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Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 27, 1996
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BROTHERS GOURMET COFFEES, INC.
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(Exact Name of Registrant as specified in its charter)
Delaware 0-23024 52-1681708
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(State or other juris- (Commission file (IRS Employer
diction of incorporation) number) Identification No.)
2255 Glades Road
Suite 100 E
Boca Raton, Florida 33431
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(Address of principal (Zip Code)
executive offices)
(407) 995-2600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On December 27, 1996 (the "Closing Date"), the Company and Dilmun
Financial Services ("Dilmun") entered into a Senior Subordinated Note
Agreement (the "Closing") (the "Subordinated Note Agreement"). On the
Closing Date, the Company drew down the full amount available under the
Subordinated Note Agreement, i.e., $15 million (the "Subordinated Loan").
The Company applied the proceeds of the Subordinated Loan as follows: (a) the
Company paid $3,027,000 to Siena Capital Partners, L.P. ("Siena"),
representing payment in full of the bridge loan facility provided by Siena to
the Company in September 1996 (the "Siena Bridge Facility"), and (b) the
Company applied the remaining $11,973,000 against the outstanding balance due
under the Revolving Credit Facility (the "Revolving Credit Facility") under
its Loan and Security Agreement, dated as of May 29, 1996, with Sanwa
Business Credit Corporation ("Sanwa") (the "Credit Agreement"). For more
information concerning the Siena Bridge Facility and Credit Agreement, see
Note 7 to the Brothers Gourmet Coffees, Inc. Notes to Condensed Consolidated
Financial Statements, September 27, 1996 ("Note 7 to the Third Quarter
Financial Statements"), included in Part I., Item 1. of the Brothers Gourmet
Coffees, Inc. Quarterly Report on Form 10-Q for the Quarter Ended September
27, 1996 (the "Third Quarter Form 10-Q").
In connection with the Closing, the Company:
1. agreed to pay a structuring fee, in the amount $337,500, to Dilmun,
and to reimburse Dilmun for certain costs and expenses (including
attorneys' fees incurred by Dilmun in connection with the negotiation
and documentation of the Subordinated Loan) on January 3, 1997;
2. paid a debt placement fee, in the amount of $750,000, to Dabney
Resnick Imperial, LLC, an affiliate of Siena and the Company's
exclusive debt placement agent ("DRI"); and
3. granted certain warrants to BIB Holdings (Bermuda) Ltd., an affiliate
of Dilmun, and Brothers Warrant Holdings I, an affiliate of DRI
("BWHI") warrants (which are described in more detail below)
to purchase up to 1,245,000 shares and 400,000 shares of Company
common stock, $.0001 par value per share (the "Common Stock"),
respectively.
The term of the Subordinated Loan is six years. The outstanding balance
of the Subordinated Loan is due and payable (absent acceleration thereof in
accordance with the terms of the Subordinated Loan Agreement) on December 26,
2002. The Subordinated Loan bears interest at the rate of 11.25% per annum.
The Subordinated Loan Agreement contains standard and customary affirmative
and negative covenants for a loan of its type, including two financial
covenants, a minimum tangible net worth covenant (starting at $4.388 million
as of September 1996 and increasing to $35.055 million as of December 2001)
and a cash flow coverage ratio (of 1.2:1 throughout the term of the
Subordinated Loan).
As discussed above, in connection with the Closing, the Company and BIB
entered into a Warrant Agreement (the "BIB Warrant Agreement") entitling BIB
to purchase up to 1,245,000 shares (the "BIB Warrant Shares") of Common
Stock, at an exercise price of $.25 per share of Common Stock (the "BIB
Warrant"). The BIB Warrant Shares vested/will vest according to the
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following schedule: (1) 265,600 BIB Warrant Shares vested on the Closing
Date, (2) an additional 265,600 BIB Warrant Shares will vest on the first
anniversary of the Closing Date (for a total of up to 531,200 BIB Warrant
Shares) if the Subordinated Loan is not paid in full on or before that date,
(3) an additional 182,600 BIB Warrant Shares will vest on the second
anniversary of the Closing Date (for a total of up to 713,800 BIB Warrant
Shares) if the Subordinated Loan is not paid in full on or before that date,
(4) an additional 166,000 BIB Warrant Shares will vest on the third
anniversary of the Closing Date (for a total of up to 879,800 BIB Warrant
Shares) if the Subordinated Loan is not paid in full on or before that date,
(5) an additional 182,600 BIB Warrant Shares will vest on the fourth
anniversary of the Closing Date (for a total of up to 1,062,400 BIB Warrant
Shares) if the Subordinated Loan is not paid in full on or before that date
and (6) an additional 182,600 BIB Warrant Shares will vest on the fifth
anniversary of the Closing Date (for a total of up to 1,245,000 BIB Warrant
Shares) if the Subordinated Loan is not paid in full on or before that date.
The term of the BIB Warrant is ten years from the Closing Date.
The BIB Warrant requires the Company to reserve, to the extent it has a
sufficient number of authorized but unissued and otherwise unreserved shares
of Common Stock available, 1,245,000 shares of Common Stock to issue to BIB
upon exercise of the BIB Warrant. The BIB Warrant further provides that, if,
at any time during the exercise period of the BIB Warrant BIB exercises the
BIB Warrant but the Company does not have a sufficient number of authorized
and unissued shares to issue upon such exercise, the Company share shall
issue phantom shares of Common Stock ("Phantom Shares") to BIB in an amount
equal to the number of BIB Warrant Shares the Company was unable to issue to
BIB because the Company did not have a sufficient number of authorized and
unissued shares to fully cover the BIB Warrant exercise. BIB has the right
to sell the Phantom Shares to the Company for cash (the "Phantom Shares
Payment") in an amount equal to the number of Phantom Shares being acquired
upon exercise of the BIB Warrant multiplied by the difference between (1) the
stated percentage (the "Stated Percentage") of the market price of the Common
Stock as of the date of exercise (the "Market Price") less (2) the exercise
price per share of Common Stock under the BIB Warrant. The Stated Percentage
is determined according to the following schedule: (a) 110% of the Market
Price in the case of any exercise during the first two years following the
Closing Date, (b) 115% of the Market Price in the case of any exercise after
the second anniversary of the Closing Date and before two and one-half years
following the Closing Date, (c) 120% of Market Price in the case of any
exercise after the date that is two and one-half years after the Closing Date
and before three years following the Closing Date, (d) 125% of Market Price
in the case of any exercise after the date that is three years after the
Closing Date and before the date that is three and one-half years following
the Closing Date and (e) 130% of Market Price in the case of any exercise
after the date that is three and one-half years after the Closing Date and
before the expiration of the BIB Warrant term. If the Company is unable, for
any reason, to make a Phantom Share Payment in cash when due, the Company may
deliver a senior subordinated promissory note to BIB (a "BIB Warrant Note")
in lieu of such cash payment. A BIB Warrant Note will bear interest at the
rate of 16% per annum and shall be due and payable (absent acceleration
thereof in accordance with the terms of the Subordinated Loan Agreement) on
December 26, 2002. In all other respects, the BIB Warrant Note(s) will be
governed by the terms of the Subordinated Note Agreement.
The BIB Warrant Agreement provides BIB with certain piggyback
registration rights and up to three demand registration rights during the
term of the BIB Warrant. The BIB Warrant
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also provides BIB with certain anti-dilution protection, which is designed to
preserve BIB's percentage ownership of Common Stock on a fully-diluted basis
upon the occurrence of certain specified corporate restructuring events.
In connection with the Closing, Sanwa, Dilmun and BIB entered into a
Subordination Agreement, and the Company executed and delivered to Sanwa,
Dilmun and BIB an acknowledgment of such Subordination Agreement. Pursuant
to the Subordination Agreement, Dilmun and BIB have agreed, subject to
certain conditions, that the Subordinated Loan will be subordinated and
subject in right of payment to the prior payment in full in cash of the
indebtedness of the Company to Sanwa under the Credit Agreement. The
Subordination Agreement contains standard and customary terms for a financing
of the type contemplated in the Subordinated Note Agreement.
In connection with the Closing, the Company and Sanwa entered into the
Second Amendment and Consent to Loan and Security Agreement (the "Second
Amendment"). Pursuant to the Second Amendment:
(1) Sanwa consented to, among other things, certain technical amendments
to (a) the Cash Flow Coverage Ratio definition (to exclude certain
Slotting Fee Payments and certain Capital Expenditures to be made by
the Company in 1997 from such ratio calculation), (b) the Slotting Fee
Payments definition, (c) the Event of Default definition (to exclude
certain payments made by the Company in connection with the settlement
of, or entry of a judgment against the Company in, the Lindgren
Litigation (as defined in the Second Amendment) and (d) the
Subordinated Debt definition (to specifically include the Subordinated
Note Agreement, the BIB Warrant and other documents related to the
Subordinated Note Agreement (the "Subordinated Note Documents"),
(2) the Company agreed to delete the Term Loan B in its entirety from the
Credit Agreement,
(3) Sanwa and the Company agreed to, among other things, certain technical
amendments to the Permitted Indebtedness, Permitted Liens, Restricted
Payments, Securities repurchase restrictions, Changes in Charter,
Bylaws or Fiscal Year and Impairment Agreements covenants in the
Credit Agreement to conform such covenants to the terms of the
Subordinated Note Documents,
(4) Sanwa consented to an increase in the Capital Expenditures limit to
$10 million per year,
(5) Sanwa added a Subordinated Debt negative covenant (which, among other
things, prohibits (a) the amendment or modification of the terms of
the Subordinated Note Documents without Sanwa's consent, (b) prohibits
payments to Dilmun/BIB (other than the Phantom Shares Payment(s)),
except in accordance with the terms of the Subordinated Note
Documents, (c) prohibits Phantom Stock Payment(s), except in
accordance with the terms of the Subordinated Note Documents, and (d)
restricts prepayment, repurchases, redemptions or retirements of the
Subordinated Loan, except in accordance with its terms (with the
exception that the Company
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may prepay up to $5 million of the Subordinated Loan, provided certain
conditions are satisfied at the time of the prepayment),
(6) Sanwa consented to the execution of the Subordinated Note Documents,
and
(7) Sanwa consented to the termination of the Credit Support Agreements
and agreed to return the Credit Support Letters of Credit to the
Providers thereof. For more information concerning the Credit Support
Agreement, the Credit Support Letters of Credit and the Providers, see
Note 7 to the Third Quarter Financial Statements.
Upon payment in full of the outstanding balance of the Siena Bridge
Facility, that facility terminated. As of the Closing Date, only one of the
four warrants granted to Siena by the Company in connection with the closing
of the Siena Bridge Facility (covering a total of 100,000 shares of Common
Stock) had vested. Upon repayment of the Siena Bridge Facility, Siena's
other three warrants (covering another 180,000 shares of Common Stock)
expired. For more information concerning the Siena Bridge Facility and the
warrants granted to Siena in connection therewith, see Note 7 to the Third
Quarter Financial Statements.
In connection with the Closing, the Company and Brothers Warrant Holdings
I, an affiliate of DRI, entered into a Warrant Agreement (the "DRI Warrant
Agreement"), entitling BWHI to acquire 400,000 shares of Common Stock at an
exercise price of $3.4375 per share of Common Stock (the "DRI Warrant"). The
DRI Warrant Agreement provides BWHI with certain piggyback registration rights
and one demand registration right during the term of the DRI Warrant. The
DRI Warrant provides BWHI with certain anti-dilution protection, which is
designed to preserve BWHI's percentage ownership of Common Stock on a
fully-diluted basis upon the occurence of certain specified corporate
restructuring events.
At the Closing and effective with the execution of the Second Amendment,
the Credit Support Agreement terminated and Sanwa agreed to return the Credit
Support Letters of Credit to the Providers thereof. For more information
concerning the Credit Support Agreement, the Credit Support Letters of Credit
and the Providers, see Note 7 to the Third Quarter Financial Statements. As
of the Closing Date, only two tranches of the first of the three warrants
granted to each of the Providers by the Company at the closing of the Credit
Agreement and Credit Support Agreement (covering a total of 103,624 shares of
Common Stock with respect to all of the Providers) had vested. Upon
termination of the Credit Support Agreement, the balance of the Providers'
first warrant and all of their second and third warrants (covering another
253,580 shares of Common Stock with respect to all of the Providers) expired.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
4.1 Senior Subordinated Note Agreement By and Between Brothers Gourmet Coffees,
Inc. as Borrower and Dilmun Financial Services, An Unlimited Irish Company,
as Lender Dated, December 27, 1996
4.2 Subordination Agreement by and among Sanwa Business Credit Corporation, a
Delaware corporation as Senior Lender and Agent, and Dilmun Financial
Services as Unlimited
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Irish Company, and BIB Holdings (Bermuda) Ltd., a Bermuda corporation,
Dated December 27, 1996
4.3 Second Amendment and Consent to Loan and Security Agreement.
4.4 Warrant Agreement between Brothers Gourmet Coffees, Inc. and BIB Holdings
(Bermuda) Ltd. for the purchase of up to 1,245,000 shares of Common Stock
4.5 Warrant Agreement between Brothers Gourmet Coffees, Inc. and Brothers
Warrant Holdings I for the purchase of 400,000 shares of Common Stock
4.6 Common Stock Purchase Warrant between Brothers Gourmet Coffees, Inc. and
Brothers Warrant Holdings I for the purchase of 400,000 shares of Common
Stock
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BROTHERS GOURMET COFFEES, INC.
(Registrant)
/s/ DONALD D. BREEN
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Date: January 10, 1997 By: Donald D. Breen
Title: President, Chief Executive Officer
and Chief Financial Officer
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EXHIBIT 4.1
BROTHERS GOURMET COFFEES, INC.
SENIOR SUBORDINATED NOTE AGREEMENT
Dated: December 27, 1996
$15,000,000
DILMUN FINANCIAL SERVICES, AN UNLIMITED IRISH COMPANY
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THE OBLIGATIONS EVIDENCED BY THIS AGREEMENT ARE SUBORDINATED
TO THE PRIOR PAYMENT IN FULL OF THE OBLIGATIONS (AS DEFINED
IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO)
PURSUANT TO, AND TO THE EXTENT PROVIDED IN THE SUBORDINATION
AGREEMENT DATED DECEMBER 27, 1996, MADE BY AND BETWEEN SANWA
BUSINESS CREDIT CORPORATION AND DILMUN FINANCIAL SERVICES
(AND ACKNOWLEDGED BY BROTHERS GOURMET COFFEES, INC.) IN
FAVOR OF THE LENDERS AND THE AGENT REFERRED TO IN SUCH
SUBORDINATION AGREEMENT.
SENIOR SUBORDINATED NOTE AGREEMENT
THIS SENIOR SUBORDINATED NOTE AGREEMENT is made as of the 27th day of
December, 1996, by and between Dilmun Financial Services, an unlimited Irish
company, ("Dilmun"), having an office at Harbourmaster Place 4, International
Financial Services Centre, Dublin, Ireland and Brothers Gourmet Coffees, Inc.
("Borrower"), a Delaware corporation, having an office at 2255 Glades Road,
Suite 100 E, Boca Raton, Florida 33431.
SECTION 1. GENERAL DEFINITIONS
1.1 DEFINED TERMS. When used herein, the following terms shall have the
following meanings:
ACCREDITED INVESTOR - as defined in Rule 501 under the Securities Act.
AFFILIATE - as to any Person, any other Person that directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, such Person.
AGENT - Dilmun (or any assignee of Dilmun pursuant to Section 10.6 hereof),
in its capacity as Lender or, if there shall be more than one Bank hereunder,
Dilmun (or any successor Agent pursuant to Section 8.7 hereof), in its capacity
as Agent hereunder.
AGREEMENT - this Senior Subordinated Note Agreement, as the same may be
modified or amended from time to time.
AUTHORIZED OFFICER - the Chief Executive Officer, Chief Financial Officer,
President or Vice President - Finance and Administration of Borrower.
BANK - Lender, or if there shall be more than one lender hereunder, each
such lender and its respective assignees, if any, pursuant to Section 10.6
hereof.
BIB - BIB Holdings (Bermuda) Ltd.
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BUSINESS DAY - a day on which the Federal Reserve Bank of New York is open
for business in New York, New York.
CAPITAL EXPENDITURES - for any fiscal period, without duplication, all
expenditures (whether made in the form of cash or other property) by Borrower or
any Subsidiary during such period for, or contracts for expenditures with
respect to, any fixed assets or improvements, or for renewals.
CAPITAL STOCK - any and all shares, interests, participations, warrants,
options or other equivalents (however designated) of capital stock of a
corporation or any and all equivalent ownership interests in a Person (other
than a corporation).
CAPITALIZED LEASE - any lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
CAPITALIZED LEASE OBLIGATION - any obligations for the payment of rent for
any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with such principles.
CASH FLOW COVERAGE RATIO - for any fiscal period, the ratio of (a)
Consolidated EBITDA for such period, plus Slotting Fees amortization during such
period, minus Slotting Fee Payments during such period, minus Capital
Expenditures during such period, minus income and franchise taxes paid during
such period to (b) the aggregate of all interest paid in cash during such
period, plus current maturities of long-term debt during such period; PROVIDED,
that any calculation of the Cash Flow Coverage Ratio under Section 5.2(K) which
includes any accounting period in fiscal year 1997 shall exclude (i) Slotting
Fee Payments made by Borrower to Yucaipa during fiscal year 1997 in an amount
not to exceed $8,000,000, (ii) Capital Expenditures made by Borrower during
fiscal year 1997 with respect to Yucaipa stores in an amount not to exceed
$853,000 and (iii) Capital Expenditures made by Borrower during fiscal year 1997
with respect to Borrower's Houston, Texas manufacturing facility in an amount
not to exceed $2,500,000 (collectively, the "Excluded Expenditures"); PROVIDED
FURTHER that, for purposes of calculating the Cash Flow Coverage Ratio for any
fiscal period, any such Excluded Expenditure or portion thereof shall be
included in any such accounting period only to the extent that such Excluded
Expenditure or portion thereof was actually paid or disbursed in such accounting
period.
CHANGE OF CONTROL - any event, transaction or occurrence as a result of
which any person or group (within the meaning of Rule 13d-5 of the Exchange Act
as in effect on the Closing Date) shall own, directly or indirectly, more than
fifty percent (50%) of the aggregate economic and voting rights associated with
the ownership of the issued and outstanding voting stock of all classes of
Borrower on a fully diluted basis.
CLOSING DATE - December 27, 1996.
COMMISSION - the Securities and Exchange Commission.
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CONSOLIDATED EBITDA - for any Person and its Consolidated Subsidiaries, for
any period, the net income (or net loss) of such Person and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP, plus (a) the
sum, without duplication, of (i) gross interest expense for such period minus
gross interest income for such period, in each case determined in accordance
with GAAP, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense net of negative goodwill amortization (other than
amortization of Slotting Fees) and (v) extraordinary or unusual non-cash losses
(PROVIDED such extraordinary or unusual losses do not at any time result in a
cash outlay by such person), less (b) extraordinary gains, each determined on a
consolidated basis for such Person and its Consolidated Subsidiaries.
CONSOLIDATED NET INTEREST EXPENSE - for any Person and its Consolidated
Subsidiaries for any period, gross interest expense of such Person and its
Consolidated Subsidiaries for such period determined in conformity with GAAP
(not including the Deferred Interest accrued during such period), less the
following for such Person and its Consolidated Subsidiaries determined in
conformity with GAAP: (i) the sum of (a) interest income for such period and
(b) gains for such period on Hedging Agreements (to the extent not included in
interest income above and to the extent not deducted in the calculation of such
gross interest expense), plus the following for such Person and its Consolidated
Subsidiaries determined in accordance with GAAP: (ii) the sum of (a) losses for
such period on Hedging Agreements (to the extent not included in such gross
interest expense) and (b) the expending of upfront costs or fees for such period
associated with Hedging Agreements (to the extent not included in gross interest
expense).
CONSOLIDATED SUBSIDIARY - of a Person at any time shall mean each of the
Subsidiaries of such Person whose accounts are or should in accordance with GAAP
be consolidated with those of such Person.
CONSOLIDATED TANGIBLE NET WORTH - with respect to a Person and its
Consolidated Subsidiaries, the excess of (i) the aggregate net book value of the
assets (excluding goodwill unamortized non-compete agreements, unamortized
transaction costs in connection with the Restructuring and other intangible
assets classified as such in accordance with GAAP) (but including Slotting Fees)
of such Person and its Consolidated Subsidiaries on a consolidated basis after
all appropriate adjustments in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence, depreciation and
amortization and excluding the amount of any write-up or revaluation of any
asset) less (ii) the Consolidated Total Liabilities of such Person and its
Consolidated Subsidiaries on a consolidated basis, in each case computed and
combined in accordance with GAAP.
CONSOLIDATED TOTAL LIABILITIES - for a Person and its Consolidated
Subsidiaries, at any date, without duplication, all obligations which in
conformity with GAAP would be included in determining total liabilities as shown
on the liabilities side of a balance sheet of such Person (except that the Notes
of Borrower issued in connection with this Agreement reflected on the balance
sheet shall be included at their face value) and its Consolidated Subsidiaries
and, includes, without limitation, in any event, all Indebtedness of such Person
and its Consolidated Subsidiaries at such date whether or not the same would be
shown.
CONTROL (and with correlative meaning, CONTROLS, CONTROLLED or CONTROLLING)
- - the possession, directly or indirectly, of power either to (i) vote 10% or
more of the Voting Stock or (ii) direct or cause the direction of the management
and policies of a Person, whether by
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contract or otherwise; and, as to a natural Person, such Person's spouse,
parents, siblings and lineal descendants.
CURRENT SENIOR LOAN AGREEMENT - the Loan and Security Agreement, dated as
of May 29, 1996, among the Senior Agent, Senior Lenders and Borrower, as the
same may be further modified, amended or supplemented after the execution and
delivery hereof.
CURRENT SENIOR LOAN DOCUMENTS - the Current Senior Loan Agreement and any
and all agreements, instruments and documents executed in connection with the
Current Senior Loan Agreement, as the same may be further modified, amended or
supplemented after the execution and delivery hereof.
CURRENT SUBORDINATION AGREEMENT - the subordination agreement of even date
herewith made by Sanwa and Dilmun, as subordinated creditor, in favor of Sanwa
and the other Senior Lenders under the Current Senior Loan Agreement, which
shall be in the form of Exhibit C hereto as the same may be further modified,
amended or supplemented after the execution and delivery hereof.
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.
DISPOSITION PLAN - the plan of disposition of Borrower's previous retail
operations adopted by the Board of Directors of Borrower in June 1995.
DOLLARS and the symbol $ - lawful money of the United States of America.
EMPLOYEE PLAN - an employee benefit plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and maintained (or that was maintained at any time
during the five (5) calendar years preceding the date of any borrowing
hereunder) for employees of Borrower or any of its ERISA Affiliates.
ENVIRONMENTAL ACTIONS - refers to any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgement, letter or other communication from any governmental
agency, department, bureau, office or other authority, or any third party
involving violations of Environmental Laws or Releases of Hazardous Materials
(i) from any assets, properties or businesses of Borrower or any of its
Subsidiaries or any predecessors in interest, (ii) from or onto any adjoining
properties or businesses or (iii) from or onto any facilities which received
Hazardous Materials generated by Borrower or any of its Subsidiaries or any
predecessors in interest.
ENVIRONMENTAL LAWS - means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601, ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act
(42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.) and the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.), as such laws may be amended or supplemented from time to
time, and any other present or future federal, state, local or foreign statute,
ordinance, rule, regulation, order, judgment,
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decree, permit, license or other binding determination of any Governmental
Authority imposing liability or establishing standards of conduct for
protection of the environment.
ERISA - the Employee Retirement Income Security Act of 1974, as amended
from time to time, and, unless the context otherwise requires, the rules and
regulations promulgated thereunder from time to time.
ERISA AFFILIATE - with respect to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which such Person
is a member and which would be deemed to be a "controlled group" within the
meaning the Sections 414(b), (c), (m) and (o) of the Internal Revenue Code.
EVENT OF DEFAULT - as defined in Section 7.1 of this Agreement.
EXCHANGE ACT - the Securities Exchange Act of 1934, as amended from time to
time and all rules and regulations promulgated from time to time thereunder.
FEDERAL FUNDS RATE - for any period, a fluctuating interest rate per annum
equal for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by Agent from three (3) Federal funds
brokers of recognized standing selected by it.
FINANCIAL STATEMENTS - the audited combined financial statements for
Borrower for the fiscal year ended December 29, 1995 and unaudited combined
financial statements of Borrower for the three months ended March 29, 1996, June
28, 1996 and September 27, 1996.
FISCAL YEAR - the 52/53 week period ending on the Friday closest to
December 31 of each year, or such other fiscal year of Borrower and its
Consolidated Subsidiaries that is agreed to in writing by the Senior Agent.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time as promulgated by the American Institute of
Certified Public Accountants or any successor institution or association.
GOVERNMENTAL AUTHORITY - any nation or government, any state or other
political subdivision thereof and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
GROSS-UP TAXES - as defined in Section 3.6(B) of this Agreement.
HAZARDOUS MATERIALS - include (i) any element, compound, or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws, (ii) petroleum and its refined products, (iii) polychlorinated
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biphenyls, (iv) any substance exhibiting a hazardous waste characteristic
including but not limited to corrosivity, ignitability, toxicity or
reactivity as well as any radioactive or explosive materials and (v) any raw
materials, building components, including but not limited to
asbestos-containing materials and manufactured products containing Hazardous
Materials.
HEDGING AGREEMENT - any interest rate swap, collar, cap, floor or a forward
rate agreement or other agreement regarding the hedging of interest rate risk
exposure executed in connection with hedging the interest rate exposure of
Borrower, and any confirming letter executed pursuant to such agreement, all as
further amended, modified or supplemented from time to time.
HOLDER - as defined in the Warrant.
INDEBTEDNESS - as to any Person, without duplication, (i) indebtedness for
borrowed money (ii) indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices), (iii) indebtedness
evidenced by bonds, debentures, notes or other similar instruments (other than
performance, surety and appeal or other similar bonds arising in the ordinary
course of business), (iv) obligations and liabilities secured by a Lien upon
property owned by such Person, whether or not owing by such Person and even
though such Person has not assumed or become liable for the payment thereof, (v)
obligations and liabilities directly or indirectly guaranteed by such Person,
(vi) obligations or liabilities created or arising under any conditional sales
contract or other title retention agreement with respect to property used and/or
acquired by such Person, even though the rights and remedies of the lessor,
seller and/or lender thereunder are limited to repossession of such property
(excluding forward coffee purchase contracts), (vii) Capitalized Lease
Obligations, (viii) all liabilities in respect of letters of credit, acceptances
and similar obligations created for the account of such Person and (ix) net
liabilities of such Person under interest rate cap agreements, interest rate
swap agreements, foreign currency exchange agreements and other Hedging
Agreements or arrangements each calculated on a basis reasonably satisfactory to
the Senior Agent and in accordance with accepted practice.
INDEMNITIES - as defined in Section 10.1 of this Agreement.
INTEREST - as defined in Section 3.1(A) of this Agreement.
INTEREST PAYMENT DATE - as defined in Section 3.4(B) of this Agreement.
INTERNAL REVENUE CODE - the Internal Revenue Code of 1986, as amended from
time to time and all rules and regulations from time to time promulgated
thereunder.
INVENTORY - all goods and merchandise of Borrower and its Subsidiaries
including, but not limited to, all raw materials, work in process, piece goods,
finished goods, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired.
LENDER - each of Dilmun, its respective assignees pursuant to Section 10.6
hereof and any other Bank hereunder, and in the event of the issuance of the
Warrant Notes, Holder.
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LIEN - any mortgage, deed of trust, pledge, lien, security interest, charge
or other encumbrance or security arrangement of any nature whatsoever, including
but not limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security.
LOAN - as defined in Section 2.1 of this Agreement.
LOAN ACCOUNT - the account of Lender at Chase Manhattan Bank, London,
England, Account No. 178-66-301, Swift No. CHASGB2L, CHIPS UID No. 018646, to
which payments shall be made pursuant to Section 3.5 of this Agreement, or such
other account as may be specified by Lender for such purpose, by notice to
Borrower.
LOAN DOCUMENTS - this Agreement, the Warrant and the Note.
MATERIAL ADVERSE CHANGE - any change with respect to or affecting Borrower
or any of its Subsidiaries, having a Material Adverse Effect.
MATERIAL ADVERSE EFFECT - as determined by the Required Banks in their
reasonable business judgment, a material adverse effect upon (i) the assets,
business, operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries, taken as whole, (ii) the ability of Borrower to
perform its obligations under any Loan Document or (iii) the legality, validity
or enforceability of any Loan Document; notwithstanding that such extent does
not of itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect.
MATERIAL CONTRACT - with respect to any Person, each contract to which such
Person is a party involving aggregate consideration payable to or by such Person
of Five Hundred Thousand Dollars ($500,000) or more (other than contracts that
by their terms may be terminated by any party thereto in the ordinary course of
its business upon less than 60 days notice) or otherwise material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
MATURITY DATE - as defined in Section 2.2 of this Agreement.
MAXIMUM RATE - as defined in Section 3.1(B) of this Agreement.
MULTIEMPLOYER PLAN - a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA for which Borrower or any ERISA Affiliate has contributed
to, or has been obligated to contribute to, during the six (6) years preceding
the date hereof.
NON-EXCLUDED TAXES - Taxes arising from (i) a change described in Section
3.6(C) of this Agreement, (ii) Borrower's failure to exercise reasonable efforts
described in Section 3.6(E) of this Agreement or (iii) the recharacterization of
payments under this Agreement as other than payments of interest and principal
pursuant to Section 163(e)(5)(B) of the Internal Revenue Code.
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NOTE - the senior subordinated promissory note or notes to be made by
Borrower on the Closing Date in favor of Lender to evidence the Loan from
Dilmun, which shall be in the form of Exhibit A annexed hereto, and , if issued
pursuant to the Warrant, the Warrant Notes to evidence the Loan from Holder, in
the form of Exhibit A annexed to the Warrant, and any note or notes issued in
replacement or substitution therefor, as any such note or notes may be further
amended, modified, or supplemented from time to time after the execution and
delivery hereof.
OBLIGATIONS - (i) the obligations of Borrower to pay, as and when due and
payable (by scheduled maturity or otherwise), all amounts from time to time
owing by it in respect of any Loan Document, whether for principal, Interest
(including, without limitation, all interest that accrues after the commencement
of any case, proceeding or other action relating to bankruptcy, insolvency or
reorganization of Borrower), fees or otherwise and (ii) the obligations of
Borrower to perform or observe all of its other obligations from time to time
existing under any Loan Document.
OTHER TAXES - as defined in Section 3.6(A) of this Agreement.
PERMITTED INVESTMENTS - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper, maturing not more than one (1) year after the date of
issue rated P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Ratings Group, (iii) overnight bank deposits, certificates of deposit and
bankers' acceptances, in each case maturing not more than one (1) year after the
date of issue, issued by commercial banking institutions and money market or
demand deposit accounts maintained at commercial banking institutions, each of
which is a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than One Hundred Million Dollars
($100,000,000), (iv) repurchase agreements having maturities of not more than
one hundred eighty (180) days from the date of acquisition which are entered
into with major money center banks included in the commercial banking
institutions described in clause (iii) above and which are secured by readily
marketable direct obligations of the government of the United States of America
or any agency thereof, and (v) investments by Borrower in its Subsidiaries.
PERSON - an individual, partnership, association, corporation, limited
liability company, joint stock or other company, entity, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
PREPAYMENT DATE - any date upon which the Loan (or any portion thereof) is
being prepaid pursuant to Section 3.3 of this Agreement.
PRIVATE PLACEMENT MEMORANDUM - the Confidential Private Placement
Memorandum, dated October 1996 with respect to the issuance of $10,000,000
Senior Subordinated Notes due 2003 with Warrants to Purchase Common Stock (and
all Exhibits thereto) delivered by Borrower in connection with the transactions
contemplated by this Agreement, including financial information delivered in
writing by Borrower to Dilmun through December 16, 1996.
PRO RATA SHARE - means with respect to any Lender, a fraction (expressed as
a percentage), the numerator of which shall be the aggregate unpaid principal
amount of the Loan
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represented by any Note held by such Lender and the denominator of which
shall be the aggregate unpaid principal amount of the Loan.
RELEASE - any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, seeping, migrating, dumping, or
disposing of any Hazardous Material (including the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Material) into the indoor or outdoor environment, including ambient air, soil,
surface or ground water.
REPLACEMENT SUBORDINATION AGREEMENTS - all subordination agreements (other
than the Current Subordination Agreement) entered into by Lender, Borrower and
the Senior Agent and/or Senior Lenders under any Senior Loan Agreement, pursuant
to which Lender shall subordinate the Obligations to Senior Indebtedness
substantially on the same terms as in the Current Subordination Agreements, as
further amended, modified or supplemented from time to time after the execution
and delivery hereof.
REPORTABLE EVENT - an event described in Section 4043 of ERISA (other than
an event not subject to the provision for thirty (30) day notice to the Pension
Benefit Guaranty Corporation under the regulations promulgated under such
Section).
REQUIRED BANKS - Lender or Banks, in each case holding, in the aggregate,
any Note or Notes evidencing at least sixty-six and two-thirds percent (66-2/3%)
of the aggregate principal amount of the Loan.
REQUIRED SENIOR LENDERS - the Required Lenders, as defined in the Current
Senior Loan Agreement, or any analogous term, as defined in any other Senior
Loan Agreement.
SANWA - Sanwa Business Credit Corporation.
SECURITIES ACT - the Securities Act of 1933, as amended from time to time
and all rules and regulations from time to time promulgated thereunder.
SECURITY - shall have the same meaning as in Section 2(l) of the Securities
Act.
SENIOR AGENT - Sanwa, in respect of the Current Senior Loan Documents, or
any replacement agent thereunder, or in the case of any other Senior Loan
Agreement, the agent for the Senior Lenders thereunder.
SENIOR INDEBTEDNESS - the "Sanwa Debt" as such term is defined in the
current Subordination Agreement, or any like term as defined in any Replacement
Subordination Agreements.
SENIOR LENDERS - any and all lenders that provide financial accommodation,
advances and/or credit under any Senior Loan Agreement.
SENIOR LOAN AGREEMENTS - the Current Senior Loan Documents and any and all
agreements (and any and all instruments and documents delivered in connection
therewith) that constitute amendments, modifications, supplements, extensions,
renewals, rollovers, refundings
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and refinancings of the Current Senior Loan Documents and pursuant to which
financial accommodation, advances and/or credit are provided to Borrower or
any of its Subsidiaries.
SLOTTING FEE PAYMENTS - for any applicable fiscal period, any payments made
by Borrower, whether by cash, credit or otherwise, during such period with
respect to Slotting Fees.
SLOTTING FEES - all fees payable by Borrower or its Subsidiaries under a
contract with a customer for a designated (a) amount of shelf space of such
customer for a designated length of time or (b) poundage of coffee.
STRUCTURING FEE - as defined in Section 3.2 of this Agreement.
SUBORDINATION AGREEMENTS - the Current Subordination Agreement and any
Replacement Subordination Agreements.
SUBSIDIARY - with respect to any Person, any other Person of which such
Person owns or controls the voting of, directly or indirectly through one or
more intermediaries, more than fifty percent (50%) of the Voting Stock or other
ownership interests representing more than fifty percent (50%) of the ordinary
voting power of such entity at the time of determination.
TAX - any tax, levy, impost, duty, withholding, assessment, fee or other
charge which is assessed, levied or imposed or calculated for any government,
governmental, semi-governmental administration fiscal or judicial body,
department, commission, authority, tribunal agency or entity (including without
limitation any penalty, addition to tax or interest payable in connection or
with any failure to pay or any delay in paying any of the same).
TERMINATION EVENT - (i) a Reportable Event with respect to any Employee
Plan, (ii) any event that causes Borrower or any of its ERISA Affiliates to
incur material liability under Section 409, 502, 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Internal Revenue
Code, (iii) the filing of a notice of intent to terminate an Employee Plan under
Section 4041(c) of ERISA, (iv) the institution of proceedings by the Pension
Benefit Guaranty Corporation to terminate an Employee Plan or (v) any other
event or condition that would constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Employee
Plan, which events described in clauses (i) through (v) above could reasonably
be likely to have a Material Adverse Effect.
TRADEMARK RIGHTS - as defined in Section 4.20 of this Agreement.
VOTING STOCK - (i) 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), (ii) other ownership interests having ordinary voting power with
respect to a Person or (iii) Securities or other interests convertible into, or
exercisable or exchangeable for, Securities or other ownership interests of the
type described in clause (i) or (ii) above.
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WARRANT - the Warrant, dated of even date herewith, from Borrower to BIB
or its designee(s), for the purchase of up to 1,245,000 shares of common
stock of Borrower which shall be in the form of Exhibit E annexed hereto.
WARRANT NOTE - the senior subordinated promissory note or notes, if
issued by Borrower to Holder pursuant to the Warrant to evidence the Loan
from Holder, in the form of Exhibit A annexed to the Warrant.
1.2 ACCOUNTING TERMS. Unless otherwise expressly provided herein, all
accounting terms not specifically defined herein shall be construed in
accordance with GAAP consistent with the application of GAAP in the
preparation of the Financial Statements, and all financial data pursuant to
this Agreement shall be prepared in accordance with such principles.
1.3 CERTAIN MATTERS OF CONSTRUCTION. Terms defined herein in the
singular shall have the correlative meaning when used in the plural and vice
versa. 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. Any pronoun used shall be deemed to refer
to the masculine, feminine and neuter genders. The Section titles, table of
contents and list of exhibits appear as a matter of convenience only and
shall not affect the interpretation of this Agreement. All references to the
knowledge of Borrower (and phrases of similar import) shall include the
knowledge of each of the Subsidiaries of Borrower.
1.4 TIME REFERENCES. Unless otherwise indicated herein, all references
to time of day refer to Eastern standard time or Eastern daylight saving
time, as in effect in New York City on such day. For purposes of the
computation of a period 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;" PROVIDED, HOWEVER, that with respect
to a computation of fees or interest payable to Lender, such period shall in
any event consist of at least one (1) full day.
SECTION 2. THE LOAN
2.1 THE LOAN. Dilmun shall make a loan to Borrower in the principal
amount of Fifteen Million Dollars ($15,000,000) which shall be funded in full
on the Closing Date, and following the Closing Date, Holder may make a loan
to Borrower in such amounts and at such times as set forth in the Warrant
(collectively, the "Loan"). The proceeds of the Loan from Dilmun shall be
applied by Borrower solely in the amounts and for the purposes set forth on
Schedule 2.1 hereto. The proceeds of the Loan from Holder, if made, shall
be applied by Borrower to the working capital of Borrower, or as otherwise
agreed between Borrower and Holder. The Loan from Dilmun shall be evidenced
by the Note in favor of Lender in the form of Exhibit A annexed hereto. The
Loan from Holder, if made, shall be evidenced by the Warrant Note, in the
form of Exhibit A to the Warrant. The Loan shall be payable in accordance
with the terms of this Agreement and the Notes.
2.2 REPAYMENT OF THE LOAN. The outstanding principal amount of the Loan
shall be repaid on December 26, 2002 (the "Maturity Date").
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SECTION 3. INTEREST, FEES, PREPAYMENTS AND REPAYMENT
3.1 INTEREST.
(A) Interest ("Interest") shall accrue (i) from and after the
Closing Date, on the outstanding principal amount of the Loan from Dilmun, at
the rate of eleven and one-quarter percent (111/4%) per annum, and (ii) if
applicable, from and after the dates the Warrant Notes are issued, on the
outstanding principal amount of the Loan from Holder at the rate of sixteen
percent (16%) per annum; in each case, compounded quarterly, on the basis of
twelve (12), thirty (30) day months elapsed over a year of three hundred
sixty (360) days.
(B) In no contingency or event whatsoever shall the aggregate of all
amounts, including, without limitation, any Interest, deemed to be interest
hereunder or under the Note and charged or collected pursuant to the terms of
this Agreement or pursuant to the Note exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Rate"). If, in any
calendar quarter or any other period during which Interest shall accrue
hereunder, any interest rate, absent such limitation, would have exceeded the
Maximum Rate, then the interest rate in respect of Interest for that period
shall be the Maximum Rate, and, if in future periods, that interest rate in
respect of Interest would otherwise be less than the Maximum Rate, then that
interest rate shall remain at the Maximum Rate until such time as the amount
of Interest paid hereunder equals the amount of Interest which would have
been paid if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the Obligations under this Agreement, the total
amount of Interest paid or accrued under the terms of this Agreement is less
than the total amount of Interest which would have been paid or accrued if
the interest rates set forth in this Agreement had at all times been in
effect, then Borrower shall, to the extent permitted by applicable law, pay
Lender an amount equal to the difference between (i) the lesser of (a) the
amount of Interest which would have been charged if the Maximum Rate had, at
all times, been in effect or (b) the amount of Interest which would have
accrued had the interest rates set forth in this Agreement, at all times,
been in effect and (ii) the amount of Interest actually paid or accrued under
this Agreement. In the event that a court determines that Lender has received
Interest and other charges hereunder in excess of the Maximum Rate, such
excess shall be deemed received on account of, and shall automatically be
applied to reduce, the Obligations other than Interest, in the inverse order
of maturity, and if there are no Obligations outstanding, Lender shall refund
to Borrower such excess.
3.2 STRUCTURING FEE. Borrower shall pay Agent on January 3, 1997, an
amount equal to Three Hundred Thirty Seven Thousand Five Hundred Dollars
($337,500) (which amount equals two and one-quarter percent (21/4%) of
Fifteen Million Dollars ($15,000,000)) (the "Structuring Fee"), representing
certain additional funding costs in relation to the Loan. The Structuring
Fee shall be deemed to be fully earned and nonrefundable upon the funding of
the Loan. In addition, Borrower shall pay Agent on the Closing Date, an
amount equal to Agent's and any other Bank's reasonable out-of-pocket costs
and expenses incurred relating to the Loan, including but not limited to the
fees and expenses of legal counsel and tax advisors to Agent or any Bank.
3.3 OPTIONAL PREPAYMENTS. From and after the Closing Date, Borrower may
prepay the Loan, in whole or in part, at any time, upon at least five (5)
Business Days' irrevocable
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prior written notice to Lender. Any partial prepayment of the outstanding
principal amount of the Loan shall be in the amount of Five Hundred Thousand
Dollars ($500,000) or in integral multiples of Five Hundred Thousand Dollars
($500,000). Any prepayment of principal on any Prepayment Date pursuant to
this Section 3.3 shall be accompanied by payment of the amount of:
(i) all Obligations (other than principal and Interest)
due and payable on such Prepayment Date; and
(ii) all Interest accrued (and not yet paid) through such
Prepayment Date on the outstanding principal amount of the Loan being prepaid.
3.4 PAYMENTS. Except where evidenced by notes or other instruments
issued or made by Borrower to Lender specifically containing payment
provisions which are expressly in conflict with this Section 3.4 (in which
event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as set forth in this
Section 3.4.
(A) The principal amount of the Loan shall be due and payable as
provided in Sections 2.2, 3.3 or 7.1 hereof, as applicable.
(B) Interest accrued on the outstanding principal amount of the
Loan shall be due and payable in arrears on the earliest of (i) the last day
of March, June, September and December of each year commencing on March 31,
1997 (each such date being sometimes referred to herein as an "Interest
Payment Date"), (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the
Obligations, (iii) any Prepayment Date or (iv) the Maturity Date.
(C) Except as may be otherwise provided in Section 3.2 hereof,
costs, fees, expenses and any Obligations payable pursuant to this Agreement
other than principal and Interest shall be due and payable by Borrower to
Lender or to any other Person designated by Lender in writing (i) on demand,
or (ii) whether or not any demand has been made, upon (a) the occurrence of
an Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, (b) any Prepayment Date or (c) the
Maturity Date.
3.5 PAYMENT PROCEDURES. Each payment payable by Borrower to Lender
under this Agreement, the Note or any of the other Loan Documents shall be
made directly to Lender, to the Loan Account, not later than 2:00 p.m., on
the due date of each such payment, by wire transfer of immediately available
federal funds in United States Dollars. If any sum would, but for the
provisions of this Section 3.5, the Note or any of the other Loan Documents,
become due and payable to Lender on any day which is not a Business Day, then
such sum shall become due and payable on the Business Day next succeeding the
day on which such sum would otherwise have become due and payable hereunder
or thereunder, and the Interest so payable to Lender shall be adjusted by
Lender accordingly.
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3.6 TAXES.
(A) OTHER TAXES. Borrower shall pay any present or future stamp,
documentary, excise, property or similar Taxes, charges or levies that arise
from any payment made under the Loan Documents by Borrower or from the
execution, delivery, performance, release, discharge, amendment, enforcement,
attempted enforcement or registration of, or otherwise with respect to, this
Agreement, any other Loan Document or any transaction contemplated by this
Agreement or any other Loan Document as any and all of the foregoing relate
to Borrower (hereinafter referred to as "Other Taxes").
(B) TAX INDEMNITY. Borrower shall indemnify Lender for the full
amount of Non-Excluded Taxes and Other Taxes, including, without limitation,
any Non-Excluded Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 3.6 (such Taxes being hereinafter referred to as
"Gross-Up Taxes") which Borrower is required to make a deduction for or which
are paid by such Lender in respect of either the Loan Documents or payments
made by Borrower under the Loan Documents (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto, whether or not such Non-Excluded
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days from the date such
Lender makes written demand therefor.
(C) CHANGE IN ACCOUNT, BRANCH, OR LAW ETC. If Borrower is required
by law to make any deductions in respect of Taxes from any payments under
this Agreement due to (a) a change of account, permanent establishment or
other branch through which Borrower makes the payments under this Agreement
or (b) a change in the applicable law, regulation or treaty, or any official
application or interpretation thereof, Borrower shall promptly notify Lender
of such change, the Taxes arising from the change shall be considered
Non-Excluded Taxes and Borrower shall indemnify Lender in accordance with
Section 3.6(B).
(D) SURVIVAL OF OBLIGATIONS. Without prejudice to the survival of
any other agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 3.6 shall survive the payment in full by
Borrower of all principal and Interest hereunder, until six (6) months after
the expiration of the applicable statute of limitation with respect to any
Gross-Up Taxes, Non-Excluded Taxes and Other Taxes.
(E) FILINGS BY LENDER. (i) Borrower shall use reasonable efforts in
good faith to file (or update the filing of) any certificate or document
provided or requested by the Lender or take any reasonable action requested
by the Lender if the filing of such certificate or document or the taking of
such action would avoid the need for, reduce the amount of, or assist in the
recovery of any payment of Taxes, or avoid the circumstances giving rise to
the need for such payment and (ii) in the event Borrower fails to exercise
the reasonable efforts in good faith described in Section 3.6(E)(i) above,
the Taxes arising from such failure shall be considered Non-Excluded Taxes
and Borrower shall indemnify Lender in accordance Section 3.6(B).
(F) RECOVERY OF TAXES. The parties to this Agreement agree to
reasonably assist each other (consistent with its pre-existing internal
policies applied on a nondiscriminatory basis and legal and regulatory
restrictions) to recover any Taxes paid in connection with the Agreement or
transactions contemplated hereunder.
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(G) ADDITIONAL INTEREST. All payments made by a party to this
Agreement pursuant to this Section 3.6 shall to the extent permitted by law
be treated by such party as additional interest.
3.7 [Intentionally omitted]
3.8 APPLICATION OF PAYMENTS AND COLLECTIONS. 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 Borrower, and 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 any person designated by Lender against the Obligations, in such
manner as Lender may deem advisable consistent with the terms of this
Agreement, notwithstanding any entry by Lender upon any of its books and
records. Notwithstanding the foregoing provisions of this Section 3.8,
unless otherwise specified by Lender, any payment or collection in respect of
any of the Obligations (other than quarterly payments of Interest pursuant to
Section 3.4(B) hereof) shall be applied by Lender (a) first, to the payment
of all Obligations (if any) other than the principal and Interest due and
payable at such time, (b) next, to the payment of all Interest which shall
then be due and payable on the principal amount of the Loan and (c) next, to
the payment of the outstanding principal amount of the Loan.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and to make advances
hereunder, Borrower represents and warrants to Lender, on the date hereof and
on each Closing Date, that:
4.1 ORGANIZATION, GOOD STANDING, ETC. Each of Borrower and its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its organization set forth in
Schedule 4.5 hereto, (ii) has all requisite power and authority to conduct
its business as now conducted and as presently contemplated and, in the case
of Borrower, to make the borrowings hereunder and to consummate the
transactions contemplated by the Loan Documents and (iii) is duly qualified
to do business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary, except where the failure
to so qualify individually or in the aggregate is not reasonably likely to
have a Material Adverse Effect.
4.2 AUTHORIZATION, ETC. The execution, delivery and performance by
Borrower of each of the Loan Documents (i) have been duly authorized by all
necessary corporate action, (ii) do not and will not contravene the charter,
by-laws, articles of organization, operating agreement or any applicable law
or any material contractual restriction binding on or otherwise affecting it
or any of its properties, (iii) do not and will not result in the violation,
breach of, conflict with, accelerate the due date of any payments under, or
(without the giving of notice or the passage of time or both) entitle any
party to terminate or call a default under any Material Contract to which the
Borrower or any of its Subsidiaries is a party, or to which any of their
respective assets are subject or otherwise bound, (iv) do not and will not
result in or require the
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creation of any Lien, upon or with respect to any of its properties and (v)
do not and will not result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties, except where such
suspension, revocation, impairment, forfeiture or nonrenewal is not
reasonably likely to have a Material Adverse Effect. Except as set forth on
Schedule 4.2 hereto, no consent of any party to any Material Contract to
which Borrower or any of its Subsidiaries is a party, or to which any of
their respective assets are subject or otherwise bound, is required.
4.3 GOVERNMENTAL APPROVALS. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or
other regulatory body is required in connection with the due execution,
delivery and performance by Borrower of each of the Loan Documents.
4.4 ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is, and each other
Loan Documents, when delivered hereunder, will be, legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except to the extent that the enforceability thereof
may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting generally,
the enforcement of creditors' rights and remedies and by general principles
of equity.
4.5 SUBSIDIARIES.
(A) Schedule 4.5(A) hereto is a complete and correct description of
the name, jurisdiction of incorporation and ownership of the outstanding
capital stock of each Subsidiary of Borrower in existence on the date hereof.
Except as set forth on Schedule 4.5(A) hereto, all shares of such stock
owned by Borrower or one or more of its Subsidiaries, as indicated in such
Schedule, are owned free and clear of all Liens and all such shares have been
duly authorized and validly issued and are fully paid and non-assessable.
(B) No such Subsidiary has issued any Securities convertible into,
or exchangeable for capital stock of such Subsidiary, and there are no
outstanding options or warrants to purchase capital stock of any such
Subsidiary of any class or kind, and there are no agreements, voting trusts
or understandings with respect thereto or affecting in any manner the sale,
pledge, assignment or other disposition thereof, including, without
limitation, any right of first refusal, options, redemption, call or other
rights with respect thereto, whether similar or dissimilar to any of the
foregoing, other than those set forth on Schedule 4.5(B).
4.6 LITIGATION. Except as set forth on Schedule 4.6 hereto, there is no
pending or, to the best of Borrower's knowledge, threatened claim, action,
suit or proceeding affecting Borrower or any of its Subsidiaries before any
court or other Governmental Authority or any arbitrator, and to the best of
Borrower's knowledge, there are no presently existing facts or circumstances
likely to give rise to any such claim, action, suit or proceeding. There is
no pending or, to the best of Borrower's knowledge, threatened claim, action,
suit or proceeding affecting Borrower or any of its Subsidiaries before any
court or other Governmental Authority or any arbitrator which is reasonably
likely to have a Material Adverse Effect.
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4.7 FINANCIAL CONDITION.
(A) The Financial Statements, copies of which have been delivered to
Lender, fairly present the financial condition of Borrower and its
Consolidated Subsidiaries as at the respective dates thereof and the results
of operations of Borrower and its Consolidated Subsidiaries for the fiscal
periods ended on such respective dates, all in accordance with GAAP, and
since December 29, 1995 (as modified by the projections contained in the
Private Placement Memorandum) there has been no Material Adverse Effect. The
accountants whose report on the audited Financial Statements is filed with
the Commission are, and during the periods covered by their report(s) were,
independent certified public accountants with respect to Borrower within the
meaning of the Securities Act and the rules and regulations thereunder.
Except as set forth on Schedule 4.7(A), since September 27, 1996, neither
Borrower nor any of its Subsidiaries has (i) undertaken any liability or
obligation, direct or contingent, except for liabilities or obligations
undertaken in the ordinary course of business, (ii) issued any securities or
incurred any liability or obligation, primary or contingent, for borrowed
money, (iii) entered into any transaction not in the ordinary course of
business, (iv) made any change in its accounting methods or practices, (v)
taken any action nor has any event occurred which would require the filing of
a Current Report on Form 8-K by Borrower with the Commission, (vi) declared
or paid any dividend or made any distribution on any of its capital stock or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
otherwise acquire any shares of its capital stock or (vii) incurred any
Indebtedness.
(B) Borrower has heretofore furnished to Lender in the Private
Placement Memorandum pro forma consolidated statements of financial condition
and pro forma consolidated statements of operations of Borrower and its
Consolidated Subsidiaries as of the dates and for the periods specified
therein. Such pro forma statements are the unaudited consolidated financial
statements of Borrower and its Consolidated Subsidiaries, as of the dates and
for the periods specified therein, adjusted to give effect to the financing
contemplated by this Agreement and the Current Senior Loan Documents and
certain other events and assumptions as set forth therein. Such pro forma
financial statements (including any related schedules and notes) have been
prepared on the basis of the statements and assumptions set forth therein and
the projections and the assumptions expressed therein were reasonably based
on the information available to Borrower at the time so furnished.
(C) Borrower has heretofore furnished to Lender in the Private
Placement Memorandum projected balance sheets, income statements and
statements of cash flow prepared on an annual basis for the years specified
therein. Such projections were believed at the time furnished to be
reasonable, have been prepared on a reasonable basis and in good faith by
Borrower, and have been based on assumptions believed by Borrower to be
reasonable at the time made and upon the best information then reasonably
available to Borrower.
4.8 COMPLIANCE WITH LAW, ETC. Neither Borrower nor any of its
Subsidiaries is in violation of its charter or by-laws, articles of
organization or operating agreement, as the case may be, any law or any
material term of any agreement or instrument binding on or otherwise
affecting it or any of its properties, except where such violation of an
instrument or agreement is not reasonably likely to have a Material Adverse
Effect. Borrower has timely made all filings required to be made under the
Exchange Act and such filings have complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
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4.9 ERISA. Schedule 4.9 hereto sets forth each Employee Plan and
Multiemployer Plan. Except as set forth on Schedule 4.9 hereto, (i) each
Employee Plan is in substantial compliance with the applicable provisions of
ERISA and the Internal Revenue Code, (ii) no Termination Event has occurred
nor is reasonably expected to occur with respect to any Employee Plan, (iii)
the most recent annual report (Form 5500 Series) with respect to each
Employee Plan, including Schedule B (Actuarial Information) thereto, copies
of which have been filed with the Internal Revenue Service and delivered or
made available to Agent, is complete and correct, and since the date of such
report there has been no material adverse change to the Employee Plan, (iv)
no Employee Plan had an accumulated or waived funding deficiency or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Internal Revenue Code at any time during the previous 12
months and (v) no Lien imposed under the Internal Revenue Code or ERISA
exists or is likely to arise on account of any Employee Plan within the
meaning of Section 412 of the Internal Revenue Code at any time during the
previous 12 months. Except as set forth on Schedule 4.9 hereto, none of
Borrower or any of its Subsidiaries or any of their respective ERISA
Affiliates have incurred any withdrawal liability under ERISA with respect to
any Multiemployer Plan, and neither Borrower nor any of its Subsidiaries is
aware of any facts indicating that Borrower or any other Loan Party or any of
their respective ERISA Affiliates may in the future incur any such withdrawal
liability. Except as required by Section 4980B of the Internal Revenue Code,
neither Borrower nor any of its Subsidiaries nor any of their respective
ERISA Affiliates maintains an employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employee of
Borrower or any of its Subsidiaries or any of their respective ERISA
Affiliates or coverage after a participant's termination of employment.
Neither Borrower nor any of its Subsidiaries or any of their respective
ERISA Affiliates have incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act or similar state law, which
remains unpaid or unsatisfied.
4.10 TAXES, ETC. Borrower and its Subsidiaries have, on a timely basis,
properly filed, caused to be filed or have been included in all material Tax
returns, reports and statements (whether federal, provincial, state, local or
otherwise) required to be filed in all jurisdictions in which such returns,
reports and statements are required to be filed. All such Tax returns are
correct and complete in all material respects. Borrower and its Subsidiaries
have, on a timely basis, paid all material Taxes shown thereon to be due
(taking into account any applicable extensions with respect thereto),
together with applicable interest and penalties, except to the extent such
Taxes are contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for
the payment thereof. Borrower and its Subsidiaries have no corporate
acquisition indebtedness within the meaning of Section 279(b) of the Internal
Revenue Code.
4.11 REGULATION U. Neither Borrower nor any of its Subsidiaries is or
will be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Loan will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
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4.12 NATURE OF BUSINESS. Except as set forth on Schedule 4.12, neither
Borrower nor any of its Subsidiaries is engaged in any business other than
the processing, contracting for, roasting, packaging, distribution and sale,
on a wholesale basis, of gourmet coffee and related products and the
Disposition Plan.
4.13 ADVERSE AGREEMENTS, ETC. Neither Borrower nor any of its
Subsidiaries is a party to any agreement or instrument, or subject to any
charter or other corporate restriction or any judgment, order, regulation,
ruling or other requirement of a court or other Governmental Authority or
regulatory body, which materially adversely affects, or, to the best
knowledge of Borrower, in the future is reasonably likely to result in a
Material Adverse Effect.
4.14 HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither Borrower nor
any of its Subsidiaries is (i) a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended or (ii) an "investment company" or an "affiliated person" or
"promoter" of, or "principal underwriter" of or for, an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended.
4.15 PERMITS, ETC. Each of Borrower and its Subsidiaries possesses all
material licenses, permits, approvals and authorizations required for it
lawfully to own and operate its respective businesses.
4.16 TITLE TO PROPERTIES. Each of Borrower and its Subsidiaries has good
and marketable title to all of its properties and assets, free and clear of
all Liens and other types of preferential arrangements, except such as are
permitted by Section 5.2(A) hereof or where the failure to have such title or
the existence of such Liens or arrangements would not, either singly or in
the aggregate, reasonably be likely to result in a Material Adverse Effect.
4.17 FULL DISCLOSURE. No Loan Document or schedule or exhibit thereto
and no certificate, report, statement or other document or information
furnished in writing by or on behalf of Borrower or any of its Subsidiaries
to Lender in connection herewith or with the consummation of the transactions
contemplated hereby, including, without limitation, all filings of Borrower
under the Securities Act and the Exchange Act made prior to the date hereof
and the Private Placement Memorandum, contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained herein or therein not misleading in any material
respect. To the best of Borrower's knowledge, there is no fact reasonably
likely to result in a Material Adverse Effect which has not been set forth in
a footnote included in the Financial Statements or a Schedule hereto.
4.18 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.18, (i)
the operations of Borrower and its Subsidiaries are in compliance with
Environmental Laws, except where non-compliance would not, either singly or
in the aggregate, reasonably be likely to have a Material Adverse Effect,
(ii) there have been no Releases at any of the properties owned or operated
by Borrower or any of its Subsidiaries or a predecessor in interest, or, to
the knowledge of Borrower, at any disposal or treatment facility which
received Hazardous Materials generated by Borrower or any of its Subsidiaries
or any predecessor in interest, except where such Releases would not, either
singly or in the aggregate, reasonably be likely to have a Material Adverse
Effect, (iii) no Environmental Actions have been asserted against Borrower or
any of
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its Subsidiaries or any predecessor in interest, nor does Borrower have
knowledge or notice of any threatened or pending Environmental Actions
against Borrower or any of its Subsidiaries or any predecessor in interest
which would, either singly or in the aggregate, reasonably be likely to have
a Material Adverse Effect and (iv) to the knowledge of Borrower, no
Environmental Actions have been asserted against any facilities that may have
received Hazardous Materials generated by Borrower or any of its Subsidiaries
or any predecessor in interest which, either singly or in the aggregate,
would reasonably be likely to result in a Material Adverse Effect.
4.19 INSURANCE. Borrower and its Subsidiaries keep their properties
adequately insured and maintain (i) insurance to such extent and against such
risks, including fire, as is customary with companies in the same or similar
businesses, (ii) workmen's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by them and (iv) such other insurance as may be
required by law or as may be reasonably required in writing by the Senior
Agent, except in all cases where such failure to do so would not, either
singly or in the aggregate, reasonably be likely to result in a Material
Adverse Effect.
4.20 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES.
(A) Each of Borrower and its Subsidiaries owns or is licensed to use
all material trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights and licenses (collectively "Trademark
Rights") which are necessary for the conduct of the business of such party.
Schedule 4.20(A) hereto sets forth all such Trademark Rights owned or which
are licensed to each of Borrower and its Subsidiaries.
(B) None of Borrower or its Subsidiaries are infringing upon the
rights of others in connection with their use of the Trademark Rights or are
acting adversely to any of such Trademark Rights. There is no claim or
action by any such other person pending, or, to the knowledge of any officer
of Borrower, threatened against Borrower or any of its Subsidiaries with
respect to any of the rights or property referred to in this Section 4.20,
other than those set forth on Schedule 4.20(B).
4.21 SOLVENCY. Immediately prior to and after giving effect to the
transactions contemplated or required to occur by this Agreement and the
Current Senior Loan Agreement: (i) the fair value of the assets of Borrower
exceeds the book value of the liabilities of Borrower; (ii) Borrower is
generally able to pay its debts as they become due and payable; and (iii)
Borrower does not have unreasonably small capital to carry on its business as
it is currently conducted.
4.22 CAPITAL STRUCTURE.
(A) The authorized capital stock of Borrower consists of 15,000,000
shares of Common Stock, of which 10,362,605 are outstanding, 2,700,000 shares
of Class B Common Stock, of which 839,332 are outstanding and 10,000,000
shares of Preferred Stock, of which none are outstanding. Each outstanding
share of capital stock has been duly and validly authorized and issued, fully
paid, and non-assessable, without any personal liability attaching to
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the ownership thereof and has not been issued in violation of any preemptive
rights of stockholders of Borrower.
(B) Borrower has not issued any interests, rights or Securities
convertible into, or exchangeable for, a membership interest any sort of
ownership interest in Borrower, and there are no outstanding options or
warrants to purchase any such membership or ownership interest in Borrower of
any class or kind, and there are no agreements, voting trusts or
understandings with respect thereto or affecting in any manner the sale,
pledge, assignment or other disposition thereof, including, without
limitation, any right of first refusal, option, redemption, call or other
rights with respect thereto, whether similar or dissimilar to any of the
foregoing, other than those set forth on Schedule 4.22(B).
4.23 BROKERAGE, ETC. There are no claims for appraisal fees, brokerage
commissions, finder's fees, investment banking fees or any similar fees in
connection with the transactions contemplated by this Agreement or the
Current Senior Loan Documents, other than those set forth on Schedule 4.23,
and neither Lender nor any other Bank is or will become obligated to pay any
such fees. None of Borrower, any Subsidiary or any Affiliate of Borrower or
any Subsidiary have, directly or indirectly, paid or delivered any fee,
commission, sum of money or item of value to a finder, agent, governmental
official and other Person, which such party knows or has reason to believe
was illegal under any law or regulation of any country, local government or
municipality having jurisdiction.
4.24 MATERIAL CONTRACTS. Set forth on Schedule 4.24 hereto is a complete
and accurate list as of the date hereof of all Material Contracts of Borrower
and its Subsidiaries, showing the parties, subject matter and term thereof
and amendments and modifications thereto. Each such Material Contract (i) is
in full force and effect and is binding upon and enforceable against each of
Borrower and its Subsidiaries that is a party thereto and, to the best of
Borrower's knowledge, all other parties thereto in accordance with its terms,
(ii) has not been otherwise amended or modified and (iii) there exists no
default under any Material Contract by Borrower or any Subsidiary party
thereto or, to Borrower's knowledge, any other party thereto, except to the
extent that the failure of the Material Contracts to comply with the
representations set forth in clauses (i), (ii) or (iii) above, would not, in
any single case or in the aggregate, reasonably be likely to have a Material
Adverse Effect.
4.25 LABOR MATTERS. Except as disclosed on Schedule 4.25, there are
no strikes, work stoppages, labor disputes, decertification petitions, union
organizing efforts, grievances or other controversies pending or, to the best
of Borrower's knowledge after diligent inquiry, threatened, between Borrower
or any Subsidiary and any of its employees, other than employee grievances
arising in the ordinary course of business which, in the aggregate, would not
have a Material Adverse Effect. All collective bargaining agreements, labor
agreements or other contracts with or affecting any employee of Borrower or
any Subsidiary necessary to continue to conduct the business operations of
Borrower or such Subsidiary are in full force and effect. Except as
disclosed on Schedule 4.25, neither Borrower nor any Subsidiary has any
obligation under any collective bargaining agreement or any employment
agreement. To the best of Borrower's knowledge, there is no organizing
activity pending or threatened by any labor union or group of employees.
Except as disclosed on Schedule 4.25, there are no representation proceedings
pending or threatened with the National Labor Relations Board, and no labor
organization or group of employees has made a pending demand for recognition.
There are no
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material complaints or charges pending or threatened to be filed with any
local or Governmental Authority based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment by
Borrower or any Subsidiary of any individual.
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS
5.1 AFFIRMATIVE COVENANTS. So long as any amount owing in respect of
the Obligations (whether or not due) shall remain unpaid, Borrower covenants
that, unless otherwise consented to by the Required Banks in writing, it
shall:
(A) REPORTING REQUIREMENTS. Furnish to Lender:
(i) simultaneously with the delivery of the financial
statements required by this Section 5.1(A), a certificate of an Authorized
Officer, stating (a) that such officer has reviewed the provisions of this
Agreement and the other Loan Documents and has made or caused to be made
under his supervision a review of the condition and operations of Borrower
and its Subsidiaries during the period covered by such financial statements
with a view to determining whether Borrower was in compliance with all of the
provisions of such Loan Documents at the times such compliance is required by
the Loan Documents, and that such review has not disclosed, and such officer
has no knowledge of, the existence during such period of an Event of Default
or Default or, if an Event of Default or such Default existed, describing the
nature and period of existence thereof and the action which Borrower and its
Subsidiaries propose to take or took with respect thereto and (b) a schedule
showing the calculations specified in Section 5.2(K) of this Agreement;
(ii) as soon as possible, and in any event within five
(5) days after the occurrence of an Event of Default or Default, or a
Material Adverse Change, the written statement of an Authorized Officer,
setting forth the details of such Event of Default, Default or Material
Adverse Change and the action which Borrower proposes to take with respect
thereto;
(iii) any and all periodic reports, proxy statements,
financial statements, registration statements, prospectuses and other
material filed by Borrower or any of its Subsidiaries with any securities
exchange or with the Commission or any other governmental or private
regulatory authority or distributed generally to the stockholders of any
class furnished to the Senior Lenders within five (5) days following the date
any such document or report is so furnished, and in the event that there are
no Senior Lenders, the Borrower shall continue to provide such documents on
the same basis to the Lender as set forth in the most recent Senior Loan
Agreement.
(B) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply with all applicable laws, rules, regulations and
orders (including, without limitation, ERISA and Environmental Laws), except
where such failure to comply would not, either in any case or in the
aggregate, reasonably be likely to result in a Material Adverse Effect.
Borrower shall timely make all filings required to be made under the Exchange
Act and such filings shall comply in all material respects with the
requirements of the Exchange Act.
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(C) PRESERVATION OF EXISTENCE, ETC. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary,
except (i) where the failure to maintain and preserve the existence, rights and
privileges of Borrower or its Subsidiaries would not, either in any single case
or in the aggregate, reasonably be likely to result in a Material Adverse
Effect, (ii) where such failure to qualify would not, either in any case or in
the aggregate, reasonably be likely to result in a Material Adverse Effect or
(iii) to the extent permitted under Section 5.2 (D) hereof.
(D) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with GAAP.
(E) INSPECTION RIGHTS. Permit, and cause each of its Subsidiaries to
permit, Agent, or any agents or representatives thereof at any time and from
time to time upon reasonable notice to Borrower during normal business hours to
examine and make copies of and abstracts from their records and books of
account, to visit and inspect their properties, to conduct examinations and to
discuss their affairs, finances and accounts with any of the directors,
officers, managerial employees, independent accountants or other representatives
thereof provided that (i) the foregoing shall be in a manner so as not to unduly
disrupt the business of Borrower or its Subsidiaries and (ii) such notice shall
not be required if an Event of Default has occurred and is continuing.
(F) MAINTENANCE OF PROPERTIES, ETC. Except as may be permitted by
any term of the Senior Loan Documents and as would not reasonably be likely to
have a Material Adverse Effect: (i) at all times do and cause to be done and
cause its Subsidiaries to do and cause to be done, all things necessary to
preserve, renew and keep in full force and effect the rights, licenses, permits,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business; (ii) maintain and operate, and cause each of its
Subsidiaries to maintain and operate, its businesses in the same general manner
in which they are presently conducted and operated; (iii) take, and cause each
of its Subsidiaries to take, all actions which may be required to obtain,
preserve, renew and extend all Permits and other authorizations which are
material to the operation of such businesses; and (iv) and at all times
maintain, preserve and protect, and cause each of its Subsidiaries to maintain,
preserve and protect all property material to the conduct of such businesses and
keep, and cause each of its Subsidiaries to keep, such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times.
(G) MAINTENANCE OF INSURANCE. Maintain for Borrower and its
Subsidiaries with responsible and reputable insurance companies or associations
insurance (including, without limitation, comprehensive general liability and
hazard insurance) with respect to their properties and business, in such amounts
and covering such risks, as is required by any Governmental Authority or other
regulatory body having jurisdiction with respect thereto and as is carried
generally in accordance with sound business practice by companies in similar
businesses similarly situated.
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(H) ENVIRONMENTAL. (i) Keep, and cause each of its Subsidiaries to
keep, any property either owned or operated by it free of any Liens arising
under Environmental Laws and (ii) comply with all Environmental Laws and provide
to Agent documentation of such compliance which Agent reasonably requests,
except where such failure to keep such property free of Liens or to so comply
would not reasonably be likely to result in a Material Adverse Effect.
(I) FURTHER ASSURANCES. Shall, and shall cause each Subsidiary to,
do, execute, acknowledge and deliver, at the sole cost and expense of Borrower
or any such Subsidiary, all such further acts and assurances as Agent may
reasonably require from time to time in order to better assure and confirm unto
Agent and the Banks the rights now or hereafter intended to be granted to Agent
and the Banks under this Agreement, any Loan Document or any other instrument
under which Borrower or any of its Subsidiaries may be or may hereafter become
bound for carrying out the intention or facilitating the performance of the
terms of the Agreement.
(J) TAXES. On a timely basis properly file, cause to be filed or
cause to be included in, and cause each of its Subsidiaries to file, cause to be
filed or cause be included in, all Tax returns, reports and statements (whether
federal, provincial, state, local or otherwise) required to be filed in all
jurisdictions in which such returns, reports and statements are required to be
filed, except to the extent that the failure to take any such action would not,
in any single case or in the aggregate, reasonably be likely to result in a
Material Adverse Effect. All such Tax returns shall be correct and complete in
all respects, except to the extent that the failure of such Tax returns to be
correct and complete would not, in any single case or in the aggregate,
reasonably be likely to result in a Material Adverse Effect. On a timely basis,
pay, and cause each of its Subsidiaries to pay, all Taxes shown thereon to be
due (taking into account any applicable extensions with respect thereto),
together with applicable interest and penalties except to the extent that (i)
such Taxes are contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien which results from the nonpayment
thereof and with respect to which adequate reserves are set aside for the
payment thereof or (ii) the failure to so pay would not, in any single instance
or in the aggregate, reasonably be likely to result in a Material Adverse
Effect.
(K) BOARD OBSERVATION RIGHTS. Agent shall have the right, at any
time and from time to time, to appoint, remove and replace up to two (2)
non-voting observers to the Board of Directors of Borrower. Such observers
shall have the right to attend and observe all meetings of the Board of
Directors and to receive and review any notices of such meetings, written
consents of the Board of Directors of Borrower and other documents and
information at the same time and on the same basis as the directors of
Borrower generally.
(L) NOTICE OF CERTAIN MATTERS. Borrower shall, as soon as possible,
and in any event within five (5) days after Borrower learns of the following,
give written notice to the Agent and Lender of (i) any material litigation
being instituted or threatened to be instituted by or against Borrower or any
Subsidiary in any federal, state, local or foreign court of before any
commission or other regulatory body (federal, state, local or foreign)
including, without limitation, any and all pending or threatened proceedings
with respect to environmental matters, (ii) any labor dispute to which
Borrower or any Subsidiary may become a party and which has had or might have
a Material Adverse Effect, any strikes or walkouts relating to any of its plants
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or facilities, and the expiration of any labor contract to which it is a
party or by which it is bound, (iii) any Event of Default, (iv) any judgment
rendered against Borrower or any Subsidiary and (v) any other event or
occurrence which could have a Material Adverse Effect.
5.2 NEGATIVE COVENANTS. So long as any amount owing in respect of the
Obligations (whether or not due) shall remain unpaid, Borrower shall not,
without the prior written consent of the Required Banks:
(A) LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of its Subsidiaries to
assign or otherwise transfer, any right to receive income, other than:
(i) Liens securing Senior Indebtedness; and
(ii) any other Liens permitted under the terms of the Senior
Loan Agreements.
(B) INDEBTEDNESS. Create, incur or suffer to exist, or permit any of
its Subsidiaries to create, incur or suffer to exist, any Indebtedness, other
than:
(i) Senior Indebtedness; and
(ii) any other Indebtedness permitted under the terms of the
Senior Loan Agreements.
(C) GUARANTIES, ETC. Assume, guarantee, indorse or otherwise become
directly or contingently liable, or permit any of its Subsidiaries to assume,
guarantee, indorse or become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise, to purchase, to
provide funds for payment, to supply funds to or otherwise invest in the debtor
or otherwise to assure the creditor against loss), in connection with any
Indebtedness of any other Person, other than:
(i) guaranties by indorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
(ii) any guaranty in respect of any Senior Indebtedness; and
(iii) any other guaranty permitted under the terms of
the Senior Loan Agreements.
(D) MERGER, CONSOLIDATION, SALE OF ASSETS, ETC.
(i) Merge or consolidate with, or purchase, lease or
otherwise acquire all or substantially all of the assets or properties of, any
Person, or permit any of its Subsidiaries to do any of the foregoing with any
Person; PROVIDED, HOWEVER, that any Subsidiary may be merged into Borrower or
another such Subsidiary, may consolidate with another such Subsidiary or
Borrower, or may purchase, lease or otherwise acquire all or substantially all
of
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the assets or properties of another such Subsidiary so long as (a) such
merger or consolidation would not cause a Default or Event of Default and (b)
Borrower gives Agent at least thirty (30) days' prior written notice of such
merger, consolidation or other acquisition.
(ii) Except for the sale of Borrower's retail operation
pursuant to the Disposition Plan, sell, assign, lease or otherwise transfer or
dispose of, or permit any of its Subsidiaries to sell, assign, lease or
otherwise transfer or dispose of, whether in one transaction or in a series of
related transactions, all or any substantial portion of its properties, rights
or other assets whether now owned or hereafter acquired to any Person; PROVIDED
that (a) Borrower and its Subsidiaries may sell Inventory in the ordinary
course of business, (b) Borrower and its Subsidiaries may dispose of obsolete
or worn-out property in the ordinary course of business and (c) Borrower and
its Subsidiaries may make such dispositions, sales, leases or transfers of
properties, rights and assets as are permitted under the Senior Loan
Agreements.
(E) CHANGE IN NATURE OF BUSINESS; AMEND ORGANIZATIONAL DOCUMENTS.
Make, or permit any of its Subsidiaries to make, any substantial change in the
nature of its business as carried on at the date hereof. Borrower and its
Subsidiaries shall not amend its Articles or Certificate of Incorporation or
by-laws or other organizational documents in a manner which could have a
Material Adverse Effect.
(F) INVESTMENTS, ETC. Make, or permit any of its Subsidiaries to
make, any loan or advance to any Person or purchase or otherwise acquire, or
permit any of its Subsidiaries to purchase or otherwise acquire, any capital
stock, other securities or obligations of, or any interest in, any Person, other
than:
(i) Permitted Investments;
(ii) investments existing on the date hereof, as set forth in
Schedule 5.2(F)(ii) hereto;
(iii) loans to, or other investments in, Borrower or any of
its Subsidiaries;
(iv) investments permitted under the terms of the Senior Loan
Agreements; and
(v) other investments (not otherwise referred to in this
Section 5.2(F)), in an aggregate amount not to exceed One Million Dollars
($1,000,000).
(G) DIVIDENDS, ETC. Directly or indirectly, and shall not permit any
Subsidiary, to declare, pay, order, make or set apart: (a) any dividend or
other distribution, direct or indirect, on account of any shares of any class of
Stock of Borrower now or hereafter outstanding, except a dividend payable solely
in shares of that class of Stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value direct or indirect of any shares of any
class of Stock of Borrower now or thereafter outstanding; (c) except with
respect to the Senior Loan Agreements, any payment or prepayment of principal or
premium, if any, or interest on, fees
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with respect to, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to obligations of
Borrower; (d) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class
of Stock of the Borrower now or hereafter outstanding; or (e) any payment by
Borrower of any management fees, advisor fees or similar fees whether
pursuant to a management agreement or otherwise to any Affiliate of Borrower;
PROVIDED, HOWEVER, that any Subsidiary may declare and pay dividends to
Borrower or any Subsidiary of which it is a Subsidiary.
(H) FEDERAL RESERVE REGULATIONS. Permit any Loan or the proceeds of
any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
(I) TRANSACTIONS WITH AFFILIATES. Enter into or be a party to, or
permit any Subsidiary to enter into or be a party to any transaction with any
Affiliate of Borrower (other than any transaction between Borrower and any
Subsidiary of Borrower or between any Subsidiary of Borrower and any other
Subsidiary of Borrower), except (i) as authorized by a majority of the
disinterested directors of Borrower or any such Subsidiary, as the case may be,
or (ii) otherwise in the ordinary course of business, in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business for fair consideration and on terms no less favorable
to Borrower or such Subsidiary as are available from unaffiliated third parties.
(J) AMENDMENT OR WAIVER OF SENIOR LOAN AGREEMENTS. Within two (2)
days following the execution and delivery thereof, fail to provide Lender with a
copy of any amendment, modification, waiver, change to or replacement of any
Senior Loan Agreement.
(K) FINANCIAL COVENANTS.
(i) CONSOLIDATED TANGIBLE NET WORTH. Permit the Consolidated
Tangible Net Worth of Borrower and its Consolidated Subsidiaries as of the end
of each fiscal quarter to be less than the amount set forth below opposite each
such fiscal quarter end:
Minimum
Fiscal Quarter End Tangible Net Worth
------------------ ------------------
September 1996 $4,388,000
December 1996 $5,212,000
March 1997 $6,822,000
June 1997 $7,414,000
September 1997 $7,994,000
December 1997 $9,536,000
March 1998 $11,509,000
June 1998 $12,317,000
September 1998 $13,175,000
December 1998 $15,158,000
March 1999 $17,110,000
June 1999 $18,231,000
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September 1999 $19,437,000
December 1999 $21,866,000
March 2000 $24,555,000
June 2000 $25,666,000
September 2000 $26,658,000
December 2000 $28,453,000
March 2001 $30,554,000
June 2001 $31,732,000
September 2001 $32,958,000
December 2001 $35,055,000
(ii) CASH FLOW COVERAGE RATIO. Permit the Cash Flow Coverage
Ratio for each period of four (4) consecutive quarters for which the last
quarter ends on a date set forth below to be less than the amount set forth
opposite such date:
Minimum Cash
Fiscal Quarter End Flow Coverage Ratio
------------------ -------------------
September 1996 1.2:1
December 1996 1.2:1
March 1997 1.2:1
June 1997 1.2:1
September 1997 1.2:1
December 1997 1.2:1
March 1998 1.2:1
June 1998 1.2:1
September 1998 1.2:1
December 1998 1.2:1
March 1999 1.2:1
June 1999 1.2:1
September 1999 1.2:1
December 1999 1.2:1
March 2000 1.2:1
June 2000 1.2:1
September 2000 1.2:1
December 2000 1.2:1
March 2001 1.2:1
June 2001 1.2:1
September 2001 1.2:1
December 2001 1.2:1
SECTION 6. CONDITIONS PRECEDENT
As a condition precedent to Lender making Loans hereunder, the following
conditions, as the case may be, shall be fulfilled in a manner reasonably
satisfactory to Lender:
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6.1 THE LOAN. Lender shall have received the following documents on or
prior to the Closing Date:
(A) a copy of the Financial Statements, together with a certificate
of an Authorized Officer, setting forth (i) all existing Indebtedness, pending
or, to the best of Borrower's knowledge, threatened litigation or claims and
other contingent liabilities of Borrower and its Subsidiaries and (ii) all
dividends declared or paid since the date of such Financial Statements and all
intercompany payments made or obligations incurred to Affiliates outside the
ordinary course of the businesses of Borrower or its Subsidiaries since such
date;
(B) projected balance sheets, income statements and statements of
cash flow all prepared on a monthly basis for the fiscal year beginning
January 4, 1997 for Borrower and its Consolidated Subsidiaries;
(C) a favorable written opinion of Brownstein Hyatt Farber &
Strickland, PC, counsel to Borrower, substantially in the form of Exhibit B
hereto;
(D) the Note, duly executed and delivered by Borrower, and any other
instruments, documents or certificates executed by Borrower or any of its
Subsidiaries in respect of the transactions contemplated by this Agreement or
which are reasonably requested by Agent;
(E) the Current Subordination Agreement, duly executed and delivered
by the parties thereto;
(F) true, correct and complete copies of each of the executed Current
Senior Loan Documents (executed on or prior to the date hereof);
(G) a certificate of an Authorized Officer setting forth in
reasonable detail the calculations required to establish whether Borrower is in
compliance with the requirements of the financial covenants of Section 5.2(K)
hereof;
(H) a certificate of an Authorized Officer certifying the names and
true signatures of those officers of Borrower that are authorized to provide all
notices under this Agreement and the Loan Documents;
(I) evidence that Borrower and its Subsidiaries are in full
compliance with all of its representations, warranties, covenants and agreements
set forth in the Current Senior Loan Documents, that neither Borrower nor its
Subsidiaries are in breach of, or default under, any of the Current Senior Loan
Documents and that the Current Senior Loan Documents are in full force and
effect in accordance with their respective terms;
(J) evidence that all requisite third party consents to the
transactions contemplated by the Loan Documents and the Current Senior Loan
Documents have been received; and
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<PAGE>
(K) the Warrant, duly executed by Borrower and delivered to BIB or
its designee(s).
(L) a copy of the organizational documents, including any Articles or
Certificate of Incorporation or other constitutive documents of Borrower and
each of its Subsidiaries, and all amendments thereto, certified by the Secretary
of State or other appropriate official of its jurisdiction of organization;
(M) good standing and tax clearance certificates, as applicable, for
Borrower and each of its Subsidiaries, issued by the Secretary of State or other
appropriate official of each applicable jurisdiction of organization and each
jurisdiction where the conduct of the business activities or the ownership of
the properties of Borrower and each of its Subsidiaries necessitates
qualification;
(N) certificates of an Authorized Officer, dated such Closing Date
and certifying that (a) the representations and warranties set forth in Section
4 hereof are true and correct on and as of such date, except for any such
representation or warranty made solely as of the Closing Date, as specified in
Section 4 hereof, (b) Borrower and its Subsidiaries, on such date, are in
compliance with all the terms and provisions set forth in this Agreement, (c) on
such date, no Default or Event of Default has occurred or is continuing and (d)
as to the incumbency and signature of the Secretary of Borrower or any other
Person executing the certificate described in clause (iv) below;
(O) certificates of the Secretary of Borrower, dated such Closing
Date and certifying (a) that attached thereto is a true and complete copy of the
Articles or Certificate of Incorporation or other constitutive documents, in
each case as amended to date, of Borrower and each Subsidiary, (b) that attached
thereto is a true and complete copy of the By-laws of Borrower and each
Subsidiary, as in effect on the date of such certificate and at all times since
a date prior to the date of the resolution described in clause (c) below, (c)
that attached thereto is a true and complete copy of a resolution duly adopted
by the Board of Directors of Borrower, authorizing the execution, delivery and
performance of this Agreement and each of the other Loan Documents executed and
delivered by Borrower, and that such resolution has not been modified, rescinded
or amended and is in full force and effect, (d) that the constitutive documents
of Borrower and each Subsidiary have not been amended since the date of the last
amendment thereto shown on the certificate of good standing, if applicable,
furnished pursuant to clause (ii) above and (e) as to the incumbency and
specimen signature of each Person executing this Agreement or any other Loan
Document on behalf of Borrower;
(P) a notice of borrowing and disbursement authorization letter with
respect to the disbursement of the proceeds of such Loan;
(Q) Borrower shall have paid all fees and expenses of Lender incurred
in connection with the transactions contemplated hereunder as provided for in
Sections 3.2 and 10.3 hereof; and
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<PAGE>
(R) such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
6.2 The following conditions shall be satisfied on the Closing Date, in
the sole discretion, reasonably exercised, of Lender:
(A) Borrower shall be in compliance with all the terms and provisions
contained herein or in the other Loan Documents on its part to be observed or
performed and no Default or Event of Default shall exist;
(B) each of the conditions precedent to such Loan set forth in the
other Loan Documents shall have been satisfied;
(C) since December 29, 1995 (as modified by the projections contained
in the Private Placement Memorandum), there shall not have occurred any Material
Adverse Effect;
(D) 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, the other Loan Documents, any Senior Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in
Lender's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents;
and
(E) all legal matters in connection with the transactions
contemplated by the Loan Documents and the Current Senior Loan Documents shall
be reasonably satisfactory to Lender and its counsel in their sole discretion.
SECTION 7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
7.1 EVENTS OF DEFAULT. The existence of any one or more of the following
events shall constitute an Event of Default:
(A) Borrower shall fail to pay any (i) principal of any Loan when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) under the Loan Documents or (ii) any Interest, any fee, indemnity or
other amounts due or other Obligations under any Loan Document when due and such
failure shall continue unremedied for fifteen (15) days;
(B) Any representation or warranty made by Borrower or any officer of
Borrower under or in connection with any Loan Document shall have been or shall
be incorrect in any material respect when made;
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(C) Borrower shall fail to perform or observe any of its Obligations
under any Loan Document, including but not limited to any covenant contained in
Sections 5.1 or 5.2 hereof (other than occurrences referred to or embodied in
other provisions of this Section 7.1), and such failure shall continue
unremedied for a period of thirty (30) days after the earlier of (i) Borrower's
receipt of notice from Lender or (ii) actual knowledge of such breach by
Borrower;
(D) Borrower or any Subsidiary shall fail to pay any principal or
interest on any of its Indebtedness (other than a Default under the Loan
described in Subsection (A)) in excess of One Million Dollars ($1,000,000), or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness; or any such Indebtedness in excess
of such amount shall be declared to be due and payable, or required to be paid
or prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof;
(E) Borrower or any Subsidiary (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such party or for any substantial part
of its property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
(iii) shall make a general assignment for the benefit of creditors or (iv) shall
take any action to authorize or effect any of the actions set forth above in
this subsection (E);
(F) Any proceeding shall be instituted against Borrower or any
Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
Borrower or any Subsidiary or for any substantial part of its property, and
either such proceeding shall remain undismissed or unstayed for a period of
seventy (70) days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property) shall occur;
(G) Any material provision of any Loan Document shall at any time for
any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower, or a proceeding shall be commenced by
Borrower or any Governmental Authority or other regulatory body having
jurisdiction over Borrower, seeking to establish the invalidity or
unenforceability thereof, or Borrower shall deny in writing that Borrower has
any material liability or obligation purported to be created under any Loan
Document;
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<PAGE>
(H) One or more judgments or orders (other than a judgment or award
described in subsections (E) or (F) of this Section 7.1 or judgments for which
Borrower has escrowed funds sufficient to satisfy such judgment) for the payment
of money exceeding any applicable insurance or bond coverage by more than One
Million Dollars ($1,000,000) in the aggregate for Borrower and its Subsidiaries
shall be rendered against Borrower or any of its Subsidiaries and either
(i) enforcement proceedings shall have been commenced by any creditor upon any
such judgment or order or (ii) there shall be any period of sixty (60)
consecutive days during which a stay of enforcement of any such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
(I) A Change of Control shall have occurred;
(J) At any time, Borrower or any of its Subsidiaries shall be liable
in respect of an aggregate principal amount of Indebtedness under all Senior
Loan Agreements in excess of Twenty-Eight Million Dollars ($28,000,000);
(K) At any time, Borrower shall be liable in respect of an aggregate
principal amount of term loan Indebtedness under all Senior Loan Agreements in
excess of Ten Million Dollars ($10,000,000);
(L) A Material Adverse Change shall have occurred; or
(M) The Structuring Fee shall have not been paid in full on January
3, 1997;
then, and in any such event, and except as otherwise provided in the
Subordination Agreement, Lender , upon the direction of the Required Banks,
shall by notice to Borrower, (i) declare all Loans, all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Loan, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower;
PROVIDED, HOWEVER, that upon the occurrence and during the continuance of any
Event of Default described in subsections (E) or (F) of this Section 7.1, the
Loan, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower, and (ii) exercise any and all of
its other rights under applicable law, hereunder and under the other Loan
Documents.
7.2 REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or thereto or contained in any other agreement between Lender and Borrower,
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 Borrower herein contained. The failure or delay of
Lender to exercise or enforce any rights, powers, or remedies hereunder or under
any of the aforesaid agreements or
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other documents shall not operate as a waiver of such rights, powers and
remedies, but all such rights, powers, and remedies shall continue in full
force and effect until the outstanding principal amount of the Loan, all
interest and all other Obligations owing or to become owing from Borrower to
Lender shall have been fully satisfied, and all rights, powers, and remedies
herein provided for are cumulative and none are exclusive.
SECTION 8. THE AGENT
The provisions of this Section 8 shall be operative during, and with
respect to, any time when there shall be more than one (1) Bank hereunder.
8.1 AUTHORIZATION AND ACTION. Each Bank (and each subsequent holder of
any Note by its acceptance thereof) hereby irrevocably appoints and authorizes
Agent, in such capacity (i) to receive on behalf of each Bank any payment of
principal of or interest on the Note outstanding hereunder and all other amounts
accrued hereunder paid to Agent, and, subject to Section 8.8 of this Agreement,
to distribute promptly to each Bank its Pro Rata Share of all payments so
received, (ii) to distribute to each Bank copies of all material notices and
agreements received by Agent and not required to be delivered to each Bank
pursuant to the terms of this Agreement; PROVIDED that Agent shall not have any
liability to the Banks for Agent's inadvertent failure to distribute any such
notice or agreement to the Banks and (iii) subject to Section 10.2 of this
Agreement, to take such action as Agent deems appropriate on its behalf to
administer the Loan and the Loan Documents and to exercise such other powers
delegated to Agent by the terms hereof or the Loan Documents (including, without
limitation, the power to give or to refuse to give notices, waivers, consents,
approvals and instructions and the power to make or to refuse to make
determinations and calculations), together with such powers as are reasonably
incidental thereto to carry out the purposes hereof and thereof. As to any
matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Note), Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Banks, and such instructions of the Required Banks shall be binding
upon all Banks and all holders of Note; PROVIDED, HOWEVER, that Agent shall not
be required to take any action which, in the reasonable opinion of Agent,
exposes Agent to liability or which is contrary to this Agreement or any Loan
Document or applicable law.
8.2 BORROWER'S DEFAULT. In the event that (i) Borrower fails to pay when
due the principal of or Interest on any Note or the amount of any other
Obligation payable hereunder or (ii) Agent receives written notice of the
occurrence of an Event of Default, Agent shall promptly give written notice
thereof to the Banks, and shall take such action with respect to such Event of
Default as it shall be directed to take by the Required Banks; PROVIDED,
HOWEVER, that, unless and until Agent shall have received such directions, Agent
may take such action or refrain from taking such action hereunder or under the
other Loan Documents with respect to an Event of Default, or Default, as it
shall deem advisable in the best interest of the Banks.
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8.3 AGENT'S RELIANCE, ETC. Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement or the other
Loan Documents, except for its own gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. Without
limiting the generality of the foregoing, Agent (i) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof, pursuant to Section 10.6 hereof, signed by such payee and
in form satisfactory to Agent, (ii) may consult with legal counsel (including,
without limitation, counsel to Agent or counsel to Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, certificates, warranties or representations made in or in connection
with this Agreement or the other Loan Documents, (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Person or to inspect property (including, without limitation, the
books and records) of any Person and (v) shall incur no liability under or in
respect of this Agreement or the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy, cable, telex or other form of electronic transmission) believed by it
to be genuine and signed or sent by the proper party or parties.
8.4 DILMUN. With respect to the Loan made by it and the Note issued to
it, Dilmun shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not Agent; and the terms
"Lender," "Bank" or "any Banks" shall, unless otherwise expressly indicated,
include Dilmun in its respective individual capacities. Dilmun may lend money
to, act as trustee or paying agent under indentures of, and generally engage in
any kind of business with, Borrower, any of its Affiliates, or any Person who
may do business with or own securities of Borrower or any of its Affiliates, all
as if Dilmun were not Agent and without any duty to account therefor to any
Banks.
8.5 BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon Agent or any other Bank, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
8.6 INDEMNIFICATION. Each Bank agrees to indemnify and hold harmless
Agent (to the extent not reimbursed by Borrower), ratably according to the Pro
Rata Shares of each Bank, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or the other Loan Documents or any action taken or omitted by Agent
under this Agreement or the other Loan Documents; PROVIDED, HOWEVER, that no
Bank shall be liable to
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Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements for
which there has been a final judicial determination that such resulted from
Agent's gross negligence or willful misconduct. Without limiting the
foregoing, each Bank agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including reasonable counsel
fees, disbursements and other charges) incurred by Agent in connection with
the preparation, execution, delivery, administration, modification, amendment
or enforcement (whether through negotiation, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement or the other Loan Documents, to the extent that Agent is not
reimbursed in full for such expenses by Borrower. The obligations of each
Bank under this Section 8.6 shall survive the termination of this Agreement
and the other Loan Documents and the payment of all other obligations of
Agent and the Banks under this Agreement and the other Loan Documents.
8.7 SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to the Banks and Borrower. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent, which shall be
Dilmun or another entity reasonably acceptable to Borrower, with such rights and
obligations hereunder as those previously held by the retiring Agent. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as Agent under this
Agreement and the other Loan Documents. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 8 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents.
SECTION 9. SUBORDINATION. The Loan and all Obligations shall be, and hereby
are, expressly made subordinate in right of payment to all Senior Indebtedness,
to the extent and in the manner provided in the Subordination Agreement.
SECTION 10. MISCELLANEOUS
10.1 INDEMNIFICATION. In addition to all of Borrower's other Obligations
under this Agreement, Borrower agrees to defend, protect, indemnify and hold
harmless Agent and each Bank and all of the respective officers, directors,
employees, attorneys, consultants and agents of Agent and each Bank
(collectively called the "Indemnities") from and against any and all losses,
damages, liabilities, obligations, penalties, fees, reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) incurred by such Indemnities, whether prior to or from and after the
Closing Date, whether direct, indirect or consequential, as a result of or
arising from or relating to or in connection with any of the following: (i) the
negotiation, preparation, execution or performance or enforcement of this
Agreement or of any document executed in connection with the transactions
contemplated by this Agreement; (ii) the furnishing of funds to Borrower under
this Agreement, including, without limitation, the
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management of any Loan; (iii) any matter relating to the financing
transactions contemplated by this Agreement or by any document executed in
connection with the transactions contemplated by this Agreement; or (iv) any
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto (collectively,
the "Indemnified Matters"); PROVIDED, HOWEVER, that Borrower shall not have
any obligation to any Indemnitee hereunder for any Indemnified Matter caused
by or resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by a final judgment of a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 10.1 may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Matters incurred by the
Indemnities. The foregoing indemnity shall survive the repayment of the
Obligations.
10.2 AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement or the other Loan Documents, and no consent to any departure therefrom
by Borrower, shall in any event be effective unless the same shall be in writing
and signed by Borrower and the Required Banks, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, (i) reduce the principal of, or
interest on, the Loans or Obligations, (ii) postpone any date fixed for any
payment of principal of, or interest or fees on, the Loans or the amount of any
other Obligations, (iii) change the percentage of the aggregate unpaid principal
amount of the Note, which shall be required for Banks to take any action
hereunder or (iv) amend, modify or waive this Section 10.2.
10.3 EXPENSES; ATTORNEYS' FEES. Borrower agrees to pay or cause to be
paid, on demand, and to save Agent (and, in the case of clauses (iii) through
(viii) below, each Bank) harmless against liability for the payment of, all
reasonable out-of-pocket expenses, regardless of whether the transactions
contemplated hereby are consummated, including but not limited to reasonable
fees and expenses of counsel for Agent (and, in the case of clauses (iii)
through (xii) below, each Bank), accounting, due diligence, periodic field
audits (except, if Borrower is not in Default, in which event expenses in
connection with only one (1) periodic field audit per year), investigation,
monitoring of assets, syndication, miscellaneous disbursements, examination,
travel, lodging and meals, incurred by Agent (and, in the case of clauses (iii)
through (viii) below, each Bank) from time to time arising from or relating to
(other than when arising from the gross negligence or willful misconduct of
Agent or a Bank, as the case may be): (i) the negotiation, preparation,
execution, delivery, performance and administration of this Agreement and the
other Loan Documents; (ii) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given; (iii) the preservation and protection of any of Agent's
and each Bank's rights under this Agreement or the other Loan Documents; (iv)
the defense of any claim or action asserted or brought against Agent or the
Banks by any Person that arises from or relates to this Agreement, any other
Loan Document, Agent's or the Bank's claims against Borrower, or any and all
matters in connection therewith; (v) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Loan Document;
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(vi) the filing of a petition, complaint, answer, motion or other pleading by
Agent or a Bank, or the taking of any action in connection with this
Agreement or any other Loan Document; (vii) any attempt to collect from
Borrower; and (viii) the receipt of any advice with respect to any of the
foregoing.
10.4 INDULGENCES NOT WAIVERS. The failure, at any time or times hereafter,
to require strict performance by Borrower of any provision of this Agreement
shall not waive, affect or diminish any right of Agent or the Banks thereafter
to demand strict compliance and performance therewith. Any suspension or waiver
of an Event of Default under this Agreement or any of the other Loan Documents
shall not suspend, waive or affect any other Event of Default under this
Agreement or any of the other Loan Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the other Loan Documents and no Event of
Default under this Agreement or any of the 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 Agent and directed to Borrower.
10.5 SEVERABILITY. Wherever possible, each provision of this Agreement or
any other Loan Documents shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or any
other Loan Documents 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 such agreement.
10.6 ASSIGNMENTS AND PARTICIPATIONS.
(A) Borrower hereby consents to each Bank's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof
or thereof, including, without limitation, each Bank's rights, title,
interests, remedies, powers, and duties hereunder or thereunder, subject to
the remaining provisions of this Section 10.6; PROVIDED, HOWEVER, that (i) at
no time during the term of this Agreement may more than thirty-three and
one-third percent (33-1/3%) of all of the Bank's interests in the Loans be
held other than by Dilmun and (ii) Dilmun shall, at all times, serve as Agent
hereunder.
(B) Subject to Section 10.6(A), each Bank may, with the written
consent of Agent, assign to one or more other Banks or other Persons all or a
portion of its rights and obligations under this Agreement; PROVIDED, HOWEVER,
that (i) such assignment is in an amount which is at least One Million Dollars
($1,000,000) or an increment of Five Hundred Thousand Dollars ($500,000) in
excess thereof, (ii) such assignee shall enter into an agreement with the
assignor in form and substance satisfactory to Agent, (iii) the parties to each
such assignment shall execute and deliver to Agent, for its acceptance, an
Assignment and Acceptance in form and substance reasonably satisfactory to
Agent, together with any Note subject to such
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<PAGE>
assignment, and such parties shall deliver to Agent a processing and
recordation fee of Two Thousand Five Hundred Dollars ($2,500) and (iv) such
assignee shall execute and deliver a Subordination Agreement (substantially
in the form of Exhibit C hereto) in accordance with the terms of Section 6 of
such Assignment and Acceptance. Upon such execution, delivery and
acceptance, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be determined in accordance with
Section 3 of such Assignment and Acceptance (or such shorter period as shall
be agreed to by Agent and the parties to such assignment), (a) the assignee
thereunder shall, in addition to the rights and obligations hereunder held by
it immediately prior to such effective date, have the rights and obligations
hereunder that have been assigned to it pursuant to such Assignment and
Acceptance and (b) the assigning Bank thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's
rights and obligations under this Agreement, such Bank shall cease to be a
party hereto). Any such assignment shall not adversely affect Borrower's
rights under this Agreement except that the assigning Bank shall not be
responsible for the obligations assigned.
(C) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto that: (i) other than as provided in such
Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement of any other instrument or document furnished pursuant
hereto; and (ii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any of its Subsidiaries or the performance or observance by Borrower of any of
its obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto.
(D) Agent shall maintain at its address referred to in Section 10.9
hereof a copy of each Assignment and Acceptance delivered to and accepted by it.
Such copies shall be available for inspection by Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(E) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee Bank, together with the Note subject to such
assignment and the processing and recordation fee, Agent may, in its sole
discretion, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit D hereto, both (i) accept such Assignment and
Acceptance and (ii) give prompt notice thereof to Borrower. Within three (3)
Business Days after its receipt of such notice, Borrower, at its own expense,
shall execute and deliver to Agent in exchange for the surrendered Note a new
Note to the order of such assignee Bank in an aggregate principal amount equal
to the Loan amount assumed by it pursuant to such Assignment and Acceptance, and
if the assigning Bank has retained any Loan
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amount hereunder, a new Note to the order of the assigning Bank in an
aggregate principal amount equal to the Loan amount retained by it hereunder.
Such new Note shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the date
of Agent's acceptance of such Assignment and Acceptance and shall otherwise
be in substantially the form of Exhibit A hereto.
(F) Each Bank may, with the consent of Agent, in its sole discretion,
at any time grant participations in any of its rights hereunder or under the
Note; PROVIDED that the participant shall not have any rights under this
Agreement or any of the other Loan Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by Borrower hereunder shall be determined as if such
Bank had not sold such participation; and PROVIDED FURTHER, that no Bank shall
transfer, grant or assign any participation under which the participant shall
have rights to approve any amendment to or waiver of this Agreement or any other
Loan Document, except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating (it being understood that any waiver of an installment on, the
application of any prepayment or the method of any application of any prepayment
to, the amortization of the Loan shall not constitute an extension of the final
scheduled maturity date) or reduce the rate or extend the time of payment of
Interest on the Loan (except in connection with a waiver of the applicability of
any increase in Interest pursuant to Section 3.1(C)), or reduce the principal
amount thereof, or increase such participant's participating interest in any
Commitment over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or a prepayment, shall not constitute
a change in the terms of any Commitment) or (ii) consent to the assignment or
transfer by Borrower of any of its rights and obligations under this Agreement.
(G) Notwithstanding any other provision of this Section 10.6, no
transfer or assignment of the interests or obligations of any Bank hereunder or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require Borrower to file a registration statement or
qualify an indenture with the Commission or it qualify the Loans under the "Blue
Sky" laws of any State.
(H) Each Bank initially party to this Agreement hereby represents,
and each Person that becomes a Bank, pursuant to an assignment permitted by this
Section 10.6 or has any interest in the Loan by its acceptance of such
assignment or interest, upon its becoming party to this Agreement, represents:
it is purchasing the Note for its own account or for one or more separate
accounts maintained by it or for the account of one or more affiliated
Accredited Investors on whose behalf it has authority to make this
representation or for the account of one or more pension or trust funds of which
it is trustee, in each case for investment and not with a view to the
distribution thereof or with any present intention of distributing or selling
any of the Note (except to one or more such affiliated Accredited Investors and
except for sales pursuant to Rule 144A under the Securities Act); PROVIDED that
the disposition of its or their property shall at all times be within its or
their control. If it is purchasing for the account of
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<PAGE>
one or more pension or trust funds, it represents that (except to the extent
it has otherwise advised Brownstein Hyatt Farber & Strickland, PC, as counsel
for Borrower, in writing) it has sole investment discretion with respect to
the acquisition of the Note to be issued to it pursuant to this Agreement and
the determination and decision on its behalf to purchase such Note for such
pension or trust funds is being made by the same individual or group of
individuals who customarily pass on such investments, so that its decision as
to purchases for all such funds is the result of one study and conclusion.
It understands that the Note have not been registered under the Securities
Act and may be resold (which resale is not now contemplated) only if
registered pursuant to the provisions of such Securities Act or if an
exemption from registration therefrom is available, and that Borrower is not
required to register the Note.
(I) Each Bank initially party to this Agreement hereby represents,
and each Person that becomes a Bank pursuant to an assignment permitted by this
Section 10.6 or has any interest in the Loan, by its acceptance of such
assignment or interest or upon its becoming party to this Agreement, represents
that one or more of the following statements is individually or collectively, as
the case may be, an accurate representation as to the source of all the funds to
be used by it to pay the purchase price of the Note purchased by it hereunder:
(i) if it is an insurance company, no part of such funds
constitutes assets allocated to a separate account (within the meaning of ERISA
and the regulations thereunder) maintained by it in which an employee benefit
plan (or its related trust) has any interest; or
(ii) if it is an insurance company, to the extent that any
part of such funds constitutes assets allocated to any separate account
maintained by it, (i) such separate account is a "pooled separate account"
within the meaning of Prohibited Transaction Class Exemption ("PTE") 90-1, in
which case it has disclosed to Borrower in writing the names of each employee
benefit plan whose assets in such separate account exceed 10% of the total
assets or are expected to exceed 10% of the total assets of such account as of
the date of such purchase (and for the purposes of this Section 10.6 (I), all
employee benefit plans maintained by the same employer or employee organization
are deemed to be a single plan), and every relevant requirement of PTE 90-1
specifically applicable to it which is required to be satisfied as of the date
of such purchase will be satisfied in all material respects as of such date of
purchase or (ii) such separate account contains only the assets of a specific
employee benefit plan, complete and accurate information as to the identity of
which it has delivered to Borrower in writing; or
(iii) if it is a "qualified professional asset manager"
or "QPAM" (within the meaning of Part V of Prohibited Transaction Class
Exemption 84-14 (the "QPAM Exemption") ) of such funds which constitute assets
of an "investment fund" (within the meaning of Part V of the QPAM Exemption)
managed by it, every relevant requirement of the QPAM Exemption specifically
applicable to it which is required to be satisfied as of the date of such
purchase will be satisfied in all material respects as of the date of such
purchase and it has disclosed to Borrower in writing its name as such QPAM and
the names of all employee benefit plans whose assets are included in such
investment fund; or
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(iv) if it is other than an insurance company or an
investment company, all or a portion of such funds consists of funds which do
not constitute assets of any employee benefit plan and the remaining portion, if
any, of such funds consists of funds which may be deemed to constitute assets of
one or more specific employee benefit plans, complete and accurate information
as to the identity of each of which it delivered to Borrower in writing; or
(v) if its funds constitute assets of an "investment fund"
(within the meaning of the QPAM Exemption referred to in subparagraph (iii)
above), such assets of such "investment funds" are managed by a QPAM (as defined
in subparagraph (iii) above), such QPAM has investment discretion with respect
to the transaction for purposes of applying the QPAM exemption, and every
relevant requirement of the QPAM Exemption specifically applicable to such QPAM
which is required to be satisfied as of the date of such purchase will be
satisfied in all material respects as of the date of such purchase.
As used in this Section 10.6, the term "employee benefit plan" shall
mean any employee benefit plan subject to section 406 of ERISA, and any employee
benefit plan, or individual retirement account subject to section 4975 of the
Internal Revenue Code, and the term "separate account" shall have the meaning
assigned to it in section 3 of ERISA.
(J) Notwithstanding any other provisions of this Section 10.6 any
participation, sale, transfer, assignment or other disposition of the interests
or obligations of any Bank hereunder shall be subject to such limitations as may
be imposed by Agent in its sole discretion and (ii) at no time shall there be
more than six (6) Banks hereunder.
(K) Agent shall maintain at its address referred to in Section 10.9 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lender and its
assignees (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and Borrower, Agent, Lender and
its assignees may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Borrower or Lender at any reasonable time and from
time to time upon reasonable prior notice. Borrower hereby irrevocably appoints
Agent as its agent for purposes of maintaining such register in accordance with
this Section 10.6(K).
10.7 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the other
Loan Documents are hereby made cumulative with the provisions of this Agreement.
Except as specifically otherwise provided in this Agreement or 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.
10.8 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
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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.
10.9 NOTICE. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto to be effective shall be in writing, shall
be sent by certified or registered mail, return receipt requested), or by
telecopier or delivered by hand or by a recognized overnight courier service
and, unless otherwise expressly provided herein, shall be deemed to have been
validly served, given or delivered when delivered against receipt or, in the
case of telecopy notice, when sent, or, in the case of telex, when the
appropriate answerback received, addressed as follows:
(A) If to Lender:
Dilmun Financial Services, an unlimited Irish company
Harbourmaster Place 4
International Financial Services Centre
Dublin, Ireland
Attention: Ruth Eaton
Phone: 011-353-167-00463
Telecopy: 011-353-167-00181
With a copy to:
Bahrain International Bank E.C.
Bahrain Commercial Complex
13th Floor, P.O. Box 5016
Manama, Bahrain
Attention: Sameer Al Aradi
Phone: 011-973-534-545
Telecopy: 011-973-535-141
and
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: David L. Kovacs, Esq.
Phone: (212) 661-6500
Telecopy: (212) 697-6686
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(B) If to Borrower, at:
Brothers Gourmet Coffees, Inc.
2255 Glades Road
Suite 100 E
Boca Raton, Florida 33431
Attention: Barry Bilmes, Vice President Finance
and Administration
Phone: (561) 995-2600
Telecopy: (561) 241-6690
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street
Twenty Second Floor
Denver, Colorado 80202-4437
Attention: John L. Ruppert, Esq.
Phone: (303) 534-6335
Telecopy: (303) 623-1956
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 10.9.
10.10 BANK'S CONSENT. Whenever Agent's or any Bank's consent is
required to be obtained under this Agreement or any of the other Loan Documents
as a condition to any action, inaction, condition or event, Agent or such Bank
shall be authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the payment of money or any other
matter.
10.11 DEMAND. Nothing in this Agreement shall affect or abrogate the
demand nature of any portion of the Obligations expressly made payable on demand
by this Agreement or by any instrument evidencing same, and the occurrence of an
Event of Default shall not be a prerequisite for requiring payment of such
Obligations.
10.12 ENTIRE AGREEMENT; HEADINGS. This Agreement, including the
Schedules and Exhibits that are attached hereto and form a part hereof, 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. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
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10.13 GOVERNING LAW; CONSENT TO FORUM. This Agreement, the Note and
the other Loan Documents shall be governed by, and construed in accordance with,
the law of the State of New York applicable to contracts made and to be
performed in the State of New York without regard to conflicts of law
principles. Any legal action or proceeding with respect to this Agreement or
any other Loan Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, Borrower hereby irrevocably accepts in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Borrower further irrevocably consents to the service of
process out of any of the aforementioned courts and in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, party at its address for notices contained in Section 10.9,
such service to become effective ten (10) days after such mailing. Borrower
hereby irrevocably appoints the Secretary of State of the State of New York as
its agent for service of process in respect of any such action or proceeding.
Nothing herein shall affect the right of Agent or any Bank to service of process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against Borrower in any other jurisdiction.
10.14 WAIVERS BY BORROWER. BORROWER, EACH BANK AND AGENT HEREBY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE OR OTHER LOAN DOCUMENTS, OR
UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT
DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR
ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. BORROWER CERTIFIES THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF AGENT OR ANY BANK HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY BANK WOULD NOT, IN THE EVENT OF ANY
ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS.
BORROWER HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
AGENT AND EACH BANK ENTERING INTO THIS AGREEMENT.
10.15 RIGHT OF SET-OFF. Upon the occurrence and during the continuance
of any Event of Default, each Bank may, and is hereby authorized to, at any time
and from time to time, without notice to Borrower (any such notice being
expressly waived by Borrower) and to the fullest extent permitted by law, and
subject to the rights of the Senior Agent and the Senior Lenders under the
Subordination Agreement, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of Borrower against any and all obligations of Borrower now or hereafter
existing under any Loan Document, irrespective of whether or not such Bank shall
have made any demand hereunder or thereunder and although such obligations may
be contingent or unmatured. Such Bank agrees to notify Borrower
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promptly after any such set-off and application made by such Bank; PROVIDED
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Bank under this Section 10.15 are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
10.16 CONSENT BY AGENT. Except as otherwise expressly set forth herein
to the contrary, if the consent, approval, satisfaction, determination,
judgment, acceptance or similar action (an "Action") of Agent or the Banks shall
be permitted or required pursuant to any provision hereof or any provision of
any other agreement to which the Borrower is a party and to which Agent or the
Banks has succeeded thereto, such Action shall be required to be in writing and
may be withheld or denied by Agent or any Bank, as the case may be, with or
without any reason, and without being subject to question or challenge on the
grounds that such Action was not taken in good faith.
10.17 NO PARTY DEEMED DRAFTER. Borrower, the Banks and Agent agree
that no party hereto shall be deemed to be the drafter of this Agreement, and
each of Borrower, the Banks and Agent further agrees that, in the event this
Agreement is ever construed by a court of law, such court shall not construe
this Agreement or any provision of this Agreement against any party hereto as
the drafter of this Agreement.
10.18 REINSTATEMENT; CERTAIN PAYMENTS. If claim is ever made upon
Agent or any Banks for repayment or recovery of any amount or amounts received
by Agent or any Banks in payment or on account of any of the Obligations under
this Agreement, Agent or such Bank shall give prompt notice of such claim to
each other Bank and Borrower, and if Agent, or any Bank repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over Agent, the Banks or any of their
property or (ii) any good faith settlement or compromise of any such claim
effected by Agent with any such claimant, then and in such event, Borrower
agrees that (a) any such judgment, decree, order, settlement or compromise shall
be binding upon Borrower notwithstanding the cancellation of any Note or other
instrument evidencing the Obligations under this Agreement or the other Loan
Documents or the termination of this Agreement or the other Loan Documents and
(b) it shall be and remain liable to Agent and the Banks hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by Agent and the Banks.
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IN WITNESS WHEREOF, this Agreement has been duly executed on the day and
year specified at the beginning hereof.
Borrower: BROTHERS GOURMET COFFEES, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Lender: DILMUN FINANCIAL SERVICES, AN
UNLIMITED IRISH COMPANY
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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SENIOR SUBORDINATED NOTE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE 2.1 - Proceeds of the Loan
SCHEDULE 4.2 - Consents of Third Parties
SCHEDULE 4.5(A) - Subsidiaries
SCHEDULE 4.5(B) - Options, Warrants, Etc. issued by the Subsidiaries
SCHEDULE 4.6 - Litigation
SCHEDULE 4.7(A) - Financial Condition
SCHEDULE 4.9 - Employee Plan and Multiemployer Plan
SCHEDULE 4.12 - Nature of Business
SCHEDULE 4.18 - Environmental Matters
SCHEDULE 4.20(A) - Licensed and Owned Trademark Rights
SCHEDULE 4.20(B) - Claims or Actions Related to Trademark Rights
SCHEDULE 4.22(A) - Capital Structure of Borrower
SCHEDULE 4.22(B) - Options, Warrants, Etc. issued by Borrower
SCHEDULE 4.23 - Broker Fees
SCHEDULE 4.24- Material Contracts
SCHEDULE 4.25 - Labor Matters
SCHEDULE 5.2(F)(II) - Investments
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EXHIBIT A - Form of Note
EXHIBIT B - Form of Opinion of Brownstein Hyatt Farber & Strickland, PC
EXHIBIT C - Form of Current Subordination Agreement
EXHIBIT D - Form of Assignment and Acceptance
EXHIBIT E - Form of Warrant
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EXHIBIT 4.2
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (hereafter this "Agreement") is made as of the
27th day of December, 1996, by and among SANWA BUSINESS CREDIT CORPORATION, a
Delaware corporation, as a Senior Lender and as Agent under the Sanwa Documents
for other Senior Lenders, and DILMUN FINANCIAL SERVICES, an unlimited Irish
company, and BIB HOLDINGS (BERMUDA) LTD., a Bermuda corporation.
RECITALS
WHEREAS, Brothers Gourmet Coffees, Inc. (the "Borrower") has entered into a
Loan and Security Agreement dated as of May 29, 1996 with Sanwa Business Credit
Corporation, as a Senior Lender and as Agent for the Senior Lenders (the "Sanwa
Loan Agreement"), pursuant to which the Senior Lenders have committed to make
loans and financial accommodations available to the Borrower to be secured by a
first lien and security interest against the Collateral.
WHEREAS, Subordinated Creditor is the holder of (a) a senior subordinated
promissory note of even date herewith issued by the Borrower in the principal
amount of Fifteen Million Dollars ($15,000,000) (the "Subordinated Note")
pursuant to the Subordinated Note Agreement and (b) the Warrant issued pursuant
to the Subordinated Note Agreement.
WHEREAS, the Borrower has requested that the Subordinated Creditor enter
into this Agreement with Sanwa as a condition of the Borrower's assumption of
the Subordinated Debt and as a condition to the Senior Lenders continuing to
advance Sanwa Debt under the Sanwa Documents on the date hereof or in the
future.
WHEREAS, Sanwa and Subordinated Creditor have entered into this Agreement
to set forth the relative rights of payment of the indebtedness and other
liabilities and obligations of the Borrower evidenced by the Sanwa Documents and
the Subordinated Debt Documents.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Subordinated Creditor, and
in order to induce the Senior Lenders, at their option, now or from time to time
hereafter, to make loans or extend credit or any other financial accommodations
to or for the benefit of the Borrower or to grant such renewals or extensions
thereof as the Senior Lenders may deem advisable and to better secure Sanwa and
the other Senior Lenders in respect of the foregoing, the Subordinated Creditor
hereby agrees with Sanwa and the other Senior Lenders as hereinafter set forth.
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Section 1. CERTAIN DEFINITIONS. In addition to the terms defined in the
recitals hereto, the following terms shall have the following meanings for
purposes of this Agreement:
"Additional Subordinated Notes" shall mean the additional senior
subordinated promissory notes issued pursuant to Section 5(d)(vi) of the Warrant
in the form of Exhibit A to the Warrant.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 ET SEQ., as from time to
time hereinafter amended, and any successor thereto or replacement therefor
which may be hereinafter enacted.
"Blockage Period" shall have the meaning ascribed thereto in subsection
2(b) hereof.
"Code" shall mean the Uniform Commercial Code as in effect from time to
time in each jurisdiction in which any of the Collateral is located.
"Collateral" shall mean all assets, property and interests in property now
owned or hereafter acquired by the Borrower or its Subsidiaries or any guarantor
thereof in or upon which a security interest, lien or mortgage is granted to
Sanwa and the other Senior Lenders by the Borrower or its Subsidiaries under the
Sanwa Documents or under any other documents, instruments, agreements or
writings executed by the Borrower or its Subsidiaries and delivered to Sanwa
including, without limitation, the Accounts, General Intangibles, Fixtures,
Inventory, Intellectual Property, Equipment and Real Estate and all Proceeds (as
defined in the Code) of all of the foregoing.
"Collection Action" shall mean any of the following: (a) to take from or
on behalf of the Borrower or any guarantor, by set-off or in any similar manner,
the whole or any part of any monies which may now or hereafter be owing by the
Borrower or any guarantor with respect to the Subordinated Debt, (b) to take any
Enforcement Action with respect to the Subordinated Debt, or (c) to accelerate
the Subordinated Debt.
"Conversion Shares" shall have the meaning ascribed thereto in the Warrant.
"Covenant Default" shall mean any Event of Default (other than a Payment
Default) with respect to any Sanwa Debt which is described in the definition of
"Event of Default" in the Sanwa Loan Agreement (excluding clauses (f), (g),(h)
and (j) thereof).
"Enforcement Action" shall mean any of the following: (a) to sue for
payment of, or to initiate or participate with others in any Event of Bankruptcy
or any suit, action or proceeding against the Borrower or any guarantor to
enforce payment of or to collect the whole or any part of the Sanwa Debt or the
Subordinated Debt or to enforce any other rights, powers, privileges or remedies
under the Sanwa Documents or the Subordinated Debt Documents or (b) to take any
action under Article 9 of the Code with respect to personal property (including
any action in the nature of a self-help remedy permitted under the Code) or
under the provisions of any state law with respect to foreclosure upon real
estate to enforce, foreclose upon, take possession of or sell any Collateral or
take any other judicial or non-judicial action with respect to the Collateral.
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"Event of Bankruptcy" shall mean any Default or Event of Default arising
under clause (f), (g), (h) or (j) of the definition of "Event of Default" in the
Sanwa Loan Agreement.
"Event of Default" shall mean the existence of an Event of Bankruptcy or a
Default or Event of Default under any Sanwa Document.
"Payment Blockage Notice" shall have the meaning ascribed thereto in
subsection 2(b) hereof.
"Payment Default" shall mean a default in the payment (including, without
limitation, any mandatory prepayment) when due (whether such payment is due at
maturity, as a result of acceleration or otherwise) of all or any portion of the
Sanwa Debt.
"Person" shall mean any natural person, corporation, limited partnership,
general partnership, limited liability partnership, limited liability company,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and a government and agency and political subdivision thereof.
"Phantom Stock Payment" shall have the meaning ascribed thereto in the
Warrant.
"Post-Petition Interest" shall mean the aggregate amount of all
post-petition interest, fees, costs or expenses or adequate protection
payments accruing or allowed to be paid during the pendency of any Event of
Bankruptcy and any other interest, fees, costs or expenses that would have
accrued but for the commencement of such Event of Bankruptcy, to the date of
payment even if the claim for such interest, fees, costs or expenses is not
an allowed claim of the type described in Section 506(b) of the Bankruptcy
Code.
"Sanwa" shall mean and include Sanwa Business Credit Corporation as a
Senior Lender and as Agent under the Sanwa Documents for the Senior Lenders and
its successors and assigns.
"Sanwa Debt" shall mean all indebtedness, obligations and liabilities of
the Borrower to Sanwa and the other Senior Lenders of any kind and every kind
and nature now existing or hereafter arising, whether contingent or otherwise
direct or indirect, matured or unmatured including, without limitation, all
principal, fees, costs, expenses, indemnities, premium, if any, interest
(including, without limitation, Post-Petition Interest) and advancements arising
under, or incurred in connection with, or created under, the Sanwa Loan
Agreement, whether such indebtedness, obligations or liabilities arise or accrue
before or after the commencement of any Event of Bankruptcy; PROVIDED that,
notwithstanding anything set forth herein to the contrary, unless otherwise
consented to in writing by the Subordinated Creditor the aggregate principal
amount of Sanwa Debt to which the Subordinated Debt shall be subordinated
pursuant to this Agreement shall not exceed in the aggregate $28,000,000 at any
one time outstanding of which not more than $10,000,000 shall be term debt.
"Sanwa Documents" shall mean and include the Sanwa Loan Agreement and the
other Financing Agreements, and all other agreements, documents and instruments
now or hereafter
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evidencing or securing Sanwa Debt, and any credit agreement, financing
agreement or other agreement, promissory note, guaranty, instrument or
document of any Person evidencing any replacement, substitution, conversion,
refunding or refinancing thereof, as the same may be amended, modified,
restated, renewed, extended or otherwise supplemented from time to time
hereafter.
"Senior Lenders" shall mean Sanwa Business Credit Corporation, in its
individual capacity as a Lender (as defined in the Sanwa Loan Agreement) under
the Sanwa Loan Agreement and any other Person hereafter becoming a party to the
Sanwa Loan Agreement as a Lender and any other Person hereafter holding any part
of the Sanwa Debt under any Sanwa Document.
"Significant Subordinated Debt Default" shall mean the occurrence of (a) a
matured Event of Default (as defined in the Subordinated Note Agreement) under
Section 7.1(i), 7.1(j) or 7.1(k) of the Subordinated Note Agreement, or (b) a
default in the payment when due under the Subordinated Note Agreement of
Subordinated Debt in excess of $100,000 or (c) a default in the payment when due
under the Subordinated Note Agreement of fees and other charges incurred by the
Borrower pursuant to the Subordinated Debt Documents in connection with the
closing of the Subordinated Debt transaction on December 27, 1996.
"Significant Subordinated Debt Default Notice" shall have the meaning
ascribed thereto in Section 5(d) hereof.
"Subordinated Creditor" shall mean and include, collectively, Dilmun
Financial Services and BIB Holdings (Bermuda) Ltd., their respective successors
and assigns and any other Person hereafter holding any part of the Subordinated
Debt under any Subordinated Debt Documents.
"Subordinated Debt" shall mean all indebtedness, obligations, and
liabilities of the Borrower to the Subordinated Creditor of any kind and every
kind and nature now existing or hereafter arising, whether contingent or
otherwise direct or indirect, matured or unmatured including, without
limitation, all principal, fees, costs, expenses, premium, if any, interest
(including, without limitation, Post-Petition Interest) and advancements arising
under, or incurred in connection with, or created under, the Subordinated Note
and the Additional Subordinated Notes, and all liabilities and obligations under
the Warrant including, without limitation, the Phantom Stock Payment, whether
such indebtedness, obligations or liabilities arise or accrue before or after
the commencement of any Event of Bankruptcy.
"Subordinated Debt Documents" shall mean and include the Subordinated Note,
the Warrant, the Subordinated Note Agreement, the Additional Subordinated Notes
and all other agreements, documents, instruments and guaranties now or hereafter
evidencing or securing the Subordinated Debt, and any credit agreement,
financing agreement or other agreement, promissory note, guaranty, instrument or
document of any Person evidencing any replacement, substitution, conversion,
refunding or refinancing thereof, as the same may be amended, modified,
restated, renewed, extended or otherwise supplemented from time to time
hereafter in accordance with the terms hereof.
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"Subordinated Note Agreement" shall mean that certain Senior Subordinated
Note Agreement, dated December 27, 1996, by and between the Borrower and Dilmun
Financial Services.
"Warrant" shall mean that certain Warrant for the Purchase of Shares of
Common Stock, dated December 27, 1996, issued by the Borrower in favor of BIB
Holdings (Bermuda) Ltd.
"Warrant Shares" shall have the meaning ascribed thereto in the Warrant.
Section 1.2 OTHER DEFINED TERMS. Unless otherwise defined herein, all
defined terms herein shall have the respective meanings ascribed thereto in the
Sanwa Loan Agreement.
Section 2. SUBORDINATION.
(a) The Subordinated Creditor agrees that the Subordinated Debt shall
be subject to the provisions of this Agreement, and the Subordinated Creditor,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions. The Subordinated Creditor further agrees
that, notwithstanding any language to the contrary contained in any Subordinated
Debt Document, the Subordinated Debt shall be and is subordinated and subject in
right of payment to the prior payment in full in cash (or in another manner
agreed to in writing by the Senior Lenders in their sole discretion) of all
Sanwa Debt when and as due (whether by acceleration or otherwise); PROVIDED that
payments on the Subordinated Debt may be made from time to time in accordance
with the terms of the Subordinated Debt Documents as provided in Section 3
hereof. Notwithstanding the foregoing, the consent of the Senior Lenders shall
not be required for the issuance by the Borrower of the Warrant Shares or
Conversion Shares or Additional Subordinated Notes in accordance with the terms
of the Subordinated Debt Documents.
(b) The Borrower will not, directly or indirectly, make or agree to
make, and the Subordinated Creditor will not ask for, demand, sue for, take,
receive, accept or retain (subject to the applicable provisions of the
Bankruptcy Code), directly or indirectly, any payment or distribution (in cash,
property or securities, by set-off or otherwise) of or on account of any
Subordinated Debt or take any Collection Action, if, at the time of such action,
payment or distribution or immediately after giving effect thereto:
(i) (x) a Payment Default shall have occurred and such Payment
Default shall not have been cured or waived or (y) judicial proceedings
shall be pending in respect of such Payment Default; or
(ii) all of the following shall have occurred:
(A) the Subordinated Creditor shall have received written notice
(a "Payment Blockage Notice") from Sanwa of the occurrence of a
Covenant Default (which Payment Blockage Notice shall describe the
nature of such Covenant Default and shall specify that such notice is
a Payment Blockage Notice pursuant to this Agreement);
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(B) such Covenant Default shall not have been cured or waived;
and
(C) less than one hundred eighty (180) days shall have elapsed
after the date of the receipt of the Payment Blockage Notice (the
period during which the restrictions imposed by this subsection
2(b)(ii) are in effect is hereinafter referred to as a "Blockage
Period");
PROVIDED, that (i) at least thirty (30) days must elapse between the
termination of one Blockage Period and the commencement of a
subsequent Blockage Period and the aggregate duration of all Blockage
Periods shall not exceed one hundred eighty (180) days during any
period of three hundred sixty (360) consecutive days, and (ii) no
Covenant Default which exists on the date of the commencement of a
Blockage Period and which was known to Sanwa on such date may be made
the basis of the commencement of a subsequent Blockage Period; and
PROVIDED FURTHER that successive breaches of financial or
other non-payment covenants by the Borrower shall be deemed to be
separate Covenant Defaults.
The foregoing restrictions in this subsection 2(b) shall cease to apply
and, unless otherwise prohibited under Section 2, 5 or 6 hereof, the Borrower
shall be permitted to resume payments with respect to the Subordinated Debt
(including, without limitation, all payments which shall not have been made on
account of the provisions contained in this subsection 2(b)):
(x) in the case of a Payment Default, upon the earlier to occur
of (1) a cure or waiver of such Payment Default or the dismissal of
any such judicial proceeding by the Senior Lenders or (2) payment in
full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all Sanwa Debt; or
(y) in the case of a Covenant Default, upon the earlier to occur
of (1) the cure or waiver thereof or (2) the expiration of the
Blockage Period or the earlier termination of such Blockage Period by
the Senior Lenders.
If any such Covenant Default shall have been cured or waived, Sanwa shall
so notify the Subordinated Creditor in writing of such occurrence; PROVIDED that
failure of Sanwa to give such notice shall not in any way affect the terms of
this Agreement or render Sanwa or any other Senior Lender liable to the
Subordinated Creditor in any respect or relieve the Subordinated Creditor of its
obligations and agreements set forth in this Agreement.
(c) Notwithstanding any language in Section 2.2(b) to the contrary,
following an acceleration of the maturity of any of the Sanwa Debt (whether as a
result of a Payment Default, a Covenant Default, an Event of Bankruptcy or
otherwise) and as long as such acceleration shall continue unrescinded, the
Sanwa Debt shall first be paid in full in cash (or in another manner agreed to
in writing by the Senior Lenders in their sole discretion) before any payment is
made on account of or applied on the Subordinated Debt.
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(d) Each payment of the Subordinated Debt by the Borrower shall be
deemed to constitute a representation of the Borrower to Sanwa and the other
Senior Lenders and the Subordinated Creditor that such payment is permitted to
be paid by the Borrower under this Agreement. Notwithstanding anything to the
contrary set forth herein, the Subordinated Creditor shall be entitled to retain
(subject to the applicable provisions of the Bankruptcy Code) any such payment
unless the Subordinated Creditor received a notice of a Payment Default or a
Payment Blockage Notice from Sanwa hereunder, in which case the Subordinated
Creditor shall hold and deliver to Sanwa such payment or an amount of
immediately available funds equal to the amount thereof in accordance with the
terms of Section 7 hereof within ten (10) days of receipt of such notice. Any
notice given under this subsection 2(d) arising from a Covenant Default shall
constitute a Payment Blockage Notice for purposes of this Section 2, commencing
on such date of payment of the Subordinated Debt, and the duration of any
resulting Blockage Period shall be governed in all respects by the terms of
subsection 2(b) hereof.
(e) This Agreement shall apply with respect to all of the Sanwa Debt,
regardless of how or in what manner the Sanwa Debt is incurred, or whether the
Sanwa Debt has already been incurred or may be incurred in the future by future
advances or other financial accommodations made or extended by the Senior
Lenders as of the date hereof or hereafter or by Persons that become holders of
Sanwa Debt after the date hereof, or whether such future advances or other
financial accommodations are made at the discretion of the Senior Lenders or
such other Person under the Sanwa Documents or pursuant to commitments
thereunder.
(f) The Subordinated Creditor acknowledges and agrees that the
subordination provisions herein contained are, and are intended to be, an
inducement and a consideration to the Senior Lenders, whether the Sanwa Debt was
created or acquired before or after the issuance of the Subordinated Debt, to
continue to hold or to acquire and continue to hold such Sanwa Debt and the
Senior Lenders shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold such Sanwa Debt. If the
Subordinated Creditor shall attempt to take any action in violation of this
Agreement, Sanwa and the other Senior Lenders may interpose as a defense or plea
the making of this Agreement and Sanwa and the other Senior Lenders may
intervene and interpose such defense in their name, and may by virtue of this
Agreement restrain the violation thereof.
Section 3. PERMITTED PAYMENTS. Subject to the terms of Sections 2, 5, and
6 hereof and subsection 8.20 of the Sanwa Loan Agreement, the Borrower may pay
to the Subordinated Creditor and the Subordinated Creditor may receive, accept
and retain (subject to the applicable provisions of the Bankruptcy Code) from
the Borrower payments made by the Borrower on the Subordinated Debt in
accordance with the terms of the Subordinated Debt Documents; PROVIDED that no
Default or Event of Default would result after giving effect to any such
payment. The Borrower will not, directly or indirectly, make or agree to make,
and the Subordinated Creditor will not ask for, demand, take, receive, accept or
retain (subject to the applicable provisions of the Bankruptcy Code), directly
or indirectly, any prepayment of the Subordinated Debt except as permitted by
the terms of this Agreement and the Sanwa Loan Agreement as in effect on the
date hereof without the prior written consent of the Senior Lenders.
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Section 4. SUBORDINATED DEBT OWED TO THE SUBORDINATED CREDITOR. The
Subordinated Creditor represents and warrants to Sanwa and the other Senior
Lenders that, as of the date hereof (i) the only outstanding Subordinated Debt
is that incurred under the Subordinated Note, (ii) the aggregate outstanding
Subordinated Debt is $15,000,000, plus fees and other charges incurred by the
Borrower pursuant to the Subordinated Debt Documents in connection with the
closing of the Subordinated Debt transaction, (iii) it holds no Lien in or upon
any property of the Borrower or any of its Subsidiaries to secure payment of the
Subordinated Debt, (iv) no other Person owns any interest in the Subordinated
Debt (whether as joint holder, participant or otherwise) and (v) to the best of
the Subordinated Creditor's knowledge, no default or event of default or other
breach exists under the Subordinated Debt Documents.
The Subordinated Creditor may not negotiate, sell, assign, transfer or
otherwise dispose of (collectively a "transfer") all or any portion of the
Subordinated Debt or any interest therein unless (a) the Subordinated Creditor
shall have given Sanwa at least ten (10) days' prior written notice of such
proposed transfer and (b) the transferee shall have unconditionally agreed in
writing, in each instance, in advance of or contemporaneously with such transfer
and in form and substance satisfactory to Sanwa to be bound by the terms of this
Agreement.
Section 5. STAND-STILL PROVISIONS. Subject to the terms of SECTIONS 2
and 6 hereof and subsection 8.20 of the Sanwa Loan Agreement, upon the
occurrence and during the continuance of a default with respect to the
Subordinated Debt (other than by reason of a Payment Default or a Blockage
Period) the Subordinated Creditor may ask or make demand for payment of any
payment of any Subordinated Debt then due in accordance with the terms of the
Subordinated Debt Documents, but shall not take any other action to enforce
payment of such amount or take any other Collection Action with respect to the
Subordinated Debt or the Borrower or any guarantor until the earliest to occur
of:
(a) payment in full in cash (or in another manner agreed to in
writing by the Senior Lenders in their sole discretion) of all Sanwa Debt;
(b) the acceleration of all Sanwa Debt;
(c) an Event of Bankruptcy; or
(d) with respect to a Significant Subordinated Debt Default only, one
hundred eighty (180) days shall have elapsed from the date on which the
Subordinated Creditor shall have given notice (a "Significant Subordinated Debt
Default Notice") to the Borrower and Sanwa of the occurrence of any Significant
Subordinated Debt Default which Significant Subordinated Debt Default Notice
shall describe the nature of such Significant Subordinated Debt Default and
shall specify that such notice is a Significant Subordinated Debt Default Notice
pursuant to this Agreement;
PROVIDED that any payments or proceeds of such exercise of any Collection Action
received by the Subordinated Creditor shall be subject to the terms of Sections
2 and 6 hereof and shall be paid over to Sanwa in accordance with Section 7
hereof.
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Notwithstanding anything contained herein to the contrary, if (i) following
the acceleration of the Sanwa Debt as described in clause (b) above, such
acceleration is rescinded by the Senior Lenders, whether or not any existing
Event of Default shall have been waived or cured, and the Borrower is restored
to the STATUS QUO ANTE existing prior to such acceleration, and (ii) the
Subordinated Creditor has taken any Collection Actions, then all such Collection
Actions shall likewise be rescinded or terminated. Upon the occurrence of any
such rescission, the terms of this Agreement shall continue to control any
subsequent Collection Actions by the Subordinated Creditor. In taking any
Collection Action, the Subordinated Creditor shall not take any action which is
intended to hinder or delay any Enforcement Action taken by the Senior Lenders
or which is inconsistent with the provisions of this Agreement.
As between the Subordinated Creditor and the Borrower, the existence of any
payment bar or standstill restriction hereunder shall not constitute a waiver of
the Subordinated Creditor's rights to receive payments of the Subordinated Debt
when due or prevent or suspend the occurrence of an "Event of Default" under the
Subordinated Debt Documents.
Section 6. INSOLVENCY PROCEEDINGS. Upon the occurrence of an Event of
Bankruptcy:
(a) This Agreement shall be applicable both before and after the
commencement, whether voluntary or involuntary, of any Event of Bankruptcy, and
all references herein to the Borrower shall be deemed to apply to the Borrower
as debtor and/or debtor in possession and to any trustee in bankruptcy for the
estate of the Borrower. Each of the parties hereto acknowledges and agrees that
this Agreement shall be enforceable under Section 510(a) of the Bankruptcy Code.
Without limiting the generality of the foregoing, this Agreement, the priorities
set forth herein and the rights and obligations of the parties hereto with
regard to Collateral shall be applicable to all post-petition Liens on
Collateral (whether such Liens are additional or replacement Liens)granted
pursuant to any bankruptcy court order, stipulation or agreement to the same
extent as if granted under the Sanwa Documents.
(b) Sanwa and the other Senior Lenders shall be entitled to receive
indefeasible payment in full in cash (or in another manner agreed to in writing
by the Senior Lenders in their sole discretion) of all Sanwa Debt before any
payment or distribution, whether in cash, property or securities, is made on
account of or applied to the Subordinated Debt;
(c) The Subordinated Debt shall forthwith become due and payable, and
any payment or distribution of assets of the Borrower of any kind or character
that occurs after an Event of Bankruptcy, whether in cash, property or
securities, to which the Subordinated Creditor would be entitled except for the
provisions of this Agreement (including any payment that may be payable by
reason of any other indebtedness of the Borrower being subordinated to payment
of any of the Subordinated Debt), shall be paid or delivered by any debtor,
debtor in possession, receiver, liquidator, custodian, conservator, trustee or
other Person making such payment or distribution, directly to Sanwa for
application to the payment of the Sanwa Debt remaining unpaid, to the extent
necessary to indefeasibly pay in full in cash (or in another manner agreed to in
writing by the Senior Lenders in their sole discretion) of all Sanwa Debt after
giving effect to any concurrent payment or distribution to Sanwa and the other
Senior Lenders. To facilitate the foregoing, at the request of Sanwa, the
Subordinated Creditor shall authorize, empower and
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direct any such debtor, debtor in possession, receiver, liquidator,
custodian, conservator, trustee or other Person having authority in the
premises to effect all such payments and deliveries. The Subordinated
Creditor also irrevocably authorizes and empowers the Senior Lenders to
demand, sue for, collect and receive every such payment or distribution
described herein, such Person to make all such payments and distributions
directly to the Senior Lenders;
(d) The Subordinated Creditor hereby irrevocably authorizes and
empowers the Senior Lenders, if the Subordinated Creditor fails to file a claim
or proof of claim in any case or proceeding related to an Event of Bankruptcy at
least forty-five (45) calendar days prior to the date established by rule of law
or order of court for such filing, to file and prove such claims on behalf of
the Subordinated Creditor;
(e) The Subordinated Creditor shall execute and deliver to the Senior
Lenders all such further instruments and other documentation confirming the
above authorization, and all such powers of attorney, proofs of claim and
assignment of claims, and shall take all such other action, as may be reasonably
requested by the Senior Lenders to enforce such claims and carry out the
purposes of this SECTION 6;
(f) In the event Sanwa or any other Senior Lender is required in any
case or proceeding related to an Event of Bankruptcy or otherwise to turn over
or otherwise return to the Borrower, the estate of the Borrower or any
guarantor, any third party or any trustee, receiver or other representative of
the Borrower or any guarantor any payment or other amount received with respect
to the Sanwa Debt (a "Recovery"), the obligations of the Subordinated Creditor
under this Agreement shall continue to be effective, or be reinstated, as the
case may be, and the Sanwa Debt shall be reinstated to the extent of such
Recovery and Sanwa and the other Senior Lenders shall be entitled to receive
payment in full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all such amounts, all as though such
payment had not been made;
(g) The Subordinated Creditor shall not contest (or support any other
Person contesting) (i) any request by the Senior Lenders for adequate protection
in any case or proceeding related to an Event of Bankruptcy or (ii) any
objection by the Senior Lenders to any motion, relief, action or proceeding in
any such case or proceeding based on the Senior Lenders claiming a lack of
adequate protection; and
(h) Although, subject to paragraph (c) above, the Subordinated
Creditor has retained its rights to vote its claims and otherwise act on its own
behalf in any case or proceeding related to an Event of Bankruptcy, the
Subordinated Creditor agrees that it will not (i) directly or indirectly, amend
the Subordinated Documents or take any other action with respect to the
Subordinated Documents or vote in any way in connection with an Event of
Bankruptcy that would be in violation of, or inconsistent with, or result in a
breach of, this Agreement or so as to challenge or contest in a case or
proceeding related to an Event of Bankruptcy or otherwise (x) the validity,
perfection, priority or enforceability of the Sanwa Debt or the liens, security
interests, mortgages and guaranties granted to secure payment of any of the
Sanwa Debt, (y) the rights of Sanwa and the other Senior Lenders set forth in
any Sanwa Document with respect to such liens, security interests, mortgages or
guaranties or (z) the
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validity or enforceability of any term, condition or provision of this
Agreement, (ii) induce any other Person to take any such action or (iii)
cooperate with any Person in taking any such action. Nothing herein shall be
construed to prohibit the Senior Lenders from seeking, in any case or
proceeding related to an Event of Bankruptcy, a determination of the value of
its secured claims, including, without limitation, a determination under 11
U.S.C. Section 506(a) and Bankruptcy Rule 3012.
Nothing contained herein shall prohibit or in any way limit Sanwa or any
other Senior Lender from objecting in any such case or proceeding related to an
Event of Bankruptcy or otherwise to any action taken by the Subordinated
Creditor.
Upon any payment or distribution of assets of the Borrower referred to in
this Section 6, the Subordinated Creditor shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any case or
proceeding related to an Event of Bankruptcy is pending, and upon a certificate
of the debtor, debtor in possession, receiver, liquidator, custodian,
conservator, trustee or other Person making any payment or distribution to such
holders for the purpose of ascertaining the Persons entitled to participate
therein, the then outstanding principal amount of the Sanwa Debt and any and all
amounts payable thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this SECTION 6.
Section 7. PAYMENTS OR DISTRIBUTIONS RECEIVED BY THE SUBORDINATED
CREDITOR. Except as to payments or distributions which the Subordinated
Creditor is permitted to receive, accept and retain (subject to the applicable
provisions of the Bankruptcy Code) pursuant to this Agreement, should any
payment or distribution of any kind or character be paid to or received by,
whether in cash, property or securities, upon or with respect to the
Subordinated Debt prior to the payment in full in cash (or in another manner
agreed to in writing by the Senior Lenders in their sole discretion) of all
Sanwa Debt, the Subordinated Creditor shall receive and hold the same in trust,
as trustee, for the benefit of Sanwa and the other Senior Lenders and shall
forthwith deliver the same to Sanwa in precisely the same form received (except
for the endorsement or assignment of the Subordinated Creditor where necessary)
for application to the Sanwa Debt and until so delivered, the same shall not be
commingled with any assets of the Subordinated Creditor and shall be held in
trust by the Subordinated Creditor as the property of Sanwa and the other Senior
Lenders.
Section 8. LIENS. The Subordinated Creditor represents that it holds no
guaranty of the Subordinated Debt or lien, security interest or mortgage in or
upon any assets of the Borrower or any of its Subsidiaries to secure payment of
the Subordinated Debt. After the date hereof, the Subordinated Creditor agrees
not to accept any guaranty of the Subordinated Debt or any lien, security
interest or mortgage in or upon the assets of the Borrower or any Subsidiary of
the Borrower to secure the Subordinated Debt.
Section 9. SUBROGATION. After all of the Sanwa Debt has been paid in full
in cash (or in another manner agreed to in writing by the Senior Lenders in
their sole discretion) and until the Subordinated Debt has been paid in full,
the Subordinated Creditor shall be subrogated to the rights of Sanwa and the
other Senior Lenders with respect to the Collateral and to receive,
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accept and retain (subject to the applicable provisions of the Bankruptcy
Code) payments or distributions with respect to the Sanwa Debt, to the extent
that distributions otherwise payable to the Subordinated Creditor have been
applied to the payment of the Sanwa Debt in accordance with the provisions of
this Agreement. As among the Borrower, its creditors other than the Senior
Lenders and the Subordinated Creditor, any payment or distribution applied to
the payment of the Sanwa Debt in accordance with the provisions of this
Agreement which otherwise would have been made to the Subordinated Creditor
shall not be deemed a payment by the Borrower on the Sanwa Debt. The
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of Sanwa, the other Senior Lenders and the
Subordinated Creditor. Nothing contained in this Agreement is intended to or
shall alter or impair the obligations of the Borrower, which are absolute and
unconditional, to pay to the Subordinated Creditor the Subordinated Debt as
and when the same shall become due and payable in accordance with its terms.
Section 10. TERM. This Agreement shall constitute a continuing agreement
between Sanwa, the other Senior Lenders and the Subordinated Creditor, and the
successors and assigns of each of them, regardless of whether such successors
and assigns are signatories hereto, and the Senior Lenders or their respective
successors and assigns may continue, without notice to the Subordinated Creditor
or to the successors and assigns thereof, to lend monies, extend credit and make
other accommodations to or for the account of the Borrower in reliance upon the
provisions of this Agreement. This Agreement shall be irrevocable by the
Subordinated Creditor until all of the Sanwa Debt shall have been paid in full
in cash (or in another manner agreed to in writing by the Senior Lenders in
their sole discretion) and all commitments under the Sanwa Documents have
expired or been terminated in writing, or the Subordinated Debt shall have been
paid in full in cash.
Section 11. WAIVERS OF THE SUBORDINATED CREDITOR. All of the Sanwa Debt
shall be deemed to have been made or incurred in reliance upon this Agreement,
and the Subordinated Creditor expressly waives notice of the creation, renewal,
extension, increase, release, accrual or other incurrence of Sanwa Debt from
time to time under the Sanwa Documents or the exchange, sale or surrender of any
Collateral as the Senior Lenders may deem advisable or of the reliance of Sanwa
and the other Senior Lenders on these provisions and all other notices not
specifically required pursuant to the terms of this Agreement or by law. The
Subordinated Creditor agrees that (a) the provisions of this Agreement shall be
specifically enforceable against it by Sanwa and the other Senior Lenders and
irrevocably waives any defense based upon the adequacy of a remedy at law which
might be asserted as a bar to such remedy of specific performance, and (b)
without notice to or further assent by it, the Sanwa Debt may from time to time,
in whole or in part, be renewed, extended, increased or released by the Senior
Lenders, as the Senior Lenders may deem advisable, that any Collateral for the
Sanwa Debt may from time to time, in whole or in part, be exchanged, sold, or
surrendered by the Senior Lenders, as the Senior Lenders may deem advisable, and
that the Senior Lenders may take any other action it may deem necessary or
appropriate in connection with the Sanwa Debt, all without in any manner or to
any extent impairing or affecting the obligations of the Borrower or the
Subordinated Creditor. The Subordinated Creditor agrees that Sanwa has not made
any warranties or representations with respect to the due execution, legality,
validity, completeness or enforceability of any Sanwa Documents or the
collectibility of the Sanwa Debt, or the
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perfection of liens, security interests or mortgages in the Collateral, and
that Sanwa and the other Senior Lenders shall be entitled to manage and
supervise the Sanwa Debt owed to them in accordance with applicable law and
its usual practices, modified from time to time as Sanwa and the other Senior
Lenders may deem appropriate under the circumstances.
Section 12. AGREEMENT UNAFFECTED BY CERTAIN EVENTS. The rights under this
Agreement of Sanwa and the other Senior Lenders as against the Subordinated
Creditor shall remain in full force and effect without regard to, and shall not
be impaired or affected by: (a) any act or failure to act on the part of the
Borrower; (b) the validity or enforceability of any Lien on any of the
Collateral or of any of the Sanwa Documents or the Subordinated Debt Documents;
(c) any extension or indulgence in respect of any payment or prepayment of the
Sanwa Debt or any part thereof or in respect of any other amount payable to
Sanwa or the other Senior Lenders; (d) any amendment, modification or waiver of,
or addition or supplement to, or deletion of, or compromise, release, consent,
termination or other action in respect of, any of the terms of any of the Sanwa
Documents, the Subordinated Debt Documents or any other agreement which may be
made relating to the Sanwa Debt or the Subordinated Debt; PROVIDED that the
Senior Lenders hereby agree that the Sanwa Documents shall not be amended to
expressly prohibit the payment of the Subordinated Debt without regard to the
terms of the Subordination Agreement; (e) any exercise or non-exercise by the
Senior Lenders of any right, power, privilege or remedy under or in respect of
any portion of the Sanwa Debt or this Agreement, or any waiver of any such
right, power, privilege or remedy or any default in respect of such Sanwa Debt
or this Agreement, or any receipt by Sanwa or the other Senior Lenders of any
security, or any failure by Sanwa or the other Senior Lenders to perfect a Lien
on, or any release by such holder of, any Collateral for the payment of the
Sanwa Debt; (f) any merger or consolidation of the Borrower into or with any of
its Subsidiaries or any such Subsidiary with any other Subsidiary of the
Borrower or of the Borrower or any of its Subsidiaries into or with any other
Person, or any sale, lease, exchange, transfer or other disposition of any or
all of the assets or property of the Borrower or any of its Subsidiaries to any
other Person; (g) any impairment, modification, change, exchange, release or
subordination of or limitation on, any liability of, or stay of actions or other
Lien enforcement proceedings against, any of the Borrower, its property or its
estate in bankruptcy resulting from any Event of Bankruptcy; (h) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, the Borrower or a subordinated creditor; or (i) the absence of any
notice to, or knowledge by, the Subordinated Creditor of the existence or
occurrence of any of the matters or events set forth in the foregoing clauses
(a) through (h).
Section 13. AMENDMENTS TO SUBORDINATED DEBT DOCUMENTS. Prior to the
payment in full in cash (or in another manner agreed to in writing by the Senior
Lenders in their sole discretion) of all Sanwa Debt in accordance with the terms
thereof and hereof and notwithstanding anything contained in the Subordinated
Debt Documents to the contrary, without the prior written consent of the Senior
Lenders (which consent shall not be unreasonably withheld), the Subordinated
Creditor shall not agree to any amendment, modification, restatement or other
supplement to any of the Subordinated Debt Documents.
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Section 14. NOTICE FROM OTHER PARTIES. (a) Each of Sanwa and the
Subordinated Creditor agrees to give to each other party hereto copies of any
written notices of default, termination, demand for payment, acceleration,
Enforcement Action and any other material written notice of a like nature
including, without limitation, any such notice which may be given under or
pursuant to the terms of any of the applicable Sanwa Documents or the
Subordinated Debt Documents, which such party may give hereafter to the Borrower
or any guarantor, in each case concurrently with, or as soon as practicable
after, the giving of such notice to the Borrower or any guarantor; PROVIDED that
failure of any party to give a copy of any such notice as provided herein shall
not in any way affect the validity or effectiveness of the notice or render the
party liable to any other party in any respect or relieve any such party of its
obligations and agreements contained herein.
(b) The Subordinated Creditor shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to it, unless and until the Subordinated Creditor shall have received a
notice of a Payment Default or a Payment Blockage Notice from Sanwa hereunder.
Prior to the receipt of any such notice, the Subordinated Creditor shall be
entitled to assume conclusively that no such facts exist, without, however,
limiting any right of Sanwa and the other Senior Lenders under the terms of this
Agreement to recover from the Subordinated Creditor any payment made in
contravention of this Agreement.
(c) The Subordinated Creditor shall be entitled to rely on the
delivery to it of a notice by a Person representing itself to be the
representative of Sanwa to establish that such notice has been given by Sanwa.
In the event that the Subordinated Creditor determines in good faith that
further evidence is required with respect to the right of any such Person to
participate in any payment or distribution pursuant to this Agreement, the
Subordinated Creditor may request evidence to the reasonable satisfaction of the
Subordinated Creditor as to any fact pertinent to the rights of the Subordinated
Creditor under this Agreement, and if such evidence is not furnished, then the
Subordinated Creditor may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 15. NOTICES. Any notice, demand or other communication required or
permitted under the terms of this Agreement shall be in writing and shall be
made by overnight courier service, telecopier, telegram, telex or certified or
registered mail, return receipt requested, and shall be deemed to be received by
the addressee one (1) Business Day after sending, if sent by courier,
telecopier, telegram or telex, and three (3) Business Days after mailing, if
sent by certified or registered mail. Notices shall be addressed as provided
below:
If to the Subordinated Creditor:
Dilmun Financial Services
Harbormaster Place 4
International Financial Services Centre
Dublin, Ireland
Attention: Ruth Eaton
Phone: 011-353-167-00463
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Telecopy: 011-353-167-00181
With a copy to:
Bahrain International Bank E.C.
Bahrain Commercial Complex
13th Floor, P.O. Box 5016
Manama, Bahrain
Attention: Sameer Al Aradi
Phone: 011-973-534-545
Telecopy: 011-973-535-141
and
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: David L. Kovacs, Esq.
Phone: (212) 661-6500
Telecopy: (212) 697-6686
If to Sanwa or any other Senior Lender:
SANWA BUSINESS CREDIT CORPORATION
One South Wacker Drive
Chicago, Illinois 60606
Attention: Robert Bartkowicz
Phone: (312) 853-1310
Telecopy No.: (312) 782-6035
or at such other address as any party may designate by notice to the other
parties in accordance with the provisions hereof.
Section 16. INSTRUMENT LEGEND. The Subordinated Creditor Note, and any
renewals or replacements thereof, and all promissory notes or other securities
for which it is exchanged or into which it is converted will, on the date hereof
or prior to the issuance thereof, be inscribed with a legend conspicuously
stating that payment thereof is subordinate and junior in right of payment to
the Sanwa Debt pursuant to the terms of this Agreement. The Subordinated
Creditor shall deliver to Sanwa a photocopy of the original Subordinated Note
marked with such legend.
Section 17. EXERCISE OF RIGHTS; CUMULATIVE REMEDIES. No failure by the
Senior Lenders to exercise, and no delay by the Senior Lenders in exercising
from time to time, any right, power, privilege or remedy under the Sanwa Debt or
the Sanwa Documents or any right, power, privilege or remedy under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, privilege or remedy under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, power,
privilege or remedy.
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The rights, powers, privileges and remedies provided in this Agreement and in
any agreement relating to any of the Sanwa Debt, the Sanwa Documents and all
other agreements, instruments and documents referred to in any of the
foregoing are cumulative and shall not be exclusive of any rights, powers,
privileges or remedies provided by law.
Section 18. GOVERNING LAW. This Agreement shall be governed by, and the
rights and liabilities of the parties hereto construed, in accordance with the
internal laws and decisions of the State of Illinois without regard to choice of
law or conflicts of law principles.
Section 19. PARTIES. This Agreement shall be binding upon, and inure to
the benefit of, Sanwa, the other Senior Lenders and the Subordinated Creditor
and their respective successors, transferees and assigns; PROVIDED that any
assignment, sale, disposition or other transfer by the Subordinated Creditor of
any of the Subordinated Debt or the Subordinated Debt Documents shall be made in
accordance with the terms of SECTION 4 hereof. Notwithstanding the failure to
execute any such agreement, the agreements effected hereby shall survive any
such assignment, sale, disposition or other transfer, and the terms of this
Agreement shall be binding upon the successors and assigns of the Subordinated
Creditor. In addition, any successor or assignee of Sanwa or any other Senior
Lender shall be entitled to rely upon and be the third party beneficiary of the
agreements provided for herein and shall be entitled to enforce the terms and
provisions hereof as if initially a party hereto. The term "Borrower" as used
herein shall also refer to the successors and assigns of the Borrower,
including, without limitation, a receiver, trustee, custodian or debtor in
possession. This Agreement is solely for the purpose of defining the rights and
priorities of the parties hereto, and their respective successors and assigns,
and no other Person (including, without limitation, the Borrower) shall have any
right, benefit, priority or interest under, or because of the existence of, this
Agreement or shall be a direct or indirect beneficiary of or have any direct or
indirect cause of action or claim in connection with this Agreement, nor shall
this Agreement affect the obligations of the Borrower to Sanwa or the other
Senior Lenders or to the Subordinated Creditor, which obligations shall remain
absolute and unconditional in all circumstances.
Section 20. SECTION TITLES. The section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the Agreement between the parties hereto.
Section 21. COUNTERPARTS. This Agreement may be executed by the parties
hereto in any number of separate counterparts (or telecopied counterparts with
original execution copy to follow) and by the different parties on separate
counterparts, all of which counterparts taken together shall constitute one and
the same instrument.
Section 22. WAIVERS; AMENDMENTS. No waiver shall be deemed to be made by
Sanwa or the other Senior Lenders of any of its rights hereunder unless the same
shall be in writing signed on behalf of Sanwa and each waiver, if any, shall be
a waiver only with respect to the specific instance involved and shall in no way
impair the rights of Sanwa or the other Senior Lenders in any other respect at
any other time. Unless otherwise expressly provided for herein, no provision of
this Agreement may be amended, modified or supplemented without the express
prior written consent thereto of Sanwa and the Subordinated Creditor.
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Section 23. ENTIRE AGREEMENT. This Agreement contains all of the terms
and conditions agreed upon by the parties relating to its subject matter and
supersedes any and all prior and contemporaneous agreements, negotiations,
correspondence, understandings and communications of the parties, whether oral
or written, respecting that subject matter.
Section 24. SUBMISSION TO JURISDICTION; MUTUAL WAIVER OF JURY AND BOND.
EACH OF SANWA, THE OTHER SENIOR LENDERS AND THE SUBORDINATED CREDITOR HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS, AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH
COURTS, AND EACH OF SANWA, THE OTHER SENIOR LENDERS AND THE SUBORDINATED
CREDITOR WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM
NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS
SET FORTH IN SECTION 15 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO THE SUBORDINATED CREDITOR'S ADDRESS BY THE
SUBORDINATED CREDITOR'S AGENT AS SET FORTH BELOW. SANWA, THE OTHER SENIOR
LENDERS AND THE SUBORDINATED CREDITOR ACKNOWLEDGE THAT THE TIME AND EXPENSE
REQUIRED FOR TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL AND HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVE
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF SANWA OR THE OTHER SENIOR LENDERS. NOTHING CONTAINED IN THIS
SECTION 24 SHALL AFFECT THE RIGHT OF SANWA TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF SANWA OR THE OTHER SENIOR LENDERS
TO BRING ANY ACTION OR PROCEEDING OR TAKE OTHER LEGAL ACTION IN THE COURTS OF
ANY OTHER JURISDICTION TO THE EXTENT NECESSARY TO ENFORCE ITS LIEN AND SECURITY
INTERESTS AGAINST COLLATERAL LOCATED IN SUCH JURISDICTION. THE SUBORDINATED
CREDITOR WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO ABOVE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
Section 25. INVALIDITY OR CONFLICT. As between Sanwa and the other Senior
Lenders, on the one hand, and the Subordinated Creditor, on the other hand, in
the event of any conflict between any term, covenant or condition of this
Agreement and any term, covenant or condition of the Subordinated Debt
Documents, the provisions of this Agreement shall govern and be controlling.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or
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unenforceability, without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
The parties hereto shall endeavor in good faith negotiations to replace any
such invalid or unenforceable provision with a valid provision, the economic
effect of which comes as close as possible to that of the invalid or
unenforceable provision.
Section 26. MARSHALING. So long as this Agreement shall be in effect, the
Subordinated Creditor to the fullest extent permitted by applicable law, waives,
with respect to the Collateral, any requirement regarding, and agrees not to
demand, request, plead or otherwise claim the benefit of, any marshaling by
Sanwa or the other Senior Lenders that may otherwise be available under
applicable law.
Section 27. ADDITIONAL PROVISIONS
(a) Sanwa and the Subordinated Creditor each undertake to perform
only such obligations on its part as are specifically set forth in this
Agreement, and no implied covenants or obligations with respect to any party
shall be read into this Agreement against the other party. Except to the extent
specifically provided for by Section 7 hereof, neither party hereto shall be
deemed to owe any fiduciary duty to the other party by virtue of the provisions
of this Agreement.
(b) The Borrower acknowledges that the Subordinated Debt shall not be
subordinated (i) to claims of any trade creditors of the Borrower or (ii) in
right of payment to the prior payment of any existing or future unsecured
indebtedness of the Borrower, but rather shall rank equally with all existing
and future unsecured indebtedness of the Borrower, (except as otherwise may be
required by bankruptcy or other laws affecting the rights of creditors
generally).
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
SANWA BUSINESS CREDIT CORPORATION,
as a Senior Lender and as agent for
the other Senior Lenders
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
DILMUN FINANCIAL SERVICES
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
BIB HOLDINGS (BERMUDA) LTD.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
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ACKNOWLEDGMENT AND AGREEMENT OF THE BORROWER
The undersigned, Brothers Gourmet Coffees, Inc., the Borrower named in the
foregoing Agreement, does hereby accept, and acknowledge receipt of a copy of,
the foregoing Agreement, and agrees that (a) it will not pay any of the
Subordinated Debt except as the foregoing Agreement permits, and (b) it will be
bound by all provisions of the foregoing Agreement. In the event of a breach by
the Borrower of any of the provisions of the Agreement, all of the Sanwa Debt
shall, without presentment, demand, protest or notice of any kind become
immediately due and payable unless the Senior Lenders shall otherwise elect in
writing.
All capitalized terms used in this Acknowledgement and Agreement without
definition shall have the same meanings as set forth in the foregoing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement and
Agreement to be duly executed as of the day and year first above written.
BROTHERS GOURMET COFFEES, INC.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
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EXHIBIT 4.3
SECOND AMENDMENT AND CONSENT TO LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT AND CONSENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of December 27, 1996, is by and between BROTHERS
GOURMET COFFEES, INC., a Delaware corporation, as Borrower, SANWA BUSINESS
CREDIT CORPORATION, a Delaware corporation, as Agent and Lender, and the
other Lenders signatory to the Loan and Security Agreement from time to time.
RECITALS
A. Borrower, Agent and Lenders are parties to that certain Loan and
Security Agreement dated as of May 29, 1996 (as from time to time amended,
restated, supplemented or otherwise modified, the "Loan Agreement"), pursuant
to which Lenders have made and may hereafter make loans and advances and
other extensions of credit to Borrower.
B. Borrower desires to enter into that certain Subordinated Note
Agreement, dated December 27, 1996, by and between Borrower and Dilmun
Financial Services and that certain Warrant for the Purchase of Shares of
Common Stock, dated December 27, 1996, issued by Borrower in favor of BIB
Holdings (Bermuda) Ltd. (collectively, the "Subordinated Agreements"),
certain of which provisions are or may be prohibited by the Loan Agreement.
C. Agent and Lenders are willing to consent to the consummation of the
Subordinated Agreements on the terms and conditions set forth in this
Amendment.
D. Borrower desires, and Agent and Lenders are willing, to amend
certain provisions of the Loan Agreement, all on the terms and conditions set
forth in this Amendment.
E. This Amendment shall constitute a Financing Agreement and these
Recitals shall be construed as part of this Amendment.
F. Capitalized terms used herein and not otherwise defined herein have
the meaning assigned to them in the Financing Agreements.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
28. AMENDMENT OF LOAN AGREEMENT.
(i) Subsection 1.1 of the Loan Agreement is hereby amended by (A)
deleting the definition of "Cash Flow Coverage Ratio" in its entirety and
replacing it with the following:
<PAGE>
"CASH FLOW COVERAGE RATIO" shall mean, for any fiscal period, the
ratio of (a) EBITDA for such period, PLUS Slotting Fees amortization
during such period, MINUS Slotting Fee Payments during such period,
MINUS Capital Expenditures during such period, MINUS income and
franchise taxes paid during such period to (b) the aggregate of all
interest paid in cash during such period, PLUS current maturities of
long-term debt during such period; PROVIDED that any calculation of
the Cash Flow Coverage Ratio under SECTION 7.11 which includes any
Accounting Period in Fiscal Year 1997 shall exclude (i) Slotting
Payments made by the Borrower to Yucaipa during Fiscal Year 1997 in an
amount not to exceed $8,000,000, (ii) Capital Expenditures made by the
Borrower during Fiscal Year 1997 with respect to Yucaipa stores in an
amount not to exceed $853,000, and (iii) Capital Expenditures made by
the Borrower during Fiscal Year 1997 with respect to the Borrower's
Houston, Texas manufacturing facility in an amount not to exceed
$2,500,000 (collectively, the "Excluded Expenditures"); PROVIDED
FURTHER that, for purposes of calculating the Cash Flow Coverage Ratio
for any fiscal period, any such Excluded Expenditure or portion
thereof shall be included in any such Accounting Period only to the
extent that such Excluded Expenditure or portion thereof was actually
paid or disbursed in such Accounting Period."
and (B) deleting the definition of "Slotting Fee Payments" in its entirety
and replacing it with the following:
"SLOTTING FEE PAYMENTS" shall mean, for any applicable fiscal
period, any payments made by the Borrower, whether by cash or credit
or otherwise, during such period with respect to Slotting Fees."
(ii) Subsection 1.1 of the Loan Agreement is hereby amended by
deleting clause (p) of the definition of "Event of Default" and replacing
it with the following:
"(p) entry of a judgment or judgments in an aggregate amount in
excess of Two Hundred Fifty Thousand Dollars ($250,000) against the
Borrower or any Subsidiary which is not stayed, bonded, vacated, paid
or discharged within thirty (30) days after entry; PROVIDED that the
entry of a judgment with respect to the Lindgren Case shall not be an
Event of Default so long as (i) the aggregate amount of such judgment
is less than $2,750,000, (ii) the escrow fund of $2,500,000 with
respect to such litigation is maintained in full force and effect
until payment of such judgment, (iii) no Lien which will have priority
over the Agent's Lien granted hereunder with respect to the Collateral
is filed or recorded with respect thereto, (iv) the execution or other
enforcement of the judgment and such subordinated Lien, if any, is
and continues to be effectively stayed or bonded, and (v) the Borrower
diligently pursues receipt of the escrow funds and, upon receipt of
such funds, the Borrower pays the judgment and any interest payable in
connection therewith."
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(iii) Subsection 1.1 of the Loan Agreement is hereby amended by (A)
re-lettering clause (y) of the definition of "Event of Default" as clause
"(z)", and (B) adding the following as a new clause (y):
"(y) any breach or default by the Borrower of any of the
provisions of any of the Subordinated Debt Documents; or"
(iv) Subsection 1.1 of the Loan Agreement is hereby amended by
deleting the definition of "Subordinated Debt" in its entirety and
replacing it with the following:
"SUBORDINATED DEBT" of a Person shall mean any Indebtedness
subordinated to the Obligations in a manner and form satisfactory to
the Agent and the Lenders, as to right and time of payment and as to
any other rights and remedies thereunder. Subordinated Debt shall
include, without limitation, the Indebtedness of the Borrower with
respect to the Warrant, the Subordinated Note and the Additional
Subordinated Notes."
(v) Subsection 1.1 of the Loan Agreement is hereby amended by inserting
the following defined terms in their proper alphabetical order:
"ADDITIONAL SUBORDINATED NOTES" shall mean the additional senior
subordinated promissory notes issued pursuant to Section 5(d)(vi) of
the Warrant in the form of Exhibit A to the Warrant.
"CONVERSION SHARES" shall have the meaning ascribed thereto in
the Warrant.
"LINDGREN CASE" shall mean Case No. 94202875-2, captioned PAUL
LINDGREN, TERRY JEAN LINDGREN AND TERRY JEAN'S INC. V. SABEY
CORPORATION, GLORIA JEAN'S COFFEE BEAN CORP., GLORIA JEAN'S COFFEE
BEAN FRANCHISE CORP., EDGLO ENTERPRISES, INC., EDWARD KVETCO, GLORIA
JEAN KVETKO AND BROTHERS GOURMET COFFEES, INC. filed in the Superior
Court of the State of Washington, in and for Spokane County.
"PHANTOM STOCK PAYMENT" shall have the meaning ascribed thereto
in the Warrant.
"SUBORDINATED AGREEMENT" shall mean that certain Subordinated
Agreement, dated as of December 27, 1996, by and among the Agent and
the Subordinated Creditor, as the same may be amended, modified,
restated or otherwise supplemented from time to time hereafter.
"SUBORDINATED CREDITOR" shall mean, collectively, Dilmun
Financial Services and BIB Holdings (Bermuda) Ltd. and their
respective successors and assigns.
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"SUBORDINATED DEBT DOCUMENTS" shall mean the Subordinated Note,
the Additional Subordinated Notes, the Warrant and the Subordinated
Note Agreement.
"SUBORDINATED NOTE" shall mean that certain senior subordinated
promissory note, dated December 27, 1996, issued by the Borrower
pursuant to the Subordinated Note Agreement in the original principal
amount of Fifteen Million Dollars ($15,000,000).
"SUBORDINATED NOTE AGREEMENT" shall mean that certain Senior
Subordinated Note Agreement, dated December 27, 1996, by and between
the Borrower and Dilmun Financial Services, as the same may be
amended, modified, restated or otherwise supplemented from time to
time hereafter in accordance with the terms of this Agreement.
"WARRANT" shall mean that certain Warrant for the Purchase of
Shares of Common Stock, dated December 27, 1996, issued by the
Borrower in favor of BIB Holdings (Bermuda) Ltd., as the same may be
amended, modified, restated or otherwise supplemented from time to
time hereafter in accordance with the terms of this Agreement.
"WARRANT SHARES" shall have the meaning ascribed thereto in the
Warrant.
(vi) Subsection 2.5 of the Loan Agreement is amended by deleting it in
its entirety. Each reference to Term Loan B, the Term Loan B Notes and
Exhibit 2.5 in the Financing Agreements is hereby deleted, together with
any text thereof which is solely and expressly related to such reference,
and all remaining text of each such Financing Agreement is hereby modified
to the extent necessary so as to remain grammatically correct after such
amendment.
(vii) Subsection 8.2 of the Loan Agreement is amended by (A) deleting
clause (vi) thereof in its entirety and replacing it with the following:
"(vi) Indebtedness incurred under the Subordinated Note and the
Additional Subordinated Notes;"
and (B) deleting the last sentence thereof in its entirety and replacing it
with the following:
"Except as permitted by SUBSECTION 8.20, the Borrower shall not,
and shall not permit any Subsidiary to, voluntarily prepay, defease,
purchase, redeem, retire or otherwise acquire any Indebtedness other
than the Obligations."
(viii) Subsection 8.10 of the Loan Agreement is amended by deleting it
in its entirety and replacing it with the following:
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"8.10 RESTRICTED PAYMENTS. The Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, declare, pay, order,
make or set apart any Restricted Payment except for (i) dividends paid
by any Subsidiary to any Subsidiary owning its capital stock or to the
Borrower, and (ii) Restricted Payments under the Subordinated Debt
Documents as permitted by Section 8.20."
(ix) Subsection 8.11 of the Loan Agreement shall be amended by deleting
it in its entirety and replacing it with the following:
"8.11 SECURITIES. Other than payments of the Phantom Stock
Payment as permitted by Section 8.20, the Borrower shall not, and
shall not permit any Subsidiary to, redeem, prepay, repurchase or
acquire any capital Stock of the Borrower of any description for
consideration or otherwise."
(x) Subsection 8.12 of the Loan Agreement is amended by deleting it in
its entirety and replacing it with the following:
"8.12 CHANGES IN CHARTER, BYLAWS OR FISCAL YEAR. Borrower shall
not, and shall not permit any Subsidiary to, (i) change its Fiscal
Year or (ii) amend its Certificate of Incorporation or Bylaws or other
constitutional documents in a manner which could have a Material
Adverse Effect; PROVIDED that the Borrower may amend its Certificate
of Incorporation to effect an increase in the authorized shares of
common Stock."
(xi) Subsection 8.16 of the Loan Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"8.16 IMPAIRMENT AGREEMENTS. Except as disclosed on EXHIBIT
8.16, the Borrower shall not, and shall not permit any Subsidiary to,
enter into or assume any agreement, instrument, indenture or other
obligation (other than the Financing Agreements and other than the
Subordinated Note Agreement with respect to clause (iii) below) which
(i) contains a negative pledge provision which would require a sharing
of any interest in the Collateral, (ii) prohibits or limits the
creation or assumption of any Lien upon its Property, whether now
owned or hereafter acquired, or (iii) restricts, prohibits or requires
the consent of any Person with respect to the payment of Restricted
Payments."
(xii) Subsection 8.18 of the Loan Agreement is amended by deleting it
in its entirety and replacing it with the following:
"8.18 CAPITAL EXPENDITURES LIMITATIONS. The Borrower shall not,
and shall not permit any Subsidiary to, make Capital Expenditures
aggregating in excess of Ten Million Dollars ($10,000,000) in any
Fiscal Year."
(xiii) Article 8 of the Loan Agreement is hereby amended by adding the
following subsection at the end thereof:
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"8.20 SUBORDINATED DEBT. The Borrower shall not, and shall not
permit any Subsidiary to:
(a) amend, modify, restate, waive or otherwise supplement, or
suffer the amendment, modification, restatement, waiver or supplement
of, any provision of any of the Subordinated Debt Documents without
the consent of the Lenders;
(b) make any required payment or other distribution (other than
the Phantom Stock Payment) to the Subordinated Creditor except in
accordance with the terms of the Subordinated Debt Documents and the
Subordination Agreement;
(c) make the Phantom Stock Payment to the Subordinated Creditor
except in accordance with the terms of the Subordinated Debt
Documents; provided that, notwithstanding any provision of the
Subordinated Debt Documents or the Subordination Agreement to the
contrary, Borrower shall not make the Phantom Stock Payment if a
Default or Event of Default shall have occurred and be continuing or
would result after giving effect to such payment; or
(d) prepay, defease, purchase, redeem, retire or otherwise
acquire any Subordinated Debt, except that the Borrower may prepay the
principal amount of the Subordinated Note in an aggregate amount not
to exceed $5,000,000; PROVIDED that (i) no prepayment may be made
prior to the first anniversary of the funding of the Subordinated
Note, (ii) no Default or Event of Default has occurred or is
continuing or would result after giving effect to any such prepayment;
and (iii) after giving effect to any such prepayment, the Borrowers
shall have unused Borrowing Availability of at least $2,000,000 and
all trade payables of the Borrower and its Subsidiaries are within
their terms."
29. CONSENT. Agent and Lenders hereby consent to the execution of the
Subordinated Debt Documents and irrevocably waive any Default or Event of
Default caused by the execution thereof.
30. PARTICIPATION AGREEMENTS. Upon the effectiveness of this Amendment in
accordance with Section 5 hereof, the Participation Agreements shall be of no
further force or effect and all obligations of the Purchasers thereunder shall
be terminated. Agent shall promptly return to Borrower the Support Letters of
Credit.
31. REPRESENTATIONS AND WARRANTIES OF BORROWER. In order to induce Agent
and Lenders to enter into this Amendment, Borrower hereby represents and
warrants to Agent and Lenders that:
(a) NO DEFAULT. After giving effect to this Amendment and the
consent set forth in Section 2 hereof, no Default or Event of Default shall
have occurred or be continuing (which has not been waived or cured);
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(b) REPRESENTATIONS AND WARRANTIES. As of the date hereof and, after
giving effect to this Amendment and the transactions contemplated by the
Subordinated Debt Documents, the representations and warranties of Borrower
contained in the Financing Agreements are true, accurate and complete in
all respects on and as of the date hereof to the same extent as though made
on and as of such date except to the extent such representations and
warranties specifically relate to an earlier date; and
(c) CORPORATE AUTHORITY; ENFORCEABILITY. (i) The execution, delivery
and performance by Borrower of this Amendment are within its corporate
powers and have been duly authorized by all necessary corporate action on
the part of Borrower, (ii) this Amendment is the legal, valid and binding
obligation of Borrower enforceable against Borrower in accordance with its
terms and (iii) neither the execution, delivery or performance by Borrower
of this Amendment nor of the Securities Purchase Agreement (1) violates any
law or regulation, or any order or decree of any court or Governmental
Authority, (2) conflicts with or results in the breach or termination of,
constitutes a default under or accelerates any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Borrower is a party or by which Borrower or any of its property is
bound or (3) results in the creation or imposition of any Lien (other than
Permitted Liens) upon any of the Collateral.
32. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
shall be conditioned upon the satisfaction of the conditions set forth in this
Section 4 and the delivery of the following documents to Agent, in form and
substance satisfactory to Agent, and consummation of all of the transactions or
the satisfaction of each condition contemplated by each such document in a
manner satisfactory to Agent and its counsel.
(a) DOCUMENTATION. Borrowers shall have delivered to Agent all of
the following documents, each dated the date hereof, in form and substance
satisfactory to Agent:
(i) AMENDMENT. Six (6) executed counterparts of this Amendment.
(ii) OTHER DOCUMENTS. All other documents, certificates and
agreements as Agent may reasonably request to accomplish the purposes
of this Agreement.
(b) SECURITIES PURCHASE AGREEMENT. Borrower shall have delivered to
Agent a copy of each of the executed Subordinated Debt Documents and all
other related documents evidencing the transactions contemplated thereby.
(c) NO DEFAULT. As of the date hereof after giving effect to this
Amendment, no Default or Event of Default under any Financing Agreement
shall have occurred and be continuing (which has not been waived or cured).
33. REFERENCE TO AND EFFECT ON FINANCING AGREEMENTS.
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33.1 RATIFICATION. Except as specifically amended above, the Loan
Agreement and the other Financing Agreements shall remain in full force and
effect and are each hereby ratified and confirmed.
33.2 NO WAIVER. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Lenders or Agent
under the Loan Agreement or any of the other Financing Agreements, or, except as
set forth in Section 2 hereof, constitute a waiver of any provision of the Loan
Agreement or any of the other Financing Agreements. Upon the effectiveness of
this Amendment each reference in (a) the Loan Agreement to "this Agreement,"
"hereunder," "hereof," or words of similar import and (b) any other Financing
Agreements to "the Agreement" or "the Loan Agreement," shall, in each case and
except as otherwise specifically stated therein, mean and be a reference to the
Loan Agreement as amended hereby.
34. MISCELLANEOUS.
34.1 SUCCESSORS AND ASSIGNS. This Amendment shall be binding on and shall
inure to the benefit of Borrower, Agent, Lenders and their respective successors
and assigns. The terms and provisions of this Amendment are for the purpose of
defining the relative rights and obligations of Borrower, Agent and Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Amendment.
34.2 ENTIRE AGREEMENT. This Amendment constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
other understandings, oral or written, with respect to the subject matter
hereof.
34.3 FEES AND EXPENSES. Borrower agrees to pay on demand all fees, costs
and expenses incurred by Agent and Lenders in connection with the preparation,
execution and delivery of this Amendment.
34.4 HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
34.5 SEVERABILITY. Wherever possible, each provision of this Amendment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by 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 the remaining provisions of this Amendment.
34.6 COUNTERPARTS. This Amendment may be executed in any number of
separate original counterparts (or telecopied counterparts with original
execution copy to follow) and by the different parties on separate counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one agreement.
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34.7 INCORPORATION OF LOAN AGREEMENT. The provisions contained in SECTIONS
10.7 and 10.8 of the Loan Agreement are incorporated herein by reference to the
same extent as if reproduced herein in their entirety.
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IN WITNESS WHEREOF, this Second Amendment and Consent to Loan and
Security Agreement has been duly executed as of the date first written above.
BROTHERS GOURMET COFFEES, INC.
By:
----------------------------------
Title:
-------------------------------
SANWA BUSINESS CREDIT CORPORATION,
as Agent and Lender
By:
----------------------------------
Title:
-------------------------------
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EXHIBIT 4.4
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
BROTHERS GOURMET COFFEES, INC.
Warrant for the Purchase of Shares of Common Stock,
par value $.0001 per Share
No. _______ 1,245,000 Shares
(pursuant to the vesting
schedule set forth herein)
THIS CERTIFIES that, for receipt in hand of previous value received, BIB
HOLDINGS (BERMUDA) LTD. (the "Holder") is entitled to subscribe for and purchase
from BROTHERS GOURMET COFFEES, INC., a Delaware corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to time
after the date hereof, and before 5:00 P.M. New York time on the date that is
ten years after the date hereof (the "Exercise Period"), up to 1,245,000 shares
of the Company's Common Stock, par value $.0001 per share ("Common Stock"), at a
price of $.25 per Share (the "Exercise Price"), pursuant to the vesting schedule
set forth in Section 5(a) hereof. This Warrant is the warrant (collectively,
including any warrants issued upon the exercise or transfer of any such
warrants, in whole or in part, the "Warrants") issued pursuant to the Senior
Subordinated Note Agreement, dated of even date herewith, between Dilmun
Financial Services, an unlimited Irish company and the Company (the "Note
Agreement"), pursuant to which such entity, among other things, has agreed to
loan the Company up to $15,000,000 on the terms set forth in the Note Agreement.
The term the "Holder" as used herein shall include any transferee to whom this
Warrant has been transferred in accordance with the terms of this Warrant.
The number of shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
35. This Warrant may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Warrant Shares, by the surrender of this
Warrant (with the appropriate Election Form at the end hereof duly executed) to
the Company at its office at 2255 Glades Road, Suite 100E, Boca Raton, Florida
33431, or at such other place as is designated
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in writing by the Company, except as provided pursuant to Section 2 hereof,
together with a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Warrant Shares for which this Warrant is being exercised (the "Stock Purchase
Price").
36. (a) In lieu of the payment of the Stock Purchase Price, the Holder
shall have the right (but not the obligation), to require the Company to convert
this Warrant, in whole or in part, into shares of Common Stock (the "Conversion
Right") as provided for in this Section 2. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by the Holder of
any of the Stock Purchase Price) that number of shares of Common Stock (the
"Conversion Shares") equal to the quotient obtained by dividing (x) the value of
this Warrant (or portion thereof as to which the Conversion Right is being
exercised if the Conversion Right is being exercised in part) at the time the
Conversion Right is exercised (determined by subtracting the aggregate Stock
Purchase Price of the shares of Common Stock as to which the Conversion Right is
being exercised in effect immediately prior to the exercise of the Conversion
Right from the aggregate Current Market Price (as defined in Section 6(c)
hereof) of the shares of Common Stock as to which the Conversion Right is being
exercised immediately prior to the exercise of the Conversion Right) by (y) the
Current Market Price of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Rights provided under this Section 2 may be
exercised in whole or in part and at any time and from time to time during the
Exercise Period. In order to exercise the Conversion Right, the Holder shall
surrender to the Company, at its offices, this Warrant with the Cashless
Exercise Form annexed hereto duly executed. The presentation and surrender
shall be deemed a waiver of the Holder's obligation to pay all or any portion of
the aggregate purchase price payable for the shares of Common Stock as to which
such Conversion Right is being exercised. This Warrant (or so much thereof as
shall have been surrendered for conversion) shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of
such Warrant for conversion in accordance with the foregoing provisions.
37. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares or
Conversion Shares issuable upon such exercise or conversion, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares or Conversion Shares shall not then have been
actually delivered to the Holder. As soon as practicable after each such
exercise or conversion of this Warrant, the Company shall issue and deliver to
the Holder a certificate or certificates for the Warrant Shares or Conversion
Shares issuable upon such exercise or conversion, registered in the name of the
Holder or its designee. If this Warrant should be exercised or converted in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
38. Any Warrants issued upon the transfer, exercise or conversion in part
of this Warrant shall be numbered and shall be registered in a Warrant Register
as they are issued. The Company shall be entitled to treat the registered
holder of any Warrant on the Warrant
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Register as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on
the part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative,
or accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his
or its authority shall be produced. Upon any registration of transfer, the
Company shall deliver a new Warrant or Warrants to the person entitled
thereto. This Warrant may be exchanged, at the option of the Holder thereof,
for another Warrant, or other Warrants of different denominations, of like
tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent.
39. (a) This Warrant shall entitle the Holder to purchase up to 1,245,000
shares of Common Stock in the aggregate, subject to the following vesting
schedule:
(1) From and after the date hereof, the Holder shall be entitled
to purchase up to 265,600 shares of Common Stock in the aggregate;
(2) From and after the date that is one year after the date
hereof, the Holder shall be entitled to purchase up to an additional 265,600
shares of Common Stock in the aggregate (for a total of up to 531,200 shares of
Common Stock in the aggregate), provided that the loan under the Note Agreement
shall not have been prepaid by the Company in whole in accordance with the terms
of the Note Agreement (a "Loan Prepayment") prior to the date that is one year
after the date hereof;
(3) From and after the date that is two years after the date
hereof, the Holder shall be entitled to purchase up to an additional 182,600
shares of Common Stock in the aggregate (for a total of up to 713,800 shares of
Common Stock in the aggregate), provided that there shall not have been a Loan
Prepayment prior to the date that is two years after the date hereof;
(4) From and after the date that is three years after the date
hereof, the Holder shall be entitled to purchase up to an additional 166,000
shares of Common Stock in the aggregate (for a total of up to 879,800 shares of
Common Stock in the aggregate), provided that there shall not have been a Loan
Prepayment prior to the date that is three years after the date hereof;
(5) From and after the date that is four years after the date
hereof, the Holder shall be entitled to purchase up to an additional 182,600
shares of Common Stock in the aggregate (for a total of up to 1,062,400 shares
of Common Stock in the aggregate), provided that there shall not have been a
Loan Prepayment prior to the date that is four years after the date hereof;
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(6) From and after the date that is five years after the date
hereof, the Holder shall be entitled to purchase up to an additional 182,600
shares of Common Stock in the aggregate (for a total of up to 1,245,000 shares
of Common Stock in the aggregate), provided that there shall not have been a
Loan Prepayment prior to the date that is five years after the date hereof;
(b) [Intentionally Omitted].
(c) As soon as practicable following the date hereof, the Company
shall at all times reserve and keep available out of its authorized and unissued
Common Stock, when and if such shares become legally available, solely for the
purpose of providing for the exercise of the rights to purchase all Warrant
Shares and/or Common Shares granted pursuant to this Warrant, such numbers of
shares of Common Stock as shall from time to time be sufficient therefor,
including such additional shares as may issuable pursuant to Sections 6, 7 and 8
of this Warrant. The Company covenants that all shares of Common Stock issuable
upon exercise of this Warrant, upon receipt by the Company of the full Exercise
Price therefor, and all shares of Common Stock issuable upon conversion of this
Warrant, shall be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, and will not be issued in
violation of any preemptive rights of stockholders, option holders, warrant
holders and any other persons and the Holders will receive good title to the
securities purchased by them, respectively, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements and
voting trusts which might be created by acts or omissions to act of the Company.
(d) If at any time during the Exercise Period the Holder duly exercises
all or a portion of this Warrant, and the Company does not have a sufficient
number of shares of Common Stock to issue upon such exercise, the Company shall
first issue all of its then available shares of authorized but unissued shares
of Common Stock to the Holder and deliver such Warrant Shares and/or Common
Shares to the Holder along with a notice (the "Default Notice") setting forth in
reasonable detail a calculation of the number of shares which were issued to the
Holder out of the authorized but unissued shares of Common Stock and the number
of shares which the Company was unable to issue in full satisfaction of the
number of shares set forth in the Election Form with respect to such exercise
(such unissued shares being referred to as the "Phantom Stock"). The Default
Notice also shall specify the date that the Company shall deliver payment to the
Holder in lieu of the Phantom Stock in accordance with this Warrant, which date
shall be within 45 days from the date of delivery of the Default Notice to the
Holder. Upon the receipt of a Default Notice, the Holder shall automatically
have the right to receive, in lieu of such number of shares of Phantom Stock, a
payment calculated pursuant to, and to be paid in accordance with, this Section
5(d) (the "Phantom Stock Payment").
(i) In the event that the Election Form with respect to any exercise
of this Warrant is delivered to the Company from and after the date hereof and
prior to the date that is two years after the date hereof, the Holder shall be
entitled to receive a payment from the Company equal to the number of shares of
Phantom Stock set forth in each Default Notice, multiplied by an amount equal to
the difference between (x) 110% of the Current Market Price per share of Common
Stock as of the date of such Default Notice less (y) the Exercise Price per
share of Common Stock.
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(ii) In the event that the Election Form with respect to any
exercise of this Warrant is delivered to the Company from and after the date
that is two years after the date hereof and prior to the date that is two and
one half years after the date hereof, the Holder shall be entitled to receive
a payment from the Company equal to the number of shares of Phantom Stock set
forth in each Default Notice multiplied by an amount equal to the difference
between (x) 115% of the Current Market Price per share of Common Stock as of
the date of such Default Notice less (y) the Exercise Price per share of
Common Stock.
(iii) In the event that the Election Form with respect to any
exercise of this Warrant is delivered to the Company from and after the date
that is two and one half years after the date hereof and prior to the date that
is three years after the date hereof, the Holder shall be entitled to receive a
payment from the Company equal to the number of shares of Phantom Stock set
forth in each Default Notice multiplied by an amount equal to the difference
between (x) 120% of the Current Market Price per share of Common Stock as of the
date of such Default Notice less (y) the Exercise Price per share of Common
Stock.
(iv) In the event that the Election Form with respect to any
exercise of this Warrant is delivered to the Company from and after the date
that is three years after the date hereof and prior to the date that is
three and one half years after the date hereof, the Holder shall be entitled
to receive a payment from the Company equal to the number of shares of
Phantom Stock set forth in each Default Notice multiplied by an amount equal
to the difference between (x) 125% of the Current Market Price per share of
Common Stock as of the date of such Default Notice less (y) the Exercise
Price per share of Common Stock.
(v) In the event that the Election Form with respect to any
exercise of this Warrant is delivered to the Company from and after the date
that is three and one half years after the date hereof and prior to the
expiration of the Exercise Period, the Holder shall be entitled to receive a
payment from the Company equal to the number of shares of Phantom Stock set
forth in each Default Notice multiplied by an amount equal to the difference
between (x) 130% of the Current Market Price per share of Common Stock as of
the date of such Default Notice less (y) the Exercise Price per share of
Common Stock.
(vi) Each Phantom Stock Payment shall be made to the Holder in
cash at the Holder's address as set forth in Section 15 hereof, or at such other
address as specified by the Holder. In the event that the Company defaults in
its obligation to make any Phantom Stock Payment pursuant to the terms of this
Warrant, the Holder, in its sole discretion, may elect to (A) enforce its rights
hereunder to collect such Phantom Stock Payment, by the commencement of legal
proceedings or otherwise, or (B) cause the Company to execute and deliver to
the Holder a Senior Subordinated Promissory Note in favor of the Holder in the
principal amount of such Phantom Stock Payment, in the form attached hereto as
Exhibit A. Notwithstanding the foregoing, in the event that either (A) a
Default or an Event of Default (as such terms are defined in the Loan and
Security Agreement dated as of May 29, 1996 between the Company and Sanwa
Business Credit Corporation, as amended (the "Loan Agreement")) under the Loan
Agreement exists at the time that the Company is required to make any Phantom
Stock Payment in cash or (B) after giving effect to such Phantom Stock Payment
in cash, a Default or an Event of Default would occur under the Loan Agreement,
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then the Company may deliver to the Holder, in lieu of the Phantom Stock
Payment in cash, a Senior Subordinated Promissory Note in favor of the Holder
in the principal amount of such Phantom Stock Payment, in the form attached
hereto as Exhibit A.
40. (a) If the Company shall, at any time after the date hereof, (i)
declare a dividend on the outstanding Common Stock payable in shares of its
capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price, and the number and kind of securities issuable upon exercise or
conversion of this Warrant, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination, or
reclassification, shall be proportionately adjusted so that the Holder after
such time shall be entitled to receive the aggregate number and kind of shares
which, if such Warrant had been exercised or converted immediately prior to such
time, he would have owned upon such exercise or conversion and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) If the Company shall, at any time after the date hereof,
distribute to all holders of Common Stock (including any such distribution made
to the stockholders of the Company in connection with a consolidation or merger
in which the Company is the continuing corporation) evidences of its
indebtedness, cash or assets (other than distributions and dividends payable in
shares of Common Stock), or rights, options, or warrants to subscribe for or
purchase Common Stock, or securities convertible into or exchangeable for shares
of Common Stock, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
for the determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, less the fair market value (as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants or convertible or exchangeable securities, or the amount of such cash,
applicable to one share, and the denominator of which shall be such Current
Market Price per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the record date for
the determination of stockholders entitled to receive such distribution.
(c) For the purpose of this Warrant, the "Current Market Price" per
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices for the 30 consecutive trading days immediately preceding the
date in question. The closing price for each day shall be the last reported
sales price regular way or, in case no such reported sale takes place on such
day, the closing bid price regular way, in either case on the principal national
securities exchange (including, for purposes hereof, the NASDAQ National Market
System) on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, the highest reported bid price for the Common Stock as furnished by
the National Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such
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information. If on any such date the Common Stock is not listed or admitted
to trading on any national securities exchange and is not quoted by NASDAQ or
any similar organization, the fair value of a share of Common Stock on such
date, as determined an independent investment banking firm mutually
acceptable to the Holder and the Company , whose determination shall be
conclusive, shall be used.
(d) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; PROVIDED, HOWEVER, that any adjustments which by
reason of this Section 6 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(e) In any case in which this Section 6 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised or converted this Warrant
after such record date, the shares of Common Stock, if any, issuable upon such
exercise or conversion over and above the shares of Common Stock, if any,
issuable upon such exercise or conversion on the basis of the Exercise Price in
effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing the
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the
calculations made in Section 6(b) hereof, this Warrant shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares
(calculated to the nearest thousandth) obtained by dividing (i) the product
obtained by multiplying the number of shares purchasable upon exercise of this
Warrant prior to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Exercise Price, by (ii) the Exercise Price in
effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this Section
6, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise or
conversion of this Warrant. If any fraction of a share would be issuable on the
exercise or conversion of this Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the same
fraction of the Current Market Price of such share of Common Stock on the date
of exercise or conversion of this Warrant.
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41. (a) If, at any time after the date hereof, the Company shall effect
any consolidation with or merger of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the surviving or
continuing corporation), or in case of any sale, lease, or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety, such successor, leasing, or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise or conversion of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash, or any combination thereof
receivable upon such consolidation, merger, sale, lease, or conveyance by a
holder of the number of shares of Common Stock for which this Warrant might have
been exercised or converted immediately prior to such consolidation, merger,
sale, lease, or conveyance, and (ii) make effective provision in its certificate
of incorporation or otherwise, if necessary, to effect such agreement. Such
agreement shall provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 6.
(b) If, at any time after the date hereof, the Company shall effect
any reclassification or change of the shares of Common Stock issuable upon
exercise or conversion of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise or conversion of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised or converted immediately prior to
such reclassification, change, consolidation, or merger. Thereafter,
appropriate provision shall be made for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
42. In case, at any time after the date hereof, the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
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(b) to issue any rights, warrants, or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common Stock
or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 7; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
43. The issuance of any shares or other securities upon the exercise or
conversion of this Warrant, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such issuance.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder and the Company shall not be required to
issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
44. (a) If, at any time during the ten-year period following the date
hereof, the Company shall file a registration statement (other than on Form S-4,
Form S-8, any other form that does not permit secondary sales or any successor
form) with the Securities and Exchange Commission (the "Commission") while any
Warrants are outstanding, the Company shall give all the then holders of any
Warrants (the "Eligible Holders") at least 45 days prior written notice of the
filing of such registration statement. If requested by any Eligible Holder in
writing within 30 days after receipt of any such notice, the Company shall, at
the Company's sole expense (other than the fees and disbursements of counsel for
the Eligible Holders and the underwriting discounts or commissions, if any,
payable in respect of the Securities (as defined below) sold by any Eligible
Holder), register or qualify all or, at each Eligible Holder's option, any
portion of the Securities of any Eligible Holders who shall have made such
request,
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concurrently with the registration of such other securities, all to the
extent requisite to permit the public offering and sale of the Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to
become effective as promptly as practicable. Notwithstanding the foregoing,
if the managing underwriter of any such offering shall advise the Company in
writing that, in its opinion, the distribution of all or a portion of the
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect
the distribution of such securities by the Company for its own account, then
any Eligible Holder who shall have requested registration of his or its
Securities shall delay the offering and sale of such Securities (or the
portions thereof so designated by such managing underwriter) for such period,
not to exceed 90 days (the "Delay Period"), as the managing underwriter shall
request, provided that no such delay shall be required as to any Securities
if any securities of the Company are included in such registration statement
and eligible for sale during the Delay Period for the account of any person
other than the Company and any Eligible Holder unless the securities included
in such registration statement and eligible for sale during the Delay Period
for such other person shall have been reduced pro rata to the reduction of
the Securities which were requested to be included and eligible for sale
during the Delay Period in such registration. As used herein, "Securities"
shall mean the Warrant Shares and the Conversion Shares, which have not been
previously sold pursuant to a registration statement or Rule 144 promulgated
under the Act.
(b) If, on any three occasions during the ten-year period following
the date hereof, the Company shall receive a written request, from Eligible
Holders who in the aggregate own (or upon exercise of all Warrants then
outstanding would own) a majority of the total number of Securities then
included (or upon such exercise would be included) in the Securities (the
"Majority Holders"), to register the sale of all or part of such Securities, the
Company shall, at the Company's sole expense (other than fees and disbursements
of counsel for the Eligible Holders and the underwriting discounts or
commissions, if any, payable in respect of the Securities sold by any Eligible
Holder), as promptly as practicable, prepare and file with the Commission a
registration statement sufficient to permit the public offering and sale of the
Securities through the facilities of all appropriate securities exchanges and
the over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Within three business days after
receiving any request contemplated by this Section 10(b), the Company shall give
written notice to all the other Eligible Holders, advising each of them that the
Company is proceeding with such registration and offering to include therein all
or any portion of any such other Eligible Holder's Securities, provided that the
Company receives a written request to do so from such Eligible Holder within 20
days after receipt by him or it of the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall use its best efforts to cause the Securities so
registered to be registered or qualified for sale under the securities or blue
sky laws of such jurisdictions as the Holder or such holders may reasonably
request; PROVIDED, HOWEVER, that the Company shall not be required to qualify to
do business in any state by reason of this Section 10(c) in which it is not
otherwise required to qualify to do business.
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(d) The Company shall keep effective any registration or
qualification contemplated by this Section 10 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for up to one (1)
year following the effectiveness of the registration statement. Notwithstanding
the foregoing, if the registration by the Company of the Securities is eligible
for use of a registration statement on Form S-3 or any successor form, the
Company shall maintain the effectiveness of such registration statement for such
period of time as shall be required to permit the Eligible Holders to complete
the offer and sale of the Securities covered thereby.
(e) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of
copies of each prospectus contained in such registration statement and each
supplement or amendment thereto (including each preliminary prospectus), all of
which shall conform to the requirements of the Act and the rules and regulations
thereunder, and such other documents, as any Eligible Holder may reasonably
request to facilitate the disposition of the Securities included in such
registration.
(f) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall furnish each Eligible Holder of any Securities so
registered with an opinion of its counsel (reasonably acceptable to the Eligible
Holders) to the effect that (i) the registration statement has become effective
under the Act and no order suspending the effectiveness of the registration
statement, preventing or suspending the use of the registration statement, any
preliminary prospectus, any final prospectus, or any amendment or supplement
thereto has been issued, nor has the Commission or any securities or blue sky
authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement and
each prospectus forming a part thereof (including each preliminary prospectus),
and any amendment or supplement thereto, complies as to form with the Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Securities have been registered or qualified for sale
pursuant to the provisions of Section 10(c).
(g) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Securities.
(h) The Company agrees that until all the Securities have been sold
under a registration statement or pursuant to Rule 144 under the Act, it shall
keep current in filing all reports, statements and other materials required to
be filed with the Commission to permit holders of the Securities to sell such
securities under Rule 144.
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45. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 11, but not be
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Securities, or (B) in any application or other document
or communication (in this Section 11 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Securities under the securities or blue sky laws
thereof or filed with the Commission or any securities exchange; or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to such Eligible Holder by or on behalf of
such person expressly for inclusion in any registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be, or (ii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability pursuant to this Section 11(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 11 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its
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written consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent of each indemnified party that is not
released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may
be sought hereunder (whether or not any indemnified party is a party
thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all
liability in respect of such action. The Company agrees promptly to notify
the Eligible Holders of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with
the sale of any Securities or any preliminary prospectus, prospectus,
registration statement, or amendment or supplement thereto, or any
application relating to any sale of any Securities.
(b) The Holder agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
any registration statement covering Securities held by the Holder, each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, and its or their respective counsel,
to the same extent as the foregoing indemnity from the Company to the Holder in
Section 11(a), but only with respect to statements or omissions, if any, made in
any registration statement, preliminary prospectus, or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder by or on behalf
of the Holder expressly for inclusion in any such registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, as the case may be. If any action shall be
brought against the Company or any other person so indemnified based on any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, and in respect of which
indemnity may be sought against the Holder pursuant to this Section 11(b), the
Holder shall have the rights and duties given to the Company, and the Company
and each other person so indemnified shall have the rights and duties given to
the indemnified parties, by the provisions of Section 11(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 11(a) or
11(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Warrant expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Securities
included in such registration in the aggregate (including for this purpose any
contribution by or on behalf of an indemnified party), as a second entity, shall
contribute to the losses, liabilities, claims, damages, and expenses to which
any of them may be subject, on the basis of relevant equitable considerations
such as the relative fault of the Company and such Eligible Holders in
connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses. The relative fault, in the case of an untrue statement,
alleged untrue
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statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged
omission relates to information supplied by the Company or by such Eligible
Holders, and the parties' relative intent, knowledge, access to information,
and opportunity to correct or prevent such statement, alleged statement,
omission, or alleged omission. The Company and the Holder agree that it
would be unjust and inequitable if the respective obligations of the Company
and the Eligible Holders for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Holder and the other indemnified parties were treated
as one entity for such purpose) or by any other method of allocation that
does not reflect the equitable considerations referred to in this Section
11(c). In no case shall any Eligible Holder be responsible for a portion of
the contribution obligation imposed on all Eligible Holders in excess of its
pro rata share based on the number of shares of Common Stock owned (or which
would be owned upon exercise of all Securities) by it and included in such
registration as compared to the number of shares of Common Stock owned (or
which would be owned upon exercise of all Securities) by all Eligible Holders
and included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 11(c), each person, if any,
who controls any Eligible Holder within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent, and counsel of each such Eligible Holder or control person
shall have the same rights to contribution as such Eligible Holder or control
person and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer
of the Company who shall have signed any such registration statement, each
director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 11(c). Anything in this Section 11(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 11(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
46. Unless registered pursuant to the provisions of Section 10 hereof, the
Securities shall be subject to a stop transfer order and the certificate or
certificates evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."
47. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
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48. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
49. Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto to be effective shall be in writing, shall be sent by
certified or registered mail, return receipt requested), or by telecopier or
delivered by hand or by a recognized overnight courier service and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered when delivered against receipt or, in the case of
telecopy notice, when sent, or, in the case of telex, when the appropriate
answerback received, addressed as follows:
(a) If to Holder, at:
BIB Holdings (Bermuda) Ltd.
c/o Conyers, Dill & Pearman
2 Church Street
Hamilton HM 11
Bermuda
Phone: 441-295-1422
Telecopy: 441-292-4720
With a copy to:
Bahrain International Bank E.C.
Bahrain Commercial Complex
13th Floor, P.O. Box 5016
Manama, Bahrain
Attention: Sameer Al Aradi
Phone: 011-973-534-545
Telecopy: 011-973-535-141
and
Squadron, Ellenoff, Plesent & Sheinfeld LLP
551 Fifth Avenue
New York, New York 10176
Attention: David L. Kovacs, Esq.
Phone: (212) 661-6500
Telecopy: (212) 697-6686
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(b) If to the Company, at:
Brothers Gourmet Coffees, Inc.
2255 Glades Road
Suite 100 E
Boca Raton, Florida 33431
Attention: Barry Bilmes, Vice President-Finance and
Administration
Phone: (561) 995-2600
Telecopy: (561) 241-6690
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street
Twenty Second Floor
Denver, Colorado 80202-4437
Attention: John L. Ruppert, Esq.
Phone: (303) 534-6335
Telecopy: (303) 623-1956
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 15.
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50. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
Dated: December , 1996
BROTHERS GOURMET COFFEES, INC.
By:
-------------------------------
[Seal]
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EXHIBIT 4.5
WARRANT AGREEMENT
BETWEEN
BROTHERS WARRANT HOLDINGS I,
A CALIFORNIA GENERAL PARTNERSHIP
AND
BROTHERS GOURMET COFFEES, INC.
DATED AS OF DECEMBER 27, 1996
THE WARRANT AND WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE WARRANT
AND WARRANT SECURITIES, AS THE CASE MAY BE, MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT
WITH RESPECT TO THE WARRANT AND WARRANT SECURITIES, AS THE CASE MAY BE, UNDER
THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
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WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is dated as of the 27th of
December, 1996, and executed by and between BROTHERS WARRANT HOLDINGS I, A
CALIFORNIA GENERAL PARTNERSHIP ("BWHI"), and BROTHERS GOURMET COFFEES, INC.,
a Delaware corporation (the "COMPANY").
WHEREAS, the Company has agreed to grant to BWHI or its assigns a common
stock warrant in the form attached hereto as EXHIBITS A hereto (the
"WARRANT") to acquire shares of the Company's Common Stock. This Agreement
sets forth certain rights and obligations of the Company and BWHI with
respect to the Warrant.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations, warranties and agreements contained in this Agreement, the
parties hereto agree as follows:
I. DEFINITIONS
Section 1.01 DEFINED TERMS. As used in this Agreement, the following
capitalized terms shall have the meanings respectively assigned to them below,
which meanings shall be applicable equally to the singular and plural forms of
the terms so defined. Terms not otherwise defined herein shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement,
dated September 20, 1996, between the Company and Siena Capital Partners, L.P.
(the "BRIDGE LOAN AGREEMENT"), and that certain Senior Subordinated Note
Agreement dated December 27, 1996, between the Company and Dilmun Financial
Services (the "SUBORDINATED LOAN AGREEMENT"). To the extent of any conflict in
defined terms in the Bridge Loan Agreement and the Subordinated Loan Agreement,
the definitions in the Subordinated Loan Agreement shall govern. To the extent
of any conflict or inconsistency in the information contained in the DISCLOSURE
SCHEDULE and the SCHEDULES, unless clearly indicated otherwise, the information
set forth in the schedules shall govern and/or be controlling.
"ADJUSTMENT TRANSACTION" shall mean any of: (i) the issuance or sale of Common
Stock, Class B Common Stock or Common Stock Equivalents for less than Fair Value
(as hereinafter defined) (other than delivery of shares of Common Stock upon
exercise of this Warrant), in addition to the number of shares outstanding as
of the date hereof, as disclosed herein, including, without limitation, any
issuance of Common Stock, Class B Common Stock or Common Stock Equivalents in
connection with the settlement of that certain litigation disclosed as Items
1.5(n)1, 2 and 3 in the DISCLOSURE SCHEDULE and Items 1., 2., 3. and 4. in the
Schedules (the "SETTLEMENT STOCK"), which Settlement Stock is valued at less
than Fair Value as of the date of such settlement or as of the date such
Settlement Stock is actually tendered to the participants in said litigation,
(ii) the declaration of a Dividend upon, or distribution in respect of, any of
the Company's capital stock, payable in Common Stock or Common Stock
Equivalents, (iii) the subdivision or combination by the Company of its
outstanding Common Stock into a larger or smaller number of shares of Common
Stock, as the case may be, (iv) any capital reorganization or reclassification
of the Common Stock or Class B Common Stock of the Company, (v) the
consolidation or merger of the Company or any Subsidiary (as hereinafter
defined) with or into
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another corporation, (vi) the sale or transfer or other disposition of all or
substantially all of the property of the Company, (vii) the dissolution,
liquidation or winding up of the Company or (viii) any event as to which the
foregoing clauses are not strictly applicable, but the failure to make an
adjustment in the Exercise Price hereunder would not fairly protect the
purchase rights, without dilution, represented by the Warrant.
"CLASS B COMMON STOCK" shall mean Class B Common Stock, $.0001 par value
per share, of the Company.
"COMMON EQUITY" shall mean the total equity interest in the Company
represented by the Common Stock and the Class B Common Stock and shall
include Common Equity resulting from any reorganization, reclassification or
recapitalization or similar event.
"COMMON STOCK" shall mean common stock, $.0001 par value per share, of the
Company.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants (including the
Warrant), convertible securities, securities and other rights (in each case
whether now existing or hereafter issued or arising) to acquire from the Company
shares of Common Stock or Class B Common Stock (without regard to whether such
options, warrants, convertible securities, securities and other rights are then
exchangeable, exercisable or convertible in full, in part or at all).
"DISCLOSURE SCHEDULE" shall mean the schedules to the Bridge Loan
Agreement.
"DIVIDEND" means, as to any Person (as hereinafter defined), any
declaration or payment of any dividend (other than a stock dividend) on, or
the making of any pro rata distribution, loan, advance, or investment to,
any shares of capital stock of such Person.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and any
successor provisions thereto.
"EXERCISE PRICE" shall have the meaning given in the Warrant, as adjusted
from time to time pursuant to the terms of the Warrant and this Agreement.
"EXPIRATION PERIOD" means the period commencing on the date hereof
through and including the seventh anniversary of the date hereof or, in the
event the seventh anniversary is not a Business Day (as hereinafter defined),
the next succeeding Business Day.
"EXERCISE QUANTITY" shall mean the number of shares of Common Stock,
determined from time to time, taking into account all shares of Common Stock
theretofore issued upon exercise of the Warrant, required to be issued by the
Company to the Holders of the Warrant. Exercise Quantity shall initially have
the meaning given in the Warrant, and may be adjusted from time to time,
pursuant to the provisions of the Warrant and this Agreement.
"FAIR VALUE" means, so long as, (a) the Company maintains its listing on a
national stock exchange, the NASDAQ system or another inter-dealer quotation
system; and (b) there exists and is continuing a public float having a minimum
value of $15 million based on an average
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trailing twenty (20) trading-day period, to the extent such definition is
applicable, with reference to the Warrant Securities (as hereinafter defined)
and the Common Stock on a per share basis, the current market price per
share of the Common Stock as of any date of determination. Notwithstanding
the foregoing, in the event the standards set forth in the preceding sentence
have not been met or with respect to other appropriate security, property,
assets, business or entity, "Fair Value" shall mean the fair value of such
item as determined by mutual agreement reached by the Holder and the Company
or, in the event the parties are unable to agree, an opinion of an
independent investment banking firm or firms in accordance with the following
procedure. In the case of any event which gives rise to a requirement to
determine "Fair Value" pursuant to this Agreement, the Company shall be
responsible for initiating the process by which Fair Value shall be
determined as promptly as practicable, but in any event within sixty (60)
days following such event and if the procedures contemplated herein in
connection with determining Fair Value have not been complied with fully,
then any such determination of Fair Value for any purpose of this Agreement
shall be deemed to be preliminary and subject to adjustment pending full
compliance with such procedures. Upon the occurrence of an event requiring
the determination of Fair Value, the Company shall give the Holder(s) of the
Warrant notice of such event, and the Company and the Holders shall engage in
direct good faith discussions to arrive at a mutually agreeable determination
of Fair Value.
In the event the Company and the Holder(s) (as hereinafter defined) are
unable to arrive at a mutually agreeable determination within thirty (30)
days of the notice, the Company and the Holder(s) of the Warrant (who, if
more than one, shall agree among themselves by a majority) shall each retain
a separate independent investment banking firm of national reputation (which
firm, in either case, may be the independent investment banking firm
regularly retained by the Company or any such Holder). Such firms shall
jointly determine the Fair Value of the security, property, assets, business
or entity, as the case may be, in question and deliver their opinion in
writing to the Company and to such Holder within thirty (30) days of their
retention. In no event shall the marketability, or lack thereof, or lack of
registration of a security be a factor in determining the "Fair Value" of
such security.
If such firms cannot jointly make such determination within such 30-day
period, then, unless otherwise directed by agreement of the Company and the
Holder(s) of a majority or more of the Warrant, such firms, in their sole
discretion, shall choose another independent investment banking firm of the
Company or such Holder(s), which firm shall make such determination and
render such an opinion. In either case, the determination so made shall be
conclusive and binding on the Company and such Holder(s). The fees and
expenses of the investment banking firm retained by Holder(s) pursuant to
this provision shall be borne by Holder(s). The fees and expenses of all
other investment banking firms retained pursuant to this provision shall be
borne by the Company.
"HOLDER" or "HOLDERS" shall mean the Person(s) then registered as the
owner(s) of the Warrant or Warrant Securities, as the case may be, on the
books and records of the Company.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or
political subdivision or agency thereof.
4
<PAGE>
"PREFERRED STOCK" shall mean Preferred Stock, $1.00 par value per share, of
the Company.
"REGISTRABLE SECURITIES" shall have the meaning assigned to it in SECTION
6.01 hereof.
"SCHEDULES" shall mean the Schedules to the Subordinated Loan Agreement.
"SUBSIDIARY" shall mean any corporation as to which an aggregate of more
than 50% of the outstanding voting stock is at any time directly or
indirectly owned by the Company, or by one or more of its Subsidiaries or by
the Company and one or more of its Subsidiaries.
"WARRANT SECURITIES" shall mean the shares of Common Stock (or other
securities representing Common Stock) purchasable or purchased from time to
time under the Warrant or acquired upon any transfer of any such shares,
together with all additional securities received in payment of dividends or
distributions on or splits of those securities or received as a result of the
adjustments provided for in ARTICLE V hereof.
II. WARRANT
On the date hereof, the Company will grant to BWHI, for good and valuable
consideration, the Warrant in the form attached as EXHIBIT A hereto. BWHI and
any subsequent Holder of the Warrant and of Warrant Securities shall have the
rights and obligations provided for in the Warrant and in this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
(a) The execution and delivery of this Agreement and the Warrant have
been duly and properly authorized by all requisite corporate action of the
Company and its board of directors, and, except as disclosed in the
DISCLOSURE SCHEDULE AND THE Schedules, no consent of any other Person is
required as a prerequisite to the validity and enforceability of this
Agreement and the Warrant that has not been obtained. The Company has the
full legal right, power and authority to execute and deliver this Agreement
and the Warrant and to perform its obligations hereunder and thereunder. When
issued and delivered pursuant to this Agreement, the Warrant will have been
duly executed, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided herein
and therein.
(b) Except as set forth in the DISCLOSURE SCHEDULE AND THE Schedules, the
Company is not a party to or otherwise subject to any contract or agreement
which restricts or otherwise affects its right or ability to execute and deliver
this Agreement or the Warrant or to perform any obligation hereunder or
thereunder (including, without limitation, issuance of the Warrant Securities).
Neither the execution or delivery of this Agreement or the Warrant, nor
compliance therewith (including, without limitation, issuance of the Warrant
Securities), will conflict with, or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any material lien upon any properties of the
Company under, or require any consent, approval, or other action by, notice to
or filing with
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<PAGE>
any court or Governmental Person pursuant to the Certificate of Incorporation
or By-laws of the Company, as currently in effect, any award of any
arbitrator, or any material agreement, instrument or law to which the
Company is subject or by which it is bound.
(c) On the date hereof, the authorized capital stock of the Company will
consist of: (i) 15,000,000 shares of Common Stock; (ii) 2,000,000 shares of
Class B Common Stock, and (iii) 10,000,000 shares of Preferred Stock. As of
September 27, 1996, the Company had issued and outstanding (A) 10,362,605
shares of Common Stock, (B) 839,332 shares of Class B Common Stock and (C) no
shares of Preferred Stock. All such outstanding shares are validly issued,
fully paid and nonassessable. Except as disclosed in the DISCLOSURE
SCHEDULE, and the SCHEDULES, and except for the Warrant issued to BIB
Holdings Bermuda L.H. ("BIB") in connection with the closing of the
Subordinated Loan Agreement (the "BIB WARRANT"), there are no rights, options
or warrants of any kind outstanding to purchase or acquire Common Stock or
Class B Common Stock or any other ownership interest in the Company, nor are
there other securities, obligations, agreements or rights of any kind
outstanding which are exercisable for, convertible into or exchangeable for
any Common Stock or Class B Common Stock or any other ownership interests in
the Company or under the terms of which the parties thereto have the right to
purchase or acquire Common Stock, Class B Common Stock or Common Stock
Equivalents. Except as disclosed in the DISCLOSURE SCHEDULE, and the
SCHEDULES, and except for the Warrant issued to BIB Holdings Bermuda L.H.
("BIB") in connection with the closing of the Subordinated Loan Agreement
(the "BIB WARRANT"), the issuance by the Company of the Warrant and the
Warrant Securities is not subject to any preemptive or similar right of any
Person pursuant to statute, contract or understanding.
(d) Except as provided in this Agreement and except as provided in the
Subordinated Loan Agreement and BIB Warrant, the Company is not subject to any
obligation to repurchase or otherwise acquire or retire any shares of capital
stock. Except as disclosed in the DISCLOSURE SCHEDULE and except as provided in
the Subordinated Loan Agreement and BIB Warrant, there is no commitment of the
Company to issue any shares, warrants, options, or other such rights, or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets, or to pay any Dividend or make any other distribution in
respect thereof.
(e) The Warrant is, and the Warrant Securities will be, issued by the
Company to BWHI in a transaction exempt from registration and qualification
under the applicable federal and state securities laws.
(f) Except as disclosed in the DISCLOSURE SCHEDULE AND THE SCHEDULES,
AND EXCEPT AS PROVIDED FOR IN THE SUBORDINATED LOAN AGREEMENT AND BIB
WARRANT, there is not in effect on the date of this Agreement any agreement
by the Company (other than this Agreement) pursuant to which any holders of
securities of the Company have a right to cause the Company to register such
securities under the Securities Act.
IV. COVENANTS
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Section 4.01 COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees that, during the term of this Agreement, unless all of the Holders of the
Warrant agree otherwise in writing:
(a) Each of the Warrant Securities issued and delivered upon the
exercise of the Warrant and payment of the Exercise Price will be duly and
validly authorized and issued, will be fully paid and nonassessable, and will
not be subject to any unpaid tax or any lien, whether respecting their
issuance to and purchase by the Holder of the Warrant or otherwise. The
Company will take all such actions as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed.
(b) The Company shall, but only to the extent shares of Common Stock are
legally available and subject to the rights of BIB under the BIB Warrant which
shall take precedence over BWHI's rights hereunder, reserve and at all times
keep available for issuance an authorized number of shares of Common Stock
sufficient to permit the full and immediate exercise of the Warrant and the full
and immediate exercise, exchange and conversion of all other securities,
options, warrants and other rights issued or granted by the Company.
(c) The Company shall not permit the par value of its Common Stock to
exceed, at any time, the Exercise Price and shall take all such actions as
may be necessary or appropriate to ensure that it does not do so.
(d) The Company shall not create or permit the existence of any class of
common stock, preferred stock, or any class or series of securities having
voting rights other than as may be required by statute, or any other class or
series of securities having any liquidation, Dividend or other preference,
other than the Common Stock, the Class B Common Stock and the Preferred Stock.
(e) As soon as available, and in no event later than the dates filed
with the SEC or any other Governmental Person or other regulatory authority,
if such documents are so filed, the Company shall deliver to the Holder(s) of
the Warrant and the Warrant Securities copies of (i) all annual, quarterly
and monthly financial statements made available by the Company to its
stockholders, (ii) all reports, notices and proxy or information statements
sent or made available generally by the Company to its stockholders, and
(iii) all regular and periodic reports and all registration statements,
prospectuses and other information filed by the Company with the Commission,
relevant state authorities or any securities exchange, securities quotation
system or other self-regulatory organization.
(f) The Company shall cooperate with the Holder(s) of the Warrant and the
Warrant Securities in supplying such information as may be reasonably necessary
for the Holder(s) to complete and file any information or other reporting forms
from time to time required by the Commission, relevant state authorities or any
securities exchange, securities quotation system
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or other self-regulatory organization, including, without limitation,
information pertaining to or required for the availability of any exemption
from the securities laws for the sale, transfer or other disposition of the
Warrant or any of the Warrant Securities.
Section 4.02 INDEMNIFICATION.
(a) In connection with any registration or qualification of Warrant
Securities hereunder, the Company agrees that BWHI and each other Holder of
the Warrant or any Warrant Securities purchased hereunder, any
underwriter(s), and their respective directors, officers, employees,
attorneys and agents, as well as each other Person (if any) controlling any
of the foregoing Persons within the meaning of Section 15 of the Securities
Act, or Section 20 of the Exchange Act, shall not incur any liability for
acts and omissions arising out of or related directly or indirectly to the
Warrant, the Warrant Securities, this Agreement, any registration statement
or prospectus or any misstatement or omission of a material fact therein; and
the Company hereby expressly waives any and all claims and actions which it
now has or may hereafter at any time have against BWHI and each other Holder
of the Warrant or underlying Warrant Securities, and their respective
directors, officers, employees, attorneys and agents, arising out of or
related directly or indirectly to any and all of the foregoing acts,
omissions and circumstances, except insofar as such liability is caused by
untrue statements or alleged untrue statements or omissions or alleged
omissions and is based upon information furnished in writing by Holder
expressly for use therein.
(b) The Company agrees to defend, indemnify and hold harmless BWHI and
each other Holder of the Warrant, this Agreement, or any Warrant Security
purchased hereunder, any underwriter(s), and their respective directors,
officers, employees, attorneys and agents, as well as each other Person (if
any) controlling any of the foregoing Persons within the meaning of Section
15 of the Securities Act, or Section 20 of the Exchange Act, from and
against any and all claims, liabilities, losses and expenses (including,
without limitation, the disbursements, expenses and fees of their respective
attorneys) that may be imposed upon, incurred by, or asserted against any of
them, any of their respective directors, officers, employees, attorneys and
agents, or any such control Person, under the Securities Act, the Exchange
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof), arise out of or are
related directly or indirectly to: (i) the Warrant or the Warrant
Securities, (ii) any registration statement or prospectus, (iii) any alleged
untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such securities were
registered under the Securities Act or the Exchange Act, or in any
preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (iv) any alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such Persons for
any legal or any other expenses reasonably incurred by such Persons in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any alleged untrue statement or alleged
omission made in such registratry prospectus, prospectus or amendment or
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supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such
respective Person specifically for use therein. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of any such indemnified Person, and shall survive the transfer of such
securities by such Person. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought
against the Company, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel reasonably
satisfactory to the party seeking indemnity hereunder) and the payment of
expenses insofar as such action shall relate to any alleged liability in
respect of which indemnity may be sought against the Company. The Company
shall not, except with the approval of each party being indemnified under
this SECTION 4.02, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to the parties being so indemnified of a release
from all liability in respect to such claim or litigation.
Section 4.03 LISTING ON THE SECURITIES EXCHANGE. The Company shall, at
its expense, list on any securities exchange where it lists its Common Stock,
and maintain and increase when necessary such listing of all outstanding
Warrant Securities so long as any shares of Common Stock shall be so listed.
The Company shall also so list on each securities exchange, and will maintain
such listing of, any other securities which the holder of the Warrant shall
be entitled to receive upon the exercise thereof if at the time any
securities of the same class shall be listed on such securities exchange by
the Company.
Section 4.04 REPURCHASES AND REDEMPTIONS. Except as otherwise
permitted under the Subordinated Loan Agreement and the BIB Warrant, the
Company shall not repurchase or redeem any of its equity securities or any
securities convertible into or exchangeable for such equity securities or any
warrants or other rights to purchase such equity securities unless it
concurrently makes a cash payment to the Holder(s) of the Warrant equal to
the product of: (1) the quotient obtained by dividing (x) the aggregate
amount of cash and the aggregate Fair Value of any property paid out by the
Company in connection with any such repurchase or redemption by (y) the
number of shares of Common Stock and Common Stock Equivalents outstanding
immediately after such repurchase or redemption (excluding Warrant
Securities) and (2) the number of shares of Common Stock issuable upon the
exercise of the Warrant.
V. ANTIDILUTION
Section 5.01 NO DILUTION OR IMPAIRMENT. The Company hereby
acknowledges that the initial number of shares issuable upon exercise of the
Warrant was calculated based upon 2.60% of the number of shares of Common
Stock, Class B Common Stock and Common Stock Equivalents outstanding and the
representation of the Company that the number of shares of Common Stock and
Common Stock Equivalents outstanding as of the date hereof (including the
Warrant Securities) was Fifteen Million Four Hundred Two Thousand Eight
Hundred Thirty (15,402,830) shares. If for any reason it shall hereafter be
determined by the Company that the actual number of shares of Common Stock,
Class B Common Stock and Common Stock
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Equivalents outstanding as of the Date hereof was different from the
foregoing, the Company will notify the Holder(s) of such determination and
if the Holder(s) does not dispute the same, the Company shall forthwith
reissue the Warrant with an appropriate proportional increase in the Exercise
Quantity to be effective from the Date hereof. If a Holder shall dispute
such determination and the parties cannot otherwise resolve the dispute
promptly and in good faith, then the Company shall appoint a firm of
independent public accountants of recognized national standing (which may be
the regular auditors of the Company), which shall give their opinion as to
the adjustment, if any, to be made to the Exercise Quantity. Upon receipt of
such opinion, the Company shall promptly mail a copy thereof to the Holder(s)
of the Warrant and shall make the adjustment described therein.
It is the intent of the parties hereto that, after giving effect to any
exercise of the Warrant, the Holder(s) of the Warrant or Warrant Securities
would collectively be the owner of 2.60% of the Common Stock and Common Stock
Equivalents (or have the right to acquire 2.60% of the Common Stock and
Common Stock Equivalents outstanding as such amount may be adjusted in the
event of a cashless exercise of the Warrant according to SECTION 2(a)(ii) or
(iii) thereof or other adjustments contemplated herein), except such
percentage may be reduced as a consequence of an issuance of Common Stock not
requiring any adjustment in the Exercise Price resulting from any Adjustment
Transaction in accordance with SECTION 5.02 or other adjustments contemplated
herein.
Upon any adjustment of the Exercise Price as provided in SECTION 5.02, the
Exercise Quantity shall be adjusted so that the New Exercise Quantity shall be
equal to the product of (x) the former Exercise Quantity and (y) the following
fraction:
THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
The Exercise Price resulting from such adjustment
EXHIBIT B hereto sets forth the formula and an illustrative example of the
manner in which the adjustments contemplated herein should be applied.
So long as any part of this Warrant is outstanding, then, without the prior
written consent of the Holders of outstanding Warrant(s) evidencing a majority
in number of the total number of Warrant Securities at the time purchasable
upon the exercise of all then outstanding Warrant(s), the Company will not take
any voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Agreement or the Warrant or impair the ability of the
Holder(s) to realize the full intended economic value thereof, but will at all
times in good faith assist in the carrying out of all such terms, and of the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder(s) of the Warrant against dilution or other
impairment.
Section 5.02 ADJUSTMENT.
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(a) In the event the Company, after the Date hereof, shall propose to
consider or engage in an Adjustment Transaction, then, in each such event,
the Company shall mail to the Holder of the Warrant notice of such proposed
action, which shall specify the date on which the stock transfer books of the
Company shall close, or a record shall be taken, for determining the holders
of Common Stock entitled to receive the benefit of such Adjustment
Transaction, or the date on which the Adjustment Transaction shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to receive securities or
other property deliverable upon such action, if any such date is to be fixed.
Such notice shall be mailed at least thirty (30) days prior to the date upon
which it is proposed that such action take place and twenty (20) days prior
to any record date to determine holders of Common Stock entitled to receive
the benefit of such Adjustment Transaction. If an Adjustment Transaction
occurs, the Exercise Price shall be adjusted by the Company so as to fairly
preserve, without dilution, the purchase rights represented by the Warrant in
accordance with SECTION 5.01 and otherwise with the essential intent and
purposes hereof. If the Holder(s) of the Warrant disputes the adjustment of
the Exercise Price made by the Company and the parties cannot otherwise
resolve the dispute promptly and in good faith, then the Company shall at its
expense appoint a firm of independent public accountants of recognized
national standing (which may be the regular auditors of the Company), which
shall give their opinion as to the adjustment, if any, to be made to the
Exercise Price as the result of the relevant Adjustment Transaction. Upon
receipt of such opinion, the Company shall promptly mail a copy thereof to
the Holder(s) of the Warrant and shall make the adjustment described
therein. An adjustment made pursuant to this SECTION 5.02(A)DIATELY AFTER
THE EFFECTIVE DATE OF ANY SUCH ISSUE, SALE, DIVIDEND, SUBDIVISION,
COMBINATION OR RECLASSIFICATION.
ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE COMPANY SHALL NOT BE
REQUIRED TO MAKE ANY ADJUSTMENT OF THE EXERCISE PRICE IN THE CASE OF THE
ISSUANCE OF SHARES OF COMMON STOCK UPON THE EXERCISE IN WHOLE OR PART OF THE
WARRANT.
(B) WHENEVER THE EXERCISE PRICE IS ADJUSTED AS PROVIDED IN THIS SECTION
5.02, the Company will, if requested, promptly obtain a certificate of a firm
of independent public accountants of recognized national standing selected by
the Board of Directors of the Company (who may be the regular auditors of the
Company) setting forth the Exercise Price, and the Exercise Quantity as so
adjusted, the computation of such adjustment and a brief statement of facts
accounting for such adjustment, and will retain such certificate on file and
mail to the Holder(s) of the Warrant a copy of such certificate from such
firm of independent public accountants.
VI. REGISTRATION RIGHTS
Section 6.01 "PIGGYBACK" REGISTRATION RIGHTS. If at any time the
Company shall determine to register under the Securities Act (including
pursuant to a demand of any security holder of the Company exercising
registration rights) any of its Common Stock (except securities to be issued
solely in connection with any acquisition of any entity or business, shares
issuable solely pursuant to employee benefit plans eligible for registration
on SEC Form S-8
11
<PAGE>
or shares to be registered on any registration form that does not permit
secondary sales), it shall send to BWHI and to each of the Holder(s) written
notice of such determination at least thirty (30) days prior to each such
filing and, if within twenty (20) days after receipt of such notice, any
Holder shall so request in writing, the Company shall use its best efforts to
include in such registration statement (to the extent permitted by
applicable regulation) all or any part of the Warrant Securities
(collectively referred to in this ARTICLE VI as "REGISTRABLE SECURITIES")
that such Holder requests to be registered, provided, however, that if, in
connection with any offering involving an underwriting of Common Stock to be
issued by the Company, the managing underwriter shall impose a limitation on
the amount of Registrable Securities included in any such registration
statement, then, to the extent that any Registrable Securities remain
available for registration after the underwriter's cutback, the Company shall
be obligated to include in such registration statement with respect to each
Holder requesting inclusion only the product of: (i) the number of
Registrable Securities with respect to which such Holder has requested
inclusion hereunder and (ii) such Holder's pro rata share of the sum of all
Registrable Securities permitted to be registered and all other securities of
the Company, the holders of which Registrable Securities and other securities
have requested that such securities be registered. Any Registrabl any
underwritten offering under this SECTION 6.01 shall be sold upon such terms
as the managing underwriters shall reasonably request but in any event shall
be upon terms not less favorable than those upon which any other selling
security holder shall sell any of its securities. If any Holder disapproves
of the terms of such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter. The Company
shall use its best efforts to cause the managing underwriter or underwriters
of a proposed underwritten offering (the "COMPANY UNDERWRITER") to permit the
Holders who have requested to participate in the registration for such
offering to include such Registrable Securities in such offering on the same
terms and conditions as the securities of the Company included therein.
Notwithstanding the foregoing, if the Company Underwriter delivers a written
opinion to the Holders that the total amount or kind of securities which
they, the Company and any other Persons intend to include in such offering
(the "TOTAL SECURITIES") is sufficiently large so as to prevent the Company
from affecting a successful offering of the Total Securities, then the amount
or kind of securities to be offered for the account of any members of
management shall be reduced pro rata to the extent necessary to reduce the
Total Securities to the amount recommended by the Company Underwriter, and if
the amount or kind of Total Securities is still sufficiently large so as to
prevent the Company from affecting a successful offering of the Total
Securities, then the amount or kind of securities to be offered for the
account of the Holders and any other Persons shall be reduced pro rata to the
extent necessary to reduce the Total Securities to the amount recommended by
the Company Underwriter. Notwithstanding the provisions of this SECTION
6.01, the Company shall have the right, at any time after it shall have given
written notice pursuant to this SECTION 6.01 request for inclusion of
Registrable Securities shall have been made), to elect not to file any such
proposed registration statement or to withdraw the same after the filing and
prior to the effective date thereof.
Section 6.02 REQUESTED REGISTRATIONS. At any time, and from time to
time upon the written request of BWHI or a majority-in-interest of the
Holders, the Company effects the registration under the Securities Act of all
or part of such Registrable Securities and specifying
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<PAGE>
the number of Registrable Securities to be registered and the intended method
of disposition thereof (a "REQUESTED REGISTRATION"), the Company will use its
best efforts to affect the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
such Holder(s), and all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof) of the Registrable Securities
so to be registered. Neither the Company nor any of its securityholders
shall have the right to include any of the Company's securities (other than
Registrable Securities) in a registration statement to be filed as part of a
Requested Registration unless: (i) such securities are of the same class as
the Registrable Securities and (ii) if such Requested Registration is an
underwritten offering, the Company or such securityholders, as applicable,
agree in writing to sell their securities on the same terms and conditions as
apply to the Registrable Securities being sold. Notwithstanding anything
herein to the contrary, the Company shall not be required to honor a request
for a Requested Registration if: (a) the Company has previously affected one
effective Requested Registration; (b) the Registrable Securities to be so
registered do not constitute at least five percent (5%) of the total number
of Registrable Securities then outstanding or issuable upon exercise or
conversion of the warrants; or (c) such request is received by the Company
(i) less than ninety (90) days following the effective date of any previous
registration statement filed in connection with a Requested Registration or
(ii) less than forty-five (45) days following the effective date of any
prement filed in connection with a Piggyback Registration, regardless of
whether any Holder exercised its rights under this Agreement with respect to
such registration.
Section 6.03 EFFECTIVENESS. If necessary to permit distribution of the
Registrable Securities, the Company shall use its best efforts to maintain
the effectiveness for up to one (1) year of the registration pursuant to
which any of the Registrable Securities are being offered, and from time to
time will amend or supplement such registration statement and the prospectus
contained therein as and to the extent necessary to comply with the
Securities Act and any applicable state securities statute or regulation.
Notwithstanding the foregoing, if the registration by the Company of the
resale of Registrable Securities is eligible for SEC Form S-3 or any
successor to such form, the Company shall use its best efforts to maintain
the effectiveness of the registration until all registered Registrable
Securities are sold. The Holder shall notify the Company promptly of the
completion of the offering of its Registrable Securities under any such
effective registration statement.
Section 6.04 FURTHER OBLIGATIONS OF THE COMPANY. Whenever, under the
preceding Sections of this ARTICLE VI, the Company is required hereunder to
register Registrable Securities, it agrees that it shall also do the
following:
(a) Furnish to each selling Holder such copies of each preliminary and
final prospectus and any other documents as such Holder may reasonably
request to facilitate the public offering of its Registrable Securities;
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<PAGE>
(b) Use its best efforts to register or qualify the Registrable
Securities to be registered pursuant to this ARTICLE VI under the applicable
securities or blue sky laws of such jurisdictions as any selling Holder may
reasonably request;
(c) Furnish to each selling Holder: (i) a signed counterpart of an
opinion of counsel for the Company, dated the effective date of the
registration statement; and (ii) a copy of any "comfort" letters signed by
the Company's independent public accountants who have examined and reported
on the Company's financial statements included in the registration statement,
covering substantially the same matters as are customarily covered in
opinions of issuer's counsel and in accountants' "comfort" letters delivered
to the underwriters in underwritten public offerings of securities;
(d) Permit each selling Holder or such Holder's counsel or other
representatives to inspect and copy such corporate documents and records as
may reasonably be requested by them in connection with such registration; and
(e) Furnish to each selling Holder, upon request, a copy of all documents
filed and all correspondence from or to the Commission in connection with any
such offering.
Section 6.05 EXPENSES. Except for underwriters' discounts and brokerage
commissions allocable to the Registrable Securities, the Company shall bear
all costs and expenses of each registration contemplated in SECTIONS 6.01 and
6.02 including, but not limited to, printing, legal and accounting fees and
expenses, SEC and NASD filing fees and blue sky fees and expenses in any
jurisdiction in which the securities to be offered are to be registered or
qualified.
Section 6.06 TRANSFER OF REGISTRATION RIGHTS. The registration rights
of the Holders of Registrable Securities under this ARTICLE VI shall inure to
the benefit of and be exercisable by any transferee of Registrable Securities.
Section 6.07 PARTICIPATION RIGHTS.
The Company will not grant to any Person (other than BWHI, the Holders,
any Affiliate thereof or any transferee of Registrable Securities under this
ARTICLE VI) at any time on or after the date of this Agreement the right (a
"PARTICIPATION RIGHT") to request the Company to register any securities of
the Company under the Securities Act by reason of the exercise by any holder
of its rights under this ARTICLE VI unless such Participation Right provides
that such securities shall not be registered and sold at the same time if the
managing underwriter for the offering, including the Registrable Securities,
believes that sale of such securities would adversely affect the amount of,
or price at which, the respective Registrable Securities being registered
under this ARTICLE VI can be sold.
The Company agrees: (1) not to affect any public or private sale or
distribution of its securities, including a sale pursuant to Regulation D
under the Securities Act, during the 10-day period prior to, and during the
90-day period beginning on, the date hereof of an underwritten
14
<PAGE>
offering made to pursuant to a registration statement filed pursuant to
SECTION 6.02, and (2) to cause each holder (other than BWHI, the Holders, any
Affiliate thereof or any transferee of Registrable Securities under this
ARTICLE VI) of its privately placed equity securities or convertible
securities purchased from the Company at any time prior to, on or after the
date of this Agreement to agree not to affect any public or private sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of
such underwritten registration, if permitted).
Notwithstanding anything in this ARTICLE VI to the contrary, in no event
shall this ARTICLE VI be construed as prohibiting, restricting or impairing
the Company's ability to comply with the registration rights agreements or
the registration rights in any warrant it has: (i) entered into on or prior
to the date hereof and (ii) disclosed on the DISCLOSURE SCHEDULE, THE
SCHEDULES OR AS SET FORTH IN THE SUBORDINATED LOAN AGREEMENT AND BIB WARRANT.
VII. TRANSFER OF WARRANT AND WARRANT SECURITIES
Section 7.01 TRANSFER. Except as set forth in SECTION 7.02 below, the
Warrant and the Warrant Securities and all rights thereunder are
transferable, in whole or in part, on the books of the Company to be
maintained for such purpose, upon surrender of such Warrant at the office of
the Company maintained for such purpose, together with a written assignment
of such Warrant duly executed by the Holder hereof or its agent or attorney
and payment of funds sufficient to pay any stock transfer taxes payable upon
the making of such transfer. Upon such surrender and payment, the Company
shall execute and deliver a new Warrant or Warrant in the name of the
assignee or assignees and in the denominations specified in such instrument
of assignment, and this Warrant shall promptly be canceled. If and when the
transferred Warrant is assigned in blank, the Company may (but shall not be
obliged to) treat the bearer thereof as the absolute owner of such Warrant
for all purposes and the Company shall not be affected by any notice to the
contrary. The transferred Warrant, if properly assigned in compliance
herewith, may be exercised by an assignee for the purchase of shares of
Common Stock without having a new Warrant issued. The Company will not close
its stock transfer books against a transfer of the Warrant or the Warrant
Securities or any exercise of the Warrant. Any such transfer or exercise
tendered while such stock transfer books shall be closed shall be deemed
effective immediately prior to such closure.
Subject to SECTION 7.02 below, the Warrant may be divided or combined
with other Warrant upon presentation at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in
which new Warrant are to be issued, signed by the Holder thereof or its agent
or attorney. Subject to compliance with this, as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrant in exchange for the Warrant or Warrant to be
divided or combined in accordance with such notice.
15
<PAGE>
The Company shall pay all expenses, taxes (other than income taxes, if
any, of the transferee) and other charges incurred by the Company in the
performance of its obligations in connection with the preparation, issue and
delivery of Warrant under this Section. The Company agrees to maintain at its
aforesaid office books for the registration and transfer of the Warrant.
Notwithstanding any provision to the contrary contained herein, the Warrant
and the Warrant Securities shall be transferable only in compliance with the
provisions of the Securities Act and applicable state securities laws in
respect of the transfer of any Warrant or any Warrant Securities.
Section 7.02 TRANSFER RESTRICTIONS. Neither this Warrant Agreement, the
Warrant nor the Warrant Securities, when issued, have been registered under
the Securities Act or under the securities laws of any state. Neither this
Agreement, the Warrant nor the Warrant Securities, when issued, may be
transferred: (a) if such transfer would constitute a violation of any
federal or state securities laws or a breach of the conditions to any
exemption from registration thereunder and (b) unless and until one of the
following has occurred: (i) registration of this Agreement, the Warrant or
the Warrant Securities, as the case may be, under the Securities Act, and
such registration or qualification as may be necessary under the securities
laws of any state, have become effective, or (ii) the Holder has delivered
evidence reasonably satisfactory to the Company that such registration or
qualification is not required.
Each certificate for Warrant Securities issued upon exercise of a Warrant
and each certificate issued to a subsequent transferee, unless at the time of
exercise such Warrant Securities are registered under the Securities Act,
shall bear a legend substantially in the following form (and any additional
legends required by law) on the face thereof:
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THE
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. THE WARRANT SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT
FOR CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE
REGISTRATION STATEMENT AND QUALIFICATION IN EFFECT WITH
RESPECT TO THE WARRANT SECURITIES UNDER THE SECURITIES ACT AND
UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN EXEMPTION
FROM SUCH REGISTRATION AND QUALIFICATION.
Section 7.03 REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing
any Warrant or Warrant Securities, and (a) in the case of loss, theft or
destruction, upon receipt by the Company of indemnity reasonably satisfactory
to it (provided that, if the owner of the same is a commercial bank or an
institutional lender or investor, its own agreement of indemnity
16
<PAGE>
shall be deemed to be satisfactory), or (b) in the case of mutilation, upon
surrender and cancellation thereof, the Company, at its expense, will
execute, register and deliver, in lieu thereof, a new certificate or
instrument for (or covering the purchase of) an equal number of Warrant or
Warrant Securities.
VIII. MISCELLANEOUS
Section 8.01 TERM. Except as otherwise expressly provided in this
Agreement or the Warrant, this Agreement shall expire seven (7) years after
the date hereof, provided that the Company's obligations to honor an exercise
of the Warrant given prior to such expiration or to perform any obligation
continue and survive notwithstanding the expiration of this Agreement.
Section 8.02 NO WAIVER UNDER OTHER AGREEMENTS. The terms and provisions
contained in this Agreement are not intended and shall not be construed to
waive, modify, repeal, stay, diminish or otherwise impair or affect in any
manner whatsoever any right or remedy of BWHI or the Holder(s) under the
Company's Certificate of Incorporation, By-laws or similar agreements.
Section 8.03 RELIANCE. Each party to this Agreement shall be entitled
to rely upon any notice, consent, certificate, affidavit, statement, paper,
document, writing or other communication reasonably believed by that party to
be genuine and to have been signed, sent or made by the proper Person or
Persons.
Section 8.04 NOTICE. All notices and other communications provided for
in this Agreement shall be in writing and delivered by registered or
certified mail, postage prepaid, or delivered by overnight courier (for next
Business Day delivery) or telecopied, addressed as follows, or at such other
address as any of the parties hereto may hereafter designate by notice to the
other parties given in accordance with this SECTION:
1) if to the Company:
Brothers Gourmet Coffees, Inc.
One Boca Place
2255 Glades Road
Boca Raton, Florida 33431
Attn: Donald D. Breen, President & CEO
Telephone: (407) 995-2638
Telecopy: (407) 241-6690
With a copy of any notice to:
Brownstein Hyatt Farber & Strickland, P.C.
22nd Floor, 410 Seventeenth Street
17
<PAGE>
Denver, Colorado 80202
Attn: John L. Ruppert, Esq.
Telephone: (303) 534-6335
Telecopy: (303) 623-1956
2) if to BWHI:
Brothers Warrant Holdings I, A California General Partnership
150 South Rodeo Drive, Suite 100
Beverly Hills, California 90212
Attn: Rick Bloom
Telephone: (310) 246-3700
Telecopy: (310) 246-3642
With a copy of any notice to:
Nida & Maloney
801 Garden Street, Suite 201
Santa Barbara, California 93101
Attn: C. Thomas Hopkins, Esq.
Telephone: (805) 568-1151
Telecopy: (805) 568-1955
Section 8.05 ENFORCEMENT. The Company acknowledges that the Holders may
proceed to exercise or enforce any right, power, privilege, remedy or
interest that they may have under this Agreement or applicable law without
notice, except as otherwise expressly provided herein, without pursuing,
exhausting or otherwise exercising or enforcing any other right, power,
privilege, remedy or interest that they may have against or in respect of any
other party, or any other Person or thing, and without regard to any act or
omission of such party or any other Person.
Section 8.06 EQUITABLE RELIEF. Each party acknowledges and agrees that
it would be impossible to measure in money the damage in the event of a
breach of any of the terms and provisions of this Agreement by any party
hereto, and that, in the event of any such breach, there may not be an
adequate remedy at law, although the foregoing shall not constitute a waiver
of any of the party's rights, powers, privileges and remedies against or in
respect of a breaching party, any other person or thing under this Agreement
or applicable law. It is therefore agreed that, in addition to all other
such rights, powers, privileges and remedies that it may have, each party
shall be entitled to injunctive relief, specific performance or such other
equitable relief as such party may request to exercise or otherwise enforce
any of the terms and provisions of this Agreement and to enjoin or otherwise
restrain any act prohibited thereby, and no party will urge, and each party
hereby waives, any defense that there is an adequate remedy available at law.
18
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Section 8.07 INTERPRETATION; HEADINGS; SEVERABILITY.
(a) The parties acknowledge and agree that since each party and its
counsel have reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision, the normal rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this
Agreement, and its terms and provisions shall be construed fairly as to all
parties hereto and not in favor of or against any party, regardless of which
party was generally responsible for the preparation of this Agreement.
(b) The Section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(c) In the event that any term or provision of this Agreement shall be
finally determined to be superseded, invalid, illegal or otherwise
unenforceable pursuant to applicable law by a governmental authority having
jurisdiction and venue, determination shall not impair or otherwise affect
the validity, legality or enforceability: (i) by or before that authority
of the remaining terms and provisions of this Agreement, which shall be
enforced as if the unenforceable term or provision were deleted, or (ii) by
or before any other authority of any of the terms and provisions of this
Agreement.
(d) If any period of time specified in this Agreement expires on a day
that is not a Business Day, that period shall be extended to and expire on
the next succeeding Business Day.
Section 8.08 SURVIVAL OF COVENANTS. Each of the covenants and other
agreements of the parties contained in this Agreement shall be absolute and,
except as otherwise expressly provided, unconditional, shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until the term of this Agreement has expired, and thereafter with
respect to events occurring prior thereto.
Section 8.09 NO REQUIRED EXERCISE. No term or provision of the Warrant
or this Agreement is intended to require, nor shall any such term or
provision be construed as requiring, any Holder of the Warrant to exercise or
put the Warrant.
Section 8.10 BINDING EFFECT. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
assigns.
Section 8.11 NO WAIVER BY ACTION. The failure or delay of a party at any
time or times to require performance of, or to exercise its rights with
respect to, any term or provision of this Agreement (except as otherwise
expressly provided herein) shall not affect its right at a later time to
enforce any such provision.
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Section 8.12 WAIVER; MODIFICATION; AMENDMENT. Each and every
modification to and amendment of this Agreement shall be in writing and
signed by the Company, BWHI (if at that time BWHI is a Holder) and by the
Holders of a majority in interest of all issued and unissued Warrant
Securities. Each and every waiver of and consent to any departure from any
term or provision hereof (except as otherwise provided herein) shall be in
writing and signed by BWHI (if at that time it is a Holder) and by the
Holders of a majority in interest of all issued and unissued Warrant
Securities and by each party against whom enforcement of the waiver or
consent may be sought.
Section 8.13 ENTIRE AGREEMENT. This Agreement and the Warrant contain
the entire agreement of the parties and supersede all other representations,
warranties, agreements and understandings, oral or otherwise, among the
parties hereto with respect to the matters contained herein, except as
otherwise provided herein.
Section 8.14 CERTIFICATE. BWHI shall have received a certificate,
dated the date of this Agreement, of the Secretary or an Assistant Secretary
of the Company, attaching a true and complete copy of the resolutions of the
Board of Directors of the Company, and of all documents evidencing other
necessary corporate or shareholder action (in form and substance satisfactory
to BWHI and to its counsel) taken by the Company in connection with the
matters contemplated by this Agreement.
Section 8.15 NO INCONSISTENT AGREEMENTS OR RIGHTS. The Company shall
not enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement.
Section 8.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT, THE WARRANT AND THE WARRANT SECURITIES AND ALL
AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE
COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF CALIFORNIA AND AGREES
AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER CALIFORNIA, COLORADO
OR FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. THE COMPANY SHALL APPOINT AN AGENT FOR SERVICE OF
PROCESS IN CALIFORNIA AND SHALL NOTIFY BWHI IN WRITING OF SUCH APPOINTMENT
AND ANY FUTURE CHANGE THEREIN. THE COMPANY AND
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BWHI EACH HEREBY AGREE TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE
SECURITIES OR ANY OTHER AGREEMENTS RELATING TO THE SECURITIES OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE WARRANT, THE WARRANT SECURITIES OR ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed as of the day and year first above written.
BWHI:
BROTHERS WARRANT HOLDINGS I,
A CALIFORNIA GENERAL PARTNERSHIP
By:
--------------------------
Name:
Title:
THE COMPANY:
BROTHERS GOURMET COFFEES, INC.,
a Delaware corporation
By:
--------------------------
Name:
Title:
22
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Exhibit A
to
Warrant Agreement
WARRANT
23
<PAGE>
EXHIBIT B TO WARRANT AGREEMENT
THE FOLLOWING IS ONLY FOR EXAMPLE PURPOSES
BOLD FIGURES ARE INPUTS
Example: 1000 shares are issued for $1000 on the day after the Closing
___________ OSBEFORE Outstanding shares (including options and
warrants) before adjustment
$__________ FVBEFORE Fair Value (per share) before adjustment
$__________ EPBEFORE Exercise Price of Warrants before adjustment
___________ OWBEFORE Number of Warrants before adjustment
_________% Fully diluted ownership before adjustment
$__________ CR Consideration received or to be received for new shares
or warrants
___________ OSAFTER Outstanding shares after sale but before Warrant
adjustment
$__________ EPAfter Exercise Price after adjustment
___________ OWAfter Number of Warrants after adjustment
$__________ FVAfter Fair Value (per share) after adjustment
_________% Fully diluted ownership after dilution
$__________ EPAfter = lesser of (OSBefore x EPBefore + CR)/OSAfter
or
$__________ EPBefore x (OSBefore x FVBefore + CR)/OSAfter/ FVBefore
___________ OWAfter = EPBefore x OWBefore/EPAfter
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Exhibit 4.6
THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE WARRANT SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION WITH RESPECT TO THE WARRANT SECURITIES UNDER THE SECURITIES ACT
AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH
QUALIFICATION AND REGISTRATION.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF A WARRANT AGREEMENT DATED AS OF EVEN DATE
HEREWITH, BETWEEN BROTHERS GOURMET COFFEES, INC. AND BROTHERS WARRANT
HOLDINGS I, A CALIFORNIA GENERAL PARTNERSHIP (AS THE SAME MAY BE
SUPPLEMENTED, MODIFIED, AMENDED, EXTENDED OR RESTATED FROM TIME TO TIME, THE
"WARRANT AGREEMENT"). AMONG OTHER THINGS, THE WARRANT AGREEMENT CONTAINS
PROVISIONS FOR RESTRICTIONS ON TRANSFER AND REGISTRATION RIGHTS. COPIES OF
THE WARRANT AGREEMENT ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE WARRANT
EFFECTIVE DATE: DECEMBER 27, 1996
Capitalized terms used and not otherwise defined in this Warrant shall have
the meanings respectively assigned to them in the Warrant Agreement referred
to in the legend above.
BROTHERS GOURMET COFFEES, INC., a Delaware corporation, having its executive
offices at One Boca Place, 2255 Glades Road, Boca Raton, Florida 33431 (the
"COMPANY"), does hereby certify and agree that, for good and valuable
consideration (the existence, sufficiency and receipt of which are hereby
acknowledged by the Company), BROTHERS WARRANT HOLDINGS I, A CALIFORNIA
GENERAL PARTNERSHIP, its successors and assigns ("HOLDER"), hereby is
entitled to purchase from the Company, during the term set forth in Section 1
hereof, up to an aggregate amount of 400,000 shares (the "EXERCISE QUANTITY")
of duly authorized,
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validly issued, fully paid and non-assessable shares of Common Stock, par
value US$.0001 per share, of the Company (the "COMMON STOCK"), all upon the
terms and provisions and subject to adjustment of such Exercise Quantity
provided in the Warrant Agreement and this Common Stock Purchase Warrant (the
"WARRANT"). The exercise price per share of Common Stock for which this
Warrant is exercisable shall be $3.4375 per share (the "EXERCISE PRICE").
1. TERM OF THE WARRANT. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., New York City time, on the
seventh anniversary hereof. In the event that this Warrant would expire on a
day that is not a Business Day, then the term of this Warrant automatically
shall be extended to 5:00 P.M., New York City time, on the next succeeding
Business Day.
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time (but not
for fractional shares, unless this Warrant is exercised in whole), by
presentation and surrender of this Warrant to the Company, together with the
annexed Exercise Form duly completed and executed and payment in the
aggregate amount equal to the Exercise Price multiplied by the number of
shares of Common Stock being purchased. At the option of Holder, payment of
the Exercise Price may be made either by (i) certified check payable to the
order of the Company, (ii) surrender of certificates then held representing,
or deduction from the number of shares issuable upon exercise of this
Warrant, of that number of shares which has an aggregate Fair Value
determined in accordance with the Warrant Agreement on the date of exercise
equal to the aggregate Exercise Price for all shares to be purchased pursuant
to this Warrant or (iii) by any combination of the foregoing methods. Upon
the Company's receipt of this Warrant, the completed and signed Exercise Form
and the requisite payment, the Company shall issue and deliver (or cause to
be delivered) to the exercising Holder stock certificates aggregating the
number of shares of Common Stock purchased. In the event of a partial
exercise of this Warrant, the Company shall issue and deliver to the Holder a
new Warrant at the same time such stock certificates are delivered, which new
Warrant shall entitle the Holder to purchase the balance of the Exercise
Quantity not purchased in that partial exercise and shall otherwise be upon
the same terms and provisions as this Warrant.
(b) In the event the Holder of this Warrant desires that any or all of the
stock certificates to be issued upon the exercise hereof be registered in a name
or names other than that of the Holder of this Warrant, the Holder must (i) so
request in writing at the time of exercise if the transfer is not a registered
transfer, (ii) provide to the Company an opinion of counsel reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under the Securities Act, and (iii) pay to the
Company funds sufficient to pay all stock transfer
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taxes (if any) payable in connection with the transfer and delivery of such
stock certificates.
(c) Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock certificate is
to be so issued) shall be deemed for all purposes to have become the Holder
of record of the shares of Common Stock for which this Warrant has been so
exercised, effective immediately prior to the close of business on the date
this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of
actual delivery of certificates representing such shares of Common Stock so
issued.
3. SURRENDER OF WARRANT; EXPENSES.
(a) Whether in connection with the exercise, exchange, registration of
transfer or replacement of this Warrant, surrender of this Warrant shall be
made to the Company during normal business hours on a Business Day (unless
the Company otherwise permits) at the executive offices of the Company
located at One Boca Place, 2255 Glades Road, Boca Raton, Florida 33431 or to
such other office or duly authorized representative of the Company as from
time to time may be designated by the Company by written notice given to the
Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or put of
this Warrant, including the costs of preparation, execution and delivery of
warrants and stock certificates, and shall pay all taxes (other than any
taxes measured by the income of any Person other than the Company) and other
charges imposed by law payable in connection with the transfer or replacement
of this Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER: LOSS.
(a) The Company at all times shall maintain at its chief executive
offices an open register for all Warrants, in which the Company shall record
the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable thereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants entitling the
identical Holder hereof to purchase the same aggregate Exercise Quantity at
the same Exercise Price per share and otherwise having the same terms and
provisions as this Warrant. The identical Holder may request such an exchange
by surrender of this Warrant to the Company, together with a written exchange
request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
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(c) This Warrant may be transferred only in accordance with the
provisions of ARTICLE VII of the Warrant Agreement, in whole or in part, by
the Holder or any duly authorized representative of such Holder. A transfer
may be registered with the Company by submission to it of this Warrant,
together with the annexed Assignment Form duly completed and executed, and if
the transfer is not a registered transfer, an opinion of counsel reasonably
satisfactory to The Company. Within five (5) Business Days after the
Company's receipt of this Warrant and the Assignment Form so completed and
executed, the Company will issue and deliver to the transferee a new Warrant
representing the portion of the Exercise Quantity transferred at the same
Exercise Price per share and otherwise having the same terms and provisions
as this Warrant, which the Company will register in the new Holder' s name.
(d) In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the Holder in
substitution therefor upon the Company's receipt of (i) evidence reasonably
satisfactory to the Company of such event (with the affidavit of an
institutional Holder being sufficient evidence), and (ii) if requested by the
Company, an indemnity agreement from any institutional Holder or an indemnity
bond from anyone else reasonably satisfactory in form and amount to the
Company.
(e) The Company will not close its books against the transfer of this
Warrant or any of the Warrant Securities in any manner which interferes with
the timely exercise of this Warrant. The Company will from time to time take
all such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The Company
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall
not entitle its Holder to any rights of a stockholder in the Company (other
than as provided in SECTION 2(C) of this Warrant and the Warrant Agreement).
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized representative and its corporate seal, if any, to be impressed
hereupon and attested to by its Secretary or Assistant Secretary.
BROTHERS GOURMET COFFEES, INC.,
a Delaware corporation
By:
------------------------------------
Name:
Title:
Attest:
- -----------------------------
Secretary
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COMMON STOCK WARRANT
EXERCISE FORM
Brothers Gourmet Coffees, Inc.
One Boca Place
2255 Glades Road
Boca Raton, Florida 33431
Attention:
--------------------
The undersigned Holder of the within Warrant hereby irrevocably elects to
exercise the within Warrant to the extent of [______] shares of Common Stock,
$____ par value per share, of the Company.
The undersigned herewith encloses the Warrant and
- a certificate representing that number of shares of Common Stock of the
Company having an aggregate current market price of $_______ in payment of the
Exercise Price;
- a check (payable to the order of the Company) in the amount
of $___________ in payment of the Exercise Price; and/or
- the undersigned hereby elects to effect a cashless exercise and
authorizes the Company to deduct from the shares issuable upon exercise a
number of shares of Common Stock of the Company having an aggregate current
market price on the date hereof of $________________.
Instructions for Registering the Securities
On the Stock Transfer Books of the Company
Name of Transferee:
---------------------------------------------------
State of Organization (if applicable):
--------------------------------
Federal Tax Identification or
Social Security Number:
------------------------------------------
Address:
--------------------------------------------------------------
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor
(exercisable for the balance of the Exercise Quantity of shares of Common
Stock underlying this Warrant) be issued and delivered to the undersigned
Holder at the address on the warrant register of the Company.
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Dated:
----------------------- ------------------------------------------
(Name of Registered Holder - Please Print)
By:
------------------------------------------
(Signature of Registered Holder or of Duly
Authorized Signatory)
Title:
---------------------------
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COMMON STOCK WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned Holder of the within Warrant hereby
sells, assigns and transfers unto the transferee whose name and address are
set forth below all of the rights of the undersigned under the within Warrant
(to the extent of the portion of the within Warrant being transferred hereby,
which portion is ___________________).
Name of Transferee:
---------------------------------------------------
State of Organization (if applicable):
--------------------------------
Federal Tax Identification or
Social Security Number:
------------------------------------------
Address:
--------------------------------------------------------------
If such portion of the Warrant being transferred shall not consist of all
of the within Warrant, then the undersigned hereby requests that, as provided
in the within Warrant, a new warrant of like tenor respecting the balance of
the Exercise Quantity of shares of Common Stock underlying this Warrant not
being transferred pursuant hereto be issued in the name of and delivered to
the undersigned. The undersigned does hereby irrevocably constitute and
appoint ________________________ attorney to register the foregoing transfer
on the books of the Company maintained for that purpose, with full power of
substitution in the premises.
As required by the Warrant, enclosed herewith is the opinion of legal
counsel for the undersigned.
Dated:
----------------------- ------------------------------------------
(Name of Registered Holder - Please Print)
By:
---------------------------------------
(Signature of Registered Holder or of Duly
Authorized Signatory)
Title:
---------------------------
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