature pages of any document by legal counsel acting in such capacity and in
accordance with instructions, shall constitute the execution and delivery of
such documents.
(d) The closing shall be deemed to have occurred and this
Purchase Agreement and the Related Documents shall be deemed to have been
simultaneously executed and delivered by all Parties in Columbus, Ohio on the
date designated by the Parties as the Closing Date.
(e) As a condition of funding its purchase obligation on the
Closing Date, the Purchaser may require that the Sellers acknowledge a list of
items to be completed or documents to be delivered post-closing. Unless
otherwise specified, all such items or documents shall be completed or delivered
within 10 Business Days after the Closing Date.
11.18 COUNTERPARTS.
This Purchase Agreement and any Related Document may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of such counterparts together shall constitute one and the same Purchase
Agreement.
11.19 GOVERNING LAW.
This Purchase Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio without regard to conflicts of
laws principles.
11.20 WAIVER OF JURY TRIAL.
The Parties, each after consulting or having had the
opportunity to consult with legal counsel, knowingly, voluntarily and
intentionally waive any right they may have to a trial by jury in any
Litigation. No Party shall seek to consolidate, by counterclaim or otherwise,
any Litigation in which a jury trial has been waived with any other Litigation
in which a jury trial cannot be or has not been waived.
11.21 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
The Parties, each after having consulted or having had the opportunity
to consult with legal counsel, knowingly, voluntarily and intentionally, and
irrevocably: (i) consent to the jurisdiction of the Common Pleas Court of
Franklin County, Ohio and the United States District Court for the Southern
District of Ohio, Eastern Division with respect to any Litigation; (ii) waive
any objections to the jurisdiction and venue of any Litigation in either such
court; (iii) agree not to commence any Litigation except in one or the other of
such courts and agree not to contest the removal of any Litigation commenced in
any other court to one or the other of such courts; (iv) agree not to seek to
remove, by consolidation or otherwise, any Litigation commenced in either of
such courts to any other court; and (v) waive personal service of process in
connection with any Litigation and consent to service of process by registered
or certified mail, postage prepaid, addressed as set forth herein. These
provisions shall not be deemed to have been modified in any respect or
relinquished by any Party except by written instrument executed by all of them.
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The Parties have caused this Purchase Agreement to be executed and
delivered effective as of the date first written above.
SELLER: PURCHASER:
ATLANTIC PREMIUM BRANDS, BANC ONE CAPITAL PARTNERS, LLC
LTD.
By: Banc One Capital Partners Holdings,
By: /s/ Merrick M. Elfman Ltd., Manager
------------------------
Name: MERRICK M. ELFMAN
Its: Chairman
By: BOCP Holdings Corporation, Manager
PREFCO CORP. By: /s/ Leonard Lilliard
---------------------------------
By: /s/ Merrick M. Elfman Name: Leonard Lilliard
------------------------ ------------------------------
Name: MERRICK M. ELFMAN Its: Authorized Signer
Its: Chairman
CARLTON FOODS CORP.
By: /s/ Merrick M. Elfman
------------------------
Name: MERRICK M. ELFMAN
Its: Chairman
RICHARDS CAJUN FOODS CORP.
By: /s/ Merrick M. Elfman
------------------------
Name: MERRICK M. ELFMAN
Its: Chairman
GROGAN'S FARM, INC.
By: /s/ Merrick M. Elfman
------------------------
Name: MERRICK M. ELFMAN
Its: Chairman
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POTTER'S ACQUISITION CORP.
By: /s/ Merrick M. Elfman
-------------------------
Name: MERRICK M. ELFMAN
Its: Chairman
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Glossary of Defined Terms
Unless otherwise expressly provided for or unless the context otherwise
clearly requires, the terms defined in this Glossary of Defined Terms shall have
the meaning specified in this Glossary when used in the Purchase Agreement and
the Related Documents. This Glossary of Defined Terms is a part of and is
incorporated by reference in each of the Purchase Agreement and the Related
Documents.
"Accelerated" (and correlative terms such as "Acceleration", "Accelerating" and
"Accelerated") means with respect to the Note that the entire unpaid Principal
Amount, together with all accrued but unpaid Interest and Assessments, becomes
immediately due and payable prior to the Maturity Date, without, except as
expressly provided for in the Note, notice of intent to accelerate, notice of
acceleration of maturity, presentment, demand, protest, notice of protest or
other notice of default or dishonor of any type whatsoever.
"Accredited Investor" means an "accredited investor," as that term is defined
under Rule 501(a) of Regulation D of the Securities Act.
"Accredited Institutional Investor" means a financial institution or other
entity that is an "accredited investor" with the meaning of clauses (1), (2),
(3) or (7) of Rule 501(a) of Regulation D of the Securities Act.
"Accountant" means the Company's independent public accountant.
"Accountant's Statement" means, with respect to each Annual Financial Statement,
a written statement of the Accountant stating in effect that in the course of
the Audit with respect to such Financial Statement, no Default has come to the
Accountant's attention, or, if a Default has come to the Accountant's attention,
stating the nature and period of existence of such Default.
"Accounting Periods" means the Fiscal Year, Quarter or Month, as applicable.
"Accounting Statements" means collectively, with respect to any Accounting
Period, statements of income, changes in financial position (cash flow) and
shareholders' equity for such Accounting Period and a statement of financial
condition as at the end of such Accounting Period.
"ACMs" means asbestos containing materials.
"Acquisition Agreement" has the meaning set forth in Background - Section A of
the Purchase Agreement.
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"Acquisition Transaction" has the meaning set forth in Background- Section A of
the Purchase Agreement.
"Adjusted Tangible Net Worth" shall mean, as of any date, Tangible Net Worth
plus Subordinated Debt (excluding any Indebtedness represented by the Note).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such specified Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to vote
10% or more of the Voting Power of a Person, or the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Amortization Commencement Date," if applicable, is set forth in the Note.
"Annual Financial Statements" means, with respect to each Fiscal Year, the
Accounting Statements of the Company with respect to such Fiscal Year, presented
with corresponding Accounting Statements for the preceding Fiscal Year, which
Accounting Statements shall be Audited, prepared in accordance with GAAP and
presented in reasonable detail (including appropriate footnotes) and in a form
reasonably satisfactory to the Purchaser.
"Applicable Law" means, with respect to any Person, any and all federal,
national, state, regional, local, municipal or foreign laws, statutes, rules,
regulations, guidelines, ordinances, licenses, permits, judicial or
administrative decisions of any country, or any political subdivision, agency,
commission, official or court thereof having jurisdiction over such Person or
its business.
"Appraisal Determined Value Amount" means, as of the date of exercise of the Put
Option, a per share amount equal to (i) the Appraisal Value divided by (ii) the
number of Outstanding Common Shares.
"Appraisal Value" means, as of the date of exercise of any Put Option, the fair
market value, as determined by mutual agreement of the Seller and the Purchaser,
or, if no agreement can be reached within 30 days of the exercise of such Put
Option, by the Appraiser, of the outstanding Capital Stock of the Seller as of
such date, assuming: (i) a cash purchase by a willing buyer from willing sellers
of all such Capital Stock as of such date; (ii) the full exercise or conversion
of outstanding Convertible Securities; (iii) if the Note remains outstanding,
the payment in full of the Note; (iv) acquisition of the Seller as a going
concern; (v) no adjustment or discount with respect to minority interest, voting
rights or rights to control management of the Seller; (vi) no adjustment for any
employment, bonus, non-competition, deferred compensation, severance or other
employment or compensation arrangements between the Seller and its employees
having a term of more than one year; and (vii) no adjustment for the tax
consequences; provided, however, that, if (A) within the six-month period
immediately preceding the date upon which the Put Option was exercised, a
Disposition or Non-
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Surviving Combination was closed or (B) as of the date upon which such Put
Option was exercised, an agreement, letter of intent or similar written
agreement or understanding with respect to a Disposition or Non-Surviving
Combination is in effect, such determination of fair market value by mutual
agreement of the Seller and Purchaser or by the Appraiser shall, notwithstanding
the foregoing assumptions be based solely upon the value per share of the
consideration received by the holders of the Company's Common Stock in such
Disposition or Non-Surviving Combination.
"Appraiser" means, with respect to any determination of the Market Determined
Value Amount or Appraisal Determined Value Amount, an independent appraiser,
which shall be an investment banking firm that is not an Affiliate of either the
Seller or the Purchaser, selected in the manner provided for in the Option
Agreement.
"Assessments" means fees charged by the Purchaser for processing late payments
of the Note and other fees charged by the Purchaser pursuant to the Purchase
Agreement and Related Documents.
"Atlantic" means Atlantic Premium Brands, Ltd., a Delaware corporation, together
with its successors and assigns.
"Audit" or "Audited" means, with respect to the Annual Financial Statements, an
examination without limitation as to scope by the Accountant in accordance with
generally accepted auditing standards for the purpose of expressing an opinion
regarding such Accounting Statements.
"Audit Report" means, with respect to the Annual Financial Statements, the
report of the Accountant indicating the scope of the Audit with respect to such
Annual Financial Statements and setting forth the opinion of such Accountant
with respect to such Annual Financial Statements as a whole, or an assertion to
the effect that an overall opinion cannot be expressed. The Audit Report shall
set forth any qualification to such opinion and, when such an overall opinion
cannot be expressed, set forth the reasons therefor.
"Benefit Plans" means collectively, Welfare Plans, Deferred Plans, ERISA Plans,
Pension Plans and any other contract, agreement, plan, arrangement, commitment,
or understanding relating to terms of employment, independent contractors
(including consulting agreements), pension, profit sharing, retirement, deferred
compensation, stock option, stock purchase, incentive, bonus, loan, guaranty,
vacation, severance, medical insurance, life insurance, disability, and other
fringe benefit plan, whether or not subject to ERISA.
"BOC Entity" means any direct or indirect wholly owned subsidiary of BANC ONE
CORPORATION or a Person whose sole general partner or sole managing member is a
direct or indirect wholly owned subsidiary of BANC ONE CORPORATION.
"BOCP" means Banc One Capital Partners, LLC.
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"BOCC Legal Department" means the internal legal staff of Banc One Capital
Corporation, or one of its Affiliates.
"Business Day" means any day other than a Saturday, Sunday or day upon which
banking institutions are authorized or required by law or executive order to be
closed in the City of Columbus, Ohio.
"Capitalized Earnings Determined Value Amount" means, as of the date of exercise
of the Put Option, a per share amount equal to (i) the Capitalized Earnings
Value of the Company divided by (ii) the number of Outstanding Common Shares.
"Capitalized Earnings Value"means, as of any date of determination, an amount
equal to six (6) times the Company's EBITDA for the preceding twelve months (i)
reduced by an amount sufficient to pay in full all principal and interest on
outstanding Permitted Indebtedness, and (ii) increased by the amount of cash and
the fair market value of all marketable securities reflected on the Financial
Statements of the Company dated closest in time to the date of determination.
"Capital Expenditures" means expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.
"Capitalized Lease Obligations" means any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock
(including each class of common stock and preferred stock) or partnership or
membership interests of such Person.
"Carlton" means Carlton Foods Corp., a Delaware corporation, together with its
successors and assigns.
"Cash Equivalents" means (i) securities issued or fully guaranteed or insured by
the United States Government or any agency or instrumentality thereof which
mature within 90 days from the date of acquisition, and (ii) time deposits,
money market securities and certificates of deposit which mature within 90 days
from the date of acquisition, of any domestic commercial bank having capital and
surplus in excess of $200,000,000, which has, or the holding company of which
has, a commercial paper rating of at least A-1 or the equivalent thereof by
Standard & Poors Corporation or P-1 or the equivalent thereof by Moody's
Investor Services.
"Cash Interest Expense" means with respect to the Company, for any period, total
interest expenses, whether paid or accrued (including the interest component of
Capitalized Lease Obligations), of the Company on a consolidated basis,
including all commissions, discounts and other fees and charges
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<PAGE> 44
owed with respect to letters of credit, but excluding, however, interest
expenses not payable in cash (including amortization of discount), all as
determined in accordance with GAAP.
"CFO Certificate" means, with respect to the Annual Financial Statements and the
Quarterly Financial Statements, a certificate signed by the chief financial
officer of Atlantic, on behalf of Atlantic, stating in effect that such
Financial Statements, when delivered, (i) were, to the best of his or her
knowledge, complete and correct in all material respects, (ii) were prepared in
accordance with GAAP, and (iii) fairly present in all material respects the
results of operations of the Company for the applicable Accounting Period and
the financial condition of the Company as at the end of such Accounting Period.
The CFO Certificate shall be presented in a form reasonably satisfactory to the
Purchaser.
"Change in Control" means, except pursuant to a Qualified Public Offering, (i)
an event or series of events by which any Person (or Persons acting in concert
as a partnership or other group) shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases, merger,
consolidation or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act), of 50% or more of the Voting
Power of Atlantic, unless such Person has acquired, or has the right to acquire,
beneficial ownership of the Warrant, Warrant Shares or any Purchased Shares,
(ii) Atlantic is merged with or into another entity with the effect that
immediately after such transaction the equity owners of Atlantic immediately
prior to such transaction hold less than a majority of the combined Voting Power
of the Person surviving the transaction, or (iii) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets of
Atlantic to any Person or group of Persons.
"Charter Documents" mean a Person's formation or other governing documents,
including but not limited to, as applicable, its articles of incorporation,
by-laws, code of regulations, articles of organization, operating agreement,
certificate of limited partnership and partnership agreement.
"Closing Date" means March _____, 1998, or such later date as the Parties shall
mutually agree.
"COBRA Requirements" means the requirements of Section 601 et seq. of ERISA or
Section 4980 of the Code.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
including the Regulations thereunder.
"Collateral" is defined in the Security Agreement.
"Commission" means the Securities Exchange Commission or any other federal
agency at the time administering the Securities Act.
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<PAGE> 45
"Common Shares" or "Common Stock" means the shares of Voting Stock and Nonvoting
Stock of Atlantic, treated as a single class of stock, at any time outstanding.
"Company" means (i) prior to the consummation of the Acquisition Transaction,
Atlantic and the Existing Subsidiaries, as a consolidated entity for financial
reporting purposes, and (ii) thereafter to Atlantic, the Existing Subsidiaries,
Potter and the Permitted Subsidiaries, as a consolidated entity for financial
reporting purposes, together with its successors and assigns.
"Compliance Certificate" means, with respect to each Fiscal Year and each
Quarter, a certificate signed by the chief financial officer of Atlantic, on
behalf of Atlantic, (i) stating that no Default has occurred and is continuing,
(ii) stating that, to the best of his or her knowledge, the Sellers are in
compliance with each of the covenants set forth in the Purchase Agreement, and
(iii) setting forth in reasonable detail a computation of each of the Financial
Tests as of the end of the applicable Fiscal Year or Quarter. The Compliance
Certificate shall be presented in a form reasonably satisfactory to the
Purchaser.
"Consolidated Indebtedness" means, with respect to the Company, as of the end of
any period on a consolidated basis, all Indebtedness of the Company then
outstanding, including the Senior Indebtedness and the Note.
"Consulting Agreement" means the Consulting Agreement dated March 15, 1996,
among Sellers Sterling and Elfman as amended.
"Contingent Put Option" is defined in the Put Option Agreement.
"Contingent Warrant" is defined in Background - Section C.
"Convertible Securities" means evidences of indebtedness, shares of stock or
other securities that are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, or options, warrants or
other rights that are exercisable for, Common Shares, whether or not the right
to convert, exchange or exercise is at the time exercisable.
"Default" means any event which is not an Event of Default as of a specified
date, but which with the lapse of time, notice, or both, would constitute an
Event of Default.
"Default Interest Rate" is set forth in the Note.
"Default Rate Election" is defined in the Note.
"Deferred Plans" means Pension Plans that are designed to defer compensation for
a select group of key or highly compensated employees and that are exempt from
the funding, participation and vesting requirements of ERISA.
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<PAGE> 46
"Disposition" means the sale, lease, conveyance, transfer or other disposition
(other than the grant of a security interest) in any single transaction or
series of related transactions of all or substantially all of the assets of the
Company.
"Distribution Agreement" means any agreement between any Seller and any of
Mistic Beverages Co., Arizona Ice Tea and Sams Club pursuant to which such
Seller is granted distribution rights or licenses with respect to products and
tradenames or trademarks (or other Intellectual Property) of such Person.
"Dividend" means (i) cash distributions or any other distributions on, or in
respect of, any class of Capital Stock, except for distributions made solely in
shares of securities of the same class; and (ii) any and all funds, cash or
other payments made in respect of the redemption, repurchase or acquisition of
Capital Stock or Convertible Securities.
"EBITDA" means with respect to the Company for any period, the sum of the
amounts for such period on a consolidated basis, of (i) Net Income, plus (ii)
depreciation and amortization expenses, plus (iii) Cash Interest Expense, plus
(iv) federal and state income taxes actually payable, plus (v) extraordinary
losses (determined in accordance with GAAP which have been included in the
determination of Net Income), plus (vi) without duplication, interest expense in
respect of the Warrants and/or Put Option deducted in computing Net Income,
minus (vii) extraordinary gains (determined in accordance with GAAP which have
been included in the determination of Net Income).
"Elfman" means Elfman Venture Partners, Inc., an Illinois corporation.
"Environmental Laws" means the federal Clean Air Act, Clean Water Act, Air
Pollution Control Act, Water Pollution Act, Resource Conservation and Recovery
Act of 1976, Solid Waste Disposal Act, Toxic Substance Control Act,
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
Hazardous Material Transportation Act, Emergency Planning and Community Right-
to- Know Act of 1986 and Occupational Safety and Health Act of 1970 and any
other federal, state or local laws, regulations or other requirements regulating
or otherwise concerning the protection of the environment, or the manufacture,
processing, distribution, treatment, emission, discharge, release, use,
handling, storage, treatment, transport, cleanup, and disposal of Hazardous
Materials.
"Equity Valuation" means, as of any date, the amount calculated by taking the
weighted average last closing sale price of the Company's Common Stock as
reported on the American Stock Exchange (or such other exchange or automated
quotation system as the Common Stock shall then be listed upon) for the 180 day
period prior to such date of determination multiplied by the number of shares of
Fully Diluted Common Stock of the Company as of such date; provided, however,
that if a Non-Surviving Combination is the event giving rise to the Equity
Valuation, then the Equity Valuation shall equal the higher of (i) the
calculation above and (ii) the valuation of the Company implied by such
Non-Surviving Combination.
"ERISA" means the Employee Retirement Security Act of 1974, as amended from time
to time.
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<PAGE> 47
"ERISA Affiliate" means all members of the group of corporations and trades or
businesses (whether or not incorporated) which are treated as a single employer
under Section 414 of the Code.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA or
Section 412 of the Code.
"Event of Default" is defined in the Note.
"Exempt Offering" means any of the following issuances of securities of Atlantic
by or on behalf of Atlantic:
(a) any Rights Offering;
(b) the issuance or sale of Common Stock pursuant to any
Benefit Plan of Atlantic; provided that (i) options are
granted only with respect to Common Stock, (ii) the
minimum exercise price per Common Share for such options
is the fair market value of the Common Stock on the date
of the option grant (iii) no options are granted to
Persons other than officers, directors, employees or other
agents, consultants or providers of services of any of the
Sellers, and (iv) the maximum number of shares subject to
such options is equal to 20% of the Outstanding Common
Shares as of the date of grant;
(c) the sale and issuance of Common Shares or Convertible
Securities pursuant to a Qualified Public Offering; and
(d) any issuance to Sterling and/or Elfman and any issuance to
a lender, a banker, finder or broker in connection with an
acquisition or disposition of a business permitted under
the Purchase Agreement; provided, that the cumulative
number of shares of Common Stock (or, in the case of
Convertible Securities, equivalent shares of Common Stock)
so issued does not exceed 200,000 shares (subject to the
equitable adjustment for stock splits, stock dividends or
recapitalization) in the aggregate after the date hereof;
and
(e) any issuance or exchange of shares of Common Stock to any
seller or shareholder of any business in connection with
any merger or acquisition thereof; provided, that (A) the
effectiveissuance or exchange price of such shares (as
determined by the Board of Directors of Atlantic in good
faith) is greater than
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<PAGE> 48
the Warrant Exercise Price in effect immediately prior to
such issuance or exchange, and (B) such merger or
acquisition shall be permitted or approved under the
Senior Loan Agreement.
"Existing Subsidiaries" means, collectively, Prefco, Carlton, Richards, and
Grogan's, as such terms are defined herein.
"Financial Statements" means the Annual Financial Statements, Quarterly
Financial Statements and Monthly Financial Statements of the Company.
"Financial Tests" means the financial tests set forth in Section 9 of the
Purchase Agreement, which tests are determined as provided for therein.
"Fiscal Year" means each year ended on December 31, or other fiscal year of
Atlantic. Each Fiscal Year consists of four Quarters.
"Fixed Charge Coverage Ratio" means, with respect to the Company, for any period
on a consolidated basis, the ratio of (i) EBITDA minus federal and state income
taxes actually payable during such period, minus Capital Expenditures of
Borrowers on a combined and consolidated basis net of purchase money and
Capitalized Lease Obligations with respect thereto, to the extent permitted
hereunder and made during the period for which the Fixed Charge Coverage Ratio
is to be calculated, to (ii) Fixed Charges during the period for which the Fixed
Charge Coverage Ratio is to be calculated.
"Fixed Charges" means with respect to the Company, for any period on a
consolidated basis, the amounts for such period of (i) Cash Interest Expense,
plus (ii) payments of principal due on the Senior Indebtedness, the Note and all
other Indebtedness of the Company (including the principal component of
Capitalized Lease Obligations).
"Fixed Put Option" is defined in the Put Option Agreement.
"Fixed Warrant" is defined in Background - Section C.
"Fully Diluted Common Shares" means, as of any date of determination, all Common
Stock outstanding plus the maximum number of shares issuable in respect of
Convertible Securities and warrants (including the Warrants) and options to
purchase Convertible Securities (whether or not the right to convert, exchange
or exercise are at the time exercisable), calculated based on the treasury
method of accounting for such shares.
"GAAP" means those generally accepted accounting principles and practices which
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor), consistently applied.
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"Grogan's" means Grogan's Farm, Inc., a Delaware corporation, together with its
successors and assigns.
"Hazardous Materials" means any flammable, ignitable, corrosive, reactive,
radioactive, explosive, chemical, hazardous, toxic or dangerous substance,
pollutant, contaminant, waste or other material regulated under Environmental
Laws; asbestos, ACM's; oil and petroleum products and natural gas, natural gas
liquids; liquefied natural gas, and synthetic gas usable for fuel; chemicals
subject to the OSHA Hazard Communication Standard; and industrial process and
pollution control wastes, whether or not hazardous within the meaning of the
Federal Resource Conservation and Recovery Act.
"Holder's Prorata Share" means, as of any date of determination, the number
obtained by dividing (A) the number of Common Shares issued and issuable upon
exercise of the Fixed Warrant, by (B) the Outstanding Common Shares as of such
date.
"Illiquidity Event" is defined in the Put Option Agreement.
"Indebtedness" means with respect to any Person, as of any date of
determination, the sum (without duplication) at such date of (i) all liability
for borrowed money or for the deferred purchase price of property or services,
(ii) all liabilities evidenced by a note, bond, debenture, or similar
instrument, (iii) all obligations under any conditional sale, lease (intended
primarily as a financing device) or other title retention or security agreement
with respect to property acquired, (iv) all obligations in respect of letters of
credit, acceptances, swaps of interest and currency exchange rates or similar
obligations issued or created for the account of the Person, (v) all direct or
indirect guaranty obligations, (vi) all liabilities or obligations secured by
any Lien on any property owned by the Person, whether or not the Person has
assumed or otherwise become liable for the payment thereof; and (vii) any
amendment, renewal, extension, revision, or refunding of such liability or
obligation.
"Indemnified Losses" means any loss, liability, claim, damage, (including
incidental and consequential damages), injury, obligation, penalty, cost, suit,
action, interest, demand, expense (including costs of investigation, defense,
reasonable attorneys' fees, amounts paid in settlement, and judgments).
"Indemnified Party" means the Purchaser and its permitted assigns, directors,
officers, members, partners, employees, agents or representatives.
"Insolvency Default" means any Event of Default designated as an Insolvency
Default in the Note.
"Insolvency Law" means Title 11 of the United States Code (or any successor law)
or any similar Applicable Law providing for bankruptcy, insolvency,
conservatorship, receivership or other similar debtor's relief.
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"Insolvency Order" means any order, judgment or decree entered in any Insolvency
Proceeding granting any Insolvency Relief.
"Insolvency Proceeding" means a proceeding before a court of competent
jurisdiction or other duly authorized authority under any Insolvency Law seeking
Insolvency Relief.
"Insolvency Relief" means discharge of indebtedness, liquidation, reorganization
or arrangement, appointment of a receiver, trustee, conservator, custodian or
liquidator or the granting of any stay or restraining order against creditors
under any Insolvency Law or other similar debtor's relief under any Insolvency
Law.
"Intellectual Property" means all business and trade names, trademarks, logos,
service marks, patents, patent applications, copyrights, know how, trade
secrets, processes, techniques, discoveries, inventions, developments, research,
formulas, designs, confidential information, customer lists, software, technical
information, data, plans and drawings, and other proprietary rights required for
or incidental to a Person's business or operations.
"Intercreditor Agreement" means together, that certain Debt Subordination
Agreement and that certain Lien Subordination Agreement, each dated as of the
date hereof, by and between the Purchaser and the Senior Lender, as modified,
amended or restated from time to time.
"Interest" is defined in the Note.
"Interest Coverage Ratio" means for any period, the ratio of (i) EBITDA to (ii)
Cash Interest Expense.
"Investment" means any loan, advance or capital contribution to, or investment
in, or purchase or other acquisition of any Capital Stock, notes, obligations,
securities or evidences of indebtedness of any Person (other than travel and
other advances to officers and employees of the Person in the ordinary course of
business).
"JCPSC" means Potter's Farm, Inc., Potter Rendering Co., Potter Leasing Company,
Ltd., together with their successors and assigns.
"Lender Reports" means, without duplication, the statements, certificates,
notices, reports and financial statements required to be delivered to the Senior
Lender pursuant to Section 9.1 of the Senior Loan Agreement.
"Lien" means any mortgage, assessment, security interest, easement, claims,
trusts, charge, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise, including judgment and mechanics'
liens), or preference, priority or other security agreement or similar
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any
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conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the UCC or comparable law of any jurisdiction
in respect of any of the foregoing).
"Litigation" means any litigation based upon or arising out of the Purchase
Agreement or any Related Document, or any related instrument or agreement, or
any of the transactions contemplated by the Purchase Agreement or any Related
Document.
"Management Letters" means any letter or report furnished by the Accountants to
management of the Company in connection with any Audit or otherwise describing
findings or recommendations with respect to the accounting or management
practices or procedures of the Company and, including all reports submitted to
the Company by the Accountant in connection with any interim or special Audit
made by the Accountant.
"Material Adverse Effect" means a material adverse effect on the business,
properties, operations, assets, results of operations or financial condition of
the Company, taken as a whole.
"Material Contracts" means with respect to Atlantic, the exhibits required by
Item 601(b)(10) of Regulation S-K as promulgated by the Commission.
"Maturity Date" is set forth in the Note.
"Month" means a calendar month, and "Monthly" means each Month.
"Monthly Financial Statements" means, with respect to each Month, the Accounting
Statements of the Company with respect to such Month, which Accounting
Statements shall be prepared and presented in the manner customary for purposes
of dissemination to management of the Company.
"Net Income" means, with respect to the Company, for any period, on a
consolidated basis, the net earnings (or loss) after taxes of the Company on a
consolidated basis for such period taken as a single accounting period
determined in accordance with GAAP.
"Non-Surviving Combination" means any merger, consolidation or other business
combination by Atlantic with one or more other entities in a transaction in
which Atlantic is not the surviving entity (other than a reincorporation).
"Nonvoting Common Stock" means the shares of nonvoting common stock of the
Seller at any time outstanding.
"Note" means the Senior Subordinated Note due March 31, 2005, in the principal
amount of $6,500,000.00 issued and sold to the Purchaser by the Sellers pursuant
to the terms of the Purchase Agreement.
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"Notice" means any notice required to be given to any Party under the Purchase
Agreement or any of the Related Documents in the manner provided in Section 12
of the Purchase Agreement.
"Original Issue Date" means the date on which the Warrant was first issued
pursuant to the Purchase Agreement.
"Outstanding Common Shares" means, as of any date of determination, all Common
Shares then outstanding plus the maximum number of Common Shares issuable in
respect of Convertible Securities outstanding on such date (whether or not any
rights to convert, exchange or exercise thereunder are presently exercisable).
"Parties" means the Sellers and the Purchaser collectively, and "Party" means
any one of the Parties.
"Payment Dates" are set forth in the Note.
"Payment Default" is defined in the Note.
"Pay Off Date" means the date upon which the Principal Amount and all accrued
but unpaid Interest and Assessments shall be paid or discharged in full.
"Pension Plans" means an "employee pension benefit plan" as that term is defined
in Section 3(2) of ERISA.
"Permitted Indebtedness" means, as of any date of determination, the aggregate
principal amount of all Indebtedness of the Sellers outstanding as of such date
of determination, but only to the extent that such Indebtedness is permitted
under the Purchase Agreement.
"Permitted Liens" means:
(1) Liens incurred pursuant to the Purchase Agreement and Related
Documents;
(2) Liens securing the Senior Indebtedness;
(3) Nonconsensual Liens securing Taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons;
(4) Liens incurred or deposits made in the ordinary course of
business (A) in connection with workers' compensation,
unemployment insurance, social security and other like laws,
or (B) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations,
surety, appeal and performance bonds and
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<PAGE> 53
other similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of property;
(5) attachment, judgment and other similar Liens arising in
connection with court proceedings, provided the execution or
other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(6) purchase money security interests granted to secure the
purchase price of assets, the purchase of which does not
violate the Purchase Agreement or any Related Document;
(7) Liens incidental to the conduct of the Seller's business or
the ownership of its property and assets which do not secure
Indebtedness and which do not in the aggregate materially
detract from the value of the Seller's property or assets or
materially impair the use thereof in the operation of its
business;
(8) Liens specifically identified in Schedule 8.1 to the Purchase
Agreement; and
(9) Liens permitted under the Senior Loan Agreement or consented
to by the Senior Lender.
provided, however, that the Seller makes adequate reserves on its books and
records in respect of such Liens in accordance with GAAP and that such Liens
individually or in the aggregate do not have a material adverse effect on the
Seller or its operations.
"Permitted Subsidiaries" means the Existing Subsidiaries and any other
Subsidiary of Atlantic permitted to be organized or acquired after the date
hereof under the Senior Loan Agreement; provided that (i) all of the capital
stock of such subsidiary is pledged to the Purchaser (subject to any first
priority pledge to the Senior Lender) to secure to Senior Indebtedness and the
Note and, (ii) such Subsidiary agrees in writing to be bound by the terms of
this Purchase Agreement and the Related Documents and becomes a joint and
several obligor under the Note.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
"Potter" means Potter's Acquisition Corp., a Delaware corporation, together with
its successors and assigns.
"Potter Agreement" has the meaning set forth in Background - Section A of the
Purchase Agreement.
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<PAGE> 54
"Potter Transaction" has the meaning set forth in Background - Section A of the
Purchase Agreement.
"Preemption Offering" means any offering of Common Shares, Convertible
Securities or other shares of Capital Stock of Atlantic by or on behalf of
Atlantic other than an Exempt Offering.
"Preemptive Rights Agreement" means the Preemptive Rights Agreement dated as of
the date hereof by and between the Seller and the Purchaser.
"Prefco" means Prefco Corp., a Delaware corporation, together with its
successors and assigns.
"Prepayment Premium" means any premium that must be paid by the Seller to the
Purchaser upon the payment of any or all of the Principal Amount of the Note
prior to the Maturity Date.
"Principal Amount" means the principal amount of the Note at any time
outstanding.
"Proceeds" is defined in the Security Agreement.
"Prohibited Transfer" means the sale of any Common Shares or Convertible
Securities in contravention of the participation rights of the Purchaser under
the Co-Sale Agreement.
"Purchase Agreement" means the Senior Subordinated Note and Warrant Purchase
Agreement, dated as of March _____, 1998 between the Sellers and the Purchaser.
"Purchase Offer" means a bona fide offer from any unrelated or unaffiliated
Person to purchase Common Shares or Convertible Securities of Atlantic made to
any Shareholder named in the Shareholder's Agreement.
"Purchased Shares" means, as of any date of determination, any Common Shares
purchased by the Purchaser prior to such date of determination pursuant to the
Preemptive Rights Agreement, or directly from the Seller in any other
transaction after the Original Issue Date.
"Purchaser" means Banc One Capital Partners, LLC, a Delaware limited liability
company, together with its successors and assigns.
"Put Option"is defined in the Put Option Agreement.
"Put Option Agreement" means the Put Option Agreement dated as of the date
hereof by and between Atlantic and the Purchaser.
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<PAGE> 55
"Put Price" means, as of any date on which Holder has given Notice of the
exercise of any Put Option, a per share purchase price equal to the greater of
(i) the Capitalized Earnings Determined Value Amount, and (ii) the Appraisal
Determined Value Amount, as of the date of such Notice.
"Put Trigger Event" means the first to occur of any of the following events: (i)
the fifth anniversary of the Closing Date; (ii) a Disposition; (iii) a
Non-Surviving Combination; (iv) the date upon which the Sellers prepay in full
the Principal Amount, Interest and Assessments, if any, on the Note; or (v)
Acceleration of the payment of the Note.
"Qualified Plans" means Pension Plans that are intended to qualify under Section
401(a) of the Code.
"Qualified Public Offering" means the first offer and sale to the public by a
Seller or any holders of shares of any class of its Capital Stock subsequent to
the date of the Purchase Agreement, pursuant to a registration statement that
has been declared effective by the Commission in which a Seller receives net
proceeds of at least $25,000,000.
"Quarter" means each quarter annual period of the Fiscal Year, and "Quarterly"
means each Quarter. Each Quarter consists of three Months.
"Quarterly Financial Statements" means, with respect to each Quarter, the
Accounting Statements of the Company with respect to such Quarter and the
current Fiscal Year to date, presented with corresponding Accounting Statements
for the same Quarter and Fiscal Year to date period for the preceding Fiscal
Year, which Accounting Statements shall be prepared in accordance with GAAP
(subject to applicable year end adjustments) and presented in reasonable detail
(but omitting footnotes).
"Registrable Securities" means: (a) any of the Warrant Shares held by the
Purchaser or any Affiliate thereof, and (b) any securities issued or issuable
with respect to any such securities described in (a) above, by way of dividend
or distribution or in connection with a recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been sold in accordance therewith, (ii) such securities shall have been
sold pursuant to Rule 144 promulgated under the Securities Act, (iii) such
securities are freely transferrable without restriction under the Securities Act
or are otherwise represented by certificates not bearing a legend restricting
further transfer, or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Seller's performance
of or compliance with the Registration Rights Agreement, including, without
limitation, (i) all Commission, stock exchange or National Association of
Securities Dealers ("NASD") registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws and in compliance with the rules of the NASD, (iii) all expenses
incurred in preparing, printing and
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<PAGE> 56
distributing any registration or prospectus or amendment or supplement thereto
and compliance with any underwriting agreements or the Registration Rights
Agreement, (iv) all fees and expenses incurred in connection with listing any
securities on any securities exchange, (v) fees and disbursements of counsel and
independent public accountants, including the expenses of any annual or special
audits or "cold comfort" letters required by or incident to such performance and
compliance, (vi) reasonable fees and disbursements of counsel and accountants
incurred by any holder of Registrable Securities to be registered, and (vii) any
fees of and disbursements to underwriters customarily paid by issuers or sellers
of securities, excluding underwriting discounts and commissions and transfer
taxes, if any.
"Registration Rights Agreement" means the Registration Rights Agreement dated as
of the date hereof by and between Atlantic and the Purchaser.
"Regulations" means the federal Income Tax Regulations (including without
limitation, Temporary Regulations) promulgated under the Code, as the same may
be amended from time to time (including corresponding provisions of successor
regulations).
"Related Documents" means the Note, Security Agreement, Warrant Certificate, Put
Option Agreement, Preemptive Rights Agreement, Registration Rights Agreement,
Shareholder Agreement, and Pledge Agreements.
"Restricted Payments" means any of the following:
(1) any Dividend or distribution (in cash or in kind) in respect
of any class of Atlantic's Capital Stock;
(2) any redemption, purchase or other acquisition, direct or
indirect, of any shares of any Atlantic's Capital Stock or
Convertible Securities (other than pursuant to the Put Option;
and
(3) any management, consulting or similar fee payable to any
Affiliate of Atlantic, except management fees not exceeding
$425,000 per year payable to Sterling and Elfman pursuant to
the Consulting Agreement with respect to each Fiscal Year
(subject to adjustment as provided for in such agreement),
provided that no Default or Event of Default exists at the
time of or immediately after giving effect to any such
payment.
"Restricted Securities" means (a) any Warrant bearing the applicable legend set
forth in the Warrant, (b) any Warrant Shares which are evidenced by a
certificate or certificates bearing such legend, and (c) unless the context
otherwise requires, any Common Shares which are at the time issuable upon the
exercise of any Warrant and which, when so issued, will be evidenced by a
certificate or certificates bearing such legend.
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"Richards" means Richards Cajun Foods Corp., a Delaware corporation, together
with its successors and assigns.
"Rights Offering" means any offering of Capital Stock or Convertible Securities
of Atlantic or any distribution of rights to purchase Capital Stock or
Convertible Securities of the Seller that is made substantially on a prorata
basis among the holders of Capital Stock of the Company.
"Securities" means collectively, the Note, the Warrant and the Warrant Shares,
and "Security" means any one of the Securities.
"Securities Act" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as of
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar federal statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar federal
statute.
"Securities Reports" means all financial statements, proxy statements, notices
and reports furnished to the securityholders of Atlantic and all registration
statements and reports (including reports on Forms 10-K, 10-Q and 8-K) filed
with the Commission.
"Security Agreement" means the Security Agreement dated as of the date hereof by
and between the Seller and the Purchaser and any document, financing statement
or instrument delivered in connection therewith, as modified, amended or
restated from time to time, together with any other agreements securing the
payment of the obligations evidenced by the Note or under the Purchase
Agreement.
"Sellers" means collectively, Atlantic and the Subsidiaries, together with their
permitted successors and assigns, and "Seller" means any one of the Sellers.
"Selling Shareholder" means a shareholder that determines to accept a Purchase
Offer that is subject to the Shareholder's Agreement.
"Senior Lender" means Fleet Capital Corporation, as lender under the Senior Loan
Agreement, together with its successors and assigns in such capacity, and any
successor senior lender under a Senior Loan Agreement that enters into an
intercreditor or subordination agreement with the Purchaser upon terms mutually
acceptable to such Lender and the Purchaser.
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"Senior Loan Agreement" shall have the meaning set forth in Background - Section
B of the Purchase Agreement, including all agreements in connection with all
extensions, renewals, restatements and refinancings thereof.
"Senior Loan" shall have the meaning specified in Background - Section B of the
Purchase Agreement, including all extensions, renewals, restatements and
refinancings thereof.
"Senior Indebtedness" means the Senior Loan and other Indebtedness incurred
pursuant to the terms of any agreement (other than the Senior Loan Agreement)
between the Seller and any bank or financial institution providing for term or
revolving credit loans secured by the Collateral and any other assets of the
Seller; provided that any such other agreement shall be permitted hereunder,
have been consented to by the Purchaser, which consent shall not be unreasonably
withheld, and the lender with respect thereto shall have been granted a security
interest in the Collateral on terms substantially equivalent to those set forth
in the Senior Loan Agreement.
"Shareholder's Agreement" means the Shareholder's Agreement dated as of the date
hereof by and among Atlantic, certain shareholders of Atlantic and the
Purchaser.
"Stated Interest Rate" is set forth in the Note.
"Sterling" means Sterling Advisors, L.P., a Delaware limited partnership.
"Subsidiary" means any entity of which more than 50% of the Voting Power is
owned or controlled by Atlantic at any date of determination, either directly or
through Subsidiaries. The Existing Subsidiaries and Potter are Subsidiaries as
defined herein and are referred to collectively as the "Subsidiaries" and
individually as a "Subsidiary."
"Tax(es)" means any federal, state, local or foreign income, gross receipts,
license, franchise, payroll, employment, excise, unemployment, personal
property, severance, disability, real property, sales, use, transfer, value
added, alternative, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
"Transfer" means, with respect to any item, the sale, exchange, pledge,
conveyance, lease, transfer or other disposition of such item or any interest
therein.
"UCC" means the Uniform Commercial Code as in effect in an applicable state.
"Voting Power" means with respect to any entity, the power to vote for or
designate members of the board of directors or similar group, whether exercised
by virtue of the record ownership of securities, under a close corporation or
similar agreement or under an irrevocable proxy.
"Voting Stock" means the shares of voting common stock of Atlantic at any time
outstanding.
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"Warrants" means, collectively, the Contingent Warrant and the Fixed Warrant and
the Warrant Certificate representing such warrants.
"Warrant Exercise Price" means $3.38 per share.
"Warrant Expiration Date" means that date which is the earliest to occur of (i)
the date on which a Qualified Public Offering is completed, (ii) the date on
which a Disposition or Non-Surviving Combination is consummated, or (iii) the
seventh anniversary of the Closing Date.
"Warrant Shares" means the Common Shares issued or issuable upon exercise of the
Warrants.
"Welfare Plans" means an "employee welfare benefit plan" as such term is defined
in Section 3(1) of ERISA.
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<PAGE> 1
EXHIBIT 4.13
PAYMENT OF THIS NOTE IS SUBORDINATED SUBJECT TO THE TERMS AND CONDITIONS OF AN
INTERCREDITOR AGREEMENT DATED AS OF THE DATE OF NOTE (AS AMENDED) BY AND BETWEEN
THE PAYEE AND FLEET CAPITAL CORPORATION
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
SENIOR SUBORDINATED NOTE
DUE MARCH 31, 2005
MAKERS ATLANTIC PREMIUM BRANDS, LTD.
PREFCO CORP.
CARLTON FOODS CORP.
RICHARDS CAJUN FOODS CORP.
GROGAN'S FARM, INC.
POTTER'S ACQUISITION CORP.
PAYEE BANC ONE CAPITAL PARTNERS, LLC
PRINCIPAL AMOUNT $6,500,000
AMORTIZATION COMMENCEMENT DATE JUNE 30, 2003
STATED INTEREST RATE 10% PER ANNUM
DEFAULT INTEREST RATE 15% PER ANNUM
DATE OF NOTE MARCH 20, 1998
MADE AT COLUMBUS, OHIO
<PAGE> 2
MATURITY DATE MARCH 31, 2005
PAYMENT DATES INTEREST : LAST DAY OF EACH
MONTH
PRINCIPAL: MARCH 31, JUNE 30,
SEPTEMBER 30,
DECEMBER 31
This is the SENIOR SUBORDINATED NOTE DUE MARCH 31, 2005 ("Note")
provided for in the Senior Subordinated Note and Warrant Purchase Agreement
dated as of March 20, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, "Purchase Agreement") by and between Payee, as
purchaser, and Makers, as seller.
THIS NOTE IS ONE OF THE RELATED DOCUMENTS REFERRED TO IN THE PURCHASE
AGREEMENT, AND CANNOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT AS
PROVIDED IN SECTION 11.14 OF THE PURCHASE AGREEMENT.
FOR VALUE RECEIVED, THE MAKERS HEREBY PROMISE TO PAY TO THE ORDER OF
THE PAYEE (OR ITS SUCCESSORS AND PERMITTED ASSIGNS) THE PRINCIPAL AMOUNT OF SIX
MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000), TOGETHER WITH INTEREST,
PREPAYMENT PREMIUMS AND ASSESSMENTS (EACH AS DEFINED HEREIN), UPON THE TERMS AND
SUBJECT TO THE CONDITIONS SET FORTH
IN THIS NOTE.
SECTION 1. DEFINITIONS AND MISCELLANEOUS PROVISIONS.
The terms "Makers", "Payee", "Principal Amount", "Amortization
Commencement Date", "Stated Interest Rate", "Default Interest Rate", "Date of
Note", "Made At", "Maturity Date", and "Payment Dates", have the definitions set
forth above. All other capitalized terms not otherwise defined in this Note
shall have the definitions set forth in the Purchase Agreement, which
definitions are, to the extent applicable, incorporated herein by reference. The
provisions of Section 11 of the Purchase Agreement are applicable to this Note
and are incorporated herein by reference.
SECTION 2. MATURITY AND PAY OFF.
2
<PAGE> 3
The unpaid Principal Amount of this Note, together with all accrued but
unpaid Interest and Assessments, shall be due and payable in full on the
Maturity Date. Payment of the Principal Amount and all accrued but unpaid
Interest and Assessments may be Accelerated upon the occurrence of an Event of
Default as provided for in this Note.
Upon request of the Makers, the Payee will furnish a letter setting
forth the amount of the payment of Principal Amount, Interest and Assessments
required to pay this Note in full as of a specified Pay Off Date.
SECTION 3. INTEREST.
Interest shall accrue on the unpaid Principal Amount from the date of
this Note through and including the Pay Off Date at the applicable interest rate
("Interest"). All accrued but unpaid Interest shall be paid monthly in arrears
on each Payment Date specified above, commencing April 30, 1998.
At all times that the Default Interest Rate is not in effect, the
interest rate on this Note shall be a fixed rate per annum equal to the Stated
Interest Rate. Upon the occurrence of an Event of Default, the Payee may elect,
in the sole exercise of its discretion, to impose the Default Interest Rate by
giving written Notice of such election to Atlantic ("Default Rate Election"). In
the event of a Default Rate Election, the interest rate on this Note shall be a
fixed rate per annum equal to the Default Interest Rate. In the case of a
Default Rate Election based upon a Payment Default, the Default Interest Rate
shall be given retroactive effect back to the date of such Payment Default (or
such later date specified in such Notice); provided, however, that if such
Notice is given more than 30 days after such Payment Default, the Default
Interest Rate shall take effect on the date of such Notice. Otherwise, the
Default Interest Rate becomes effective as of the date of such Notice. In either
case, the Default Interest Rate shall continue to be the interest rate on this
Note until the date on which such Event of Default has been remedied or waived
and no other Default or Event of Default is continuing unremedied or unwaived
with respect to which a Default Rate Election has been given, provided that the
Note has not been Accelerated.
Notwithstanding any provision of this Note to the contrary: (i) in no
event shall the interest rate on this Note be a rate per annum in excess of the
maximum interest rate permissible under Applicable Law, and (ii) to the extent
that Interest (or other amounts paid with respect to this Note that are deemed
to be interest under
3
<PAGE> 4
Applicable Law) result in interest payments in excess of those permitted
under Applicable Law, such excess payments shall be applied to the payment of
the unpaid Principal Amount (without payment of any Prepayment Premium and
without regard to any required minimum amount for partial prepayments) or, if
the Principal Amount has been paid in full, shall be refunded to the Makers.
Interest shall be calculated based upon: (i) the actual number of days
elapsed over each Month, including any additional days elapsed because the
scheduled Payment Date fell on a non - Business Day; (ii) Months consisting of
30 days each; (iii) Quarters consisting of three 30 day Months, and (iv) Monthly
compounding of any Interest or Assessment accrued but unpaid as of each Payment
Date.
SECTION 4. PRINCIPAL AMOUNT.
The Principal Amount shall be paid in installments as set forth below,
payable Quarterly on each Payment Date, commencing on the Amortization
Commencement Date and continuing until the earlier of the Pay Off Date or the
Maturity Date. In the event of any partial prepayment of Principal Amount, each
such partial prepayment shall be applied to pay the scheduled installments of
Principal Amount in inverse order of the Payment Dates on which such
installments are due and payable.
PAYMENT DATE INSTALLMENT PAYMENT
June 30, 2003 $812,500
September 30, 2003 $812,500
December 31, 2003 $812,500
March 31, 2004 $812,500
June 30, 2004 $812,500
September 30, 2004 $812,500
December 31, 2004 $812,500
March 31, 2005 $812,500
4
<PAGE> 5
SECTION 5. PREPAYMENTS.
The Makers may prepay the Principal Amount in whole at any time or in
part from time to time; provided that (i) each partial prepayment of Principal
Amount shall be in an amount equal to or greater than $500,000, and (ii) the
Makers pay any Prepayment Premiums as provided for below.
The Makers shall pay as a Prepayment Premium the percent shown below of
the Principal Amount of such prepayment ("Prepayment Premium").
<TABLE>
<CAPTION>
IF PREPAYMENT IS MADE
ON OR AFTER BUT BEFORE PREPAYMENT PREMIUM
- --------------------------------------------------------------------------------------
<S> <C> <C>
Date of Note January 1, 2001 3%
January 1, 2001 January 1, 2002 2%
January 1, 2002 January 1, 2003 1%
January 1, 2003 Maturity Date None
- --------------------------------------------------------------------------------------
</TABLE>
All prepayments of Principal Amount shall be accompanied by the payment
of (i) all Interest accrued but unpaid through the date of prepayment with
respect to the Principal Amount prepaid, and (ii) all unpaid Assessments.
SECTION 6. LATE PAYMENTS.
A payment of Principal Amount, Interest[, Prepayment Premium] or
Assessment shall be deemed to be in default if such payment is not made in the
manner provided for in this Note prior to 2:00 p.m., Columbus, Ohio, time on the
fifth day after such payment is due. The Payee may, in the sole exercise of its
discretion, by Notice to the Makers, assess a fee of $1,000 per Payment Date
with respect to which there is a late payment to reimburse the Payee for the
cost of processing such late payment. Such late fee shall be deemed to be an
Assessment for purposes of this Note. The Payee may not assess a late fee with
respect to any Payment Date after payment of this Note is Accelerated.
5
<PAGE> 6
SECTION 7. PAYMENTS.
Unless otherwise agreed by the Payee, all payments of Principal Amount
and Interest due and payable shall be made by wire transfer of immediately
available funds to the account of the Payee at or before 2:00 p.m., Columbus,
Ohio, time on each Payment Date. Any wire transfer received by the Payee after
2:00 p.m., Columbus, Ohio, time shall be deemed to have been received by the
Payee prior to such time on the next Business Day.
Unless otherwise specified in writing by the Payee to the Makers, all
such payments shall be wired as follows:
Bank One, Columbus, OH
ABA #044-000-037
FAO Banc One Capital Corporation
Account #981039134
In the event that any scheduled Payment Date falls on a non - Business
Day, such Payment Date shall be deemed to be the next Business Day following
such scheduled Payment Date, and such additional days shall be deemed to have
elapsed for purposes of computing accrued Interest payable on such Payment Date.
SECTION 8. EVENTS OF DEFAULT.
(a) Enumeration of Defaults. Each of the following events shall be an
"Event of Default" for the purposes of this Note. An Event of Default shall be
deemed to continue until waived by Notice by the Payee to the Makers or remedied
by action of the Makers.
(b) Payment Default. The Makers default in the payment when due of any
installment of Principal Amount, Interest[, Prepayment Premium] or Assessment,
and such default is not remedied in the manner (including the payment of any
Assessment) and within the grace period provided for in Section 6 of this Note
("Payment Default"). A Payment Default shall be deemed to have occurred
notwithstanding the fact that the default in payment resulted from compliance
with or enforcement of the Intercreditor Agreements subject to the terms
thereof.
(c) Covenant Default. The Makers fail to observe or perform any
affirmative covenant, negative covenant, reporting requirement or any other
agreement set forth in the Purchase Agreement or the Related Documents and such
default is not
6
<PAGE> 7
remedied within 30 days after Notice of such default, regardless of whether
Notice is given by the Payee or the Makers.
(d) Warranty Default. Any representation or warranty given by the
Makers in the Purchase Agreement or the Related Documents proves to have been
untrue, incomplete or misleading in any material respect when made or when
deemed to have been made and such breach is not remedied (if it is capable of
being remedied) within 30 days after Notice of such default by the Payee or the
Maker.
(e) Financial Test Default. As of any applicable date of determination,
the Makers fail to satisfy any of the Financial Tests.
(f) Acceleration Default. The holder of the Senior Indebtedness
accelerates the payment of such Indebtedness for any reason, or the Maker
defaults in the payment of any other Indebtedness with an unpaid principal
amount in excess of $250,000, and such default remains unremedied beyond the
applicable grace period therefor, unless waived by the obligee thereof.
(g) Subordination Default. Any document with respect to the Senior
Indebtedness is amended or modified in violation of the Intercreditor Agreement,
or any amounts previously paid with respect to this Note must be repaid or held
in trust by the Payee due to compliance with or enforcement of the Intercreditor
Agreement.
(h) Insolvency Default. Any Maker: (i) discontinues the conduct of its
business; (ii) applies for or consents to the imposition of any Insolvency
Relief; (iii) voluntarily commences or consents to the commencement of an
Insolvency Proceeding; (iv) files an answer admitting the material allegations
of any involuntary commencement of an Insolvency Proceeding; (v) makes a general
assignment for the benefit of its creditors; (vi) is unable or admits in writing
its inability to pay its debts as they become due; or (vii) any Insolvency Order
is entered against such Maker and such Insolvency Order is not dismissed within
60 days of its entry ("Insolvency Default").
(i) Fraudulent Conveyance Default. The Maker: (i) conceals, removes or
permits to be concealed or removed all or any part of its property with the
intent to hinder, delay or defraud any of its creditors; (ii) makes or permits
any conveyance of its material properties that would be deemed fraudulent to
creditors under any Insolvency Law or other Applicable Law; or (iii) has, while
it is insolvent, caused or permitted any of its creditors to obtain a Lien on
any of its property by legal proceedings or otherwise which is not vacated
within 30 days.
7
<PAGE> 8
(j) Judgments. A final, nonappealable judgment or judgments is or are
entered against the Maker in the aggregate amount of $100,000 or more on a claim
or claims not covered by insurance and such judgment or judgments shall remain
unsatisfied for a period of 60 days.
SECTION 9. REMEDIES AND ACCELERATION.
(a) Remedies. Upon the occurrence of an Event of Default, the Payee
shall have (i) all rights and remedies granted to it under this Note, the
Purchase Agreement and the Related Documents, and (ii) all rights of a creditor
under Applicable Law (including the UCC). All such rights and remedies and the
exercise thereof shall be cumulative. No exercise of any such rights and
remedies shall be deemed to be exclusive or constitute an election of remedies.
(b) Acceleration of Payment. Upon the occurrence of an Insolvency
Default, payment of this Note shall be Accelerated automatically and without
Notice. Upon the occurrence and during the continuation of any other Event of
Default, the Payee may, in the sole exercise of its discretion, elect to cause
payment of this Note to be Accelerated by giving Notice of such election to the
Makers. Once payment of this Note has been Accelerated, such Acceleration may be
revoked only by the Payee, in the sole exercise of its discretion, by giving
Notice of revocation to the Makers.
(c) Waiver of Default. No Default or Event of Default may be waived or
shall be deemed to have been waived except by an express Notice by the Payee to
the Makers, and any such waiver shall be applicable only to the specific
Defaults or Events of Default expressly identified in such Notice and shall not
be deemed to apply to any other or subsequent Default or Event of Default. The
Payee may grant or withhold any such waiver in the sole exercise of its
discretion, and may condition such waiver upon the payment by the Maker of a
premium, the grant of additional security interests or the acceptance of other
terms and conditions under this Note or the Purchase Agreement. No course of
dealing by the Payee, or the failure, forbearance or delay by the Payee in
exercising any of its rights or remedies under this Note, the Purchase Agreement
or any Related Document shall operate as a waiver of any Default or Event of
Default or of any right of the Payee under this Note.
SECTION 10. WAIVERS BY MAKER.
To the full extent permitted by Applicable Law, Makers waive with
respect to this Note: presentment; protest and demand; notice of protest, demand
and dishonor;
8
<PAGE> 9
and diligence in collection. Makers agree that the Payee may release all or any
part of the collateral securing the payment of this Note; any guarantor or
surety with respect to this Note; or any other Maker from its obligation with
respect to this Note, all without Notice to Makers and without affecting in any
way the obligation of Makers under this Note.
SECTION 11. SECURITY FOR PAYMENT.
Payment of this Note is secured under the terms and subject to the
conditions of certain of the Related Documents. Nothing in this Note shall be
deemed to preclude the Payee from obtaining other or additional security for the
payment of this Note, to require the Payee to elect remedies or proceed against
any collateral or guarantee before Accelerating payment of this Note or to take
any legal or other action to collect payment of this Note.
SECTION 12. INTERCREDITOR AGREEMENT.
The Payee and the Senior Lender are parties to an Intercreditor
Agreement dated as of the date hereof, pursuant to which certain of the Payee's
rights under this Note and the Related Documents are subordinated to the Senior
Lender. Nothing in this Note, the Purchase Agreement or such Intercreditor
Agreement shall grant to Maker any rights as a beneficiary under such
Intercreditor Agreement nor any right to enforce against the Payee any provision
of such Intercreditor Agreement.
SECTION 13. COLLECTION AND ASSESSMENT FOR COSTS.
The Makers shall reimburse the Payee for all reasonable costs and
expenses (including legal fees and disbursements) incurred by the Payee in
connection with the collection or attempted collection of the payment of this
Note through legal proceedings or otherwise after the occurrence of an Event of
Default. All such amounts shall be deemed to be Assessments for purposes of this
Note.
SECTION 14. AMENDMENT.
This Note may not be amended, restated, supplemented or otherwise
modified except by an express written agreement executed and delivered by the
Makers and the Payee. Compliance with the covenants and other provisions of this
Note may not be waived except by an express written waiver signed and delivered
by the Party against whom enforcement is sought.
9
<PAGE> 10
SECTION 15. GOVERNING LAW.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PAYEE AND MAKERS UNDER
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF
OHIO, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 16. WAIVER OF JURY TRIAL.
THE PAYEE AND THE MAKER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY
TO CONSULT WITH LEGAL COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION. NEITHER THE
PAYEE NOR THE MAKERS SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION
IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL
NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER THE
PAYEE OR THE MAKERS EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY PARTY AGAINST WHOM
ENFORCEMENT IS SOUGHT.
SECTION 17. CONSENT TO JURISDICTION, VENUE AND SERVICE OF
PROCESS.
THE PAYEE AND THE MAKERS, EACH AFTER HAVING CONSULTED OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY, AND IRREVOCABLY: (I) CONSENT TO THE JURISDICTION OF THE COMMON
PLEAS COURT OF FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION WITH RESPECT TO ANY LITIGATION;
(II) WAIVE ANY OBJECTIONS TO THE VENUE OF ANY LITIGATION IN EITHER SUCH COURT;
(III) AGREE NOT TO COMMENCE ANY LITIGATION EXCEPT IN ONE OR THE OTHER OF SUCH
COURTS AND AGREE NOT TO CONTEST THE REMOVAL OF ANY LITIGATION COMMENCED IN ANY
OTHER COURT TO ONE OR THE OTHER OF SUCH COURTS; (IV) AGREE NOT TO SEEK TO
REMOVE, BY CONSOLIDATION OR OTHERWISE, ANY LITIGATION COMMENCED IN EITHER OF
SUCH COURTS TO ANY OTHER COURT; AND (V) WAIVES PERSONAL SERVICE OF PROCESS IN
CONNECTION WITH ANY LITIGATION AND CONSENTS TO SERVICE OF PROCESS BY REGISTERED
OR CERTIFIED MAIL, POSTAGE PREPAID, ADDRESSED AS PROVIDED IN THE PURCHASE
AGREEMENT. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE PAYEE OR THE MAKER EXCEPT BY WRITTEN
INSTRUMENT EXECUTED BY ALL OF THEM.
10
<PAGE> 11
IN WITNESS WHEREOF, this Note has been executed and delivered by and on
behalf of the Makers, effective as of the Date of Note set forth above.
MAKERS:
ATLANTIC PREMIUM BRANDS, LED.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
PREFCO CORP.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
CARLTON FOODS CORP.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
RICHARDS CAJUN FOODS
CORP.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
11
<PAGE> 12
GROGAN'S FARM, INC.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
POTTER'S ACQUISITION
CORP.
BY: /s/ Merrick M. Elfman
--------------------------
NAME: MERRICK M. ELFMAN
ITS: CHAIRMAN
12
<PAGE> 1
EXHIBIT 4.14
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE COMMISSION STATING THAT SUCH DISTRIBUTION, SALE, TRANSFER,
ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
WARRANT CERTIFICATE
COMMON STOCK PURCHASE WARRANT
OF
BANC ONE CAPITAL PARTNERS, LLC
--------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS............................................................................2
SECTION 2. DURATION AND EXERCISE OF WARRANT.......................................................2
2.1 WARRANT EXERCISE PRICE........................................................2
2.2 WARRANT EXERCISE PERIOD. ....................................................3
2.3 MANNER OF EXERCISE............................................................3
2.4 WHEN EXERCISE EFFECTIVE.......................................................3
2.5 DELIVERY OF STOCK CERTIFICATES, ETC...........................................3
SECTION 3. ANTIDILUTION ADJUSTMENT................................................................4
3.1 NUMBER OF WARRANT SHARES......................................................4
3.2 ADJUSTMENT - CAPITAL EVENT....................................................4
3.3 ADJUSTMENT - SALE OF COMMON STOCK OR CONVERTIBLE SECURITIES...................4
3.4 ADJUSTMENT REORGANIZATION EVENT...............................................5
3.5 OTHER EVENT. ................................................................6
SECTION 4. RESTRICTIONS ON TRANSFER...............................................................6
4.1 RESTRICTIVE LEGENDS...........................................................6
4.2 NOTICE OF PROPOSED TRANSFER; OPINION OF COUNSEL...............................6
SECTION 5. AVAILABILITY OF INFORMATION............................................................7
SECTION 6. RESERVATION OF STOCK, ETC..............................................................8
SECTION 7. DUE ORGANIZATION; NO VIOLATION.........................................................8
SECTION 8. CAPITALIZATION.........................................................................8
SECTION 9. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND SUBSTITUTION OF
WARRANT................................................................................8
9.1 OWNERSHIP OF WARRANT..........................................................8
9.2 REGISTRATION OF TRANSFERS.....................................................8
9.3 REPLACEMENT OF WARRANT CERTIFICATE............................................9
9.4 EXPENSES......................................................................9
SECTION 10. EXCHANGE FOR VOTING STOCK..............................................................9
SECTION 11. OTHER RIGHTS OF HOLDER.................................................................9
SECTION 12. NO RIGHTS AS STOCKHOLDER..............................................................10
SECTION 13. MISCELLANEOUS.........................................................................10
</TABLE>
1
<PAGE> 3
WARRANT CERTIFICATE
Dated as of March 20, 1998
This certifies that, for value received, BANC ONE CAPITAL PARTNERS, LLC
(the "Holder"), is entitled to purchase from ATLANTIC PREMIUM BRANDS, LTD., a
Delaware corporation (the "Company"), 666,947 shares of the Nonvoting Common
Stock of the Company, as adjusted as provided for in Section 3, in the manner
and subject to the terms and conditions set forth herein. The shares of
Nonvoting Common Stock of the Company issued or issuable upon the exercise of
this Warrant are referred to collectively as the "Warrant Shares" and
individually as a "Warrant Share."
This Warrant is being issued by the Company pursuant to the Senior
Subordinated Note and Warrant Purchase Agreement dated as of the date hereof by
and between the Company, as seller, and the Holder, as purchaser (the "Purchase
Agreement"), and cannot be sold, assigned or otherwise transferred except as
provided in Section 11.14 of the Purchase Agreement.
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
SECTION 1. DEFINITIONS.
All capitalized terms not otherwise defined herein shall have the
definitions set forth in the Glossary of Defined Terms attached to the Purchase
Agreement, which definitions are, to the extent applicable, incorporated in this
Warrant by reference.
SECTION 2. DURATION AND EXERCISE OF WARRANT.
2.1 WARRANT EXERCISE PRICE. The purchase price per Warrant
Share payable by the Holder to the Company upon any exercise of this Warrant
(the "Warrant Exercise Price") shall be $3.38 per Warrant Share; provided,
however, that:
2
<PAGE> 4
(i) if the number of Warrant Shares issuable upon
exercise of this Warrant is adjusted as
provided for in Section 3, the Warrant
Exercise Price shall be automatically
adjusted such that the Warrant Exercise Price
as adjusted shall be equal to $3.38 per Share
multiplied by a fraction, (A) the numerator
of which is the original number of Warrant
Shares issuable upon exercise of this Warrant
as of the date of this Warrant, and (B) the
denominator of which is the number of Warrant
Shares issuable upon exercise of this Warrant
as of the date of any such adjustment;
(ii) In the event that, at any time prior to the
fifth anniversary date of this Warrant, the
Company issues or sells to any Person, other
than in an Exempt Offering, for cash or in
exchange for property any shares of Common
Stock or any Convertible Securities at a
price per share (or, in the case of
Convertible Securities, at an equivalent
price per share of Common Stock) that is less
than the Warrant Exercise Price then in
effect, the Warrant Exercise Price shall be
automatically adjusted such that the Warrant
Exercise Price as adjusted shall be equal to
the lesser of (A) a fraction (x) the
numerator of which is the sum of (i) the
product of $3.38 and the number of
Outstanding Common Shares outstanding as of
the date hereof, (ii) the aggregate
consideration received by Atlantic from and
after the date hereof from the issuance, sale
or exchange of shares of Common Stock or
Convertible Securities (including the fair
market value of any property received in any
such issuance, sale or exchange as determined
by the Board of Directors of Atlantic in good
faith), and (iii) the minimum consideration
receivable upon the exercise of all
outstanding Convertible Securities issued
after the date hereof, divided by (y) the
number of Outstanding Common Shares
outstanding immediately after such issue,
sale or exchange, and (B) the Warrant
Exercise Price in effect immediately prior to
such issue, sale or exchange.
2.2 WARRANT EXERCISE PERIOD. This Warrant shall be
exercisable in a single exercise at any time after the date hereof but on or
before the Warrant Expiration Date; provided, however, that, in the event the
Holder elects to participate in a Purchase Offer pursuant to the terms of the
Shareholders Agreement, the Holder may exercise this Warrant in part to the
extent of the Holder's participation in such Purchase Offer in the manner
provided for in Section 2.3.
2.3 MANNER OF EXERCISE. This Warrant may be exercised by
the Holder upon surrender of this Warrant and the Notice of Exercise attached
hereto duly completed and executed
3
<PAGE> 5
on behalf of the Holder, at the principal office of the Company (or at such
other office or agency of the Company as it may designate by Notice to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment of the Warrant Exercise Price by wire transfer or delivery of a
certified or cashier's check to the Company. In the event of the partial
exercise of this Warrant as provided for in Section 2.2, (i) the Holder shall
indicate the number of Warrant Shares subject to such Purchase Offer, (ii) the
Warrant Exercise Price with respect to the Warrant Shares issued upon such
partial exercise shall be the Warrant Exercise Price in effect as of the date of
such partial exercise; and (iii) the Company shall reissue to the Holder in
exchange for this Warrant a new Warrant in a form identical to this Warrant,
except that the number of Warrant Shares issuable upon exercise of this Warrant
shall be appropriately adjusted to give effect to such partial exercise.
The Holder may, in lieu of paying the Warrant Exercise Price by wire
transfer or delivery of a certified or cashier's check to the Company, reduce
the unpaid principal amount of the Note by an amount equal to the funds which
would otherwise have been delivered; provided that the Holder shall not pay the
Warrant Exercise Price through a reduction in the unpaid principal amount of the
Note if such reduction would result in a breach or violation of the provisions
of Applicable Law, its Charter Documents, the Senior Loan Agreement or the
Intercreditor Agreement (or any replacements or refinancings thereof). The
Holder shall execute and deliver to the Company such documents as the Company or
its counsel may reasonably request to effect any reduction of the unpaid
principal amount of the Note pursuant to the foregoing sentence.
2.4 WHEN EXERCISE EFFECTIVE. The exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant and the Notice of Exercise shall have
been surrendered and the Company receives (i) payment of the Warrant Exercise
Price, or (ii) the documents effecting the reduction of the unpaid principal
amount of the Note, as provided in Section 2.3; and immediately prior to the
close of business on such Business Day the Holder shall be deemed to have become
the holder of record of the Warrant Shares.
2.5 DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after the exercise of this Warrant, and in any event within five (5)
Business Days thereafter, the Company will cause to be issued in the name of and
delivered to the Holder a certificate or certificates for the number of Warrant
Shares to which the Holder shall be entitled upon such exercise, rounded up to
the nearest whole share. The Company will pay any taxes that may be payable in
respect of (i) the issuance of Warrant Shares, or (ii) the issuance of a new
Warrant if this Warrant is exercised as to fewer than all the Warrant Shares to
which it relates. The Company will not, however, be required to pay any transfer
tax payable because Warrant Shares or a new Warrant are to be registered in a
name other than that of the Holder, and the Company will not be required to
issue any Warrant Shares or to issue a new Warrant registered in a name other
than that of the Holder until (x) the Company receives either (A) evidence that
any applicable transfer taxes have been paid, or (B) funds with which to pay
those taxes; or (y) it has been established to the Company's satisfaction that
no such tax is due.
4
<PAGE> 6
SECTION 3. ANTIDILUTION ADJUSTMENT.
3.1 NUMBER OF WARRANT SHARES. The number of Warrant
Shares that may be purchased by the Holder upon exercise of this Warrant is
666,947; provided, however, that such number of shares is subject to adjustment
as provided for in this Section 3.
3.2 ADJUSTMENT - CAPITAL EVENT. In the event that the
Company (i) declares a dividend or makes a distribution with respect to
outstanding shares of its Capital Stock of the Company, which dividend or
distribution is paid entirely or in part in shares of Common Stock or
Convertible Securities, or (ii) subdivides, combines or reclassifies outstanding
shares of its Common Stock or Convertible Securities, the number of Warrant
Shares issuable upon exercise of this Warrant shall be adjusted immediately
after such event as follows. The adjusted number of Warrant Shares shall be a
number equal to the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such record date multiplied by a fraction (i) the
numerator of which is the number of Fully Diluted Common Shares outstanding
immediately after such event, and (ii) the denominator of which is the number of
Fully Diluted Common Shares outstanding immediately prior to such event. Any
such adjustment shall be rounded down to the nearest whole share.
3.3 ADJUSTMENT REORGANIZATION EVENT. In the event of (i)
any capital reorganization or reclassification or recapitalization of any shares
of Capital Stock of the Company (other than an event described in Section 3.2),
(ii) any merger or consolidation of the Company with or into any other Person in
which the Company is not the surviving entity, or which effects a
reclassification or recapitalization of any shares of Capital Stock of the
Company, or (iii) the sale, exchange or transfer of the property of the Company
to any other Person as an entirety or substantially as an entirety, there shall
thereafter be issuable upon the exercise of this Warrant (in lieu of the Warrant
Shares), as appropriate, the number of shares of stock, other securities or
property to which the Holder of the number of shares of Common Stock equal to
the number of Warrant Shares then issuable upon the exercise of this Warrant
would have been entitled to as a result of such event.
Prior to and as a condition of the consummation of any such event, the
Company shall cause effective provisions to be made to effect the purposes of
this Section 3.3.
3.4 OTHER EVENT. In case any event shall occur as to
which the other provisions of this Section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof, then the Holder may request in writing within one hundred
twenty (120) days after the occurrence of such event that the Company examine
the propriety of an adjustment to the number of Warrant Shares. Unless the
Company and the Holder shall have mutually agreed upon an adjustment, or that no
adjustment is required, within thirty (30) days after the receipt of such
request,
5
<PAGE> 7
the Company shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regularly engaged accountants of
the Company), to give an opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Section
3, necessary to preserve the purchase rights represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Holder and shall make the adjustments described therein. If such opinion states
that no such adjustment is necessary, the Holder shall reimburse the Company for
one-half of the cost and expense of such opinion.
SECTION 4. RESTRICTIONS ON TRANSFER.
4.1 RESTRICTIVE LEGENDS. Except as otherwise permitted by
this Section 4, this Warrant, each Warrant issued in exchange or substitution
for this Warrant, each Warrant issued upon the registration of Transfer of this
Warrant, each certificate representing the Warrant Shares and each certificate
issued upon the registration of Transfer of any Warrant Shares, shall be stamped
or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION
STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE
ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OR A NO-ACTION LETTER FROM THE COMMISSION STATING THAT SUCH
DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND LAWS."
4.2 NOTICE OF PROPOSED TRANSFER; OPINION OF COUNSEL.
Prior to any Transfer of any Restricted Securities, the Holder will give Notice
to the Company of the Holder's intention to effect such Transfer. Each such
Notice of a proposed Transfer (a) shall describe the manner and circumstances of
the proposed Transfer in sufficient detail to enable counsel to render the
opinion referred to below, and (b) shall designate counsel for the Holder. The
Holder will submit a copy of such Notice to the counsel designated in such
Notice and the Company will promptly submit a copy of the Notice to its counsel.
The following provisions shall then apply:
(i) if in the opinion of counsel to the Company
the proposed Transfer may be effected without
registration of such Restricted Securities
under the Securities Act, the Company will
promptly notify the Holder and the Holder
shall thereupon be entitled to Transfer such
Restricted Securities in accordance with the
terms of the Notice
6
<PAGE> 8
delivered by the Holder to the Company. Each
Warrant or certificate for Warrant Shares, if
any, issued upon or in connection with such
Transfer shall bear the applicable
restrictive legend set forth above, unless in
the opinion of such counsel, such legend is
no longer required to ensure compliance with
the Securities Act. If for any reason,
counsel for the Company (after having been
furnished with the information required by
this Section 4.2) shall fail to deliver an
opinion to the Company, or the Company shall
fail to notify the Holder as aforesaid,
within thirty (30) days after receipt of
Notice of the Holder's intention to effect a
Transfer, then for all purposes of this
Warrant, the opinion of counsel for the
Holder shall be sufficient to authorize the
proposed Transfer and the opinion of counsel
for the Company shall not be required in
connection with such proposed Transfer; and
(ii) if, in the opinion of counsel to the Company,
the proposed Transfer may not be effected
without registration of such Restricted
Securities under the Securities Act, the
Company will promptly so notify the Holder
and the Holder shall not be entitled to
Transfer such Restricted Securities until
receipt of a further Notice from the Company
under clause (i) above or until registration
of such Restricted Securities under the
Securities Act has become effective.
SECTION 5. AVAILABILITY OF INFORMATION.
To the extent they are applicable to the Company, the Company will
comply with the reporting requirements of Sections 13 and 15(d) of the
Securities Exchange Act and all other public information reporting requirements
of the Commission (including the requirements of Rule 144 promulgated by the
Commission under the Securities Act) from time to time in effect. Subject to the
terms and conditions set forth in the Registration Rights Agreement, the Company
will cooperate with the Holder at the Holder's expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
Transfer of any Restricted Securities or the Transfer of Restricted Securities
by affiliates of the Company.
SECTION 6. RESERVATION OF STOCK, ETC.
The Company shall, not later than June 30, 1999, cause a sufficient
number of shares of Nonvoting Common Stock to permit the full exercise of this
Warrant to be authorized and will, thereafter, at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant
and free from preemptive rights, a sufficient number of shares of Nonvoting
7
<PAGE> 9
Common Stock to cover the Warrant Shares issuable or exchangeable upon the
exercise of this Warrant. All such shares shall be duly authorized and, when
issued upon such exercise and receipt of the Warrant Exercise Price, shall be
validly issued, fully paid and non-assessable; provided, however, that in the
event (and, until such time as) the Company fails to cause such a sufficient
number of shares of Nonvoting Common Stock to be authorized, this Warrant shall
be deemed to be exercisable to purchase an equivalent number of shares of Voting
Common Stock.
SECTION 7. DUE ORGANIZATION; NO VIOLATION.
The Company shall at all times prior to the Warrant Expiration Date
remain a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation. The Company shall comply in all
material respects with (i) any Applicable Law and (ii) its Charter Documents;
provided, however, that the Company may exercise in good faith its right to
protest and actively pursue the same diligently and by appropriate proceedings.
SECTION 8. CAPITALIZATION.
The Company represents and warrants that its authorized Capital Stock
as of March 19, 1998, consists solely of 30,000,000 shares of Common Stock, of
which 7,400,174 shares are issued and outstanding and 2,345,700 shares are
reserved for issuance, and (ii) 5,000,000 shares of Preferred Stock, $.01 par
value, of which no shares are issued and outstanding; and that it has no other
Capital Stock authorized, issued or outstanding.
SECTION 9. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND
SUBSTITUTION OF WARRANT.
9.1 OWNERSHIP OF WARRANT. Until due presentment for
Transfer, the Company may treat the Person in whose name this Warrant is
registered on the register kept at the Company's principal office as the owner
and holder hereof for all purposes, notwithstanding any Notice to the contrary,
provided that when this Warrant has been properly Transferred, the Company shall
treat such transferee as the owner of this Warrant for all purposes,
notwithstanding any Notice to the contrary. Subject to the foregoing provisions
and to Section 4, this Warrant, if properly Transferred, may be exercised by the
transferee without first having a new Warrant issued.
9.2 REGISTRATION OF TRANSFERS. Subject to Section 4, the
Company shall register the Transfer of this Warrant permitted under the terms
hereof upon records to be maintained by the Company for that purpose upon
surrender of this Warrant to the Company at the Company's principal office,
together with the Form of Assignment attached hereto duly completed and
executed. Upon any such registration of Transfer, a new Warrant in substantially
the form of this Warrant, shall be issued to the transferee.
8
<PAGE> 10
9.3 REPLACEMENT OF WARRANT CERTIFICATE. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and of an indemnification reasonably satisfactory
to the Company, or, in the case of any such mutilation, upon surrender of this
Warrant for cancellation at the Company's principal office, the Company at its
expense will promptly execute and deliver, in lieu thereof, a new Warrant of
like tenor.
9.4 EXPENSES. The Company will pay all expenses, Taxes
(other than transfer and income Taxes) and other charges in connection with the
preparation, issuance and delivery from time to time of this Warrant or the
Warrant Shares.
SECTION 10. EXCHANGE FOR VOTING STOCK.
The Company shall, upon the written request of Holder, issue and
exchange shares of Voting Stock on a share-for-share basis for any Nonvoting
Stock issued upon the exercise of this Warrant to the extent that the Holder:
(i) sells such Warrant Shares pursuant to a
registration statement under the Securities
Act, provided that such offering is
underwritten on a firm commitment basis or
otherwise provides for a widely dispersed
distribution of the shares;
(ii) sells such Warrant Shares in a private
placement pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act,
provided that no purchaser or related group
of purchasers acquires more than 2% of the
outstanding shares of Voting Stock;
(iii) sells such Warrant Shares as part of a direct
sale, together with other shareholders of the
Company, to a third party that is not related
to or affiliated with the Holder, provided
that pursuant to such sale the purchaser
acquires at least a majority of the
outstanding Voting Stock without regard to
any shares purchased from the Holder; or
(iv) does not own or have the right to receive
upon exercise of the Warrant or otherwise,
more than 4.9% of the Voting Stock that would
be outstanding after such exchange.
9
<PAGE> 11
SECTION 11. OTHER RIGHTS OF HOLDER.
The Warrant Shares shall be subject to the terms and conditions of the
Put Option Agreement, the Shareholders Agreement, the Preemption Agreement and
the Registration Rights Agreement.
SECTION 12. NO RIGHTS AS STOCKHOLDER.
Nothing contained in this Warrant shall be construed as conferring upon
the Holder any rights as a stockholder of the Company prior to the exercise
hereof or as imposing any obligation on the Holder to purchase any Capital Stock
of the Company.
SECTION 13. MISCELLANEOUS.
The provisions of Section 11 of the Purchase Agreement are applicable
to this Agreement and are incorporated by reference in this Agreement.
ATLANTIC PREMIUM BRANDS, LTD.
By: /S/ Merrick M. Elfman
--------------------------
Its: Chairman
10
<PAGE> 12
NOTICE OF EXERCISE
The undersigned hereby elects to exercise the Warrant evidenced by this
Warrant Certificate, and to purchase [_______ of] the Warrant Shares issuable
hereunder and herewith makes payment in full therefor [by delivery of a
certified or official bank check payable to the order of the Company in the
amount of the Warrant Exercise Price] [by agreeing hereby to reduce the
outstanding principal balance of the Company's Note payable to the undersigned
by the amount of the Warrant Exercise Price] and requests that certificates for
such Warrant Shares be issued in the name of and delivered to:
Name:
Social Security or Employer Identification Number:
Address:
Deliver to:
Address:
If the number of Warrant Shares as to which the Warrant is being
exercised are fewer than all the Warrant Shares to which the Warrant relates,
please issue a new Warrant for the balance of such Warrant Shares registered in
the name of the undersigned and delivered it to the undersigned at the following
address:
Address:
Name of
Holder (Print):
-------------------------
Dated:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
11
<PAGE> 13
Signature Guarantee:
- ----------------------------
By:
-------------------------
Name:
Title:
NOTE: The signature of this Notice of Exercise must correspond exactly
with the name of the Holder as specified on the face of this
Warrant Certificate.
The signature to this Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member
firm of the New York Stock Exchange.
12
<PAGE> 14
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Warrant in and to the foregoing Warrant Certificate and the shares of
Common Stock issuable upon exercise of said Warrant.
Name of
Holder (Print):
-------------------------
Dated:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
13
<PAGE> 1
EXHIBIT 4.15
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL OR A NO-ACTION
LETTER FROM THE COMMISSION STATING THAT SUCH DISTRIBUTION, SALE, TRANSFER,
ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
WARRANT CERTIFICATE
CONTINGENT COMMON STOCK PURCHASE WARRANT
OF
BANC ONE CAPITAL PARTNERS, LLC
--------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS............................................................................3
SECTION 2. DURATION AND EXERCISE OF CONTINGENT WARRANT............................................3
2.1 CONTINGENT WARRANT EXERCISE PRICE. .........................................3
2.2 CONTINGENT WARRANT EXERCISE PERIOD............................................4
2.3 MANNER OF EXERCISE. .........................................................4
2.4 WHEN EXERCISE EFFECTIVE.......................................................4
2.5 DELIVERY OF STOCK CERTIFICATES, ETC...........................................4
SECTION 3. ANTIDILUTION ADJUSTMENT................................................................4
3.1 NUMBER OF WARRANT SHARES......................................................4
3.2 ADJUSTMENT - CAPITAL EVENT....................................................5
3.3 ADJUSTMENT - SALE OF COMMON STOCK OR CONVERTIBLE SECURITIES...................5
3.4 ADJUSTMENT REORGANIZATION EVENT...............................................6
3.5 OTHER EVENT. ................................................................7
SECTION 4. RESTRICTIONS ON TRANSFER...............................................................7
4.1 RESTRICTIVE LEGENDS...........................................................7
4.2 NOTICE OF PROPOSED TRANSFER; OPINION OF COUNSEL...............................8
SECTION 5. AVAILABILITY OF INFORMATION............................................................8
SECTION 6. RESERVATION OF STOCK, ETC..............................................................9
SECTION 7. DUE ORGANIZATION; NO VIOLATION.........................................................9
SECTION 8. CAPITALIZATION.........................................................................9
SECTION 9. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND SUBSTITUTION OF
WARRANT................................................................................9
9.1 OWNERSHIP OF WARRANT..........................................................9
9.2 REGISTRATION OF TRANSFERS....................................................10
9.3 REPLACEMENT OF WARRANT CERTIFICATE...........................................10
9.4 EXPENSES.....................................................................10
SECTION 10. EXCHANGE FOR VOTING STOCK.............................................................10
SECTION 11. OTHER RIGHTS OF HOLDER................................................................11
SECTION 12. NO RIGHTS AS STOCKHOLDER..............................................................11
SECTION 13. MISCELLANEOUS.........................................................................11
</TABLE>
i
<PAGE> 3
CONTINGENT WARRANT CERTIFICATE
Dated as of March 20, 1998
This certifies that, for value received, BANC ONE CAPITAL PARTNERS, LLC
(the "Holder"), is entitled to purchase from ATLANTIC PREMIUM BRANDS, LTD., a
Delaware corporation (the "Company"), the number of shares of the Nonvoting
Common Stock of the Company specified in Section 3.1, as adjusted as provided
for in Section 3, in the manner and subject to the terms and conditions set
forth herein. The shares of Nonvoting Common Stock of the Company issued or
issuable upon the exercise of this Contingent Warrant are referred to
collectively as the "Warrant Shares" and individually as a "Warrant Share."
This Contingent Warrant is being issued by the Company pursuant to the
Senior Subordinated Note and Warrant Purchase Agreement dated as of the date
hereof by and between the Company, as seller, and the Holder, as purchaser (the
"Purchase Agreement").
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT, AND CANNOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT
AS PROVIDED IN SECTION 11.14 OF THE PURCHASE AGREEMENT.
SECTION 1. DEFINITIONS.
All capitalized terms not otherwise defined herein shall have the
definitions set forth in the Glossary of Defined Terms attached to the Purchase
Agreement, which definitions are, to the extent applicable, incorporated in this
Contingent Warrant by reference.
SECTION 2. DURATION AND EXERCISE OF CONTINGENT WARRANT.
2.1 CONTINGENT WARRANT EXERCISE PRICE. The purchase price
per Warrant Share payable by the Holder to the Company upon any exercise of this
Contingent Warrant (the "Warrant Exercise Price") shall be $3.38 per Warrant
Share; provided, however, that:
(i) if the Number of Warrant Shares issuable upon
exercise of this Contingent Warrant is
adjusted as provided for in Section 3, the
Warrant Exercise Price shall be automatically
adjusted such that. the Warrant Exercise
Price as adjusted shall be equal to $3.38 per
Share in effect immediately prior to such
adjustment multiplied by a fraction, (A) the
numerator of which is the original number of
Warrant Shares issuable upon exercise of this
Contingent Warrant as of the date of this
Contingent Warrant Share, and (B) the
denominator
2
<PAGE> 4
of which is the number of Warrant Shares
issuable upon exercise of this Contingent
Warrant as of the date of any such
adjustment;
(ii) In the event that, at any time prior to the
fifth anniversary date of this Contingent
Warrant, the Company issues or sells to any
Person, other than in an Exempt Offering, for
cash or in exchange for property any shares
of Common Stock or any Convertible Securities
at a price per share (or, in the case of
Convertible Securities, at an equivalent
price per share of Common Stock) that is less
than the Warrant Exercise Price then in
effect, the Warrant Exercise Price shall be
automatically adjusted such that the Warrant
Exercise Price as adjusted shall be equal to
the lesser of (A) a fraction (x) the
numerator of which is the sum of (i) the
product of $3.38 and the number of
Outstanding Common Shares outstanding as of
the date hereof, (ii) the aggregate
consideration received by Company from and
after the date hereof from the issuance, sale
or exchange of shares of Common Stock or
Convertible Securities (including the fair
market value of any property received in any
such issuance, sale or exchange as determined
by the Board of Directors of Company in good
faith), and (iii) the minimum consideration
receivable upon the exercise of all
outstanding Convertible Securities issued
after the date hereof, divided by (y) the
number of Outstanding Common Shares
outstanding immediately after such issue,
sale or exchange, and (B) the Warrant
Exercise Price in effect immediately prior to
such issue, sale or exchange.
2.2 CONTINGENT WARRANT EXERCISE PERIOD. This Contingent
Warrant shall be exercisable in a single exercise at any time after the earlier
to occur of (i) a Put Trigger Event, and (ii) the fifth anniversary date of this
Contingent Warrant, but on or before the Warrant Expiration Date.
2.3 MANNER OF EXERCISE. This Contingent Warrant may be
exercised by the Holder upon surrender of this Contingent Warrant and the Notice
of Exercise attached hereto duly completed and executed on behalf of the Holder,
at the principal office of the Company (or at such other office or agency of the
Company as it may designate by Notice to the Holder at the address of the Holder
appearing on the books of the Company), upon payment of the Warrant Exercise
Price by wire transfer or delivery of a certified or cashier's check to the
Company.
The Holder may, in lieu of paying the Warrant Exercise Price by wire
transfer or delivery of a certified or cashier's check to the Company, reduce
the unpaid principal amount of the Note by an amount equal to the funds which
would otherwise have been delivered; provided that the Holder
3
<PAGE> 5
shall not pay the Warrant Exercise Price through a reduction in the unpaid
principal amount of the Note if such reduction would result in a breach or
violation of the provisions of Applicable Law, its Charter Documents, the Senior
Loan Agreement or the Intercreditor Agreement (or any replacements or
refinancings thereof). The Holder shall execute and deliver to the Company such
documents as the Company or its counsel may reasonably request to effect any
reduction of the unpaid principal amount of the Note pursuant to the foregoing
sentence.
2.4 WHEN EXERCISE EFFECTIVE. The exercise of this
Contingent Warrant shall be deemed to have been effected immediately prior to
the close of business on the Business Day on which this Contingent Warrant and
the Notice of Exercise shall have been surrendered and the Company receives (i)
payment of the Warrant Exercise Price, or (ii) the documents effecting the
reduction of the unpaid principal amount of the Note, as provided in Section
2.3; and immediately prior to the close of business on such Business Day the
Holder shall be deemed to have become the holder of record of the Warrant
Shares.
2.5 DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after the exercise of this Contingent Warrant, and in any event
within five (5) Business Days thereafter, the Company will cause to be issued in
the name of and delivered to the Holder a certificate or certificates for the
number of Warrant Shares to which the Holder shall be entitled upon such
exercise, rounded up to the nearest whole share. The Company will pay any taxes
that may be payable in respect of (i) the issuance of Warrant Shares, or (ii)
the issuance of a new Contingent Warrant if this Contingent Warrant is exercised
as to fewer than all the Warrant Shares to which it relates. The Company will
not, however, be required to pay any transfer tax payable because Warrant Shares
or a new Contingent Warrant are to be registered in a name other than that of
the Holder, and the Company will not be required to issue any Warrant Shares or
to issue a new Contingent Warrant registered in a name other than that of the
Holder until (x) the Company receives either (A) evidence that any applicable
transfer taxes have been paid, or (B) funds with which to pay those taxes; or
(y) it has been established to the Company's satisfaction that no such tax is
due.
SECTION 3. ANTIDILUTION ADJUSTMENT.
3.1 NUMBER OF WARRANT SHARES. The number of Warrant
Shares that may be purchased by the Holder upon exercise of this Contingent
Warrant is contingent upon the Equity Valuation of the Company determined as of
the fifth anniversary date of this Contingent Warrant (or, if such date is
earlier, the date upon which this Warrant first becomes exercisable). Such
number of Warrant Shares shall be equal to the number of Warrant Shares set
opposite Equity Valuation of the Company as of such date in the following table;
provided, however, that such number of Warrant Shares is subject to adjustment
as provided for in this Section 3:
4
<PAGE> 6
<TABLE>
<CAPTION>
EQUITY VALUATION WARRANT SHARES
<S> <C>
$69,000,000 or less 428,753
69,000,001 to $74,000,000 378,948
$74,000,001 to $80,000,000 281,018
$80,000,001 to $90,000,000 185,264
$90,000,001 to $100,000,000 91,614
$100,000,001 or greater 0
</TABLE>
As used in this Section, the term "Equity Valuation" is defined in the
Glossary of Defined Terms.
3.2 ADJUSTMENT - CAPITAL EVENT. In the event that the
Company (i) declares a dividend or makes a distribution with respect to
outstanding shares of its Capital Stock of the Company, which dividend or
distribution is paid entirely or in part in shares of Common Stock or
Convertible Securities, or (ii) subdivides, combines or reclassifies outstanding
shares of its Common Stock or Convertible Securities, the number of Warrant
Shares shall be adjusted immediately after the applicable record date with
respect to such event. The adjusted number of Warrant Shares shall be a number
equal to the number of Warrant Shares issuable upon exercise of this Contingent
Warrant immediately prior to such event multiplied by a fraction (i) the
numerator of which is the number of Fully Diluted Common Shares immediately
after such event, and (ii) the denominator of which is the number of Fully
Diluted Common Shares outstanding immediately prior to such event. Any such
adjustment shall be rounded down to the nearest whole share.
3.3 ADJUSTMENT REORGANIZATION EVENT. In the event of (i)
any capital reorganization or reclassification or recapitalization of any shares
of Capital Stock of the Company (other than an event described in Section 3.2),
(ii) any merger or consolidation of the Company with or into any other Person in
which the Company is not the surviving entity, or which effects a
reclassification or recapitalization of any Shares of Capital Stock of the
Company, or (iii) the sale, exchange or transfer of the property of the Company
to any other Person as an entirety or substantially as an entirety, there shall
thereafter be issuable upon the exercise of this Contingent Warrant (in lieu of
the Warrant Shares), as appropriate, the number of shares of stock, other
securities or property to which the Holder of the number of shares of Common
Stock equal to the Number of Warrant Shares then issuable upon the exercise of
this Warrant at the date of such event would have been entitled to as a result
of such event.
5
<PAGE> 7
Prior to and as a condition of the consummation of any such event, the
Company shall cause effective provisions to be made to effect the purposes of
this Section 3.3.
3.4 OTHER EVENT. In case any event shall occur as to
which the other provisions of this Section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Contingent Warrant in accordance with the essential intent
and principles hereof, then the Holder may request in writing within one hundred
twenty (120) days after the occurrence of such event that the Company examine
the propriety of an adjustment to the number of Warrant Shares. Unless the
Company and the Holder shall have mutually agreed upon an adjustment, or that no
adjustment is required, within thirty (30) days after the receipt of such
request, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regularly engaged
accountants of the Company), to give an opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in this
Section 3, necessary to preserve the purchase rights represented by this
Contingent Warrant. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder and shall make the adjustments described therein.
If such opinion states that no such adjustment is necessary, the Holder shall
reimburse the Company for one-half of the cost and expense of such opinion.
SECTION 4. RESTRICTIONS ON TRANSFER.
4.1 RESTRICTIVE LEGENDS. Except as otherwise permitted by
this Section 4, this Contingent Warrant, each Contingent Warrant issued in
exchange or substitution for this Contingent Warrant, each Contingent Warrant
issued upon the registration of Transfer of this Contingent Warrant, each
certificate representing the Warrant Shares and each certificate issued upon the
registration of Transfer of any Warrant Shares, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION
STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE
ISSUER RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER OR A NO-ACTION LETTER FROM THE COMMISSION STATING THAT SUCH
DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND LAWS."
6
<PAGE> 8
4.2 NOTICE OF PROPOSED TRANSFER; OPINION OF COUNSEL.
Prior to any Transfer of any Restricted Securities, the Holder will give Notice
to the Company of the Holder's intention to effect such Transfer. Each such
Notice of a proposed Transfer (a) shall describe the manner and circumstances of
the proposed Transfer in sufficient detail to enable counsel to render the
opinion referred to below, and (b) shall designate counsel for the Holder. The
Holder will submit a copy of such Notice to the counsel designated in such
Notice and the Company will promptly submit a copy of the Notice to its counsel.
The following provisions shall then apply:
(i) if in the opinion of counsel to the Company
the proposed Transfer may be effected without
registration of such Restricted Securities
under the Securities Act, the Company will
promptly notify the Holder and the Holder
shall thereupon be entitled to Transfer such
Restricted Securities in accordance with the
terms of the Notice delivered by the Holder
to the Company. Each Warrant or certificate
for Warrant Shares, if any, issued upon or in
connection with such Transfer shall bear the
applicable restrictive legend set forth
above, unless in the opinion of such counsel,
such legend is no longer required to ensure
compliance with the Securities Act. If for
any reason, counsel for the Company (after
having been furnished with the information
required by this Section 4.2) shall fail to
deliver an opinion to the Company, or the
Company shall fail to notify the Holder as
aforesaid, within thirty (30) days after
receipt of Notice of the Holder's intention
to effect a Transfer, then for all purposes
of this Contingent Warrant, the opinion of
counsel for the Holder shall be sufficient to
authorize the proposed Transfer and the
opinion of counsel for the Company shall not
be required in connection with such proposed
Transfer; and
(ii) if, in the opinion of counsel to the Company,
the proposed Transfer may not be effected
without registration of such Restricted
Securities under the Securities Act, the
Company will promptly so notify the Holder
and the Holder shall not be entitled to
Transfer such Restricted Securities until
receipt of a further Notice from the Company
under clause (i) above or until registration
of such Restricted Securities under the
Securities Act has become effective.
SECTION 5. AVAILABILITY OF INFORMATION.
To the extent they are applicable to the Company, the Company will
comply with the reporting requirements of Sections 13 and 15(d) of the
Securities Exchange Act and all other public information reporting requirements
of the Commission (including the requirements of Rule 144
7
<PAGE> 9
promulgated by the Commission under the Securities Act) from time to time in
effect. Subject to the terms and conditions of the Registration Rights
Agreement, the Company will cooperate with the Holder at the Holder's expense to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the Transfer of any Restricted Securities or the
Transfer of Restricted Securities by affiliates of the Company.
SECTION 6. RESERVATION OF STOCK, ETC.
The Company shall, not later than June 30, 1999, cause a sufficient
number of shares of Nonvoting Common Stock to permit the full exercise of this
Warrant to be authorized and will, thereafter, at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Contingent
Warrant and free from preemptive rights, a sufficient number of shares of
Nonvoting Common Stock to cover the Warrant Shares issuable or exchangeable upon
the exercise of this Contingent Warrant. All such shares shall be duly
authorized and, when issued upon such exercise and receipt of the Warrant
Exercise Price, shall be validly issued, fully paid and non-assessable;
provided, however, that in the event (and, until such time as) the Company fails
to cause such a sufficient number of shares of Nonvoting Common Stock to be
authorized, this Warrant shall be deemed to be exercisable to purchase an
equivalent number of shares of Voting Common Stock).
SECTION 7. DUE ORGANIZATION; NO VIOLATION.
The Company shall at all times prior to the Warrant Expiration Date
remain a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation. The Company shall comply in all
material respects with (i) any Applicable Law and (ii) its Charter Documents;
provided, however, that the Company may exercise in good faith its right to
protest and actively pursue the same diligently and by appropriate proceedings.
SECTION 8. CAPITALIZATION.
The Company represents and warrants that its authorized Capital Stock
as of March 19, 1998, consists solely of (i) 30,000,000 shares of Common Stock,
of which 7,400,174 shares are issued and outstanding and 2,345,700 shares are
reserved for issuance, and (ii) 5,000,000 shares of Preferred Stock, $.01 par
value, of which no shares are issued and outstanding and that it has no other
Capital Stock authorized, issued or outstanding.
8
<PAGE> 10
SECTION 9. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND
SUBSTITUTION OF WARRANT.
9.1 OWNERSHIP OF WARRANT. Until due presentment for
Transfer, the Company may treat the Person in whose name this Contingent Warrant
is registered on the register kept at the Company's principal office as the
owner and holder hereof for all purposes, notwithstanding any Notice to the
contrary, provided that when this Contingent Warrant has been properly
Transferred, the Company shall treat such transferee as the owner of this
Contingent Warrant for all purposes, notwithstanding any Notice to the contrary.
Subject to the foregoing provisions and to Section 4, this Contingent Warrant,
if properly Transferred, may be exercised by the transferee without first having
a new Warrant issued.
9.2 REGISTRATION OF TRANSFERS. Subject to Section 4
hereof, the Company shall register the Transfer of this Contingent Warrant
permitted under the terms hereof upon records to be maintained by the Company
for that purpose upon surrender of this Contingent Warrant to the Company at the
Company's principal office, together with the Form of Assignment attached hereto
duly completed and executed. Upon any such registration of Transfer, a new
Warrant in substantially the form of this Contingent Warrant, shall be issued to
the transferee.
9.3 REPLACEMENT OF WARRANT CERTIFICATE. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Contingent Warrant and of an indemnification reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender of this Contingent for cancellation at the Company's principal office,
the Company at its expense will promptly execute and deliver, in lieu thereof, a
new Warrant of like tenor.
9.4 EXPENSES. The Company will pay all expenses, Taxes
(other than transfer and income Taxes) and other charges in connection with the
preparation, issuance and delivery from time to time of this Contingent Warrant
or the Warrant Shares.
SECTION 10. EXCHANGE FOR VOTING STOCK.
The Company shall, upon the written request of Holder, issue and
exchange shares of Voting Stock on a share-for-share basis for any Nonvoting
Stock issued upon the exercise of this Contingent Warrant to the extent that the
Holder:
(i) sells such Warrant Shares pursuant to a
registration statement under the Securities
Act, provided that such offering is
underwritten on a firm commitment basis or
otherwise provides for a widely dispersed
distribution of the shares;
9
<PAGE> 11
(ii) sells such Warrant Shares in a private
placement pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act,
provided that no purchaser or related group
of purchasers acquires more than 2% of the
outstanding shares of Voting Stock;
(iii) sells such Warrant Shares as part of a direct
sale, together with other shareholders of the
Company, to a third party that is not related
to or affiliated with the Holder, provided
that pursuant to such sale the purchaser
acquires at least a majority of the
outstanding Voting Stock without regard to
any shares purchased from the Holder; or
(iv) does not own or have the right to receive
upon exercise of the Warrant or otherwise,
more than 4.9% of the Voting Stock that would
be outstanding after such exchange.
SECTION 11. OTHER RIGHTS OF HOLDER.
The Shares shall be subject to the terms and conditions of the Put
Option Agreement, the Shareholders' Agreement, the Preemption Agreement and the
Registration Rights Agreement.
SECTION 12. NO RIGHTS AS STOCKHOLDER.
Nothing contained in this Contingent Warrant shall be construed as
conferring upon the Holder any rights as a stockholder of the Company prior to
the exercise hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.
SECTION 13. MISCELLANEOUS.
The provisions of Section 11 of the Purchase Agreement are applicable
to this Agreement and are incorporated by reference in this Agreement.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ Merrick M. Elfman
-----------------------------
MERRICK M. ELFMAN, Chairman
10
<PAGE> 12
NOTICE OF EXERCISE
The undersigned hereby elects to exercise the Warrant evidenced by this
Warrant Certificate, and to purchase the Warrant Shares issuable hereunder and
herewith makes payment in full therefor [by delivery of a certified or official
bank check payable to the order of the Company in the amount of the Warrant
Exercise Price] [by agreeing hereby to reduce the outstanding principal balance
of the Company's Note payable to the undersigned by the amount of the Warrant
Exercise Price] and requests that certificates for such Warrant Shares be issued
in the name of and delivered to:
Name:
Social Security or Employer Identification Number:
Address:
Deliver to:
Address:
If the number of Warrant Shares as to which the Warrant is being
exercised are fewer than all the Warrant Shares to which the Warrant relates,
please issue a new Warrant for the balance of such Warrant Shares registered in
the name of the undersigned and deliver it to the undersigned at the following
address:
Address:
Name of
Holder (Print):
-----------------------------
Dated:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
-------------------------------------
11
<PAGE> 13
Signature Guarantee
- -------------------------------
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
NOTE: The signature of this Notice of Exercise must correspond exactly
with the name of the Holder as specified on the face of this
Warrant Certificate.
The signature to this Notice of Exercise must be guaranteed by a
commercial bank or trust company in the United States or a member
firm of the New York Stock Exchange.
12
<PAGE> 14
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to ___________________ all of the rights of the undersigned in and to
this Contingent Warrant in and to the foregoing Warrant Certificate and the
shares of Common Stock issuable upon exercise of said Contingent Warrant.
Name of
Holder (Print):
-----------------------------
Dated:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
-------------------------------------
13
<PAGE> 1
EXHIBIT 4.16
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
PUT OPTION AGREEMENT
------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS............................................................................1
SECTION 2. PUT OPTION.............................................................................1
2.1 PUT OPTION....................................................................1
2.2 MANNER OF EXERCISE............................................................1
2.3 CLOSING AND PAYMENT...........................................................2
2.4 APPOINTMENT OF APPRAISER......................................................2
SECTION 3. TERMINATION............................................................................2
SECTION 4. MISCELLANEOUS. .......................................................................2
</TABLE>
i
<PAGE> 3
PUT OPTION AGREEMENT
This is the PUT OPTION AGREEMENT dated as of March 20, 1998
("Agreement") by and between ATLANTIC PREMIUM BRANDS, LTD. ("Company"), a
Delaware corporation, and BANC ONE CAPITAL PARTNERS, LLC ("Holder"), a Delaware
limited liability company, provided for and entered into pursuant to the Senior
Subordinated Note and Warrant Purchase Agreement dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"Purchase Agreement"), by and among the Holder, as purchaser, and the Company
and certain of its subsidiaries, as sellers. The Company and the Holder are
referred to collectively as the "Parties" and individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
SECTION 1. DEFINITIONS.
All capitalized terms not otherwise defined in this Agreement
shall have the definitions set forth in the Glossary of Defined Terms attached
to the Purchase Agreement, which definitions are, to the extent applicable,
incorporated in this Agreement by reference.
SECTION 2. PUT OPTION.
2.1 PUT OPTION. Upon the earlier to occur of: (i) the fifth
anniversary of the Closing Date; (ii) a Disposition; (iii) a Non-Surviving
Combination; (iv) the date upon which the Sellers prepay the Note in full; or
(v) any Acceleration of the payment of the Note; and, provided, that at the time
of such occurrence an Illiquidity Event has occurred and is continuing, then the
Holder shall have the option (the "Fixed Put Option") to require the Company to
purchase from the Holder, upon the terms and subject to the conditions set forth
in this Agreement, all, but not less than all, of the Warrant Shares issued or
issuable to the Holder upon exercise of the Fixed Warrant then owned by the
Holder at a purchase price per share equal to the Put Option Price then in
effect.
Upon the earlier to occur of: (i) the fifth anniversary of the
Closing Date, (ii) a Disposition; or (iii) a Non-Surviving Combination; and,
provided, that, at the time of such occurrence, an Illiquidity Event has
occurred and is continuing, the Holder shall have the option (the "Contingent
Put Option") to require the Company to purchase from the Holder, upon the terms
and subject to the conditions set forth in this Agreement, all, but not less
than all, of the Warrant Shares issued or issuable to the Holder upon exercise
of the Contingent Warrant then owned by the Holder at a purchase price per share
equal to the Put Option Price then in effect.
<PAGE> 4
The Fixed Put Option and the Contingent Put Option are
referred to collectively as the "Put Options" and individually as a "Put
Option". The term "Illiquidity Event" means that, as of any date of
determination, if (i) the Company is not listed on a stock exchange or other
dealer network, or (ii) the average weekly trading volume of the Company's
Common Stock for four consecutive calendar weeks falls below the product of
(A)15% of (B) the number of Holder's outstanding Warrant Shares.
2.2 MANNER OF EXERCISE. Each Put Option may be exercised by the
Holder giving a one time irrevocable Notice within 30 days of the effective date
of such Put Option to the Company that the Holder elects to exercise such Put
Option upon the terms and subject to the conditions set forth in this Agreement.
Upon final determination of the Put Price, the Company shall be required to
purchase from the Holder all of the Warrant Shares issued or issuable upon
exercise of the Warrant subject to such Put Option then owned by the Holder. The
Company shall not be obligated to purchase the Warrant Shares subject to such
Put Option then owned by the Holder if the Company shall be unable to do so
without a breach or violation of the provisions of Applicable Law, its Charter
Documents or the Senior Loan Agreement. Notwithstanding the foregoing, the
Company shall use reasonable efforts to remove any such limitations upon its
ability to purchase the Warrant Shares, and the Company shall have the
continuing obligation to purchase such Warrant Shares immediately after and to
the extent such limitations have been removed.
2.3 CLOSING AND PAYMENT. With respect to each Put Option, the
closing for the purchase of the Warrant Shares pursuant to this Agreement shall
occur within fifteen Business Days following the date of the determination of
the Put Price. The Put Price shall be payable to the Holder by the Company by
(i) wire transfer of immediately available funds, or (ii) by delivery of a
certified or cashiers' check.
2.4 APPOINTMENT OF APPRAISER. If the appointment of an
Appraiser is necessary in connection with the determination of any Put Price,
then within (i) ten days after the exercise of such Put Option if there is a
Disposition or Non-Surviving Combination or (ii) ten days after the expiration
of the 30 day period in which the Company and the Holder may agree on an
Appraisal Value, the Company and the Holder shall endeavor in good faith to
select a mutually acceptable Appraiser. If no such Appraiser is mutually
selected within such time period or such longer time period as the Company and
the Holder shall mutually agree upon, then within ten days thereafter, the
Company and the Holder shall each designate an investment banking firm that is
not an Affiliate of either the Company or the Holder, and within ten days
thereafter, such investment banking firms shall mutually select the Appraiser.
The Company shall pay the reasonable fees and expenses of the Appraiser, and, if
applicable, the Company and the Holder shall each pay the fees and expenses of
the investment banking firm designated by each of them for the purpose of
selecting the Appraiser.
SECTION 3. TERMINATION. Notwithstanding the foregoing, if the Holder
ceases to own Warrant Shares representing at least 1% of the Outstanding Common
Shares of the Company at any time prior to the exercise of the Fixed Put Option,
the rights of the Holder under this Agreement and the obligations of the Company
hereunder shall terminate.
2
<PAGE> 5
SECTION 4. MISCELLANEOUS. The provisions of Section 12 of the Purchase
Agreement are applicable to this Agreement and are incorporated by reference in
this Agreement.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
ATLANTIC PREMIUM BRANDS, LTD. BANC ONE CAPITAL PARTNERS, LLC
By: Banc One Capital Partners Holdings,
Ltd.,
By: /s/ Merrick M. Elfman Manager
---------------------------------
Name: Merrick M. Elfman By: BOCP Holdings Corporation, Manager
-------------------------------
Its: Chairman By: /s/ Leonard Lilliard
-------------------------------- ---------------------------------
Name: Leonard Lilliard
-------------------------------
Its: Authorized Signer
3
<PAGE> 1
EXHIBIT 4.17
--------------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS. .....................................1
SECTION 2. DEMAND REGISTRATION RIGHTS.........................1
SECTION 3. "PIGGYBACK" REGISTRATION RIGHTS....................3
SECTION 4. REGISTRATION PROCEDURES............................4
SECTION 5. INDEMNIFICATION....................................7
SECTION 6. RULE 144...........................................8
SECTION 7. COVENANTS..........................................8
SECTION 8. TERMINATION OF REGISTRATION RIGHTS.................9
SECTION 9. SPECIFIC PERFORMANCE...............................9
SECTION 10. MISCELLANEOUS......................................9
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This is the REGISTRATION RIGHTS AGREEMENT, dated as of March 20, 1998
("Agreement"), by and among ATLANTIC PREMIUM BRANDS, LTD. ("Company"), a
Delaware corporation, and BANC ONE CAPITAL PARTNERS, LLC, a Delaware limited
liability company ("Holder"), provided for and entered into pursuant to the
Senior Subordinated Note and Warrant Purchase Agreement dated as of the date
hereof, as amended, restated, supplemented or otherwise modified from time to
time ("Purchase Agreement") by and between Holder, as purchaser, and the Company
and certain of its subsidiaries, as sellers.
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement and
the Purchase Agreement, the Parties hereby agree as follows:
SECTION 1. DEFINITIONS.
All capitalized terms not otherwise defined in this Agreement shall have
the definitions set forth in the Glossary of Defined Terms attached to the
Purchase Agreement, which definitions are, to the extent applicable,
incorporated in this Agreement by reference.
SECTION 2. DEMAND REGISTRATION RIGHTS.
(a) Demand for Registration. If the Company shall receive a written request
from the Holder requesting that the Company effect the registration under the
Securities Act of all or part of the Holder's Registrable Securities ("Demand
Request"), the Company shall use its best efforts to effect such registration as
soon as practicable. Subject to the provisions of Section 2 (f), the Company may
register for sale in such registration other securities which the Company has
been requested to register by the holders thereof, provided however, that no
securities other than Registrable Securities shall be included in such
registration unless the managing underwriter shall have advised the Holder that
the inclusion of such other securities would not adversely affect such offering.
The Company shall not be required to effect more than two registrations pursuant
to requests made pursuant to this Section 2. Notwithstanding the provisions of
this Section 2, if the Company receives a Demand Request at a time when the
Company has retained an investment bank in connection with a primary offering of
Common Stock or Convertible Securities or otherwise has commenced efforts with
regard to such an offering, the Company may elect to treat the Demand Request
made under this Section 2 as a "piggyback" registration under Section 3 by
giving Notice to the Holder within 90 days of the Company's receipt of the
Demand Request.
(b) Registration Statement Form. Registrations under this Section 2 shall
be on such appropriate registration forms as shall be selected by the Company,
provided that such forms
1
<PAGE> 4
permit the disposition of the Registrable Securities in accordance with the
Holder's intended method or methods of disposition as specified in its request
for such registration. The Company shall include in any such registration
statement all information which the Holder shall reasonably request. Where the
Company is not eligible for use of Form S-3, the Holder shall only be entitled
to make a Demand Request with respect to a number of its Registrable Securities
which is equal to or greater than 50% of the maximum number of Warrant Shares
issuable upon exercise of the Warrant (assuming exercised on the Closing Date
with no restrictions on exercise).
(c) Effective Registration Statement. A registration requested pursuant to
this Section 2 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective under the
Securities Act, (ii) if such registration is not kept effective in accordance
with Section 4, (iii) if such registration becomes the subject of any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason other than an act or omission of the
Holder, or (iv) if any conditions to closing specified in the purchase agreement
or underwriting agreement entered into in connection with such registration are
not satisfied for any reason other than an act or omission of the Holder.
(d) Expenses. The Company shall pay all Registration Expenses in connection
with any registration requested pursuant to this Section 2. If a request made
under Section 2 is withdrawn by the Holder promptly following disclosure to it
of information concerning the Company that is materially and adversely different
from the information known to the Holder at the time such request was made, the
Company will pay any Registration Expenses in connection with such request
without reducing the number of registrations which the Holder has a right to
request under Section 2 hereof. The Holder shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or other
disposition of its Registrable Securities.
(e) Underwritten Offerings. If a registration pursuant to this Section 2
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected by the Company. If requested by the underwriters for any
underwritten offering, the Company will enter into an underwriting agreement
with such underwriters, such agreement to be satisfactory in substance and form
to the Company and the underwriters and to contain such terms as are generally
prevailing in agreements of this type. Holder shall not be required to make any
representations and warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Holder, the Holder's intended method of distribution, any other information
provided by the Holder for inclusion in the registration statement or prospectus
and any other representation required by law.
(f) Priority in Requested Registrations. If a requested registration
pursuant to this Section 2 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing that, in its opinion, the number
of securities of any class requested to be included in such registration exceeds
the number which can be sold in (or during the time of) such offering without
delaying or jeopardizing the success of the offering (including the price per
share acceptable to the Holder), then the Company will include in such
registration (i) first, all of the Holder's Registrable
2
<PAGE> 5
Securities that the Company is so advised can be sold in such offering, (ii)
second, to the extent permitted by the managing underwriter, securities to be
registered by the Company for its own account and/or by other holders of
securities in such manner and amounts as the Company shall determine.
SECTION 3. "PIGGYBACK" REGISTRATION RIGHTS.
(a) Participation in Registration. If the Company at any time
proposes to register any securities under the Securities Act (other than by a
registration on Form S-4 or Form S-8 or any successor or similar form and other
than pursuant to Section 2), whether or not for sale for its own account, it
will each such time, promptly give Notice to the Holder. Upon the written
request of the Holder made within 30 days after the receipt of any such Notice
(which request shall specify the Registrable Securities intended to be disposed
of and the intended method of disposition), the Holder shall have the right to
participate in such registration on the terms and conditions thereof. If, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay any
Registration Expenses in connection therewith), without prejudice, however, to
the rights of the Holder to request that such registration be effected as a
registration under Section 2, and (ii) in the case of a determination to delay
registration, the Company shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. No registration effected under this Section 3 shall relieve
the Company of its obligation to effect any registration under Section 2.
(b) Expenses. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3. The Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or other
disposition of its Registrable Securities.
(c) Underwritten Offerings. If a registration pursuant to this
Section 3 involves an underwritten offering, the Company shall, if requested by
the Holder, arrange for such underwriters to include the Holder's Registrable
Securities among the securities to be distributed by such underwriters. In such
case, the Holder shall be a party to the underwriting agreement. Holder shall
not be required to make any representations and warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding the Holder, the Holder's intended method of distribution,
any other information provided by the Holder for inclusion in the registration
statement or prospectus and any other representation required by law.
(d) Priority in Registrations. If a registration pursuant to this
Section 3 involves an underwritten offering, and the managing underwriter shall
advise the Company in writing that,
3
<PAGE> 6
in its opinion, the number of securities of any class requested to be included
in such registration exceeds the number which can be sold in (or during the time
of) such offering without delaying or jeopardizing the success of the offering,
then the Company will include in such registration, to the extent to which the
Company is advised can be sold in such offering, securities as follows:
(i) if such registration is for the account of the
Company, first, all securities proposed by the Company
to be sold for its own account, second, such
Registrable Securities requested by the Holder to be
included in such registration, and third, all other
securities of the Company requested to be included in
such registration in such amount and in such manner as
the Company shall determine;
(ii) if such registration is not for the account of the
Company, first, such Registrable Securities requested
to be included in such registration and all other
securities proposed to be sold by other holders shall
be included in such registration pro rata on the basis
of the number of shares so proposed to be sold, and
second all securities proposed by the Company to be
sold for its own account.
SECTION 4. REGISTRATION PROCEDURES.
If the Company is required to effect the registration of any Registrable
Securities as provided herein, the Company shall proceed in the following
manner:
(a) prepare and as expeditiously as possible file (and in any event
within 90 days of receipt of Holder's request under Section 2) with the
Commission the registration statement to effect such registration and use its
best efforts to cause such Registration Statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until the
earlier of (i) 90 days after the date such registration statement is declared
effective by the Commission, or (ii) such time as all Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the Holder;
4
<PAGE> 7
(c) furnish to Holder such number of prospectuses (including
preliminary prospectuses) and copies of each amendment and supplement thereto
and such other documents as Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities;
(d) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Holder shall reasonably request, to keep
such registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be reasonably
necessary or desirable to enable the Holder to consummate the disposition of its
Registrable Securities in such jurisdictions in accordance with the intended
method of disposition, provided, however, that the Company shall not be required
to qualify to do business, to consent to general service of process, or to
register as a broker or dealer in any such jurisdiction;
(e) enter into and perform its obligations under any underwriting
or placement agreement, and take all actions in connection therewith in order to
expedite or facilitate the disposition of the Registrable Securities;
(f) notify the Holder in writing of (i) any stop order or the
commencement of any proceedings for that purpose, (ii) any suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
commencement of any proceedings for that purpose, or (iii) any notification
received by the Company regarding the necessity or desirability of filing any
supplement or amendment to the registration statement;
(g) in any underwritten offering, furnish to the Holder (i) an
opinion of counsel for the Company, dated the effective date of such
registration statement, in form and substance as is customarily given to
underwriters, and (ii) a comfort letter, dated the effective date of such
registration statement, signed by the Company's independent public accountants
in form and substance as is customarily given to underwriters, in each case
addressed to the underwriters and the Holder;
(h) notify Holder upon discovery of the happening of any event as a
result of which the prospectus included in such registration statement includes
an untrue statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, or any other event
that would cause the registration statement to no longer be current, and at the
request of the Holder, as soon as practicable, prepare, file and furnish to
Holder a reasonable number of copies of a supplement or an amendment to such
prospectus which may be required on account of such event and use its
commercially reasonable efforts to cause such supplement or amendment to become
effective as soon as practicable;
(i) cause to be maintained a transfer agent for its securities from
and after a date not later than the effective date of such registration
statement;
5
<PAGE> 8
(j) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange or interdealer
quotation system on which any of the Registrable Securities is then listed; and
(k) enter into such agreements and take such other actions as the
Holder shall reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities.
The Company may require the Holder to furnish the Company such information
regarding the Holder and the distribution of the Registrable Securities as the
Company may from time to time reasonably request in writing.
Upon receipt of any Notice from the Company of the happening of any
circumstance or event of the kind described in Section 4(h), the Holder shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
registration statement until it receives copies of the supplemented or amended
prospectus or other notification that such disposition may be resumed, and, if
so directed by the Company, will destroy all copies, other than permanent file
copies, then in Holder's possession of the prospectus relating to such
Registrable Securities. The Company will use its best efforts to effect such
amendment or supplement as promptly as possible.
SECTION 5. INDEMNIFICATION.
(a) Indemnification by the Company. In the event of any
registration pursuant to Section 2 or 3, the Company will, and hereby does,
indemnify and hold harmless the Holder, its directors, partners, members and
officers, any underwriter acting on behalf of the Holder and each other Person,
if any, who controls any such Person within the meaning of the Securities Act
(collectively, "Holder Indemnified Persons"), against any losses, claims,
damages, expenses (including legal fees and expenses) or liabilities, joint or
several, to which any one of them may become subject under the Securities Act or
otherwise, provided however, that the Company shall not be so liable to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon (i) the Company's reliance upon written information furnished to
the Company by any Holder Indemnified Person for use in the registration
statement, (ii) any Holder Indemnified Person's failure to provide a copy of the
final prospectus, as the same may be then supplemented or amended, to the
purchaser at or prior to the written confirmation of the sale of Registrable
Securities, and (iii) any Holder Indemnified Person's delivery of a copy of a
registration statement or prospectus, or any amendments or supplements thereto,
with respect to which the Company has given Notice to the Holder pursuant to
Section 4(h) and the Holder Indemnified Person has not relied on such
registration statement or prospectus prior to the receipt of such Notice. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holder or other Person and shall survive the
transfer of the Registrable Securities by the Holder.
(b) Indemnification by the Holder. In the event of any registration
pursuant to Section 2 or 3, the Holder will, and hereby does, indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 5) the Company, each director
6
<PAGE> 9
and officer of the Company and any underwriter acting on behalf of the Company
and each other Person, if any, who controls any such Person within the meaning
of the Securities Act (collectively, "Company Indemnified Persons"), against any
losses, claims, damages, expenses (including legal fees and expenses) or
liabilities, joint or several, to which any one of them may become subject under
the Securities Act or otherwise, to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon the Company's
reliance upon written information furnished to the Company by any Holder
Indemnified Person for use in the registration statement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any other Company Indemnified Person and shall survive
the transfer of such Registrable Securities by the Holder. Notwithstanding the
foregoing, the maximum liability of the Holder for any indemnification under
this Section 5(b) shall be the aggregate net proceeds received by the Holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Procedures for Claims. Promptly after receipt of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 5, an indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give Notice to the indemnifying party of the
commencement of such action. Failure to give prompt Notice shall not relieve the
indemnifying party of its obligation under this Section 5, except to the extent
that the indemnifying party is actually prejudiced by such failure. The
indemnifying party shall be entitled to participate in and to assume the defense
of such action at its expense, jointly with any other indemnifying party, with
counsel reasonably satisfactory to the indemnified party, provided however, that
an indemnified party shall have the right to retain its own counsel, with fees
and expenses thereof to be paid by the indemnifying party, if in such
indemnified party's reasonable judgment an actual or potential conflict of
interest between such indemnified and indemnifying party may exist in respect of
such claim. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof a release from all liability by the
plaintiff to the indemnified party. The amount paid or payable by an
indemnifying party shall include any legal or other expenses reasonably incurred
by the indemnified party in connection with the investigation or defense of any
such action or claim.
SECTION 6. RULE 144. If the Company shall have filed a registration
statement, the Company will file the reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Commission thereunder. The Company shall, upon the request of the
Holder, provide the Holder and any institutional investor designated
by such Holder such financial and other information as the Holder may reasonably
determine to be necessary in order to permit the Holder's compliance with Rule
144A under the Securities Act in connection with the resale of any Registrable
Securities, except at such time as the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.
SECTION 7. COVENANTS. The Company covenants and agrees that (a) it will not
effect or permit to occur any combination or subdivision of its securities which
would adversely affect the ability of the Holder to include its Registrable
Securities in any registration contemplated herein or
7
<PAGE> 10
the marketability of such Registrable Securities; and (b) it shall not
participate in or cooperate with any offering of its securities, either directly
or indirectly, by any shareholder of the Company under Regulation S of the
Securities Act.
SECTION 8. TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Agreement shall terminate on the earlier to occur of
(i) such time as neither the Holder nor any Affiliate of the Holder owns
Registrable Securities representing at least 1% of the Outstanding Common Shares
of the Company, or (ii) the tenth (10th) anniversary of the Closing Date.
SECTION 9. SPECIFIC PERFORMANCE. The Parties recognize and agree that money
damages may be insufficient to compensate the Holder for breaches by the Company
of terms hereof and, consequently, that the equitable remedy of specific
performance of the terms hereof will be available in the event of any such
breach
SECTION 10. MISCELLANEOUS. The provisions of Section 12 of the Purchase
Agreement are applicable to this Agreement and are incorporated by reference in
this Agreement.
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
COMPANY: HOLDER:
ATLANTIC PREMIUM BRANDS, LTD. BANC ONE CAPITAL PARTNERS, LLC
By: /s/ Merrick M. Elfman By: Banc One Capital Partners Holdings, Ltd.,
-------------------------- Manager
Name: Merrick M. Elfman
------------------------ By: BOCP Holdings Corporation, Manager
Title: Chairman
----------------------- By: /s/ Leonard Lilliard
-----------------------------------
Name: Leonard Lilliard
---------------------------------
Title: Authorized Signer
8
<PAGE> 1
EXHIBIT 4.18
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
SHAREHOLDERS AGREEMENT
--------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS....................................................1
SECTION 2. SALES BY SHAREHOLDERS..........................................1
2.1 NOTICE OF PURCHASE OFFERS.............................1
2.2 RIGHT TO PARTICIPATE..................................1
2.3 CONSUMMATION OF PURCHASE OFFER. .....................2
2.4 ONGOING RIGHTS........................................2
2.5 PERMITTED EXCEPTIONS. ...............................2
SECTION 3. INTENTIONALLY OMITTED
SECTION 4. PROHIBITED TRANSFERS...........................................3
4.1 TREATMENT OF PROHIBITED TRANSFERS.....................3
4.2 SALE RIGHTS...........................................3
SECTION 5. LEGENDED CERTIFICATE...........................................4
5.1 LEGEND................................................4
5.2 LEGEND REMOVAL........................................4
SECTION 6. TERMINATION....................................................4
SECTION 7. OTHER OBLIGATIONS OF THE COMPANY. .............................5
SECTION 8. MISCELLANEOUS..................................................5
i
<PAGE> 3
SHAREHOLDERS AGREEMENT
This is the CO-SALE AGREEMENT dated as of March 20, 1998 ("Agreement")
by and among ATLANTIC PREMIUM BRANDS, LTD. ("Company"), a Delaware corporation,
the undersigned shareholders of the company (individually, a "Shareholder" and
collectively, the "Shareholders"), and BANC ONE CAPITAL PARTNERS, LLC
("Holder"), a Delaware limited liability company, provided for in and entered
into pursuant to the Senior Subordinated Note and Warrant Purchase Agreement
dated the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the "Purchase Agreement") by and among Holder, as purchaser,
and the Company and certain of its subsidiaries, as sellers. The Company, the
Shareholders and the Holder are referred to collectively as the "Parties" and
individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Glossary of Defined Terms attached to the
Purchase Agreement, which definitions are, to the extent applicable,
incorporated in this Agreement by reference.
SECTION 2. SALES BY SHAREHOLDERS.
2.1 NOTICE OF PURCHASE OFFERS. If any Shareholder ("Selling
Shareholder") receives and proposes to accept one or more Purchase Offers, then
such Selling Shareholder shall promptly provide Notice to the Holder of the
terms and conditions of such Purchase Offer.
2.2 RIGHT TO PARTICIPATE. The Holder shall have the right,
exercisable upon written Notice to the Selling Shareholder within fifteen (15)
Business Days after receipt of the Notice of the Purchase Offer, to participate
in such Purchase Offer on the same terms and conditions. If the Holder exercises
its right of participation granted by this Agreement, the number of Common
Shares or Convertible Securities which such Selling Shareholder may sell
pursuant to such Purchase Offer shall be reduced in the manner provided below.
The right of participation of the Holder shall be subject to the following terms
and conditions:
(a) The Holder may sell that number of its Warrant Shares in
the Purchase Offer as shall be equal to the product obtained by multiplying (i)
the aggregate number of Common Shares subject to the Purchase Offer by (ii) a
fraction (A) the numerator of which is the number of Warrant Shares at the time
owned by the Holder, and (B) the denominator of which is the sum of (x) the
<PAGE> 4
number of Common Shares (and Common Share equivalent of Convertible
Securities) at the time beneficially owned by the Shareholders, including their
family members and trusts, partnerships, limited liability companies and any
other entities formed for any of their benefit, and (y) the number of Warrant
Shares then owned by the Holder.
(b) If the Holder elects to participate in the Purchase Offer,
it shall deliver to the Selling Shareholder for Transfer to the purchase offeror
one or more certificates, properly endorsed for Transfer, free and clear of all
adverse claims, which represent that number of Warrant Shares which the Holder
elects to sell pursuant to this Agreement. Such certificates shall be delivered
to the Selling Shareholder no later than two Business Days prior to the date set
for consummation of the Purchase Offer.
2.3 CONSUMMATION OF PURCHASE OFFER. The certificate or
certificates delivered to the Selling Shareholder pursuant to Section 2.2 shall
be Transferred by the Selling Shareholder to the purchase offeror in
consummation of the Purchase Offer pursuant to the terms and conditions
specified in the Notice of Purchase Offer delivered to the Holder, and the
Selling Shareholder shall promptly thereafter remit to the Holder that portion
of the sale proceeds which equals (i) the purchase price per share, multiplied
by (ii) the number of shares sold by the Holder in connection with such Purchase
Offer.
2.4 ONGOING RIGHTS. The exercise or non-exercise by the Holder
of its rights to participate in one or more Purchase Offers hereunder shall not
adversely affect the Holder's right to participate in subsequent Purchase Offers
pursuant to this Agreement.
2.5 PERMITTED EXCEPTIONS. The participation rights of the
Holder hereunder shall not apply to (i) any bona fide gift by a Shareholder, or
(ii) the Transfer of Common Shares or Convertible Securities to the spouse or
descendants of a Shareholder or any trust, partnership, limited liability
company or other entity established for the benefit of the Shareholder or his
spouse or descendants; provided that the Shareholder shall give prior written
Notice to the Holder of such gift or other Transfer and the donee or transferor
shall become a party to and be bound by, and comply with, all provisions of this
Agreement. In addition, the participation rights of the Holder shall not apply
to any sale by a Shareholder that would comply with the volume limitation set
forth in Rule 144(e) adopted under the Securities Act (or any successor rule or
regulation).
SECTION 3. INTENTIONALLY OMITTED.
SECTION 4. PROHIBITED TRANSFERS.
4.1 TREATMENT OF PROHIBITED TRANSFERS. If a Shareholder engages
in a Prohibited Transfer, the Holder, in addition to such other remedies as may
be available at law or in equity, shall have the sale rights provided for in
Section 4.2.
2
<PAGE> 5
4.2 SALE RIGHTS. If a Prohibited Transfer occurs, the Holder
shall have the right to sell to the Shareholder engaging in such Prohibited
Transfer that number of Warrant Shares or Convertible Securities owned by the
Holder which shall be equal to the number of shares the Holder would have been
entitled pursuant to the terms hereof to Transfer to the purchase offeror in the
Prohibited Transfer. Such sale shall be made on the following terms and
conditions:
(a) The price per share at which such Warrant Shares or
Convertible Securities shall be sold to the Shareholder shall be equal or
equivalent to the price per share paid by the purchase offeror to the
Shareholder in the Prohibited Transfer. The Shareholder shall also reimburse the
Holder for any and all reasonable fees and expenses, including legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Holder's rights under this Section 4.
(b) Within thirty (30) days after the earlier of the date on
which the Holder (i) receives Notice from a Shareholder of a Prohibited
Transfer, or (ii) otherwise becomes aware of a Prohibited Transfer, the Holder
shall, if it determines in its sole discretion to exercise its sale rights
pursuant to this Section 4, deliver to the Shareholder engaging in the
Prohibited Transfer the certificate or certificates representing the Warrant
Shares to be sold hereunder free and clear of all adverse claims and properly
endorsed for Transfer.
(c) The Shareholder engaging in the Prohibited Transfer shall,
upon receipt of the certificate or certificates for the Warrant Shares to be
sold by the Holder pursuant to this Section 4, pay the aggregate purchase price
therefor plus the amount of reimbursable fees and expenses, as specified in this
Section 3.2, by wire transfer of immediately available funds or certified or
cashier's check made payable to the order of the Holder.
SECTION 5. LEGENDED CERTIFICATE.
5.1 LEGEND. Each certificate representing Common Shares or
Convertible Securities of the Company now or hereafter owned by the Shareholders
shall be endorsed by the Company with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT
BY AND BETWEEN THE SHAREHOLDER AND OTHER PARTIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY.
5.2 LEGEND REMOVAL. The legend required by this Agreement shall
be removed from any certificate upon the earlier of the termination of this
Agreement or the date upon which the provisions of this Agreement are no longer
applicable to the securities represented by such certificate.
3
<PAGE> 6
SECTION 6. TERMINATION.
The rights of the Holder and the obligations of the Shareholders and
the Company under this Agreement shall terminate upon the earlier to occur of
the following events:
(a) the liquidation or dissolution of the Company;
(b) the execution by the Company of a general assignment for
the benefit of creditors or the appointment of a receiver or trustee for the
property or assets of the Company;
(c) the consummation of an Qualified Public Offering; or
(d) such time as the Holder does not own Warrant Shares
representing at least 1% of the Outstanding Common Shares of the Company.
SECTION 7. OTHER OBLIGATIONS OF THE COMPANY.
The Company agrees to use reasonable efforts to enforce the terms of
this Agreement, to inform the Holder of any breach hereof and to assist the
Holder in the exercise of its rights hereunder.
SECTION 8. MISCELLANEOUS.
The provisions of Section 11 of the Purchase Agreement are applicable
to this Agreement and are incorporated by reference in this Agreement.
[Remainder of this page intentionally blank]
4
<PAGE> 7
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
ATLANTIC PREMIUM BRANDS, LTD. BANC ONE CAPITAL PARTNERS, LLC
By: /s/ Merrick M. Elfman By: Banc One Capital Partners
--------------------------------- Holdings, Ltd., Manager
Name: /s/ Merrick M. Elfman By: BOCP Holdings Corporation,
------------------------------- Manager
Its: Chairman
-------------------------------- By: /s/ Leonard Lilliard
------------------------------
SHAREHOLDERS: Name: Leonard Lilliard
---------------------------
/s/ Douglas L. Becker Its: Authorized Signer
- ------------------------------------
DOUGLAS L. BECKER
/s/ Eric D. Becker
- ------------------------------------
ERIC D. BECKER
/s/ Merrick M. Elfman
- ------------------------------------
MERRICK M. ELFMAN
/s/ Rudolph Christopher Hoehn-Saric
- ------------------------------------
RUDOLPH CHRISTOPHER HOEHN-SARIC
/s/ Alan F. Sussna
- ------------------------------------
ALAN F. SUSSNA
/s/ Steven M. Taslitz
- ------------------------------------
STEVEN M. TASLITZ
<PAGE> 1
EXHIBIT 4.19
-----------------------------------------------------
ATLANTIC PREMIUM BRANDS, LTD.
PREEMPTIVE RIGHTS AGREEMENT
------------------------------------------------------
DATED AS OF MARCH 20, 1998
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS...............................................1
SECTION 2. RIGHTS OFFERING...........................................1
2.1 NOTICE OF RIGHTS OFFERING........................1
2.2 MANNER OF EXERCISE...............................1
2.3 PARTICIPATION BY HOLDER..........................1
SECTION 3. PREEMPTIVE RIGHTS.........................................2
3.1 NOTICE OF PREEMPTION OFFERING....................2
3.2 MANNER OF EXERCISE...............................2
3.3 PARTICIPATION BY HOLDER..........................2
3.4 UNSOLD SECURITIES................................2
SECTION 4. TERMINATION OF RIGHTS.....................................2
SECTION 5. MISCELLANEOUS.............................................3
i
<PAGE> 3
PREEMPTIVE RIGHTS AGREEMENT
This is the PREEMPTIVE RIGHTS AGREEMENT dated as of March 20, 1998
("Agreement") by and between ATLANTIC PREMIUM BRANDS, LTD. ("Company"), a
Delaware corporation, and BANC ONE CAPITAL PARTNERS, LLC ("Holder"), a Delaware
limited liability company, provided for in and entered into pursuant to the
Senior Subordinated Note and Warrant Purchase Agreement, dated as of the date of
this Agreement, as amended, restated, supplemented or otherwise modified from
time to time ("Purchase Agreement") by and among the Holder, as purchaser, and
the Company and certain of its subsidiaries, as sellers. The Company and the
Holder are referred to collectively as the "Parties" and individually as a
"Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Glossary of Defined Terms attached to the
Purchase Agreement, which definitions are, to the extent applicable,
incorporated in this Agreement by reference.
SECTION 2. RIGHTS OFFERING
At any time after the date hereof and until the termination of this
Agreement, the Holder shall have the right to participate in any Rights Offering
upon the terms and subject to the conditions set forth in this section.
2.1 NOTICE OF RIGHTS OFFERING. The Company shall give the
Holder at least 30 days' prior Notice of each Rights Offering. Such Notice shall
set forth: (i) the proposed commencement date for such Rights Offering; (ii) the
number and description of the securities to be offered pursuant to the Rights
Offering; (iii) the purchase price for such securities; and (iv) other material
terms of the Rights Offering.
2.2 MANNER OF EXERCISE. The Holder may, in the sole exercise of
its discretion, elect to participate in any such Rights Offering by giving
Notice of its irrevocable election to participate to the Company at least
fifteen days prior to the proposed commencement date of such Rights Offering.
2.3 PARTICIPATION BY HOLDER. If it elects to participate in
such Rights Offering, the Holder shall have the right to purchase, pursuant to
such Rights Offering, securities of each type
<PAGE> 4
issued in such Rights Offering in a maximum number or amount equal to the
Holder's Prorata Share of the total number or amount of each such type of
security offered pursuant to such Rights Offering.
SECTION 3. PREEMPTIVE RIGHTS
At any time after the Holder exercises the Warrant and until the
termination of this Agreement, the Holder shall have the right to participate in
any Preemption Offering upon the terms and subject to the conditions set forth
in this section.
3.1 NOTICE OF PREEMPTION OFFERING. The Company shall give the
Holder at least 30 days' prior Notice of each Preemption Offering. Such Notice
shall set forth: (i) the proposed commencement date for such Preemption
Offering; (ii) the number and description of the securities to be offered
pursuant to the Preemption Offering; (iii) the purchase price for such
securities; and (iv) other material terms of the Preemption Offering.
3.2 MANNER OF EXERCISE. The Holder may, in the sole exercise of
its discretion, elect to participate in any such Preemption Offering by giving
Notice of its election to participate to the Company at least 5 days prior to
the proposed commencement date of such Preemption Offering.
3.3 PARTICIPATION BY HOLDER. If it elects to participate in
such Preemption Offering, the Holder shall have the right to purchase, upon the
same terms and condition as those provided for in such Preemption Offering,
securities of each type issued in such Preemption Offering in a maximum number
or amount equal to the Holder's Prorata Share of the total number or amount of
each such type of security offered pursuant to such Preemption Offering.
3.4 UNSOLD SECURITIES. The Company may, for a period of not
more that 90 days after the commencement date for any Preemption Offering, offer
and sell the securities subject to such Preemption Offering which were not sold
to the Holder pursuant to this Agreement, to any Person or Persons upon the
terms and subject to the conditions of such Preemption Offering.
SECTION 4. TERMINATION OF RIGHTS.
The rights of the Holder under this Agreement and the obligations of
the Company hereunder shall terminate upon the earliest to occur of the
following events:
(a) the tenth anniversary of the date of this Agreement;
(b) exercise of the Put Option; and
(c) the Holder ceases to own Warrant Shares representing at
least 1% of the Outstanding Common Shares of the Company.
2
<PAGE> 5
SECTION 5. MISCELLANEOUS.
The provisions of Section 12 of the Purchase Agreement are applicable
to this Agreement and are incorporated by reference in this Agreement.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
ATLANTIC PREMIUM BRANDS, LTD. BANC ONE CAPITAL PARTNERS, LLC
By: Banc One Capital Partners Holdings, Ltd.,
By: /s/ Merrick M. Elfman Manager
----------------------------
Name: Merrick M. Elfman By: BOCP Holdings Corporation, Manager
--------------------------
Its: Chairman By: /s/ Leonard Lilliard
--------------------------- ---------------------------------
Name: Leonard Lilliard
-------------------------------
Its: Authorized Signer
3
<PAGE> 1
EXHIBIT 4.23
DEBT SUBORDINATION AGREEMENT
THIS DEBT SUBORDINATION AGREEMENT ("Agreement") is made and entered into
this 20th day of March, 1998, among BANC ONE CAPITAL PARTNERS, LLC, a limited
liability company organized under the laws of the State of Delaware (together
with its successors and permitted assigns, "Subordinated Creditor"); ATLANTIC
PREMIUM BRANDS, LTD., CARLTON FOODS CORP., PREFCO CORP., GROGAN'S FARM, INC.,
RICHARDS CAJUN FOODS CORP. AND POTTER'S ACQUISITION CORP., each a Delaware
corporation (collectively referred to as, "Borrowers"); and FLEET CAPITAL
CORPORATION, a Rhode Island corporation (together with its successors and
assigns, "Senior Creditor").
RECITALS:
Senior Creditor and Borrowers are parties to a certain Loan and Security
Agreement dated the date hereof (as at any time amended, the "Loan Agreement")
pursuant to which Senior Creditor may make loans and other extensions of credit
to or for the benefit of Borrowers from time to time, secured by all or
substantially all of the assets of Borrowers.
Subordinated Creditor and Borrowers are parties to a certain Senior
Subordinated Note and Warrant Purchase Agreement dated as of March 20, 1998 (as
at any time amended, the "Note Purchase Agreement"), pursuant to which
Subordinated Creditor has agreed to make a loan to Borrowers in the amount of
$6,500,000, as evidenced by a certain Senior Subordinated Note (the as at any
time amended, "Subordinated Note"), payment of which is secured by a junior lien
upon substantially all of Borrowers' assets.
A condition to any obligation of Senior Creditor to make any loans or other
extensions of credit to Borrowers under the Loan Agreement is the execution and
delivery of this Agreement by Senior Creditor, Borrowers and Subordinated
Creditor. A condition to any obligation of Subordinated Creditor under the Note
Purchase Agreement is the execution of this Agreement by Senior Creditor,
Borrowers and Subordinated Creditor. Each of the parties desires to enter into
this Agreement to facilitate the consummation of the transactions contemplated
by the Loan Agreement and the Subordinated Note.
NOW, THEREFORE, for TEN DOLLARS ($10.00) and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and the mutual
covenants herein, and to induce Senior Creditor to provide financial
accommodations to or for the benefit of Borrowers, the parties hereto, intending
to be legally bound hereby, do agree as follows:
<PAGE> 2
1. DEFINITIONS; RULES OF CONSTRUCTION.
(a) Capitalized terms used in this Agreement, unless otherwise
defined, shall have the meanings ascribed to them in the Loan Agreement. In
addition to such other terms as are elsewhere defined herein, the following
terms shall have the following meanings for the purposes of this Agreement:
"Accruals" shall mean, on any date of determination thereof, (i) all
unpaid interest accrued through such date with respect to the principal
amount of Loans and other Obligations outstanding under any of the Senior
Creditor Loan Documents on such date, such principal amount not to exceed
the Maximum Senior Principal Cap, and (ii) all Enforcement Expenses
incurred by Senior Creditor under any of the Senior Creditor Loan Documents
through such date.
"Applicable Pro Forma EBITDA" shall mean, on any date, Borrowers'
written estimate (which estimate shall be delivered to both Senior Creditor
and Subordinated Creditor at least 5, but not more than 45, days in advance
of the effective date of any requested increase in the Total Senior Credit
Facility in effect under Section 1 of the Loan Agreement) of Borrowers' and
their Subsidiaries' pro forma EBITDA, on a Consolidated and combined basis,
(i) for the 12-month period immediately preceding the date of such written
estimate, in the case of an increase in the Total Senior Credit Facility in
connection with a proposed acquisition by a Borrower of Equity Interests or
Property of another Person, in which case pro forma EBITDA shall be
calculated as if such acquisition had occurred on the day before the first
day of such 12-month period, or (ii) for the 12-month period immediately
following the date of such written estimate, in the case of an increase in
the Total Senior Credit Facility for any other purpose. Senior Creditor
shall be authorized to rely upon any estimate provided to it by Borrowers
of their and their Subsidiaries' pro forma EBITDA in determining whether
any increase in the Total Senior Credit Facility will not exceed the Senior
Debt Limit and any such written estimate shall be conclusive and binding
upon all parties.
"Bankruptcy Case" shall mean any case hereafter commenced by or
against Borrowers under any chapter of the Bankruptcy Code.
"Bankruptcy Code" shall mean title 11 of the United States Code.
"Enforcement Expenses" shall mean all costs and expenses incurred by
Senior Creditor in connection with its enforcement of any rights or
remedies under the Senior Creditor Loan Documents, the collection of any of
the Senior Debt or the protection of, or realization upon, any Collateral
after the occurrence and during the continuance of a Senior Debt Default,
including, by way of example, reasonable attorneys' fees, court costs,
appraisal and consulting fees, auctioneers' fees, rent, storage, insurance
premiums, taxes, and like items, whether such amounts are allowed as a
claim against Borrowers under the Bankruptcy Code.
-2-
<PAGE> 3
"Lien Subordination" shall mean that certain Lien Subordination
Agreement between Senior Creditor and Subordinated Creditor of even date
herewith.
"Maximum Senior Principal Cap" shall mean, on any date, thereof, an
amount equal to the lesser of (i)$70,000,000 or (ii) the Pro Forma Cap.
"Obligor" shall mean Borrowers and any other Person that is liable for
the payment of the whole or any part of the Senior Debt.
"Payment Default" shall mean a Senior Debt Default that results from
Borrowers' failure to pay any of the Senior Debt on the due date thereof
(whether due at stated maturity, upon acceleration, on demand or
otherwise).
"Plan" shall mean a plan proposed in an Insolvency Proceeding for the
reorganization or rehabilitation of an Obligor, a composition or extension
of any of such Obligor's Debts or a liquidation in whole or in part of such
Obligor's assets.
"Pro Forma Cap" shall mean, on any date of determination thereof, an
amount equal to $26,000,000, provided that if after the date hereof
Borrowers request an increase in the Total Senior Credit Facility and shall
in connection therewith determine the Applicable Pro Forma EBITDA, then the
"Pro Forma Cap" shall mean an amount equal to the greater of (i)
$26,000,000 or (ii) the Applicable Pro Forma EBITDA in effect on such date
multiplied by 4. If after the date hereof the amount of the Pro Forma Cap
is increased to an amount above $26,000,000 based upon Borrowers'
calculation of the Applicable Pro Forma EBITDA, such increase in the Pro
Forma Cap (as well as any increase in the Total Senior Credit Facility as a
consequence thereof) shall be deemed to be a permanent increase in such
amount, irrespective of any subsequent changes in Borrowers' or their
Subsidiaries' financial performance or condition or any subsequent
calculation of the Applicable Pro Forma EBITDA.
"Qualified Lender" shall mean (i) any parent, affiliate or subsidiary
of Senior Creditor and (ii) any bank, trust company, savings institution,
insurance company, finance company, investment partnership or company, or
other financial institution or institutional lender of recognized national
or regional standing in the business of making, purchasing or refinancing
of indebtedness for borrowed money.
"Reorganization Securities" shall mean and include (a) shares of
common stock (or other equity securities) of Debtor and (b) debt securities
of Debtor, the payment of which is subordinated to the full and final
payment of all Senior Debt at the time outstanding and to the payment of
all debt securities issued in exchange therefor to Senior Creditor, which
shares or other equity or debt securities have been provided for by a Plan
that has been approved by final order of a court and that has been accepted
by Senior Creditor.
-3-
<PAGE> 4
"Senior Creditor Loan Documents" shall mean the Loan Documents (as
defined in the Loan Agreement).
"Senior Debt" shall mean (i) all Loans at any time made and all other
Obligations now or hereafter existing under or with respect to any of the
Senior Creditor Loan Documents, (ii) any and all loans made or other credit
extended by Senior Creditor to Borrowers during the pendency of any
Bankruptcy Case, (iii) all interest at any time accrued with respect to any
of the foregoing (including any interest that accrues during the pendency
of any Bankruptcy Case, whether or not Senior Creditor is authorized under
the Bankruptcy Code to collect such interest from Borrowers), and (iv) all
Enforcement Expenses which Borrowers are now or hereafter liable to pay to
Senior Creditor under any agreement or by Applicable Law.
"Senior Debt Default" shall mean an Event of Default under (and as
defined in) the Loan Agreement.
"Senior Debt Limit" shall mean, on any date of determination thereof,
the sum of the Maximum Senior Principal Cap in effect on such date plus all
Accruals through such date.
"Subordinated Debt" shall mean all Debt of Borrowers to Subordinated
Creditor under or with respect to the Subordinated Note, whether such Debt
is now or hereafter existing and however and whenever made or incurred, and
whether direct or indirect, absolute or contingent, due or to become due,
joint or several, or secured or unsecured, including all principal,
interest and premium on, and all other amounts payable in respect of, the
Subordinated Note, and all fees, charges, expenses, attorneys' fees,
commitment or other fees, indemnity amounts, collection costs and other
amounts owing by Borrowers to Subordinated Creditor under any of the
Subordinated Debt Documents or otherwise.
"Subordinated Debt Default" shall mean an event of default under any
of the Subordinated Debt Documents except to the extent that such event of
default results from (i) any default resulting from a breach of any
affirmative covenant (except Borrowers' failure to timely deliver any
financial reporting to Subordinated Creditor) or (ii) any default resulting
from a breach of any representation or warranty.
"Subordinated Debt Documents" shall mean and include the Note Purchase
Agreement, the Subordinated Note, the Subordinated Security Agreement and
all other agreements or instruments now or hereafter evidencing or securing
the payment of the whole or any part of the Subordinated Debt.
"Subordinated Security Agreement" shall have the meaning ascribed to
it in the Lien Subordination.
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"Total Senior Credit Facility" shall mean, on any date, the total
amount of the credit facility provided for in, and in effect under, Section
1 of the Loan Agreement on such date, which amount, on the date hereof, is
$26,000,000.
(b) The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. All references to statutes and related
regulations shall include any amendments to same and any successor statutes and
regulations. All references to any instruments or agreements, including any of
the Senior Creditor Loan Documents or any of the Subordinated Debt Documents
shall include any and all modifications thereto and any and all restatements,
extensions or renewals thereof. All references to any of the Subordinated Debt
or Senior Debt shall mean all renewals, extensions, substitutions, refundings,
refinancings, restructurings or replacements of any such Debt (including all
successive renewals, extensions, substitutions, refundings, refinancings,
restructurings or replacements of such Debt). All references to "including" and
"include" shall be understood to mean "including, without limitation."
2. SUBORDINATION.
(a) Subject to the provisions of paragraph 5 hereof relating to
payments on the Subordinated Debt that are permitted to be made to the extent
and under the circumstances set forth in paragraph 5, Subordinated Creditor
hereby postpones and subordinates all of the Subordinated Debt to the full and
final payment and discharge of all of the Senior Debt and Senior Creditor shall
be entitled to receive payment in full of all Senior Debt before any payment or
distribution (other than a distribution of Reorganization Securities) is made on
account of or applied to any of the Subordinated Debt. Each holder of Senior
Debt, whether now outstanding or hereafter created, incurred, assumed or
guaranteed, shall be deemed to have acquired Senior Debt with full knowledge of
and in reliance upon this Agreement, and each holder of Subordinated Debt,
whether now outstanding or hereafter created, incurred, assumed or guaranteed,
shall be deemed to have acquired the Subordinated Debt with full knowledge and
subject to the terms and provisions of this Agreement.
(b) In the event of any distribution, division or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of any Obligor or the proceeds thereof to
creditors of any Obligor or upon any indebtedness of any Obligor, by reason of
the liquidation, dissolution or other winding up of such Obligor or such
Obligor's business, or in the event of any sale of assets of any Obligor or
Insolvency Proceeding involving any Obligor or its assets, any payment or
distribution of any kind or character, whether in cash, securities or other
property (excluding Reorganization Securities), which shall be payable or
deliverable upon or with respect to any of the Subordinated Debt shall be paid
or delivered directly to Senior Creditor for application to the Senior Debt
(whether or not the same is then due) until all of the Senior Debt has been
fully paid and discharged. Each Subordinated Note shall at all times bear a
conspicuous legend that the Subordinated Debt evidenced thereby is subordinated
to the Senior Debt pursuant to this Agreement.
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(c) Upon any distribution of the assets of any Obligor or the
proceeds thereof in any Insolvency Proceeding, the holders of the Subordinated
Debt shall be entitled to rely upon any order made by the court in which such
Insolvency Proceeding is pending, or a certificate of the debtor, custodian,
liquidating trustee, agent or other Person making any distribution to such
holders, for the purpose of ascertaining the Persons entitled to participation
in such distribution, the holders of the Senior Debt, the amount thereof or
payable thereon, the amount or amounts paid or distribution thereon and all
other facts pertinent thereto or to this paragraph 2.
(d) If any holder of Subordinated Debt shall not file a proper claim
or proof of debt as shall be necessary in order to have the claims of such
holders allowed in any Insolvency Proceeding commenced by or against an Obligor
or involving such Obligor's assets, in the form required in such Insolvency
Proceeding, at least 15 days prior to the expiration of the time to file such
claim or proof of debt, Senior Creditor is hereby irrevocably authorized and
shall have the right (but not the obligation) to file an appropriate claim or
proof of debt in such Insolvency Proceeding for and on behalf of such holder of
Subordinated Debt.
3. WARRANTIES AND REPRESENTATIONS.
(a) Subordinated Creditor hereby represents and warrants that: (i) it
has not relied nor will it rely on any representation or information of any
nature made by or received from Senior Creditor relative to Borrowers in
deciding to execute this Agreement; (ii) no part of the Subordinated Debt is
evidenced by any instrument or writing except the Subordinated Debt Documents;
(iii) Subordinated Creditor is the lawful owner of the Subordinated Debt; (iv)
Subordinated Creditor has not heretofore assigned or transferred any of the
Subordinated Debt, any interest therein or any Collateral or security pertaining
thereto; and (v) Subordinated Creditor has not heretofore given any
subordination in respect of the Subordinated Debt.
(b) Senior Creditor hereby represents and warrants that: (i) it has
not relied nor will it rely on any representation or information of any nature
made by or received from Subordinated Creditor relative to Borrowers in deciding
to execute this Agreement; (ii) no part of the Senior Debt is evidenced by any
instrument or writing except the Senior Creditor Loan Documents; (iii) Senior
Creditor is the lawful owner of the Senior Debt; (iv) Senior Creditor has not
heretofore assigned or transferred any of the Senior Debt, any interest therein
or any Collateral or security pertaining thereto; and (v) Senior Creditor has
not given any subordination in respect of the Senior Debt.
(c) Each of the parties hereto represents and warrants to each of the
other parties hereto that this Agreement has been duly executed and delivered by
such party and is the valid and binding obligation of such party, enforceable
against such party in accordance with the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by principles of equity.
4. NEGATIVE COVENANTS. For so long as this Agreement is in effect,
Borrowers and Subordinated Creditor agree with Senior Creditor that, except as
otherwise expressly provided
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in this Agreement: (i) Borrowers shall not, directly or indirectly, make any
payment on account of any part of the Subordinated Debt or, except as expressly
authorized by the Lien Subordination, grant any Lien upon any assets of
Borrowers to secure the payment of any of the Subordinated Debt; (ii)
Subordinated Creditor shall not demand, collect or accept from an Obligor any
payment on account of the Subordinated Debt or any part thereof, or accelerate
the maturity of the Subordinated Debt or realize upon or enforce any Lien upon
the Collateral; (iii) except as otherwise expressly provided in the Subordinated
Debt Documents as in effect on the date hereof, Subordinated Creditor shall not
exchange, set off, release, convert to equity or otherwise discharge any part of
the Subordinated Debt; (iv) Subordinated Creditor shall not hereafter give any
subordination in respect of the Subordinated Debt or sell, transfer, assign or
grant a security interest or participation in any of the Subordinated Debt to
any Person other than Senior Creditor without the prior written consent of
Senior Creditor unless Subordinated Creditor gives Senior Creditor at least 5
days prior written notice of such transfer or assignment and the transferee or
assignee thereof first agrees in writing with Senior Creditor to be bound by the
terms of this Agreement; and (v) Borrowers shall not hereafter issue any
instrument or other writing evidencing any part of the Subordinated Debt other
than the Subordinated Note and the Note Purchase Agreement, and Subordinated
Creditor will not receive any such writing.
5. PERMITTED PAYMENTS; PAYMENT AND REMEDY BARS.
(a) Except as otherwise provided in paragraph 2(b) and in this
paragraph 5, Borrowers may pay to Subordinated Creditor, and Subordinated
Creditor may accept and retain, any regularly scheduled installment of principal
and interest as and when due and payable to Subordinated Creditor by Borrowers
under the Subordinated Note as in effect on the date hereof and in accordance
with its present tenor, but without prepayment (whether mandatory or optional).
(b) No direct or indirect payment in respect of any principal or
interest payable on any of the Subordinated Debt shall be made by Borrowers or
any other Person liable for any of the Subordinated Debt, or be accepted or
retained by Subordinated Creditor, if at the time such payment is made or
received there exists a Payment Default, the Subordinated Creditor has received
written notice thereof from Borrowers or Senior Creditor and such Payment
Default shall not have been cured or in writing waived (or the benefit of this
subparagraph (b) waived in writing) by Senior Creditor.
(c) Upon the occurrence and during the continuance of a Senior Debt
Default that is not a Payment Default, Senior Creditor may bar the making and
acceptance of any and all payments with respect to Subordinated Debt by giving
written notice (each a "Payment Bar Notice") to Borrowers and Subordinated
Creditor. Any such Payment Bar Notice shall state that a Senior Debt Default has
occurred and that the Payment Bar Notice is being delivered pursuant to this
Agreement. During the period (each such period, a "Payment Bar Period")
commencing on the date a Payment Bar Notice is given by Senior Creditor and
ending on the applicable Payment Bar Termination Date (as hereinafter defined),
no payment with respect to the Subordinated Debt (including any payment due at
maturity if the maturity thereof occurs during such Payment Bar Period, whether
by acceleration or otherwise) shall be made by or on behalf
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of any Obligor. For the purpose hereof, the term "Payment Bar Termination Date"
shall mean, with respect to any Payment Bar Notice, the earlier of the dates on
which: (i) all Senior Debt Defaults identified in such Payment Bar Notice shall
have been cured or waived in writing in accordance with the applicable
provisions of the Senior Creditor Loan Documents, or (ii) 180 days shall have
elapsed after the date on which Senior Creditor shall have given such Payment
Bar Notice to Borrowers.
(d) Senior Creditor and Subordinated Creditor each agrees to send to
the other a copy of each notice of default or acceleration that it sends to
Borrowers, promptly after the sending of same to Borrowers, and shall endeavor
in good faith (but without liability to the other for its failure to do so) to
give to the other written notice of any default by Borrowers deemed by it to be
material, promptly after its having obtained knowledge of such default. Upon the
occurrence and during the continuance of a Subordinated Debt Default,
Subordinated Creditor may, subject to giving Senior Creditor not less than 15
nor more than 30 days' prior written notice of Subordinated Creditor's intent to
exercise any of its rights and remedies as a consequence of such Subordinated
Debt Default, exercise any or all of its rights and remedies to enforce payment
of the Subordinated Debt; provided, however, that Subordinated Creditor shall
not be authorized to exercise any of its rights or remedies during a Remedy Bar
Period (as hereinafter defined) and Subordinated Creditor's enforcement of any
Lien that it may now hold or hereafter obtain with respect to any of the
Collateral shall in all events be subject to all of the limitations and
restrictions contained in the Lien Subordination; and provided further, however,
that all Senior Debt then or thereafter due shall first be paid in full before
the holders of any Subordinated Debt are entitled to receive or retain any
payment or property on account of or for application to the Subordinated Debt.
(e) Upon the occurrence and during the continuance of a Senior Debt
Default (including a Senior Debt Default resulting from the occurrence of any
Subordinated Debt Default), Senior Creditor may, at its option, bar Subordinated
Creditor from exercising against any Obligor any of the rights and remedies
hereinafter described in this subparagraph (e) by delivering a written notice
(each a "Remedy Bar Notice") to each holder of Subordinated Debt. Each such
Remedy Bar Notice shall state that a Senior Debt Default has occurred and that a
Remedy Bar Notice is being delivered pursuant to this Agreement. During any
period (each such period, a "Remedy Bar Period") commencing on the date such
Remedy Bar Notice is received by Subordinated Creditor and ending on the
applicable Remedy Bar Termination Date (as hereinafter defined), no holder of
Subordinated Debt shall take any action to (A) accelerate the maturity of, or
demand as immediately due and payable, all or any part of the Subordinated Debt,
(B) commence, continue or participate (except as provided in clause (iv) of the
definition of "Remedy Bar Termination Date" below) in any judicial, arbitral or
other proceeding or any other enforcement action of any kind against any Obligor
or any of such Obligor's assets (including any involuntary proceeding under the
Bankruptcy Code) seeking, directly or indirectly, to enforce any of their rights
or remedies, or to enforce any of the obligations incurred by Borrowers or any
other Person under or in connection with the Subordinated Debt or the
Subordinated Debt Documents, (C) commence or pursue any judicial, arbitral or
other proceeding or legal action of any kind, seeking injunctive or other
equitable relief to prohibit, limit or impair the commencement or pursuit by
Senior Creditor of any of its rights or remedies
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under or in connection with the Senior Creditor Loan Documents or otherwise
available to Senior Creditor under Applicable Law, or (D) commence or join with
any other creditor of any borrower in commencing any Insolvency Proceeding
against any Borrower. For the purpose hereof, the term "Remedy Bar Termination
Date" shall mean, with respect to any Remedy Bar Notice, the date, following the
receipt of such Remedy Bar Notice by the holders of Subordinated Debt, on which
the earliest of the following events shall occur: (i) all Senior Debt Defaults
identified in such Remedy Bar Notice shall have been cured or in writing waived
in accordance with the applicable provisions of the Senior Creditor Loan
Documents; (ii) 180 days shall have elapsed after the date of receipt by
Subordinated Creditor of such Remedy Bar Notice; (iii) Senior Creditor shall
have accelerated the maturity, or demanded immediate payment, of the entire
balance of the Senior Debt; (iv) any voluntary proceeding under any chapter of
the Bankruptcy Code by Borrowers shall be commenced, or any involuntary
proceeding under the Bankruptcy Code shall have been filed against
Borrowers(other than by any holder of Subordinated Debt) and an order for relief
shall have been entered by the court in such proceeding (provided that nothing
in this paragraph 5(e) shall be construed to prevent the holders of Subordinated
Debt from appearing and participating in such involuntary proceeding to the
fullest extent permitted by Applicable Law at any time after the filing
thereof); or (v) Senior Creditor shall commence or pursue (1) any judicial,
arbitral or other proceeding or enforcement action of any kind against any
Obligor or any of its assets, seeking directly or indirectly, to enforce any of
the obligations incurred by such Obligor under any of the Senior Creditor Loan
Documents or (2) any action (by judicial proceeding or otherwise) to foreclose
or otherwise enforce any Liens securing Senior Debt against any of the
Collateral; provided, however, that actions taken by Senior Creditor to receive,
collect, retain or apply to the Senior Debt the cash proceeds of any Collateral
(including proceeds of Accounts and Inventory) paid in the ordinary course of
business of any Obligor's compliance with the Senior Creditor Loan Documents or
to limit or terminate the advancing or readvancing of Loans or the issuance or
reissuance of Letters of Credit or similar contingent obligations by Senior
Creditor under the terms of the Senior Creditor Loan Documents shall not be
construed to be actions described in the foregoing clauses (v)(1) or (v)(2) of
this subparagraph (e). After the Remedy Bar Termination Date, Subordinated
Creditor may enforce its rights and remedies under the Subordinated Security
Agreement, but subject in all events to the restrictions and limitations of the
Lien Subordination, including all requirements therein to give notice of intent
to initiate any enforcement action.
(f) Nothing contained in the foregoing subparagraphs (c), (d) and (e)
of this paragraph 5 shall limit, modify or impair Senior Creditor's ability to
give both a Payment Bar Notice and a Remedy Bar Notice, whether simultaneously
or successively, so long as, with respect to each of such Payment Bar Notice and
such Remedy Bar Notice, and the respective Payment Bar Period and Remedy Bar
Period commenced thereby, the respective conditions and limitations applicable
thereto as set forth in such subparagraphs (c), (d) and (e), and the applicable
provisions of subparagraph (g), of this paragraph 5 shall be satisfied in
accordance with the terms thereof; provided, however, that notwithstanding
anything herein to the contrary, if a Remedy Bar Notice is given simultaneously
with a Payment Bar Notice or during the pendency of a Payment Bar Period
commenced by such Payment Bar Notice, then the Remedy Bar Period commenced by
such Remedy Bar Notice shall terminate not later than the date of termination of
such Payment Bar Period.
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(g) The foregoing provisions of this paragraph 5 shall be subject to
the following additional conditions and limitations:
(i) No Payment Bar Notice may be given during the pendency of
any Payment Bar Period, no Remedy Bar Notice may be given during the
pendency of a Remedy Bar Period, and no more than one Payment Bar
Period and no more than one Remedy Bar Period may be commenced during
any period of 365 consecutive days; and
(ii) No facts or circumstances constituting a Senior Debt
Default existing on the date any Payment Bar Notice is given and of
which an officer of Senior Creditor has actual knowledge may be used
as a basis for any additional or subsequent Payment Bar Notice. No
facts or circumstances constituting a Senior Debt Default existing on
the date any Remedy Bar Notice is given and of which Senior Creditor
has actual knowledge may be used as a basis for any additional or
subsequent Remedy Bar Notice.
(h) In no event shall Senior Creditor's continuing to honor any
request of Borrowers for Loans or other extensions of credit under the Loan
Agreement after the occurrence or during the continuance of any Senior Debt
Default be deemed a waiver thereof, unless such Senior Debt Default is expressly
waived in writing by Senior Creditor.
(i) Notwithstanding anything herein that may authorize the holders of
the Subordinated Debt to exercise remedies when no Remedy Bar Period is in
effect, in no event shall any holder of Subordinated Debt be authorized to take
any action with respect to the Collateral that is prohibited by the terms of the
Lien Subordination. To the extent that any provision of this Agreement relating
to any Collateral shall be deemed to be in conflict with any provision of the
Lien Subordination, the terms of the Lien Subordination shall govern and
control.
6. TURNOVER OF PROHIBITED TRANSFERS. If notwithstanding the
provisions of this Agreement any payment, distribution or security (other than
Reorganization Securities), or the proceeds thereof, are received by any holder
of Subordinated Debt on account of or with respect to any of the Subordinated
Debt other than as expressly permitted in paragraph 5 hereof, such payment,
distribution or security (other than Reorganization Securities) shall be held in
trust for the benefit of, and shall immediately be paid or delivered by such
holder to, Senior Creditor in the form received (except for the addition of any
endorsement or assignment necessary to effect a transfer of all rights therein
to Senior Creditor) for application to the Senior Debt (or to be held as
collateral for the payment of obligations of Obligors in respect of outstanding
Letters of Credit or similar contingent obligations incurred pursuant to the
Senior Creditor Loan Documents). Senior Creditor is irrevocably authorized to
supply any required endorsement or assignment which may have been omitted. Until
so delivered, any such payment, distribution or security shall not be commingled
with other funds or property of Subordinated Creditor.
7. AMENDMENTS TO DOCUMENTS.
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(a) Senior Creditor and each Obligor shall be authorized to amend any
of the Senior Creditor Loan Documents to which they are a party in accordance
with the terms thereof, and without prior notice to or the consent of any of the
holders of the Subordinated Debt, except that Senior Creditor and Borrowers
shall not without the prior written consent of Subordinated Creditor (i) make
Loans or other extensions of credit that would cause the aggregate Senior Debt
outstanding at any time to exceed the Senior Debt Limit, (ii) increase the rate
of interest payable with respect to the Senior Debt by more than 2.00% per annum
over the rate in effect on the date hereof other than as a result of the
imposition of the Default Rate (as defined in the Loan Agreement on the date
hereof), (iii) increase the amount of the fees payable by Borrowers under the
Loan Agreement as in effect on the date hereof, but without prejudice to Senior
Creditor's and Borrowers' right to agree to the payment of other fees if and to
the extent required by Senior Creditor as a condition to Senior Creditor's
making available extensions of credit to Borrowers other than those provided for
in the Loan Agreement on the date hereof, consisting of a term loan(iv)
accelerate the amortization schedule of any portion of the Senior Debt except as
otherwise permitted by the Senior Creditor Loan Documents as such amortization
schedule is in effect on the date hereof or as such schedule may hereafter be
accelerated with Borrowers' and Subordinated Creditor's prior written consent,
or (v) alter any provisions in the Loan Agreement to prohibit Borrowers from
making any payment on the Subordinated Debt when the holders of Subordinated
Debt are entitled under the terms of this Agreement to accept and retain such
payment. Borrowers shall promptly after the execution of any such amendments or
modifications give conformed copies thereof to Subordinated Creditor.
(b) Without the prior written consent of Senior Creditor (which
consent may be given or withheld in Senior Creditor's sole discretion), no
provision of the Subordinated Debt Documents shall be amended, modified or
supplemented if the effect thereof would be to (i) advance the originally
scheduled dates for the payment of principal, interest or other sums payable in
respect of any Subordinated Debt, or modify in any manner adverse to any Obligor
the dates for or premiums payable in connection with prepayments, (ii) impose
on any Obligor prepayment charges, closing fees or other fees or amounts that
are greater than the respective amounts thereof in effect on the date hereof, or
(iii) impose on any Obligor any representations, warranties, covenants, events
of default or other provisions that are more restrictive or burdensome to such
Obligor than the terms and provisions of the Subordinated Debt Documents as in
effect on the date of this Agreement.
8. PURCHASE OF SENIOR DEBT.
(a) If there exists any Senior Debt Default as a consequence of
which Senior Creditor elects to enforce its enforcement remedies under the
Senior Creditor Loan Documents or under Applicable Law, Subordinated Creditor
shall have the option (but not the obligation), upon at least 20 (but not more
than 30) days prior written notice to Senior Creditor, to purchase from Senior
Creditor all, but not less than all, of the Senior Debt for an amount in cash
equal to then outstanding balance of the Senior Debt, including the principal
amount of all Loans, accrued but unpaid interest with respect thereto as of the
date of such purchase, all unpaid fees, expenses and other charges then owing
under the Senior Creditor Loan Documents and all contingent obligations of any
Obligor to Senior Creditor (including any contingent obligations
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related to any outstanding Letters of Credit). In connection with any such
purchase, Subordinated Creditor shall indemnify Senior Creditor for any losses
incurred by Senior Creditor during the 60-day period following such purchase as
a consequence of any returned checks for which a provisional credit had been
given by Senior Creditor in calculating the purchase price for the Senior Debt.
Any purchase must be consummated within 30 days after Senior Creditor's receipt
of a notice of Subordinated Creditor's intent to effectuate a purchase, unless
extended by Senior Creditor in its sole discretion, and any notice once given
shall be irrevocable. Upon the exercise of such option by the Subordinated
Creditor, the Senior Creditor will assign to the Subordinated Creditor all of
its right, title and interest in and to the Senior Creditor Loan Documents and
the Senior Debt without recourse or warranty, whereupon this Agreement shall be
terminated.
(b) Notwithstanding any sale or assignment of the Senior Debt and
Senior Creditor Loan Documents by Senior Creditor to Subordinated Creditor
hereunder, Borrowers agree that any such sale and assignment by Senior Creditor
shall not operate to terminate or impair Borrowers' indemnifications of Senior
Creditor under the Senior Creditor Loan Documents or otherwise, all of which
shall survive any such sale and assignment.
9. CERTAIN WAIVERS AND CONSENTS. Borrowers and Subordinated Creditor
each hereby waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance of this
Agreement in any action brought therefor by Senior Creditor. To the fullest
extent permitted by Applicable Law, Borrowers and Subordinated Creditor each
hereby further waives: (i) presentment, demand, protest, notice of protest,
notice of default or dishonor, notice of payment or nonpayment and any and all
other notices and demands of any kind in connection with all negotiable
instruments evidencing all or any portion of the Senior Debt; (ii) the right to
require Senior Creditor to marshall any securities, or to enforce any Lien
Senior Creditor may now or hereafter have in any Collateral securing the Senior
Debt or to pursue any claim it may have against any guarantor of the Senior
Debt, as a condition to Senior Creditor's entitlement to receive any payment on
account of the Senior Debt; (iii) notice of the acceptance of this Agreement by
Senior Creditor; and (iv) notice of any Loans or other credit made available to
Borrowers, extensions of time granted, amendments to the Loan Agreement or the
other Senior Creditor Loan Documents, or other action taken in reliance hereon.
Subordinated Creditor hereby consents and agrees that Senior Creditor may,
without in any manner impairing, releasing or otherwise affecting the
subordination provided for in this Agreement or any of Senior Creditor's rights
hereunder and without prior notice to or the consent of Subordinated Creditor:
(i) release, renew, extend, compromise or postpone the time of payment of any of
the Senior Debt; (ii) substitute, exchange or release any or all of the
Collateral or decline or neglect to perfect Senior Creditor's Lien upon any of
the Collateral; (iii) add or release any Person primarily or secondarily liable
from any of the Senior Debt; (iv) amend or modify any of the Senior Creditor
Loan Documents (except as provided in paragraph 7 hereof) or waive any Senior
Debt Default; and (v) except as provided in paragraph 7 hereof, increase or
decrease the amount of the Senior Debt or the rate of interest or the amount of
any other charges payable in connection therewith.
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10. STATEMENT OF ACCOUNT. Borrowers and Subordinated Creditor each
agrees to render to Senior Creditor from time to time upon Senior Creditor's
request therefor a statement of Borrowers' account with Subordinated Creditor
and to afford Senior Creditor access to the books and records of Subordinated
Creditor and Borrowers in order that Senior Creditor may make a full examination
of the state of accounts of Borrowers with Subordinated Creditor.
11. INDULGENCES NOT WAIVERS. Neither the failure nor any delay on the
part of Senior Creditor to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with respect
to any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party making such
waiver, and then only to the extent specifically stated in such writing.
12. DURATION. This Agreement shall become effective when executed by
Borrowers and Subordinated Creditor and accepted by Senior Creditor in Atlanta,
Georgia, and, when so accepted, shall constitute a continuing agreement of
subordination, and shall remain in effect until all of the Senior Debt has been
paid in full in immediately available funds and all commitments of Senior
Creditor to make Loans or otherwise extend credit under the Loan Agreement have
been terminated or expired. Senior Creditor may, without notice to Subordinated
Creditor, extend or continue credit and make other financial accommodations to
or for the account of Borrowers in reliance upon this Agreement. The provisions
of this Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time payment of any Senior Debt is rescinded or otherwise must
be returned by Senior Creditor upon or in connection with any Insolvency
Proceeding of an Obligor, all as if any such payment had not been made.
13. DEFAULT AND ENFORCEMENT. If at any time any holder of Subordinated
Debt fails to comply with any provision of this Agreement that is applicable to
such holder, Senior Creditor may demand specific performance of this Agreement,
whether or not Borrowers itself has complied with the terms hereof, and may
exercise any other remedy available at law or equity. Without limiting the
generality of the foregoing, if any holder of Subordinated Debt, in violation of
this Agreement, shall institute or participate in any action, suit or proceeding
against Borrowers, then Borrowers may interpose as a defense or dilatory plea
this Agreement and Senior Creditor is irrevocably authorized to intervene and to
interpose such defense or plea in its or Borrowers' name. If any holder of
Subordinated Debt attempts to enforce any Lien with respect to any Collateral in
violation of this Agreement or the Lien Subordination, Borrower or Senior
Creditor (in Borrowers' or Senior Creditor's name) may by virtue of this
Agreement restrain such enforcement.
14. NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement or by Applicable Law shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt, or when received
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<PAGE> 14
by telecopy at the office of the noticed party or on the third Business Day
after deposit in the United States mails, postage prepaid, addressed as set
forth below:
(a) If to Senior Fleet Capital Corporation
Creditor: 300 Galleria Parkway
Suite 800
Atlanta, Georgia 30369
Attention: Loan Administration Mgr.
Telecopy: (770) 759-2483
(b) If to Subordinated Banc One Capital Partners, LLC
Creditor: 150 East Gay Street
24th Floor
Columbus, Ohio 43215
Attention: General Counsel
Telecopy: (614) 217-1111
(c) If to Borrowers: Atlantic Premium Brands, Ltd.
650 Dundee Road
Suite 370
Northbrook, Illinois 60062
Attention: President
Telecopy: (610) 941-2991
Any addressee may alter the address to which communications are to be sent
by giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice. Notice given in any other manner shall
nevertheless be effective as to the noticed party on the date actually received
by such noticed party.
15. ENTIRE AGREEMENT. This Agreement and the Lien Subordination constitute
and express the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersede all prior agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. If and to the extent the terms hereof are inconsistent with any
subordination provisions contained in the Subordinated Note, the terms of this
Agreement shall govern and control. Neither this Agreement nor any portion or
provision hereof may be changed, waived or amended orally or in any manner other
than by an agreement in writing signed by Senior Creditor, Borrowers and
Subordinated Creditor.
16. ADDITIONAL DOCUMENTATION. Borrowers and Subordinated Creditor shall
execute and deliver to Senior Creditor such further instruments and shall take
such further action as Senior Creditor may reasonably request from time to time
in order to carry out the provisions and intent of this Agreement.
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<PAGE> 15
17. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
Senior Creditor, its successors and assigns, and shall be binding upon both
Borrowers and Subordinated Creditor and their respective heirs, executors,
successors and assigns; provided, however, that, except as otherwise expressly
set forth in this paragraph 17 and in paragraph 4 herein, neither Subordinated
Creditor nor any subsequent holder of any Subordinated Debt shall assign or
transfer to any Person any part of the Subordinated Debt. Without limiting the
generality of the foregoing, any Qualified Lender whose loans or advances to
Borrowers or any other Obligor hereafter are used to refinance and pay
indefeasibly in full the Senior Debt shall be deemed for all purposes hereof to
be the successor to Senior Creditor, and from and after the date of any such
refinancing and satisfaction in full of the Senior Debt such Qualified Lender
shall be deemed a party hereto in the place and stead of Senior Creditor as if
such Qualified Lender had been the original signatory hereto, and all loans,
advances, liabilities, debit balances, covenants and duties at any time or times
owed by Borrowers to such successor to Senior Creditor, whether direct or
indirect, absolute or contingent, secured or unsecured, due or to become due,
then existing or thereafter arising, including any renewals, extensions,
modifications, or replacements of any of the foregoing, shall be deemed for all
purposes hereunder to constitute and be Senior Debt.
18. DEFECTS WAIVED. This Agreement is effective notwithstanding any defect
in the validity or enforceability of any instrument or document at any time
evidencing or securing the whole or any part of the Senior Debt.
19. GOVERNING LAW. The validity, construction and enforcement of this
Agreement shall be governed by the internal laws of the State of Georgia.
20. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, it is the intent of the parties that such invalidity
or unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
21. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties to this Agreement on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
22. JURY TRIAL WAIVER. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY
MATTER CONCERNED WITH THIS AGREEMENT OR THE SENIOR DEBT, SUBORDINATED CREDITOR,
BORROWERS AND SENIOR CREDITOR EACH HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ALL RIGHTS TO A TRIAL BY JURY.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, sealed and delivered on the day and year first above written.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
CARLTON FOODS CORP.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
PREFCO CORP.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
GROGAN'S FARM, INC.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
RICHARDS CAJUN FOODS CORP.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
[Signatures continued on following page]
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<PAGE> 17
POTTER'S ACQUISITION CORP.
By: /s/ MERRICK M. ELFMAN
---------------------
MERRICK M. ELFMAN, Chairman
BANC ONE CAPITAL PARTNERS, LLC
("Subordinated Creditor")
By: /s/ LEONARD LILLIARD
---------------------
Title: Vice President
Accepted in Atlanta, Georgia, this 20th day of March, 1998.
FLEET CAPITAL CORPORATION
("Senior Creditor")
By: /s/ ROLAND ROBINSON
---------------------
Title: Vice President
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<PAGE> 1
EXHIBIT 4.24
LIEN SUBORDINATION AGREEMENT
THIS LIEN SUBORDINATION AGREEMENT (this "Agreement") is made on March 20,
1998, by and between FLEET CAPITAL CORPORATION, a Rhode Island corporation
(together with its successors and assigns, "Senior Creditor"), and BANC ONE
CAPITAL PARTNERS, LLC, a limited liability company organized under the laws of
the State of Delaware ("Subordinated Creditor").
RECITALS:
Senior Creditor and Atlantic Premium Brands, Ltd., Carlton Foods Corp.,
Prefco Corp., Grogan's Farm, Inc., Richards Cajun Foods Corp. and Potter's
Acquisition Corp., each a Delaware corporation (collectively referred to as
"Borrowers"), are parties to a certain Loan and Security Agreement dated the
date hereof (as at any time amended, the "Loan Agreement") pursuant to which
Senior Creditor may from time to time make loans to Borrowers secured by all or
substantially all of Borrowers' assets.
Subordinated Creditor and Borrowers are parties to a certain Senior
Subordinated Note and Warrant Purchase Agreement dated as of March 20, 1998 (as
at any time amended, the "Note Purchase Agreement"), hereof pursuant to which
Subordinated Creditor has agreed to make a loan to Borrowers as evidenced by a
certain Senior Subordinated Note (as hereinafter defined) payment of which is
secured by a junior lien upon substantially all of Borrowers' assets.
Senior Creditor, Subordinated Creditor and Borrowers are parties to a
certain Debt Subordination Agreement of even date herewith pursuant to which
Subordinated Creditor has subordinated the payment of all indebtedness at any
time owing to it by Borrowers to the full and final payment of all indebtedness
at any time owing to Senior Creditor by Borrowers (as at any time amended, the
"Debt Subordination").
The parties hereto desire to enter into this Agreement for the purpose of
establishing the priorities of their respective liens and security interests in
the assets of Borrowers and setting forth certain other agreements between them
with respect to Borrowers.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and in consideration
of the foregoing premises, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and the mutual covenants herein,
and to induce Lender to provide financial accommodations to or for the benefit
of Borrowers in accordance with the Loan Agreement, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. CERTAIN DEFINITIONS; RULES OF CONSTRUCTION.
<PAGE> 2
a. Capitalized terms used in this Agreement, unless otherwise defined,
shall have the meanings ascribed to them in the Debt Subordination. In
addition, the following terms shall have the following meanings for
the purposes of this Agreement:
"Applicable Law" shall have the meaning ascribed to it in the Loan
Agreement.
"Collateral" shall have the meaning ascribed to it in the Loan
Agreement and in any of the other Senior Creditor Loan Documents.
"Enforcement Action" shall mean any action taken by Senior Creditor or
Subordinated Creditor to repossess, replevy, attach, garnish, levy upon,
collect the proceeds of, foreclose its Lien upon, sell or otherwise dispose
of any Collateral, whether by judicial action, under power of sale, by
self-help repossession, by notification to account obligors of any Borrower
or otherwise.
"Enforcement Notice" shall mean a written notice given by Subordinated
Creditor to Senior Creditor of Subordinated Creditor's intent to initiate
Enforcement Action, which notice shall specify the date on which
Subordinated Creditor intends to initiate such Enforcement Action and shall
be given (i) in the manner provided and in accordance with the terms set
forth in paragraph 5(d) of the Debt Subordination if a Remedy Bar Notice
has not been given to Subordinated Creditor within the immediately
preceding 365 days and (ii) at least 7 days prior to the initiation of any
Enforcement Action proposed to be taken on or after a Remedy Bar
Termination Date.
"Equipment" shall have the meaning ascribed to it in the Loan
Agreement.
"Event of Default" shall mean the occurrence of any event or the
existence of any condition that constitutes an "Event of Default" under
(and as defined in) the Loan Agreement.
"Insolvency Proceeding" shall mean any action, case or proceeding
commenced by or against a Person, or any agreement of such Person, for (a)
the entry of an order for relief under any chapter of the Bankruptcy Code
or other insolvency or debt adjustment law (whether state, federal or
foreign), (b) the appointment of a receiver, trustee, liquidator or other
custodian for such Person or any part of its property, (c) an assignment or
trust mortgage for the benefit of creditors of such Person, or (d) the
liquidation, dissolution or winding up of the affairs of such Person.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting property. For the purpose of the
Agreement, Borrowers shall be deemed to be the owner of any property which
it
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<PAGE> 3
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the property has been retained by or
vested in some other Person for security purposes.
"Loan Agreement" shall have the meaning ascribed to it in the Recitals
hereto.
"Person" shall mean an individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company, land
trust, business trust, or unincorporated organization, or a government
agency or political subdivision thereof.
"Subordinated Note" shall mean that certain Senior Subordinated Note
dated March __, 1998, made by Borrowers to the order of Subordinated
Creditor in the original principal amount of $6,500,000.
"Subordinated Security Agreement" shall mean that Security Agreement
executed by Borrowers in favor of Subordinated Creditor and pursuant to
which Borrowers have granted to Subordinated Creditor security interests in
all of the Collateral (other than Real Estate) as security only for the
payment of the Subordinated Debt.
"Warrants" shall have the meaning ascribed to it in the Note Purchase
Agreement.
b. The terms "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Paragraph or subdivision. All references to statutes and
related regulations shall include any amendments of same and any
successor statutes and regulations. All references to any instruments
or agreements shall include any and all modifications thereto and any
and all restatements, extensions or renewals thereof. All references
to "including" and "include" shall be understood to mean "including,
without limitation."
2. CONSENTS TO LIENS. Senior Creditor hereby consents to Borrowers' grant of
Liens in the Collateral to Subordinated Creditor and agrees that the
existence of such Liens shall not constitute an Event of Default under any
of the Senior Creditor Loan Documents. Subordinated Creditor hereby
consents to Borrowers' grant of Liens in the Collateral to Senior Creditor
as security for the payment and performance of all of the Senior Debt and
agrees that the existence of such Liens shall not constitute an Event of
Default under any of the Subordinated Debt Documents.
3. PRIORITY OF LIENS.
a. Subordinated Creditor and Senior Creditor agree at all times, whether
before, after or during the pendency of any Insolvency Proceeding and
notwithstanding
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<PAGE> 4
the priorities which would ordinarily result from the order of
granting or perfection of any Liens, the order of filing or recording
of any financing statements or mortgages, or the priorities that would
otherwise apply under Applicable Law, that any Liens which Senior
Creditor may at any time have in or with respect to any of the
Collateral shall constitute first priority Liens in such property to
secure the payment and performance of all of the Senior Debt and shall
be superior to any Lien or other interest at any time held by
Subordinated Creditor in the same property arising pursuant to the
Subordinated Debt Documents, by operation of Applicable Law or
otherwise; and any Lien or other interests at any time held by
Subordinated Creditor in any of the Collateral shall be subordinate to
any Liens at any time held by Senior Creditor therein.
b. For purposes of the foregoing priorities, any claim of a right of
setoff by Subordinated Creditor shall be treated in all respects as a
Lien and no claim to right of setoff by Subordinated Creditor shall be
asserted to defeat or diminish the rights or priorities provided for
herein in favor of Senior Creditor.
c. If for any reason any Lien granted or conveyed by Borrowers to Senior
Creditor pursuant to the Senior Creditor Loan Documents or otherwise
is set aside or otherwise declared ineffective, in whole or in part,
by any court of competent jurisdiction, and if as a consequence
thereof Subordinated Creditor becomes entitled to receive any payments
or proceeds from or on account of any of the Collateral or on account
of Subordinated Creditor's Lien in any of the Collateral, then any
such payments or proceeds received by Subordinated Creditor shall be
used by it to purchase a junior participation in all of the Senior
Debt pursuant to a junior participation agreement in form and content
satisfactory to Senior Creditor but in all events providing that
Senior Creditor's retained interest in the Senior Debt and all costs
and expenses incurred by Senior Creditor (including attorneys' fees)
in attempting to collect the Senior Debt or to realize upon any of the
Collateral shall be paid in full before Subordinated Creditor shall be
entitled to any payment on account of its junior participation and
Subordinated Creditor's junior participation will be without recourse
of any kind to Senior Creditor except for Senior Creditor's gross
negligence or willful misconduct after the date of Subordinated
Creditor's purchase of such junior participation.
d. In no event shall Subordinated Creditor institute, encourage, or join
as a party in the institution of, or assist in the prosecution of, any
action, suit or proceeding seeking a determination that the Lien of
Senior Creditor in any of the Collateral is invalid, unperfected or
avoidable, or is or should be subordinated to the interests of any
other Person.
4. STANDBY AS TO ENFORCEMENT ACTION.
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<PAGE> 5
a. If and for so long as(i) an Event of Default exists under the Senior
Creditor Loan Documents and Senior Creditor is taking any Enforcement
Action with respect to any of the Collateral, or(ii) a Remedy Bar
Period is in effect, then in any such event, Subordinated Creditor
shall not take any Enforcement Action with respect to any of the
Collateral unless and until all of the Senior Debt has been paid
finally and in full and any commitments of Senior Creditor under the
Loan Agreement have been terminated or expired.
b. At any time that Subordinated Creditor is not prohibited from
initiating any Enforcement Action, Subordinated Creditor shall be
authorized to initiate such Enforcement Action only after having given
to Senior Creditor all required Enforcement Notices. Notwithstanding
anything to the contrary contained herein, in no event shall
Subordinated Creditor be authorized to initiate any Enforcement Action
with respect to any of the Collateral other than that portion
consisting solely of Equipment until all of the Senior Debt has been
paid in full and all commitments of Senior Creditor to Borrowers under
any of the Senior Creditor Loan Documents have been terminated or
expired. Subordinated Creditors shall forthwith cease any Enforcement
Action taken with respect to any Equipment after the date it receives
notice of Senior Creditor's commencement of any Enforcement Action
with respect to such Equipment.
c. If Subordinated Creditor shall receive any proceeds from any sale,
liquidation, casualty or other disposition of any Collateral, whether
in connection with the initiation of an Enforcement Action or
otherwise, Subordinated Creditor shall be obligated to hold such
proceeds in trust and promptly turn over such proceeds, less its costs
and expenses incurred in connection with any such Enforcement Action,
to Senior Creditor for application to the Senior Debt until the Senior
Debt is paid in full and any commitments by Senior Creditor under the
Senior Creditor Loan Documents have been terminated or expired.
5. AGREEMENT ON CERTAIN BANKRUPTCY MATTERS.
a. Without impairing, abrogating or in any way affecting Senior
Creditor's rights hereunder, including the relative priorities
established by Paragraph 3 hereof, Senior Creditor may during any
Bankruptcy Case give or withhold its consent to Borrowers' or any
bankruptcy trustee's use of any Collateral (including cash proceeds of
any Collateral) or may provide financing or otherwise extend credit to
Borrowers or any bankruptcy trustee secured by a Lien in any or all of
the Collateral that is senior in priority to all Liens at any time
held by Subordinated Creditor, and Subordinated Creditor shall be
deemed to have consented to Borrowers' or any bankruptcy trustee's use
of Collateral if and to the extent consented to by Senior Creditor and
to any financing proposed to be provided by Senior Creditor to
Borrowers or any bankruptcy trustee during the pendency of any such
Bankruptcy Case.
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<PAGE> 6
b. If in or as a result of any Bankruptcy Case Senior Creditor returns,
refunds or repays to Borrowers or any trustee or committee appointed
in the Bankruptcy Case any payment or proceeds of any Collateral in
connection with any action, suit or proceeding alleging that Senior
Creditor's receipt of such payment or proceeds was a transfer voidable
under state or federal law, then Senior Creditor shall not be deemed
ever to have received such payment or proceeds for purposes of this
Agreement in determining whether and when all of the Senior Debt has
been paid in full.
6. AGREEMENT TO RELEASE LIENS.
a. Subordinated Creditor agrees that it will, upon Senior Creditor's
request and whether or not an Event of Default exists, release its
Liens in any Equipment concurrently with Senior Creditor's release of
its Lien therein in connection with Borrowers' authorized disposition
of such Equipment pursuant to the terms of the Senior Creditor Loan
Documents as in effect on the date hereof.
b. Subordinated Creditor agrees that it will, if requested to do so by
Senior Creditor after and during the continuance of an Event of
Default under the Senior Creditor Loan Documents, release its Liens in
any Equipment in connection with and in order to facilitate any
orderly liquidation sale of such Collateral by Borrowers or any
bankruptcy trustee or receiver for Borrowers, and promptly upon the
request of Senior Creditor, it will, at its expense (but without
waiving any obligation of reimbursement by Borrowers under the
Subordinated Debt Documents), execute and deliver such documents,
instruments and agreements as are necessary to effectuate such release
and to evidence such release in the appropriate public records.
c. Subordinated Creditor agrees that it will, upon payment in full of all
Subordinated Debt (excluding debt or obligations owing from Borrowers
to Subordinated Creditor under or in connection with the Warrants),
release its Liens upon all of the Collateral.
7. WAIVER OF MARSHALLING; APPLICATION OF PAYMENTS AND PROCEEDS. Subordinated
Creditor hereby waives any right to require Senior Creditor to marshall any
security or collateral or otherwise to compel Senior Creditor to seek
recourse against or satisfaction of the indebtedness to it from one source
before seeking recourse or satisfaction from another source. Senior
Creditor shall be authorized to apply any and all payments, collections and
proceeds of Collateral received by it to such portion of the Senior Debt as
Senior Creditor may lawfully elect consistent with the provisions of the
Senior Creditor Loan Documents.
8. PROVISIONS CONCERNING INSURANCE. Proceeds of the Collateral include
insurance proceeds, and therefore the priorities set forth in Paragraph 3
hereof govern the ultimate
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<PAGE> 7
disposition of casualty insurance proceeds. Senior Creditor shall have the
sole and exclusive right, as against Subordinated Creditor, to adjust
settlement of insurance claims in the event of any covered loss, theft or
destruction of the Collateral. All proceeds of such insurance shall inure
to Senior Creditor, and Subordinated Creditor shall cooperate (if
necessary) in a reasonable manner in effecting the payment of insurance
proceeds to Senior Creditor. Senior Creditor shall have the right (as
between the parties hereto) to determine whether such proceeds will be
applied to its claim or used to rebuild, replace or repair the affected
Collateral. If such proceeds are applied to the Senior Debt, any proceeds
remaining after payment in full of the Senior Debt and all expenses of
collection, including reasonable attorneys' and paralegals' costs, fees and
expenses, shall be promptly remitted to Subordinated Creditor for
application to the Subordinated Debt, or to Borrowers, as applicable.
9. NOTICES. All notices, requests and demands to or upon a party hereto shall
be given in the manner and to the Persons set forth in the Debt
Subordination. Subordinated Creditor hereby agrees that any requirement for
the giving of notice by Senior Creditor under Applicable Law or otherwise
in connection with any exercise by Senior Creditor of any of its rights or
remedies with respect to the Collateral shall be satisfied by the giving of
written notice at least 5 days prior to the date on which such rights or
remedies are to be exercised by Senior Creditor, provided that nothing
herein shall be deemed to require the giving of any such notice when such
notice is not required by Applicable Law. Notwithstanding anything to the
contrary herein or in the Debt Subordination, no Enforcement Notice shall
be deemed effective unless and until actually received by Senior Creditor
at the applicable address for Senior Creditor pursuant to paragraph 14 of
the Debt Subordination.
10. NO DUTIES IMPOSED UPON SENIOR CREDITOR. The rights granted to Senior
Creditor in this Agreement are solely for its protection and nothing herein
contained imposes on Senior Creditor any duties with respect to any of the
Collateral. Senior Creditor has no duty to preserve rights against prior
parties on any instrument or chattel paper received from Borrowers as
collateral security for any of the Senior Debt.
11. RELATIONSHIP OF PARTIES. This Agreement is entered into solely for the
purposes set forth above, and, except as is expressly provided otherwise
herein, neither party assumes any responsibility to the other party to
advise such other party of information known to such party regarding the
financial condition of Borrowers or regarding the Collateral, or of any
other circumstances bearing upon the risk of nonpayment of the obligations
of Borrowers, under the Subordinated Debt Documents, or the Senior Creditor
Loan Documents. Each party shall be responsible for managing its
relationship with Borrowers and neither party shall be deemed the agent of
the other for any purpose. Subordinated Creditor and Senior Creditor each
may alter, amend, supplement, release, discharge or otherwise modify any
terms of the Subordinated Debt Documents or of the Senior Creditor Loan
Documents, respectively, without the consent of the other, except as
otherwise provided in the Debt Subordination.
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<PAGE> 8
12. SPECIFIC ENFORCEMENT. If Subordinated Creditor fails to comply with any
provision of this Agreement that is applicable to it, Senior Creditor may
demand specific performances of this Agreement and may exercise any other
remedy available at law or equity.
13. NO ADDITIONAL RIGHTS OF BORROWERS HEREUNDER. Nothing herein shall be
construed to confer additional rights upon Borrowers. Without limiting the
generality of the foregoing, if any party hereto shall enforce its rights
or remedies in violation of this Agreement, Borrowers shall not be
authorized to use such violation as a defense to any right or remedy
exercised by such party, nor assert such violation as a counterclaim or
basis of setoff or recoupment against such party, unless the other party
hereto consents in writing and itself asserts that the exercise of right or
remedy is in violation of this Agreement.
14. INDEPENDENT CREDIT INVESTIGATIONS. Neither the parties hereto nor any of
their respective directors, officers, agents or employees shall be
responsible to the others or to any other Person, for Borrowers' solvency,
financial condition or ability to repay any of the Subordinated Debt or any
of the Senior Debt, or for statements of Borrowers, oral or written, or for
the validity, sufficiency or enforceability of any of the Subordinated Debt
Documents or any of the Senior Creditor Loan Documents, or the validity or
priority of any Liens granted by Borrowers to either party in connection
with any of the Subordinated Debt Documents or any of the Senior Creditor
Loan Documents. Each party hereto has entered into its agreements with
Borrowers based upon its own independent investigation, and makes no
warranty or representation to the other party nor does it rely upon any
representation of the other party with respect to matters identified or
referred to in this Paragraph.
15. TERM OF AGREEMENT. This Agreement shall continue in full force and effect
and shall be irrevocable by any party hereto until the earliest to occur of
the following: (i) the parties hereto in writing mutually agree to
terminate this Agreement; (ii) the Subordinated Debt is fully paid and
discharged (other than in a manner that constitutes a breach of this
Agreement), and the Subordinated Debt Documents are terminated and all
Liens in favor of Subordinated Creditor with respect to any of the
Collateral are terminated; or (iii) the Senior Debt is fully paid and
discharged and any commitments of Senior Creditor under the Senior Creditor
Loan Documents are terminated or have expired.
16. GOVERNING LAW. This Agreement shall be interpreted, and the rights and
obligations of the parties hereto determined, in accordance with the
internal laws of the State of Georgia.
17. NO THIRD PARTY BENEFICIARIES. Nothing contained in this Agreement shall be
deemed to indicate that this Agreement has been entered into for the
benefit of any Person other
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<PAGE> 9
than the parties hereto. No Person other than the parties hereto shall be
authorized to enforce any of the provisions of this Agreement.
18. CONFLICT WITH DOCUMENTS. The provisions of this Agreement are intended by
the parties to control any conflicting provisions in the Senior Creditor
Loan Documents or the Subordinated Debt Documents, including any covenants
prohibiting further borrowing or encumbrances of Collateral.
19. PARAGRAPH HEADINGS. The paragraph headings contained in this Agreement are
and shall be deemed to be without substantive meaning or content of any
kind whatsoever and are not a part of the Agreement between the parties
hereto.
20. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so 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. In proving this Agreement in
any judicial proceeding, it shall not be necessary to produce or account
for more than one such counterpart signed by the party against whom such
enforcement is sought. Any signature delivered by a party by facsimile
transmission shall be deemed to be an original signature hereto.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. In no event, however, shall either party hereto transfer or
assign any Lien that it may have in any of the Collateral to any Person
unless the transferee or assignee thereof shall first agree in writing to
be bound by the terms of this Agreement the same as if an original
signatory hereto. Any Qualified Lender whose loans or advances to Borrowers
hereafter are used to refinance and pay indefeasibly in full the Senior
Debt shall be deemed for all purposes hereof to be the successor to Senior
Creditor, and from and after the date of such refinancing and satisfaction
in full of the Senior Debt such Qualified Lender shall be deemed a party
hereto in the place and stead of Senior Creditor as if such Qualified
Lender had been the original signatory hereto, and all loans, advances,
liabilities, debit balances, covenants and duties at any time or times owed
by Borrowers to such successor to Lender, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, then
existing or thereafter arising, including any renewals, extension,
modifications or replacements of any of the foregoing, shall be deemed for
all purposes hereunder to constitute and be Senior Debt.
22. FURTHER ASSURANCES. Each of the parties hereto agrees to execute such
amendments to financing statements and other documents as may be necessary
to reflect of record the existence of this Agreement and the relative
priorities established pursuant to Paragraph 3 hereof.
- 9 -
<PAGE> 10
23. SEVERABILITY. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under Applicable
Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
24. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Debt Subordination
express the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior
understandings and agreements of the parties regarding the same subject
matter. This Agreement may not be amended or modified except by a writing
signed by the parties hereto.
25. JURY TRIAL WAIVER. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
SUBORDINATED CREDITOR AND SENIOR CREDITOR EACH HEREBY WAIVES ALL RIGHTS TO
A TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR OTHER PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BANC ONE CAPITAL PARTNERS, LLC
("Subordinated Creditor")
By: /s/ LEONARD LILLIARD
---------------------------------
Title: Vice President
FLEET CAPITAL CORPORATION
("Senior Creditor")
By: /s/ ROLAND ROBINSON
---------------------------------
Title: Vice President
- 10 -
<PAGE> 11
BORROWERS' ACKNOWLEDGMENT AND AGREEMENT
The undersigned hereby accepts and acknowledges receipt of a copy of the
foregoing Intercreditor Agreement and consents to and agrees to be bound by all
provisions thereof, including the agreements between Senior Creditor and
Subordinated Creditor with respect to the payment by each to the other of
certain proceeds derived from the liquidation of the Collateral. The undersigned
further acknowledges and agrees that the Lien Subordination Agreement may be
modified or amended at any time or times without notice to or the consent of the
undersigned.
Capitalized terms used in this Acknowledgment and Agreement without
definition have the meanings specified in the foregoing Intercreditor Agreement
unless the context otherwise requires.
As of March 20, 1998.
ATLANTIC PREMIUM BRANDS, LTD.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
CARLTON FOODS CORP.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
PREFCO CORP.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
GROGAN'S FARM, INC.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
[Signatures continued on following page]
- 11 -
<PAGE> 12
RICHARDS CAJUN FOODS CORP.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
POTTER'S ACQUISITION CORP.
By: /s/ MERRICK M. ELFMAN
---------------------------
MERRICK M. ELFMAN, Chairman
- 12 -
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT TO CONSULTING AGREEMENT (this "AMENDMENT") is made as
of the 16th day of October, 1996, by and between Atlantic Beverage Company,
Inc., a Delaware corporation (the "COMPANY"), STERLING ADVISORS, L.P., a
Delaware limited partnership ("STERLING") and ELFMAN VENTURE PARTNERS, INC., an
Illinois corporation ("EVP"). Sterling and EVP are hereinafter referred to
together as the "MANAGERS".
WHEREAS, effective as of March 15, 1996, the Company and the Managers
entered into a Consulting Agreement (the "AGREEMENT") which provided for the
Managers rendering consulting services to the Company in consideration for
payment of fees and other consideration therefore, all on terms more
specifically enumerated in the Agreement; and
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement; and
WHEREAS, the Company and the Managers have agreed to amend the
Agreement as set forth herein, all according to the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Amendment. Section 4C of the Agreement is hereby amended by
adding the following sentence to the end of said Section:
"Notwithstanding the foregoing, in the event that the Company,
either directly or indirectly, acquires or merges with the (i)
business now known as Grogan's Farm, Inc. or Grogan's Sausage,
Inc., the $50,000 increase in the Base Fee shall not commence
until January 1, 1997, and (ii) business now known as
"Partin's Country Sausage", there shall be no increase in the
Base Fee."
2. Continued Effectiveness of Agreement. Except as expressly amended
hereby, the Agreement shall continue in full force and effect.
(end of text)
******************************
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
STERLING ADVISORS, L.P.
By Sterling Group, Inc.
By /s/ STEVEN M. TASLITZ
---------------------
Steven M. Taslitz, President
ELFMAN VENTURE PARTNERS, INC.
By /s/ MERRICK M. ELFMAN
---------------------
Merrick M. Elfman, President
ATLANTIC BEVERAGE COMPANY, INC.
By /s/ MERRICK M. ELFMAN
---------------------
Merrick M. Elfman, Chairman
2
<PAGE> 1
EXHIBIT 10.5
SECOND AMENDMENT TO CONSULTING AGREEMENT
THIS SECOND AMENDMENT TO CONSULTING AGREEMENT (this "AMENDMENT") is
made this 7th day of September, 1997, effective as of the 1st day of July,
1997, by and between Atlantic Premium Brands, Ltd., a Delaware corporation (the
"COMPANY"), STERLING ADVISORS, L.P., a Delaware limited partnership
("STERLING") and ELFMAN VENTURE PARTNERS, INC., an Illinois corporation
("EVP"). Sterling and EVP are hereinafter referred to together as the
"MANAGERS".
WHEREAS, effective as of March 15, 1996, the Company and the Managers
entered into a Consulting Agreement, amended as of October 16, 1996 (as
amended, the "AGREEMENT") which provided for the Managers rendering consulting
services to the Company in consideration for payment of fees and other
consideration therefore, all on terms more specifically enumerated in the
Agreement; and
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement; and
WHEREAS, the Company and the Managers have agreed to amend the
Agreement as set forth herein, all according to the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Amendment. The parties acknowledge that the Managers have and
will spend substantial amounts of time in assisting the Company in the
acquisition of certain assets of J.C. Potter Sausage Company (and affiliates)
and the related financing, which will include subordinated, or mezzanine,
financing. In consideration of such efforts, upon the consummation of such
acquisition and financing, there shall be due and owing from the Company to the
Managers an aggregate of $750,000.00. Such amounts shall be paid in lieu of
all other fees payable under the Agreement (which will not include
reimbursement of expenses) which would otherwise be due and payable during the
time period beginning July 1, 1997 through and including December 31, 1998.
2. Continued Effectiveness of Agreement. Except as expressly amended
hereby, the Agreement shall continue in full force and effect.
(end of text)
******************************
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
STERLING ADVISORS, L.P.
By Sterling Group, Inc.
By /s/ STEVEN M. TASLITZ
---------------------
Steven M. Taslitz, President
ELFMAN VENTURE PARTNERS, INC.
By /s/ MERRICK M. ELFMAN
---------------------
Merrick M. Elfman, President
ATLANTIC PREMIUM BRANDS, LTD.
By /s/ ALAN F. SUSSNA
------------------
Alan F. Sussna, CEO
2
<PAGE> 1
EXHIBIT 11
ATLANTIC PREMIUM BRANDS, LTD.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Twelve
Months Ended
December 31, 1997
-----------------
<S> <C>
NET INCOME $ 356,867
==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,102,850
==============
NET INCOME PER SHARE $ 0.05
==============
COMPUTATION OF WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Shares outstanding as of December 31, 1996 6,801,142
Less: Treasury stock (404,532)
Plus: impact of 976,964 shares issued through private
placement, outstanding 168 out of 365 days 449,403
Impact of dilutive stock options as of December 31, 256,837
1997 --------------
Adjusted Shares Outstanding as of 12/31/97 7,102,850
==============
</TABLE>
1
<PAGE> 2
ATLANTIC PREMIUM BRANDS, LTD.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three
Months Ended
December 31, 1997
-----------------
<S> <C>
NET INCOME $ (233,056)
==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,638,781
==============
NET INCOME PER SHARE $ (0.03)
==============
COMPUTATION OF WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Shares outstanding as of Sept. 30, 1997 (excluding
private placement): 6,801,142
Less: Treasury stock at 9/30/97 (404,532)
Plus: impact of 976,964 shares issued through private
placement, outstanding 90 out of 90 days 976,964
Impact of dilutive stock options as of Dec. 31, 1997 265,207
--------------
Adjusted Shares Outstanding as of 12/31/97 7,638,781
==============
</TABLE>
2
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ATLANTIC PREMIUM BRANDS, LTD.
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- --------------------------------------- --------------------------------------
Carlton Foods Corp. Delaware
Grogan's Farm, Inc. Delaware
Potter Sausage Co. Delaware
Prefco Corp. Delaware
(also does business as Blue Ribbon)
Richards Cajun Foods Corp. Delaware
Texas Traditions, Inc. Delaware
<PAGE> 1
EXHIBIT 23
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-K, into Atlantic Premium
Brands, Ltd.'s previously filed Registration Statements on Form S-8 File Nos.
33-80010 and 333-39561.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,262,805
<SECURITIES> 0
<RECEIVABLES> 9,565,489
<ALLOWANCES> 117,000
<INVENTORY> 4,213,026
<CURRENT-ASSETS> 15,596,706
<PP&E> 7,194,641
<DEPRECIATION> 2,255,105
<TOTAL-ASSETS> 34,953,692
<CURRENT-LIABILITIES> 19,267,950
<BONDS> 0
0
0
<COMMON> 73,770
<OTHER-SE> 9,314,684
<TOTAL-LIABILITY-AND-EQUITY> 34,953,692
<SALES> 172,198,494
<TOTAL-REVENUES> 172,198,494
<CGS> 152,608,121
<TOTAL-COSTS> 17,872,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,692,610
<INCOME-PRETAX> 406,857
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 356,857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 356,857
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
