UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1998.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________________.
Commission File Number 000-24124
FRESH AMERICA CORP.
(Exact name of registrant as specified in its charter)
Texas 76-0281274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6600 LBJ FREEWAY, SUITE 180, DALLAS, TX 75240
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (972) 774-0575
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At August 10, 1998 the Registrant had 4,863,962 shares of its Common Stock
outstanding.
Total number of pages in this report, including the cover page is 173. Exhibit
index on page 15.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
FRESH AMERICA CORP.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
July 3, January 2,
1998 1998
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents ..................... $ 218 $ 2,725
Accounts receivable, net ...................... 54,139 43,361
Advances to growers ........................... 1,662 --
Inventories ................................... 5,658 7,360
Prepaid expenses and other .................... 2,046 1,550
Deferred income taxes ......................... 437 362
Total current assets ...................... ------- -------
64,160 55,358
Property, plant and equipment, net .............. 16,011 13,581
Notes receivable from shareholders .............. 166 166
Goodwill, net of amortization of $873 and $261, . 20,206 9,138
respectively Other assets ....................... 2,131 1,721
-------- -------
$102,674 $79,964
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion ............. $ 4,091 $10,750
of long-term debt
Accounts payable .............................. 38,207 27,711
Accrued salaries and wages .................... 1,379 3,434
Other accrued expenses ........................ 1,370 920
Income taxes payable .......................... 493 1,324
-------- -------
Total current liabilities ................. 45,540 44,139
Long-term debt, less current portion ............ 16,607 6,193
Deferred income taxes ........................... 157 198
Other liabilities ............................... 179 99
-------- -------
Total liabilities ......................... 62,483 50,629
-------- -------
Shareholders' Equity:
Common stock $.01 par value. Authorized
10,000,000 shares; issued 4,854,397 and
4,483,983 respectively .................... 49 45
Additional paid-in capital .................. 25,041 16,508
Foreign currency translation adjustment ..... (274) (179)
Retained earnings ........................... 15,375 12,961
-------- -------
Total shareholders' equity ................ 40,191 29,335
-------- -------
Commitments and contingencies ................... -- --
-------- --------
$ 102,674 $ 79,964
========= =========
The notes to consolidated financial statements are an integral part of
these statements.
2
<PAGE>
FRESH AMERICA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
July 3, June 27, July 3, June 27,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .......................................... 159,598 110,625 292,605 201,073
Cost of goods sold ................................. 142,156 99,407 260,643 181,526
--------- --------- --------- ---------
Gross profit ........................... 17,442 11,218 31,962 19,547
--------- --------- --------- ---------
Selling, general and administrative expenses:
Salaries and related costs ..................... 7,782 5,449 15,043 9,522
Rent, maintenance and related costs ............ 2,682 1,491 4,991 2,668
Insurance expense .............................. 323 316 671 626
Automobile, travel and related costs ........... 417 307 763 533
Communication expense .......................... 370 272 696 450
Depreciation and amortization .................. 863 431 1,618 828
Nonrecurring transaction costs ................. -- -- 1,395 --
Other .......................................... 1,179 371 1,789 832
--------- --------- --------- ---------
13,616 8,637 26,966 15,459
--------- --------- --------- ---------
Operating income ........................ 3,826 2,581 4,996 4,088
--------- --------- --------- ---------
Other income (expense):
Interest expense ............................... (606) (180) (1,034) (201)
Interest income ................................ 35 81 84 138
Other, net ..................................... (39) 94 (165) 156
--------- --------- --------- ---------
(610) (5) (1,115) 93
--------- --------- --------- ---------
Income before income taxes ......................... 3,216 2,576 3,881 4,181
Provision for income taxes ......................... 1,256 952 1,467 1,525
--------- --------- --------- ---------
Net income ............................... $ 1,960 $ 1,624 $ 2,414 $ 2,656
========= ========= ========= =========
Earnings per share:
Basic .......................................... $ 0.41 $ 0.37 $ 0.51 $ 0.61
========= ========= ========= =========
Diluted ........................................ $ 0.40 $ 0.36 $ 0.49 $ 0.58
========= ========= ========= =========
</TABLE>
The notes to consolidated financial statements are an integral part of
these statements.
3
<PAGE>
FRESH AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JULY 3, JUNE 27,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................. 2,414 2,656
Adjustments to reconcile net income to net cash provided by
operating activities, excluding the effects of acquisitions:
Depreciation and amortization ............................. 1,618 828
Noncash transaction costs, net of tax ..................... 519 --
Deferred income taxes ..................................... (153) --
Other ..................................................... 364 75
Change in assets and liabilities:
Accounts receivable ...................................... (7,330) (2,192)
Advances to growers ...................................... (638) --
Inventories .............................................. 2,030 2,099
Prepaid expenses ......................................... (295) (653)
Other assets ............................................. 262 (327)
Accounts payable ......................................... 7,861 6,452
Accrued expenses and other current liabilities ........... (2,451) (2008)
-------- -------
Total adjustments
Net cash provided by operating activities .............. 1,787 4,274
-------- -------
4,201 6,930
-------- -------
Cash flows from investing activities:
Additions to property, plant and equipment, net ............. (2,689) (3,725)
Cost of acquisitions, exclusive of cash acquired ............ (6,103) (932)
-------- -------
Net cash used in investing activities .............. (8,792) (4,657)
-------- -------
Cash flows from financing activities:
Proceeds from revolving line of credit ...................... 51,420 4,664
Repayments of revolving line of credit ...................... (64,092) (8,614)
Additions to short-term indebtedness ........................ 5,019 --
Payments of short-term indebtedness ......................... (5,169) --
Proceeds from shareholder loans ............................. -- 1,172
Additions to long-term indebtedness ......................... 15,015 106
Repayments of long-term indebtedness ........................ (161) (256)
Net proceeds from exercise of employee stock options ........ 106 118
-------- -------
Net cash provided by (used in) financing activities . 2,138 (2,810)
-------- -------
Effect of exchange rate changes on cash ....................... (54) --
Net increase (decrease) in cash and cash ......... (2,507) (537)
Cash and cash equivalents at beginning of year ................ 2,725 4,247
-------- -------
Cash and cash equivalents at end of year ...................... $ 218 $ 3,710
======== =======
Supplemental disclosures of cash flow information:
Cash paid for interest .................................... $ 572 $ 202
Cash paid for income taxes ................................. $ 1,793 $ 1,498
</TABLE>
4
<PAGE>
The notes to consolidated financial statements are an integral part of
these statements.
FRESH AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES.
Fresh America Corp. and subsidiaries (the "Company") is an integrated food
distribution management company engaged in the procurement, processing,
warehousing and delivery of fresh produce and other refrigerated perishable
products. The Company was founded in 1989 and distributes throughout the United
States and Canada through twenty-two distribution and processing facilities.
UNAUDITED INTERIM FINANCIAL INFORMATION - The consolidated balance sheet
as of July 3, 1998, the consolidated statements of income for the quarters and
six month periods ended July 3, 1998 and June 27, 1997, the consolidated
statements of cashflows for the six month periods ended July 3, 1998 and June
27, 1997, and related notes have been prepared by the Company and are unaudited.
In the opinion of the Company, the interim financial information includes all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair statement of the results of the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the interim financial
information. The interim financial information should be read in conjunction
with the Company's audited consolidated financial statements included in the
Annual Report on Form 10-K for the fiscal year ended January 2, 1998. The
results for the quarters and the six month periods ended July 3, 1998 and June
27, 1997 may not be indicative of operating results for the full year.
The consolidated financial statements give retroactive effect to an
acquisition of an operating business consummated in the first quarter of 1998
which was accounted for as a pooling of interests (Note 3).
The following are the significant accounting policies followed by the
Company in the preparation of the consolidated financial statements.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Fresh America Corp. and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
EARNINGS PER SHARE - Basic earnings per share (EPS) is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. See Note 6.
COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards "SFAS" No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components. Components of
comprehensive income are net income and all other nonowner changes in equity
such as the change in the cumulative translation adjustment. This statement
requires that an enterprise: (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings
5
<PAGE>
and additional paid-in capital in the equity section of a balance sheet. SFAS
No. 130 is effective for financial statements issued for periods beginning after
December 15, 1997, which for the Company is fiscal 1998. Presentation of
comprehensive income for earlier periods provided for comparative purposes is
required and has been presented in these financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS - The Company intends to adopt SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information" in
its fiscal year ended January 1, 1999 consolidated financial statements. This
statement requires a public business enterprise to report financial and
descriptive information about its reportable operating segments based on how
management measures performance and makes decisions about allocating resources.
The disclosures required by the statement are not required for interim financial
statements in the initial year of its application.
Effective January 3, 1998, the Company adopted Statement of Position
("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use," which was issued in March 1998. The SOP requires
that certain costs related to the development or purchase of internal-use
software be capitalized and amortized over the estimated useful life of the
software. The SOP also requires that costs related to the preliminary project
stage and post-implementation/operations stage of internal-use computer software
development be expensed as incurred.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting of the Costs of Start-up Activities" which is
effective for the financial statements issued for periods beginning after
December 15, 1998. The Company believes SOP 98-5 will not have a material impact
on its financial statements or accounting policies. The Company will adopt the
provisions of SOP 98-5 in the first quarter of 1999.
The Company is also assessing the reporting and disclosure requirements of
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities.
This statement establishes accounting and reporting standards for fiscal years
beginning after June 15, 1999. The Company believes SFAS No. 133 will not have a
material impact on its financial statements or accounting policies. The Company
will adopt the provisions of SFAS No. 133 in the first quarter of 2000.
FOREIGN CURRENCY TRANSLATION - The financial statements of all foreign
subsidiaries were prepared in their respective local currencies and translated
into U.S. dollars based on the current exchange rate at the end of the period
for the balance sheet and a weighted-average rate for the period on the
statement of income. Translation adjustments are reflected in the foreign
currency translation adjustments in Shareholders' Equity and, accordingly, have
no effect on net income. Exchange gains and losses for all foreign subsidiaries
are included in income for transactions denominated in currencies other than the
functional currency.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FISCAL YEAR - The Company's fiscal year is a 52-week or 53 week period
ending on the first Friday in January. The quarters ended July 3, 1998 and June
27, 1997 each consist of 13 weeks. The six months periods ended July 3, 1998 and
June 27, 1997 consist of 26 weeks and 25 weeks, respectively.
6
<PAGE>
NOTE 2. AGREEMENT WITH SAM'S CLUB.
In August 1995, the Company entered into a five-year distribution
agreement (the "Agreement") with Sam's Club. The Agreement, which began on
December 1, 1995, replaced the Company's previously existing license agreement
with Sam's Club which expired on November 30, 1995. Under terms of the
Agreement, the Company expanded its distribution arrangement with Sam's into
specified exclusive new territories approximately doubling the number of Sam's
clubs serviced by the Company. As a result of this expansion, the Company
commenced operations from two new distribution centers in Chicago, Illinois and
Cincinnati, Ohio on January 2, 1997. For further information, see Note 2 to the
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 2, 1998.
The Agreement provides Sam's the option to reduce the number of clubs
within the Company's exclusive territory by forty per year under certain
circumstances and to discontinue service for clubs in which Sam's elects not to
offer produce, if any. In February 1997, Sam's advised the Company that as a
result of opening certain new Wal-Mart Supercenter Distribution Centers, it
elected to exercise the existing option under the Agreement to distribute
produce directly with respect to forty clubs. Twenty-seven clubs were
transitioned in May 1997 and the remaining thirteen clubs were transitioned in
November 1997. In March 1998, Sam's began the transfer of an additional forty
clubs, which was completed in April 1998. The 1997 withdrawal of clubs did not
have a material adverse effect on the Company's financial position in 1997, and
the lost revenue attributable to the clubs withdrawn in 1998 is estimated to be
less than 3 percent of the Company's total fiscal 1998 revenues. The Company has
conducted its operations assuming that Sam's will withdraw forty clubs per year
for each of the remaining years of the Agreement.
NOTE 3. ACQUISITIONS.
On February 2, 1998, the Company acquired substantially all of the net
operating assets and the business of Francisco Distributing Company, L.L.C.
("Francisco"), a produce marketing, distribution and repackaging company based
in Norwalk, California. The acquisition was accounted for using the purchase
method of accounting. As consideration for the net assets received, the Company
paid $5,575,000 in cash, 285,437 shares of Company common stock valued at $19.27
per share and contingent consideration subject to a minimum of $2.5 million with
a maximum of $16.6 million based on the pre-tax earnings of Francisco for the
1998 and 1999 fiscal years subject to certain adjustments. The minimum
contingent payments have been recorded as a liability and are payable in cash or
a combination of cash and common stock.
On March 4, 1998, the Company completed a merger with Ontario Tree Fruits
Limited and its affiliated companies (collectively, "OTF") by exchanging 609,713
shares of its common stock or exchangeable common stock for all of the common
stock of OTF and certain residual equity interests. OTF imports and distributes
fresh produce to large retail chains and hundreds of independent grocers and
wholesalers in Canada and the Northeastern United States.
The Merger constituted a tax-free reorganization and has been accounted
for as a pooling of interests. Accordingly, all prior periods consolidated
financial statements presented have been restated to include the combined
results of operations, financial position and cash flows of OTF as though it had
always been a part of the Company.
7
<PAGE>
Prior to the merger, OTF's fiscal year ended on August 31. In recording
the business combination, OTF's prior period financial statements have been
restated to a year ended December 31, to conform with the Company's fiscal
year-end.
There were no transactions between OTF and the Company prior to the
combination, and immaterial adjustments were recorded to conform OTF's
accounting policies to those of the Company. Certain reclassifications were made
to the OTF financial statements to conform to the Company's presentations.
In connection with the acquisition of OTF, the Company incurred
nonrecurring transaction costs of approximately $1.4 million, which were
expensed in the first quarter of 1998. The nonrecurring transaction costs
included approximately $942,000 of non-cash expenses ($519,000, net of tax)
related to the issuance of 52,342 shares of the Company's common stock to the
financial advisors of OTF.
In connection with the purchase of substantially all the net operating
assets of Lone Star Produce, Inc. in 1995, the Company issued a convertible
promissory note which allowed Lone Star (at Lone Star's option) to convert the
note into the Company's common stock at $6.49 per share. The note was valued at
approximately $1,459,000 and is included in current debt in the Company's
balance sheet at January 2, 1998. The conversion option had an original
expiration date of March 31, 1998. By mutual agreement, the conversion deadline
was extended and the note was converted into 72,725 shares in April 1998.
For those acquisitions accounted for using the purchase method of
accounting, only the results of operations of the acquired companies subsequent
to their respective acquisition dates are included in the consolidated financial
statements of the Company. At the acquisition dates, the purchase price was
allocated to assets acquired and liabilities assumed based on their relative
fair market values. The excess of total purchase price over fair values of the
net assets acquired was recorded as goodwill, which is being amortized over a 15
to 20 year period.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and Francisco as if the
acquisition occurred as of the beginning of 1997, after giving effect to certain
adjustments, including amortization of goodwill, decreased interest income,
increased interest expense and related income tax effects. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and Francisco constituted a single
entity during such periods.
SIX MONTHS ENDED
(In thousands, except per share amounts) JULY 3, JUNE 27,
1998 1997
--------- --------
Net sales ................................... $ 299,859 $253,885
========= ========
Net income .................................. $ 2,432 $ 3,438
========= ========
Earnings per share - diluted ................ $ 0.49 $ 0.71
========= ========
NOTE 4. DEBT.
On February 2, 1998, the Company restructured its existing loan agreement
with a major bank to provide a revolving line of credit ("Revolver") of up to
$12 million and a bridge loan of $5 million (the "Bridge Loan"). On May 15,
1998, the Company amended the terms of the above referenced loan agreement and
increased the borrowing availability under the Revolver to $15 million. The
Revolver
8
<PAGE>
expires February 2, 2001 and is subject to certain covenants and borrowing base
requirements. Outstanding principal amounts under the Revolver (none outstanding
as of August 10, 1998) accumulate interest at the bank prime rate (8.5% as of
August 10, 1998), or at the Company's election, the eurodollar rate plus 1.75%
(7.4% as of August 10, 1998).
On May 15, 1998 the Company completed a $20 million, 12 percent
subordinated debt financing with a major national insurance company. The note
has a final maturity of May 1, 2003 with principal payments of $6,666,666 due on
May 1, 2001 and May 1, 2002. Interest payments are due semi-annually in May and
November. A total of $15 million was funded on May 15, 1998 with the remaining
$5 million funded on August 3, 1998. A portion of the initial proceeds was used
to prepay the Bridge Loan and the remainder to pay off existing balances on the
Revolver. In connection with the subordinated note, the Company issued 116,612
warrants on May 15, 1998 and 38,871 warrants on August 3, 1998, both at an
exercise price of $22.70 per share. The warrants are exercisable on May 1, 1999
and expire May 1, 2003.
Additionally, the Company's Canadian subsidiaries have a demand agreement
with a Canadian bank to provide revolving credit facilities of up to $10.2
million, denominated in Canadian dollars, subject to certain covenant and
borrowing base requirements. The revolving credit facility is collateralized by
substantially all assets of such Canadian subsidiaries. Interest on borrowings
accrue at U.S. prime plus 0.75% (9.25% at August 10, 1998) or Canadian prime
plus 0.75% (7.5%), depending on the denomination of the borrowings. As of July
3, 1998, borrowings under the agreement amounted to $3.1 million, denominated in
Canadian dollars.
NOTE 5. COMPREHENSIVE INCOME.
The following table reconciles the Company's net income to its
comprehensive income (in thousands):
QUARTER ENDED SIX MONTHS ENDED
---------------------- ------------------
July 3, June 27, July 3, June 27,
1998 1997 1998 1997
------- ------- ------- ------
Net Income ....................... $ 1,960 $ 1,624 $ 2,414 $2,656
Other comprehensive income-foreign
currency translation adjustments (103) -- (95) (6)
------- ------- ------- ------
Comprehensive income ............. $ 1,857 $ 1,624 $ 2,319 $2,650
======= ======= ======= ======
NOTE 6. EARNINGS PER SHARE.
Shares used in calculating basic and diluted income per share (in
thousands):
QUARTER ENDED SIX MONTHS ENDED
------------------- ------------------
July 3, June 27, July 3, June 27,
1998 1997 1998 1997
------- ------- ------- ------
Weighted average common shares
outstanding - basic ........... 4,779 4,351 4,759 4,347
9
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Dilutive securities:
Common stock options .......... 172 179 189 189
Contingent shares related
to acquisitions ............. -- 33 -- 33
------- ------- ------- ------
Weighted average common shares
outstanding - diluted basis ... 4,951 4,563 4,948 4,569
======= ======= ======= ======
NOTE 7. SUBSEQUENT EVENT.
On August 14, 1998, the Company acquired all of the capital stock of Jos.
Notarianni & Co., a produce distribution and value-added tomato ripening and
repacking company based in Scranton, Pennsylvania. As consideration, the Company
paid $5,390,000 in cash and 292,951 shares of Company common stock valued at
$19.15 per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the components of the consolidated statements
of income as a percentage of net sales for the periods indicated (including the
restatement to reflect the acquisition of OTF, which was accounted for as a
pooling of interests):
QUARTER ENDED SIX MONTHS ENDED
------------------- ------------------
JULY 3, JUNE 27, JULY 3, JUNE 27,
1998 1997 1998 1997
------- ------- ------- ------
Net sales ......................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ................ 89.1 89.9 89.1 90.3
------- ------- ------- ------
Gross profit ...................... 10.9 10.1 10.9 9.7
Selling, general and
administrative expenses ........ 8.5 7.8 8.7 7.7
Nonrecurring transaction costs .... -- -- 0.5 --
------- ------- ------- ------
Operating income .................. 2.4 2.3 1.7 2.0
Other income (expense) ............ (0.4) -- (0.4) --
------- ------- ------- ------
Income before income taxes ........ 2.0 2.3 1.3 2.0
Provision for income taxes ........ 0.8 0.9 0.5 0.7
------- ------- ------- ------
Net income ........................ 1.2% 1.4% 0.8% 1.3%
======= ======= ======= ======
COMPARISON OF QUARTER ENDED JULY 3, 1998 TO QUARTER ENDED JUNE
27, 1997
The Company's quarters ended July 3, 1998 and June 27, 1997 each include
13 weeks.
NET SALES. Net sales increased $49.0 million, or 44.3%, to $159.6 million
in the second quarter of 1998 from $110.6 million in the second quarter of 1997.
Of the total increase, approximately $44 million was due to acquisitions made
subsequent to the second quarter of 1997. As a percentage of net sales, Sam's
represented 37.7% in the second quarter of 1998 compared to 57.9% in the second
quarter of 1997.
COST OF GOODS SOLD. Cost of goods sold increased by $42.7 million, or
43.0% to $142.2 million in the second quarter of 1998 from $99.4 million in the
second quarter of 1997, primarily reflecting the increase in net sales above. As
a percentage of net sales, cost of goods sold decreased to 89.1% from 89.9%,
which in turn increased the Company's gross profit percentage to 10.9% from
10.1%. The
10
<PAGE>
increase in gross profit percentage is due to the continuing increasing trend in
specialty food service and value-added businesses, which generally have higher
gross margins than those derived from the Company's programs and
retail/wholesale businesses. Net sales from these businesses were over 17% of
total revenues in the second quarter of 1998 compared to approximately 12% in
the same period in 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased by $5.0 million, or 57.7% to $13.6
million in the second quarter of 1998 from $8.6 million in the second quarter of
1997. The increase is primarily due to SG&A expenses related to new business
($4.1 million) and, to a lesser extent, additional headcount and other costs
required to support the Company's increased acquisition, integration and
operating activities.
OPERATING INCOME. As a result of the foregoing factors, operating income
increased by $1.2 million, or 48.2%, to $3.8 million in the second quarter of
1998 from $2.6 million in the second quarter of 1997.
OTHER INCOME (EXPENSE). Interest expense increased $426,000 to $606,000 in
the second quarter of 1998 from $180,000 in the second quarter of 1997 primarily
due to increased borrowings to help finance acquisitions that were made
subsequent to the second quarter of 1997.
PROVISION FOR INCOME TAXES. The effective tax rate increased to 39% in the
second quarter of 1998 from 37% in the second quarter of 1997. The increase was
primarily due to the tax effect of increased pre-tax earnings incurred by the
Company's Canadian subsidiaries, which have a higher statutory tax rate than the
United States.
NET INCOME. As a result of the foregoing factors, net income increased
$336,000 or 20.7% to $1,960,000 in the second quarter of 1998 compared to
$1,624,000 in the second quarter of 1997.
COMPARISON OF SIX MONTHS ENDED JULY 3, 1998 TO SIX MONTHS ENDED
JUNE 27, 1997.
The six months periods ended July 3, 1998 and June 27, 1997 include 26
weeks and 25 weeks, respectively. Therefore, when comparing the two periods, it
should be noted that the 1998 period includes one additional week of operations
compared to the 1997 period.
NET SALES. Net sales increased $91.5 million, or 45.5% to $292.6 million
in the first six months of 1998 from $201.1 million in the first six months of
1997. Of the increase, approximately $76 million was due to acquisitions made
subsequent to the second quarter of 1997 and $7.7 million was due to the effect
of an additional week in the first six months of 1998. As a percentage of net
sales, Sam's represented 39.4% in the first six months of 1998 compared to 58.4%
in the same period in 1997.
COST OF GOODS SOLD. Cost of goods sold increased by $79.1 million, or
43.6% to $260.6 million in the first six months of 1998 from $181.5 million in
the first six months 1997, primarily reflecting the increase in net sales above.
As a percentage of net sales, cost of goods sold decreased to 89.1% from 90.3%,
which in turn increased the Company's gross profit percentage to 10.9% from
9.7%. The increase in gross profit percentage is due to the continuing
increasing trend in specialty food service and value-added businesses, which
generally have higher gross margins that those derived from the Company's
programs and retail/wholesale businesses. Net sales from these businesses were
over 18% of total revenues in the first six months of 1998 compared to
approximately 11% in the same period in 1997.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $11.5 million, or 74.4% to $27.0 million in
the first six months of 1998 from $15.5 million in the first six months of 1997.
Included in the 1998 period are nonrecurring transaction expenses of $1.4
million related to the acquisition of OTF. The remaining increase is primarily
due to SG&A expenses related to new business ($7.8 million) and, to a lessor
extent, additional headcount and other costs required to support the Company's
increased acquisition, integration and operating activities.
OPERATING INCOME. As a result of the foregoing factors, which include $1.4
million of nonrecurring transaction costs in the first six months of 1998,
operating income increased $0.9 million, or 22.2% to $5.0 million in the first
six months of 1998 from $4.1 million in the first six months of 1997. The
following table summarizes the effect of the nonrecurring transaction costs on
operating income in the first six months of 1998 (in thousands):
Six Months Ended
----------------------------------------
July 3, % of June 27, % of
1998 net sales 1997 net sales
------- ------- ------- ------
Operating income as reported .... $ 4,996 1.7% $ 4,088 2.0%
Nonrecurring transaction costs .. 1,395 -- -- --
------- ------- ------- ------
Operating income before
nonrecurring transaction costs $ 6,391 2.2% $ 4,088 2.0%
======= ======= ======= ======
OTHER INCOME (EXPENSE). Interest expense increased $0.8 million to $1.0
million in the first six months of 1998 from $0.2 million in the comparable 1997
period due to increased borrowings to help finance acquisitions that were made
subsequent to the second quarter of 1997.
PROVISIONS FOR INCOME TAXES. The effective income tax rate increased to
38% in the first six months of 1998 from 36% in the first six months of 1997.
The increase was primarily due to the tax effect of increased pre-tax earnings
incurred by the Company's Canadian subsidiaries, which has a higher statutory
tax rate than the United States.
NET INCOME. As a result of the foregoing factors, net income decreased
$242,000, or 9% to $2,414,000 in the first six months of 1998 compared to
$2,656,000 in the first six months of 1997. The following table summarizes the
effect of the nonrecurring transaction costs on the net income and earnings per
share in the first six months of 1998 (in thousands):
Six Months Ended
----------------------
July 3, June 27,
1998 1997
--------- ---------
Net income as reported ............................... $ 2,414 $ 2,656
Nonrecurring transaction costs,
net of tax ......................................... $ 789 --
--------- ---------
Net income before effect of
nonrecurring transaction costs ..................... $ 3,203 $ 2,656
========= =========
Earning per share as reported:
Basic ......................................... $ 0.51 $ 0.61
Diluted ....................................... $ 0.49 $ 0.58
12
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Effect of nonrecurring transaction costs:
Basic .......................................... $ 0.16 --
Diluted ........................................ $ 0.16 --
Earnings per share before effect of
nonrecurring transaction costs:
Basic .......................................... $ 0.67 $ 0.61
Diluted ........................................ $ 0.65 $ 0.58
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $4.2 million for the first six
months of 1998 compared to $6.9 million in the first six months of 1997. The
difference is primarily due to increased use of working capital to support the
growth in the business.
Cash used in investing activities increased $4.1 million to $8.8 million
in the first six months of 1998 from $4.7 million in the first six months of
1997. Cash expended in the first six months of 1998 was primarily due to the
acquisition of Francisco (see Note 3 to the accompanying unaudited consolidated
financial statements) and, to a lesser extent, expenditures related to the
Company's computer system implementation, which began in the second quarter of
1998. Cash used for investing activities in the same period in 1997 consisted
primarily of the purchase of a processing and distribution center in Richmond,
Indiana and the acquisition of other businesses.
Cash provided by financing activities was $2.1 million in the first six
months of 1998 compared to cash used in financing activities of $2.8 million in
the first six months of 1997. The increase in cash flows from financing
activities compared to the prior year is primarily due to borrowings used to
finance the cash portion of the Francisco acquisition. The $15 million in funds
borrowed under the Company's subordinated debt agreement (see Note 4 to the
accompanying unaudited consolidated financial statements) were used primarily to
pay off existing revolving credit facilities and for expenditures related to the
Company's computer system.
At July 3, 1998, the Company had working capital of $18.6 million compared
to $11.2 million at January 2, 1998. On February 2, 1998, the Company entered
into a new $17 million revolving line of credit and bridge loan bank facility to
be used for general corporate purposes, including acquisitions. In May 1998, the
bridge loan portion of the facility was prepaid and the revolving line of credit
was increased from $12 million to $15 million. As of August 10, 1998, there were
no borrowings outstanding under the facility. The Company also has revolving
credit facilities of up to $10.2 million, denominated in Canadian dollars,
through its Canadian subsidiaries. Such facilities have an outstanding balance
of $3.1 million, denominated in Canadian dollars, as of July 3, 1998. In May
1998, the Company completed a $20 million, 12 percent subordinated debt
financing that matures in May 2003 (see Note 4 to the accompanying unaudited
consolidated financial statements). Fifteen million dollars were borrowed on May
15, 1998 with the remaining $5 million borrowed on August 3, 1998.
Management believes that the combination of cash generated from operating
activities, availability under its bank lines of credit, the proceeds generated
from its subordinated debt financing and the use of operating leases where
appropriate is sufficient to meet its needs for operations, computer system
implementations and near-term debt service requirements. The Company intends to
continue its expansion activities and most likely will require additional debt
or equity capital to meet such requirements. The Company believes it has access
to the capital markets and can also obtain additional
13
<PAGE>
credit from financial institutions in order to raise the capital necessary to
fund such expansion activities. See "Outlook and Uncertainties" below.
YEAR 2000
In 1998, the Company developed a plan to implement a new enterprise-wide
management information system, which better meets the Company's diverse and
long-term needs. Implementation of the new system commenced in March 1998 and is
currently expected to be completed by the end of 1999. The implementation is
also expected to ensure that the Company's computer systems and applications
will function properly beyond 1999 in all material respects. The Company
believes that it has allocated adequate resources for this purpose and expects
its Year 2000 date conversion program to be successfully completed on a timely
basis.
QUARTERLY RESULTS AND SEASONALITY
The Company's business is seasonal, with its greatest quarterly sales volume
historically occurring in the fourth quarter. A substantial portion of the
Company's produce sales consists of staple items such as apples, oranges,
grapefruit, potatoes, onions, lettuce and tomatoes which are generally strongest
during the fall, winter and spring. The supply of certain of these items
declines during the summer, although lost sales are replaced to some extent by
more seasonal products such as peaches, plums, nectarines, grapes, strawberries
and melons. Sales of imported fresh fruit such as Clementine oranges,
tangerines, grapes, and refrigerated, pre-packaged products, such as vegetable
trays, are strongest during the fourth quarter holiday season. Because the
Company's results of operations depend significantly on sales generated during
the fourth quarter, any adverse development affecting the Company's operations
during this period, such as the unavailability of high quality produce, harsh
weather conditions, or product costs, could have a disproportionate impact on
the Company's results of operations for the full year.
INFLATION
Although the Company cannot determine the precise effects of inflation,
management does not believe inflation has had a material effect on the Company's
sales or results of operations. However, independent of normal inflationary
pressures, the Company's produce products are subject to fluctuating prices
which result from factors discussed in "Quarterly Results and Seasonality"
above.
OUTLOOK AND UNCERTAINTIES
Certain information in this Quarterly Report on Form 10-Q may
contain "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
these provisions, including any projections of earnings, revenues or other
financial items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products or services,
any statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. The Company's future financial condition and
results, as well as any forward-looking statements, are subject to inherent
risks and uncertainties, including, without limitation, potential limitations on
the Company's ability to pursue its acquisition strategy and successfully
integrate acquired operations, dependence on its
14
<PAGE>
primary customer, significant competition, limitations arising from the
Company's indebtedness, government regulation, seasonality and dependence on key
management. Additional information concerning these and other risk factors is
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1998, a copy of which may be obtained from the Company upon request.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of shareholders was held on June 25, 1998. At the
meeting, the shareholders reelected Class I directors, David I. Sheinfeld and
Colon Washburn, to serve three year terms until their successors are elected and
qualified. Their terms will expire at the 2001 annual meeting. The terms of
Steven R. Grinstead and Lawrence V. Jackson will expire at the 1999 annual
meeting; and the term of Thomas M. Hubbard and Sheldon I Stein will expire at
the 2000 annual meeting.
In addition to the election of certain directors, the share holders
approved an amended and restated version of the Fresh America Corp. 1996 Stock
Option and Award Plan and ratified the selection of KPMG Peat Marwick LLP as
Fresh America Corp.'s independent auditors for fiscal 1998.
The results of the vote for the election of directors were as follows:
David I. Sheinfeld, 4,763,074 for, 5,555 against; Colon Washburn, 4,763,074 for,
5,555 against. In the vote on the adoption of the Amended and Restated Fresh
America Corp. 1996 Stock Option and Award Plan, 3,027,494 were cast in favor of
adoption, 636,122 against and 10,820 abstained. In the vote on ratification of
independent auditors, 4,754,979 votes were cast in favor of ratification and
11,050 were cast against ratification while 2,600 votes were withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
Exhibit 10.1 - Securities Purchase Agreement between Fresh America
Corp. and John Hancock Mutual Life Insurance Company
dated as of May 4, 1998.
Exhibit 10.2 - Note Agreement between Fresh America Corp. and John
Hancock Mutual Life Insurance Company dated as of
May 4, 1998.
Exhibit 10.3 - Warrant Agreement between Fresh America Corp. and
John Hancock Mutual Life Insurance Company dated as
of May 4, 1998.
Exhibit 10.4 - Second Amendment to Restated Business Loan Agreement
between Fresh America Corp. and Bank of America
Texas, N.A. dated as of May 14, 1998.
Exhibit 27.1 - Financial Data Schedule.
Exhibit 27.2 - Financial Data Schedule - Restated.
15
<PAGE>
Reports on Form 8-K
NONE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FRESH AMERICA CORP.
(Registrant)
/S/ ROBERT C. KIEHNLE Date: AUGUST 14, 1998
Robert C. Kiehnle
Executive Vice President and
Chief Financial Officer
16
EXHIBIT 10.1
FRESH AMERICA CORP.
SECURITIES PURCHASE AGREEMENT
DATED AS OF MAY 4, 1998
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2003
155,483 WARRANTS TO PURCHASE COMMON STOCK
<PAGE>
TABLE OF CONTENTS PAGE
1. PURCHASE AND SALE OF SECURITIES...................................... 1
1.1 Issue of Securities by the Company............................. 1
1.2 The Closing.................................................... 2
1.3 Original Issue Discount........................................ 3
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY........................ 3
2.1 Nature of Business............................................. 3
2.2 Financial Statements; Debt; Material Adverse
Change......................................................... 3
2.3 Subsidiaries and Affiliates.................................... 5
2.4 Title to Properties............................................ 5
2.5 Taxes.......................................................... 6
2.6 Pending Litigation............................................. 6
2.7 Corporate Organization and Authority........................... 6
2.8 Charter Instruments, Other Agreements.......................... 7
2.9 Restrictions on the Company.................................... 7
2.10 Compliance with Law............................................ 7
2.11 Pension Plans.................................................. 8
2.12 Environmental Compliance....................................... 9
2.13 Due Authorization; Enforceability.............................. 9
2.14 Governmental Consent to Sale of Purchased
Securities..................................................... 10
2.15 Hart-Scott-Rodino Compliance................................... 11
2.16 No Defaults.................................................... 11
2.17 Private Offering of Purchased Securities....................... 11
2.18 Use of Proceeds................................................ 12
2.19 Capitalization................................................. 12
2.20 Solvency....................................................... 13
2.21 Full Disclosure................................................ 13
3. REPRESENTATIONS OF THE PURCHASER..................................... 14
3.1 Purchase for Investment........................................ 14
3.2 ERISA.......................................................... 14
4. FIRST CLOSING CONDITIONS............................................. 16
4.1 Opinions of Counsel............................................ 16
4.2 Warranties and Representations True; Compliance................ 16
4.3 Officers' Certificates......................................... 16
4.4 Organic Documents.............................................. 17
4.5 Legality....................................................... 17
4.6 Financing Documents............................................ 17
4.7 Reservation of Shares.......................................... 18
4.8 Certain Consents............................................... 18
4.9 Private Placement Numbers...................................... 18
4.10 Fees and Expenses.............................................. 18
4.11 Other Purchasers............................................... 18
4.12 Proceedings Satisfactory....................................... 19
i
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5. SECOND CLOSING CONDITIONS............................................ 19
5.1 Opinions of Counsel............................................ 19
5.2 Warranties and Representations True; Compliance................ 19
5.3 Officers' Certificates......................................... 20
5.4 Organic Documents.............................................. 20
5.5 Legality....................................................... 20
5.6 Financing Documents............................................ 20
5.7 Fees and Expenses.............................................. 21
5.8 Other Purchasers............................................... 21
5.9 Proceedings Satisfactory....................................... 21
6. INTERPRETATION OF THIS AGREEMENT..................................... 21
6.1 Terms Defined.................................................. 21
6.2 Other Definitions.............................................. 24
6.3 Section Headings and Table of Contents and
Construction................................................... 24
6.4 Governing Law.................................................. 24
7. MISCELLANEOUS........................................................ 25
7.1 Communications................................................. 25
7.2 Reproduction of Documents...................................... 25
7.3 Survival....................................................... 25
7.4 Successors and Assigns......................................... 26
7.5 Amendment and Waiver........................................... 26
7.6 Expenses....................................................... 26
7.7 Waiver of Jury Trial; Consent to Jurisdiction;
Etc............................................................ 26
7.8 Indemnification of Each Purchaser.............................. 27
7.9 Entire Agreement............................................... 28
7.10 Execution in Counterpart....................................... 28
Annex 1 -- Information as to Purchasers
Annex 2 -- Payment Instructions at Closing; Address of Company for Notices
Annex 3 -- Information as to Company
Exhibit 0 -- Form of Note Agreement
Exhibit 0 -- Form of Warrant Agreement
Exhibit 0 -- Form of Opinion of Company Counsel -- First Closing
Exhibit 0 -- Form of Opinion of Purchasers' Counsel -- First Closing
Exhibit 0 -- Form of Officers' Certificate -- First Closing
Exhibit 0 -- Form of Secretary's Certificate -- First Closing
Exhibit 0 -- Form of Subsidiary Guarantor Secretary's Certificate
Exhibit 0 -- Form of Subsidiary Guarantee
Exhibit 0 -- Form of Opinion of Company Counsel -- Second Closing
Exhibit 0 -- Form of Opinion of Purchasers' Counsel -- Second Closing
Exhibit 0 -- Form of Officers Certificate -- Second Closing
Exhibit 0 -- Form of Secretary's Certificate -- Second Closing
ii
<PAGE>
FRESH AMERICA CORP.
SECURITIES PURCHASE AGREEMENT
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2003
155,483 WARRANTS TO PURCHASE COMMON STOCK
Dated as of May 4, 1998
[SEPARATELY EXECUTED BY EACH OF THE
PURCHASERS LISTED ON ANNEX 1 HERETO]
Ladies and Gentlemen:
FRESH AMERICA CORP. (together with any successors and assigns who become
such in accordance herewith, the "COMPANY"), a Texas corporation, hereby agrees
with you as set forth below.
1. PURCHASE AND SALE OF SECURITIES.
1.1 ISSUE OF SECURITIES BY THE COMPANY.
(A) ISSUE OF NOTES. The Company will authorize the issue of Twenty
Million Dollars ($20,000,000) in aggregate principal amount of its twelve
percent (12%) Senior Subordinated Notes due May 1, 2003 (all such notes,
whether initially issued, or issued in exchange or substitution for, any
such note, in each case in accordance with the Note Agreement,
collectively, the "NOTES"). The Notes shall be issued pursuant to a Note
Agreement (as may be amended, restated or otherwise modified from time to
time, the "NOTE AGREEMENT") in the form of Exhibit 0. The Notes shall be
in the form of Attachment A to the Note Agreement, and shall have the
terms as provided in the Note Agreement and in the Notes.
(B) ISSUE OF WARRANTS. The Company will authorize the issue of an
aggregate of one hundred fifty-five thousand four hundred eighty-three
(155,483) Warrants (the "WARRANTS") to purchase shares of Common Stock.
The Warrants shall be issued pursuant to a Warrant Agreement (as may be
amended, restated or otherwise modified from time to time, the "WARRANT
AGREEMENT") in the form of Exhibit 0. The certificates representing the
Warrants (the "WARRANT CERTIFICATES") shall be in the form of Attachment A
to the Warrant Agreement, and the Warrants shall have the terms provided
in the Warrant Certificates and the Warrant Agreement.
1
<PAGE>
1.2 THE CLOSING.
(A) PURCHASE AND SALE OF PURCHASED SECURITIES. The Company hereby
agrees to sell to you and you hereby agree to purchase from the Company,
in accordance with the provisions hereof, the aggregate principal amount
of Notes set forth below your name on Annex 1 and the aggregate amount of
Warrants set forth below your name on Annex 1, at an aggregate purchase
price for such Notes and Warrants equal to one hundred percent (100%) of
the principal amount of Notes to be purchased.
(B) FIRST CLOSING. The closing (the "FIRST CLOSING") of the sale of
the First Closing Purchased Securities will be held at 10:00 a.m., local
time, on May 15, 1998, or such other time and date as the Other
Purchasers, the Company and you shall agree (the "FIRST CLOSING DATE"), at
the office of Hebb & Gitlin, a Professional Corporation, One State Street,
Hartford, Connecticut 06103. At the First Closing:
(i) the Company will deliver to you one or more Notes (if any,
as set forth below your name on Annex 1), in the denominations
indicated on Annex 1 under the heading "First Closing," in the
aggregate principal amount of your purchase on the First Closing
Date, dated the First Closing Date and registered in the name of the
holder indicated on Annex 1; and
(ii) the Company will deliver to you one or more Warrant
Certificates (if any,
2
<PAGE>
as set forth below your name on Annex 1), representing the number of
Warrants indicated on such Annex 1 under the heading "First
Closing," and registered in the name of the holder indicated on
Annex 1;
against payment by federal funds wire transfer in immediately available
funds of the purchase price therefor, as directed by the Company on Annex
2, which shall be an account at a bank located in the United States of
America.
(C) SECOND CLOSING. The closing (the "SECOND Closing") of the sale
of the Second Closing Purchased Securities will be held at such time and
on such date (but in no event later than August 3, 1998) as the Other
Purchasers, the Company and you shall agree (the "SECOND CLOSING DATE"),
at the office of Hebb & Gitlin, a Professional Corporation, One State
Street, Hartford, Connecticut 06103; PROVIDED, HOWEVER, that the Company
shall have given you and each Other Purchaser not less than five (5)
Business Days' advance notice of the proposed Second Closing Date. At the
Second Closing:
(i) the Company will deliver to you one or more Notes (if any,
as set forth below your name on Annex 1), in the denominations
indicated on Annex 1 under the heading "Second Closing," in the
aggregate principal amount of your purchase on the Second Closing
Date, dated the Second Closing Date and registered in the name of
the holder indicated on Annex 1; and
(ii) the Company will deliver to you one or more Warrant
Certificates (if any, as set forth below your name on Annex 1),
representing the number of Warrants indicated on such Annex 1 under
the heading "Second Closing," and registered in the name of the
holder indicated on Annex 1;
against payment by federal funds wire transfer in immediately available
funds of the purchase price therefor, as directed by the Company on Annex
2, which shall be an account at a bank located in the United States of
America.
(D) OTHER PURCHASERS. Contemporaneously with the execution and
delivery hereof, the Company is entering into a separate Securities
Purchase Agreement identical (except for the name and signature of the
purchaser) to this Agreement (this Agreement and such other separate
Securities Purchase Agreements, each as from time to time amended or
modified, being herein sometimes referred to as the "SECURITIES PURCHASE
AGREEMENTS") with each other purchaser (individually, an "OTHER
PURCHASER," and collectively, the "OTHER PURCHASERS") listed on Annex 1,
providing for the sale to each Other Purchaser of the Purchased Securities
set forth below its name on such Annex. The sales of the Purchased
Securities to you and to each Other Purchaser are separate sales.
1.3 ORIGINAL ISSUE DISCOUNT. You and the Company agree to treat, for
income tax purposes and purposes of determining compliance with the Applicable
Interest Law and calculation of the Maximum Legal Rate of Interest, any original
issue discount attributable, as a result of the delivery of the Warrants, to any
Note issued by the Company in accordance with the terms and conditions of this
Agreement as being less than the product of:
(a) one-quarter of one percent (0.25%) of the stated redemption
price at maturity (as such term is defined in Section 1273(a) of the IRC)
of such Note; MULTIPLIED BY
(b) the number of complete years to maturity of such Note.
You and the Company agree to use the foregoing for all United States federal,
state and local income tax purposes with respect to the transactions
contemplated by the Financing Documents.
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
To induce you to enter into this Agreement and to purchase and pay for the
Purchased Securities to be delivered to you at each Closing, the Company
warrants and represents, as of each Closing Date, as follows:
2.1 NATURE OF BUSINESS. The Offering Memorandum describes correctly in all
material respects the general nature of the business and principal Properties
and assets of the Company.
2.2 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE.
(A) FINANCIAL STATEMENTS. The Company has provided you with the
financial statements of the Company contained in the Offering Memorandum
and those described on PART 0 OF ANNEX 3. Such financial statements
present fairly in all material respects the financial position of the
Company and the Subsidiaries on a consolidated basis as of the respective
dates specified in
3
<PAGE>
such Part and the results of their consolidated operations and cash flows
for the respective periods so specified in conformity with GAAP applied on
a consistent basis throughout the periods involved.
(B) DEBT. PART 0 OF ANNEX 3 lists, both before and after giving
effect to the transactions contemplated by the Financing Documents, all
Debt of the Company and the Subsidiaries which has either an outstanding
principal amount or, in the case of a revolving credit or similar
facility, a commitment or commitments, of One Million Dollars ($1,000,000)
or more, and provides the following information with respect to each item
of such Debt: the obligor, each guarantor thereof and each other Person
similarly liable in respect thereof, the holder thereof, the outstanding
amount as of April 3, 1998, the current portion of the outstanding amount
as at such date, the final maturity, required sinking fund payments, and a
description of the collateral securing such Debt. The aggregate principal
amount of all Debt of the Company and the Subsidiaries as of the First
Closing Date was Twenty-Four Million One Hundred Thirty-Nine Thousand
Dollars ($24,139,000).
(C) LIENS. PART 0 OF ANNEX 3 lists, both before and after giving
effect to the transactions contemplated by the Financing Documents, all
Liens securing Debt of the Company and the Subsidiaries which has either
an outstanding principal amount or, in the case of a revolving credit or
similar facility, a commitment or commitments, of One Million Dollars
($1,000,000) or more, and provides the following information with respect
to each Lien: the holder thereof, the Debt or other obligations secured by
such Lien, the outstanding amount thereof and a description of the
collateral. The aggregate principal amount of all Debt of the Company and
the Subsidiaries secured by any Lien as of the First Closing Date was
Twenty Million Two Hundred Fifty-Nine Thousand Dollars ($20,259,000).
(D) CONTINGENT OBLIGATIONS. There are no Guaranties or other
contingent obligations in respect of which disclosure is required, or for
which provisions are required to be made, in the consolidated financial
statements of the Company and the Subsidiaries in accordance with GAAP,
other than those so disclosed, and for which such provision has been made,
in the financial statements referred to in Section 0 and which are
described on PART 2.2(B) OF ANNEX 3.
(E) MATERIAL ADVERSE CHANGE. Since January 2, 1998, there has been
no change in the business, operations, profits, financial condition,
Properties or business prospects of the Company and the Subsidiaries,
except changes that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(F) PROJECTIONS. The Company has delivered to you projected
financial statements of the Company contained in PART 0 OF ANNEX 3
(collectively, the "PROJECTIONS"). The assumptions used in preparation of
the Projections were reasonable when made. Such Projections were prepared
by the executive and financial personnel of the Company and the
Subsidiaries in the light of the business of the Company and the
Subsidiaries. Such Projections were prepared in good faith, had a
reasonable basis and represented the good faith opinion of the Company as
to the projected results of the operations of the Company and the
Subsidiaries as of the date thereof.
(G) INVESTMENTS. PART 0 OF ANNEX 3 lists all Investments of the
Company and the Subsidiaries outstanding on the First Closing Date which,
but for clause (h) of the definition of
4
<PAGE>
Restricted Investments, would be classified as Restricted Investments in
accordance with the provisions of the Note Agreement.
2.3 SUBSIDIARIES AND AFFILIATES.
(A) OWNERSHIP OF SUBSIDIARIES. PART 0 OF ANNEX 3 sets forth for each
Subsidiary:
(i) its full legal name;
(ii) its jurisdiction of incorporation or organization;
(iii) the percentage of the Voting Stock of which is held by
the Company and each other Subsidiary.
(B) AFFILIATES. PART 0 OF ANNEX 3 sets forth the name of each
Affiliate (other than members of the families of officers and directors of
the Company) and the nature of the affiliation of such Affiliate.
(C) IDENTIFICATION OF CERTAIN SUBSIDIARIES. PART 0 OF ANNEX 3 sets
forth the identity of each Subsidiary which is liable (as a guarantor,
borrower, co-obligor or otherwise) in respect of any of the obligations of
the Company under the Senior Credit Agreement, as in effect on such
Closing Date.
2.4 TITLE TO PROPERTIES.
(A) GENERAL. Each of the Company and the Subsidiaries has good and
marketable title to all of the Property reflected in the most recent
balance sheet referred to in Section 0 (except as sold or otherwise
disposed of in the ordinary course of business), free from Liens not
otherwise permitted by provisions of the Note Agreement. Each of the
Company and the Subsidiaries has maintained and kept, or caused to be
maintained and kept, its respective properties in good repair, working
order and condition (ordinary wear and tear excepted), so that the
business to be carried on in connection therewith may be properly
conducted at all times.
(B) LEASES. All leases necessary for the conduct of the business of
the Company and the Subsidiaries are valid and subsisting and are in full
force and effect, except for such failures to be valid and subsisting
that, in the aggregate for all such failures, could not reasonably be
expected to have a Material Adverse Effect. Each lease of real Property
grants to the Company or the Subsidiary party thereto the right to the
quiet enjoyment of the premises leased thereunder during the term thereof.
(C) INTELLECTUAL PROPERTY. Each of the Company and the Subsidiaries
owns, possesses or has the right to use all of the licenses, permits,
franchises, patents, copyrights, trademarks, service marks and trade names
necessary for the present and currently planned future conduct of its
business, without any known conflict with the rights of others, except for
such failures to own, possess, or have the right to use, that, in the
aggregate for all such failures, could not reasonably be expected to have
a Material Adverse Effect.
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2.5 TAXES.
(A) RETURNS FILED; TAXES PAID. All material tax returns required to
be filed by the Company, any Subsidiary and each other Person with which
the Company or any Subsidiary files or has filed a consolidated return in
any jurisdiction have in fact been filed on a timely basis. All taxes,
assessments, fees and other governmental charges upon the Company and any
such Person, and upon any of their respective Properties, income or
franchises, that are due and payable have been paid, except for such
failures to pay that, in the aggregate for all such Persons, could not
reasonably be expected to have a Material Adverse Effect. Except for the
tax matters set forth on PART 2.5 OF ANNEX 3, the Company knows of no
proposed additional tax assessment against it or any such Person that
could reasonably be expected to have a Material Adverse Effect.
(B) BOOK PROVISIONS ADEQUATE. The amount of the liability for taxes
reflected in each of the statements of financial condition referred to in
Section 0 is in each case an adequate provision in all material respects
for taxes as of the dates of such statements of financial condition
(including, without limitation, any payment due pursuant to any tax
sharing agreement) as are or may become payable by any one or more of the
Company and the other Persons consolidated with the Company in such
financial statements in respect of all tax periods ending on or prior to
such dates.
2.6 PENDING LITIGATION.
(A) PENDING LITIGATION. There are no proceedings, actions or
investigations pending or threatened, against or affecting the Company or
any of the Subsidiaries in any court or before any Governmental Authority
or arbitration board or tribunal that, in the aggregate for all such
proceedings, actions and investigations, could reasonably be expected to
have a Material Adverse Effect.
(B) NO VIOLATIONS. Neither the Company nor any Subsidiary is in
violation of any judgment, order, writ, injunction or decree of any court,
Governmental Authority, arbitration board or tribunal that, in the
aggregate for all such violations, could reasonably be expected to have a
Material Adverse Effect.
2.7 CORPORATE ORGANIZATION AND AUTHORITY.
Each of the Company and each Subsidiary:
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all corporate power and authority necessary to own and
operate its Properties and to carry on its business as now conducted and
as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and other
governmental authorizations necessary to own and operate its Properties
and to carry on its business as now conducted and as presently proposed to
be conducted, except where the failure to have such
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licenses, certificates, permits, franchises and other governmental
authorizations, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is authorized
to do business and is in good standing, as a foreign corporation, in each
state in the United States of America and in each other jurisdiction where
it is required to do so, except where the failure to be so qualified or
licensed and authorized and in good standing, in the aggregate for all
such failures, could not reasonably be expected to have a Material Adverse
Effect.
2.8 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
Neither the Company is nor any Subsidiary is in violation in any respect
of:
(a) any term of any charter instrument or bylaw; or
(b) any term in any agreement or other instrument to which it is a
party or by which it or any of its Property may be bound, except for such
violations that, in the aggregate for all such violations, could not
reasonably be expected to have a Material Adverse Effect.
2.9 RESTRICTIONS ON THE COMPANY.
Neither the Company nor any Subsidiary:
(a) is a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all such
contracts, agreements, and charter and corporate restrictions, is
reasonably likely to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts its right
or ability to incur Debt or to issue Rights of the Company, as the case
may be, other than the Financing Documents and the agreements listed on
PART 0(B) OF ANNEX 3, none of which restricts the issuance and sale of the
Notes or the Warrants or the execution and delivery of, or compliance with
this Agreement or the other Financing Documents by the Company or any
Subsidiary Guarantor; and
(c) has agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its Property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
the provisions of the Note Agreement.
True, correct and complete copies of each of the agreements, if any, listed on
PART 0(B) OF ANNEX 3 have been provided to you.
2.10 COMPLIANCE WITH LAW.
Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
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2.11 PENSION PLANS.
(A) OPERATION OF PLANS; LIABILITIES. The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not
resulted in and could not reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred
any liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the IRC relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or
in the imposition of any Lien on any of the rights, Properties or assets
of the Company or any ERISA Affiliate, in either case pursuant to Title I
or IV of ERISA or to such penalty or excise tax provisions or to section
401(a)(29) or 412 of the IRC, other than such liabilities or Liens as
individually or in the aggregate would not have a Material Adverse Effect.
(B) RELATIONSHIP OF BENEFIT LIABILITIES TO PLAN ASSETS. The present
value of the aggregate benefit liabilities under each of the Plans, if
any, as is subject to Title IV of ERISA (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year on
the basis of the actuarial assumptions specified for funding purposes in
such Plan's most recent actuarial valuation report, did not exceed the
aggregate current value of the assets of such Plan allocable to such
benefit liabilities, except as could not reasonably be expected to have a
Material Adverse Effect or result in the imposition of any fine, penalty
or forfeiture or in any Lien upon any Property of the Company or any
Subsidiary or ERISA Affiliate. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(C) WITHDRAWAL LIABILITIES. The Company and its ERISA Affiliates
have not incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans, other than such liabilities as
individually or in the aggregate would not have a Material Adverse Effect.
(D) POSTRETIREMENT BENEFIT OBLIGATIONS. The expected postretirement
benefit obligation (determined as of the last day of the Company's most
recently ended fiscal year in accordance with Financial Accounting
Standards Board Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the
IRC) of the Company will not have a Material Adverse Effect.
(E) PROHIBITED TRANSACTIONS. The execution and delivery of the
Financing Documents and the issuance and sale of the Purchased Securities
hereunder will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the IRC. The
representation by the Company in the foregoing sentence is made in
reliance upon and subject to the accuracy of your representation in
Section 0 as to the Sources of the funds used to pay the purchase price of
the Purchased Securities to be purchased by you.
(F) FOREIGN PENSION PLANS. Other than as set forth in PART 0 OF
ANNEX 3, the
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Company does not have or maintain, and is not required to contribute to,
any Foreign Pension Plan.
2.12 ENVIRONMENTAL COMPLIANCE.
(A) COMPLIANCE -- Except as disclosed on PART 0(A) OF ANNEX 3, each
of the Company and the Subsidiaries is in compliance with all
Environmental Protection Laws in effect in each jurisdiction where it is
presently doing business or is located, other than any non-compliance
which could not reasonably be expected to have a Material Adverse Effect.
(B) LIABILITY -- Except as disclosed on PART 0(B) OF ANNEX 3,
neither the Company nor any Subsidiary is subject to any liability under
any Environmental Protection Law that, individually or in the aggregate,
could be reasonably expected to have a Material Adverse Effect.
(C) NOTICES -- Except as disclosed on PART 0(C) OF ANNEX 3, neither
the Company nor any Subsidiary has received any:
(i) written notice from any Governmental Authority by which
any of its present or previously-owned or leased real Properties has
been designated, listed, or identified in any manner by any
Governmental Authority charged with administering or enforcing any
Environmental Protection Law as a hazardous substance disposal or
removal site, "Super Fund" clean-up site, or candidate for removal
or closure pursuant to any Environmental Protection Law;
(ii) written notice of any Lien arising under or in connection
with any Environmental Protection Law that has attached to any
revenues of, or to, any of its owned or leased real Properties; or
(iii) summons, citation, notice, directive, letter, or other
written communication from any Governmental Authority concerning any
intentional or unintentional action or omission by the Company or
any Subsidiary in connection with its ownership or leasing of any
real Property resulting in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, dumping, or otherwise
disposing of any hazardous substance into the environment resulting
in any material violation of any Environmental Protection Law;
which, in any such case, relates to or makes reference to an event or
condition which could reasonably be expected to have a Material Adverse
Effect.
2.13 DUE AUTHORIZATION; ENFORCEABILITY.
(A) SALE OF PURCHASED SECURITIES IS LEGAL AND AUTHORIZED. The
issuance, sale and delivery of the Notes and the Warrants by the Company,
the execution and delivery by each Obligor of the Financing Documents to
which it is a party and compliance by each Obligor with all of the
provisions of each Financing Document to which it is a party:
(i) is within the corporate powers of such Obligor; and
(ii) is legal and does not conflict with, result in any breach
of any of the
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provisions of, constitute a default under, or result in the creation
of any Lien upon any Property of any Obligor under the provisions
of:
(A) any agreement, charter instrument, bylaw or other
instrument to which such Obligor is a party or by which such
Obligor is or may be bound;
(B) any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to such
Obligor or any of its Property; or
(C) any statute or other rule or regulation of any
Governmental Authority applicable to such Obligor or any of
its Property.
(B) OBLIGATIONS ARE ENFORCEABLE. Each Obligor has duly authorized by
all necessary action on its part each of the Financing Documents to which
it is a party. Each of the Financing Documents has been executed and
delivered by one or more duly authorized officers of each Obligor which is
a party thereto and constitutes a legal, valid and binding obligation of
such Obligor, enforceable in accordance with its terms, except that:
(i) the enforceability thereof may be limited by applicable
bankruptcy, reorganization, arrangement, insolvency, moratorium, or
other similar laws affecting the enforceability of creditors' rights
generally and subject to the availability of equitable remedies; and
(ii) rights to indemnity and contribution contained therein
may be limited by applicable law or public policy.
2.14 GOVERNMENTAL CONSENT TO SALE OF PURCHASED SECURITIES.
(a) Neither the nature of any Obligor nor of any of its businesses
or Properties, nor any relationship between any Obligor and any other
Person, nor any circumstance in connection with the offer, issuance, sale
or delivery of the Notes or the Warrants and the execution and delivery of
any Financing Document, nor the performance of the obligations of any
Obligor thereunder, is such as to require a consent, approval or
authorization of, or pre-filing, registration or qualification with, any
Governmental Authority on the part of such Obligor as a condition thereto,
except for:
(i) to the extent required, registration under the Securities
Act of resales of the Common Stock issuable upon exercise of the
Warrants as required pursuant to the provisions of the Warrant
Agreement; and
(ii) such consents, approvals, authorizations, pre-filings,
registrations and qualifications described on PART 2.14(A) OF ANNEX
3, all of which have been obtained on or prior to such Closing Date.
(b) Each of the issuance and sale of the Notes and the Warrants, the
incurrence of the Debt and the other obligations represented thereby, the
execution and delivery of the Financing Documents by each Obligor which is
a party thereto and the performance of the obligations of each Obligor
hereunder and thereunder, by such Obligor:
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(i) is not subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of
1935, as amended, the Transportation Acts of the United States of
America (49 U.S.C.), as amended, or the Federal Power Act, as
amended; and
(ii) does not violate any provision of any statute or other
rule or regulation of any Governmental Authority applicable to such
Obligor.
2.15 HART-SCOTT-RODINO COMPLIANCE.
The Warrants are "convertible voting securities" as such term is defined
in 16 C.F.R. ss.801.1(f)(2) which do not entitle the Purchasers to presently
vote in respect of the election of directors of the Company. Assuming that,
notwithstanding the fact that the Warrants are not currently exercisable on
either Closing Date, the Warrants were all exercised on such Closing Date, the
Purchasers as a group would not hold (as such term is defined in 16 C.F.R.
ss.801.1(c)) on the Second Closing Date either:
(a) fifteen percent (15%) or more of the total number of shares of
the Common Stock of the Company; or
(b) Common Stock having a Fair Market Value of Fifteen Million
Dollars ($15,000,000) or more.
2.16 NO DEFAULTS.
No event has occurred and no condition exists that, upon the execution and
delivery of the Financing Documents and the issuance and sale of the Purchased
Securities, would constitute a Default or an Event of Default.
2.17 PRIVATE OFFERING OF PURCHASED SECURITIES.
(A) NUMBER OF OFFEREES. Neither the Company, BancAmerica Robertson
Stephens (the only agent, broker or dealer retained by the Company in
connection with the sale of the Purchased Securities) nor any other Person
acting on behalf of the Company has offered any of the Purchased
Securities or any Security of the Company similar to either the Notes or
the Warrants for sale to, or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any
prospective purchaser, other than the number of institutional "accredited
investors" (as defined in Regulation D under the Securities Act)
(including you) set forth on PART 0(A) OF ANNEX 3, each of whom was
offered all or a portion of the Purchased Securities at private sale for
investment.
(B) CONDUCT OF SALE. Neither the Company, BancAmerica Robertson
Stephens nor any Person acting on behalf of the Company in connection with
the transactions contemplated by the Financing Documents (including,
without limitation, the offering and sale of the Purchased Securities) has
engaged in any conduct or entered into any agreements or understandings so
as to subject the transactions contemplated by the Financing Documents to
the registration provisions of section 5 of the Securities Act, the
provisions of the Trust Indenture Act of 1939, as amended, or to the
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registration, qualification or other similar provisions of any securities
or "blue sky" law of any applicable state.
2.18 USE OF PROCEEDS.
(A) USE OF PROCEEDS. The Company shall apply the proceeds from the
sale of the Purchased Securities as specified on PART 0 OF ANNEX 3.
(B) MARGIN REGULATIONS. None of the transactions contemplated in any
of the Financing Documents (including, without limitation, the use of the
proceeds from the sale of the Purchased Securities) violates, will violate
or will result in a violation of section 7 of the Exchange Act, or any
regulation issued pursuant thereto, including, without limitation,
Regulation G, Regulation T or Regulation X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., Chapter II.
(C) ABSENCE OF FOREIGN OR ENEMY STATUS. Neither the sale of the
Purchased Securities nor the use of proceeds from the sale thereof will
result in a violation of any of the foreign assets control regulations of
the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended), or any ruling issued thereunder or any enabling legislation or
Presidential Executive Order in connection therewith.
2.19 CAPITALIZATION.
(A) CAPITALIZATION. PART 0(A) OF ANNEX 3 correctly sets forth, after
giving effect to the issuance of the Purchased Securities and the
consummation of all other transactions contemplated by this Agreement on
each Closing Date:
(i) the authorized and outstanding shares of the Capital
Stock, Rights and other Securities of the Company (specifying the
type, class or series of all such Capital Stock and other Securities
and whether such Capital Stock and other Securities are voting or
non-voting) and, in the case of any Rights, the number of shares of
Common Stock into which such Rights are currently exercisable or
convertible; and
(ii) all obligations (contingent or otherwise) of the Company
to repurchase or otherwise acquire or retire any shares of Capital
Stock or Rights of the Company.
All such outstanding shares of Capital Stock have been duly authorized and
validly issued and are fully paid, non-assessable and free and clear of
any Lien created by the Company. There are no preemptive rights,
subscription rights, or other contractual rights similar in nature to
preemptive rights with respect to any Capital Stock of the Company.
(B) RESERVATION OF COMMON STOCK. The Company has authorized and
unissued, and has reserved for issuance, a sufficient number of shares of
Common Stock to permit, after giving effect to the transactions
contemplated by the Financing Documents, the exercise of all of the
Warrants and all other Rights (including, without limitation, the
Outstanding Warrant) exercisable or convertible into Common Stock. Each
share of Common Stock reserved for issuance upon exercise of the Warrants,
when issued, will be fully paid and nonassessable, free and clear of any
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Lien and not subject to any preemptive rights.
(C) STOCKHOLDERS AGREEMENTS. Other than the Warrant Agreement and as
specified on PART 0(C) OF ANNEX 3, there is no other agreement or
understanding known to the Company between or among any holders of the
Capital Stock or Rights of the Company regarding the Capital Stock of the
Company. The Company has provided you with true,accurate and complete
copies of all agreements referred to in PART 0(C) OF ANNEX 3.
2.20 SOLVENCY.
(A) ASSETS GREATER THAN LIABILITIES. The fair value of the business
and assets of the Company, of each Subsidiary Guarantor and of the Company
and the Subsidiaries, on a consolidated basis exceeds, as of and after
giving effect to the transactions consummated on each Closing Date, the
liabilities of such Person or group of Persons (including, without
limitation, the Notes, the Subsidiary Guarantees and all other Debt of
such Person or group of Persons) as of such time.
(B) MEETING LIABILITIES. After giving effect to the transactions
contemplated by the Financing Documents, the Company, each Subsidiary
Guarantor and the Company and the Subsidiaries, on a consolidated basis:
(i) will not be engaged in any business or transaction, or
about to engage in any business or transaction, for which such
Person or group of Persons has unreasonably small assets or capital
(within the meaning of the Uniform Fraudulent Transfer Act, the
Uniform Fraudulent Conveyance Act and section 548 of the Federal
Bankruptcy Code); and
(ii) will be able to pay its debts as they mature.
(C) INTENT. The Obligors are entering into the Financing Documents
with no intent to hinder, delay, or defraud either current creditors or
future creditors of any Obligor.
2.21 FULL DISCLOSURE.
Neither the statements made in this Agreement, the Offering Memorandum,
the financial statements referred to in Section 0, nor any other written
statement furnished by or on behalf of the Company to you in connection with the
negotiation or the closing of the sale of the Purchased Securities, taken as a
whole, contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein and herein, taken as a whole,
not misleading.
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3. REPRESENTATIONS OF THE PURCHASER
3.1 PURCHASE FOR INVESTMENT.
You represent to the Company that you are a financially sophisticated
institutional investor that is experienced in financial matters and you are
purchasing the Purchased Securities listed on Annex 1 below your name for your
own account, or for the account of one or more separate accounts maintained by
you, for investment and with no present intention of, or view to, distributing
such Purchased Securities or any part thereof except in compliance with the
Securities Act, but without prejudice to your right at all times to:
(a) sell or otherwise dispose of all or any part of the Purchased
Securities under a registration statement filed under the Securities Act,
or in a transaction exempt from the registration requirements of such Act,
including (in the case of the Notes) a transaction pursuant to Rule 144A;
and
(b) have control over the disposition of all of your assets to the
fullest extent required by any applicable law.
It is understood that, in making the representations set out in Section
0(a) and Section 0, the Company is relying, to the extent applicable, upon your
representation as aforesaid.
3.2 ERISA.
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "SOURCE") to be used by you to pay
the purchase price of the Purchased Securities:
(A) GENERAL ACCOUNT -- you are an insurance company and the Source
is an "insurance company general account," as such term is defined in DOL
Prohibited Transaction Class Exemption 95-60 (issued July 12, 1995) ("PTCE
95-60"), and there is no employee benefit plan, treating as a single plan
all plans maintained by the same employer (and affiliates thereof as
defined in section V(a)(1) of PTCE 95-60) or by the same employee
organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such
plan, exceeds 10% of the total reserves and liabilities of such general
account as determined under PTCE 95-60 (exclusive of separate account
liabilities) plus surplus, as set forth in the National Association of
Insurance Commissioners Annual Statement filed with your state of
domicile; or
(B) SEPARATE ACCOUNT -- the Source is a separate account:
(I) 10% POOLED SEPARATE ACCOUNT -- that is an insurance
company pooled separate account, within the meaning of DOL
Prohibited Transaction Class Exemption 90-1 (issued January 29,
1990) ("PTCE 90-1") and with respect to which the requirements of
PTCE 90-1 are otherwise met, and to the extent that there are any
plans whose assets in such separate account exceed ten percent (10%)
of the assets of such separate account, you have disclosed the names
of such plans to the Company in writing; or
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(II) IDENTIFIED PLAN ASSETS -- that is comprised of employee
benefit plans identified by you in writing and with respect to which
the Company hereby warrants and represents that, as of each Closing
Date, neither the Company nor any ERISA Affiliate is a "party in
interest" (as defined in section 3 of ERISA) or a "disqualified
person" (as defined in section 4975 of the Code) with respect to any
plan so identified; or
(III) GUARANTIED SEPARATE ACCOUNT -- that is maintained solely
in connection with fixed contractual obligations of an insurance
company, under which any amounts payable, or credited, to any
employee benefit plan having an interest in such account and to any
participant or beneficiary of such plan (including an annuitant) are
not affected in any manner by the investment performance of the
separate account (as provided by 29 CFR ss.2510.3-101(h)(1)(iii));
or
(C) QPAM -- the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed twenty percent (20%) of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling or
controlled by the QPAM (applying the definition of "control" in section
V(e) of the QPAM Exemption) owns a five percent (5%) or more interest in
the Company and:
(i) the identity of such QPAM; and
(ii) the names of all employee benefit plans whose assets are
included in such investment fund
have been disclosed to the Company in writing; or
(D) EXEMPT PLANS -- the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of ERISA
and IRC ss.4975.
As used in this Section 0, the terms "EMPLOYEE BENEFIT PLAN" and "SEPARATE
ACCOUNT" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
It is understood that, in making the representations set out in Section
0(a), Section 0 and Section 0, the Company is relying, to the extent applicable,
upon your representation as aforesaid.
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4. FIRST CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation, the
obligation to purchase and pay for the First Closing Purchased Securities are
subject to the following conditions precedent, and the failure by the Company to
satisfy all such conditions shall relieve you, at your election, of all such
obligations.
4.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Hughes & Luce, L.L.P., special counsel for the
Company; and
(b) Hebb & Gitlin, your special counsel;
closing opinions, each dated as of the First Closing Date, and substantially in
the respective forms set forth in Exhibit 0 and Exhibit 0. This Section 0 shall
constitute direction by the Company to such counsel named in Section 0 to
deliver such closing opinion to you.
4.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE.
(A) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 0 shall be true on the First Closing
Date with the same effect as though made on and as of that date.
(B) COMPLIANCE WITH THIS AGREEMENT AND FINANCING DOCUMENTS. The
Company shall have performed and complied with all agreements and
conditions contained herein and in the other Financing Documents that are
required to be performed or complied with by the Company on or prior to
the First Closing Date, and such performance and compliance shall remain
in effect on the First Closing Date.
4.3 OFFICERS' CERTIFICATES.
You shall have received:
(A) OFFICERS' CERTIFICATE -- a certificate dated the First Closing
Date and signed (on behalf of the Company) by two (2) Senior Officers of
the Company, substantially in the form of Exhibit 0; and
(B) SECRETARY'S CERTIFICATE -- COMPANY -- a certificate dated the
First Closing Date and signed on behalf of the Company by the Secretary or
an Assistant Secretary of the Company, substantially in the form of
Exhibit 0.
(C) SECRETARY'S CERTIFICATE -- SUBSIDIARY GUARANTORS -- a
certificate dated the First Closing Date and signed on behalf of each
Subsidiary Guarantor by the Secretary or an Assistant Secretary of each
such Subsidiary Guarantor, substantially in the form of Exhibit 0.
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4.4 ORGANIC DOCUMENTS.
You shall have received:
(A) COMPANY GOOD STANDING CERTIFICATE -- a long-form certificate of
good standing or equivalent certificate or certificates of the Secretary
of State of the State of Texas, certifying the due incorporation, good
standing and satisfactory tax status of the Company and listing all
charter documents with respect to the Company on file with the Secretary
of State of the State of Texas;
(B) SUBSIDIARY GUARANTOR GOOD STANDING CERTIFICATES -a long-form
certificate of good standing or equivalent certificate or certificates of
the Secretary of State of the State of incorporation of each Subsidiary
Guarantor, certifying the due incorporation, good standing and
satisfactory tax status of such Subsidiary Guarantor and listing all
charter documents with respect to such Subsidiary Guarantor on file with
the Secretary of State of the State of incorporation of such Subsidiary
Guarantor;
(C) COMPANY CHARTER -- copies of all charter documents on file with
the Secretary of State of the State of Texas with respect to the Company,
certified by the Secretary of State of the State of Texas to be true,
correct and complete; and
(D) SUBSIDIARY GUARANTOR CHARTERS -- copies of all charter documents
on file with the Secretary of State of the State of incorporation of each
Subsidiary Guarantor with respect to such Subsidiary Guarantor, certified
by such Secretary of State to be true, correct and complete.
4.5 LEGALITY.
The Notes and the Warrants shall on the First Closing Date qualify as a
legal investment for you under applicable insurance law (without regard to any
"basket" or "leeway" provisions), and the acquisition thereof shall not subject
you to any penalty or other onerous condition pursuant to any such law or
regulation, and you shall have received such evidence as you may reasonably
request to establish compliance with this condition.
4.6 FINANCING DOCUMENTS.
(A) NOTE AGREEMENT; NOTES. The Company shall have executed and
delivered to each Purchaser the Note Agreement. The Company shall have
issued to each such Purchaser Notes in the respective principal amounts
set forth below such Purchaser's name on Annex 1.
(B) WARRANT AGREEMENT; WARRANTS. The Company shall have executed and
delivered to each Purchaser the Warrant Agreement. The Company shall have
issued to each such Purchaser Warrants in the respective amounts set forth
below such Purchaser's name on Annex 1.
(C) SUBSIDIARY GUARANTEE. Each of the Subsidiary Guarantors shall
have executed and delivered to you an Unconditional Guarantee (as may be
amended, restated or otherwise modified from time to time in accordance
with the terms thereof, a "SUBSIDIARY GUARANTEE") in the form of Exhibit
0.
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4.7 RESERVATION OF SHARES. The shares of Common Stock issuable upon
exercise of each Warrant (whether issuable at the First Closing or the Second
Closing) shall have been duly authorized and reserved for issuance.
4.8 CERTAIN CONSENTS.
(A) SENIOR AGENT. The Senior Agent shall have executed and delivered
to you a consent, in form and substance acceptable to you, to the
transactions contemplated by the Financing Documents, permitting the
Company to incur and have outstanding the indebtedness and all other
obligations in respect of the Note Agreement, the Warrant Agreement, the
Notes and the Warrants, the issuance and sale of the Notes and the
Warrants and the issuance of Common Stock to the holders of the Warrants
upon exercise of the Warrants, permitting each Subsidiary Guarantor to
enter into the Subsidiary Guarantee, and waiving any default or event of
default which might have occurred by virtue of the execution and delivery
of this Agreement and the other Financing Documents.
(B) OTHER EQUITY HOLDERS. No consent of the holder of the
Outstanding Warrant or of any other class of Capital Stock or Rights shall
be required to enter into the transactions contemplated by the Financing
Documents or having any anti-dilution, preemptive right, redemption right
or similar right in respect of any of the transactions contemplated by the
Financing Documents.
4.9 PRIVATE PLACEMENT NUMBERS.
The Company shall have obtained or caused to be obtained private placement
numbers for the Notes and the Warrants from the CUSIP Service Bureau of Standard
& Poor's, a division of McGraw-Hill, Inc. and you shall have been informed of
such private placement numbers. The Company shall have informed the Purchasers
in writing of the CUSIP number for the Common Stock.
4.10 FEES AND EXPENSES.
All fees and disbursements required to be paid pursuant to Section 0 shall
have been paid in full.
4.11 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to execute and deliver a
Securities Purchase Agreement, the Note Agreement, the Warrant Agreement or any
other Financing Document to be executed and delivered by it, or to accept
delivery of or make payment for the First Closing Purchased Securities.
4.12 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
First Closing Purchased Securities and all documents and papers relating thereto
shall be reasonably satisfactory to you and your special counsel. You and your
special counsel shall have received copies of such documents and papers as you
or they may reasonably request in connection therewith or in connection with
your special counsel's closing opinion, all in form and substance reasonably
satisfactory to you and your special counsel.
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5. SECOND CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation, the
obligation to purchase and pay for the Second Closing Purchased Securities are
subject to the following conditions precedent, and the failure by the Company to
satisfy all such conditions shall relieve you, at your election, of all such
obligations.
5.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Hughes & Luce, L.L.P., special counsel for the Company; and
(b) Hebb & Gitlin, your special counsel;
closing opinions, each dated as of the Second Closing Date, and substantially in
the respective forms set forth in Exhibit 0 and Exhibit 0. This Section 0 shall
constitute direction by the Company to such counsel named in Section 0 to
deliver such closing opinion to you.
5.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE.
(A) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 0 shall be true in all material
respects on the Second Closing Date with the same effect as though made on
and as of that date.
(B) COMPLIANCE WITH THIS AGREEMENT AND FINANCING DOCUMENTS. The
Company shall have performed and complied with all agreements and
conditions contained herein and in the other Financing Documents that are
required to be performed or complied with by the Company on or prior to
the Second Closing Date, and such performance and compliance shall remain
in effect on the Second Closing Date.
(C) MATERIAL ADVERSE CHANGE. No event or circumstance (either
individually or in the aggregate with all other events and circumstances)
shall have occurred since the First Closing Date which shall have had a
material adverse effect upon:
(i) the business, operations, profits, financial condition or
Properties of the Company and the Restricted Subsidiaries, taken as
a whole;
(ii) the ability of the Company to perform its obligations
under any Financing Document; or
(iii) the validity or enforceability of any of the Financing
Documents.
5.3 OFFICERS' CERTIFICATES.
You shall have received:
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(A) OFFICERS' CERTIFICATE -- a certificate dated the Second Closing
Date and signed (on behalf of the Company) by two (2) Senior Officers of
the Company, substantially in the form of Exhibit 0; and
(B) SECRETARY'S CERTIFICATE -- a bring-down certificate dated the
Second Closing Date and signed on behalf of the Company by the Secretary
or an Assistant Secretary of the Company, substantially in the form of
Exhibit 0.
5.4 ORGANIC DOCUMENTS.
You shall have received:
(A) COMPANY GOOD STANDING CERTIFICATE -- a long-form certificate of
good standing or equivalent certificate or certificates of the Secretary
of State of the State of Texas, certifying the due incorporation, good
standing and satisfactory tax status of the Company and listing all
charter documents with respect to the Company on file with the Secretary
of State of the State of Texas;
(B) COMPANY CHARTER -- copies of all charter documents on file with
the Secretary of State of the State of Texas with respect to the Company
and not delivered at the First Closing, certified by the Secretary of
State of the State of Texas to be true, correct and complete.
5.5 LEGALITY.
The Notes and the Warrants shall on the Second Closing Date qualify as a
legal investment for you under applicable insurance law (without regard to any
"basket" or "leeway" provisions), and the acquisition thereof shall not subject
you to any penalty or other onerous condition pursuant to any such law or
regulation, and you shall have received such evidence as you may reasonably
request to establish compliance with this condition.
5.6 FINANCING DOCUMENTS.
(A) AGREEMENTS IN FULL FORCE AND EFFECT. Each of the Note Agreement,
the Warrant Agreement, each Subsidiary Guarantee and each of the First
Closing Purchased Securities shall be and remain in full force and effect.
(B) CONFIRMATION OF SUBSIDIARY GUARANTEE. Each of the Subsidiary
Guarantors shall have acknowledged in writing that the Subsidiary
Guarantee executed by such Subsidiary Guarantor extends to the obligations
of the Company evidenced by the Notes issued at the Second Closing, and
that such Notes are "Guaranteed Obligations" as defined in such Subsidiary
Guarantee.
5.7 FEES AND EXPENSES.
All fees and disbursements required to be paid pursuant to Section 0 shall
have been paid in full.
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5.8 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to accept delivery of or
make payment for the Second Closing Purchased Securities.
5.9 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Second Closing Purchased Securities and all documents and papers relating
thereto shall be reasonably satisfactory to you and your special counsel. You
and your special counsel shall have received copies of such documents and papers
as you or they may reasonably request in connection therewith or in connection
with your special counsel's closing opinion, all in form and substance
reasonably satisfactory to you and your special counsel.
6. INTERPRETATION OF THIS AGREEMENT
6.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
AGREEMENT, THIS -- means this Securities Purchase Agreement, as it may be
amended, restated or otherwise modified from time to time.
CLOSING -- means and includes the First Closing Date and the Second
Closing Date.
CLOSING DATE -- means and includes the First Closing Date and the Second
Closing Date.
COMPANY -- has the meaning specified in the introductory sentence.
ENVIRONMENTAL PROTECTION LAW -- means any law, statute or regulation
enacted by any Governmental Authority in connection with or relating to the
protection or regulation of the environment, including, without limitation,
those laws, statutes and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing or
transporting of Hazardous Materials and any applicable orders, decrees or
judgments issued by any court of competent jurisdiction in connection with any
of the foregoing.
FINANCING DOCUMENTS -- means and includes this Agreement, the identical
Securities Purchase Agreements executed by the Other Purchasers, the Note
Agreement, the Notes, the Warrant Agreement, the Warrants, the Warrant
Certificates, each Subsidiary Guarantee and the other agreements, certificates
and instruments to be executed pursuant to the terms of each of the foregoing,
as each may be amended, restated or otherwise modified from time to time.
FIRST CLOSING -- Section 0.
FIRST CLOSING DATE -- Section 0.
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FIRST CLOSING PURCHASED SECURITIES -- means the Notes and the Warrants to
be purchased by the Purchasers at the First Closing, as set forth for each
Purchaser on Annex 1 hereto under the heading "First Closing."
GOVERNMENTAL AUTHORITY -- means:
(a) the government of:
(i) the United States of America and any state or other
political subdivision thereof; or
(ii) any other jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or that asserts
any jurisdiction over the conduct of the affairs of, or the Property
of, the Company or any such Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
HAZARDOUS MATERIAL -- means all or any of the following:
(a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Environmental Protection Laws as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances" or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, "TLCP
toxicity" or "EP toxicity";
(b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters
and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources;
(c) any flammable substances or explosives or any radioactive
materials;
(d) asbestos or urea formaldehyde in any form; and
(e) dielectric fluid containing levels of polychlorinated biphenyls
in excess of fifty parts per million.
NOTE AGREEMENT -- Section 0.
NOTES -- Section 0.
OBLIGORS -- means and includes the Company and each Subsidiary Guarantor.
OTHER PURCHASERS -- Section 0.
OUTSTANDING WARRANT -- means that certain warrant to purchase five
thousand (5,000) shares of the Common Stock issued to Henri Morris & Associates.
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PROJECTIONS -- Section 0.
PTCE 95-60 -- Section 0.
PURCHASED SECURITIES -- means the Notes and the Warrants to be purchased
by the Purchasers pursuant to Section 0 of this Agreement, and shall include the
First Closing Purchased Securities and the Second Closing Purchased Securities.
PURCHASERS -- means you and the Other Purchasers.
QPAM EXEMPTION -- means Prohibited Transaction Class Exemption 84-14
issued by the DOL.
RULE 144A -- means Rule 144A promulgated under the Securities Act, 17
C.F.R. ss.230.144A, as such rule may be amended from time to time.
SECOND CLOSING -- Section 0.
SECOND CLOSING DATE -- Section 0.
SECOND CLOSING PURCHASED SECURITIES -- means the Notes and the Warrants to
be purchased by the Purchasers at the Second Closing, as set forth for each
Purchaser on Annex 1 hereto under the heading "Second Closing."
SECURITIES PURCHASE AGREEMENT -- Section 0.
SOURCE -- Section 0.
SUBSIDIARY GUARANTEE -- Section 0.
SUBSIDIARY GUARANTOR -- means each Subsidiary scheduled or required to be
scheduled on PART 0 OF ANNEX 3.
WARRANT AGREEMENT -- Section 0.
WARRANT CERTIFICATES -- Section 0.
WARRANTS -- Section 0.
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6.2 OTHER DEFINITIONS.
The following terms shall have the respective meanings ascribed to such
terms in the Note Agreement:
Affiliate Lien
Applicable Interest Law Material Adverse Effect
Bank of America Maximum Legal Rate of Interest
Business Day Multiemployer Plan
Capital Stock Offering Memorandum
Common Stock Person
Debt Plan
Default Property
DOL Restricted Investment
ERISA Rights
ERISA Affiliate Securities Act
Event of Default Security
Exchange Act Senior Agent
Fair Market Value Senior Credit Agreement
Foreign Pension Plan Senior Officer
GAAP Subsidiary
Investments Voting Stock
IRC
6.3 SECTION HEADINGS AND TABLE OF CONTENTS AND
CONSTRUCTION.
(A) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof
and shall not affect the construction hereof. The words "herein,"
"hereof," "hereunder" and "hereto" refer to this Agreement as a whole and
not to any particular Section or other subdivision. References to Sections
are, unless otherwise specified, references to Sections of this Agreement.
References to Annexes and Exhibits are, unless otherwise specified,
references to Annexes and Exhibits attached to this Agreement.
(B) CONSTRUCTION. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
6.4 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
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7. MISCELLANEOUS
7.1 COMMUNICATIONS.
(A) METHOD; ADDRESS. All communications hereunder shall be in
writing and shall be delivered either by nationwide overnight courier or
by facsimile transmission (confirmed by delivery by nationwide overnight
courier sent on the day of the sending of such facsimile transmission).
Communications to the Company shall be addressed as set forth on Annex 2,
or at such other address of which the Company shall have notified each
Purchaser. Communications to the Purchasers shall be addressed as set
forth on Annex .
(B) WHEN GIVEN. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
(C) SERVICE OF PROCESS. Notwithstanding the foregoing provisions of
this Section 0, service of process in any suit, action or proceeding
arising out of or relating to this Agreement or any document, agreement or
transaction contemplated hereby shall be delivered in the manner provided
in Section 0(c).
7.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Purchased
Securities (except the Purchased Securities themselves), and financial
statements, certificates and other information previously or hereafter furnished
to any Purchaser, may be reproduced by the Company or any Purchaser by any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and each Purchaser may destroy any original
document so reproduced. Any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not
the original is in existence and whether or not such reproduction was made by
the Company or such Purchaser in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 0 shall prohibit the
Company or any Purchaser from contesting the accuracy or validity of any such
reproduction.
7.3 SURVIVAL.
All warranties, representations, certifications and covenants made by the
Company herein or in any certificate or other instrument delivered by the
Company on behalf of the Company hereunder shall be considered to have been
relied upon by you and shall survive the delivery to you of the Purchased
Securities regardless of any investigation made by you or on your behalf. All
statements in any certificate or other instrument delivered by or on behalf of
the Company pursuant to the terms hereof shall constitute warranties and
representations by the Company hereunder.
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7.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of the Purchasers and their successors and
assigns, and shall be enforceable by any such Purchaser, successor or assignee
whether or not an express assignment of rights hereunder shall have been made by
you or your successor or assign. Anything contained in this Section 0
notwithstanding, the Company may not assign any of its respective rights, duties
or obligations hereunder or under any of the other Financing Documents without
the prior written consent of all Purchasers.
7.5 AMENDMENT AND WAIVER.
This Agreement may be amended, and the observance of any term hereof may
be waived, with (and only with) the written consent of the Company and you.
7.6 EXPENSES.
Whether or not the Notes and the Warrants are sold, the Company shall pay,
at the Closing (if the Notes and the Warrants are sold, and otherwise upon
receipt of any statement or invoice therefor), all reasonable out-of-pocket
fees, expenses and costs attributable to legal and accounting services incurred
by you relating hereto, including, without limitation, the statement
presented at the Closing by your special counsel for reasonable fees and
disbursements incurred in connection herewith, each additional statement for
reasonable fees and disbursements (promptly upon receipt thereof) of your
special counsel rendered after the Closing in connection with the issuance of
the Notes and the Warrants, all fees and disbursements of Ernst & Young related
hereto and all expenses incurred by you or on your behalf or the Company's
behalf in complying with each of the conditions to the Closing set forth in
Section 0.
7.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(A) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(B) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW
YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS
SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM
26
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JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY
TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT
IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN
ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION
CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(D) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN
ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE
COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH OTHER MANNER, AS MAY BE
PERMITTED BY APPLICABLE LAW.
27
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7.8 INDEMNIFICATION OF EACH PURCHASER.
From and at all times after the date of this Agreement, and in addition to
all of your other rights and remedies against the Company, the Company agrees to
indemnify and hold harmless you and each of your directors, officers, employees,
agents, investment advisors and affiliates against any and all claims (whether
valid or not), losses, damages, liabilities, costs and expenses of any kind or
nature whatsoever (including, without limitation, reasonable attorneys' fees,
costs and expenses), incurred by or asserted against you or any such director,
officer, employee, agent, investment advisor or affiliate, from and after the
date hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any suit, action or proceeding (including
any inquiry or investigation) by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or enforcement of this Agreement or the other Financing Documents or
any transactions contemplated herein or therein, or any of the transactions
contemplated hereunder, whether or not such you or any such director, officer,
employee, agent, investment advisor or affiliate is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation; PROVIDED,
HOWEVER, that no indemnified party shall have the right to be indemnified
hereunder for any liability resulting from the willful misconduct or gross
negligence of such indemnified party or breach by such indemnified party of its
own obligations under this Agreement. All of your foregoing losses, damages,
costs and expenses shall be payable as and when incurred upon the demand of the
indemnified party. The obligations of the Company and your rights under this
Section 0 shall survive the termination of this Agreement.
7.9 ENTIRE AGREEMENT.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
7.10 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
28
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If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
FRESH AMERICA CORP.
By:_____________________________
Name:
Title:
Accepted:
[SEPARATELY EXECUTED BY EACH
OF THE FOLLOWING PURCHASERS]
29
EXHIBIT 10.2
FRESH AMERICA CORP
NOTE AGREEMENT
DATED AS OF MAY 4, 1998
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2003
<PAGE>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
PAGE
1. PAYMENTS............................................................. 1
1.1 Interest Payment............................................... 1
1.2 Required Principal Payments.................................... 1
1.3 Optional Principal Payments.................................... 1
1.4 Special Principal Payments..................................... 3
1.5 Offer to Pay Upon Change in Control............................ 4
1.6 Delivery of Notes in Payment of Warrant Purchase
Price.......................................................... 6
1.7 Payments Among Noteholders..................................... 6
1.8 Notation of Notes on Payment................................... 6
1.9 No Other Payments of Principal; Acquisition of
Notes.......................................................... 7
1.10 Manner of Payments............................................. 8
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................ 8
2.1 Registration of Notes.......................................... 8
2.2 Exchange of Notes.............................................. 9
2.3 Replacement of Notes........................................... 9
2.4 Issuance Taxes................................................. 10
3. GENERAL COVENANTS.................................................... 10
3.1 Payment of Taxes and Claims.................................... 10
3.2 Maintenance of Properties; Corporate Existence;
etc............................................................ 10
3.3 Payment of Notes and Maintenance of Office..................... 11
3.4 Pension Plans.................................................. 11
3.5 Private Offering............................................... 12
4. NEGATIVE AND FINANCIAL COVENANTS..................................... 12
4.1 Mergers and Consolidations..................................... 12
4.2 Disposition of Assets, Restricted Subsidiary Stock............. 13
4.3 Liens.......................................................... 16
4.4 Net Worth...................................................... 20
4.5 Fixed Charge Coverage.......................................... 20
4.6 Total Debt..................................................... 20
4.7 Senior Debt.................................................... 20
4.8 Restricted Payments and Restricted Investments................. 21
4.9 Seniority to Future Subordinated Debt.......................... 22
4.10 Designation of Subsidiaries.................................... 22
4.11 Line of Business............................................... 23
4.12 Transactions with Affiliates................................... 23
4.13 Subsidiary Guarantees.......................................... 24
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5. REPORTING COVENANTS.................................................. 24
5.1 Financial and Business Information............................. 24
5.2 Officer's Certificates......................................... 27
5.3 Accountants' Certificates...................................... 28
5.4 Inspection..................................................... 28
6. EVENTS OF DEFAULT.................................................... 28
6.1 Events of Default.............................................. 28
6.2 Default Remedies............................................... 31
6.3 Annulment of Acceleration of Notes............................. 32
7. SUBORDINATION........................................................ 33
7.1 General........................................................ 33
7.2 Insolvency..................................................... 33
7.3 Proofs of Claim................................................ 33
7.4 Acceleration of Senior Debt.................................... 34
7.5 Payment Default in Respect of Senior Debt...................... 34
7.6 Significant Nonpayment Default in Respect of
Senior Debt.................................................... 34
7.7 Standstill..................................................... 35
7.8 Turnover of Payments........................................... 36
7.9 Subordination Unaffected by Certain Events..................... 36
7.10 Waiver and Consent............................................. 37
7.11 Reinstatement of Subordination................................. 37
7.12 Obligations Not Impaired....................................... 37
7.13 Payment of Senior Debt; Subrogation............................ 38
7.14 Reliance of Holders of Senior Debt............................. 38
7.15 Identity of Holders of Senior Debt............................. 38
7.16 Amendments to Senior Credit Facility........................... 38
8. INTERPRETATION OF THIS AGREEMENT..................................... 39
8.1 Terms Defined.................................................. 39
8.2 Accounting Principles.......................................... 65
8.3 Directly or Indirectly......................................... 66
8.4 Section Headings and Table of Contents and
Construction................................................... 66
8.5 Governing Law.................................................. 66
8.6 General Interest Provisions.................................... 66
9. MISCELLANEOUS........................................................ 68
9.1 Communications................................................. 68
9.2 Reproduction of Documents...................................... 68
9.3 Survival; Entire Agreement..................................... 69
9.4 Successors and Assigns......................................... 69
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9.5 Amendment and Waiver........................................... 69
9.6 Expenses....................................................... 71
9.7 Waiver of Jury Trial; Consent to Jurisdiction;
Etc............................................................ 71
9.8 Execution in Counterpart....................................... 72
Annex 1 -- Addresses of Purchasers; Payment Information
Annex 2 -- Address of Company
Annex 3 -- Senior Credit Agreement Definitions
Attachment A -- Form of Note
iii
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NOTE AGREEMENT
NOTE AGREEMENT, dated as of May 4, 1998, among FRESH AMERICA CORP., a
Texas corporation (together with its successors and assigns, the "COMPANY"), and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY and SIGNATURE 1A (CAYMAN), LTD. (together with their respective
successors and assigns, the "PURCHASERS").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the Purchasers
have agreed to purchase from the Company, and the Company has agreed to sell to
the Purchasers, Twenty Million Dollars ($20,000,000) in aggregate principal
amount of the Notes; and
WHEREAS, the Company and the Purchasers wish to enter into
this Agreement to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties to this Agreement hereby agree as follows:
1. PAYMENTS
1.1 INTEREST PAYMENT.
Interest on the Notes shall be computed and paid in the manner and on the
dates provided in the Notes.
1.2 REQUIRED PRINCIPAL PAYMENTS.
The Company shall pay, and there shall become due and payable, Six Million
Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars ($6,666,666) in
principal amount of the Notes on each of May 1, 2001 and May 1, 2002, in each
case, at one hundred percent (100%) of the principal amount paid, together with
interest accrued thereon to the date of payment. The entire principal of the
Notes remaining outstanding on May 1, 2003, together with interest accrued
thereon, shall become due and payable on such date. The payments required to be
made on May 1, 2001 and May 1, 2002, and the payment required to be made at
maturity on May 1, 2003, are each hereinafter referred to as a "REQUIRED
PRINCIPAL PAYMENT."
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1.3 OPTIONAL PRINCIPAL PAYMENTS.
(A) OPTIONAL PRINCIPAL PAYMENTS WITH PREPAYMENT COMPENSATION AMOUNT.
The Company may pay the principal amount of the Notes in whole or in part,
on any date in a minimum aggregate amount of Five Hundred Thousand Dollars
($500,000), or in any higher integral multiples of One Hundred Thousand
Dollars ($100,000) (or, if the aggregate outstanding principal amount of
the Notes is less than Five Hundred Thousand Dollars ($500,000) at such
time, then such principal amount), together with:
(i) an amount equal to the Prepayment Compensation Amount due
at such time in respect of the principal amount of the Notes being
so paid; and
(ii) interest on such principal amount then being paid accrued
to the payment date.
(B) NOTICE OF OPTIONAL PAYMENT. The Company will give notice of any
optional payment of the Notes pursuant to this Section 0 to each holder of
Notes not less than thirty (30) days nor more than sixty (60) days before
the specified payment date, stating:
(i) the specified payment date;
(ii) that such payment is to be made pursuant to
this Section 0;
(iii) the principal amount of each Note to be
paid on such date;
(iv) the interest to be paid on each such Note, accrued to the
specified payment date;
(v) the amounts and the due dates of the then remaining
Required Principal Payments determined after giving effect to such
payment; and
(vi) if such payment is made on or prior to May 1, 2001, the
calculation (with details) of an estimated Standard Prepayment
Compensation Amount, if any (calculated as if the date of such
notice was the date of payment), due in connection with such
payment; and, if such payment is made after May 1, 2001, the
Modified Prepayment Compensation Amount in connection with such
payment.
Notice of payment having been so given, the aggregate principal amount of
the Notes to be paid stated in such notice, together with the Prepayment
Compensation Amount determined as of the specified payment date, if any,
and interest thereon accrued to the specified payment date, shall become
due and payable on the specified payment date. If such payment is due on
or prior to May 1, 2001, then, two (2) Business Days prior to the making
of such payment, the Company shall deliver to each holder of Notes by
facsimile transmission (confirmed by nationwide overnight courier) a
certificate of a Senior Financial Officer specifying the details of the
calculation of the
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Standard Prepayment Compensation Amount as of the specified payment date,
and including a copy of the source of interest rate information used in
the calculation thereof.
(C) EFFECT OF PARTIAL PAYMENTS ON REQUIRED Payments. Each partial
payment of the principal of the Notes made pursuant to this Section 0
shall be applied against and reduce the then-remaining Required Principal
Payments in the inverse order of the due dates of such payments.
1.4 SPECIAL PRINCIPAL PAYMENTS.
(A) PRINCIPAL PAYMENTS WITH SPECIAL PREPAYMENT COMPENSATION AMOUNT.
On any Special Prepayment Date, if any, but in any event on or before May
1, 1999, the Company may pay all, but not less than all, the principal
amount of the Notes, together with:
(i) an amount equal to the Special Prepayment Compensation
Amount due at such time in respect of the entire principal amount of
the Notes; and
(ii) interest on the principal amount of the Notes accrued to
the Special Prepayment Date.
(B) NOTICE OF SPECIAL PREPAYMENT. The Company will give notice of
any optional payment of the Notes pursuant to this Section 0 to each
holder of Notes not less than thirty (30) days nor more than sixty (60)
days before the scheduled Special Prepayment Date, stating:
(i) the scheduled Special Prepayment Date;
(ii) that such payment is to be made pursuant to
this Section 0;
(iii) the principal amount of each Note to be
paid on such Special Prepayment Date;
(iv) the interest to be paid on each such Note, accrued to the
Special Prepayment Date;
(v) the calculation (with details) of an estimated Special
Prepayment Compensation Amount, if any (calculated as if the date of
such notice was the date of payment), due in connection with such
payment.
Notice of payment having been so given, the aggregate principal amount of
the Notes to be paid stated in such notice, together with the Special
Prepayment Compensation Amount, if any, determined as of the Special
Prepayment Date, and interest thereon accrued to the Special Prepayment
Date, shall become due and payable on such date; PROVIDED, HOWEVER, that
the Company may not consummate such prepayment if such Special Prepayment
Event does not occur. Two (2) Business Days prior to the making of such
payment, the Company shall deliver to each holder of Notes by facsimile
transmission (confirmed by nationwide overnight courier) a certificate of
a Senior Financial Officer specifying the details of the calculation of
the Special Prepayment Compensation Amount as of the Special Payment Date,
and including a copy of the source of
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interest rate information used in the calculation thereof.
(C) DEFERRAL OF PREPAYMENT. In the event that such Special
Prepayment Event does not occur on the Special Prepayment Date in respect
thereof, such purchase shall be deferred until and shall be made on the
date on which such Special Prepayment Event occurs or, if the Company
determines that efforts to effect such Special Prepayment Event have
ceased or have been abandoned, then the Company's right to prepayment the
Notes under this Section 0 shall terminate. The Company shall keep each
holder of Notes reasonably and timely informed of:
(i) any such deferral of the Special Prepayment
Date;
(ii) the date on which such Special Prepayment
Event is expected to occur; and
(iii) any determination by the Company that efforts to effect
such Special Prepayment Event have ceased or been abandoned.
1.5 OFFER TO PAY UPON CHANGE IN CONTROL.
(A) NOTICE OF CHANGE IN CONTROL NOTICE EVENT. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any Senior
Officer (including, without limitation, via the receipt of notice of a
Change in Control Notice Event from any holder of Notes), the Company
will, within five (5) Business Days after the occurrence of such event,
give notice of such Change in Control Notice Event to each holder of
Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
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(ii) be executed by a Senior Officer;
(iii) refer to this Section 0; and
(iv) specify, in reasonable detail, the nature and date of the
Change in Control Notice Event.
(B) OFFER IN RESPECT OF A CHANGE IN CONTROL. In the event of a
Change in Control, the Company will, within five (5) Business Days after
the occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the
Company, at least twenty (20) days prior to such Change in Control), give
notice of such Change in Control to each holder of Notes. Such notice
shall contain an irrevocable separate offer to each holder of Notes to pay
all, but not less than all, of the principal of, and interest and
Prepayment Compensation Amount, if any, on the Notes held by such holder
on a date (the "CHANGE IN CONTROL PAYMENT DATE") specified in such notice
that is not less than twenty (20) days and not more than thirty (30) days
after the date of such notice. Each such notice shall:
(i) be dated the date of the sending of such
notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the
nature and date of the Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note
outstanding;
(vi) specify the interest that would be due on each Note
offered to be paid, accrued to the Change in Control Payment Date;
and
(vii) if the Change in Control Payment Date is on or prior to
May 1, 2001, the calculation (with details) of an estimated Standard
Prepayment Compensation Amount, if any (calculated as if the date of
such notice was the date of payment), due in connection with such
payment; and, if such Change in Control Payment Date is after May 1,
2001, the Modified Prepayment Compensation Amount in connection with
such payment.
(C) ACCEPTANCE, REJECTION. Each holder of Notes shall have the
option to accept or reject such offered payment. In order to reject such
offered payment, a holder of Notes shall cause a notice of such rejection
to be delivered to the Company at least five (5) days prior to the Change
in Control Payment Date. A failure to reject in writing such written offer
of payment as provided in this Section 0, or a written acceptance of such
offered prepayment, shall be deemed to constitute an acceptance of such
offer.
(D) DEFERRAL OF OBLIGATION TO PURCHASE. The obligation of the
Company to purchase Notes pursuant to the offers required by Section 0 and
accepted or deemed accepted in accordance with Section 0 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control
does not occur prior to the Change in Control Payment Date in respect
thereof, such purchase shall be deferred until and shall be made on the
date on which such Change in Control occurs or, if the Company determines
that efforts to effect such Change in Control have ceased or have been
abandoned, then such offer, acceptances and obligation to purchase shall
be deemed to have been rescinded. The Company shall keep each holder of
Notes reasonably and timely informed of:
(i) any such deferral of the date of purchase;
(ii) the date on which such Change in Control and
the purchase are expected to occur; and
(iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned.
(E) PAYMENT. The offered payment shall be made at one hundred
percent (100%) of the principal amount of the Notes to be prepaid,
together with interest and Prepayment
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Compensation Amount, if any, on such Notes, accrued to and determined as
of the Change in Control Payment Date. In the event that such Change of
Control Payment Date is on or prior to May 1, 2001, two (2) Business Days
prior to the making of such payment, the Company shall deliver to each
holder of Notes by facsimile transmission a certificate of a Senior
Financial Officer specifying:
(i) the details of the calculation of the Standard Prepayment
Compensation Amount as of the specified payment date, and including
a copy of the source of interest rate information used in such
calculation; and
(ii) the amounts and the due dates of the then remaining
Required Principal Payments determined after
giving effect to such payment.
(F) EFFECT OF PARTIAL REPURCHASES ON REQUIRED Payment. At the time
of the making of any partial repurchase of Notes pursuant to this Section
0, an amount equal to the principal amount of the Notes so repurchased
shall be applied against and reduce each of the then remaining Required
Principal Payments by a percentage equal to the quotient of:
(i) the aggregate principal amount of the Notes
so paid; DIVIDED BY
(ii) the aggregate principal amount of the Notes outstanding
immediately prior to such payment.
1.6 DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE.
The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the shares of Common
Stock issued upon exercise of the Warrants. Promptly following the receipt of
any Note so tendered, the Company shall promptly cancel and retire such
surrendered Note (and no such Note shall be reissued), and shall issue to the
holder thereof a new Note in the principal amount of such tendered Note
remaining after deduction of the principal amount thereof applied to payment of
the purchase price for the shares of Common Stock. For purposes of Rule 144
under the Securities Act, 17 C.F.R. ss.230.144, the Company and you agree that a
tender of Notes in payment of the exercise price in respect of the Warrants
shall not be deemed a prepayment of the Notes, but rather a conversion of such
Notes, pursuant to the terms of the Warrant Agreement and the Warrants, into
Common Stock.
1.7 PAYMENTS AMONG NOTEHOLDERS.
If at the time any payment of the principal of the Notes made pursuant to
Section 0, Section 0 or Section 0 is due there is more than one Note
outstanding, the aggregate principal amount of each such required or optional
partial payment of the Notes shall be allocated among the Notes at the time
outstanding pro rata in proportion to the respective unpaid principal amounts of
all such outstanding Notes.
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1.8 NOTATION OF NOTES ON PAYMENT.
Upon any partial payment of a Note, the holder of such Note may (but shall
not be required to), at its option:
(a) surrender such Note to the Company pursuant to Section 0 in
exchange for a new Note in a principal amount equal to the principal
amount remaining unpaid on the surrendered Note;
(b) make such Note available to the Company for notation thereon of
the portion of the principal so paid; or
(c) mark such Note with a notation thereon of the portion of the
principal so paid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.9 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES.
Except for payments of principal made in accordance with this Section 0,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes unless:
(a) the Company or such Subsidiary or Affiliate shall have offered
in writing to acquire Notes, PRO RATA, from all holders of the Notes upon
the same terms and at the same price, which price shall be clearly
disclosed;
(b) such offer will remain open for at least ten (10) Business Days
from the date the offer is received by each holder of Notes;
(c) the Company will provide each holder of Notes with a calculation
of the estimated Prepayment Compensation Amount that would be due if the
Company were to pay, in accordance with Section 1.3, the amount of Notes
in respect of which such offer is being made; and
(d) the Company will promptly provide each holder of Notes with such
other information regarding such offer (including, without limitation, if
requested, a list of all holders of Notes indicating the amount of the
holdings of each and whether such holder shall have accepted or rejected
such offer, as of the most recent practicable time) as such holder shall
reasonably request.
In the event that the Company acquires any Notes, such Notes will thereafter be
cancelled and no Notes will be issued in substitution therefor. The aggregate
principal amount of Notes so repurchased by the Company shall be applied against
and reduce each of the then remaining Required Principal Payments by a
percentage equal to the quotient of:
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(i) the aggregate principal amount of the Notes so paid;
DIVIDED BY
(ii) the aggregate principal amount of the Notes outstanding
immediately prior to such payment.
1.10 MANNER OF PAYMENTS.
(A) MANNER OF PAYMENT. The Company shall pay all amounts payable
with respect to each Note (without any presentment of such Notes and
without any notation of such payment being made thereon) by crediting, by
federal funds bank wire transfer, the account of the holder thereof in any
bank in the United States of America as may be designated in writing by
such holder, or in such other manner as may be reasonably directed or to
such other address in the United States of America as may be reasonably
designated in writing by such holder. Annex 1 shall be deemed to
constitute notice, direction or designation (as appropriate) by the
Purchaser to the Company with respect to payments to be made to the
Purchaser as aforesaid. In the absence of such written direction, all
amounts payable with respect to each Note shall be paid by check mailed
and addressed to the registered holder of such Note at the address shown
in the register maintained by the Company pursuant to Section 0.
(B) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
to, any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment shall have so fallen due; PROVIDED that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, such interest shall
accrue and be payable to (but not including) the actual date of payment,
and the amount of the next succeeding interest payment shall be adjusted
accordingly.
(C) PAYMENTS, WHEN RECEIVED. Any payment to be made to the holders
of Notes hereunder or under the Notes shall be deemed to have been made on
the Business Day such payment actually becomes available at such holder's
bank prior to the close of business of such bank, PROVIDED that interest
for one day at the non-default interest rate of the Notes shall be due on
the amount of any such payment that actually becomes available to such
holder at such holder's bank after 12:00 noon (local time of such bank).
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section 3.3, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 0 and the name and address of each transferee of one or more Notes shall
be registered in such register. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 0.
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2.2 EXCHANGE OF NOTES.
(A) EXCHANGE OF NOTES. Upon surrender of any Note at the office of
the Company maintained pursuant to Section 0, duly endorsed or accompanied
by a written instrument of transfer duly executed by the registered holder
of such Note or such holder's attorney duly authorized in writing, the
Company will execute and deliver, at the Company's expense (except as
provided in Section 0), a new Note or Notes in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be registered in the name of
such Person as such holder may request and shall be substantially in the
form of Attachment A. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have
been paid thereon. Each such new Note shall carry the same rights to
unpaid interest and interest to accrue that were carried by the Note so
exchanged or transferred. Notes shall not be transferred in denominations
of less than Five Hundred Thousand Dollars ($500,000), PROVIDED that a
holder of Notes may transfer its entire holding of Notes regardless of the
principal amount of such holder's Notes.
(B) COSTS. The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company, the
surrendered Note and any Note issued in substitution or replacement for
the surrendered Note. The Company may require payment of a sum sufficient
to cover any stamp tax or governmental charge imposed in respect of any
such transfer of Notes.
2.3 REPLACEMENT OF NOTES.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; PROVIDED, HOWEVER, that if the
holder of such Note is a Purchaser, an institutional investor or a nominee
either, the unsecured agreement of indemnity of such Purchaser or
institutional investor (but not of any nominee therefor) shall be deemed
to be satisfactory; or
(b) in the case of mutilation, upon surrender and
cancellation thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
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2.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due (but not, in any event, income
taxes) in connection with and as the result of the initial issuance and sale of
the Notes and in connection with any modification, waiver or amendment of this
Agreement or the Notes and shall save each holder of Notes harmless without
limitation as to time against any and all liabilities with respect to all such
taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as
any of the Notes shall be outstanding:
3.1 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Restricted Subsidiary to, pay before
they become delinquent:
(a) all taxes, assessments and governmental charges
or levies imposed upon it or its Property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords, growers or suppliers of agricultural
products and other like Persons that, if unpaid, might result in the
creation of a statutory, regulatory or common law Lien (other than a Lien
expressly permitted pursuant to Section 0) upon its Property;
PROVIDED, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings and reasonable book reserves in accordance with GAAP have been
established and maintained with respect thereto.
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.
The Company shall, and will cause each Restricted Subsidiary to:
(A) PROPERTY -- maintain its Property in good condition, ordinary
wear and tear and obsolescence excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto; PROVIDED,
HOWEVER, that this Section 0 shall not prevent the Company or any
Restricted Subsidiary from discontinuing the operation or the maintenance
of any of its Properties if such discontinuance is desirable in the
conduct of its business and such discontinuance could not reasonably be
expected to have a Material Adverse Effect;
(B) INSURANCE -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types and in such amounts as is
customary in the case of corporations of established reputations engaged
in the same or a similar business and similarly situated;
(C) FINANCIAL RECORDS -- keep proper books of record and account, in
which full and correct entries shall be made of all dealings and
transactions of or in relation to the Properties and business thereof, and
which will permit the production of financial statements in accordance
with GAAP;
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(D) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done all
things necessary to preserve and keep in full force and effect its
corporate existence, corporate rights (charter and statutory) and
corporate franchises, except as permitted by Section 0; and
(E) COMPLIANCE WITH LAW -- comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, any environmental protection law) and obtain all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties and the
conduct of its business except for such violations and failures to obtain
that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Prepayment Compensation Amount, if any) on, the Notes, as and when
the same shall become due according to the terms hereof and of the Notes, and
will maintain an office at the address of the Company provided in Annex 2 where
notices, presentations and demands in respect hereof or the Notes may be made
upon it. Such office will be maintained at such address until such time as the
Company notifies the holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.
3.4 PENSION PLANS.
(A) COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Pension Plan, comply with
all applicable provisions of ERISA and the IRC, except for such failures
to comply that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
(B) PROHIBITED ACTIONS. The Company will not, and
will not permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the IRC) or
"reportable event" (as such term is defined in section 4043 of
ERISA) that could result in the imposition of a tax or penalty;
(ii) incur with respect to any Plan any "accumulated funding
deficiency" (as such term is defined in section 302 of ERISA),
whether or not waived;
(iii) terminate any Plan in a manner that could result in the
imposition of a
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Lien on the Property of the Company or any Restricted Subsidiary
pursuant to section 4068 of ERISA or the creation of any liability
under section 4062 of ERISA;
(iv) fail to make any payment required by section
515 of ERISA;
(v) incur any withdrawal liability under Title IV of ERISA
with respect to any Multiemployer Plan or any liability as a result
of the termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of any Lien
on the Property of the Company or any ERISA Affiliate, in either
case pursuant to Title I or Title IV of ERISA or pursuant to the
penalty or excise tax or security provisions of the IRC;
if the aggregate amount of the taxes, penalties, funding deficiencies,
interest, amounts secured by Liens, and other liabilities in respect of
any of the foregoing at any time could reasonably be expected to have a
Material Adverse Effect.
(C) FOREIGN PENSION PLANS. The Company will, and will cause each
Restricted Subsidiary to, at all times, comply in all material respects
with all laws, regulations and orders applicable to the establishment,
operation, administration and maintenance of all Foreign Pension Plans,
and pay when due all premiums, contributions and any other amounts
required by applicable Foreign Pension Plan documents or applicable laws,
except where the failure to comply with such laws, regulations and orders,
and to make such payments, in the aggregate for all such failures, could
not reasonably be expected to have a Material Adverse Effect.
3.5 PRIVATE OFFERING.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
4. NEGATIVE AND FINANCIAL COVENANTS
4.1 MERGERS AND CONSOLIDATIONS.
The Company will not, nor will it permit any Restricted Subsidiary to,
merge with or into or consolidate with any other Person, permit any other Person
to merge or consolidate with or into it or sell all or substantially all of its
Property to any other Person; PROVIDED, HOWEVER, that the foregoing restriction
does not apply to the merger or consolidation of the Company with or into
another corporation or sale of all or substantially all of the Property of the
Company to any other Person if:
(a) the corporation that results from such merger or consolidation
or to which all or substantially all of the Property of the Company is
sold (the "SURVIVING Corporation") is
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organized under the laws of, and conducts substantially all of its
business and has substantially all of its Properties within, the United
States of America or any jurisdiction or jurisdictions thereof;
(b) the Surviving Corporation (if not the Company) expressly assumes
the due and punctual payment of the principal of and Prepayment
Compensation Amount, if any, and interest on all of the Notes, according
to their tenor, and the due and punctual performance and observance of all
the covenants in the Notes, this Agreement and each other Financing
Document to be performed or observed by the Company, pursuant to such
assumption agreements and instruments in such forms as shall be approved
by the Required Holders, and the Company causes to be delivered to each
holder of Notes an opinion, satisfactory in form and substance to the
Required Holders, of independent counsel to the effect that such
agreements and instruments are enforceable in accordance with their terms;
and
(c) immediately prior to, and immediately after the consummation of
the transaction, and after giving effect thereto:
(i) no Default or Event of Default exists or would exist; and
(ii) the Surviving Corporation would be permitted by the
provisions of Section 0 to incur at least One Dollar ($1.00) of
additional Adjusted Debt, and of Section 0 to incur at least One
Dollar ($1.00) of additional Senior Debt, assuming that the
financial ratios set forth in Section 0 and Section 0 were
recalculated on a Pro Forma Adjusted Basis as of the last day of the
fiscal quarter of the Surviving Corporation then most recently
ended.
Notwithstanding the foregoing, a Restricted Subsidiary may merge with or into,
or consolidate with, or Transfer all or substantially all of its Property to:
(A) the Company so long as the Company is the
Surviving Corporation;
(B) a Wholly-Owned Restricted Subsidiary, so long as such
Wholly-Owned Restricted Subsidiary is the Surviving Corporation; and
(C) any Person other than the Company or a Restricted Subsidiary so
long as such Transfer complies in all respects with Section 0.
4.2 DISPOSITION OF ASSETS, RESTRICTED SUBSIDIARY STOCK.
(A) DISPOSITION OF ASSETS. The Company will not, and will not permit
any Restricted Subsidiary to Transfer any Property except:
(i) Transfers of inventory and of other Property no longer
necessary for the operation of, and that are individually and in the
aggregate immaterial to, the business of the Company and the
Restricted Subsidiaries, in each case in the ordinary course of
business of the Company or such Restricted Subsidiary;
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(ii) Transfers from the Company to a Wholly-Owned
Restricted Subsidiary;
(iii) Transfers from a Restricted Subsidiary
to the Company or a Wholly-Owned Restricted Subsidiary;
(iv) Transfers for Acceptable Consideration arising solely out
of Sale-Leaseback Transactions, so long as:
(A) the Property is both Transferred and concurrently or
thereafter leased by the Company or a Restricted Subsidiary as
lessee, in each case within one hundred eighty (180) days
after the construction of such Property or the initial
acquisition thereof by the Company or a Restricted Subsidiary;
(B) within one hundred eighty (180) days after the
Transfer involved in such Sale-Leaseback Transaction, the
proceeds of such Transfer, net of reasonable and ordinary
transaction costs, expenses and income tax on any gain related
to such Transfer incurred and actually paid in connection with
such Transfer, are applied by the Company or such Restricted
Subsidiary to:
(I) purchase Tangible Property ; or
(II) pay, on or prior to its scheduled maturity,
an amount of Debt of the Company or any Restricted
Subsidiary (other than Debt owing to an Affiliate or
Debt subordinate to the Subordinated Notes); and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or Event
of Default would exist;
(v) any other Transfer at any time of any Property (other than
in connection with Sale-Leaseback Transactions) to a Person for an
Acceptable Consideration if:
(A) the SUM of:
(I) the book value of such Property at the time of
Transfer; PLUS
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
after the Fiscal Year End Date immediately preceding the
date of such Transfer;
would be less than fifteen percent (15%) of Consolidated Total
Assets measured as of the Fiscal Year End Date immediately
preceding the date of such Transfer;
(B) the SUM of:
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(I) the book value of such Property at the time of
Transfer; PLUS
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
since the Closing Date;
would be less than forty percent (40%) of Consolidated Total
Assets measured as of the most recent Fiscal Year End Date;
and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or Event
of Default would exist;
and
(vi) any other Transfer of Property (other than in a
Sale-Leaseback Transaction), but solely to the extent that, within
one hundred eighty (180) days after such Transfer, the proceeds of
such Transfer, net of reasonable and ordinary transaction costs,
expenses and income tax on any gain related to such Transfer
incurred and actually paid in connection with such Transfer, are
applied by the Company or such Restricted Subsidiary to:
(A) purchase Tangible Property; or
(B) pay, on or prior to its scheduled maturity, an
amount of Debt of the Company or any Restricted Subsidiary
(other than Debt owing to an Affiliate or Debt subordinate to
the Subordinated Notes).
(B) DISPOSITION OF RESTRICTED SUBSIDIARY STOCK. The Company will
not, and will not permit any Restricted Subsidiary to, sell or otherwise
dispose of any shares of the stock or Rights of a Restricted Subsidiary
(such stock and Rights herein called "RESTRICTED SUBSIDIARY STOCK"), nor
will any Restricted Subsidiary issue, sell or otherwise dispose of any
shares of, or Rights to purchase shares of, its own Restricted Subsidiary
Stock; PROVIDED, HOWEVER, that the foregoing restrictions do not apply to:
(i) Transfers by the Company or a Restricted Subsidiary of
shares of Restricted Subsidiary Stock to the Company or a
Wholly-Owned Restricted Subsidiary;
(ii) the issuance by a Restricted Subsidiary of shares of its
own Restricted Subsidiary Stock to the Company or a Wholly-Owned
Restricted Subsidiary;
(iii) the issuance by a Restricted Subsidiary of shares of its
own Restricted Subsidiary Stock to directors, Management or
Affiliates; PROVIDED, however, that at no time shall the total
number of shares of such Restricted Subsidiary Stock issued to or
held by Management and Affiliates as a group (including shares
underlying Rights) exceed twenty-five percent (25%) of the total
number of shares of such Restricted Subsidiary Stock outstanding
following any such issuance; and
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(iv) the Transfer of all of the Restricted Subsidiary Stock of
a Restricted Subsidiary owned by the Company and its other
Restricted Subsidiaries if:
(A) such Transfer satisfies the requirements of Section
0 or Section 0 or both;
(B) in connection with such Transfer, the entire
Investment (whether represented by stock, Debt, claims or
otherwise) of the Company and its other Restricted
Subsidiaries in such Restricted Subsidiary is Transferred to a
Person other than the Company or a Restricted Subsidiary not
being simultaneously disposed of; and
(C) the Restricted Subsidiary being disposed of has no
continuing Investment in any other Restricted Subsidiary not
being simultaneously disposed of or in the Company.
For purposes of determining the book value of assets constituting
Restricted Subsidiary Stock being Transferred as provided in clause
(b)(iv) above, such book value shall be deemed to be the aggregate book
value of the net assets of the Restricted Subsidiary that shall have
issued such
Restricted Subsidiary Stock.
(C) RESTRICTED SUBSIDIARY MERGERS AND
Consolidations. A merger or consolidation of a Restricted Subsidiary in
which a Person other than the Company or a Wholly-Owned Restricted
Subsidiary shall be the Surviving Corporation shall be deemed to be a
disposition of the Restricted Subsidiary Stock of such Restricted
Subsidiary and shall be
subject to Section 0.
4.3 LIENS.
(A) NEGATIVE PLEDGE. The Company will not, and will not permit any
Restricted Subsidiary to, cause or permit, or agree or consent to cause or
permit in the future (upon the happening of a contingency or otherwise),
any of their Property, whether now owned or hereafter acquired, at any
time to be subject to a Lien except:
(I) CLOSING DATE LIENS --
(A) Liens in existence on the Closing Date and described
in PART 2.2(C) OF ANNEX 3;
(II) ORDINARY COURSE BUSINESS LIENS --
(A) PERFORMANCE BONDS -- Liens incurred or deposits made
in the ordinary course of business to secure the performance
of letters of credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance bonds
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(of a type other than set forth in Section 0) and other
similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property;
(B) REAL ESTATE -- Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real property;
PROVIDED, HOWEVER, that such exceptions and encumbrances do
not in the aggregate materially detract from the value of said
Properties or materially interfere with the use of such
Properties in the ordinary conduct of the business of the
Company and the Subsidiaries;
(C) TAXES, WORKERS' COMPENSATION, ETC. --
(I) Liens securing taxes, assessments or
governmental charges which are either not yet due or
payable or which are being actively contested in good
faith and by appropriate proceedings, or
(II) pledges or deposits securing obligations
under worker's compensation, unemployment compensation
laws or similar legislation to secure public or
statutory obligations of the Company or any Restricted
Subsidiary; or
(III) levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, vendors,
landlords and other like Persons;
PROVIDED, HOWEVER, that the payment thereof is not required by
Section 0 and that adequate reserves have been made against
such claims; and
(D) PACA -- any Lien (including any Lien arising out of
any constructive trust) arising under PACA which is asserted,
perfected or imposed by any growers or suppliers to the
Company or any Restricted Subsidiary of agricultural products,
so long as no creditors of the Company or any of the
Restricted Subsidiaries have asserted their rights under PACA
that, in the aggregate, exceed Five Hundred Thousand Dollars
($500,000);
(III) JUDICIAL LIENS -- Liens arising from judicial
attachments and judgments, securing appeal bonds or supersedeas
bonds, and arising in connection with court proceedings (including,
without limitation, surety bonds and letters of credit or any other
instrument serving a similar purpose); PROVIDED, HOWEVER, that the
execution or other enforcement of such Liens is effectively stayed,
that the claims secured thereby are being actively contested in good
faith and by appropriate proceedings, that adequate reserves have
been made against such claims and that the aggregate amount so
secured will not at any time exceed Five Million Dollars
($5,000,000);
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(IV) INTERGROUP LIENS -- Liens on Property of a Restricted
Subsidiary; PROVIDED, HOWEVER, that such Liens secure only
obligations owing to the Company;
(V) PURCHASE MONEY LIENS -- any Lien on Property acquired or
owned by the Company or any Restricted Subsidiary or leased by the
Company or any Restricted Subsidiary as lessee under any Capital
Lease which secures Debt (including Debt in respect of a Capital
Lease) incurred to pay all or a portion of the related purchase
price or costs of construction, extension or improvement of such
Property, so long as:
(A) that such purchase price or costs of construction,
extension or improvement shall not exceed the Fair Market
Value of such Property, extension or improvement, as the case
may be, determined at the time of the creation of such Lien;
(B) such Lien is created contemporaneously with, or
within one hundred eighty (180) days of, such acquisition,
construction, extension or improvement;
(C) such Lien encumbers only Property so purchased,
acquired, constructed, extended or improved after the Closing
Date;
(D) such Lien is not, after the creation thereof,
extended to any other Property; and
(E) immediately prior to the incurrence of, and after
giving effect to the incurrence of, all Debt secured by the
Liens referred to in such clauses, no Default or Event of
Default exists or would exist;
(VI) ACQUISITION LIENS -- any Lien (including, without
limitation, any Lien arising out of a Capital Lease) existing on
Property at the time of acquisition thereof by the Company or any
Restricted Subsidiary (whether or not the Debt secured thereby is
assumed by the Company or any Restricted Subsidiary), or existing on
the Property of, the Debt of or the Capital Stock of any Person
(other than an Unrestricted Subsidiary) at the time such Person
became a Restricted Subsidiary (whether by means of the acquisition
of all or substantially all of the Property of such Person, of the
Capital Stock thereof or otherwise) or merges or consolidates with
the Company or any Restricted Subsidiary, so long as:
(A) the aggregate principal amount of Debt secured
thereby does not exceed the acquisition cost of such Property,
the consideration paid for the acquisition of such Person or
the consideration paid in connection with such merger or
consolidation, as the case may be, as determined at the date
of the acquisition, merger or consolidation;
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(B) such Lien shall not extend to or cover any Property
other than the Property subject to such Lien at the time of
any such acquisition; and
(C) immediately after, and after giving effect to, such
acquisition, merger or consolidation, and the assumption of
all such Liens no Default or Event of Default exists or would
exist; and
(VII) OTHER LIENS -- Liens securing Debt of the Company or any
Restricted Subsidiary and not otherwise permitted by clauses (i)
through (vi), inclusive, of this Section 0(a) so long as,
immediately prior to, and immediately after giving effect to the
incurrence of such Debt:
(A) no Default or Event of Default exists
or would exist; and
(B) it would be permitted by the provisions of Section 0
to incur at least One Dollar ($1.00) of additional Adjusted
Debt, and, to the extent that such Liens secure Senior Debt,
of Section 0 to incur at least One Dollar ($1.00) of
additional Senior Debt, assuming that the financial ratios set
forth in Section 0 and Section 0 were recalculated on a Pro
Forma Basis as of the last day of the fiscal quarter of the
Company then most recently ended.
(B) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property
shall be subjected to a Lien in violation of Section 0, the Company will
forthwith make or cause to be made, to the fullest extent permitted by
applicable law, provision whereby the Notes will be secured equally and
ratably as to such Property with all other obligations secured thereby
pursuant to such agreements and instruments as shall be approved by the
Required Holders, and the Company will promptly cause to be delivered to
each holder of a Note an opinion of independent counsel satisfactory to
the Required Holders to the effect that such agreements and instruments
are enforceable in accordance with their terms, and in any event the Notes
shall have the benefit, to the full extent that, and with such priority
as, the holders of Notes may be entitled under applicable law, of an
equitable Lien on such Property (and any proceeds thereof) securing the
Notes. Such violation of Section 0 will constitute an Event of Default
hereunder, whether or not any such provision is made or any equitable Lien
is created pursuant to this Section 0.
(C) CONSTRUCTION. Nothing in this Section 0 shall be construed to
permit the incurrence or existence of any Debt not otherwise permitted by
this Agreement. Nothing in this Agreement that permits the incurrence or
existence of any Debt shall be construed to permit the incurrence or
existence of a Lien securing such Debt unless such Lien is permitted by
Section 0.
4.4 NET WORTH.
The Company will not at any time permit Consolidated Net Worth to be less
than an amount equal to the sum of:
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(a) Nineteen Million Five Hundred Thousand Dollars
($19,500,000); PLUS
(b) for each fiscal quarter of the Company ending after January 2,
1998, an amount equal to the greater of:
(i) Zero Dollars ($0); and
(ii) fifty percent (50%) of Consolidated Net Company Income
determined in respect of such fiscal quarter.
4.5 FIXED CHARGE COVERAGE.
The Company will not at any time permit the Pro Forma Combined Fixed
Charge Coverage Ratio for a period consisting of any four (4) out of the five
(5) then most recently ended full consecutive fiscal quarters of the Company,
measured as at the end of the most recently ended fiscal quarter of the Company,
to be less than 1.5 to 1.0.
4.6 TOTAL DEBT.
The Company will not at any time permit the ratio of Consolidated Adjusted
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 4.5 to 1.0 at any time from the Closing Date through and
including January 7, 2000; or
(b) 4.0 to 1.0 at any time following January 7, 2000.
4.7 SENIOR DEBT.
The Company will not at any time permit the ratio of Consolidated Senior
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 3.5 to 1.0 at any time from the Closing Date through and
including January 7, 2000; or
(b) 3.0 to 1.0 at any time following January 7, 2000.
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4.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
(A) LIMIT ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. The
Company will not, nor will it permit any Restricted Subsidiary to, at any
time, declare or make or incur any liability to declare or make any
Restricted Payment or make or authorize, or permit any Restricted
Subsidiary to make or authorize, any Restricted Investment unless,
immediately after and after giving effect to the proposed Restricted
Payment or Restricted Investment:
(i) the sum of
(A) the aggregate amount of Restricted Investments
(valued in each case at acquisition cost) made during the
period commencing on the Closing Date and ending on the date
of, and after giving effect to, such proposed Restricted
Payment or Restricted Investment; PLUS
(B) the aggregate amount of Restricted Payments made
during the period commencing on the Closing Date and ending on
the date of, and after giving effect to, such proposed
Restricted Payment or Restricted Investment;
would not exceed an amount equal to the sum of:
(I) Five Million Dollars ($5,000,000); PLUS
(II) fifty percent (50%) of Consolidated Net
Company Income in respect of the period beginning on
January 2, 1998 and ending on the last day of the fiscal
quarter of the Company then most recently ended (or
MINUS one hundred percent (100%) of Consolidated Net
Company Income for such period if Consolidated Net
Company Income for such period is a loss); PLUS
(III) the aggregate amount of net cash proceeds
received by the Company from the sale of any Specified
Stock made after the Closing Date; PLUS
(IV) the aggregate amount of net cash proceeds
received after the Closing Date by the Company or any
Subsidiary from the sale or liquidation, or as a result
of the final maturity, of any Restricted Investment made
after the Closing Date; PLUS
(V) the aggregate principal amount of any Debt
(including the Notes) cancelled in exchange for or
converted into any Specified Stock after the Closing
Date; and
(ii) no Default or an Event of Default would exist.
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(B) OTHER MATTERS. For the purpose of making computations under
Section 0, Restricted Investments made solely by issuance of Specified
Stock of the Company shall in each case be excluded. Any Person that
becomes a Restricted Subsidiary after the Closing Date shall be deemed to
have made, at the time it becomes a Restricted Subsidiary, all Restricted
Investments of such Person existing immediately after it becomes a
Restricted Subsidiary.
4.9 SENIORITY TO FUTURE SUBORDINATED DEBT.
The Company shall not incur, create, assume or Guaranty any Debt which is
subordinated in right of payment to any other Debt of the Company unless such
Debt is also subordinated in right of payment, on the same terms, to the
obligations of the Company in respect of the Notes and this Agreement. The
Company shall not incur, create, assume or Guaranty any Debt owing to any
Subsidiary or any Affiliate unless such Debt is subordinated in right of
payment, on terms acceptable to the Required Holders, to the obligations of the
Company in respect of the Notes and this Agreement.
4.10 DESIGNATION OF SUBSIDIARIES.
(A) RIGHT OF DESIGNATION. Subject to the following sentence, each of
the Subsidiaries listed on Annex 3 shall be a Restricted Subsidiary so
long as it shall continue to satisfy the requirements of the definition of
Restricted Subsidiary. Subject to the satisfaction of the requirements of
Section 0, the Company shall have the right to designate as a Restricted
Subsidiary any Subsidiary which, following such designation, would meet
the definition of a "Restricted Subsidiary," and to designate any
Restricted Subsidiary as an Unrestricted Subsidiary, by delivering to each
holder of Notes a writing, signed by a Senior Officer, so designating such
Subsidiary. Any Subsidiary not designated as a Restricted Subsidiary shall
be deemed to be an Unrestricted Subsidiary.
(B) DESIGNATION CRITERIA.
(i) No Subsidiary shall at any time after the Closing Date be
designated as a Restricted Subsidiary unless:
(A) such Subsidiary at such time meets all of the
requirements of being a Restricted Subsidiary as set forth in
the definition thereof (other than clause (a) of such
definition);
(B) immediately before and after, and after giving
effect to such designation, no Default or Event of Default
exists or would exist; and
(C) such Subsidiary shall not previously have been
designated as a Restricted Subsidiary on more than one (1)
other occasion.
(ii) No Restricted Subsidiary shall at any time after the
Closing Date be designated as an Unrestricted Subsidiary unless:
(A) immediately after, and after giving effect to such
designation, no Default or Event of Default exists or would
exist; and
(B) immediately prior to such designation, such
Restricted Subsidiary being so designated does not own,
directly or indirectly, any Capital Stock of any Restricted
Subsidiary not being simultaneously designated as an
Unrestricted Subsidiary.
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(C) CONSEQUENCE OF DESIGNATION. By designating a Subsidiary as an
Unrestricted Subsidiary, the Company shall be deemed to have made an
Investment in such Subsidiary in an amount equal to the Fair Market Value
of its Investment in such Subsidiary on the date of such designation.
(D) EFFECTIVENESS. Any designation under this Section 0 that
satisfies all of the conditions set forth in this Section 0 shall become
effective, for purposes of this Agreement, on the day that notice thereof
shall have been delivered by the Company to each holder of Notes in
accordance with Section 0.
4.11 LINE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business if, as a result, the general nature of the business in
which the Company and the Restricted Subsidiaries, taken as a whole, would then
be engaged would be substantially changed from the general nature of the
business in which the Company and the Restricted Subsidiaries, taken as a whole,
are engaged on the Closing Date as described in the Offering Memorandum.
4.12 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any transaction, including, without limitation, the purchase, sale,
lease or exchange of Property or the rendering of any service, with any
Affiliate, except for:
(a) relocation loans (including, without limitation, short-term
bridge financing in connection with the purchase of a principal residence)
to any executive or employee of the Company or any Restricted Subsidiary
not exceeding at any time Five Hundred Thousand Dollars ($500,000);
(b) other loans, advances and other extensions of credit to any
executive, officer, director or stockholder (or any relative of any of the
foregoing) not exceeding at any time the sum of:
(i) Three Hundred Thousand Dollars ($300,000) in
the aggregate at any time outstanding; PLUS
(ii) one percent (1%) of Consolidated Net Company Income in
respect of the period beginning on the first day of the fiscal
quarter of the Company commencing after the First Closing Date and
ending on the last day of the fiscal quarter of the Company then
most recently ended (or MINUS one percent (1%) of Consolidated Net
Company Income for such period if Consolidated Net Company Income
for such period is a loss); and
(c) transactions in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
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4.13 SUBSIDIARY GUARANTEES.
The Company will not at any time permit any Subsidiary to incur, create,
assume, Guaranty or otherwise become liable in respect of any Debt in respect of
any Senior Credit Facility (whether as primary obligor, guarantor, surety or
otherwise) after the Closing Date unless such Subsidiary, upon or prior to such
incurrence, creation, assumption, Guaranty or otherwise becoming liable in
respect of any such Debt, shall enter into an unconditional subordinated
Guaranty (the "SUBSIDIARY GUARANTEE") in favor of the holders of the Notes in
substantially the form of Exhibit 4.5(c) to the Securities Purchase Agreement.
The Company will cause each Subsidiary which entered into a Subsidiary Guarantee
on the Closing Date, and each Subsidiary subsequently entering into a Subsidiary
Guarantee pursuant to this Section 0, to maintain such Subsidiary Guarantee for
so long as such Subsidiary remains liable in respect of any such Debt.
5. REPORTING COVENANTS
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(A) QUARTERLY FINANCIAL STATEMENTS -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
and in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end
of such quarter; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal
year ending with such quarter;
for the Company and the Restricted Subsidiaries, setting forth in each
case, in comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by a Senior Financial
Officer, and accompanied by the certificate required by Section 0;
PROVIDED, that delivery of copies of the Company's Quarterly Report on
Form 10-Q filed with the SEC within the time period specified above shall
be deemed to satisfy the requirements of this Section 0 so long as such
Quarterly Report contains or is accompanied by the information specified
in this Section 0;
(B) ANNUAL FINANCIAL STATEMENTS -- as soon as practicable after the
end of each fiscal year of the Company, and in any event within one
hundred twenty (120) days thereafter:
(i) a consolidated balance sheet as at the end
of such year; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such year;
for the Company and the Restricted Subsidiaries, setting forth, in
comparative form, the financial statement for the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP, and
accompanied by:
(A) an audit report thereon of independent certified public
accountants of recognized national standing, which report shall
state without qualification (including, without limitation,
qualifications related to the scope of the audit, the compliance of
the audit with generally accepted auditing standards, or the ability
of the Company or a material subsidiary thereof to continue as a
going concern), that such financial statements have been prepared
and are in conformity with GAAP; and
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(B) the certificates required by Section 0 and
Section 0;
PROVIDED, that delivery of the Company's Annual Report on Form 10-K for
such fiscal year filed with the SEC within the time period specified above
shall be deemed to satisfy the requirements of this Section 0 so long as
such Annual Report contains or is accompanied by the reports and other
information otherwise specified in this Section 0;
(C) SEC AND OTHER REPORTS -- promptly upon their becoming available,
and in any event within fifteen (15) days thereafter:
(i) each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally;
(ii) each regular or periodic report (including, without
limitation, each Form 10-K, Form 10-Q and Form 8-K), any
registration statement which shall have become effective, and each
final prospectus and all amendments thereto filed by the Company or
any Restricted Subsidiary with the SEC; and
(iii) all press releases and other statements made available
by the Company or any Restricted Subsidiary to the public concerning
material developments in the business of the Company or the
Restricted Subsidiaries;
(D) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within two (2) Business
Days of becoming aware:
(i) of the existence of any condition or event
which constitutes a Default or an Event of Default; or
(ii) that the holder of any Note, any lender or creditor in
respect of a Senior Credit Facility or any holder of any other Debt
in a principal amount of Two Hundred Fifty Thousand Dollars
($250,000) or more, shall have given notice or taken any other
action with respect to a claimed Default, Event of Default or
default or event of default;
a notice specifying the nature of the claimed Default, Event of Default or
default or event of default and the notice given or action taken (if any)
by such holder and what action the Company is taking or proposes to take
with respect thereto;
(E) ERISA --
(i) within two (2) Business Days of becoming aware of the
occurrence of any "reportable event" (as such term is defined in
section 4043 of ERISA) for which notice thereof has not been waived
pursuant to regulations of the DOL or "prohibited transaction" (as
such term is defined in section 406 of ERISA or section 4975 of the
IRC) in connection with any Plan or any trust created thereunder, a
notice specifying the nature thereof, what action the Company is
taking or proposes to take with respect thereto, and, when known,
any action taken by the Internal Revenue Service, the DOL or the
PBGC with respect thereto; and
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(ii) prompt notice of and, where applicable, a description of:
(A) any notice from the PBGC in respect of the
commencement of any proceedings pursuant to section 4042 of
ERISA to terminate any Plan or for the appointment of a
trustee to administer any Plan, and any distress termination
notice delivered to the PBGC under section 4041 of ERISA in
respect of any Plan, and any determination of the PBGC in
respect thereof;
(B) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA, any
Multiemployer Plan becoming "insolvent" (as such term is
defined in section 4245 of ERISA) under Title IV of ERISA, or
the whole or partial withdrawal of the Company or any ERISA
Affiliate from any Multiemployer Plan and the withdrawal
liability incurred in connection therewith; or
(C) the occurrence of any event, transaction or
condition that could result in the incurrence of any liability
of the Company or any ERISA Affiliate or the imposition of a
Lien on the Property of the Company or any ERISA Affiliate, in
either case pursuant to Title I or Title IV of ERISA or
pursuant to the penalty or excise tax or security provisions
of the IRC;
PROVIDED, HOWEVER, that the Company shall not be required to deliver any
such notice at any time when the aggregate amount of the actual or
potential liability of the Company and the Restricted Subsidiaries in
respect of all such events at such time could not reasonably be expected
to have a Material Adverse Effect;
(F) AUDITOR'S REPORTS -- each report or, upon the request of any
holder of Notes, any management letter submitted to the Company or any
Restricted Subsidiary by independent accountants in connection with any
annual, interim or special audit made of the books of the Company or any
Subsidiary;
(G) ACTIONS, PROCEEDINGS -- promptly after the commencement of any
action or proceeding relating to the Company or any Subsidiary in any
court or before any governmental authority or arbitration board or
tribunal as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, is reasonably likely to
have a Material Adverse Effect, a notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(H) OTHER CREDITORS -- promptly upon the reasonable request of any
holder of Notes, copies of any statement, report or certificate furnished
to any holder of Debt to the extent that the information contained in such
statement, report or certificate has not already been delivered to each
holder of Notes;
(I) RULE 144A -- promptly upon the request of any holder of Notes,
information required to permit the holder to comply with 17 C.F.R.
ss.230.144A, as amended from time to time, in connection with a transfer
of any Note; and
(J) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information as from time to time may be reasonably requested by
any holder of Notes.
5.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes
pursuant to Section 0 or Section 0 shall be accompanied by a certificate of a
Senior Financial Officer, setting forth:
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(A) COVENANT COMPLIANCE -- the financial information (including
detailed calculations) required in order to establish whether the Company
was in compliance with the requirements of Section 0 (in each case where
such Section imposes numerical financial requirements) as of the end of
the period covered by the financial statements then being furnished
(including with respect to such Section, where applicable, the
calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Section, and the
calculation of the amount, ratio or percentage then in existence); and
(B) EVENT OF DEFAULT -- a statement that the signer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision or authority, a review of the transactions and conditions of
the Company and the Subsidiaries from the beginning of the accounting
period covered by the income statements being delivered therewith to the
date of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.
5.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section 0
shall be accompanied by a certificate of the accountants who were engaged to
audit such financial statements, stating that they have reviewed Section 0(A),
Section 0(B) and Section 0 through Section 0, inclusive, and the corresponding
definitions of financial terms used therein and defined in Section 0, and
stating further, whether, in making their audit, such accountants have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if such accountants are aware that any such condition or event
then exists, specifying the nature and period of existence thereof.
5.4 INSPECTION.
The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the Restricted
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Restricted Subsidiaries) all at such reasonable times, upon such
reasonable notice and as often as may be reasonably requested. At all times
during which there exists a Default or Event of Default, expenses incurred by
the holders of the Notes in connection with this Section 0 shall be paid in
accordance with Section 0 and otherwise such expenses will be borne by such
holder.
6. EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(A) PAYMENTS ON NOTES --
(I) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT PAYMENTS --
the Company fails to make any payment of principal or Prepayment
Compensation Amount on any Note on or before the date such payment
is due; or
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(II) INTEREST PAYMENTS -- the Company fails to make any
payment of interest on any Note on or before five (5) Business Days
after the date such payment is due;
(B) OTHER DEFAULTS --
(I) NEGATIVE AND FINANCIAL COVENANT DEFAULTS -- the Company or
any Restricted Subsidiary fails to comply with any provision of
Section 0; or
(II) OTHER DEFAULTS -- the Company or any Restricted
Subsidiary fails to comply with any other provision hereof, and such
failure continues for more than thirty (30) days after such failure
shall first become known to any Senior Officer;
(C) WARRANTIES OR REPRESENTATIONS -- any warranty, representation or
other statement by or on behalf of the Company contained in the Securities
Purchase Agreement or any other Financing Document, in any written
amendment, supplement, modification or waiver with respect to any
Financing Document or in any instrument furnished in compliance herewith
or in reference hereto, shall have been false or misleading in any
material respect when made;
(D) ACCELERATION OF DEBT --
(i) the Company or any Restricted Subsidiary fails to make,
when due, at maturity or otherwise, any payment or payments in an
amount aggregating in excess of Two Million Dollars ($2,000,000) in
respect of any Debt; or
(ii) any event shall occur or any condition shall exist in
respect of Debt, or under any agreement securing or relating to such
Debt:
(A) as a result of which the maturity of such Debt, or a
portion thereof, is accelerated; or
(B) that requires the Company or any Restricted
Subsidiary to repurchase such Debt from the holders thereof;
PROVIDED that the aggregate amount of all obligations in respect of
all such Debt exceeds at such time Two Million Dollars ($2,000,000);
(E) INSOLVENCY --
(I) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(A) a receiver, liquidator, custodian or trustee of the
Company or any Restricted Subsidiary, or of all or any
substantial part of the Property of either, is appointed by
court order and such order remains in effect for more than
sixty (60) days; or an order for relief is entered with
respect to the Company or any Restricted Subsidiary, or the
Company or any Restricted Subsidiary is adjudicated a bankrupt
or insolvent;
(B) all or any substantial part of the Property of the
Company or any Restricted Subsidiary is sequestered by court
order and such order remains in effect for more than sixty
(60) days; or
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(C) a petition is filed against the Company or any
Restricted Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter
in effect, and is not dismissed within sixty (60) days after
such filing;
(II) VOLUNTARY PETITIONS -- the Company or any Restricted
Subsidiary files a voluntary petition in bankruptcy or seeks relief
under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or consents to
the filing of any petition against it under any such law; or
(III) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the
Company or a Restricted Subsidiary makes an assignment for the
benefit of its creditors, or admits in writing its inability, or
fails, to pay its debts generally as they become due, or consents to
the appointment of a receiver, liquidator or trustee of the Company
or a Restricted Subsidiary or of all or a substantial part of its
Property;
(F) UNDISCHARGED FINAL JUDGMENTS -- a final, non-appealable judgment
or final, non-appealable judgments for the payment of money aggregating
more than Two Million Dollars ($2,000,000) in excess of all applicable
insurance coverage which has not been contested by the relevant insurer or
insurers is or are outstanding against one or more of the Company and the
Restricted Subsidiaries and any one of such judgments shall have been
outstanding for more than sixty (60) days from the date of its entry and
shall not have been discharged in full or stayed; or
(G) SUBSIDIARY GUARANTY -- any Subsidiary Guaranty shall cease to be
in full force and effect or shall be declared by a court or other
Governmental Authority of competent jurisdiction to be void, voidable or
unenforceable against any Subsidiary Guarantor; the validity or
enforceability of any Subsidiary Guaranty against any Subsidiary Guarantor
shall be contested by such Subsidiary Guarantor, the Company or any
Affiliate; or any Subsidiary Guarantor, the Company or any Affiliate shall
deny that such Subsidiary Guarantor has any further liability or
obligation under any Subsidiary Guaranty.
6.2 DEFAULT REMEDIES.
(A) ACCELERATION OF MATURITY OF NOTES.
(I) ACCELERATION ON EVENT OF DEFAULT.
(A) AUTOMATIC. If any Event of Default specified in
Section 0 shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable together with interest accrued thereon and, to the
extent permitted by law, the Prepayment Compensation Amount at
such time with respect to the principal amount of such Notes,
without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived.
(B) BY ACTION OF HOLDERS. Subject to Section 0, if any
Event of Default shall exist, the Required Holders may
exercise any right, power or Remedy permitted to such
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holder or holders by law, and shall have, in particular,
without limiting the generality of the foregoing, the right to
declare the entire principal of, and all interest accrued on,
all the Notes then outstanding to be, and such Notes shall
thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on,
the Notes and, to the extent permitted by law, the Prepayment
Compensation Amount at such time with respect to such
principal amount of such Notes.
(II) ACCELERATION ON PAYMENT DEFAULT. Subject to Section 0,
during the existence of an Event of Default described in Section 0,
and irrespective of whether the Notes then outstanding shall have
become due and payable pursuant to Section 0, any holder of Notes
who or which shall have not consented to any waiver with respect to
such Event of Default may, at his or its option, by notice in
writing to the Company, declare the Notes then held by such holder
to be, and such Notes shall thereupon become, forthwith due and
payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and the Company shall forthwith
pay to such holder the entire principal of and interest accrued on
such Notes and, to the extent permitted by law, the Prepayment
Compensation Amount at such time with respect to such principal
amount of such Notes.
(B) VALUABLE RIGHTS. The Company acknowledges, and the parties
hereto agree, that the right of each holder to maintain its investment in
the Notes free from repayment by the Company (except as herein
specifically provided for) is a valuable right and that the provision for
payment of a Prepayment Compensation Amount by the Company in the event
that the Notes are prepaid or are accelerated as a result of an Event of
Default is intended to provide compensation for the deprivation of such
right under such circumstances.
(C) OTHER REMEDIES. During the existence of an Event of Default and
irrespective of whether the Notes then outstanding shall become due and
payable pursuant to Section 0, and irrespective of whether any holder of
Notes then outstanding shall otherwise have pursued or be pursuing any
other rights or Remedies, subject to Section 0, any holder of Notes may
proceed to protect and enforce its rights hereunder and under such Notes
by exercising such Remedies as are available to such holder in respect
thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any agreement contained
herein or in aid of the exercise of any power granted herein; PROVIDED,
HOWEVER, that the maturity of such holder's Notes may be accelerated only
in accordance with Section 0.
(D) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and Remedies. All rights
and Remedies of each holder of Notes hereunder and under applicable law
are cumulative to, and not exclusive of, any other rights or Remedies any
such holder of Notes would otherwise have.
(E) SUBORDINATION. The rights of the holders of the Notes to receive
payments in respect of this Agreement and the Notes, and to exercise any
Remedies, solely as between the holders of the Notes and the holders of
the Senior Debt, shall be subject in all respects to the provisions of
Section 7; PROVIDED, HOWEVER, that all such rights shall remain
unconditional and absolute as between the holders of the Notes and the
Company.
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6.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 0, then and in every such
case, the holders of sixty-six and two-thirds percent (66_%) in principal amount
of the Notes at the time outstanding (exclusive of Notes then owned by any one
or more of the Company, any Restricted Subsidiary or any Affiliate) may, by
written instrument filed with the Company, rescind and annul such declaration,
and the consequences thereof; PROVIDED, however, that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of the
other sums payable hereunder and under the Notes (except any principal of,
or interest or Prepayment Compensation Amount on, the Notes which shall
have become due and payable by reason of such declaration under Section 0)
shall have been duly paid; and
(c) each and every other Default and Event of Default shall have
been waived pursuant to Section 0 or otherwise made good or cured;
and PROVIDED FURTHER that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
7. SUBORDINATION
7.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to all
Senior Debt to the extent provided in this Section 0.
7.2 INSOLVENCY.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its Property;
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(c) any assignment by the Company for the benefit of
creditors; or
(d) any other marshalling of the assets of the
Company;
all Senior Debt shall first be paid in full, in cash or cash equivalents, before
any payment or distribution, whether in cash, Securities or other Property,
shall be made to any holder of any Subordinated Debt on account of any
Subordinated Debt. Any payment or distribution, whether in cash, Securities or
other Property (other than Securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinated, at least to the extent provided in this Section 0 with respect to
Subordinated Debt, to the payment of all Senior Debt at the time outstanding and
to any Securities issued in respect thereof under any such plan of
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reorganization or readjustment), which would otherwise (but for this Section 0)
be payable or deliverable in respect of Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt shall have
been paid in full, in cash or cash equivalents.
7.3 PROOFS OF CLAIM.
If any holder of Subordinated Debt does not file a proper claim or proof
of debt therefor prior to ten (10) days before the expiration of the time to
file such claim or proof, then the Senior Agent is hereby authorized and
empowered (but not obligated) as the agent and attorney-in-fact for such holder
for the specific and limited purpose set forth in this paragraph, to file such
claim or proof for or on behalf of such holder; PROVIDED, HOWEVER, that the
Senior Agent shall have, prior to taking any such action, given fifteen (15)
days prior written notice (which notice may be given up to sixty (60) days prior
to the expiration of the time to file such claim) to such holder of Subordinated
Debt that they intend to file such claim or proof of debt. In no event may the
Senior Agent or any holder of the Senior Debt vote any claim on behalf of any
holder of the Subordinated Debt, and such agency and appointment of
attorney-in-fact shall not extend to any such right to vote any such claim.
7.4 ACCELERATION OF SENIOR DEBT. In the event that the holders of any
Senior Debt, or any trustee or agent acting on behalf of any such holders,
accelerate the maturity of such Senior Debt or demand that the Company
repurchase the same, then, and in each such case, no direct or indirect payment
(in cash, Property or Securities or by set-off or otherwise) shall be made or
agreed to be made on account of any Subordinated Debt, or as a sinking fund for
any Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition or payment of any Subordinated Debt until such
time as such Senior Debt has been paid in full in cash or cash equivalents. The
Company shall give prompt written notice to each holder of Subordinated Debt of
its knowledge of the acceleration of the maturity of any Senior Debt.
7.5 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
If:
(a) the Company shall default in the payment of any principal of or
premium, if any, or interest on any Senior Debt (a "SENIOR PAYMENT
DEFAULT") when the same becomes due and payable, whether at maturity or at
a date fixed for prepayment or otherwise; and
(b) the Company receives from the Senior Agent written notice (a
"PAYMENT DEFAULT NOTICE") of the happening of such Senior Payment Default
stating that such notice is a payment blockage notice pursuant to this
Section 0;
then no direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt unless and until such Senior Payment Default
shall have been cured or waived or otherwise shall have ceased to exist.
The Company shall give prompt written notice to each holder of
Subordinated Debt of its receipt of any Payment Default Notice under this
Section 0.
7.6 SIGNIFICANT NONPAYMENT DEFAULT IN RESPECT OF SENIOR
DEBT.
If:
(a) any Significant Nonpayment Default shall have
occurred; and
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(b) the Company receives from the Senior Agent written notice (a
"NONPAYMENT DEFAULT NOTICE") of the happening of such Significant
Nonpayment Default, stating that such notice is a payment blockage notice
pursuant to Section 0 of this Agreement;
then no direct or indirect payment (in cash, property or Securities or by
set-off or otherwise) shall be made or agreed to be made for or on account of
any Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in
respect of any redemption, retirement, repurchase, prepayment, purchase or other
acquisition or payment of any Subordinated Debt, for a period (each, a "PAYMENT
BLOCKAGE PERIOD") commencing on the date the Nonpayment Default Notice is
delivered to the Company and ending on the Payment Blockage Period Termination
Date; PROVIDED, HOWEVER, that:
(i) only one such Payment Blockage Period may arise in any
period of three hundred sixty (360) consecutive days;
(ii) no more than three (3) Payment Blockage Periods may be
instituted pursuant to this Section 0; and
(iii) no Payment Blockage Period may be imposed as a result of
any Significant Nonpayment Default which served as the basis for or
was continuing during a previous Payment Blockage Period.
All payments in respect of Subordinated Debt postponed during any Payment
Blockage Period shall be immediately due and payable upon the termination
thereof (together with such additional interest as is provided for herein and in
the Notes for late payment of principal, Prepayment Compensation Amount and
interest).
The Company shall give prompt written notice to each holder of
Subordinated Debt of its receipt of any Nonpayment Default Notice under this
Section 0.
7.7 STANDSTILL.
Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, for so long as any amount is outstanding
under a Senior Credit Facility, no holder of any Subordinated Debt may exercise
any Remedies in respect thereof (and no acceleration or purported acceleration
pursuant to Section 0 or Section 0 shall become effective) during any period (a
"STANDSTILL PERIOD") commencing on the first date the holders of the
Subordinated Debt, but for the provisions of this Section 0, would have been
entitled to accelerate the maturity of the Subordinated Debt pursuant to Section
0 or Section 0 and ending upon the earliest of:
(a) the date which is:
(i) if any Event of Default described in Section 0 has
occurred and is continuing, ninety (90) days; and
(ii) if no Event of Default described in Section 0 has
occurred or is continuing, one hundred twenty (120) days;
in each case, after the commencement of such Standstill
Period;
(b) the date that any holder of any Senior Debt commences the
exercise of any Remedies in respect of such Debt; and
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(c) the first date upon which any of the Events of Default described
in Section 0 shall have occurred and be continuing beyond any period of
grace specified therein; and, in such event, the automatic acceleration of
the Notes contemplated in respect of such Event of Default pursuant to
Section 0 shall occur immediately upon the termination of the Standstill
Period.
7.8 TURNOVER OF PAYMENTS.
If:
(a) any payment or distribution shall be paid to or collected or
received by any holders of Subordinated Debt in contravention of any of
the terms of this Section 0; and
(b) the Senior Agent shall have notified the holders of Subordinated
Debt of the facts by reason of which such payment or collection or receipt
so contravenes this Section 0 or constituted a Significant Nonpayment
Default;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents, to the Senior Agent, on behalf of the holders of the
Senior Debt, and, until so delivered, the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
If any amount is delivered to the Senior Agent pursuant to this Section 0,
whether or not such amounts have been applied to the payment of Senior Debt, and
the outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, by the Company or otherwise other than pursuant to this Section 0,
the holders of Senior Debt shall return to such holders of Subordinated Debt an
amount equal to the amount delivered to such holders of Senior Debt pursuant to
this Section 0, so long as after the return of such amounts the Senior Debt
shall remain paid in full, in cash or cash equivalents.
7.9 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.
The rights set forth in this Section 0 of the holders of the Senior Debt
as against each holder of Subordinated Debt shall remain in full force and
effect without regard to, and shall not be impaired by:
(a) any act or failure to act on the part of the
Company;
(b) any change in the manner, place or terms of payment of, or any
extension or indulgence in respect of, any payment or prepayment of the
Senior Debt or any part thereof or in respect of any other amount payable
to any holder of Senior Debt;
(c) any amendment, modification, restatement, renewal, refinancing
or waiver of, or addition or supplement to, or deletion from, or
compromise, release, consent or other action in respect of, any of the
terms of any Senior Debt or any other agreement relating to any Senior
Debt, other than such as would cause all or any portion of such Debt to
fail to meet the definition of "Senior Debt;"
(d) any sale, exchange, release or other dealing with any Property
which is the subject of any Lien securing any Senior Debt, or any failure
or delay in the perfection of any such Lien;
(e) any release of any Person liable in any manner (including,
without limitation, by virtue of any Guaranty) for the payment or
collection of the Senior Debt;
(f) any exercise or non-exercise by any holder of Senior Debt of any
right, power, privilege or remedy under or in respect of any Senior Debt
or Subordinated Debt or any waiver of any such right, power,
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privilege or remedy or any default in respect of any Senior Debt or the
Subordinated Debt, any dealing with or action against any collateral
security therefor or any receipt by any holder of Senior Debt of any
security, or any failure by any holder of Senior Debt to perfect a
security interest in, or any release by any such holder of Senior Debt of,
any security for the payment of any Senior Debt;
(g) any merger or consolidation of the Company or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
Person, or any Transfer of any or all of the Property of the Company or
any of its Subsidiaries to any other Person; or
(h) the absence of any notice to, or knowledge of, any holder of
Subordinated Debt of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (a) through (g).
7.10 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 0 or of the creation, renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.
7.11 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the provisions
set forth in this Section 0 shall continue to be effective, or be reinstated, as
the case may be, as to any payment in respect of any Senior Debt that is
rescinded or must otherwise be returned by the holder of such Senior Debt upon
the occurrence or as a result of any bankruptcy or judicial proceeding, all as
though such payment had not been made.
7.12 OBLIGATIONS NOT IMPAIRED.
Nothing contained in this Section 0 shall impair, as between the Company
and any holder of Subordinated Debt, the obligation of the Company to pay to
such holder the principal thereof and Prepayment Compensation Amount, if any,
and interest thereon as and when the same shall become due and payable in
accordance with the terms thereof and to comply with each and every provision of
the Notes and this Agreement or prevent any holder of any Subordinated Debt from
exercising all rights, powers and remedies otherwise permitted by applicable law
or under this Agreement, all subject to the rights of the holders of the Senior
Debt to receive cash, Securities or other Property otherwise payable or
deliverable to the holders of Subordinated Debt.
7.13 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full of all Senior Debt, the holders of Subordinated
Debt shall be subrogated to all rights of any holder of Senior Debt to receive
any further payments or distributions applicable to the Senior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property which otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of Subordinated Debt.
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7.14 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be deemed
to acknowledge and agree that the foregoing subordination provisions are, and
are intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt. Each such holder of Senior Debt is
intended to be, and is, a third party beneficiary of this Section 0. Each holder
of Subordinated Debt acknowledges and agrees that the provisions set forth in
this Section 0 shall be enforceable against such Persons by the holders of the
Senior Debt. Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, none of the provisions of this Section 0
(including, without limitation, this Section 0) may, directly or indirectly, be
amended, modified, supplemented or waived without the prior written consent of
the Senior Agent, on behalf of the holders of the Senior Debt.
7.15 IDENTITY OF HOLDERS OF SENIOR DEBT.
Upon the request of any holder of Subordinated Debt, the Company shall
deliver to such holder a list of all holders of Senior Debt outstanding at such
time, providing the name and address of each such holder of Senior Debt and the
principal amount of Senior Debt held by each such holder; PROVIDED, however,
that, if any holder of Senior Debt shall have appointed an agent or other
representative with respect to the Senior Debt held by it, the Company may
provide the name and address of such agent or representative in lieu of the name
and address of such holder of Senior Debt.
7.16 AMENDMENTS TO SENIOR CREDIT FACILITY.
Notwithstanding the other provisions of this Section 0, no amendment to or
refinancing, replacement or refunding of the Senior Debt or any agreement or
instrument related thereto shall be effective as to the holders of the
Subordinated Debt or be entitled to the benefits of this Section 0 without the
consent of each holder of Notes to the extent that such amendment, refinancing,
replacement or refunding would directly prohibit the Company or any Subsidiary
from making scheduled or required payments in respect of the Subordinated Debt
in any manner which is not specifically set forth in the Senior Credit
Agreement, as in effect on the Closing Date. The holders of the Senior Debt may
restrict the right of the Company to make, or prohibit the Company from making,
optional prepayments of the Notes in accordance with the provisions of Section 0
or Section 0 or other optional repurchases of the Notes.
8. INTERPRETATION OF THIS AGREEMENT
8.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
ACCEPTABLE CONSIDERATION -- means, with respect to any Transfer of any
Property of the Company or any Restricted Subsidiary, cash consideration,
promissory notes or such other consideration (or any combination of the
foregoing) as is, in each case for the Fair Market Value thereof and in each
case in which the value of the Property so Transferred is equal to or greater
than One Million Dollars ($1,000,000), determined by the Board of Directors, in
its good faith opinion, to be in the best interests of the Company and to
reflect the Fair Market Value of such Property.
ACCEPTABLE REVOLVING CREDIT FACILITY -- means and includes a revolving
credit agreement or similar agreement:
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(a) pursuant to which the lender commits to permit the Company,
subject to the conditions therein, to obtain from time to time thereunder
loans or advances of cash, letters of credit or bankers acceptances and
periodically repay the same; and
(b) the obligations under which are not, by its terms or the terms
of any ancillary agreement, expressed to be subordinated in right of
payment to any other Debt of the Company or any Subsidiary; and
(c) the obligations under which are not owing to the Company, any
Affiliate or any Subsidiary.
ACQUIRED BUSINESS -- means and includes, in connection with any
computation of Pro Forma Combined Income Available for Fixed Charges, Pro Forma
Combined EBITDA or Pro Forma Combined Fixed Charges for any period, any Person
(other than an Unrestricted Subsidiary) all the Capital Stock of which or
substantially all of the Property of which was acquired by the Company or a
Restricted Subsidiary, or which shall have merged into or consolidated with the
Company (with the Company being the Surviving Corporation) or which shall have
merged with or into or consolidated with a Restricted Subsidiary with the result
that the Surviving Corporation became a Restricted Subsidiary, in each case,
during such period, if, but only if:
(a) Consolidated EBITDA, Consolidated Rental Expense and
Consolidated Fixed Charges and for such acquired Persons for such Period
can be determined on a basis reasonably acceptable to the holders of Notes
for such period, and Consolidated Debt and Consolidated Senior Debt for
such acquired Persons can be determined on a basis reasonably acceptable
to the holders of Notes as at the relevant time of determination; and
(b) concurrently with any such determination, the Company shall have
delivered to the holders of the Notes audited financial statements (to the
extent available) and other financial information prepared in accordance
with GAAP and reasonably satisfactory to the holders of the Notes with
respect to such acquired Person, which financial statements and
information demonstrates the basis for such determination to an extent
reasonably satisfactory to the holders of the Notes.
ADJUSTED DEBT -- with respect to any Person, means, without duplication,
the liabilities of such Person with respect to:
(A) BORROWED MONEY -- borrowed money;
(B) SECURED LIABILITIES -- borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such liabilities
have been assumed);
(C) CAPITAL LEASES -- Capital Leases of such Person;
and
(D) GUARANTEES -- any Guaranty of such Person of any obligation or
liability of another Person of obligations of the type listed in clause
(a) through clause (d) of this definition of Adjusted Debt.
Adjusted Debt shall not include letters of credit, surety bonds or similar
instruments.
AFFILIATE -- means and includes, at any time, each Person (other than a
Restricted Subsidiary):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
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(b) that beneficially owns or holds ten percent (10%) or more of any
class of the Voting Stock of the Company;
(c) ten percent (10%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, ten percent (10%) or more of the
equity interest) of which is beneficially owned or held by the Company or
a Subsidiary; or
(d) that is an officer or director of the Company or
that is an Initial Manager Affiliate;
at such time; PROVIDED, HOWEVER, that none of the Purchasers nor any affiliate
of any Purchaser shall be deemed to be an "Affiliate," and no Person holding any
one or more of the Notes or Warrants shall be deemed to be an "Affiliate" solely
by virtue of the ownership of such securities. As used in this definition:
CONTROL -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS -- and references thereto shall mean this Note Agreement
as it may from time to time be amended or supplemented.
ANNEX 3 -- means Annex 3 to the Securities Purchase Agreement.
APPLICABLE INTEREST LAW -- means any present or future law (including,
without limitation, the laws of the State of New York and the United States of
America) which has application to the interest and other charges pursuant to
this Agreement and the Notes.
BANK OF AMERICA -- means Bank of America Texas, N.A.
BOARD OF DIRECTORS -- means, at any time, the board of directors of the
Company or any committee thereof that, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
BORROWING BASE -- means:
(a) for so long as the Senior Credit Agreement (as amended, renewed
or extended) remains in effect, the "Adjusted Borrowing Base," as defined
in the Senior Credit Agreement, as in effect on the date hereof, and as
set forth on Annex 3 hereto; PROVIDED, HOWEVER, that if clause (b) of the
definition of "Adjusted Borrowing Base" in the Senior Credit Agreement is
amended (including, without limitation, in connection with a renewal or
extension of the Senior Credit Facility) to remove the PACA Adjustment
deduction from the "Borrowing Base" (as defined in the Senior Credit
Agreement as in contained therein, then such amendment shall be given
effect for purposes of calculating the Borrowing Base; and
(b) thereafter, any substantially similar formulation contained in
any other Acceptable Revolving Credit Facility at such time, so long as:
(i) if such formulation contains a PACA Adjustment, such
formulation would yield an amount no higher than the amount
calculated in accordance with the definition of "Adjusted Borrowing
Base" as set forth in the Senior Credit Agreement, as in effect on
the date hereof; and
(ii) if such formulation does not contain a PACA Adjustment,
such formulation would yield an amount no higher than the amount
calculated in accordance with the definition of "Adjusted
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Borrowing Base" as set forth in the Senior Credit Agreement, as in
effect on the date hereof but assuming that such definition did not
contain a PACA Adjustment;
and, in either case, which formulation is provided to each holder of the
Notes in writing disclosing that the Company intends to use such
formulation as the "Borrowing Base."
So long as:
(i) there has been no bad faith on the part of either the Company or
any lender in the preparation of the Borrowing Base Certificate;
(ii) the Borrowing Base Certificate contains no
manifest error;
(iii) such Borrowing Base Certificate was completed no more than
thirty-five (35) days prior to the date of determination; and
(iv) such Borrowing Base Certificate measures the Borrowing Base as
of a date no more than fifty (50) days prior to the date of determination;
then the Borrowing Base at any time shall be deemed to be the amount set forth
on the most recent Borrowing Base Certificate delivered to the Senior Agent. In
all other cases, the Borrowing Base shall equal the actual Borrowing Base on the
date of determination.
BORROWING BASE CERTIFICATE - for so long as the Senior Credit Agreement
(as amended, renewed or extended) remains in effect, has the meaning ascribed to
the term "Borrowing Base Report" in the Senior Credit Agreement, as in effect on
the date hereof, and as set forth on Annex 3 hereto; and thereafter, means any
such similar certificate provided pursuant to the terms of the Acceptable
Revolving Credit Facility the borrowing base formulation under which is
designated by the Company to be the "Borrowing Base" in compliance with the
provisions of the definition of "Borrowing Base."
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York or in the State of Texas are required or
permitted by law (other than a general banking moratorium or holiday for a
period exceeding four (4) consecutive days) to be closed.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required to recognize the acquisition of an asset and the incurrence
of a liability in accordance with GAAP.
CAPITAL STOCK -- means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.
CHANGE IN CONTROL -- means, at any time, an occurrence or circumstance as
a result of which individuals who, as of the date of this Agreement, constitute
the Board of Directors (for purposes of this definition, the "INCUMBENT BOARD")
cease for any reason to constitute at least a majority of the Board of
Directors; PROVIDED, HOWEVER, that any individual becoming a director of the
Company, subsequent to the date of this Agreement, whose election or nomination
for election by the Company's stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) or
other actual or threatened solicitation of proxies or contest by or on behalf of
a Person other than the Board of Directors.
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CHANGE IN CONTROL NOTICE EVENT -- means
(a) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control; or
(b) the making of any written offer by any person (as such term is
used in section 13(d) and section 14(d)(2) of the Exchange Act as in
effect on the Closing Date) or related persons constituting a group (as
such term is used in Rule 13d-5 under the Exchange Act as in effect on the
Closing Date) to the holders of the Common Stock which offer, if accepted
by the requisite number of such holders, would result in a Change in
Control.
CHANGE IN CONTROL PAYMENT DATE -- Section 0.
CLOSING DATE -- means the first date any Notes are sold.
COMMON STOCK -- means the Common Stock, par value $.01 per share, of the
Company.
COMPANY -- the introductory paragraph.
CONSOLIDATED ADJUSTED DEBT -- means, at any time, an amount equal to
Adjusted Debt of the Company and the Restricted Subsidiaries, determined on a
consolidated basis at such time.
CONSOLIDATED DEPRECIATION EXPENSE -- means, for any Persons for any
period, the amount of depreciation and amortization expense of the such Persons,
determined on a consolidated basis for such Persons for such period, but only to
the extent deducted from revenues of such Persons in the determination of
Consolidated Net Income of such Persons for such period.
CONSOLIDATED EBITDA -- means, for any Persons for any period, the sum of:
(a) Consolidated Net Income of such Persons; PLUS
(b) Consolidated Interest Expense of such Persons;
PLUS
(c) Consolidated Tax Expense of such Persons; PLUS
(d) Consolidated Depreciation Expense of such Persons;
determined in respect of such period.
CONSOLIDATED FIXED CHARGES -- means, for any Persons for any period, an
amount equal to the sum of:
(a) Consolidated Interest Expense of such Persons;
PLUS
(b) Consolidated Rental Expense of such Persons;
determined in respect of such period.
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CONSOLIDATED INTEREST EXPENSE -- means, for any Persons for any period,
the amount of interest accrued on, or with respect to, interest bearing
obligations of such Persons for such period, including, without limitation,
amortization of debt discount, imputed interest on Capital Leases and (in the
case of the Company) interest on the Notes, determined on a consolidated basis
for such period, but, in each case, only to the extent deducted from the
revenues of such Persons in the determination of Consolidated Net Income of such
Persons for such period.
CONSOLIDATED NET COMPANY INCOME -- means, for any period, net income of
the Company and the Restricted Subsidiaries determined on a consolidated basis
for such period, but excluding:
(a) any gain or net loss (net of any tax effect) arising from the
sale of capital assets or any write-up or write-down of assets, other than
in the ordinary course of business;
(b) earnings or losses of any Restricted Subsidiary accrued prior to
the date it became a Restricted Subsidiary;
(c) earnings or losses of any Person, substantially all the assets
of which have been acquired in any manner by the Company or a Subsidiary,
realized by such Person prior to the date of such acquisition;
(d) earnings or losses of any Person (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary shall have
an ownership interest unless such net earnings shall have actually been
received by the Company or such Restricted Subsidiary in the form of cash
distributions;
(e) any portion of the net earnings of any Restricted Subsidiary
that for any reason is unavailable for payment of dividends to the Company
or any other Restricted Subsidiary or that cannot be freely converted into
United States dollars;
(f) the earnings or losses of any Person to which assets of the
Company shall have been sold, transferred or disposed of, or into which
the Company shall have merged, prior to the date of such transaction;
(g) any gain or loss arising from the acquisition of
any Securities of the Company or any Restricted Subsidiary;
(h) proceeds of any life insurance policy;
(i) reversal of any extraordinary, unusual or nonrecurring
contingency reserves not created during such period; and
(j) other extraordinary gains or losses.
CONSOLIDATED NET INCOME -- means, for the Company and the Restricted
Subsidiaries, Consolidated Net Company Income, and for any other Persons for any
period, net income of the such Persons determined
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on a consolidated basis for such period, but excluding:
(a) any gain or net loss (net of any tax effect) arising from the
sale of capital assets or any write-up or write-down of assets, other than
in the ordinary course of business;
(b) earnings or losses of any other Person, substantially all the
capital stock or Property of which have been acquired in any manner by
such Persons, realized by such other Person prior to the date of such
acquisition;
(c) earnings or losses of any other Person in which such Persons
shall have an ownership interest unless such net earnings shall have
actually been received by the one or more of such Persons in the form of
cash distributions;
(e) any portion of the net earnings of any of such Persons that for
any reason is unavailable for payment of the obligations of such Person or
that cannot be freely converted into United States dollars;
(f) the earnings or losses of any other Person to which assets of
any of such Persons shall have been sold, transferred or disposed of, or
into which any of such Persons shall have merged, prior to the date of
such transaction;
(g) any gain or loss arising from the acquisition of
any Securities of any of such Persons;
(h) proceeds of any life insurance policy;
(i) reversal of any extraordinary, unusual or nonrecurring
contingency reserves not created during such period; and
(j) other extraordinary gains or losses.
CONSOLIDATED NET WORTH -- means, at any time, the Net Worth of the Company
and the Restricted Subsidiaries determined on a consolidated basis at such time.
CONSOLIDATED RENTAL EXPENSE -- means, for any Persons for any period, an
amount equal to Operating Rental Expense of such Persons, determined on a
consolidated basis for such period, but only to the extent deducted from
revenues in determining Consolidated Net Income of such Persons for such period.
CONSOLIDATED SENIOR DEBT -- means, at any time, the amount of Adjusted
Debt of the Company and the Restricted Subsidiaries, determined on a
consolidated basis at such time, other than the Notes and other than any
Adjusted Debt which is not by its terms validly and expressly subordinated to
the Subordinated Debt.
CONSOLIDATED TAX EXPENSE -- means, for any Persons for any period, the
amount of tax expense of
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such Persons in respect of federal and state taxes imposed on or measured by
income or excess profits, to the extent, but only to the extent, deducted from
revenues of such Persons in determining Consolidated Net Income of such Persons
for such period.
CONSOLIDATED TOTAL ASSETS -- means, at any time, an amount equal to the
book value of all assets of the Company and the Restricted Subsidiaries,
determined on a consolidated basis at such time.
CONTROL PERSON -- means
(a) any person (as such term is used in section 13(d) and section
14(d)(2) of the Exchange Act as in effect on the Closing Date); or
(b) related Persons constituting a group (as such term is used in
Rule 13d-5 under the Exchange Act as in effect on the Closing Date);
PROVIDED, HOWEVER, that an Initial Manager Affiliate or a group constituted
entirely of Initial Manager Affiliates shall not be a Control Person so long as,
after giving effect to such event which would (if such Initial Manager Affiliate
or group of Initial Manager Affiliates were deemed to be Control Persons)
otherwise have constituted a Change of Control, at least a majority of the
Initial Managers at such time remain employed by the Company having duties
commensurate with those of one or more of the Initial Managers immediately prior
to such event.
DEBT -- with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:
(A) BORROWED MONEY -- borrowed money;
(B) DEFERRED PURCHASE PRICE OF PROPERTY -- the deferred purchase
price of Property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title retention
agreement with respect to any such Property);
(C) SECURED LIABILITIES -- borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such liabilities
have been assumed);
(D) CAPITAL LEASES -- Capital Leases of such Person;
(E) LETTERS OF CREDIT -- letters of credit or instruments serving a
similar function issued or accepted by banks and other financial
institutions for the account of such Person (whether or not representing
obligations for borrowed money), other than undrawn trade letters of
credit in the ordinary course of business;
(F) SWAPS -- Swaps of such Person; and
(G) GUARANTEES -- any Guaranty of such Person of any obligation or
liability of another Person of obligations of the type listed in clause
(a) through clause (f) of this definition of Debt.
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As used in this definition,
SWAPS -- means, with respect to any Person, obligations with respect
to interest rate swaps and currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency, except that if any agreement relating to such
obligation provides for the netting of amounts payable by and to such
Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the
amount of such obligations shall be the net amount thereof. The aggregate
net obligation of Swaps at any time shall be the aggregate amount of the
obligations of such Person under all Swaps assuming all such Swaps had
been terminated by such Person as of the end of the then most recently
ended fiscal quarter of such Person. If such net aggregate obligation
shall be an amount owing to such Person, then the amount shall be deemed
to be Zero Dollars ($0).
Unless the context otherwise requires, "Debt" means Debt of the Company or of a
Restricted Subsidiary.
DEFAULT -- means any event which, with the giving of notice or the passage
of time, or both, would become an Event of Default.
DOL -- means the United States Department of Labor and any successor
agency.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
EVENT OF DEFAULT -- Section 6.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.
EXCLUDED TRANSFERS -- means and includes Transfers referred to in any of
clauses (i), (ii), (iii), (iv) or (vi) of Section 0.
FAIR MARKET VALUE -- means, with respect to any Property, the sale value
of such Property that would be realized in an arm's-length sale at such time
between an informed and willing buyer, and an informed and willing seller, under
no compulsion to buy or sell, respectively.
FINANCING DOCUMENTS -- means and includes this Agreement, the Securities
Purchase Agreement, the Notes, the Warrant Agreement, the Warrant certificates,
each Subsidiary Guarantee and the other agreements, certificates and instruments
to be executed pursuant to the terms of each of the foregoing, as each may be
amended, restated or otherwise modified from time to time.
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FISCAL YEAR END DATE -- means the first Friday in January of each year;
PROVIDED, HOWEVER, that if the Company shall elect to change its fiscal year to
a calendar year end, the Fiscal Year End Date shall mean December 31 of each
such fiscal year.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program:
(a) established or maintained outside of the United States of
America by the Company or any Restricted Subsidiary primarily for the
benefit of the employees (substantially all of whom are aliens not
residing in the United States of America) of the Company or such
Restricted Subsidiary, which plan, fund or other similar program provides
for retirement income for such employees or results in a deferral of
income for such employees in contemplation of retirement; and
(b) not otherwise subject to ERISA.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
GUARANTY -- means with respect to any Person (for the purposes of this
definition, the "GUARANTOR") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or
any Property constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such
indebtedness, dividend or obligation; or
(ii) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary Obligor
or otherwise to advance or make available funds for the purchase or
payment of such indebtedness, dividend or obligation;
(c) to lease Property or to purchase securities or other Property or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or obligation
of the Primary Obligor against loss in respect thereof.
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For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:
(i) in each case where the obligation that is the subject of such
Guaranty is in the nature of indebtedness for money borrowed it shall be
assumed that the amount of the Guaranty is the amount of the direct
obligation then outstanding; and
(ii) in each case where the obligation that is the subject of such
Guaranty is not in the nature of indebtedness for money borrowed it shall
be assumed that the amount of the Guaranty is the amount (if any) of the
direct obligation that is then due.
INITIAL MANAGER AFFILIATE -- means and includes:
(a) any Initial Manager;
(b) any spouse, child, lineal descendant or sibling
of an Initial Manager;
(c) a trust for the sole benefit of one or more of the spouse,
children or lineal descendants of one or more of the Initial Managers, so
long as any Person described in clause (a) or (b) above has the right to
control such trust;
(d) upon the death or incompetency of any Initial Manager, the
executor, administrator, conservator or other personal representative of
the person or Property of such Initial Manager; and
(e) a corporation, partnership, limited liability company or other
similar business entity directly or indirectly controlled by one or more
of the Initial Managers.
INITIAL MANAGERS -- means and includes David I. Sheinfeld,
Thomas M. Hubbard, Steve R. Grinstead, Sheldon I. Stein, Robert
C. Kiehnle, Lawrence Jackson and Colon Washburn.
INTANGIBLE ASSETS - with respect to any Person, at any time, means the
following:
(a) deferred assets, other than prepaid expenses which are
refundable (including, without limitation, insurance and prepaid taxes);
(b) patents, copyrights, trademarks, trade names, service marks,
brand names, franchises, goodwill, experimental expenses and other similar
intangibles;
(c) unamortized debt discount and expense;
(d) contract rights;
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(e) computer software; and
(e) all other Property which would be considered to be intangible
under GAAP.
INVESTMENTS -- means all investments, made in cash or by delivery of
Property, by the Company and the Subsidiaries:
(a) in any Person, whether by acquisition of stock, Debt or other
obligation or Security, or by loan, guaranty, advance or capital
contribution, or otherwise; or
(b) in any Property.
IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
LIEN -- means any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property (for purposes of this
definition, the "OWNER"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes, and the filing of any financing statement
under the Uniform Commercial Code of any jurisdiction, or an agreement to
give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting real Property; and
(c) any interest in any Property held by the Owner evidenced by a
conditional sale agreement, Capital Lease or other arrangement pursuant to
which title to such Property has been retained by or vested in some other
Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
MANAGEMENT - means, with respect to any Restricted Subsidiary, means any
Senior Officer and any senior officer or director of such Restricted Subsidiary.
MATERIAL ADVERSE EFFECT -- means, with respect to any event or
circumstance (either individually or in the aggregate with all other events and
circumstances), an effect caused thereby or resulting therefrom that would be
materially adverse as to, or in respect of:
(a) the business, operations, profits, financial condition or
Properties of the Company and the Restricted Subsidiaries, taken as a
whole;
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(b) the ability of the Company to perform its
obligations under any Financing Document; or
(c) the validity or enforceability of any of the
Financing Documents.
MAXIMUM LEGAL RATE OF INTEREST -- means the maximum rate of interest that
a holder of Notes may from time to time legally charge the Company by agreement
and in regard to which the Company would be prevented successfully from raising
the claim or defense of usury under the Applicable Interest Law as now or
hereafter construed by courts having appropriate jurisdiction.
MODIFIED PREPAYMENT COMPENSATION AMOUNT -- means, with respect to Prepaid
Principal and the date the payment thereof is due, an amount equal to the
applicable percentage set out below of the Prepaid Principal:
================================================================================
IF PREPAYMENT OCCURS DURING
THE PERIOD SPECIFIED BELOW: PERCENTAGE OF PREPAID PRINCIPAL:
================================================================================
From and including May 2, 2001 3.00%
to and including May 1, 2002
- --------------------------------------------------------------------------------
On or after May 2, 2002 0.00%
================================================================================
MULTIEMPLOYER PLAN -- means any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate
is an "employer" (as such term is defined in section 3 of ERISA).
NET WORTH -- means, with respect to any Person, at any time, the
stockholders' equity of such Person as would be reflected on a balance sheet of
such Person prepared in accordance with GAAP at such time.
NONPAYMENT DEFAULT NOTICE -- Section 0.
NOTE -- means and includes each 12% Senior Subordinated Note due May 1,
2003 issued pursuant to this Agreement.
OFFERING MEMORANDUM -- means the confidential offering memorandum, dated
March 19, 1998, of BancAmerica Robertson Stephens relating to the offering of
the Notes and the Warrants of the Company, together with all exhibits thereto.
ONTARIO -- means, collectively, Ontario Tree Fruits, Limited, an Ontario
corporation; Trio Importing (No. 2) Company, Ltd, an Ontario corporation;
1277649 Ontario Limited, an Ontario corporation; FOSAR, INC., a New Jersey
corporation; and SARFOG, INC., a New Jersey corporation.
OPERATING LEASE -- means, with respect to any Person, any lease other than
a Capital Lease.
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OPERATING RENTAL EXPENSE -- means, for any Person for any period, all
fixed payments which the lessee is required to make by the terms of any
Operating Lease during such period but shall not include amounts required to be
paid in respect of maintenance, repairs, income taxes, property taxes,
insurance, assessments or other similar charges or additional rentals (in excess
of fixed minimums) based upon a percentage of gross receipts.
PACA -- means the Perishable Agricultural Commodities Act of 1930, as
amended from time to time.
PACA ADJUSTMENT -- means, in connection with the calculation of any
borrowing base amount under the Senior Credit Agreement or any Acceptable
Revolving Credit Facility, a deduction from such borrowing base formulation for
amounts owed to growers of agricultural products that may have statutory rights
against certain assets of the Company and the Subsidiaries under PACA or any
comparable state law.
PAYMENT BLOCKAGE PERIOD -- Section 0.
PAYMENT BLOCKAGE PERIOD TERMINATION DATE -- means, with respect to any
Significant Payment Default, the earliest of:
(a) the date one hundred eighty (180) days after the earlier of:
(i) the date upon which the Nonpayment Default
Notice was given; and
(ii) the date that any Standstill Period arising out of such
Significant Nonpayment Default commenced;
(b) the date on which such Significant Nonpayment Default shall have
been cured or waived in writing or shall have ceased to exist;
(c) the date such Payment Blockage Period shall have been terminated
by written notice to the Company from the Senior Agent;
(d) the date of the repayment in full in cash or cash
equivalents of the Senior Debt; and
(e) the date on which any holder or holders of the Senior Debt
exercise any Remedies.
PAYMENT DEFAULT NOTICE -- Section 0.
PBGC -- means the Pension Benefit Guaranty Corporation, or any other
Person succeeding to the duties thereof.
PERSON -- means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
PLAN -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding three (3) years, has been established or
maintained, or to which contributions are or, within
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the preceding three (3) years, have been made or required to be made, by the
Company or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
PREPAID PRINCIPAL -- means any portion of the principal amount of the
Notes being paid for any reason (including, without limitation, acceleration,
optional payment or mandatory payment required because of the occurrence of a
contingency) prior to its regularly scheduled maturity date.
PREPAYMENT COMPENSATION AMOUNT -- at any time, means:
(a) if such time is on or prior to May 1, 2001, the Standard
Prepayment Compensation Amount; and
(b) if such time is after May 1, 2001, the Modified Prepayment
Compensation Amount.
PRO FORMA ADJUSTED BASIS -- means, with respect to any merger,
consolidation or sale of all or substantially all of the Property of the
Company, the measurement of any financial test or ratio assuming:
(a) such merger, consolidation or sale of all or substantially all
of the Property of the Company, and all related transactions (including,
without limitation, the incurrence of any Debt in connection with any such
transaction), occurred on the first day of the relevant measuring period
of such financial ratio or test;
(b) that any such Debt incurred in connection with such transaction
which bears interest at a floating rate bore interest throughout such
period at the rate in effect on the date of such transaction; and
(c) that "Consolidated Adjusted Debt," "Consolidated
Senior Debt," and "Pro Forma Combined EBITDA" are measured
for:
(i) the Surviving Corporation and those of its subsidiaries
which, had they been Subsidiaries of the Company, would be
Restricted Subsidiaries, on a consolidated basis; and
(ii) the Company and the Restricted Subsidiaries,
on a consolidated basis;
on a combined basis.
PRO FORMA BASIS -- means, in connection with the incurrence of any Debt,
the measurement of any financial test or ratio assuming:
(a) such Debt was incurred on the first day of the relevant
measuring period of such financial ratio or test; and
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(B) THAT ANY SUCH DEBT IN CONNECTION WITH SUCH
TRANSACTION WHICH BEARS INTEREST AT A FLOATING RATE BORE INTEREST
THROUGHOUT SUCH PERIOD AT THE RATE IN EFFECT ON THE DATE OF SUCH
TRANSACTION.
PRO FORMA COMBINED EBITDA -- means, for any period, without duplication,
the sum of:
(a) Consolidated EBITDA of:
(i) the Company and the Restricted Subsidiaries
for such period; and
(ii) each Acquired Business with respect to such
period;
on a pro forma combined basis, assuming that the Acquired Business became
an Acquired Business on the first day of such period; PLUS
(b) the lesser of:
(i) the aggregate amount of transaction expenses incurred in
connection with the acquisition by the Company of Ontario, but only
to the extent deducted from the revenues of the Company and the
Restricted Subsidiaries in the determination of Consolidated Net
Company Income of the Company and the Restricted Subsidiaries for
such period; and
(ii) One Million Five Hundred Thousand Dollars
($1,500,000).
PRO FORMA COMBINED FIXED CHARGE COVERAGE RATIO -- means, for any period,
the ratio of Pro Forma Combined Net Income Available for Fixed Charges to Pro
Forma Combined Fixed Charges, determined in each case in respect of such period.
PRO FORMA COMBINED FIXED CHARGES -- means, for any period, without
duplication, Consolidated Fixed Charges of:
(a) the Company and the Restricted Subsidiaries for
such period; and
(b) each Acquired Business with respect to such
period;
on a pro forma combined basis, assuming that the Acquired Business became an
Acquired Business on the first day of such period.
PRO FORMA COMBINED NET INCOME AVAILABLE FOR FIXED CHARGES -- means, for
any period, without duplication, the sum of:
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(a) Pro Forma Combined EBITDA for such period; PLUS
(b) Consolidated Rental Expense of:
(i) the Company and the Restricted Subsidiaries
for such period; and
(ii) each Acquired Business with respect to such
period;
on a pro forma combined basis, assuming that the Acquired Business became
an Acquired Business on the first day of such period.
PROPERTY -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
PURCHASERS -- the introductory paragraph.
REMEDIES -- means and includes, with respect to any Debt (including,
without limitation, the Senior Debt and the Subordinated Debt):
(a) the acceleration of the maturity of any of such
Debt;
(b) the exercise of any put right or other similar right to require
the Company or any Subsidiary to repurchase any of such Debt prior to the
stated maturity thereof;
(c) the collection or commencement of proceedings against the
Company, any Subsidiary or any other Person obligated on such Debt or any
of their respective Property, to enforce or collect any of such Debt;
(d) taking possession of or foreclosing upon (whether by judicial
proceedings or otherwise) any Liens or other collateral security for such
Debt; or causing a marshalling of any Property of the Company or any
Subsidiary;
(e) the making of a demand in respect of any Guaranty
given by the Company or any Subsidiary of such Debt;
(f) exercising any other remedies with respect to such Debt or any
claim with respect thereto; or
(g) the taking of any action against the Company, any Subsidiary or
any other Person obligated on or for such Debt, or any of their respective
assets, pursuant to the terms of the agreements governing such Debt.
REQUIRED HOLDERS -- means, at any time, the holders of not less than
fifty-one percent (51%) in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by any one or more of the Company, any Restricted
Subsidiary or any Affiliate).
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REQUIRED PRINCIPAL PAYMENT -- Section 0.
RESTRICTED INVESTMENT -- means, at any time, all Investments except the
following:
(a) Investments in Property (including, without limitation, real
Property and interests therein) to be used in the ordinary course of
business and current assets arising from the sale of goods and services in
the ordinary course of business of the Company and the Subsidiaries;
(b) Investments in one or more Restricted Subsidiaries or any
corporation that concurrently with such Investment becomes a Restricted
Subsidiary;
(c) Investments in direct obligations of the United States of
America, any agency thereof or obligations guaranteed by the United States
of America, so long as such obligations are backed by the full faith and
credit of the United States of America; PROVIDED that such obligations
mature within three (3) years from the date of acquisition thereof;
(d) Investments in any obligation of any state of the United States
or municipality thereof given either of the two (2) highest ratings by at
least one credit rating agency of recognized national standing and
maturing within three (3) years from the date of acquisition;
(e) Investments in certificates of deposit or banker's acceptances
either:
(i) issued by Bank of America; or
(ii) given one (1) of the two (2) highest ratings by at least
one credit rating agency of recognized national standing, issued by
a bank or trust company organized under the laws of the United
States of America or any state thereof having capital, surplus and
undivided profits aggregating at least Two Hundred Fifty Million
Dollars ($250,000,000);
(f) Investments in money market mutual funds that invest solely in
so-called "money market" instruments maturing not more than one year after
the acquisition thereof and given one of the two (2) the highest ratings
by at least one credit rating agency of recognized national standing and
which are properly classified as current assets in accordance with GAAP;
(g) Investments in commercial paper given either of the two (2)
highest ratings by at least one credit rating agency of recognized
national standing, that mature not more than two hundred seventy (270)
days from the date of creation thereof;
(h) Investments existing as of the Closing Date and
listed on PART 2.2(G) OF ANNEX 3;
(i) payments made by the Company or any Restricted Subsidiary in the
ordinary course of business to growers of fruits or vegetables in
consideration of any such grower's promise to:
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(i) provide such grower's crop (after harvest) to the Company
or a Restricted Subsidiary for distribution and sale; and
(ii) reimburse the Company or such Restricted Subsidiary for
payment from the proceeds of the sale by the Company or such
Restricted Subsidiary of such crop;
and
(j) Investments made after the Closing Date not otherwise permitted
in an aggregate amount not to exceed Two Million Dollars ($2,000,000).
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon.
RESTRICTED PAYMENT -- means and includes:
(a) any dividend or other distribution, direct or indirect, on
account of any shares of Capital Stock or Rights of the Company
(including, without limitation, the Common Stock), now or hereafter
outstanding, except a dividend payable solely in shares of Specified Stock
of the Company;
(b) any dividend or other distribution, direct or indirect, on
account of any shares of Capital Stock or Rights of any Restricted
Subsidiary, now or hereafter outstanding, except:
(i) a dividend payable solely in shares of
Specified Stock of such Restricted Subsidiary; or
(ii) to the extent that such dividend or distribution is,
directly or indirectly, payable to the Company;
(c) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of Capital Stock or Rights of the
Company now or hereafter outstanding (other than, in the case of Rights,
the retirement of such rights by virtue of the exercise or conversion
thereof into Common Stock);
(d) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any shares of Capital Stock or Rights of any
Restricted Subsidiary now or hereafter outstanding, except to the extent
that such redemption, retirement, purchase or other acquisition is made
from, and the payment in respect of such redemption, retirement, purchase
or other acquisition is paid, directly or indirectly, to the Company; and
(e) any payment, whether in respect of principal, premium, interest,
fees, expenses or otherwise, in respect of, or any redemption, retirement,
purchase or other acquisition, direct or indirect, of, any Debt owed by
the Company to any Affiliate.
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RESTRICTED SUBSIDIARY -- means, at any time, a Subsidiary:
(a) that as of the Closing Date has been designated on Annex 3 as a
"Restricted Subsidiary" or, after the Closing Date and pursuant to Section
0, has been designated as a "Restricted Subsidiary";
(b) organized under the laws of the United States of America or any
jurisdiction thereof, Canada, any nation which is a member of the European
Economic Community or Mexico;
(c) that conducts substantially all of its business and has
substantially all of its tangible Property within the United States of
America, Canada, any nation of the European Common Market or Mexico; and
(d) at least fifty percent (50%) (by number of votes) of each class
of the Voting Stock of which is legally and beneficially owned by any one
or more of the Company and its Wholly-Owned Restricted Subsidiaries;
at such time.
RESTRICTED SUBSIDIARY STOCK -- Section 0.
RIGHT -- means and includes:
(a) any warrant (including, without limitation, any Warrant) or any
option (including, without limitation, employee stock options) to acquire
Common Stock;
(b) any right issued to holders of the Common Stock, or any class
thereof, permitting the holders thereof to subscribe to shares of Common
Stock or Rights (pursuant to a rights offering or otherwise);
(c) any right to acquire Common Stock pursuant to the provisions of
any Security convertible or exchangeable into Common Stock; and
(d) any similar right permitting the holder thereof to subscribe for
or purchase shares of Common Stock.
SALE-LEASEBACK TRANSACTIONS -- means transactions or series of related
transactions in which the Company or a Restricted Subsidiary sells any of its
Property to any Person (other than to the Company or to a Restricted Subsidiary)
and concurrently with, or after, such sale or transfer, rents or leases as
lessee such Property so sold from such Person.
SEC -- means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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SECURITIES PURCHASE AGREEMENT -- means, collectively, each of the
Securities Purchase Agreements, dated as of May 4, 1998, between the Company and
each of the Purchasers, relating to the offering and sale of the Notes and the
Warrants.
SECURITY -- means "security" as defined by section 2(1) of the Securities
Act.
SENIOR AGENT -- means, until the Company shall have delivered any contrary
written direction to the holders of the Notes, Bank of America, and thereafter,
any one agent or lender in respect of any Senior Credit Facility, or a
representative of either, designated in writing to each holder of Notes by the
Company as being the "Senior Agent".
SENIOR CREDIT AGREEMENT -- means the Restated Business Loan Agreement,
dated February 2, 1998, between the Company and Bank of America, as amended to
the date hereof and as thereafter amended in compliance with the provisions of
Section 0.
SENIOR CREDIT FACILITY -- means and includes:
(a) the Senior Credit Agreement; and
(b) any revolving credit agreement or agreement, any agreement or
agreements in respect of long-term Debt for borrowed money, extended by
banks or other institutional lenders (and excluding, without limitation,
Capital Leases and other forms of credit not in the nature of Debt for
borrowed money) designated in writing as such by the Company to the
holders of the Notes.
SENIOR DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest (including interest accruing
after the filing of a petition under the Bankruptcy Code, to the extent
allowed), fees, expenses, indemnification or otherwise, in respect of:
(a) any Acceptable Revolving Credit Facility, in an aggregate amount
for all such Acceptable Revolving Credit Facilities not exceeding at any
time of incurrence or creation thereof, the greater of:
(i) Fifty Million Dollars ($50,000,000); and
(ii) the Borrowing Base; and
(b) any other Debt for borrowed money or Capital Leases of the
Company (including, without limitation, additional Debt for in respect of
an Acceptable Revolving Credit Facility); PROVIDED, HOWEVER, that "Senior
Debt" referred to in this clause (b) shall not include:
(i) Debt that, by its terms or the terms of any ancillary
agreement with the
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holders of such Debt, is expressed to be subordinated in right of
payment to any other Debt of the Company or any Subsidiary;
(ii) Debt owing to the Company, any Affiliate or
any Subsidiary; or
(iii) any such other Debt the incurrence or creation thereof
would have caused the Company not to be in compliance with any
provision of Section 0, if the financial ratio tests set forth in
each of Section 0 through Section 0, inclusive, were tested
immediately after, and after giving effect to, the incurrence of
such Debt, assuming that:
(A) the entire amount of such Debt was included in both
Consolidated Adjusted Debt and Consolidated Senior Debt and
was considered outstanding in computing Consolidated Net Worth
as of the date of incurrence thereof; and
(B) for purposes of computing Consolidated Interest
Expense for any relevant period, the entire amount of such
Debt was incurred as of the first day of such period, remained
outstanding throughout such period and bore interest at the
rate in effect on the date of determination.
SENIOR FINANCIAL OFFICER -- means any one of the chief financial officer,
the treasurer and the principal accounting officer of the Company.
SENIOR OFFICER -- means any one of the chairman of the board of directors,
the president, the chief executive officer, the chief operating officer and the
chief financial officer of the Company.
SENIOR PAYMENT DEFAULT -- Section 0.
SIGNIFICANT NONPAYMENT DEFAULT -- means and includes any event of default
under any Senior Credit Facility in respect of the failure of the Company to
comply with any material covenant or agreement therein.
SPECIAL PREPAYMENT COMPENSATION AMOUNT - means, with respect to Prepaid
Principal prepaid in connection with a Special Prepayment Event and the Special
Prepayment Date, the Standard Prepayment Compensation Amount as calculated with
respect thereto; PROVIDED, HOWEVER, that in calculating the Present Value of the
Prepaid Cash Flows, a discount rate PER ANNUM determined with respect to such
Prepaid Principal and the Special Prepayment Date, equal to the sum of:
(a) four percent (4.00%) per annum; PLUS
(b) the PER ANNUM percentage rate (rounded to the nearest three (3)
decimal places) equal to the bond equivalent yield to maturity derived
from the Bloomberg Rate, or if the Bloomberg Rate is not then available,
the Applicable H.15 Rate, determined as of the date that is two (2)
Business Days prior to such Special Prepayment Date;
divided by two (2), and a discount period of six (6) months of thirty (30) days
each, shall be used.
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Terms used in this definition and defined in the definition of "Standard
Prepayment Compensation Amount" have the respective meanings ascribed to such
terms therein.
SPECIAL PREPAYMENT DATE -- means the date of the consummation of any
Special Prepayment Event.
SPECIAL PREPAYMENT EVENT -- means the incurrence by the Company of any
Debt in connection with a Specified Acquisition, on the date of such Specified
Acquisition or within ninety (90) days thereafter, the proceeds of which Debt
are applied on the date of the incurrence thereof to:
(a) either:
(i) pay a portion of the purchase price of such
Specified Acquisition;
(ii) refinance all or a portion of the Debt of the acquired
Person assumed in connection with such Specified Acquisition; or
(iii) some combination of the uses specified
in the immediately preceding clauses (i) and (ii);
so long as a significant portion of the sum of the purchase price and the
amount of such assumed Debt of the acquired Person so refinanced are paid
with the proceeds of such newly incurred Debt; and
(b) to fund all or a substantial portion of the prepayment of all of
the Notes in accordance with Section 0.
SPECIFIED ACQUISITION -- means and includes the acquisition by the Company
or any Restricted Subsidiary of all or substantially all of the Property of or
all or substantially all of the of the Capital Stock of, or the merger or
consolidation of the Company or a Restricted Subsidiary with or into, any, all
or any combination of those Persons previously specified to you in writing by
the Company as being potential acquisition targets, or any holding company all
or substantially all of the Property of which comprises all or substantially all
of the Capital Stock of any of them.
SPECIFIED STOCK -- means and includes, with respect to any Person:
(a) its common stock; and
(b) any class of its Capital Stock which:
(i) does not, pursuant to its terms or the terms of any
ancillary agreement or document, require the Company or any
Subsidiary to redeem all or any portion thereof at any time, whether
or not conditioned upon the happening of a contingency, prior to
September 1, 2003; and
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(ii) does not, pursuant to its terms or the terms of any
ancillary agreement or document, confer upon the holders thereof any
right in respect of the failure of such Person to pay any dividend
in respect thereof (other than cumulation of such dividends or the
right to nominate or otherwise select or participate in the
selection of one or more directors of such Person).
When used herein without reference to a particular Person, the term "Specified
Stock" means Specified Stock of the Company.
STANDARD PREPAYMENT COMPENSATION AMOUNT -- means, with respect to Prepaid
Principal and the date the payment thereof is due (the "PAYMENT DATE") an amount
equal to the excess (if any) of the Present Value of the Prepaid Cash Flows over
the amount of such Prepaid Principal, determined in respect of such Prepaid
Principal as of such Payment Date. As used in this definition:
PRESENT VALUE OF THE PREPAID CASH FLOWS -- means the sum of the
present values of the then remaining scheduled payments of principal and
interest that would have been payable in respect of such Prepaid Principal
but that are no longer payable as a result of the early payment of such
Prepaid Principal. In determining such present values:
(i) the amount of interest accrued through and including the
day immediately preceding such Payment Date on such Prepaid
Principal since the scheduled interest payment date immediately
preceding such Payment Date shall be deducted from the first of such
payments of interest; and
(ii) a discount rate PER ANNUM equal to the Make-Whole
Discount Rate determined with respect to such Prepaid Principal and
such Payment Date DIVIDED by two (2), and a discount period of six
(6) months of thirty (30) days each, shall be used.
MAKE-WHOLE DISCOUNT RATE -- means the sum of:
(i) two and one-half percent (2.50%) PER ANNUM;
PLUS
(ii) the PER ANNUM percentage rate (rounded to the nearest
three (3) decimal places) equal to the bond equivalent yield to
maturity derived from the Bloomberg Rate, or if the Bloomberg Rate
is not then available, the Applicable H.15 Rate, determined as of
the date that is two (2) Business Days prior to such Payment Date.
APPLICABLE H.15 -- means, at any time, the United States Federal
Reserve Statistical Release H.15(519) then most recently published and
available to the public, or if such publication is not available, then any
other source of current information in respect of interest rates on
securities of the United States of America that is generally available
and, in the judgment of the Required Holders, provides information
reasonably comparable to the H.15(519) report.
APPLICABLE H.15 RATE -- means, at any time, the then most current
annual yield to maturity
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of the hypothetical United States Treasury obligation listed in the
Applicable H.15 with a Treasury Constant Maturity (as such term is defined
in such Applicable H.15) equal to the Weighted Average Life to Maturity of
such Prepaid Principal. If no such United States Treasury obligation with
a Treasury Constant Maturity corresponding exactly to such Weighted
Average Life to Maturity is listed, then the yields for the two (2) then
most current hypothetical United States Treasury obligations with Treasury
Constant Maturities most closely corresponding to such Weighted Average
Life to Maturity (one (1) with a longer maturity and one (1) with a
shorter maturity, if available) shall be calculated pursuant to the
immediately preceding sentence and the Make-Whole Discount Rate shall be
interpolated or extrapolated from such yields on a straight-line basis.
BLOOMBERG RATE -- means the PER ANNUM yield reported on the
Bloomberg Financial Markets System at 10:00 a.m. (New York time) on the
second (2nd) Business Day preceding such Payment Date for United States
government securities having a maturity (rounded to the nearest month)
corresponding to the Weighted Average Life to Maturity of such Prepaid
Principal. Page USD shall be used as the source of such yields, or if not
then available, such other screen available on the Bloomberg Financial
Markets System as shall, in the opinion of the Required Holders, provide
equivalent information.
TREASURY CONSTANT MATURITY -- has the meaning specified in the
Applicable H.15.
WEIGHTED AVERAGE LIFE TO MATURITY -- means the number of years
(calculated to the nearest one-twelfth (1/12th)) obtained by DIVIDING the
Remaining Dollar-Years of such Prepaid Principal by such Prepaid
Principal, determined as of such Payment Date.
REMAINING DOLLAR-YEARS -- means the result obtained by:
(a) MULTIPLYING, in the case of each then remaining scheduled
payment of principal that would have been payable in respect of
Prepaid Principal but is no longer payable as a result of the
payment of such Prepaid Principal;
(i) an amount equal to such scheduled
payment of principal; by
(ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such Payment Date and
the date such scheduled principal payment would be due if such
Prepaid Principal had not been so prepaid; and
(b) calculating the sum of each of the products obtained in
the preceding subsection (a).
STANDSTILL PERIOD -- Section 0.
SUBSIDIARY -- means a corporation of which the Company owns, directly or
indirectly, more than fifty percent (50%) (by number of votes) of each class of
Voting Stock.
SUBSIDIARY GUARANTEE -- Section 0.
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SUBSIDIARY GUARANTOR -- means and includes, for so long as such Subsidiary
is required to maintain a Subsidiary Guarantee pursuant to Section 0, each
Subsidiary identified on PART 2.3(C) OF ANNEX 3 and each other Subsidiary
required to enter into a Subsidiary Guaranty pursuant to Section 0.
SUBORDINATED DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest (including interest accruing
after the filing of a petition under the Bankruptcy Code, to the extent
allowed), fees, expenses, indemnification or otherwise, in respect of this
Agreement and the Notes.
SURVIVING CORPORATION -- Section 0.
TANGIBLE PROPERTY -- means productive Property other than Intangible
Assets for use in the conduct of the business of the Company and the Restricted
Subsidiaries; PROVIDED, HOWEVER, that:
(a) in the event that the Company or any Restricted Subsidiary
acquires (by purchase of shares of Capital Stock, merger, consolidation or
otherwise) any Person, the entire purchase price for such Person shall be
deemed to have been expended upon "Tangible Property" so long as the sum,
without duplication, of:
(i) all goodwill and other amounts attributable to the excess
of acquisition cost over the book value of the acquired Person as a
result of such acquisition; PLUS
(ii) the book value of all Intangible Assets of
such acquired Person;
does not exceed twenty-five percent (25%) of the purchase
price thereof; and
(b) in the event of a purchase of a group of Property in a single or
group of related transactions, not more than ten percent (10%) of the
purchase price thereof shall be attributable to Intangible Assets.
TRANSFERS -- means and includes, with respect to any Property, any sales,
leases, transfers or other dispositions of such Property; the term "TRANSFER,"
when used as a verb with respect to any Property, means to sell, lease as
lessor, transfer or otherwise dispose of such Property; and the term
"TRANSFERRED" has a correlative meaning.
UNRESTRICTED SUBSIDIARY -- means any Subsidiary that is not a Restricted
Subsidiary.
VOTING STOCK -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency), and, in the case of the Company, shall include the Common Stock.
Except as otherwise provided, references herein to "Voting Stock" shall mean
Voting Stock of the Company.
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WARRANT -- means each warrant to purchase Common Stock issued pursuant to
the Warrant Agreement.
WARRANT AGREEMENT -- means the Warrant Agreement, dated as of May 4, 1998
among the Company and the Purchasers, pursuant to which the Warrants were
issued.
WHOLLY-OWNED RESTRICTED SUBSIDIARY -- means, at any time, any Restricted
Subsidiary one hundred percent (100%) of all of the equity Securities (except
directors' qualifying shares and except, in the case of 1277649 Ontario Limited,
an Ontario corporation, its exchangeable common stock exchangeable on a
one-for-one basis into shares of the Common Stock, issued to the sellers of
Ontario) and Voting Stock of which are owned by any one or more of the Company
and the Company's other Wholly-Owned Restricted Subsidiaries at such time.
8.2 ACCOUNTING PRINCIPLES.
(A) GENERALLY. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in accordance
with GAAP. Where the character or amount of any asset or liability or item
of income or expense, or any consolidation or other accounting computation
is required to be made for any purpose hereunder, it shall be done in
accordance with GAAP; PROVIDED, HOWEVER, that if any term defined herein
includes or excludes amounts, items or concepts that would not be included
in or excluded from such term if such term were defined with reference
solely to GAAP, such term will be deemed to include or exclude such
amounts, items or concepts as set forth herein.
(B) CONSOLIDATION. Whenever accounting amounts of a group of Persons
are to be determined "on a consolidated basis" it shall mean that, as to
balance sheet amounts to be determined as of a specific time, the amount
that would appear on a consolidated balance sheet of such Persons prepared
as of such time, and as to income statement amounts to be determined for a
specific period, the amount that would appear on a consolidated income
statement of such Persons prepared in respect of such period, in each case
with all transactions among such Persons eliminated, and prepared in
accordance with GAAP except as otherwise required hereby.
(C) CURRENCY. With respect to any determination, consolidation or
accounting computation required hereby, any amounts not denominated in the
currency in which this Agreement specifies shall be converted to such
currency in accordance with the requirements of GAAP (as such requirements
relate to such determination, consolidation or computation) and, if no
such requirements shall exist, converted to such currency in accordance
with normal banking procedures, at the closing rate as reported in THE
WALL STREET JOURNAL published most recently as of the date of such
determination, consolidation or computation or, if no such quotation shall
then be available, as quoted on such date by any bank or trust company
reasonably acceptable to the Required Holders.
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8.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.
8.4 SECTION HEADINGS AND TABLE OF CONTENTS AND
CONSTRUCTION.
(A) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof
and shall not affect the construction hereof. The words "herein,"
"hereof," "hereunder" and "hereto" refer to this Agreement as a whole and
not to any particular Section or other subdivision. References to Sections
are, unless otherwise specified, references to Sections of this Agreement.
References to Annexes and Exhibits are, unless otherwise specified,
references to Annexes and Exhibits attached to this Agreement.
(B) CONSTRUCTION. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants. The word "or," as used
herein, is not exclusive.
8.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. IN
ADDITION, THE PARTIES HERETO SELECT, TO THE EXTENT THEY MAY LAWFULLY DO SO, THE
INTERNAL LAWS OF THE STATE OF NEW YORK AS THE APPLICABLE INTEREST LAW.
8.6 GENERAL INTEREST PROVISIONS.
(A) INTEREST IN RESPECT OF THE NOTES. It is the intention of the
Company and the Purchasers to conform strictly to the Applicable Interest
Law. Accordingly, it is agreed that, notwithstanding any provisions to the
contrary in this Agreement or in the Notes, the aggregate of all interest,
and any other charges or consideration constituting interest under the
Applicable Interest Law that is taken, reserved, contracted for, charged
or received pursuant to this Agreement or the Notes shall under no
circumstances exceed the maximum amount of interest allowed by the
Applicable Interest Law. If any such excess interest is ever charged,
received or collected on account of or relating to this Agreement and the
Notes (including any charge or amount which is not denominated as
"interest" but is legally deemed to be interest under Applicable Interest
Law), then in such event:
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(i) the provisions of this Section 0 shall
govern and control;
(ii) the Company shall not be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum
amount of interest allowed by the Applicable Interest Law;
(iii) any excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited to the
principal amount of the Notes by the holders thereof, and if the
principal balance of the Notes is paid in full, any remaining excess
shall be forthwith paid to the Company; and
(iv) the effective rate of interest shall be automatically
subject to reduction to the Maximum Legal Rate of Interest.
If at any time thereafter, the Maximum Legal Rate of Interest is
increased, then, to the extent that it shall be permissible under the
Applicable Interest Law, the Company shall forthwith pay to the holders of
the Notes, on a PRO RATA basis, all amounts of such excess interest that
the holders of the Notes would have been entitled to receive pursuant to
the terms of this Agreement and the Notes had such increased Maximum Legal
Rate of Interest been in effect at all times when such excess interest
accrued. To the extent permitted by the Applicable Interest Law, all sums
paid or agreed to be paid to the holders of the Notes for the use,
forbearance or detention of the indebtedness evidenced thereby shall be
amortized, prorated, allocated and spread throughout the full term of the
Notes.
(B) EFFECT OF ISSUANCE OF NOTES TOGETHER WITH WARRANTS. The Company
and the Purchasers agree, to the extent permitted by the Applicable
Interest Law, that, for purposes of computing the interest in respect of
the Notes under the Applicable Interest Law:
(i) the aggregate purchase price of the Notes shall equal the
difference of:
(A) the initial aggregate principal amount
of the Notes; and
(B) the amount of original issue discount attributable
to the Notes in respect of the issuance of the Warrants
together with the Notes;
(ii) the amount of original issue discount attributable to the
Notes in respect of the issuance of the Warrants shall be deemed to
be the purchase price of the Warrants;
(iii) the Warrants and the Notes shall be deemed to have been
separately issued for the respective purchase prices set forth
above; and
(iv) no portion of the return, if any, to the holders of the
Warrants in respect of their investment therein shall be deemed to
be interest in respect of the Notes.
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9. MISCELLANEOUS
9.1 COMMUNICATIONS.
(A) METHOD; ADDRESS. All communications hereunder or under the Notes
shall be in writing and shall be delivered either by nationwide overnight
courier or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2, or at such other address of which the Company shall have
notified each holder of Notes. Communications to the holders of the Notes
shall be addressed as set forth on Annex 1 by such holder, or at such
other address of which such holder shall have notified the Company (and
the Company shall record such address in the register for the registration
and transfer of Notes maintained pursuant to Section 0).
(B) WHEN GIVEN. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
(C) SERVICE OF PROCESS. Notwithstanding the foregoing provisions of
this Section 0, service of process in any suit, action or proceeding
arising out of or relating to this agreement or any document, agreement or
transaction contemplated hereby, or any action or proceeding to execute or
otherwise enforce any judgment in respect of any breach hereunder or under
any document or agreement contemplated hereby, shall be delivered in the
manner provided in Section 0(c).
9.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by any holder at the closing of its purchase of the Notes
(except the Notes themselves and Warrants), and financial statements,
certificates and other information previously or hereafter furnished to any
holder of Notes, may be reproduced by the Company or any holder of Notes by any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and each holder of Notes may destroy any
original document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Company or such holder of Notes in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. Nothing in this
Section 0 shall prohibit the Company or any holder of Notes from contesting the
accuracy or validity of any such reproduction.
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9.3 SURVIVAL; ENTIRE AGREEMENT.
All warranties, representations, certifications and covenants contained
herein, in the Securities Purchase Agreement or in any certificate or other
instrument delivered hereunder shall be considered to have been relied upon by
the other parties hereto and shall survive the delivery to any holder of Notes
regardless of any investigation made by or on behalf of any party hereto. All
statements in any certificate or other instrument delivered pursuant to the
terms hereof or of the Securities Purchase Agreement shall constitute warranties
and representations hereunder. All obligations hereunder (other than payment of
the Notes, but including, without limitation, reimbursement obligations in
respect of costs, expenses and fees) shall survive the payment of the Notes and
the termination hereof. Subject to the preceding sentence, this Agreement, the
Notes and the other Financing Documents embody the entire agreement and
understanding among the Company and the Purchasers, and supersede all prior
agreements and understandings, relating to the subject matter hereof.
9.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder of rights hereunder shall have been made by any predecessor holder.
Anything contained in this Section 0 notwithstanding, but subject to Section 0,
the Company may not assign any of its respective rights, duties or obligations
hereunder or under any of the other Financing Documents without the prior
written consent of all holders of Notes. For purposes of the avoidance of doubt,
any holder of a Note shall be permitted to pledge or otherwise grant a Lien in
and to such Note (including, without limitation, pledging such Note to a trustee
for the benefit of certain secured noteholders pursuant to documents relating to
the financing of such holder or to one or more banks or other institutions
providing financing in connection with the purchase by such holder of such
Note); PROVIDED, HOWEVER, that any such pledgee or holder of a Lien shall not be
considered a holder hereunder until it shall have foreclosed upon such Note in
accordance with applicable law and informed the Company, in writing, of the
same.
9.5 AMENDMENT AND WAIVER.
(A) REQUIREMENTS. This Agreement may be amended, and the observance
of any term hereof may be waived, with (and only with) the written consent
of the Company and the Required Holders; PROVIDED, HOWEVER, that no such
amendment or waiver shall, without the written consent of the holders of
all Notes (exclusive of Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding;
(i) change the amount or time of any prepayment or payment of
principal or Prepayment Compensation Amount or the rate or time of
payment of interest;
(ii) amend or waive the provisions of Section 0, Section 0,
Section 0 or Section 0, or amend or waive any defined term to the
extent used therein;
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(iii) amend or waive the definition of "Required Holders" or
otherwise amend the percentage of Notes required to be held by
holders of Notes consenting to any action under this Agreement;
(iv) amend or waive this Section 0 or amend or waive any
defined term to the extent used herein.
The holder of any Note may specify that any such written consent executed
by it shall be effective only with respect to a portion of the Notes held
by it (in which case it shall specify, by dollar amount, the aggregate
principal amount of Notes with respect to which such consent shall be
effective) and in the event of any such specification such holder shall be
deemed to have executed such written consent only with respect to the
portion of the Notes so specified.
No amendment, supplement or modification of the provisions of
Section 0, or any defined term to the extent used therein, shall be
effective as to any holder of Senior Debt who has not consented to such
amendment, supplement or modification.
(B) SOLICITATION OF NOTEHOLDERS.
(I) SOLICITATION. Each holder of the Notes (irrespective of
the amount of Notes then owned by it) shall be provided by the
Company with all material information provided by the Company to any
other holder of Notes with respect to any proposed waiver or
amendment of any of the provisions hereof or the Notes. Executed or
true and correct copies of any amendment or waiver effected pursuant
to the provisions of this Section 0 shall be delivered by the
Company to each holder of outstanding Notes forthwith following the
date on which such amendment or waiver becomes effective.
(II) PAYMENT. The Company shall not, nor shall any Restricted
Subsidiary or Affiliate, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of
Notes as consideration for or as an inducement to the entering into
by any holder of Notes of any waiver or amendment of any of the
provisions hereof or of the Notes unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to the holders of all Notes then outstanding.
(III) SCOPE OF CONSENT. Any amendment or waiver made pursuant
to this Section 0 by a holder of Notes that has transferred or has
agreed to transfer its Notes to the Company, any Restricted
Subsidiary or any Affiliate and has provided or has agreed to
provide such amendment or waiver as a condition to such transfer
shall be void and of no force and effect except solely as to such
holder, and any amendments effected or waivers granted that would
not have been or would not be so effected or granted but for such
amendment or waiver (and the amendments or waivers of all other
holders of Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
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(C) BINDING EFFECT. Except as provided in Section 0, any amendment
or waiver consented to as provided in this Section 0 shall apply equally
to all holders of Notes and shall be binding upon them and upon each
future holder of any Note and upon the Company whether or not such Note
shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon.
9.6 EXPENSES.
(A) AMENDMENTS AND WAIVERS. The Company shall pay when billed the
reasonable costs and expenses (including reasonable attorneys' fees)
incurred by the holders of the Notes in connection with the consideration,
negotiation, preparation or execution of any amendments, waivers,
consents, standstill agreements and other similar agreements with respect
to this Agreement or any other Financing Document (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(B) RESTRUCTURING AND WORKOUT, INSPECTIONS. At any time when a
Default or Event of Default exists, the Company shall pay when billed the
reasonable costs and expenses (including reasonable attorneys' fees and
the fees of professional advisors) incurred by the holders of the Notes in
connection with the assessment, analysis or enforcement of any rights or
remedies that are or may be available to the holders of Notes, including,
without limitation, in connection with inspections made pursuant to
Section 0; PROVIDED, HOWEVER, that at all other times inspections will be
at the expense of the inspecting holder of Notes.
(C) COLLECTION. If the Company shall fail to pay when due any
principal of, or Prepayment Compensation Amount or interest on, any Note,
the Company shall pay to each holder of Notes, to the extent permitted by
law, such amounts as shall be sufficient to cover the costs and expenses,
including but not limited to reasonable attorneys' fees, incurred by such
holder in collecting any sums due on such Note.
9.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(A) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(B) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
BY SUCH PARTY IN
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ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW
YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN
ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO
THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF
THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY
PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH
COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(C) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(D) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
9.8 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
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[Remainder of page intentionally blank. Next page is signature page.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed and delivered by one of its duly authorized officers or
representatives.
FRESH AMERICA CORP.
By:______________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:______________________________
Name:
Title:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:______________________________
Name:
Title:
SIGNATURE (1A) CAYMAN, LTD.
By: John Hancock Mutual Life
Insurance Company,
Portfolio Advisor
By:______________________________
Name:
Title:
71
EXHIBIT 10.3
FRESH AMERICA CORP
WARRANT AGREEMENT
DATED AS OF MAY 4, 1998
155,483 WARRANTS TO PURCHASE COMMON STOCK
<PAGE>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
PAGE
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES................. 1
1.1 Form of Warrant Certificates................................... 1
1.2 Execution of Warrant Certificates; Registration
Books.......................................................... 1
1.3 Transfer, Split Up, Combination and Exchange of
Warrant Certificates; Lost or Stolen Warrant
Certificates................................................... 2
1.4 Subsequent Issuance of Warrant Certificates.................... 2
1.5 Effect of Issuance in Registered Form.......................... 3
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE...................... 3
2.1 Exercise of Warrants........................................... 3
2.2 Issuance of Common Stock....................................... 5
2.3 Unexercised Warrants........................................... 5
2.4 Cancellation and Destruction of Warrant
Certificates................................................... 6
2.5 Notice of Expiration........................................... 6
2.6 Fractional Shares.............................................. 6
3. AGREEMENTS OF THE COMPANY............................................ 6
3.1 Reservation of Common Stock.................................... 6
3.2 Common Stock To Be Duly Authorized and Issued,
Fully Paid and Nonassessable................................... 6
3.3 Transfer Taxes................................................. 7
3.4 Common Stock Record Date....................................... 7
3.5 Rights in Respect of Common Stock.............................. 7
3.6 CUSIP Number................................................... 7
3.7 Right of Action................................................ 8
3.8 Right to Receive Distribution of Spinoff Warrants.............. 8
4. ANTIDILUTION ADJUSTMENTS............................................. 10
4.1 Mechanical Adjustments......................................... 10
4.2 Stock Dividends, Subdivisions and Combinations................. 10
4.3 Dividends and Distributions.................................... 11
4.4 Repurchases of Common Stock or Rights.......................... 11
4.5 Issuances of Additional Common Stock or Rights................. 12
4.6 Expiration of Rights........................................... 13
4.7 Spinoff........................................................ 14
4.8 Consolidation; Merger; Sale; Reclassification.................. 14
4.9 De Minimis Changes in Purchase Price........................... 15
4.10 Adjustment of Number of Shares Issuable Pursuant
to Warrants.................................................... 15
4.11 Miscellaneous.................................................. 15
4.12 Other Securities............................................... 16
4.13 Additional Agreements of the Company........................... 16
5. REPORTING COVENANTS.................................................. 17
5.1 Financial and Business Information............................. 17
5.2 Information Concerning Antidilution Adjustments................ 18
6. REGISTRATION RIGHTS.................................................. 19
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6.1 Shelf Registration............................................. 19
6.2 Incidental Registration........................................ 21
6.3 Companies Registration......................................... 23
6.4 Registration Procedures........................................ 23
6.5 Reasonable Investigation....................................... 26
6.6 Registration Expenses.......................................... 27
6.7 Indemnification; Contribution.................................. 27
6.8 Holdback Agreements; Registration Rights to
Others......................................................... 30
6.9 Other Registration of Common Stock............................. 30
6.10 Availability of Information.................................... 30
7. INTERPRETATION OF THIS AGREEMENT..................................... 31
7.1 Certain Defined Terms.......................................... 31
7.2 Descriptive Headings........................................... 47
7.3 Governing Law.................................................. 47
8. MISCELLANEOUS........................................................ 47
8.1 Expenses....................................................... 47
8.2 Amendment and Waiver........................................... 48
8.3 Directly or Indirectly......................................... 49
8.4 Survival of Representations and Warranties;
Entire Agreement............................................... 49
8.5 Successors and Assigns......................................... 49
8.6 Notices........................................................ 49
8.7 Satisfaction Requirement....................................... 50
8.8 Severability................................................... 50
8.9 Counterparts................................................... 50
8.10 Waiver of Jury Trial; Consent to Jurisdiction;
Etc............................................................ 50
Annex 1 -- Addresses of Purchasers
Annex 2 -- Address of Company
Attachment A -- Form of Warrant Certificate
ii
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WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of May 4, 1998 among FRESH AMERICA CORP., a
Texas corporation (together with its successors and assigns, the "COMPANY"), and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY and SIGNATURE 1A (CAYMAN), LTD. (together with their respective
successors and assigns, the "PURCHASERS").
AGREEMENT
In consideration of the premises and the mutual agreements set forth
herein, the parties to this Agreement hereby agree as follows:
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES.
1.1 FORM OF WARRANT CERTIFICATES. The warrant certificates (individually,
a "WARRANT CERTIFICATE" and, collectively, the "WARRANT CERTIFICATES")
evidencing the Warrants, and the forms of assignment and of election to purchase
shares to be attached to such certificates, shall be substantially in the form
set forth in Attachment A hereto and may have such letters, numbers or other
marks of identification or designation as may be required to comply with any law
or with any rule or regulation of any governmental authority, stock exchange or
self-regulatory organization. Each Warrant Certificate shall be dated the date
of issuance thereof by the Company, either upon initial issuance or upon
transfer or exchange, and on its face shall initially entitle the holder thereof
to purchase a number of shares of Common Stock equal to the number of Warrants
specified on the face of such Warrant Certificate at a price per share equal to
the Purchase Price, but the number of such shares and the Purchase Price shall
be subject to adjustment as provided herein.
1.2 EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS.
(A) EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates
shall be executed on behalf of the Company by an officer of the Company
authorized by the Board of Directors. In case the officer of the Company
who shall have signed any Warrant Certificate shall cease to be such an
officer of the Company before issuance and delivery by the Company of such
Warrant Certificate, such Warrant Certificate nevertheless may be issued
and delivered with the same force and effect as though the individual who
signed such Warrant Certificate had not ceased to be such an officer of
the Company, and any Warrant Certificate may be signed on behalf of the
Company by any individual who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this
Agreement any such individual was not such an officer.
(B) REGISTRATION BOOKS. The Company will keep or cause to be kept at
its office maintained at the address of the Company set forth in Section 0
hereof or at such other office of the Company in the United States of
America of which the Company shall have given notice to each holder of
Warrant Certificates, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Warrant Certificates, the
registration number and the number of Warrants evidenced on its face by
each of the Warrant Certificates and the date of each of the Warrant
Certificates.
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1.3 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT
CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES.
(A) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up, combined
or exchanged for another Warrant Certificate or Warrant Certificates
representing Warrants entitling the holder to purchase a minimum of one
thousand (1,000) shares of the Common Stock or, if less, the entire number
of Warrants represented by the Warrant Certificate so surrendered,
entitling the registered holder or Transferee thereof to purchase a like
number of shares of Common Stock as the Warrant Certificate or Warrant
Certificates surrendered then entitled such registered holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange
any Warrant Certificate shall make such request in writing delivered to
the Company, and shall surrender the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined or exchanged at the
office of the Company referred to in Section 0 hereof, whereupon the
Company shall deliver promptly to the Person entitled thereto a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
(B) LOSS, THEFT, ETC. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate (which evidence shall
be, in the case of any Purchaser or another institutional investor, notice
from such institutional investor of such ownership (or of ownership by
such institutional investor's nominee) and such loss, theft, destruction
or mutilation), and:
(i) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; PROVIDED, HOWEVER, that if
the holder of such Warrant Certificate is an institutional investor
or a Purchaser, or a nominee of an institutional investor or a
Purchaser, such Purchaser's or institutional investor's own
unsecured agreement of indemnity shall be deemed to be satisfactory;
or
(ii) in the case of mutilation, upon surrender
and cancellation thereof;
the Company at its own expense will execute and deliver, in lieu thereof,
a new Warrant Certificate, dated the date of such lost, stolen, destroyed
or mutilated Warrant Certificate and of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant Certificate.
1.4 SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES. Subsequent to the
original issuance, no Warrant Certificates shall be issued except:
(a) Warrant Certificates issued upon any transfer, combination,
split up or exchange of Warrants pursuant to Section 0 hereof;
(b) Warrant Certificates issued in replacement of mutilated,
destroyed, lost or stolen Warrant Certificates pursuant to Section 0
hereof; and
(c) Warrant Certificates issued pursuant to Section 0 hereof upon
the partial exercise of any Warrant Certificate to evidence the
unexercised portion of such Warrant Certificate.
1.5 EFFECT OF ISSUANCE IN REGISTERED FORM. Every holder of a Warrant
Certificate by accepting the same consents and agrees with the Company and with
every other holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Company if surrendered at the office of the Company referred
to in Section 0 hereof, duly endorsed or accompanied by an instrument of
transfer (in the form attached hereto) and payment of any applicable
transfer tax or stamp tax; and
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(b) the Company may deem and treat the Person in whose name each
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than the Company)
for all purposes whatsoever, and the Company shall not be affected by any
notice to the contrary.
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE.
2.1 EXERCISE OF WARRANTS.
(A) MANNER OF EXERCISE. At any time and from time to time on or
after the Effective Date and prior to the Expiration Date, the holder of
any Warrant Certificate may exercise the Warrants evidenced thereby, in
whole or in part (but not, in the case of any exercise in part, to the
extent that such exercise would result in the issuance of the lesser of
one hundred (100) whole shares of Common Stock and such lesser number of
shares as is issuable by virtue of exercise of all the Warrants held by
such holder), by surrender of such Warrant Certificate, with an election
to purchase (a form of which is attached to each Warrant Certificate)
attached thereto duly executed, to the Company at its office referred to
in Section 0 hereof, together with payment of the Purchase Price for each
share of Common Stock with respect to which the Warrants are then being
exercised. Such Purchase Price shall be payable either:
(i) in cash pursuant to Section 0 hereof;
(ii) by a tender of Notes pursuant to Section 0
hereof;
(iii) by a tender of cash pursuant Section 0
hereof and Notes pursuant to Section 0 hereof; or
(iv) by delivery of Warrant Certificates pursuant to Section 0
hereof.
(B) PAYMENT IN CASH. Upon exercise of any Warrants, the holder of a
Warrant Certificate may pay the Purchase Price (and shall pay the excess
of the Purchase Price for the Warrants being exercised over the amounts so
deemed to be paid by tender of Notes pursuant to Section 0) in cash or by
certified or official bank check payable to the order of the Company or by
wire transfer of immediately available funds to the account of the
Company.
(C) PAYMENT IN NOTES. To the extent that any holder of any Warrant
Certificate surrenders with such Warrant Certificate any Note then held by
such holder, such holder shall be deemed to have paid that portion of the
Purchase Price equal to one hundred percent (100%) of the principal of
such Note which the holder thereof directs the Company to accept as
payment of the Purchase Price, which Note shall be cancelled and not
reissued. To the extent that the principal amount of such tendered Note is
greater than the amount of the Purchase Price paid by surrender thereof,
the Company shall deliver a new Note to the tendering holder thereof, in
accordance with the provisions of the Note Agreement, in the principal
amount equal to the amount not so applied to payment of the Purchase
Price. At the time of the issuance of the shares of Common Stock pursuant
to the exercise of the Warrants of any holder, the Company shall pay all
accrued and unpaid interest on the principal amount of any Note of such
holder cancelled pursuant to this Section 0 up to but excluding the date
of such issuance. For purposes of Rule 144 under the Securities Act, 17
C.F.R. ss.230.144, the Company and the Purchasers agree that a tender of
the principal of any Notes in payment of the exercise price in respect of
the Warrants shall not be deemed a prepayment of the Notes, but rather a
conversion of such Notes, pursuant to the terms of the Notes, the Note
Agreement, this Agreement and the Warrants, into Common Stock.
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(D) NET EXERCISE. In the event that any holder of Warrant
Certificates delivers such Warrant Certificates to the Company and
notifies the Company in writing that such holder intends to exercise all,
or any portion of, the Warrants represented by such Warrant Certificates
to satisfy its obligation to pay the Purchase Price in respect thereof by
virtue of the provisions of this Section 0, such holder shall become
entitled to receive, instead of the number of shares of Common Stock such
holder would have received had the Purchase Price been paid pursuant to
Section 0 or Section 0 hereof, a number of shares of Common Stock in
respect of the exercise of such Warrants equal to the product of:
(i) the number of shares of Common Stock issuable upon such
exercise of such Warrant Certificate (or, if only a portion of such
Warrant Certificate is being exercised, issuable upon the exercise
of such portion); MULTIPLIED BY
(ii) the quotient of:
(A) the difference of:
(I) the Market Price per share of Common Stock at
the time of such exercise; MINUS
(II) the Purchase Price per share of Common Stock
at the time of such exercise;
DIVIDED BY
(B) the Market Price per share of Common Stock at the
time of such exercise.
The Company shall not be required to issue fractional shares by virtue of
this Section 0, but shall pay the exercising holder cash in lieu of such
fractional share in accordance with Section 0 hereof. For purposes of Rule
144 under the Securities Act, 17 C.F.R. ss.230.144, the Company and the
Purchasers agree that the exercise of any Warrants in accordance with this
Section 0 shall be deemed to be a conversion of such Warrants, pursuant to
the terms of this Agreement and the Warrants, into Common Stock.
2.2 ISSUANCE OF COMMON STOCK. Upon timely receipt of a Warrant
Certificate, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for each of the shares to be purchased in the
manner provided in Section 0 hereof and an amount equal to any applicable
transfer tax (if not payable by the Company as provided in Section 0 hereof),
the Company shall thereupon promptly cause certificates representing the number
of whole shares of Common Stock then being purchased to be delivered to or upon
the order of the registered holder of such Warrant Certificate, registered in
such name or names as may be designated by such holder, and, promptly after such
receipt deliver the cash, if any, to be paid in lieu of fractional shares
pursuant to Section 0 hereof to or upon the order of the registered holder of
such Warrant Certificate. For the avoidance of doubt, subsequent to the creation
or issuance of any Share Purchase Rights and prior to the Share Purchase Right
Detachment Date, each share of Common Stock issued upon the exercise of any
Warrant or Warrants shall in each case include the attached Share Purchase
Rights; and subsequent to any Share Purchase Right Detachment Date and prior to
the Share Purchase Right Termination Date, the Company shall issue, in addition
to the shares of Common Stock issuable upon exercise of the Warrants, such Share
Purchase Rights as would have been attached to such shares of Common Stock had
such exercise of the Warrants and issuance of Common Stock occurred immediately
prior to the Share Purchase Right Detachment Date.
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2.3 UNEXERCISED WARRANTS. In case the registered holder of any Warrant
Certificate shall exercise less than all the Warrants evidenced thereby, a new
Warrant Certificate evidencing Warrants equal in number to the number of
Warrants remaining unexercised shall be issued by the Company to the registered
holder of such Warrant Certificate or to its duly authorized assigns.
2.4 CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All Warrant
Certificates surrendered to the Company for the purpose of exercise, exchange,
substitution or transfer shall be cancelled by it, and no Warrant Certificates
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Agreement. The Company shall cancel and retire any other
Warrant Certificates purchased or acquired by the Company otherwise than upon
the exercise thereof.
2.5 NOTICE OF EXPIRATION. All Warrants that have not been exercised or
purchased in accordance with the provisions of this Agreement shall expire and
all rights of holders of such Warrants shall terminate and cease on the
Expiration Date. The Company agrees to notify each holder of Warrants, not less
than forty-five (45) days but not more than one hundred twenty (120) days, prior
to the Expiration Date in writing, of the Expiration Date and that, on the
Expiration Date, all Warrants remaining unexercised shall expire and all rights
of holders of such Warrants shall terminate and cease.
2.6 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock upon the exercise of any Warrant. Upon the
exercise of any Warrant, there shall be paid to the holder thereof, in lieu of
any fractional share of Common Stock resulting therefrom, an amount of cash
equal to the product of:
(a) the fractional amount of such share; TIMES
(b) the Market Price, as determined on the trading day immediately
prior to the date of exercise of such Warrant.
3. AGREEMENTS OF THE COMPANY.
3.1 RESERVATION OF COMMON STOCK. The Company covenants and agrees that it
will at all times cause to be reserved and kept available out of its authorized
and unissued shares of Common Stock such number of shares of Common Stock as
will be sufficient to permit the exercise in full of all Warrants issued
hereunder and all other Rights exercisable or convertible into Common Stock. In
addition, at all times subsequent to the creation or issuance of any Share
Purchase Rights and prior to the Share Purchase Right Termination Date, the
Company shall reserve a sufficient number of Share Purchase Rights as will be
sufficient to permit all shares of Common Stock issuable upon exercise in full
of all Warrants issued hereunder and all other Rights exercisable or convertible
into Common Stock to be issued together with the attached or detached Share
Purchase Rights.
3.2 COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND
NONASSESSABLE. The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock delivered
upon the exercise of any Warrants, at the time of delivery of the certificates
representing such shares, shall be duly and validly authorized and issued and
fully paid and nonassessable, free of any preemptive rights in favor of any
Person in respect of such issuance and free of any Lien created by, or arising
out of actions of, the Company, any Subsidiary or any Affiliate.
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3.3 TRANSFER TAXES. The Company covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the initial issuance or delivery of:
(a) each Warrant Certificate;
(b) each Warrant Certificate issued in exchange for any other
Warrant Certificate pursuant to Section 0 or Section 0 hereof; and
(c) each share of Common Stock issued upon the exercise of any
Warrant.
The Company shall not, however, be required to:
(i) pay any transfer tax that may be payable in respect of the
transfer or delivery of certificates representing Warrants or shares of
Common Stock in a name other than that of the registered holder of the
certificate surrendered for exercise, conversion, transfer or exchange
(any such tax being payable by the holder of such certificate at the time
of surrender); or
(ii) issue or deliver any such certificates referred to in the
foregoing clause (i) until any such tax referred to in the foregoing
clause (i) shall have been paid.
3.4 COMMON STOCK RECORD DATE. Each Person in whose name any certificate
for shares of Common Stock is issued upon the exercise of Warrants shall for all
purposes be deemed to have become the holder of record of the Common Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Warrant Certificate evidencing such Warrants was duly surrendered with an
election to purchase attached thereto duly executed and payment of the aggregate
Purchase Price (and any applicable transfer taxes, if payable by such Person)
was made.
3.5 RIGHTS IN RESPECT OF COMMON STOCK. Except as otherwise set forth
herein, prior to the exercise of the Warrants evidenced thereby, the holder of a
Warrant Certificate shall not be entitled to any rights of a stockholder in the
Company with respect to shares for which the Warrants shall be exercisable,
including, without limitation, the right to vote in respect of any matter upon
which the holders of Common Stock may vote or the right to receive dividends or
other distributions and, except as expressly set forth herein, and shall not be
entitled to receive any notice of any proceedings of the Company. Prior to the
exercise of the Warrants evidenced thereby, the holders of the Warrant
Certificates shall not have any obligation or any liability as stockholders of
the Company, whether such obligation or liabilities are asserted by the Company
or by creditors of the Company.
3.6 CUSIP NUMBER. The Company covenants and agrees to maintain:
(a) a private placement number in respect of the
Warrants; and
(b) a CUSIP number in respect of the Common Stock;
in each case, from the CUSIP Service Bureau of Standard & Poor's, a division of
McGraw-Hill, Inc.
3.7 RIGHT OF ACTION. All rights of action in respect of the Warrants are
vested in the respective registered holders of the Warrant Certificates, and any
registered holder of any Warrant Certificate, without the consent of the holder
of any other Warrant Certificate, may, on its own behalf and for its own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, its right to
exercise the Warrants evidenced by such Warrant Certificate in the manner
provided in such Warrant Certificate and in this Agreement.
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3.8 RIGHT TO RECEIVE DISTRIBUTION OF SPINOFF WARRANTS.
(A) RIGHT TO RECEIVE SPINOFF WARRANTS. In the event of a Spinoff,
the Company shall, or shall cause the Distributed Entity to, distribute to
each Person who was a registered holder of Warrants on the date of the
Spinoff such holder's ratable share (based on the number of Warrants held
by such holder on the date of the Spinoff) of an aggregate number of
warrants to purchase Spinoff Shares of the Distributed Entity (the
"SPINOFF WARRANTS") equal to the Spinoff Warrant Number. The distribution
of the Spinoff Warrants shall occur on a date fixed by the Company which
is not later than five (5) Business Days after the Spinoff Calculation
Date. The Spinoff Warrants shall:
(i) be immediately exercisable on the date of
issuance thereof;
(ii) expire on the later of the Expiration Date and the date
forty-five (45) days after the issuance thereof;
(iii) each represent (subject to adjustment as provided in the
Spinoff Warrant Agreement) the right to purchase one (1) validly
issued, fully paid and non-assessable Spinoff Share at a purchase
price (subject to adjustment as provided in the Spinoff Warrant
Agreement) equal to the Spinoff Warrant Purchase Price, payable (as
set forth in the Spinoff Warrant Agreement) in cash, in Notes or in
Spinoff Warrants (but not in Warrants); and
(iv) otherwise have terms and provisions substantially
identical to those of the Warrants.
(B) NOTICE OF DECLARATION. In the event of a Spinoff, the Company
shall give written notice thereof to each holder of Warrants (or former
holder of Warrants) entitled to receive a distribution of the Spinoff
Warrants, within five (5) days after the declaration of the dividend or
distribution or the announcement of such reclassification or other similar
arrangement giving rise to such Spinoff, which notice shall:
(i) provide a detailed description of the
Spinoff;
(ii) state the date the Spinoff will occur;
(iii) state the Spinoff Calculation Date;
(iv) explain that the Spinoff Warrant Number and the Spinoff
Warrant Purchase Price shall be determined as of the Spinoff
Calculation Date;
(v) state the date fixed for distribution of the
Spinoff Warrants;
(vi) state the aggregate number of Spinoff Shares to be
distributed, dividended, issued or deemed issued per share of Common
Stock;
(vii) state the number of shares of Common
Stock into which each Warrant is then exercisable; and
(viii) describe the right described in Section
0.
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(C) SPINOFF WARRANT AGREEMENT. On or prior to the date of the
Spinoff, the Company shall cause the Distributed Entity to enter into a
warrant agreement (the "SPINOFF WARRANT AGREEMENT") to govern the terms of
the Spinoff Warrants. The terms and provisions of the Spinoff Warrant
Agreement shall be substantially identical to those set forth in this
Warrant Agreement, including, without limitation, substantially identical
antidilution provisions and agreements of the Distributed Entity as
contained herein with respect to the Company, and shall be in form
acceptable to those holders of Warrants (or former holders of Warrants)
entitled to receive a distribution of the majority of the Spinoff
Warrants. The Company shall also cause to be delivered to each such holder
or former holder an opinion, satisfactory in form and substance to those
holders of Warrants (or former holders of Warrants) entitled to receive a
distribution of the majority of the Spinoff Warrants, of independent
counsel to the effect that such warrant agreement and the certificates
representing the Spinoff Warrants to be issued thereunder are enforceable
in accordance with their terms, that upon payment of the purchase price
therefor the Distributed Entity's common stock to be issued upon exercise
thereof shall be validly issued, fully paid and non-assessable, free and
clear of any lien or encumbrance created by the Company or the Distributed
Entity and as to such other matters as are customarily addressed in
connection with an issuance of warrants as such holders may reasonably
request.
(D) NOTICE OF DISTRIBUTION. Two (2) Business Days following the
Spinoff Calculation Date, the Company shall, or shall cause the
Distributed Entity to, provide a written notice to each holder of Warrants
(or former holder of Warrants) entitled to receive a distribution of the
Spinoff Warrants, which notice shall:
(i) state the date fixed for distribution of the
Spinoff Warrants;
(ii) state the Spinoff Warrant Number and the Spinoff Warrant
Purchase Price, together with a detailed calculation of each;
(iii) provide a detailed calculation of the Market
Capitalization of the Company, the Market Capitalization of the
Distributed Entity, the Market Capitalization Percentage of the
Company and the Market Capitalization Percentage of the Distributed
Entity;
(iv) provide a detailed calculation of the
Pre-Spinoff Ownership Percentage; and
(v) state the number of Spinoff Warrants being issued to each
such holder.
The Company shall, or shall cause the Distributed Entity to, distribute
the Spinoff Warrants to each holder of Warrants (or former holder of
Warrants) entitled to receive a distribution of the Spinoff Warrants on
the date fixed therefor.
(E) DIVIDENDS PAID PARTLY IN SPINOFF SHARES. For purposes of this
Section 0 and Section 0 hereof, any dividend or distribution declared or
paid partly in Spinoff Shares and partly in Common Stock, other Securities
or other Property shall be deemed to be a Spinoff subject to the
provisions of this Section 0 to the extent made in Spinoff Shares and a
separate dividend of Common Stock, other Securities or Property subject to
the provisions of Section 0 hereof to the extent payable in Property other
than Spinoff Shares.
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4. ANTIDILUTION ADJUSTMENTS.
4.1 MECHANICAL ADJUSTMENTS. The number of shares of Common Stock
purchasable upon the exercise of each Warrant, and the Purchase Price, shall be
subject to adjustment as set forth in this Section 0.
4.2 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In the event that the
Company shall, on or after the date hereof:
(a) pay a dividend in shares of Additional Common Stock or make a
distribution in shares of Additional Common Stock;
(b) reclassify by subdivision its outstanding shares of Common Stock
into a greater number of shares; or
(c) reclassify by combination its outstanding shares of Common Stock
into a smaller number of shares;
then, and in each such case, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision or
combination shall be adjusted to that price determined by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(i) the total number of outstanding shares of Common Stock
immediately prior to such event; DIVIDED BY
(ii) the total number of outstanding shares of Common Stock
immediately after such event.
An adjustment made pursuant to this Section 0 shall become effective on the
effective date of such event.
4.3 DIVIDENDS AND DISTRIBUTIONS. In the event that the Company shall make
or pay any dividend of, or distribute to holders of shares of Common Stock
(including, without limitation, any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
shares of capital stock (other than Common Stock, which shall be subject to
Section 0 and other than Spinoff Shares, which shall be subject to Section 0) or
rights, warrants or options exercisable into such capital stock (other than
Rights, which shall be subject to Section 0 and other than Spinoff Shares, which
shall be subject to Section 0), other Securities, evidences of its indebtedness
or any of its Property (other than cash dividends payable out of current net
income or retained earnings), then, in each case, the Purchase Price in effect
after the record date in respect of which such stock, rights, warrants, options,
other Securities, indebtedness or Property were dividended or distributed shall
be adjusted by multiplying the Purchase Price in effect immediately prior to
such record date by the quotient of:
(a) the difference of:
(i) the Market Price on such record date; MINUS
(ii) the quotient of:
(A) the then fair value (as determined by the Valuation
Agent, whose determination, if so made, shall be conclusive)
of the shares of stock, rights, warrants, options, other
Securities, evidences of indebtedness or Property so
dividended or distributed; DIVIDED BY
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(B) the number of shares of Common Stock outstanding on
the record date;
DIVIDED BY
(b) the Market Price on such record date.
Such adjustment shall be made whenever any such dividend or distribution is
made, and shall become effective on the date of such dividend or distribution.
4.4 REPURCHASES OF COMMON STOCK OR RIGHTS. In the event that the Company
shall repurchase, redeem, retire or otherwise acquire shares of Common Stock or
Rights for a Consideration Per Share greater than the Closing Price in effect on
the date immediately preceding the date of such repurchase, redemption,
retirement or acquisition, then the Purchase Price in effect immediately after
such event shall be adjusted by multiplying the Purchase Price in effect
immediately prior to such event by the quotient of:
(a) the difference of:
(i) the product of:
(A) the number of shares of Common Stock (calculated on
a Fully-Diluted Basis) immediately prior to such event;
MULTIPLIED BY
(B) the Closing Price in effect on the date immediately
preceding such event;
MINUS
(ii) the Aggregate Consideration Paid;
DIVIDED BY
(b) the product of:
(i) the Closing Price in effect on the date
immediately preceding such event; MULTIPLIED BY
(ii) the difference of:
(A) the number of shares of Common Stock (calculated on
a Fully-Diluted Basis) immediately prior to such event; MINUS
(B) the number of shares of Common Stock (or initially
issuable pursuant to such Rights) so repurchased, redeemed,
retired or otherwise acquired.
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In the event that any of the Aggregate Consideration Paid consists of
Property other than cash, the value of such Property for purposes of computing
the Aggregate Consideration Paid shall be determined by the Valuation Agent as
of a date not more than thirty (30) days prior to the date of determination
thereof and shall be set forth in a written certificate of the Valuation Agent
which shall be delivered to the holders of the Warrants in the manner
contemplated by Section 0.
4.5 ISSUANCES OF ADDITIONAL COMMON STOCK OR RIGHTS. In the event that the
Company shall issue or sell shares of Additional Common Stock or Rights
(excluding Excluded Securities) for no consideration or at a Consideration Per
Share lower than the Market Price in effect on the date of such issuance or
sale, then the Purchase Price in effect immediately after such event shall be
adjusted by multiplying the Purchase Price in effect immediately prior to such
event by the quotient of:
(a) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; PLUS
(ii) the quotient of:
(A) the Aggregate Consideration Receivable;
DIVIDED BY
(B) the Market Price;
in each case immediately prior to such event;
DIVIDED BY
(b) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; PLUS
(ii) the number of shares of Additional Common Stock so issued
or sold (or initially issuable pursuant to such Rights).
In the event that any of the Aggregate Consideration Receivable consists
of Property other than cash, the value of such Property for purposes of
computing the Aggregate Consideration Receivable shall be determined by the
Valuation Agent as of a date not more than thirty (30) days prior to the date of
determination thereof and shall be set forth in a written certificate of the
Valuation Agent which shall be delivered to the holders of the Warrants in the
manner contemplated by Section 0.
4.6 EXPIRATION OF RIGHTS. Upon the expiration of any Rights in respect of
the issuance of which adjustment was made pursuant to Section 0, without the
exercise thereof, the Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter be such Purchase Price and such number of shares
of Common Stock as would have been had such Purchase Price and such number of
shares of Common Stock been originally adjusted (or had the original adjustment
not been required, as the case may be) as if:
(a) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise of such
Rights; and
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(b) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Rights, whether or not exercised;
PROVIDED that no such readjustment shall have the effect of increasing the
Purchase Price by an amount in excess of the amount of the reduction
initially made in respect of the issuance, sale, or grant of such Rights.
4.7 SPINOFF. In the event of a Spinoff, the Purchase Price of the Warrants
in effect immediately prior to the Spinoff Calculation Date shall be adjusted,
effective on the Spinoff Calculation Date, by multiplying the Purchase Price of
the Warrants in effect immediately prior to the Spinoff Calculation Date by the
Market Capitalization Percentage of the Company, calculated as of the Spinoff
Calculation Date.
4.8 CONSOLIDATION; MERGER; SALE; RECLASSIFICATION. In the
event that there shall be:
(a) any consolidation of the Company with, or merger of the Company
with or into, another corporation in which either:
(i) the Company is not the surviving corporation;
(ii) the shares of Common Stock outstanding immediately prior
to such merger or consolidation are reclassified or substantially
changed); or
(iii) the holders of the Common Stock immediately prior to
such consolidation or merger are issued cash, Securities of any
Person other than the Company or Property (other than Securities of
the Company) and the holder or holders of the common stock of the
Person with whom the Company consolidates or merges become, as a
result of such transaction, the holders of the Common Stock;
(b) any sale or conveyance to another corporation of
the Property of the Company substantially as an entirety;
(c) any reclassification of the Common Stock that
results in the issuance of other Securities of the Company;
or
(d) any detachment from the Common Stock of any Share
Purchase Rights;
in each case, other than in a Spinoff, then, in each such case, lawful provision
shall be made as a part of the terms of such transaction so that the holders of
Warrants shall thereafter have the right to purchase the number and kind of
shares of stock, other Securities, Share Purchase Rights, cash, Property and
Rights receivable upon such consolidation, merger, sale, conveyance,
reclassification or detachment by a holder of such number of shares of Common
Stock as the holder of a Warrant would have had the right to acquire upon the
exercise of such Warrant immediately prior to such consolidation, merger, sale,
conveyance or reclassification, at the Purchase Price then in effect, and,
without further action on the part of any Person, each Warrant will thereafter
represent the right to receive, upon payment of the Purchase Price, such shares
of stock, other Securities, Share Purchase Rights, cash, Property and Rights as
are so receivable. The Company agrees that, as a condition of proceeding with
such consolidation, merger or sale, it shall cause the Person surviving such
merger or consolidation, the Person or Persons holding the shares of the Common
Stock of the Company immediately after such transaction or the Person to whom
such sale or conveyance is made, as the case may be, at the time of such
consolidation, merger or sale, to expressly assume the due and punctual
observance and performance of each and every provision of this Agreement and all
obligations and liabilities of the Company hereunder (subject to the foregoing
sentence), in each case, pursuant to such agreements and instruments as are
reasonably acceptable to the Required Warrantholders.
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4.9 DE MINIMIS CHANGES IN PURCHASE PRICE. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the Purchase Price; PROVIDED that any
adjustments that, at the time of the calculation thereof, are less than one
percent (1%) of the Purchase Price at such time and by reason of this Section 0
are not required to be made at such time shall be carried forward and added to
any subsequent adjustment or adjustments for purposes of determining whether
such subsequent adjustment or adjustments, as so supplemented, exceed the one
percent (1%) amount set forth in this Section 0 and, if any such subsequent
adjustment, as so supplemented or otherwise, should exceed such one percent (1%)
amount, all adjustments deferred prior thereto and not previously made shall
then be made. All calculations shall be made to the nearest cent ($0.01).
4.10 ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS. Upon
each adjustment of the Purchase Price as a result of any calculations made
pursuant to Section 0, Section 0, Section 0, Section 0 or Section 0, each
Warrant outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of shares of Common Stock (calculated to the nearest share) obtained by
multiplying the number of shares of Common Stock covered by such Warrant
immediately prior to such adjustment by the quotient of:
(a) the Purchase Price in effect immediately prior to
such adjustment, DIVIDED BY
(b) the Purchase Price in effect immediately after such adjustment.
All Warrants originally issued by the Company hereunder shall, subsequent to any
adjustment made to the Purchase Price hereunder, evidence the right to purchase,
at the adjusted Purchase Price, the number of shares of Common Stock determined
to be purchasable from time to time hereunder upon exercise of such Warrants,
all subject to further adjustment as provided herein. Each such adjustment shall
be valid and binding upon the Company and the holders of Warrants irrespective
of whether the Warrant Certificates theretofore and thereafter issued express
the Purchase Price per share of Common Stock and the number of shares of Common
Stock that were expressed upon the initial Warrant Certificates issued
hereunder.
4.11 MISCELLANEOUS.
(a) Adjustments shall be made pursuant to this Section 0
successively whenever any of the events referred to in Section 0 through
Section 0, inclusive, shall occur.
(b) If any Warrant shall be exercised subsequent to the record date
for any of the events referred to in Section 0 through Section 0,
inclusive, but prior to the effective date thereof, appropriate
adjustments shall be made immediately after such effective date so that
the holder of such Warrant on such record date shall have received, in the
aggregate, the kind and number of shares of Common Stock or other
Securities or Property that it would have owned or been entitled to
receive on such effective date had such Warrant been exercised prior to
such record date.
(c) Shares of Common Stock owned by or held for the account of the
Company or any Subsidiary shall not, for purposes of the adjustments set
forth in this Section 0, be deemed outstanding.
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4.12 OTHER SECURITIES. In the event that at any time, as a result of an
adjustment made pursuant to this Section 0, each holder of Warrants shall become
entitled to purchase any Securities of the Company other than shares of Common
Stock, the number or amount of such other Securities so purchasable and the
Purchase Price of such Securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in Section 0 through Section 0, inclusive, hereof, and all
other relevant provisions of this Section 0 that are applicable to shares of
Common Stock shall be applicable to such other Securities.
4.13 ADDITIONAL AGREEMENTS OF THE COMPANY. The Company covenants and
agrees that:
(a) The Company shall not, by amendment to its Charter as in effect
on the date hereof, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, liquidation, issuance or sale of
Securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, or which would have the effect of circumventing
or avoiding the provisions of this Section 0, but shall at all times in
good faith assist in the carrying out of all the provisions of this
Section 0 and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the holders of the Warrant
Certificates against dilution or other impairment.
(b) Before taking any action that would result in an adjustment to
the then current Purchase Price to a price that would be below the then
current par value of Common Stock issuable upon exercise of any Warrant,
the Company will take or cause to be taken any and all necessary corporate
or other action that may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon payment of such Purchase Price as so adjusted.
(c) If the Company shall amend the provisions of any Rights (other
than the Warrants), including, without limitation, the Outstanding Warrant
or any outstanding stock options, or make any adjustment thereto (either
in violation of this Section 0 or pursuant to any antidilution provision)
so as to reduce the Consideration Per Share applicable thereto, increase
the number of shares issuable upon exercise thereof or otherwise change
the economic terms (such as the purchase price, exercise price, conversion
price or conversion ratio) thereof, then the Company shall make
appropriate adjustment, as nearly as practical to those that would be
required by the provisions of Section 0 through Section 0, inclusive, most
nearly analogous to the effect of such amendment, to the Purchase Price,
and, pursuant to Section 0, to the number of shares of Common Stock
issuable upon exercise of the Warrants, as shall be fair and equitable,
such adjustment to be determined by the Valuation Agent.
(d) In the event that any of the events described in any of Section
0 through Section 0, inclusive, give rise to an adjustment to the
purchase, exercise or conversion price or conversion ratio, or number of
shares of Common Stock issuable upon conversion or exercise, of any Rights
(other than the Warrants), including, without limitation, the Outstanding
Warrant or any outstanding stock options, then the adjustments provided
for in Section 0 through Section 0, inclusive, in respect of such event
shall give effect both to the event giving rise to such adjustment under
this Agreement and to all such adjustments made in respect of such other
Rights; PROVIDED, HOWEVER, that no such adjustment shall duplicate any
adjustment required to be made in respect thereof by virtue of the
provisions of Section 0.
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5. REPORTING COVENANTS
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Warrants:
(A) QUARTERLY FINANCIAL STATEMENTS -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
and in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end
of such quarter; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal
year ending with such quarter;
for the Company and the Subsidiaries, setting forth in each case, in
comparative form, the financial statements for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by the chief financial
officer of the Company; PROVIDED, that delivery of copies of the Company's
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission within the time period specified above shall be deemed to
satisfy the requirements of this Section 0 so long as such Quarterly
Report contains or is accompanied by the information specified in this
Section 0;
(B) ANNUAL FINANCIAL STATEMENTS -- as soon as practicable after the
end of each fiscal year of the Company, and in any event within one
hundred twenty (120) days thereafter:
(i) a consolidated balance sheets as at the end
of such year; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such year;
for the Company and the Subsidiaries, setting forth in comparative form,
the financial statement for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied by an audit
report thereon of independent certified public accountants of recognized
national standing, which report shall state without qualification
(including, without limitation, qualifications related to the scope of the
audit, the compliance of the audit with generally accepted auditing
standards, or the ability of the Company or a material subsidiary thereof
to continue as a going concern), that such financial statements have been
prepared and are in conformity with GAAP; PROVIDED, that the delivery of
the Company's Annual Report on Form 10-K for such fiscal year filed with
the Securities and Exchange Commission within the time period specified
above shall be deemed to satisfy the requirements of this Section 0 so
long as such Annual Report contains or is accompanied by the reports and
other information otherwise specified in this Section 0;
(C) SEC AND OTHER REPORTS -- promptly upon their becoming available:
(i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to stockholders
generally; and
(ii) each regular or periodic report (including, without
limitation, each Form 10-K,
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Form 10-Q and Form 8-K), and each amendment thereto filed by the
Company or any Subsidiary with the Securities and Exchange
Commission (and any successor agency); and
(D) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information as from time to time may be requested by any holder
of Warrants.
5.2 INFORMATION CONCERNING ANTIDILUTION ADJUSTMENTS.
(A) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common
Stock issuable upon the exercise of Warrants is adjusted or the Purchase
Price in respect thereof is adjusted, as herein provided, the Company
shall promptly give to each holder of Warrants notice of such adjustment
or adjustments and shall promptly deliver to each holder of Warrants a
certificate of the chief financial officer of the Company setting forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares after
such adjustment;
(ii) a brief statement of the facts requiring
such adjustment; and
(iii) the computation by which such
adjustment was made.
(B) ANNUAL CERTIFICATE. So long as any Warrant is outstanding,
within one hundred twenty (120) days of the end of each fiscal year of the
Company, the Company shall deliver to each holder of Warrants a
certificate of the chief financial officer of the Company setting forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares as of
the end of such fiscal year;
(ii) a brief statement of the facts requiring each adjustment,
if any, required to be made in such fiscal year; and
(iii) the computation by which each such
adjustment was made.
(C) CONFIRMATION BY ACCOUNTANTS. At the request of a holder of
Warrants in connection with any dispute concerning the accuracy or
validity of any certificate of the chief financial officer pursuant to
Section 0 or Section 0, such certificate shall be confirmed by a
certificate from the independent certified public accountants of the
Company.
(D) NOTICES OF CERTAIN EVENTS. Whenever the Company shall publicly
announce the authorization of any Notice Event, the Company shall, not
less than fifteen (15) days prior to the record date with respect to such
event (or, if no record date for the same shall be fixed, not less than
fifteen (15) days prior to the occurrence of such Notice Event), give to
each holder of Warrants, written notice of such event setting forth any
change in the number of shares of Common Stock the Company estimates will
be issuable upon the exercise of each Warrant, the estimated Purchase
Price after any adjustment required to be made hereunder and a brief
statement of the facts requiring such adjustment and the computation by
which the Company expects such adjustment will be made. Notwithstanding
the foregoing, no failure of the Company to give any such notice shall
affect the validity of the action taken unless such failure was in bad
faith.
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6. REGISTRATION RIGHTS.
6.1 SHELF REGISTRATION.
(A) FILING AND EFFECTIVENESS. On or prior to the Shelf Filing Date,
the Company will file a "shelf" registration statement (the "SHELF
REGISTRATION") on form S-3 or such other appropriate form pursuant to Rule
415 under the Securities Act or any similar rule that may be adopted by
the SEC with respect to dispositions of all of the Registrable Securities
in such manner or manners specified by the holders thereof. The Company
agrees to cause the Shelf Registration to be declared effective as
promptly as is practicable after such filing (and in any event, prior to
the Shelf Effective Date) and agrees to keep the Shelf Registration
effective (and to take any and all other actions necessary in order to
permit public resale of the Registrable Securities covered by the Shelf
Registration) for a period (the "SHELF EFFECTIVE PERIOD") beginning on the
date such Shelf Registration shall first be declared effective under the
Securities Act and ending upon the earlier to occur of April 30, 2000 and
such date as no Registrable Securities shall remain, subject to the terms
and conditions set forth in this Agreement. The Company further agrees, if
necessary, to supplement or make amendments to such Shelf Registration, if
required by the registration form utilized by the Company for the Shelf
Registration or by the instructions applicable to such registration form
or by the Securities Act, and the Company agrees to furnish to the holders
of the Registrable Securities covered by the Shelf Registration copies of
any such supplement or amendment prior to its being used or filed with the
SEC.
(B) APPROVAL OF SHELF REGISTRATIONS. If the Requisite Holders shall
have approved the filing of any Shelf Registration as provided in Section
0, but any holder of Registrable Securities objects to such filing on the
grounds that the disclosure contained in the Shelf Registration contains
any misstatement of a material fact or omits to state a fact required to
be stated therein or necessary to make the statements therein not
misleading, then such holder shall have the right, in its sole discretion,
to withdraw from the Shelf Registration. If the Company receives notice of
such withdrawal from any holder wishing to withdraw from the Shelf
Registration, then the Company shall not name such holder in the
registration statement or, in the case of withdrawal in connection with
any amendment or supplement to a registration statement in which such
holder is already named, shall amend such registration statement to delete
references to such holder, and to withdraw the Registrable Securities of
such holder, from the registration statement. The Shelf Registration shall
not be considered effective with respect to any such withdrawing holder.
(C) SELECTION OF UNDERWRITERS. If any offering pursuant to a Shelf
Registration is in the form of an underwritten offering, the underwriters
of such offering shall be one or more underwriting firms of recognized
standing selected by the Requisite Holders and reasonably acceptable to
the Company. In the event of an underwritten offering pursuant to the
Shelf Registration, no securities of the Company (other than the
Registrable Securities) shall be included in any such offering without the
prior written consent of all holders of Registrable Securities
participating in such offering.
(D) ACCELERATION OF REQUIREMENT TO FILE SHELF REGISTRATION. In the
event that the Company becomes aware that any event described in clause
(b), clause (c) or clause (d) of the definition of "Effective Date" will
or will be likely to occur on or before the Shelf Effective Date, then,
and in each such case, the Company shall file the Shelf Registration as
soon as possible, and, in any event, on or before the date which is thirty
(30) days after the Company becoming aware of any such occurrence, and
shall use its diligent best efforts to cause the Shelf Registration to be
declared effective under the Securities Act as soon after such filing as
is practicable.
(E) TEMPORARY SUSPENSION OF USE OF REGISTRATION STATEMENT.
Notwithstanding anything to the contrary in this Section 6, if at any time
and from time to time after the first date of effectiveness of the Shelf
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Registration, the Company may notify the holders of Registrable Securities
in writing in the manner contemplated by Section 8.6 hereof of a Potential
Material Event, which notice shall inform the holders of Registrable
Securities that they shall not offer or sell any Registrable Securities as
described in the following sentence. From the time of receipt of such
notice to the earliest to occur of:
(i) the public disclosure by the Company of the
Potential Material Event;
(ii) receipt of written notice from the Company that such
Potential Material Event no longer exists; and
(iii) the date thirty (30) days after the
date of the notice of such Potential Material Event;
the holders of Registrable Securities shall not offer or sell any
Registrable Securities pursuant to the Shelf Registration; PROVIDED,
HOWEVER, that the Company may not:
(A) deliver more than one (1) notice of a Potential Material
Event in respect of any one (1) Potential Material Event; or
(B) deliver any notice of a Potential Material Event for a
period of sixty (60) days following the expiration or earlier
termination of any other period during which the holders of
Registrable Securities may not by virtue of the provisions of this
Section 6.11 sell or offer to sell Registrable Securities.
The Company shall promptly (and in no event more than two (2) Business
Days after the occurrence of such event) notify each holder of the
occurrence of any event described in Section 0 or Section 0; and any such
notice and any notice given pursuant to Section 0 shall state that each
holder of Registrable Securities may resume offers and sales of the
Registrable Securities under the Shelf Registration. If any amended
prospectus or prospectus supplement shall be necessary as a result of the
occurrence of the Potential Material Event so that the prospectus does not
contain any untrue statement of any material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, the Company shall supply such amended prospectus or
prospectus supplement to each holder of Registrable Securities together
with such notice, and such notice shall inform the holders of Registrable
Securities concerning use of such amended prospectus or prospectus
supplement. The Company shall file each amended prospectus or prospectus
with the SEC in compliance with the provisions of Rule 424 under the
Securities Act.
6.2 INCIDENTAL REGISTRATION.
(A) FILING OF REGISTRATION STATEMENT. If the Company at any time
proposes to register any of its Common Stock (an "INCIDENTAL
REGISTRATION") under the Securities Act (other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor forms
thereto, in connection with an offer made solely to existing Security
holders or employees of the Company), for sale in an underwritten Public
Offering closing on or after the Effective Date, it will each such time
give prompt written notice to all holders of Registrable Securities of its
intention to do so, which notice shall be given to all such holders at
least fifteen (15) Business Days prior to the date that a registration
statement relating to such registration is proposed to be filed with the
SEC. Upon the written request of any such holder to include its shares
under such registration statement (which request shall be made within ten
(10) Business Days after the receipt of any such notice and shall specify
the Registrable Securities intended to be disposed of by such holder), the
Company will use its best efforts
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<PAGE>
to effect the registration of all Registrable Securities that the Company
has been so requested to register by such holder; PROVIDED, HOWEVER, that
if, at any time after giving written notice of its intention to register
any Securities for sale in connection with an underwritten Public Offering
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any
reason not to register such Securities, the Company may, at its election,
give written notice of such determination to each such holder and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities of such Persons in connection with such registration.
(B) SELECTION OF UNDERWRITERS. Notice of the Company's intention to
register such Securities shall designate the proposed underwriters of such
offering (which shall be one or more underwriting firms of recognized
standing) and shall contain the Company's agreement to use its best
efforts, if requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Securities that the Company
has been so requested to register pursuant to this Section 0, it being
understood that the holders of Registrable Securities shall have no right
to select different underwriters for the disposition of their Registrable
Securities.
(C) PRIORITY ON INCIDENTAL REGISTRATIONS. If the managing
underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting sale) that, in such
underwriter's opinion, the number of shares or Securities requested to be
included in such Incidental Registration exceeds the number that can be
sold in such offering within a price range acceptable to the Company (such
writing to state the basis of such opinion and the approximate number of
shares or Securities that may be included in such offering without such
effect), the Company will include in such Incidental Registration, to the
extent of the number of shares of Securities that the Company is so
advised can be sold in such offering:
(i) in the case of any registration initiated by the Company
for the purpose of selling Securities for its own account:
(A) FIRST, shares that the Company proposes to issue and
sell for its own account; and
(B) SECOND, Registrable Securities requested to be sold
by the holders thereof pursuant to this Section 0 and all
Securities proposed to be registered by the Other
Stockholders, PRO RATA among such holders on the basis of the
number of shares requested to be so registered by such
holders; and
(ii) in the case of a registration initiated by any Other
Stockholder pursuant to demand or required registration rights in
favor of such Other Stockholder:
(A) FIRST, Securities requested to be sold by the Other
Stockholders requesting such Registration;
(B) SECOND, Registrable Securities requested to be sold
by the holders thereof pursuant to this Section 0 and all
Securities proposed to be registered by the Other Stockholders
(other than those referred to in Section 0(c)(ii)(A)), PRO
RATA among such holders on the basis of the number of shares
requested to be so registered by such holders; and
(C) THIRD, shares that the Company proposes to issue and
sell for its own account.
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6.3 COMPANIES REGISTRATION. If the Securities Act (whether by statutory
amendment, amendment of the rules and regulations thereunder or both) is amended
after the date hereof to provide for a Companies Registration Scheme, and the
Company is or becomes eligible to participate in the Companies Registration
Scheme, then the Company, promptly following the request of the Required
Holders, shall use its reasonable best efforts to register promptly under the
Companies Registration Scheme so as to facilitate the resale under the
registration statement contemplated by such Companies Registration Scheme of the
Registrable Securities in accordance with the method or methods of distribution
contemplated by the Holders.
6.4 REGISTRATION PROCEDURES. The Company will use its best efforts to
effect each Registration, and to cooperate with the sale of such Registrable
Securities in accordance with the intended method of disposition thereof as
quickly as practicable, and the Company will as expeditiously as possible:
(a) subject, in the case of an Incidental Registration, to the
proviso to Section 0, prepare and file with the SEC the registration
statement and use its best efforts to cause the Registration to become
effective; PROVIDED, HOWEVER, that:
(i) before the initial filing of any registration statement,
the Company will furnish to the holders of the Registrable
Securities covered by such registration statement, their counsel,
and the underwriters, if any, and their counsel, copies of all such
documents proposed to be filed at least ten (10) days prior thereto,
which documents will be subject to the reasonable review, within
such ten (10) day period, of such holders, their counsel and the
underwriters; and
(ii) before filing any prospectus or any amendments or
supplements to any registration statement or prospectus, the Company
will furnish to the holders of the Registrable Securities covered by
such registration statement, their counsel, and the underwriters, if
any, and their counsel, copies of all such documents proposed to be
filed a reasonable period of time (in light of the nature of the
amendments or changes contained therein, which shall in every event
be at least one (1) day and shall never be required to be more than
ten (10) days) prior thereto, which documents will be subject to the
reasonable review, within such period, of such holders, their
counsel and the underwriters;
(b) subject, in the case of an Incidental Registration, to the
proviso to Section 0, prepare and file with the SEC such amendments and
post-effective amendments to any registration statement and any prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities covered
by such registration statement; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each holder of Registrable Securities included in
such Registration and the underwriter or underwriters, if any, without
charge, at least one signed copy of the registration statement and any
post-effective amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the prospectus
(including each preliminary prospectus and each prospectus filed under
Rule 424 under the Securities Act), any amendments or supplements thereto
and any documents incorporated by reference therein, as such holder or
underwriter may reasonably request in order to facilitate the disposition
of the Registrable Securities being sold by such holder (it being
understood that the Company consents to the use of the prospectus and any
amendment or supplement thereto by each holder of Registrable Securities
covered by such registration statement and the underwriter or
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or
supplement thereto);
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(d) notify each holder of the Registrable Securities of any stop
order or other order suspending the effectiveness of any registration
statement, issued or threatened by the SEC in connection therewith, and
take all reasonable actions required to prevent the entry of such stop
order or to remove it or obtain withdrawal of it at the earliest possible
moment if entered;
(e) if requested by the managing underwriter or underwriters, if
any, or any holder of Registrable Securities in connection with any sale
pursuant to a registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information relating to such
underwriting as the managing underwriter or underwriters, if any, or such
holder reasonably requests to be included therein; and make all required
filings of such prospectus supplement or post-effective amendment as soon
as practicable after being notified of the matters incorporated in such
prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is declared
effective, use its best efforts to register or qualify, and cooperate with
the holders of Registrable Securities included in such Registration, the
underwriter or underwriters, if any, and their counsel, in connection with
any necessary registration or qualification of the Registrable Securities
covered by such Registration for offer and sale under the securities or
"blue sky" laws of each state and other jurisdiction of the United States
as any such holder or the managing underwriter, if any, reasonably
requests in writing; use its best efforts to keep each such registration
or qualification effective, including through new filings, or amendments
or renewals, during the period such registration statement is required to
be kept effective; and do any and all other acts or things necessary or
advisable to enable the disposition in all such jurisdictions reasonably
requested of the Registrable Securities covered by such Registration;
PROVIDED, HOWEVER, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service
of process in any such jurisdiction where it is not then so subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends)
representing Securities to be sold under such Registration, and enable
such Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or such holders may
request;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities within the United States and having jurisdiction over the
Company or any Subsidiary as may reasonably be necessary to enable the
seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Securities;
(i) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Requisite Holders shall
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each Registration, a
"comfort letter" from the Company's independent certified public
accountants covering such matters of the type customarily covered by
"cold comfort letters" as the Requisite Holders and the underwriters
reasonably request; and
(ii) at the time of any underwritten sale pursuant to the
registration statement, a "bring-down comfort letter," dated as of
the date of such sale, from the Company's independent certified
public accountants covering such matters of the type customarily
covered by comfort letters as the Requisite Holders and the
underwriters reasonably request;
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(k) use its best efforts to obtain, at the time of any underwritten
sale pursuant to each Registration, an opinion or opinions, favorable to
the Requisite Holders in form and scope, from counsel for the Company in
customary form;
(l) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly prepare, file with the SEC
and furnish to such seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers or prospective purchasers
of such Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they are made;
(m) otherwise comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders (as
contemplated by Section 11(a) under the Securities Act) an earnings
statement satisfying the provisions of Rule 158 under the Securities Act
no later than ninety (90) days after the end of the twelve (12) month
period beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the registration statement,
which statement shall cover said twelve (12) month period;
(n) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration from
and after a date not later than the effective date of such Registration;
and
(o) obtain and maintain the registration of the Common Stock under
either section 12(b) or section 12(g) of the Exchange Act; and use its
best efforts to cause all Registrable Securities covered by each
Registration to be listed subject to notice of issuance, prior to the date
of first sale of such Registrable Securities pursuant to such
Registration, on:
(i) either the New York Stock Exchange, Inc., or
the NASDAQ National Market; and
(ii) each other securities exchange, if any, on which the
Common Stock is then listed.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by applicable laws or regulations.
6.5 REASONABLE INVESTIGATION. The Company shall:
(a) give the holders of Registrable Securities, their underwriters,
if any, and their respective counsel and accountants the opportunity to
participate in the preparation of the registration statement, each
prospectus included therein or filed with the SEC and each amendment
thereof or supplement thereto;
(b) give each such holder and underwriter reasonable opportunities
to discuss the business of the Company with its officers, counsel and the
independent public accountants who have certified its financial
statements;
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(c) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating in
any disposition pursuant to any Registration, and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial
and other records, pertinent corporate documents and properties of the
Company reasonably requested by any such Person; and
(d) cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Person in connection with
such Registration;
in each such case, as shall be reasonably necessary, in the good faith opinion
of such holder or such underwriter, to enable it to conduct a "reasonable
investigation" within the meaning of section 11(b)(3) of the Securities Act and
to satisfy the requirement of reasonable care imposed by section 12(a)(2) of the
Securities Act.
6.6 REGISTRATION EXPENSES. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities, including,
without limitation, any such registration not effected by the Company.
6.7 INDEMNIFICATION; CONTRIBUTION.
(A) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, to
the fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors and agents, if any, and each Person,
if any, who controls such holder within the meaning of section 15 of the
Securities Act, against all losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses (under the Securities Act or
common law or otherwise), joint or several, resulting from any violation
by the Company of the provisions of the Securities Act or any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if
amended or supplemented) or any preliminary prospectus or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case
of any prospectus, in light of the circumstances under which they were
made) not misleading, except to the extent that such losses, claims,
damages, liabilities (or proceedings in respect thereof) or expenses are
caused by any untrue statement or alleged untrue statement contained in or
by any omission or alleged omission from information concerning any holder
furnished in writing to the Company by such holder expressly for use
therein. If the offering pursuant to any registration statement provided
for under this Section 0 is made through underwriters, no action or
failure to act on the part of such underwriters (whether or not such
underwriter is an Affiliate of any holder of Registrable Securities) shall
affect the obligations of the Company to indemnify any holder of
Registrable Securities or any other Person pursuant to the preceding
sentence. If the offering pursuant to any registration statement provided
for under this Section 0 is made through underwriters, the Company agrees,
to the extent required by such underwriters, to enter into an underwriting
or other agreement providing for indemnity of such underwriters, their
officers, directors and agents, if any, and each Person, if any, who
controls such underwriters within the meaning of section 15 of the
Securities Act to the same extent as hereinbefore provided with respect to
the indemnification of the holders of Registrable Securities; PROVIDED
that the Company shall not be required to indemnify any such underwriter,
or any officer or director of such underwriter or any Person who controls
such underwriter within the meaning of section 15 of the Securities Act,
to the extent that the loss, claim, damage, liability (or proceedings in
respect thereof) or expense for which indemnification is claimed results
from such underwriter's failure to send or give a copy of an amended or
supplemented final prospectus to the Person asserting an untrue statement
or alleged untrue statement or omission or alleged omission at or prior to
the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such amended or
supplemented final prospectus prior to such written confirmation and the
underwriter was provided with such amended or supplemented final
prospectus.
(B) INDEMNIFICATION BY THE HOLDERS. In connection with any
registration statement in which a
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holder of Registrable Securities is participating, each such holder,
severally and not jointly, shall indemnify, to the fullest extent
permitted by law, the Company, each underwriter (if the underwriter so
requires) and their respective officers, directors and agents, if any, and
each Person, if any, who controls the Company or such underwriter within
the meaning of section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect thereof) and
expenses resulting from any untrue statement or alleged untrue statement
of a material fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of any prospectus,
in light of the circumstances under which they were made) not misleading,
but only to the extent that such untrue statement is contained in or such
omission is from information so concerning a holder furnished in writing
by such holder expressly for use therein; PROVIDED, HOWEVER, that such
holder's obligations hereunder shall be limited to an amount equal to the
proceeds to such holder of the Registrable Securities sold pursuant to
such registration statement.
(C) CONTROL OF DEFENSE. Any Person entitled to indemnification under
the provisions of this Section 0 shall give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, permit such indemnifying party to
assume the defense of such claim, with counsel reasonably satisfactory to
the indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without the consent
of the indemnified party if such settlement attributes liability to the
indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with
respect to any registration statement provided for under this Section 0
shall so provide. In the event an indemnifying party shall not be
entitled, or elects not, to assume the defense of a claim, such
indemnifying party shall not be obligated to pay the fees and expenses of
more than one counsel or firm of counsel for all parties indemnified by
such indemnifying party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties
in respect to such claim.
(D) CONTRIBUTION. If for any reason the foregoing indemnity is
unenforceable, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the
indemnifying party and the indemnified party as well as any other
relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities shall
be required to contribute any amount in excess of the amount such holder
would have been required to pay to an indemnified party if the indemnity
under Section 0(b) hereof was enforceable. No Person guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation. The obligation of any Person to
contribute pursuant to this Section 0 shall be several and not joint.
(E) ADVANCEMENT OF EXPENSES. An indemnifying party shall make
payments of all
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amounts required to be made pursuant to the foregoing provisions of this
Section 0 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when
otherwise due or payable. Without limiting the generality of the
foregoing, each indemnifying party, as an interim measure during the
pendency of any claim, action, investigation, inquiry or proceeding
arising out of or based upon any matter or subject for which indemnity (or
contribution in lieu thereof) would be available to any indemnified party
under any provision of this Section 0, shall promptly reimburse each
indemnified party, as often as invoiced therefor (but in no event more
often than monthly), for all reasonable legal or other expenses incurred
in connection with the investigation or defense of any such claim, action,
investigation, inquiry or proceeding, notwithstanding the absence of any
judicial determination as to the propriety or enforceability of the
indemnifying party's obligation to reimburse the indemnified party for
such expenses and notwithstanding the possibility that the obligations to
pay such expenses might later have been held to be improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
is held to be improper, the indemnified party agrees to promptly return
the amount so advanced to the indemnifying party, together with interest,
compounded monthly, at the prime rate (or other commercial lending rate
for borrowers of the highest credit standing) listed from time to time in
The Wall Street Journal which represents the base rate on corporate loans
posted by a substantial majority of the nation's thirty (30) largest
banks. Any such interim reimbursement payments which are not made to the
indemnified party within thirty (30) days of a request therefor shall bear
interest at such prime rate from the date of such request to the extent
such reimbursement payments are ultimately determined to be proper
obligations of the indemnifying party. To the extent required by any
underwriter in connection with the execution of any underwriting agreement
pursuant to which the holders of Registrable Securities shall be selling
any shares of Common Stock, the Company shall agree to advancement of the
expenses of such underwriter to at least the same extent as provided in
this Section 0.
(F) SURVIVAL. The indemnity and contribution agreements contained in
this Section 0 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of
Registrable Securities, its officers, directors, agents or any Person, if
any, who controls such holder as aforesaid, and shall survive the transfer
of such Securities by such holder.
6.8 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of Registrable
Securities, the Company agrees, and each holder of Registrable Securities
by acquisition of such Registrable Securities agrees, to enter into
customary holdback agreements concerning sale or distribution of
Registrable Securities and other equity Securities of the Company, except,
in the case of any holder of Registrable Securities, to the extent that
such holder is prohibited by applicable law or exercise of fiduciary
duties from agreeing to withhold Registrable Securities from sale or is
acting in its capacity as a fiduciary or investment adviser. Without
limiting the scope of the term "fiduciary," a holder shall be deemed to be
acting as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the Employee
Retirement Income Security Act of 1974, as amended, or the Investment
Company Act of 1940, as amended, or if such Registrable Securities are
held in a separate account under applicable insurance law or regulation.
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(b) If the Company shall at any time after the date hereof provide
to any holder of any Securities of the Company rights with respect to the
registration of such Securities under the Securities Act, such rights
shall not be in conflict with or adversely affect any of the rights
provided in this Section 0 to the holders of Registrable Securities.
6.9 OTHER REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of exercise of Warrants or conversion of
any class of Common Stock into any other class of Common Stock require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be.
6.10 AVAILABILITY OF INFORMATION. At any time that any class of the Common
Stock is registered under section 12(b) or section 12(g) of the Exchange Act,
the Company will comply with the reporting requirements of sections 13 and 15(d)
of the Exchange Act (whether or not it shall be required to do so pursuant to
such Sections) and will comply with all other public information reporting
requirements of the SEC from time to time in effect. In addition, the Company
shall file such reports and information, and shall make available to the public
and to the holders of Registrable Securities such information, as shall be
necessary to permit such holders to offer and sell Registrable Securities
pursuant to the provisions of Rules 144 promulgated under the Securities Act.
The Company will also cooperate with each such holder in supplying such
information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the availability of an exemption from the registration provisions
of the Securities Act in connection with the sale of any Registrable Securities.
The Company will furnish to each such holder, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and copies of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange or with the
SEC.
7. INTERPRETATION OF THIS AGREEMENT.
7.1 CERTAIN DEFINED TERMS. For the purpose of this Agreement, the
following terms shall have the meanings set forth below or set forth in the
Section hereof following such term:
ACQUIRING PERSON -- means and includes, with respect to any Share Purchase
Rights, any holders of Common Stock or other persons (as such term is used in
Section 13(d) and Section 14(d)(2) of the Exchange Act as in effect on the
Closing Date) or related persons constituting a group (as such term is used in
Rule 13d-5 under the Exchange Act as in effect on the Closing Date)
participating in or sponsoring one or more Share Purchase Triggering Events
specified in the Share Purchase Rights Plan.
ADDITIONAL COMMON STOCK -- means Common Stock, including treasury shares,
issued after the date hereof, except Common Stock issued upon the exercise of
any one or more Warrants.
AFFILIATE -- means, at any time, a Person (other than a Subsidiary or the
Purchasers):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds ten percent (10%) or more of any
class of the Voting Stock of the Company; or
(c) ten percent (10%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, ten percent (10%) or more of the
equity interest) of which is beneficially owned or held by the Company or
any Subsidiary;
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at such time.
As used in this definition,
CONTROL -- means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS -- and references thereto shall mean this Warrant
Agreement as it may from time to time be amended or supplemented.
AGGREGATE CONSIDERATION PAID -- means, in the case of a repurchase,
redemption, retirement or acquisition of shares of Common Stock, the aggregate
amount paid by the Company in connection therewith and, in the case of a
repurchase, redemption, retirement or acquisition of Rights, the sum of:
(a) the aggregate amount paid by the Company for such
Rights; PLUS
(b) the aggregate consideration or premiums stated in such Rights to
be payable for the shares of Common Stock covered thereby.
For purposes of clause (a) above, in the event of the repurchase,
redemption, retirement or acquisition of any Rights together with other
Securities or obligations of the Company or any other Person in which the
purchase price for the Rights and such other Securities or obligations is
expressed as a single purchase price (including, without limitation, upon the
issuance or sale of Preferred Stock or debt Securities which are convertible
into Common Stock), the aggregate amount paid by the Company for such Rights
shall include only the portion of such single purchase price attributable to
such Rights, and not the portion attributable to such other Securities or
obligations. The portion of such purchase price attributable to such Rights in
such case shall be equal to the product of:
(i) such single purchase price; MULTIPLIED BY
(ii) the quotient of:
(A) the fair market value (as determined by the Valuation
Agent) of such Right, independent of the value of such other
Securities or obligations (computed using the Black-Scholes option
pricing model or such other pricing model as the Valuation Agent
determines is appropriate, and applying such reasonable assumptions
concerning price variances with respect to the Common Stock and such
other variables as the Valuation Agent considers appropriate);
DIVIDED BY
(B) the fair market value (as determined by the Valuation
Agent) of such Right together with such other Securities or
obligations (computed using such methodology and making such
assumptions as the Valuation Agent determines is appropriate).
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AGGREGATE CONSIDERATION RECEIVABLE -- means, in the case of an issuance or
sale of shares of Additional Common Stock, the aggregate amount paid to the
Company in connection therewith and, in the case of an issuance or sale of
Rights, or any amendment thereto, the sum of:
(a) the aggregate amount paid to the Company for such
Rights; PLUS
(b) the aggregate consideration or premiums stated in such Rights to
be payable for the shares of Additional Common Stock covered thereby;
in each case without deduction for any fees, expenses or
underwriters discounts.
For purposes of clause (a) above, in the event of the issuance or sale of
any Rights together with other Securities or obligations of the Company or any
other Person in which the purchase price for the Rights and such other
Securities or obligations is expressed as a single purchase price (including,
without limitation, upon the issuance or sale of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
to the Company for such Rights shall include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; MULTIPLIED BY
(ii) the quotient of:
(A) the fair market value (as determined by the Valuation
Agent) of such Right, independent of the value of such other
Securities or obligations (computed using the Black-Scholes option
pricing model or such other pricing model as the Valuation Agent
determines is appropriate, and applying such reasonable assumptions
concerning price variances with respect to the Common Stock and such
other variables as the Valuation Agent considers appropriate);
DIVIDED BY
(B) the fair market value (as determined by the Valuation
Agent) of such Right together with such other Securities or
obligations (computed using such methodology and making such
assumptions as the Valuation Agent determines is appropriate).
AGREEMENT, THIS -- means this Warrant Agreement, as it may be from time to
time amended or supplemented.
BOARD OF DIRECTORS -- means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CHARTER -- means the Restated Articles of Incorporation of the Company.
CLOSING PRICE -- means, on any date with respect to any share of common
stock of any Person:
(a) the last sale price, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked
prices on such date, in each case as officially reported on the principal
national securities exchange on which such common stock is then listed or
admitted to trading; and
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(b) if no such common stock is then listed or admitted to trading on
any national securities exchange, but is listed on the NASDAQ National
Market or the NASDAQ SmallCap Market, as the case may be, the last trading
price of such common stock on such date as reported by NASDAQ, or if there
shall have been no trading on such date, the average of the reported
closing bid and asked prices on such date as shown by NASDAQ.
When used in this Agreement without reference to a particular Person or common
stock, "Closing Price" means the Closing Price of the Common Stock.
COMMON STOCK -- means the Common Stock, par value $0.01 per share, of the
Company; PROVIDED, HOWEVER, that subsequent to any creation or issuance by the
Company of any Share Purchase Rights and prior to the earlier of the Share
Purchase Right Detachment Date and the Share Purchase Right Termination Date,
the term "Common Stock," and references to any shares thereof, shall in each
case include the attached Share Purchase Rights.
COMPANIES REGISTRATION SCHEME -- means an amendment or amendment to the
Securities Act (whether by statutory amendment, amendment of the rules and
regulations thereunder or both), such as, without limitation, as proposed in the
Report of the Advisory Committee on the Capital Formation and Regulatory
Processes of the Securities and Exchange Commission, dated July 24, 1996,
pursuant to which:
(a) issuers of Securities are permitted to register all issuances of
securities on an integrated company registration statement; and
(b) under the provisions of such amendment, such registration could
cover the re-offering or resale by the holders thereof of shares of Common
Stock issued upon the exercise of the Warrants, if any, outstanding at
such time.
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COMPANY -- shall have the meaning specified in the introductory paragraph
hereof.
CONSIDERATION PER SHARE -- means, with respect to shares of Common Stock
or Rights, the quotient of:
(a) the Aggregate Consideration Paid (in the case of a repurchase,
redemption, retirement or other acquisition for value of Common Stock or
Rights) or the Aggregate Consideration Receivable (in the case of an
issuance or sale of Common Stock or Rights by the Company), as the case
may be, in respect of such shares of Common Stock or such Rights; DIVIDED
BY
(b) the total number of such shares of Common Stock or, in the case
of Rights, the total number of shares of Common Stock into which such
Rights are exercisable or convertible.
DISTRIBUTED ENTITY -- means any subsidiary or other Person in which the
Company owns any ownership interest at any time, the capital stock, the Spinoff
Shares of which are dividended or otherwise distributed (including, without
limitation, in any recapitalization) to the stockholders of the Company in
respect of the Common Stock in a Spinoff.
EFFECTIVE DATE -- means the earliest to occur of:
(a) May 1, 1999;
(b) any merger, consolidation, amalgamation or similar combination
of the Company with or into any other Person (other than a merger,
consolidation, amalgamation or similar combination in which the Company is
the surviving corporation and in which the stockholders of the Company
retain the Common Stock held by them immediately prior to the occurrence
of such event);
(c) the sale, conveyance or transfer of all or substantially all of
the Property of the Company to any other Person or group of Persons; and
(d) the fixing or establishment of a record date for determination
of the holders of the Common Stock entitled to receive any distribution of
cash, Securities or other Property to the holders of the Common Stock in
connection with a transaction described in clause (b) or clause (c) above.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
EXCLUDED SECURITIES -- means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 0 through Section 0, inclusive, hereof,
and in respect of which an adjustment has been made pursuant to such
Section;
(b) shares of Common Stock issuable upon exercise of the Warrants or
any other Rights (including, without limitation, the Outstanding Warrant
and outstanding stock options) outstanding on the date hereof;
(c) shares of Common Stock issued to the public in a bona fide
public offering registered under the Securities Act to Persons other than:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or
Rights;
PROVIDED, HOWEVER, that a bona fide public offering sold through an
underwriter and held open to the public generally shall not fail to meet
the requirements of this clause (c) merely by virtue of the fact that one
or more Affiliates, employees or existing holders of Common Stock or
Rights may have been purchasers from the underwriters therein so long as
no pre-existing arrangement or agreement to so purchase shares in
connection with such offering was in existence or in effect; and
(d) shares of Common Stock issued as the consideration in a
transaction involving a bona fide acquisition by the Company of another
Person (whether by acquisition of capital stock of such Person or all or
substantially all of the Property of such Person, or by merger or
consolidation of such Person into the Company or any Subsidiary) so long
as the economic terms of such acquisition were negotiated at arm's length
and so long as neither such Person nor the Person or Persons to whom such
Common Stock is issued are:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or Rights;
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PROVIDED, HOWEVER, that in the event that the acquired Person is a
corporation the common stock of which is registered under either section
12(b) or section 12(g) of the Exchange Act, the issuance of shares of
Common Stock to all stockholders of the acquired Person in a bona fide
acquisition shall not fail to meet the requirements of this clause (d)
merely by virtue of the fact that one or more Affiliates, employees or
existing holders of Common Stock or Rights may have been the beneficial
owners (as such term is defined in Rule 13d-3 under the Exchange Act, 17
C.F.R. ss.240.13d-3) of five percent (5%) or less of the common stock of
such acquired Person and so long as no pre-existing arrangement or
agreement to so issue shares in connection with such offering was in
existence or in effect;
(e) Rights consisting of stock options granted with an exercise
price not less than the Closing Price thereof as of the date of the grant
issued to employees, consultants or independent contractors of the Company
pursuant to any stock option plan approved by the Board of Directors at
any time, so long as, and to the extent that:
(i) the aggregate number of shares of Common Stock issuable
upon exercise of all such outstanding stock options (whether or not
then currently exercisable) does not at any time exceed fifteen
percent (15%) of the aggregate number of shares of Common Stock on a
Fully Diluted Basis at such time, such number of shares to be
appropriately adjusted in respect of the occurrence of any of the
events described in Section 0 hereof; and
(ii) no other holder of any Rights or any other Securities of
the Company shall have the right to any preemptive, subscription or
similar right in respect of such issuance;
and shares of Common Stock issuable upon the exercise of such stock
options; PROVIDED, HOWEVER, that the Company may at any time reduce the
exercise price of any such options to a price which, on the date of such
reduction, is not less than the Closing Price calculated as of such date;
and
(f) Share Purchase Right Securities issued or sold by the Company or
any Acquiring Person upon exercise of any Share Purchase Rights in
accordance with the provisions of any Share Purchase Right Agreement, and
any Common Stock, if any, issued upon the exercise or conversion of any
such Share Purchase Right Securities in accordance with the provisions of
the Share Purchase Rights and the Share Purchase Right Agreement.
EXPIRATION DATE -- means the later to occur of:
(a) May 1, 2003; and
(b) the first date upon which the entire then-remaining principal
amount of the Notes, together with all accrued and unpaid interest thereon
and all other amounts due in respect thereof, is fully and finally paid in
cash.
FAIR VALUE -- means, with respect to any share of common stock of any
Person at any time, the quotient of:
(a) the difference of:
(i) the sum of:
(A) the fair salable value of such Person as a going
concern, giving effect to all Property thereof and subject to
all liabilities thereof, that would be realized in an arm's
length sale between an informed and willing buyer and an
informed and willing seller,
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under no compulsion to buy or sell, respectively, as of a date
that is within fifteen (15) days of the date as of which the
determination is to be made, determined by agreement among the
holders of the Warrants and the Company and, if, in the
Company's view after reasonable negotiation no such agreement
can be reached, by the Valuation Agent, such determination in
either case to be made without regard to the absence of a
liquid or ready market for such common stock; PLUS
(B) the aggregate exercise or conversion price of all
Warrants and all other Valuable Rights of such Person
(including, without limitation, Valuable Rights of such Person
in respect of any shares of Preferred Stock convertible at
such time into shares of common stock of such Person) in
existence and remaining unexercised on such date;
MINUS
(ii) if there shall then exist any outstanding shares of
Preferred Stock (other than Preferred Stock convertible at such time
into shares of common stock of such Person, which shares represent
Valuable Rights of such Person at such time), the aggregate
liquidation preference of (or, if less, the aggregate price, if any,
at which such Person could elect to redeem) such shares of Preferred
Stock (together with all accrued and unpaid dividends thereon);
DIVIDED BY
(b) the sum of:
(i) the total number of shares of common stock
then outstanding; PLUS
(ii) the aggregate number of shares of common stock issuable
in respect of all Valuable Rights of such Person (including, without
limitation, Valuable Rights of such Person in respect of any shares
of Preferred Stock convertible at such time into shares of common
stock of such Person) at such time.
FULLY DILUTED BASIS -- means, with respect to any calculation of the
number of shares of common stock of any Person at any time, the sum of:
(a) the number of shares of common stock of such Person outstanding
at such time; PLUS
(b) the aggregate number of shares of common stock of such Person
issuable upon the exercise, conversion or exchange, as the case may be, of
all Rights of such Person outstanding at such time, regardless of whether
such Rights of such Person are then exercisable, convertible or
exchangeable and, with respect to any Rights of such Person, regardless of
whether the consideration given up by the holder of such Right of such
Person in connection with the exercise, conversion or exchange thereof
would exceed the value of the common stock of such Person received upon
such exercise, conversion or exchange.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
INCIDENTAL REGISTRATION -- Section 0.
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INITIAL PURCHASE PRICE -- means Twenty-Two Dollars and Seventy Cents
($22.70) per share.
INITIATING HOLDERS -- means, at any time, the holders (other than the
Company or any Affiliate thereof) of at least fifty-one percent (51%) (by number
of shares) of the Registrable Securities at such time (excluding any Registrable
Securities held directly or indirectly by the Company or any Affiliate thereof).
LIEN -- means any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property (for purposes of this
definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes, and the filing of any financing statement
under the Uniform Commercial Code of any jurisdiction, or an agreement to
give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting real Property;
(c) stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner evidenced by a
conditional sale agreement, capitalized lease or other arrangement
pursuant to which title to such Property has been retained by or vested in
some other Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
MARKET CAPITALIZATION -- means, with respect to any Person, at any time of
determination, the product of:
(a) the Market Price of the common stock of such Person at such time
of determination; MULTIPLIED BY
(b) the number of shares of the common stock of such Person
outstanding at such time.
MARKET CAPITALIZATION PERCENTAGE -- means, with respect to any Person, at
any time of determination, the quotient of:
(a) the Market Capitalization of such Person as of the Spinoff
Calculation Date; DIVIDED BY
(b) the sum of:
(i) the Market Capitalization of the
Distributed Entity as of the Spinoff Calculation
Date; PLUS
(ii) the Market Capitalization of the Company as of the
Spinoff Calculation Date.
MARKET PRICE -- means, per share of common stock of any Person, as of any
date of determination, the arithmetic mean of the daily Closing Prices for the
twenty (20) consecutive trading days before such date of
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determination; PROVIDED that if such common stock is then neither listed or
admitted to trading on any national securities exchange, the NASDAQ National
Market or the NASDAQ SmallCap Market, then "Market Price" means the Fair Value
of one share of such common stock, as determined by the Valuation Agent as of
the date of determination. When used in this Agreement without reference to a
particular Person or common stock, "Market Price" means the Market Price of the
Common Stock.
NASD -- means the National Association of Securities Dealers, Inc.
NASDAQ -- means the NASDAQ Stock Market, Inc., a subsidiary of the NASD.
NASDAQ NATIONAL MARKET -- has the meaning ascribed thereto in Rule 4200(r)
of NASDAQ.
NASDAQ SMALLCAP MARKET -- has the meaning ascribed thereto in Rule 4200(t)
of NASDAQ.
NOTE AGREEMENT -- means the Note Agreement, dated as of the date hereof,
among the Company and the Purchasers, pursuant to which the Notes were issued.
NOTES -- means the 12% Senior Subordinated Notes due May 1, 2003 issued
pursuant to the Securities Purchase Agreement and the Note Agreement.
NOTICE EVENT -- means any event that would require an adjustment in the
Purchase Price pursuant to Section 0 hereof.
OTHER STOCKHOLDERS -- means and includes, at any time, all holders of
Securities of the Company at such time (other than the holders of Registrable
Securities).
OUTSTANDING WARRANT -- means that certain warrant to purchase five
thousand (5,000) shares of the Common Stock issued to Henri Morris & Associates.
PERSON -- means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
POTENTIAL MATERIAL EVENT shall mean and include the following:
(a) the possession by the Company of material
undisclosed information not ripe for disclosure in a
registration statement; or
(b) any undisclosed material engagement or material activity by the
Company which would, in the good faith determination of the Board of
Directors of the Company, be adversely affected by disclosure in a
registration statement at such time.
PREFERRED STOCK -- means and includes, with respect to any Person, all
capital stock of such Person of any class which is preferred as to payment upon
a liquidation or dissolution of such Person or both, over the common stock of
such Person.
PRE-SPINOFF OWNERSHIP PERCENTAGE -- means, with respect to any Spinoff,
the quotient, expressed as a percentage, of:
(a) the number of shares of Common Stock issuable immediately prior
to the Spinoff upon exercise of all Warrants remaining outstanding at such
time; DIVIDED BY
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(b) the aggregate number of shares of Common Stock at such time
calculated on a Fully Diluted Basis.
PROPERTY -- means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
PUBLIC OFFERING -- shall mean any sale of Common Stock in a transaction
either registered under, or requiring registration under, section 5 of the
Securities Act.
PURCHASE PRICE -- means, prior to any adjustment pursuant to Section 0 of
this Agreement, the Initial Purchase Price and thereafter, the Initial Purchase
Price as thereafter successively adjusted and readjusted from time to time.
PURCHASERS -- shall have the meaning specified in the introductory
paragraph hereof.
REGISTRABLE SECURITIES -- means, at any time:
(a) any shares of Common Stock that have been issued upon the
exercise of any Warrant;
(b) any shares of Common Stock into which such shares of Common
Stock shall have been converted at any time; and
(c) any shares of Common Stock that are issuable upon the exercise
of the Warrants or the conversion of Common Stock referred to in clause
(a) or clause (b) above.
For purposes of Section 0 hereof and the definitions of "Initiating Holders" and
"Requisite Holders" herein, holders of Warrants at any time shall be deemed to
be holders of Registrable Securities described in clauses (b) and (c) of this
definition that are at such time issuable upon exercise in full of such
Warrants, whether or not such holders are then entitled so to exercise such
Warrants pursuant to the terms thereof.
As to any particular Registrable Securities once issued, such Securities
shall cease to be Registrable Securities:
(i) when a registration statement with respect to the sale of such
Securities shall have become effective under the Securities Act and such
Securities shall have been disposed of in accordance with such
registration statement;
(ii) when they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act;
(iii) when they shall have been otherwise transferred and subsequent
disposition of them shall not require registration or qualification under
the Securities Act or any similar state law then in force; or
(iv) when they shall have ceased to be outstanding or (with respect
to Registrable Securities described in clause (c) of this definition)
issuable upon exercise of the Warrants.
REGISTRATION -- means the Shelf Registration and each Incidental
Registration.
REGISTRATION EXPENSES -- means all expenses incident to the Company's
performance of or compliance with Section 6.1 through Section 0, inclusive,
including, without limitation:
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(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities);
(c) expenses of printing certificates for the Registrable Securities
in a form eligible for deposit with Depositary Trust Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties);
(f) fees and disbursements of counsel for the Company and its
independent certified public accountants (including the expenses of any
management review, cold comfort letters or any special audits required by
or incident to such performance and compliance);
(g) securities acts liability insurance (if the
Company elects to obtain such insurance);
(h) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration;
(i) fees and expenses of other Persons retained by
the Company; and
(j) reasonable fees and expenses of counsel for holders of
Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or fees and expenses of more than one
counsel representing the holders of Registrable Securities or any other selling
expenses, discounts or commissions incurred in connection with the sale of
Registrable Securities.
REQUIRED WARRANTHOLDERS -- means, at any time, the holders of at least
fifty-one percent (51%) of all Warrants outstanding (excluding any Warrants
directly or indirectly held by the Company, any Subsidiary or any Affiliate) at
such time.
REQUISITE HOLDERS -- means, with respect to any registration or proposed
registration of Registrable Securities pursuant to Section 0 hereof, any holder
or holders (other than the Company or any Affiliate or Subsidiary) holding at
least fifty-one percent (51%) of the shares of Registrable Securities (excluding
any shares of Registrable Securities directly or indirectly held by the Company
or any Affiliate or Subsidiary) to be so registered.
RIGHT -- means and includes:
(a) any warrant (including, without limitation, in the case of the
Company, any Warrant and the Outstanding Warrant) or any option
(including, without limitation, employee stock options) to acquire common
stock of such Person;
(b) any right issued to holders of the common stock of such Person,
or any class thereof, permitting the holders thereof to subscribe to
shares of Additional Common Stock (in the case of the Company) or
additional common stock or additional Rights of such Person (pursuant to a
rights offering or otherwise);
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(c) any right to acquire common stock of such Person pursuant to the
provisions of any Security convertible or exchangeable into such common
stock; and
(d) any similar right permitting the holder thereof to subscribe for
or purchase shares of common stock of such Person.
References in this Agreement to a Right or Rights of a Person means a Right or
Rights, regardless of whether or not issued by such Person, relating to the
common stock of such Person. When used in this Agreement without reference to a
particular Person, "Right" means a Right of the Company.
SECURITIES PURCHASE AGREEMENT -- means the Securities Purchase Agreement,
dated as of the date hereof, between the Company and the Purchaser, relating to
the offering and sale of the Notes and the Warrants.
SEC -- means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as amended.
SECURITY -- shall have the meaning specified in section 2(1) of the
Securities Act.
SHARE PURCHASE RIGHT -- means any Right created by the Company after the
date hereof which meets the following criteria:
(a) such Right is distributed to each holder of the Common Stock as
of the record date for the distribution thereof;
(b) such Right remains attached to each share of Common Stock
(including, without limitation, shares issued on or after the record date
for the distribution thereof but prior to any date of detachment thereof)
pending the occurrence of one or more Share Purchase Triggering Events;
(c) such Right shall become detached from, and may be transferred
separately from, the shares of Common Stock upon the occurrence of one or
more Share Purchase Triggering Events; and
(d) such Right shall become exercisable by all holders thereof other
than an Acquiring Person, upon the occurrence of one or more Share
Purchase Triggering Events (which may or may not be the Share Purchase
giving rise to the detachment of the Share Purchase Rights) specified in
the Share Purchase Rights Plan, into Share Purchase Right Securities.
SHARE PURCHASE RIGHT DETACHMENT DATE -- means the date upon which any
Share Purchase Right becomes detached from, and may be transferred separately
from, the shares of Common Stock.
SHARE PURCHASE RIGHT TERMINATION DATE -- means the earlier to occur of the
expiration, termination or redemption by the Company of all Share Purchase
Rights.
SHARE PURCHASE RIGHT PLAN -- means the plan or agreement pursuant to which
the Share Purchase Rights are issued and governing the terms thereof.
SHARE PURCHASE RIGHT SECURITIES -- means and includes any of the following
Securities issuable upon exercise of a Share Purchase Right:
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(a) shares of Common Stock or Rights of the Company,
or Securities containing Rights of the Company;
(b) shares of other capital stock of the Company or other Securities
convertible or exchangeable into capital stock of the Company; or
(c) shares of capital stock of an Acquiring Person or any Affiliate
thereof or other Securities convertible or exchangeable into any such
capital stock.
SHARE PURCHASE TRIGGERING EVENT -- means and includes any and all of the
following:
(a) the acquisition by any Acquiring Person of a percentage of the
outstanding Common Stock specified in the Share Purchase Right Plan (but
in no event less than ten percent (10%) of the outstanding Common Stock);
(b) the making by any Acquiring Person of a tender offer for the
Common Stock or any substantial portion thereof;
(c) the commencement of, or the occurrence of any event in
furtherance of, any actual or threatened election contest (as contemplated
by Rule 14a-11 under the Exchange Act) or other actual or threatened
solicitation of proxies or contest by or on behalf of a Person other than
the Board of Directors which, if fully completed, would result in a
majority of the directors of the Company following consummation of such
contest or proposal and the election or elections of directors at which
such contest or proposal is directed being Persons who were not directors
immediately prior to the commencement of such contest or proposal; or
(d) any similar or other action which would, if completed, result in
an Acquiring Person either owning a majority of the Common Stock or
controlling the Board of Directors.
SHELF EFFECTIVE DATE -- means May 1, 1999, or such earlier date as would
be required by Section 0.
SHELF EFFECTIVE PERIOD -- Section 0.
SHELF FILING DATE -- means January 1, 1999, or such earlier date as would
be required by Section 0.
SHELF REGISTRATION -- Section 0.
SPINOFF - means and includes:
(a) any payment or making of any dividend in, or making of any
distribution of, any Spinoff Shares to the stockholders of the Company in
respect of the Common Stock; or
(b) any reclassification of the Common Stock in any manner or other
similar arrangement such that Spinoff Shares are issued to or deemed
issued to the Company's stockholders.
SPINOFF CALCULATION DATE -- means, with respect to any Spinoff, the
thirtieth (30th) trading day following the consummation of such Spinoff.
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SPINOFF SHARES -- means and includes any capital stock, partnership or
membership interest, or warrant, option or other right to acquire any such
capital stock, partnership or membership interests, or other similar equity
interest of any Distributed Entity, in each case, which is dividended or
otherwise distributed (including, without limitation, in any recapitalization)
to the stockholders of the Company in respect of the Common Stock in a Spinoff.
SPINOFF WARRANT AGREEMENT -- Section 0.
SPINOFF WARRANT NUMBER -- means, at any time, with respect to any Spinoff,
the quotient of:
(a) the product of:
(i) the Pre-Spinoff Ownership Percentage;
MULTIPLIED BY
(ii) the aggregate number of Spinoff Shares, calculated as of
the Spinoff Calculation Date on a Fully Diluted Basis (but prior to
giving effect to the issuance of the Spinoff Warrants);
DIVIDED BY
(b) the difference of:
(i) one hundred percent (100%); MINUS
(ii) the Pre-Spinoff Ownership Percentage.
SPINOFF WARRANT PURCHASE PRICE -- means, on any date of determination,
with respect to any Spinoff, the quotient of:
(a) the product of:
(i) the Market Capitalization Percentage of the
Distributed Entity as of such date; MULTIPLIED BY
(ii) the number of Warrants outstanding on such
date; MULTIPLIED BY
(iii) the Purchase Price on such date prior to giving effect
to any adjustment in the Purchase Price (including, without
limitation, that required by Section 0) resulting from the Spinoff;
DIVIDED BY
(b) the Spinoff Warrant Number.
SPINOFF WARRANTS -- Section 0.
SUBSIDIARY -- means, at any time, each corporation, association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time.
TRANSFEREE -- means any registered transferee of all or any part of any
one or more Warrant Certificates acquired by the Purchasers under this
Agreement.
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VALUABLE RIGHT -- means, with respect to any Person at any time, a Right,
the effective conversion, exercise or purchase price of which on the date of
determination is less than the Market Price in respect of the shares of common
stock of such Person issuable upon conversion, exercise or purchase pursuant to
such Right on such date.
VALUATION AGENT -- means the Board of Directors, unless the Required
Warrantholders shall disagree in good faith with the determination of the Board
of Directors, in which case the determination shall be made by a firm of
independent certified public accountants, an investment banking firm or
appraisal firm (which firm shall own no material amount of Securities of, and
shall not be an Affiliate, Subsidiary or a related Person of, the Company) of
recognized national standing retained by the Company and reasonably acceptable
to the Required Warrantholders.
VOTING STOCK -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency), and, in the case of the Company, shall include the Common Stock.
WARRANT -- shall mean each Warrant to purchase shares of the Common Stock
issued pursuant to this Agreement.
WARRANT CERTIFICATE -- Section 0.
7.2 DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
7.3 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
8. MISCELLANEOUS.
8.1 EXPENSES. The Company agrees to pay, and save the Purchasers and any
Transferees harmless against liability for the payment of, all out-of-pocket
expenses (including, without limitation, the reasonable fees and disbursements
of special counsel for the Purchasers and any Transferee) arising in connection
with the transactions herein contemplated, including, without limitation:
(a) the cost, if any, of complying with Section 0
hereof;
(b) any subsequent proposed modification of, or proposed consent
requested or initiated by or on behalf of the Company under, this
Agreement, the Warrant Certificates or the Warrants, whether or not such
proposed modification shall be effected or proposed consent granted
(including, without limitation, all document production and duplication
charges and the reasonable fees and expenses of one special counsel
engaged by the holders of Warrants in connection therewith); and
(c) the enforcement of (or determination of whether or how to
enforce) any rights under this Agreement, the Warrant Certificates or the
Warrants or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement or
the transactions contemplated hereby or by reason of the Purchasers' or
any Transferee's having acquired any Warrant Certificate, including,
without limitation, the reasonable fees and expenses of one special
counsel engaged by the holders of the Warrants and incurred by the holders
of the Warrants and the costs and expenses incurred in any bankruptcy case
involving the Company or any Subsidiary.
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The obligations of the Company under this Section 0 shall survive the transfer
of any Warrant Certificate or portion thereof or interest therein by any
Purchaser or any Transferee and the exercise or expiration of any Warrant.
8.2 AMENDMENT AND WAIVER. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with and only with the
written consent of the Company and:
(a) in the case of Section 0 through Section 0, Section 0, Section 0
or Section 0 hereof (other than this Section 0), or of any term defined in
Section 0 to the extent used therein, the written consent of the Required
Warrantholders;
(b) the provisions of Section 0 hereof, and of any term defined in
Section 0 hereof as used in Section 0 hereof, may be amended, modified or
supplemented only by a writing duly executed by or on behalf of the
Initiating Holders and the Company; PROVIDED, HOWEVER, that compliance by
the Company with the provisions of Section 0 hereof,
with respect to any particular registration, may be waived
by the Requisite Holders; and
(c) in the case of this Section 0, or of any term defined in Section
0 to the extent used herein, the written consent of all holders of
Warrants then outstanding and all Registrable Securities then outstanding
(excluding any Warrants or Registrable Securities directly or indirectly
held by the Company, any Subsidiary or any Affiliate);
PROVIDED, HOWEVER, that:
(i) no such amendment or waiver of any of the provisions of this
Agreement pertaining to the Purchase Price or the number or kind of shares
of Common Stock that may be purchased upon exercise of each Warrant; and
(ii) no change delaying the occurrence of the Effective Date or
accelerating the occurrence of the Expiration Date;
shall be effective as to the holder of any Warrant unless
consented to in writing by such holder.
8.3 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers
to any action to be taken by any Person, or that such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person, including actions taken by or on behalf of any
partnership in which such Person is a general partner.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein and in the Securities Purchase
Agreement in connection herewith shall survive the execution and delivery of
this Agreement and the Warrant Certificates, the transfer by any Purchaser of
any Warrant Certificate or portion thereof or interest therein and the exercise
or expiration of any Warrant, and may be relied upon by the Purchasers or any
Transferee, regardless of any investigation made at any time by or on behalf of
such Purchaser or Transferee. Subject to the preceding sentence, this Agreement
and the Warrant Certificates embody the entire agreement and understanding among
the Company and the Purchasers, and supersede all prior agreements and
understandings, relating to the subject matter hereof.
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8.5 SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not. Notwithstanding the foregoing sentence, the Company may not assign any of
its rights, duties or obligations hereunder or under the Warrants without the
prior written consent of all holders of the Warrants then outstanding.
8.6 NOTICES. All communications hereunder or under the Warrants shall be
in writing and shall be delivered either by national overnight courier or by
facsimile transmission (confirmed by delivery by national overnight courier sent
on the day of the sending of such facsimile transmission), and shall be
addressed to the following addresses:
(a) if to a Purchaser, at its address set forth on Annex 1 to this
Agreement, or at such other address as such Purchaser shall have specified
to the Company in writing;
(b) if to any other holder of any Warrant Certificate, addressed to
such other holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall not
have so specified an address to the Company, then addressed to such other
holder in care of the last holder of such Warrant Certificate that shall
have so specified an address to the Company; and
(c) if to the Company, at the address set forth on Annex 2 to this
Agreement, or at such other address as the Company shall have specified to
each holder of Warrants in writing.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
8.7 SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchasers or to any holder or holders of
Warrant Certificates, the determination of such satisfaction shall, unless
specifically required herein in any instance to be "reasonable" or words to
similar effect, be made by such Purchasers, holder or holders, as the case may
be, in the sole and exclusive judgment (exercised in good faith) of the Person
or Persons making such determination.
8.8 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or 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.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
8.10 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(A) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE WARRANTS OR ANY OF THE DOCUMENTS, AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY.
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(B) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE WARRANTS OR ANY OF THE
DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY
BREACH UNDER THIS AGREEMENT, THE WARRANTS OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL DISTRICT
COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW YORK STATE COURT
LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS SOLE
DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE
IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING
BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY
CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH
COURT. IN ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR
TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE WARRANTS OR
ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(D) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN
ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE
COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH OTHER MANNER, AS MAY BE
PERMITTED BY APPLICABLE LAW.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed and delivered by one of its duly authorized officers or
representatives.
FRESH AMERICA CORP.
By:________________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:________________________________
Name:
Title:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By:________________________________
Name:
Title:
SIGNATURE (1A) CAYMAN, LTD.
By: John Hancock Mutual Life
Insurance Company,
Portfolio Advisor
By:________________________________
Name:
Title:
45
EXHIBIT 10.4
[BANK OF AMERICA LOGO]
COMBINED
SECOND AMENDMENT TO RESTATED BUSINESS LOAN AGREEMENT
AND
SECOND AMENDMENT TO BUSINESS LOAN SECURITY AGREEMENT
THIS COMBINED SECOND AMENDMENT TO RESTATED BUSINESS LOAN AGREEMENT AND
SECOND AMENDMENT TO BUSINESS LOAN SECURITY AGREEMENT (this "AMENDMENT") is dated
as of May 14, 1998, between FRESH AMERICA CORP., a Texas corporation
("BORROWER"), the undersigned "SUBSIDIARY/DEBTORS" (herein so called), and BANK
OF AMERICA TEXAS, N.A., a national banking association ("BANK").
W I T N E S S E T H:
WHEREAS, Borrower and Bank entered into that certain Restated Business
Loan Agreement dated February 2, 1998, (as amended through the date of this
Amendment and as may further be amended, extended, renewed, or restated from
time to time, the "LOAN AGREEMENT"), providing for (a) a revolving line of
credit of up to $12,000,000, and (b) a bridge loan of up to $5,000,000, each
made available by Bank to Borrower;
WHEREAS, to secure the payment and performance of, among other things,
Borrower's obligations under the Loan Agreement, Borrower and Subsidiary/Debtors
executed that certain Business Loan Security Agreement dated February 2, 1998
(as amended through the date of this Amendment and as may further be amended,
extended, renewed, or restated from time to time, the "SECURITY AGREEMENT"),
creating and granting Liens in favor of Bank with respect to certain assets of
Borrower and Subsidiary/Debtors;
WHEREAS, simultaneously with the effectiveness of this
Amendment, Borrower is prepaying the Bridge Note in full;
WHEREAS, Bank and Borrower desire to amend the Loan Agreement as described
herein to, among other things, (a) increase the maximum amount available under
the revolving line of credit from $12,000,000 to $15,000,000, (b) modify the
collateral required to be pledged as security for the indebtedness under the
Loan Agreement, (c) amend certain limitations on capital expenditures and
acquisitions, and (d) modify certain borrowing base reporting requirements; and
WHEREAS, Bank, Borrower, and Subsidiary/Debtors desire to amend the
Security Agreement as described herein to modify the collateral required to be
pledged as security for the indebtedness under the Loan Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained and
subject to the terms and conditions set forth herein, Bank, Borrower, and
Subsidiary/Debtors hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein and defined in the Loan
Agreement shall have the meanings set forth in the Loan Agreement except
as otherwise provided herein.
<PAGE>
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
(a) SECTION 2.1(A) is entirely amended, as follows:
(A) DURING THE AVAILABILITY PERIOD DESCRIBED BELOW, THE BANK WILL
PROVIDE A LINE OF CREDIT TO THE BORROWER. THE AMOUNT OF THE
LINE OF CREDIT (THE "REVOLVING FACILITY COMMITMENT") IS
$15,000,000, SUBJECT TO ADJUSTED BORROWING BASE RESTRICTIONS
AND REDUCTION IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
(b) SECTION 2.1(C) is entirely amended, as follows:
(C) AT ANY TIME WHEN THE PRINCIPAL AMOUNT OUTSTANDING
UNDER THE REVOLVING FACILITY COMMITMENT EXCEEDS
$7,500,000, THE BORROWER AGREES NOT TO PERMIT THE
OUTSTANDING PRINCIPAL BALANCE OF THE LINE OF
CREDIT PLUS THE OUTSTANDING AMOUNTS OF ANY
LETTERS OF CREDIT, INCLUDING (I) THE TOTAL FACE
AMOUNT OF ALL UNDRAWN AND UNCANCELLED LETTERS OF
CREDIT AND (II) AMOUNTS DRAWN ON LETTERS OF
CREDIT AND NOT YET REIMBURSED, TO EXCEED THE
ADJUSTED BORROWING BASE. IF THE BORROWER EXCEEDS
THIS LIMIT, THE BORROWER WILL IMMEDIATELY PAY THE
EXCESS TO THE BANK UPON THE BANK'S DEMAND.
(c) SECTION 6.2(A) is entirely amended, as follows:
(A) WITH RESPECT TO ANY COMPANY THAT IS PARTY TO THE
SECURITY AGREEMENT ON MAY 5, 1998, PRESENT AND
FUTURE ACCOUNTS RECEIVABLE (INCLUDING, WITHOUT
LIMITATION, GROWER CONTRACT RECEIVABLES),
INVENTORY, MACHINERY, EQUIPMENT, FIXTURES,
CONTRACT RIGHTS, PATENTS, TRADEMARKS, LICENSES,
OTHER GENERAL INTANGIBLES, INSTRUMENTS, CHATTEL
PAPER, AND DOCUMENTS OF SUCH COMPANY, TOGETHER
WITH ALL PROCEEDS AND PRODUCTS THEREOF, PURSUANT
TO THE SECURITY AGREEMENT; INCLUDING, WITHOUT
LIMITATION BORROWER'S RIGHTS TO PAYMENT UNDER THE
SAM'S CONTRACT;
(d) SECTION 6.2(D) is entirely amended, as follows:
(D) WITH RESPECT TO ANY COMPANY THAT BECOMES A PARTY TO THE
SECURITY AGREEMENT AFTER MAY 14, 1998, ALL PRESENT AND FUTURE
ACCOUNTS RECEIVABLE (INCLUDING, WITHOUT LIMITATION, GROWER
CONTRACT RECEIVABLES) AND INVENTORY OF SUCH COMPANY, TOGETHER
WITH ALL PROCEEDS AND PRODUCTS THEREOF, PURSUANT TO THE
SECURITY AGREEMENT.
(e) SECTION 10.3(E) is entirely amended, as follows:
(E) (I) CONCURRENT WITH ANY BORROWING NOTICE
REQUESTING AN ADVANCE THAT, WHEN MADE, WILL CAUSE
THE PRINCIPAL AMOUNT OUTSTANDING UNDER THE
REVOLVING FACILITY COMMITMENT TO EXCEED
$7,500,000, A BORROWING BASE REPORT SETTING FORTH
THE RESPECTIVE AMOUNTS OF ACCEPTABLE RECEIVABLES,
ACCEPTABLE GROWER CONTRACT RECEIVABLES, AND
ACCEPTABLE INVENTORY AS OF THE LAST DAY OF THE
PREVIOUS MONTH, TOGETHER WITH THE CALCULATION OF
THE ADJUSTED BORROWING BASE; AND
(II) FOR ANY MONTH DURING WHICH THE PRINCIPAL AMOUNT
OUTSTANDING UNDER THE REVOLVING FACILITY COMMITMENT EVER
EXCEEDS $7,500,000, A BORROWING BASE REPORT SETTING FORTH THE
RESPECTIVE AMOUNTS OF ACCEPTABLE RECEIVABLES, ACCEPTABLE
GROWER CONTRACT RECEIVABLES, AND ACCEPTABLE INVENTORY AS OF
THE LAST DAY OF SUCH MONTH, TOGETHER
<PAGE>
WITH THE CALCULATION OF THE ADJUSTED BORROWING BASE. ANY
BORROWING BASE REPORT REQUIRED TO BE DELIVERED UNDER THIS
CLAUSE (II) SHALL BE DELIVERED TO THE BANK WITHIN 30 DAYS
AFTER THE LAST DAY OF THE APPLICABLE MONTH.
ANY BORROWING BASE REPORT WHICH HAS BEEN TIMELY DELIVERED
SHALL REMAIN IN EFFECT UNTIL THE NEXT BORROWING BASE REPORT IS
TIMELY DELIVERED.
(f) The definition of "SUBORDINATED DEBT" in SECTION 10.4 is entirely
amended, as follows:
"SUBORDINATED DEBT" MEANS, AT ANY TIME, (A) DEBT OF ANY
COMPANY INCURRED IN CONNECTION WITH BORROWER'S 12% SENIOR
SUBORDINATED NOTES DUE MAY , 2003, IN THE PRINCIPAL AMOUNT OF
$20,000,000, AND ANY NOTES GIVEN BY BORROWER IN EXCHANGE FOR THOSE
NOTES IF THE NOTES SO GIVEN ARE SUBJECT TO THE SAME TERMS AS THE
ORIGINAL NOTES (COLLECTIVELY, THE "SUBORDINATED NOTES"), AND (B) ANY
OTHER DEBT OF ANY COMPANY (I) INCURRED AT A TIME WHEN NO POTENTIAL
DEFAULT OR DEFAULT HAS OCCURRED AND IS CONTINUING UNDER THIS
AGREEMENT, (II) THE INCURRENCE OF WHICH SHALL NOT CAUSE A POTENTIAL
DEFAULT OR DEFAULT UNDER THIS AGREEMENT (III) FOR WHICH NO SCHEDULED
OR MANDATORY PRINCIPAL PAYMENT OR SINKING FUND PAYMENT IS DUE ON OR
BEFORE THE EXPIRATION DATE, (IV) WHOSE COVENANTS ARE NO MORE
RESTRICTIVE THAN THOSE SET FORTH IN THIS AGREEMENT, AND (V) THE
PAYMENT OF WHICH IS SUBORDINATED TO DEBT OWED BY THE COMPANIES TO
THE BANK IN A MANNER ACCEPTABLE TO THE BANK.
(g) SECTION 10.9(E) is entirely amended, as follows:
(E) INCURRING PURCHASE MONEY DEBT TO FINANCE THE PURCHASE OF
EQUIPMENT FOR ANY REPORTING COMPANY SO LONG AS THE OUTSTANDING
PRINCIPAL AMOUNT OF THAT DEBT FOR ALL OF THE REPORTING
COMPANIES, WHEN AGGREGATED WITH THE OUTSTANDING PRINCIPAL
AMOUNT OF THE DEBT PERMITTED UNDER SECTION 10.9(G) BELOW,
NEVER EXCEEDS $5,000,000.
(h) SECTION 10.11 is entirely amended, as follows:
10.11 CAPITAL EXPENDITURES. NO COMPANY SHALL MAKE CAPITAL
EXPENDITURES OTHER THAN PERMITTED CAPITAL EXPENDITURES. "PERMITTED
CAPITAL EXPENDITURES" MEANS, WITHOUT DUPLICATION, (A) CAPITAL
EXPENDITURES MADE IN CONNECTION WITH PERMITTED ACQUISITIONS, (B) THE
PORTION OF CAPITAL EXPENDITURES FINANCED WITH DEBT PERMITTED UNDER
SECTION 10.9(E) OF THIS AGREEMENT, OR (C) FOR ANY FISCAL YEAR OF THE
BORROWER BEGINNING AFTER JANUARY 3, 1998, A TOTAL AMOUNT OF CAPITAL
EXPENDITURES (OTHER THAN CAPITAL EXPENDITURES IN CONNECTION WITH
PERMITTED ACQUISITIONS OR PERMITTED PURSUANT TO SUBSECTIONS (A) AND
(B) ABOVE) THAT DOES NOT EXCEED THE SUM OF (I) $3,500,000 FOR ALL
COMPANIES, PLUS (II) AMOUNTS, UP TO $500,000, FOR THE IMMEDIATELY
PRECEDING FISCAL YEAR UNDER CLAUSE (I) ABOVE THAT WERE NOT UTILIZED
FOR "PERMITTED CAPITAL EXPENDITURES".
(i) SECTION 10.13(J) is entirely amended, as follows:
(J) INVESTMENTS IN OTHER PERSONS; PROVIDED THAT SUCH INVESTMENTS
DO NOT IN THE AGGREGATE EXCEED $2,000,000.
(j) SECTION 10.14(D) is entirely amended, as follows:
(D) IF, IMMEDIATELY AFTER CONSUMMATION OF SUCH ACQUISITION, THE
PRINCIPAL AMOUNT OUTSTANDING UNDER THE REVOLVING FACILITY
COMMITMENT WILL EXCEED $7,500,000, THEN WITHOUT THE PRIOR
APPROVAL OF THE BANK, THE CONSIDERATION TO BE PAID BY ANY
COMPANY IN CONNECTION WITH THE
<PAGE>
ACQUISITION THAT IS COMPRISED OF CASH AND/OR DEBT, TO THE
EXTENT SUCH DEBT IS A FIXED OBLIGATION OF THAT COMPANY THAT
WILL BECOME A LIABILITY OF THE COMPANY UNDER GAAP PRIOR TO THE
EXPIRATION DATE -- WHETHER ASSUMED, INCURRED, OR TO REMAIN,
BUT IN ANY EVENT SUBJECT TO SECTIONS 10.9(F) AND (G) -- (I)
DOES NOT COLLECTIVELY EXCEED $2,000,000;
(k) SECTION 10.14(E) is entirely amended, as follows:
(E) IF THE CONSIDERATION DESCRIBED IN SECTION 10.14(D) ABOVE TO BE
PAID BY ANY COMPANY IN CONNECTION WITH THE ACQUISITION
COLLECTIVELY EXCEED $2,000,000, THE BORROWER PROVIDES THE BANK
WITH EVIDENCE, SATISFACTORY TO THE BANK, OF THE POSITIVE
OPERATING INCOME OF THE PERSON TO BE ACQUIRED FOR THE MOST
RECENT 12-MONTH PERIOD;
(l) New SECTION 10.25(I) and (J) are hereby added immediately following
SECTION 10.25(H), to read as follows:
(I) PREPAY OR CAUSE TO BE PREPAID ANY PRINCIPAL OF, OR ANY
INTEREST ON, ANY OF THE SUBORDINATED NOTES EXCEPT (A)
EXCHANGES OF SUBORDINATED NOTES FOR OTHER SUBORDINATED NOTES,
AND (B) CONVERSIONS OF DEBT UNDER THE SUBORDINATED NOTES TO
EQUITY OF BORROWER THAT IS NOT MANDATORILY REDEEMABLE.
(J) AGREE TO ANY CHANGE OR AMENDMENT TO THE TERMS OF
THE SUBORDINATED NOTES (OR ANY INDENTURE OR
AGREEMENT IN CONNECTION THEREWITH) IF THE EFFECT
OF SUCH CHANGE OR AMENDMENT IS TO: (A) INCREASE
THE INTEREST RATE ON THE SUBORDINATED NOTES, (B)
CHANGE THE DATES UPON WHICH PAYMENTS OF PRINCIPAL
OR INTEREST ARE DUE ON THE SUBORDINATED NOTES
OTHER THAN TO EXTEND SUCH DATES, (C) CHANGE ANY
DEFAULT OR EVENT OF DEFAULT OR COVENANT OTHER
THAN TO DELETE OR MAKE LESS RESTRICTIVE ANY
DEFAULT OR COVENANT PROVISION THEREIN, (D) CHANGE
THE REDEMPTION OR PREPAYMENT PROVISIONS OF THE
SUBORDINATED NOTES OTHER THAN TO EXTEND THE DATES
THEREFOR OR TO REDUCE THE PREMIUMS PAYABLE IN
CONNECTION THEREWITH, OR (E) CHANGE OR AMEND ANY
OTHER TERM IF SUCH CHANGE OR AMENDMENT WOULD
MATERIALLY INCREASE THE OBLIGATIONS OF THE
OBLIGOR OR CONFER ADDITIONAL MATERIAL RIGHTS TO
THE HOLDER OF THE SUBORDINATED NOTES IN A MANNER
ADVERSE TO BORROWER OR THE BANK.
(m) EXHIBIT A-1 is entirely amended in the form of, and all references to
EXHIBIT A-1 are changed to, the attached AMENDED EXHIBIT A-1.
3. AMENDMENTS TO SECURITY AGREEMENT. The Security Agreement
is hereby amended as follows:
(a) PARAGRAPH 1 of the Security Agreement is amended by entirely amending
the following definitions, as follows:
CHATTEL PAPER MEANS, FOR EACH DEBTOR (OTHER THAN ANY DEBTOR
EXECUTING AN ADDITIONAL SUBSIDIARIES SUPPLEMENT PURSUANT TO
PARAGRAPH 10(E) AFTER MAY 14, 1998), ANY "CHATTEL PAPER," AS THAT
TERM IS DEFINED IN CHAPTER 9
OF THE UCC.
DOCUMENT MEANS, FOR EACH DEBTOR (OTHER THAN ANY DEBTOR EXECUTING AN
ADDITIONAL SUBSIDIARIES SUPPLEMENT PURSUANT TO PARAGRAPH 10(E) AFTER
MAY 14, 1998), ANY "DOCUMENT," AS THAT TERM IS DEFINED IN CHAPTER 9
OF THE UCC, INCLUDING, WITHOUT LIMITATION, ALL DOCUMENTS OF TITLE
AND WAREHOUSE RECEIPTS OF DEBTOR.
<PAGE>
EQUIPMENT MEANS, FOR EACH DEBTOR (OTHER THAN ANY DEBTOR EXECUTING AN
ADDITIONAL SUBSIDIARIES SUPPLEMENT PURSUANT TO PARAGRAPH 10(E) AFTER
MAY 14, 1998), ANY "EQUIPMENT," AS THAT TERM IS DEFINED IN CHAPTER 9
OF THE UCC, AND, IN ANY EVENT, INCLUDES, WITHOUT LIMITATION, ALL
MACHINERY, EQUIPMENT, FURNISHINGS, AND FIXTURES AND ANY AND ALL
ADDITIONS, SUBSTITUTIONS, AND REPLACEMENTS OF ANY OF THE FOREGOING,
WHEREVER LOCATED, TOGETHER WITH ALL ATTACHMENTS, COMPONENTS, PARTS,
EQUIPMENT, AND ACCESSORIES INSTALLED THEREON OR AFFIXED THERETO.
GENERAL INTANGIBLES MEANS, FOR EACH DEBTOR (OTHER THAN ANY DEBTOR
EXECUTING AN ADDITIONAL SUBSIDIARIES SUPPLEMENT PURSUANT TO
PARAGRAPH 10(E) AFTER MAY 5, 1998), ANY "GENERAL INTANGIBLES," AS
THAT TERM IS DEFINED IN CHAPTER 9 OF THE UCC, AND, IN ANY EVENT,
INCLUDES, WITHOUT LIMITATION, EACH OF THE FOLLOWING: (A) ALL OF
DEBTOR'S PATENTS, PATENT APPLICATIONS, PATENT RIGHTS, SERVICE MARKS,
TRADEMARKS, TRADE NAMES, TRADE SECRETS, INTELLECTUAL PROPERTY,
REGISTRATIONS, GOODWILL, COPYRIGHTS, FRANCHISES, LICENSES, PERMITS,
PROPRIETARY INFORMATION, CUSTOMER LISTS, DESIGNS, AND INVENTIONS;
(B) ALL OF DEBTOR'S BOOKS, RECORDS, DATA, PLANS, MANUALS, COMPUTER
SOFTWARE, AND COMPUTER PROGRAMS; (C) ALL OF DEBTOR'S CONTRACT
RIGHTS, PARTNERSHIP INTERESTS AND JOINT VENTURE INTERESTS, DEPOSIT
ACCOUNTS, INVESTMENT ACCOUNTS, AND CERTIFICATES OF DEPOSIT; (D) ALL
RIGHTS OF DEBTOR TO PAYMENT UNDER LETTERS OF CREDIT AND SIMILAR
AGREEMENTS;(E) ALL TAX REFUNDS AND TAX REFUND CLAIMS OF DEBTOR; (F)
ALL CAUSES OF ACTION OF DEBTOR (WHETHER ARISING IN CONTRACT, TORT,
OR OTHERWISE AND WHETHER OR NOT CURRENTLY IN LITIGATION) AND ALL
JUDGMENTS IN FAVOR OF DEBTOR; (G) ALL RIGHTS AND CLAIMS OF DEBTOR
UNDER WARRANTIES AND INDEMNITIES; AND (H) ALL RIGHTS OF DEBTOR UNDER
ANY INSURANCE, SURETY, OR SIMILAR CONTRACT OR ARRANGEMENT.
INSTRUMENT MEANS, FOR EACH DEBTOR (OTHER THAN ANY DEBTOR EXECUTING
AN ADDITIONAL SUBSIDIARIES SUPPLEMENT PURSUANT TO PARAGRAPH 10(E)
AFTER MAY 14, 1998), ANY "INSTRUMENT," AS THAT TERM IS DEFINED IN
CHAPTER 9 OF
THE UCC.
(b) PARAGRAPH 4 of the Security Agreement is entirely amended, as
follows:
4. COLLATERAL. THE TERM "COLLATERAL" MEANS THE
FOLLOWING ITEMS AND TYPES OF PROPERTY, WHEREVER
LOCATED AND NOW OR IN THE FUTURE ACQUIRED OR EXISTING:
O FOR EACH DEBTOR, ALL OF ITS ACCOUNTS, INVESTMENT
PROPERTY, GROWER CONTRACT RECEIVABLES, INVENTORY,
AND PLEDGED SECURITIES;
O FOR EACH DEBTOR (OTHER THAN ANY DEBTOR EXECUTING AN ADDITIONAL
SUBSIDIARIES SUPPLEMENT PURSUANT TO PARAGRAPH 10(E) AFTER MAY
14, 1998), ALL OF ITS CHATTEL PAPER, DOCUMENTS, EQUIPMENT,
GENERAL INTANGIBLES, AND INSTRUMENTS; AND
O ALL CASH AND NONCASH PROCEEDS OF ANY OTHER
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ALL
CASH, ACCOUNTS, GENERAL INTANGIBLES, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER, GOODS, AND ANY OTHER
PROPERTY RECEIVED UPON THE SALE OR DISPOSITION OF
ANY OTHER COLLATERAL AND ALL INSURANCE PROCEEDS
OF ANY KIND PAID AT ANY TIME IN CONNECTION WITH
ANY OTHER COLLATERAL.
(c) PARAGRAPH 10(E) of the Security Agreement is entirely amended, as
follows:
(E) ADDITIONAL DEBTORS. ANY PERSON THAT BECOMES A SUBSIDIARY OF ANY
DEBTOR SUBSEQUENT TO THE DATE HEREOF AND THAT WAS NOT A "DEBTOR"
UNDER THIS AGREEMENT AT THE TIME OF INITIAL EXECUTION HEREOF SHALL
BECOME A "DEBTOR" HEREUNDER BY EXECUTING AND DELIVERING TO SECURED
PARTY AN ADDITIONAL SUBSIDIARIES SUPPLEMENT IN THE FORM ATTACHED
HERETO AS ANNEX 4. ANY SUCH SUBSIDIARY SHALL THEREAFTER BE DEEMED A
"DEBTOR" FOR ALL PURPOSES UNDER THIS AGREEMENT (EXCEPT TO THE EXTENT
CERTAIN PROVISIONS SPECIFICALLY DO NOT APPLY TO "DEBTORS" EXECUTING
AN ADDITIONAL SUBSIDIARIES SUPPLEMENT AFTER MAY 14, 1998).
<PAGE>
(d) ANNEX 4 to the Security Agreement is entirely amended in the form of,
and all references to ANNEX 4 are changed to, the attached AMENDED ANNEX
4.
4. CONDITIONS PRECEDENT. This Amendment will become effective as of the date
first written above, provided that the Bank has received from the Borrower
a duly executed original of this Amendment, together with each item set
forth on the attached ANNEX 1.
5. CONTINUED EFFECT. Except to the extent amended hereby, all
terms, provisions and conditions of the Loan Agreement and
the other Loan Documents shall continue in full force and
effect and the Loan Agreement and the other Loan Documents
shall remain enforceable and binding in accordance with
their respective terms. Borrower and each
Subsidiary/Debtor confirms and agrees that the other Loan
Documents, and the liens and security interests granted
therein, shall continue to secure Borrower's obligations
and indebtedness to Bank, direct or indirect, arising pursuant to the
Revolving Note and the Loan Agreement, as amended hereby, whether or not
such other Loan Documents shall be expressly supplemented or amended in
connection with this Amendment. All references in the Loan Documents to
the Loan Agreement shall hereafter be deemed to be references to the Loan
Agreement as amended hereby. All references in the Loan Documents to the
Security Agreement shall hereafter be deemed to be references to the
Security Agreement as amended hereby.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute one and
the same document, and each party hereto may execute this Amendment by
signing any of such counterparts.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon, and inure to
be the benefit of, the parties hereto and their respective heirs,
administrators, successors and assigns.
8. NO ORAL AGREEMENTS. THIS WRITTEN AMENDMENT AND THE DOCUMENTS EXECUTED IN
CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BANK:
BANK OF AMERICA TEXAS, N.A.
By:
Connor J. Duffey, Vice President
BORROWER:
FRESH AMERICA CORP.
By:
Robert C. Kiehnle, Executive Vice President
COMBINED SECOND AMENDMENT SIGNATURE PAGE
PAGE ONE OF TWO PAGES
<PAGE>
SUBSIDIARY/DEBTORS:
LONE STAR PRODUCE ACQUISITION CORP.
By:
Robert C. Kiehnle, Vice President
PRODUCE PLUS, INC.
By:
Robert C. Kiehnle, Vice President
ONE MORE TOMATO, INC.
By:
Robert C. Kiehnle, Vice President
FRESH AMERICA CALIFORNIA, INC.
By:
Robert C. Kiehnle, Vice President
C. KALIL FRUIT AND VEGETABLE, INC.
By:
Robert C. Kiehnle, Vice President
SAM'S BANANA CO., INC.
By:
Robert C. Kiehnle, Vice President
FRESH AMERICA LOUISIANA, INC.
By:
Robert C. Kiehnle, Vice President
FRESH AMERICA GEORGIA, INC.
By:
Robert C. Kiehnle, Vice President
FRESH AMERICA SAN DIEGO, INC.
By:
Robert C. Kiehnle, Vice President
HEREFORD HAVEN, INC.
By:
Robert C. Kiehnle, Vice President
FRANCISCO ACQUISITION CORP.
By:
Robert C. Kiehnle, Vice President
COMBINED SECOND AMENDMENT SIGNATURE PAGE
PAGE two OF TWO PAGES
<PAGE>
ANNEX 1
1. COMBINED SECOND AMENDMENT TO RESTATED BUSINESS LOAN AGREEMENT AND SECOND
AMENDMENT TO BUSINESS LOAN SECURITY AGREEMENT (this "AMENDMENT") dated as
of May 14, 1998, between FRESH AMERICA CORP., a Texas corporation
("BORROWER"), the "SUBSIDIARY/DEBTORS" (herein so called), and BANK OF
AMERICA TEXAS, N.A., a national banking association ("BANK"), the defined
terms in which have the same meanings when used in this Annex, to which
must be attached the following:
<TABLE>
<CAPTION>
<S> <C>
AMENDED EXHIBIT A-1 [TO CREDIT AGREEMENT] - AMENDED AND RESTATED REVOLVING NOTE
AMENDED ANNEX 4 [TO SECURITY AGREEMENT] - AMENDED ADDITIONAL SUBSIDIARIES SUPPLEMENT
</TABLE>
2. AMENDED AND RESTATED REVOLVING NOTE dated as of May 14, 1998, executed by
Borrower, and payable to Bank in the stated principal amount of
$15,000,000.
3. RELEASE OF LIEN, executed by Bank, releasing liens granted to Bank by
Borrower by that certain Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Rents dated as of February 2, 1998, executed
by Borrower as GRANTOR, for the benefit of Bank, with respect to certain
Real Property located in Harris County, Texas, and recorded in the Real
Property Records of Harris County, Texas at Vol. 516-91, Pgs. No.
0842-0864, Filmcode No. S858449.
4. RELEASE OF LIEN, executed by Bank, releasing liens granted to Bank by
Borrower by that certain Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Rents dated as of February 2, 1998, executed
by Borrower as GRANTOR, for the benefit of Bank, with respect to certain
Real Property located in Wayne County, Indiana, and recorded in the Real
Property Records of Wayne County, Indiana at Instrument No.
1998001571.
5. EVIDENCE OF PAYMENT of all amounts outstanding under the Bridge Loan
Commitment.
6. CONSENT of Bank to Borrower's incurrence of debt described in ITEMS 7-10,
below.
7. SECURITIES PURCHASE AGREEMENT dated as of May , 1998, executed by and
between Borrower and each PURCHASER described therein.
8. NOTE AGREEMENT dated as of May , 1998, executed by and between Borrower
and each PURCHASER described therein.
9. WARRANT AGREEMENT dated as of May , 1998, executed by and between Borrower
and each PURCHASER described therein.
10. SUBORDINATED GUARANTY dated as of May , 1998, one executed by each
Subsidiary of Borrower OTHER THAN Unrestricted Subsidiaries.
11. SECRETARY OR ASSISTANT SECRETARY CERTIFICATES for Borrower and each
Subsidiary/Debtor, executed by its Secretary or any Assistant Secretary as
to the resolutions of its directors authorizing the Amendment and the
transactions contemplated inITEMS 7-10, above, and as to no changes with
respect to the incumbency of its officers, its bylaws or corporate
charter.
12. OPINION of counsel to Borrower with respect to ITEMS 7-10 above, addressed
to the PURCHASERS described therein.
13. OPINION of counsel to Purchasers with respect to ITEMS 7-10 above,
addressed to the PURCHASERS described therein.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-END> JUL-03-1998
<CASH> 218
<SECURITIES> 0
<RECEIVABLES> 54,139
<ALLOWANCES> 0
<INVENTORY> 5,658
<CURRENT-ASSETS> 64,160
<PP&E> 16,001
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,674
<CURRENT-LIABILITIES> 45,540
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 40,142
<TOTAL-LIABILITY-AND-EQUITY> 102,674
<SALES> 292,605
<TOTAL-REVENUES> 292,605
<CGS> 260,643
<TOTAL-COSTS> 260,643
<OTHER-EXPENSES> 165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,034
<INCOME-PRETAX> 3,881
<INCOME-TAX> 1,467
<INCOME-CONTINUING> 2,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,414
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.49
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-END> JUN-27-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
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0
0
<COMMON> 0
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<SALES> 201,073
<TOTAL-REVENUES> 201,073
<CGS> 181,526
<TOTAL-COSTS> 281,526
<OTHER-EXPENSES> (156)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 201
<INCOME-PRETAX> 4,181
<INCOME-TAX> 1,525
<INCOME-CONTINUING> 2,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,656
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.58
</TABLE>
