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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 17, 1998 (February 2, 1998)
Fresh America Corp.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Texas 000-24124 76-0281274
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
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6600 LBJ Freeway, Suite 180
Dallas, Texas 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(972) 774-0575
F-1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 2, 1998, Fresh America Corp. (the "Registrant" or the
"Company"), through a wholly-owned acquisition subsidiary, completed the
acquisition of substantially all of the assets of Francisco Distributing
Company, LLC, a California limited liability company ("Francisco"), for
(subject to adjustment and excluding transaction costs) approximately $5.8
million in cash, $5.5 million in Company common stock, certain contingent
payments plus the assumption of certain liabilities. Subject to an
aggregate floor and ceiling of approximately $2.5 million and $16.5 million,
respectively, the Company has agreed to pay Francisco contingent payments
(payable in cash, Company common stock or a combination of both) based upon a
multiple of Francisco's pre-tax earnings in excess of certain minimum
thresholds in each of fiscal 1998 and 1999. Francisco sells, distributes,
transports and repacks fresh produce primarily in southern California and
Arizona. For the nine months ended September 30, 1997, Francisco reported sales
of approximately $68.9 million. The Company will use the acquired assets to
continue operating the business previously operated by Francisco. For more
information with respect to the terms of the Francisco acquisition, reference
is made to the Asset Purchase Agreement attached as Exhibit 2.1 to this report,
which is incorporated herein by reference.
The Company financed the acquisition (and refinanced Francisco's
existing bank debt) with borrowings under its senior credit facility with a
group of banks led by Bank of America Texas, N.A., which was amended in
connection with the acquisition (the "Amended Facility"). The Amended Facility
contains a $12 million revolving credit facility (under which approximately $9.3
million is outstanding as of the date hereof) terminating on February 2, 2001
and a $5 million fully-drawn bridge facility maturing on September 30, 1998. For
more information with respect to the terms of the Amended Facility, reference is
made to the copy of the Amended Facility attached as Exhibit 99.1 to this
report, which is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
In accordance with paragraph (a)(4) of Item 7 of Form 8-K, the
historical financial statements required in connection with the Francisco
acquisition are not included in this initial report and will be filed within 60
days after the date of this report.
(b) Pro Forma Financial Information
In accordance with paragraph (b)(2) of Item 7 of Form 8-K, the
pro forma financial information required in connection with the Francisco
acquisition are not included in this initial report and will be filed within 60
days after the date of this report.
(c) Exhibits
2.1 Asset Purchase Agreement, dated as of February 2, 1998, by and
among Francisco Acquisition Corp., a Texas corporation, Fresh
America Corp., a Texas corporation, Francisco Distributing
Company, LLC, a California limited liability company, and the
owners named therein.
F-2
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99.1 Restated Business Loan Agreement between Fresh America Corp.
and Bank of America Texas, N.A., dated February 2, 1998.
F-3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 17, 1998 FRESH AMERICA CORP.
By: /s/ ROBERT C. KIEHNLE
---------------------------------
Robert C. Kiehnle
Chief Financial Officer
F-4
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INDEX TO EXHIBITS
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Exhibit
Number Description
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2.1 Asset Purchase Agreement, dated as of February 2, 1998, by and
among Francisco Acquisition Corp., a Texas corporation, Fresh
America Corp., a Texas corporation, Francisco Distributing
Company, LLC, a California limited liability company, and the
owners named therein.
99.1 Restated Business Loan Agreement between Fresh America Corp. and
Bank of America Texas, N.A. dated February 2, 1998.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
FRANCISCO ACQUISITION CORP.
"BUYER"
FRESH AMERICA CORP.
"ISSUER"
FRANCISCO DISTRIBUTING COMPANY, LLC
THE "COMPANY"
AND
THE OWNERS NAMED HEREIN
"OWNERS"
FEBRUARY 2, 1998
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Contingent Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS . . . . . . . . . . . . . . . . 9
3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Condition and Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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3.11 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.18 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Members and Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.23 Principal Customers and Suppliers; Competing Interests . . . . . . . . . . . . . . . . . 19
3.24 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.26 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.27 Construction of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND ISSUER . . . . . . . . . . . . . . . . . . . . . 22
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 No Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V COVENANTS OF THE COMPANY AND THE OWNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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5.2 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Repair and Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Warn Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8 Guaranty of Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9 Information for Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI COVENANTS OF BUYER AND ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Conduct of Business After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Year End Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Payment of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Fulfillment of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Conditions to Obligations of Buyer and Issuer . . . . . . . . . . . . . . . . . . . . . 30
8.2 Conditions to Obligations of the Company and the Owners . . . . . . . . . . . . . . . . 31
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ARTICLE IX SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Indemnification of Buyer and Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Indemnification of the Company and the Owners . . . . . . . . . . . . . . . . . . . . . 34
9.4 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Exclusivity of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X NONCOMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Agreement and Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XI AGREEMENT TO REGISTER THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.1 Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.2 Investment Intent and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.3 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.5 Orderly Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.6 Cooperation and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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12.3 Attorneys' Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.4 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.8 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Exhibits:
A - Form of Employment Agreement for Jack Cancellieri
B - Form of Employment Agreement for Fernando Vargas
C - Form of Legal Opinion for the Company's and the Owners' Counsel
D - Form of Legal Opinion for Buyer's and Issuer's Counsel
Schedules:
1.1 - Asset Listing
1.2 - Excluded Assets
1.3(a) - Assumed Agreements
1.3(c) - Assumed Liabilities
3.4 - Permitted Liens
3.5 - Leased Real Estate
3.8 - Condition of Assets
3.9 - Potential Violations
3.11 - Exceptions to Financial Statements
3.12 - Disclosed Liabilities
3.13 - Material Changes
3.15 - Litigation
3.17 - Environmental Matters
3.18 - Permits
3.19(a) - Material Agreements
3.19(d) - Material Agreement Consents
3.20 - Registered Intellectual Property
3.21 - Members and Creditors
3.22 - Subsidiaries and Investments
3.23(a) - Principal Customers and Suppliers
3.23(b) - Competing Interests
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3.24 - Employees
3.25(a) - Employee Benefit Plans
3.25(c) - Employee Pension Benefit Plans
3.25(d) - Contributions to Multiemployer Plan
3.25(e) - Vesting under Employee Benefit Plans
7.3 - Transfer Taxes
7.4 - Purchase Price Allocation
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
into to be effective as of February 2, 1998, by and among Francisco Acquisition
Corp., a Texas corporation ("Buyer"), Fresh America Corp., a Texas corporation
and parent corporation of Buyer ("Issuer"), Francisco Distributing Company,
LLC, a California limited liability company (the "Company"), Jack Cancellieri
("Cancellieri"), a member of the Company, F.J.V., Inc., a California
corporation and member of the Company ("F.J.V."), and Fernando Vargas, the
President and sole shareholder of F.J.V. ("Vargas"). Cancellieri, F.J.V. and
Vargas are individually and collectively referred to herein as the "Owners."
PRELIMINARY STATEMENTS
The Company is engaged in the business of selling, distributing or
otherwise transporting fresh produce primarily in Southern California and
Arizona.
The Company desires to sell to Buyer, and Buyer desires to purchase
from the Company, substantially all of the Company's assets on the terms and
conditions set forth in this Agreement.
The Owners, by their direct and indirect ownership of the Company,
will receive substantial direct and indirect benefits from the transactions
contemplated by this Agreement, and Buyer and Issuer have requested that the
Owners enter into this Agreement as a condition to Buyer's and Issuer's
execution hereof.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
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AGREEMENT
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Purchase and Sell. At the closing of the
transactions contemplated by this Agreement (the "Closing"), the Company agrees
to sell, transfer, assign and deliver to Buyer the Assets, and Buyer agrees to
purchase and take the Assets, on the terms and subject to the conditions set
forth in this Agreement. As used herein the "Assets" mean all assets and
properties of the Company, of every kind, nature and description, whether
tangible or intangible, real or personal, contingent or otherwise, including
without limitation, all accounts receivable, inventory, equipment, rolling
stock, real property, fixtures, furnishings, systems, goodwill, leasehold
rights, leasehold improvements, vehicles, prepaid assets, contract rights,
licenses, permits, customer, prospect and marketing lists, routes, sales data,
records, computer software and software licenses, proprietary information,
intellectual property, trade secrets, patents, patent applications, patent
licenses, trademarks and trade names (including all rights to the name
"Francisco Distributing Company, LLC"), copyrights, drawings and designs owned
by the Company or acquired by the Company after the date hereof and prior to
the Closing, but will exclude the Excluded Assets (as defined in Section 1.2).
Set forth in Schedule 1.1 is a complete list (including the street address,
where applicable) of each asset of the Company with a book value or fair market
value greater than $10,000.
1.2 Excluded Assets. Notwithstanding the provisions of Section
1.1, the Assets will exclude all of the Company's cash, cash equivalents and
marketable securities, the minute books, the seal and membership interest
records of the Company and the notes, produce prepayments and other assets of
the Company specifically identified on Schedule 1.2 (collectively, the
"Excluded Assets").
1.3 Assumed Liabilities. It is understood and agreed that neither
Buyer nor Issuer will assume any direct or indirect debts, obligations or
liabilities of the Company or the Owners of any nature, whether absolute,
accrued, contingent, liquidated or otherwise, and whether due or to become due,
asserted or unasserted, known or unknown (collectively, "Liabilities"), except
for the following specifically identified Liabilities (collectively, the
"Assumed Liabilities"): (a) obligations of the
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Company to be performed in the ordinary course of business accruing after the
Closing under the agreements to be assumed by Buyer and identified on Schedule
1.3(a) (the "Assumed Agreements"); (b) trade payables and accrued expenses
incurred by the Company in the ordinary course of business prior to the
Closing; and (c) the Liabilities owing to National Bank of Southern California
specifically identified on Schedule 1.3(c). All other Liabilities of the
Company will be retained by the Company and discharged in full by the Company
out of the Excluded Assets or out of the purchase price for the Assets. For
purposes of this Agreement, ordinary course obligations under the Assumed
Agreements do not include any Liabilities under an agreement resulting from or
relating to any breach or default (or event that with notice or lapse of time
would constitute a breach or default) by the Company or any of the Owners under
such agreement.
1.4 Purchase Price. The aggregate consideration to be paid to the
Company for the Assets (the "Purchase Price") will be (a) a cash payment made
at the Closing of $5,575,000 (the "Cash Payment"); (b) a number of shares of
the common stock of Issuer, $.01 par value (the "Common Stock"), with an
aggregate value of $5,500,000, valued at the Average Trading Price (as defined
below) per share; (c) certain contingent payments as described in Section 1.5
(the "Contingent Payments"); and (d) the assumption of the Assumed Liabilities.
No fractional shares of Common Stock will be issued to the Company, and in lieu
thereof, all fractional shares will be increased to the next higher whole
number of shares. As used herein, "Average Trading Price" means the per share
average closing price of the Common Stock on the Nasdaq Stock Market for the
ten consecutive trading days immediately prior to two business days before the
Closing; provided, however, the Average Trading Price will not be less than $18
and will not be more than $22.
1.5 Contingent Payments.
(a) The Contingent Payments will be determined from
Pretax Prebonus Earnings (as defined in Section 1.5(d)) for Buyer's 1998 and
1999 fiscal years, as follows: (i) if Pretax Prebonus Earnings for Buyer's 1998
fiscal year are greater than $691,000, $3.10 per $1.00 of Pretax Prebonus
Earnings in excess of $691,000 will be paid to the Company, but such
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Contingent Payment pursuant to this clause (i) will not exceed $2,957,400; (ii)
if Pretax Prebonus Earnings for Buyer's 1998 fiscal year are greater than
$1,645,000, $4.00 per $1.00 of Pretax Prebonus Earnings in excess of $1,645,000
will be paid to the Company, but such Contingent Payment pursuant to this
clause (ii) will not exceed $5,020,000; (iii) if Pretax Prebonus Earnings for
Buyer's 1999 fiscal year are greater than $816,000, $2.40 per $1.00 of Pretax
Prebonus Earnings in excess of $816,000 will be paid to the Company, but such
Contingent Payment pursuant to this clause (iii) will not exceed $3,568,800;
and (iv) if Pretax Prebonus Earnings for Buyer's 1999 fiscal year are greater
than $2,303,000, $1.90 per $1.00 of Pretax Prebonus Earnings in excess of
$2,303,000 will be paid to the Company, but such Contingent Payment pursuant to
this clause (iv) will not exceed $5,016,000. Notwithstanding the foregoing and
regardless of the amount, if any, of Pretax Prebonus Earnings, but subject to
Section 1.5(c), the Contingent Payment for Buyer's 1998 fiscal year will not be
less than $1,000,000, and the Contingent Payment for Buyer's 1999 fiscal year
will not be less than $1,500,000.
(b) The Contingent Payments will be payable in cash,
Common Stock or a combination thereof as provided in Section 1.5(e). The
$1,000,000 minimum Contingent Payment (subject to Section 1.5(c)) for Buyer's
1998 fiscal year will be due and payable on the first business day of the 1999
fiscal year and any additional Contingent Payment for Buyer's 1998 fiscal year
will be due and payable in a single installment on March 31, 1999. The
$1,500,000 minimum Contingent Payment for Buyer's 1999 fiscal year will be due
and payable on the first business day of the 2000 fiscal year and any
additional Contingent Payment for Buyer's 1999 fiscal year will be due and
payable in a single installment on March 31, 2000.
(c) If the aggregate net book value of the Assets less
the aggregate amount of the Assumed Liabilities, as determined from the audited
balance sheet of the Company as of December 31, 1997 prepared by Buyer after
the Closing (the "Year End Balance Sheet"), is less than $2,000,000, the
Purchase Price will be reduced by an amount equal to such difference by
deducting such difference from the Contingent Payment for Buyer's 1998 fiscal
year.
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(d) As used herein, "Pretax Prebonus Earnings" means, for
any fiscal year of Buyer, an amount equal to the sum of (i) the net income of
Buyer for such fiscal year; plus (ii) federal, state and local income taxes
deducted in arriving at such net income; plus (iii) employee bonus expenses
deducted in arriving at such net income. In determining Pretax Prebonus
Earnings, (x) corporate overhead expenses charged by Issuer to Buyer will not
exceed $75,000 for any fiscal year; (y) goodwill associated with the purchase
of the Assets will be amortized over a 15 year period; and (z) amortizable
capitalized costs incurred by Buyer in the start up of its operation of the
business previously conducted by the Company, including, without limitation,
the costs related to the transactions contemplated hereby, will not exceed
$200,000. Pretax Prebonus Earnings for Buyer's 1998 fiscal year will be
calculated by annualizing the Pretax Prebonus Earnings for the period from the
Closing to the last day of such fiscal year. Pretax Prebonus Earnings will be
determined in accordance with generally accepted accounting principles
consistently applied.
(e) At least three business days prior to the scheduled
payment date of any Contingent Payment, Issuer will elect whether to convert on
the scheduled payment date up to fifty percent of such payment amount into
shares of Common Stock at the Conversion Price (as defined below), and after
such election, the Company will elect at least two business days prior to such
scheduled payment date whether to convert on the scheduled payment date up to
fifty percent of such payment amount into shares of Common Stock at the
Conversion Price. No fractional shares will be issued upon conversion of any
Contingent Payment. In lieu of fractional shares, all fractional shares will
be increased to the next higher whole number of shares. Any portion of a
Contingent Payment not converted into shares of Common Stock will be due and
payable in cash on the scheduled payment date. As used herein, the Conversion
Price means the average per share closing price of the Common Stock on the
Nasdaq Stock Market (or on the principal national stock exchange on which the
Common Stock is then listed) for the ten trading days immediately preceding the
last day of Buyer's 1998 of 1999 (as applicable) fiscal year end.
(f) If in the event of any merger or consolidation of
Issuer in which Issuer is not the survivor, any sale of all or substantially
all of Issuer's assets or any other similar
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reorganization of Issuer (a "Reorganization"), the Common Stock outstanding at
the time of the Reorganization is converted into publicly traded common stock,
the term "Common Stock" as used herein will mean such publicly traded common
stock. If a Reorganization occurs and the outstanding Common Stock is
converted into property or securities that are not publicly traded common
stock, the Contingent Payments will not be convertible and will be payable in
cash only.
ARTICLE II
CLOSING
2.1 Time and Place. The Closing will occur at the offices of
Gibson, Dunn & Crutcher, 4 Park Plaza, Irvine, California 92614 on the date on
which all of the Closing Conditions set forth in Article VIII are satisfied or
waived (the "Closing Date"), but in no event later than January 31, 1998.
2.2 Closing Deliveries. At the Closing,
(a) Buyer will deliver to the Company the following, each
of which will be duly executed by the parties thereto, as applicable,
and will be in form and substance satisfactory to the Company and its
legal counsel:
(i) the Cash Payment by wire transfer of
immediately available funds;
(ii) an assignment and assumption agreement
pursuant to which Buyer will assume the Assumed Liabilities;
(iii) an officer's certificate with incumbency and
including the charter, the bylaws, applicable resolutions of
the Board of Directors and certificates of good standing and
tax status in the jurisdiction of its incorporation; and
(iv) a certificate dated the Closing Date to the
effect that the representations and warranties of Buyer
contained in this Agreement are true and
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correct in all material respects on and as of the Closing Date
with the same effect as though such representations and
warranties had been made on and as of such date, and the
covenants and agreements of Buyer to be performed on or before
the Closing Date in accordance with this Agreement have been
duly performed in all material respects.
(b) Issuer will deliver to the Company the following
documents, each of which will be duly executed by the parties thereto
and will be in form and substance satisfactory to the Company and its
legal counsel:
(i) stock certificates evidencing the shares of
Common Stock to be issued to the Company on the Closing Date;
(ii) an officer's certificate with incumbency and
including the charter, the bylaws, applicable resolutions of
the Board of Directors and certificates of good standing and
tax status in the jurisdiction of its incorporation; and
(iii) a certificate dated the Closing Date to the
effect that the representations and warranties of Issuer
contained in this Agreement are true and correct in all
material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been
made on and as of such date, and the covenants and agreements
of Issuer to be performed on or before the Closing Date in
accordance with this Agreement have been duly performed in all
material respects.
(c) The Company and the Owners will deliver to Buyer the
following documents, each of which will be duly executed by the
parties thereto and will be in form and substance reasonably
satisfactory to Buyer and its legal counsel:
(i) bills of sale and other instruments of
assignment, transfer and conveyance and such other documents
necessary or desirable to transfer good and
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marketable title to the Assets to Buyer, free and clear of any
Liens other than Permitted Liens (as such capitalized terms
are defined in Section 3.4);
(ii) an officer's certificate with incumbency and
including the articles of organization, the operating
agreement, applicable resolutions of the members and
certificates of good standing and tax status in those
jurisdictions in which the Company does business and is
required to be qualified;
(iii) an officer's certificate with supporting
financial information certifying that the aggregate net book
value of the Assets less the aggregate amount of the Assumed
Liabilities, as determined on the Closing Date in accordance
with generally accepted accounting principles consistent with
the Company's past practices, is no less than $2,000,000;
(iv) all consents, approvals and authorizations of
third parties required to be obtained by the Company or the
Owners in order to effect the transfer of the Assets and the
Assumed Liabilities and the other transactions contemplated
hereby;
(v) a certificate dated the Closing Date of the
Company and the Owners to the effect that the representations
and warranties of the Company and the Owners contained in this
Agreement are true and correct in all material respects on and
as of the Closing Date as though such representations and
warranties had been made on and as of such date, and the
covenants and agreements of the Company and the Owners to be
performed on or before the Closing Date in accordance with
this Agreement have been duly performed in all material
respects; and
(vi) the originals or copies of all of the
Company's books, records, ledgers, disks, proprietary
information and other data and all other written or electronic
depositories of information relating to the Assets and the
Assumed Liabilities requested by either Buyer or its legal
counsel.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS
The Company and the Owners, jointly and severally, hereby represent
and warrant to Buyer and Issuer as follows:
3.1 Organization and Qualification. The Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of California, has all requisite power and authority to
own, lease and operate its properties and to conduct its business as presently
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly qualified and in good standing would
not have a Material Adverse Effect. As used herein, Material Adverse Effect
means any change or effect that individually or when taken together with all
other such changes or effects, would be materially adverse to the business,
operations, assets, condition (financial or otherwise), results of operations,
Liabilities or prospects of the Company.
3.2 Authority. The Company and the Owners have all requisite
power and authority to execute, deliver and perform under this Agreement and
all other agreements and instruments required to be executed and delivered by
the Company or the Owners hereunder (together with this Agreement, as each may
be amended, modified, or supplemented, the "Company Documents"). The
execution, delivery and performance by the Company of each Company Document
have been duly authorized by all members of the Company and all other necessary
action on the part of the Company and the Owners has been taken. This
Agreement has been, and at the Closing the other Company Documents will be,
duly executed and delivered by the Company and the Owners (to the extent each
is a party thereto). This Agreement is, and, upon execution and delivery by
the Company and the Owners at the Closing, each of the other Company Documents
will be, a legal, valid and binding agreement of the Company and the Owners (to
the extent each is a party thereto), enforceable against the Company and the
Owners in accordance with their respective terms.
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3.3 Books and Records. The Company has made available to Buyer
and Issuer true, correct and complete copies of the Company's articles of
organization, operating agreement, minute books and member record books.
3.4 Title to Assets. The Company has good, valid and marketable
title to, or holds by valid and existing lease or license, all of the Assets
and owns, or holds by valid and existing lease or license, all of the Assets
free and clear of any liens, claims, security interests, encumbrances or
contingencies of any nature (collectively, "Liens"), other than (a) Liens for
current taxes not yet due; (b) minor imperfections of title and encumbrances
that do not materially detract from or interfere with the present use or value
of such properties; and (c) Liens securing Assumed Liabilities described in
Schedule 3.4 (the Liens referred to in clauses (a), (b) and (c) are
collectively, "Permitted Liens"). The execution and delivery of the Company
Documents by the Company and the Owners at the Closing will convey to and vest
in Buyer good and marketable title to the Assets, free and clear of any Liens
except for Permitted Liens.
3.5 Real Estate. Attached as Schedule 3.5 are true, correct and
complete copies of all leases relating to the real property used by the
Company, including all amendments, modifications and renewals thereof
(collectively, the "Leased Real Estate"). With respect to the Leased Real
Estate, except as identified in Schedule 3.5, (a) all necessary consents to the
assignment of such leases to Buyer have been obtained and each such lease will
continue to be binding against the landlord in accordance with its terms
following the Closing; (b) no party to any such lease has repudiated any
provision thereof; and (c) the Company has not received any notice of breach,
default or violation of any such lease. The Company does not own any real
property.
3.6 Accounts Receivable. All accounts receivable of the Company
constitute bona fide, valid and binding claims arising in the ordinary course
of the Company's business at the aggregate recorded amount thereof out of arms
length transactions with third parties unrelated to the Company or any Owner
and all of such accounts receivable, net of reserves for doubtful accounts,
will be collectible in the ordinary course of business.
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3.7 Inventories. The inventories of the Company do not include
any material amounts of items below standard quality, or any material amounts
of damaged or spoiled items or items not salable in the ordinary course of the
Company's business in excess of the value of the inventories written down or
reserved against in the unaudited balance sheet of the Company as of November
30, 1997. The quantities of each type of inventory are consistent with the
past practices of the Company and are reasonable and warranted in the present
circumstances of the Company. The Company has performed in the ordinary course
of its business regular tests in accordance with industry practice to determine
whether its products comply in all material respects with all applicable
requirements under applicable laws and regulations.
3.8 Condition and Sufficiency of Assets. Except as set forth in
Schedule 3.8, the Assets (a) are fit and usable for the purposes for which they
are presently being used; (b) are in good operating condition and repair,
ordinary wear and tear excepted; (c) to the knowledge of the Company and the
Owners, conform with all applicable laws, rules and regulations; (d) except for
the Excluded Assets, constitute all of the assets and properties used by the
Company in connection with the operation of its business as currently
conducted; and (e) except for the Excluded Assets, are sufficient to conduct
the business of the Company as currently conducted. The Assets that are of an
insurable character are insured against loss or damage to the extent and in the
manner customary for companies engaged in similar businesses and operating
similar properties.
3.9 No Violation. Except as set forth on Schedule 3.9, neither
the execution or delivery of any of the Company Documents nor the consummation
of the transactions contemplated thereby, including without limitation the
transfer of the Assets to Buyer and the assumption by Buyer of the Assumed
Liabilities, will conflict with or result in the breach of any term or
provision of, or violate, or constitute a default under, or result in the
creation of any Lien on the Assets pursuant to, or relieve any third party of
any obligation to the Company or give any third party the right to terminate or
accelerate any obligation under, any provision of the Company's articles of
organization or operating agreement, Material Agreement (as defined in Section
3.19), instrument, Permit (as defined in Section 3.18), or to the knowledge of
the Company and the Owners, any order, law or regulation to which the Company
or any Owner is a party or by which the Company, any Owner or any of the Assets
is in any way bound or obligated.
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3.10 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental or quasi-governmental agency, authority,
commission, board or other body (collectively, a "Governmental Body") is
required on the part of the Company or the Owners in connection with the
transactions contemplated by this Agreement, other than the filing of the
notification and report form required by the Hart-Scott Rodino Antitrust
Improvements Act of 1976 (the "HSR Act").
3.11 Financial Statements. Prior to the date hereof, the Company
has delivered to Buyer and Issuer (a) true and complete copies of the unaudited
balance sheet of the Company as of November 30, 1997 and the related statements
of operations and cash flow for the eleven months then ended and the comparable
period of the preceding year; (b) true and complete copies of the audited
balance sheet of the Company as of September 30, 1997 (the "Latest Balance
Sheet") and the related statements of operations and cash flow for the nine
months then ended; and (c) true and complete copies of the reviewed balance
sheets of the Company as of December 31, 1996 and 1995 and the related
statements of operations and cash flow for the twelve months then ended (the
financial statements referred to in clauses (a), (b) and (c) are collectively,
the "Financial Statements"). Except as described in Schedule 3.11, the
Financial Statements present fairly the financial condition of the Company at
the dates specified and the results of its operations for the periods specified
and have been prepared in accordance with generally accepted accounting
principles, consistently applied, subject in the case of the interim statements
to changes resulting from normal period-end adjustments for recurring accruals
(which will not be material individually or in the aggregate) and to the
absence of certain footnote disclosure and other presentation items. The
Financial Statements do not contain any items of a special or nonrecurring
nature, except as expressly stated therein. The Financial Statements have been
prepared from the books and records of the Company, which accurately and fairly
reflect all the transactions of, acquisitions and dispositions of assets by,
and incurrence of liabilities by the Company.
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3.12 Absence of Undisclosed Liabilities. The Company has no
material Liabilities except for (a) the Assumed Liabilities; (b) Liabilities
reflected in the Latest Balance Sheet; (c) Liabilities arising since the date
of the Latest Balance Sheet in the ordinary course of business consistent with
past practices; and (d) Liabilities disclosed on Schedule 3.12.
3.13 Absence of Material Adverse Change. Except as set forth in
Schedule 3.13, since the date of the Latest Balance Sheet there has not been
(a) a Material Adverse Effect; (b) any increase in salary, bonus or other
compensation to any officers, employees or agents of the Company, other than
annual increases and bonuses made in the ordinary course of business consistent
with past practices; (c) any payment (including without limitation any dividend
or other distribution, equity repurchase or repayment of indebtedness) to any
Owner, any manager, officer or employee of the Company or any relative or
affiliate of any of the foregoing, other than the regular payment of
compensation to employees of the Company and dividends to the Owners for the
payment of taxes on the income of the Company in the ordinary course of
business consistent with past practices; (d) any breach or default (or event
that with notice or lapse of time would constitute a breach or default),
termination or threatened termination under any Material Agreement (as defined
in Section 3.19(a)); (e) any theft, damage, destruction, casualty loss,
condemnation or eminent domain proceeding affecting any of the Assets with a
book or fair market value in excess of $10,000, whether or not covered by
insurance; (f) any sale, assignment or transfer of any of the assets of the
Company, except for inventory in the ordinary course of business consistent
with past practices and other assets with a book or fair market value less than
$10,000; (g) any waiver by the Company of any material rights related to the
Company's business or operations or any of the Assets or Assumed Liabilities;
(h) any change by the Company in its accounting or tax reporting methods,
principles or practices; (i) any other transaction, agreement or commitment
entered into by the Company or any Owner affecting the Company's business or
operations or any of the Assets or Assumed Liabilities, except in the ordinary
course of business consistent with past practices; (j) a loss of any customer
or supplier set forth on Schedule 3.23; or (k) any agreement or understanding
to do or resulting in any of the foregoing.
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3.14 Taxes. All required federal, state, local and other tax
returns, notices and reports (including without limitation income, property,
sales, use, franchise, withholding, social security and unemployment tax
returns) relating to or involving transactions with the Company have been
accurately prepared and duly and timely filed, and all taxes required to be
paid with respect to the periods covered by any such returns have been timely
paid. No tax deficiency has been proposed or assessed against the Company, and
the Company has not executed any waiver of any statute of limitations on the
assessment or collection of any tax. No tax audit, action, suit, proceeding,
investigation or claim is now pending or, to the knowledge of the Company and
the Owners, threatened against the Company or any Owner, in its capacity as
such, and no issue or question has been raised (and is currently pending) by
any taxing authority in connection with any of the Company's or the Owners' tax
returns or reports. The Company has withheld or collected from each payment
made to each of its employees the full amount of all taxes required to be
withheld or collected therefrom and has paid the same to the proper tax
receiving authorities or authorized depositories. The Company currently is,
and has at all times been, duly qualified to be taxed as a partnership or
limited liability company, as applicable.
3.15 Litigation. Except as set forth on Schedule 3.15, there are
currently no pending or, to the knowledge of the Company and the Owners,
threatened lawsuits, administrative proceedings or reviews, arbitrations, or
formal complaints or investigations by any individual, corporation,
partnership, Governmental Body or other entity (each, a "Person") against or
relating to the Company or any of its members, employees or agents (in their
capacities as such) or any of the Assets or the Assumed Liabilities or to which
any of the Assets is subject, which if adversely determined could result in a
material Liability. Neither the Company, any Owner nor any of the Assets is
subject to or bound by any currently existing judgment, order, writ, injunction
or decree.
3.16 Compliance With Laws. The Company is currently complying in
all material respects with and at all times during the last five years has
complied in all material respects with, and the Assets and the use, operation
and maintenance thereof comply in all material respects with and have at all
times complied in all material respects with, and neither the Company nor any
of the Assets nor the use, operation or maintenance thereof is in violation or
contravention of, any applicable material statute,
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law, ordinance, decree, order, rule or regulation of any Governmental Body;
including without limitation, all material federal, state and local laws
relating to occupational health and safety, employment and labor matters.
3.17 Environmental Matters.
(a) Without limiting the generality of the other
representations and warranties set forth in this Article III, except as
described in Schedule 3.17: (i) the Company is in compliance in all material
respects with all applicable Environmental Laws (as defined in Section
3.17(b)), including without limitation by having all Permits (as defined in
Section 3.18) required under any Environmental Laws for the operation of its
business; (ii) to the knowledge of the Company and the Owners, none of the real
property leased by the Company contains any Hazardous Substance (as defined in
Section 3.17(b)) in violation of any applicable Environmental Laws; (iii) the
Company has not received any notices, demand letters or requests for
information from any Governmental Body or other Person indicating that the
Company may be in violation of, or liable under, any Environmental Law or
relating to any of the Assets; (iv) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance
or the threatened or actual violation of any Environmental Law; (v) to the
knowledge of the Company and the Owners, no Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law from any real property leased by the Company or as a result
of any activity of the Company; (vi) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses regarding
compliance or noncompliance with any Environmental Law conducted by or which
are in the possession of the Company relating to the activities of the Company
or any of real property leased by the Company that have not been delivered to
Buyer prior to the date hereof; (vii) to the knowledge of the Company and the
Owners, there are no underground storage tanks on, in or under any real
property leased by the Company, and no underground storage tanks have been
closed or removed from any of such properties; (viii) to the knowledge of the
Company and the Owners, neither the Company nor any of the Assets is subject to
any material Liabilities or expenditures relating to any suit, settlement,
court order, administrative order, regulatory requirement, judgment or claim
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asserted or arising under any Environmental Law; and (ix) no asbestos
containing materials on the real property leased by the Company have been
disturbed, broken or subject to mechanical abrasion to the extent to cause a
release of asbestos fibers as a result of any activity of the Company.
(b) As used herein, "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, permit, license, authorization, approval, consent, order, judgment,
decree, injunction, requirement or agreement with any Governmental Body
relating to (i) the protection, preservation or restoration of the environment
(including without limitation air, water vapor, surface water, groundwater,
drinking water, surface land, subsurface land, plant and animal life or any
other natural resource) or to human health or safety; or (ii) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and in effect on the date of the Closing.
As used herein, "Hazardous Substance" means any substance listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law. Hazardous Substance includes
any substance to which exposure is regulated by any Governmental Body or any
Environmental Law, including without limitation any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos or asbestos containing material,
urea formaldehyde, foam insulation, lead or polychlorinated biphenyls.
3.18 Permits. The Company owns or possesses from each appropriate
Governmental Body all right, title and interest in and to all permits,
licenses, authorizations, approvals, quality certifications, franchises or
rights (collectively, "Permits") issued by any Governmental Body material to
the conduct its business. Each of such material Permits is described on
Schedule 3.18. No loss or expiration of any such Permit is pending or, to the
knowledge of the Company and the Owners, threatened or reasonably foreseeable,
other than expiration in accordance with the terms thereof and that may be
renewed in the ordinary course of business without lapsing.
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3.19 Material Agreements.
(a) Schedule 3.19(a) lists each agreement and arrangement
to which (x) the Company is a party or a beneficiary or by which the Company or
any of the Assets is bound and (y) that is material to the Company or the
Assets, whether written or oral (collectively, the "Material Agreements"),
including without limitation (i) any supply, distribution or other agreements
or arrangements pursuant to which third parties are or will be entitled or
obligated to purchase or use any of the Assets with an aggregate purchase price
in excess of $25,000; (ii) any warranty agreements or arrangements under which
the Company has any Liability in excess of $25,000; (iii) any leases with a
term of one year or more or pursuant to which the Company is entitled to or
obligated to pay in excess of $25,000; (iv) any capital or operating leases or
conditional sales agreements relating to vehicles or equipment; (v) any supply
or manufacturing agreements or arrangements pursuant to which the Company is
entitled or obligated to acquire any assets from a third party with an
aggregate purchase price in excess of $25,000; (vi) insurance policies; (vii)
any employment, consulting, noncompetition, separation, collective bargaining,
union or labor agreements or arrangements; (viii) any agreement evidencing,
securing or otherwise relating to any indebtedness in excess of $25,000 for
which the Company has any Liability, (ix) any agreement with or for the benefit
of any member, manager, officer or employee of the Company, or any affiliate or
family member thereof; and (x) any other agreement or arrangement pursuant to
which the Company could be required to make or be entitled to receive aggregate
payments in excess of $25,000.
(b) The Company has performed all of its obligations
under each Material Agreement, and to the knowledge of the Company and the
Owners, there exists no breach or default (or event that with notice or lapse
of time would constitute a breach or default) under any Material Agreement.
(c) Each Material Agreement is valid, binding and in full
force and effect and enforceable in accordance with its respective terms.
There has been no termination or threatened termination or notice of default
under any Material Agreement. The Company has delivered to Buyer a copy of
each written Material Agreement and a written summary of all material terms of
each oral Material Agreement.
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(d) Except as set forth in Schedule 3.19(d), no consent
of any Person is required in connection with the transactions contemplated by
this Agreement in order to preserve the rights of the Company and Buyer under
or to prevent any disadvantage to the Company or Buyer in respect of any
Material Agreement. All consents set forth on Schedule 3.19(d) will be
obtained prior to the Closing Date.
3.20 Intellectual Property Rights. Set forth on Schedule 3.20 is a
complete list of all registered patents, trademarks, service marks, trade
names, copyrights, material and manufacturing specifications, drawings and
designs included in the Assets or necessary in connection with the operation of
the Company's business (collectively, the "Intellectual Property"), without
infringing on or otherwise acting adversely to the rights or claimed rights of
any Person, and neither the Company nor any Owner is obligated to pay any
royalty or other consideration to any Person in connection with the use of any
such Intellectual Property. To the knowledge of the Company and the Owners, no
other Person is infringing on the rights of the Company in any of its
Intellectual Property.
3.21 Members and Creditors. Set forth in Schedule 3.21 is a
complete list of each Person that owns any direct or indirect equity or debt
interest (other than accounts payable incurred in the ordinary course of the
Company's business) in the Company (including, without limitation, options or
warrants to purchase membership interests and any indebtedness for borrowed
money, whether or not evidenced by a note or other written instrument) and a
description of each such equity or debt interest.
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3.22 Subsidiaries and Investments. Except as set forth on Schedule
3.22, the Company does not own any direct or indirect equity or debt interest
in any other Person and is not obligated or committed to acquire any such
interest.
3.23 Principal Customers and Suppliers; Competing Interests. Set
forth in Schedule 3.23(a) are (a) a list of the ten largest customers of the
Company by dollar volume (with the amount of revenues attributable to each such
customer) for the 1997 fiscal year to date ended November 30, 1997, and (b) a
list of the ten largest suppliers of the Company by dollar volume (with the
amount of payments attributable to each such supplier) for the fiscal year
ended December 31, 1996 and the 1997 fiscal year to date ended December 17,
1997. Except as described in Schedule 3.23(b), none of the Company, the Owners
or any manager, officer, relative or affiliate of any of the foregoing owns,
directly or indirectly, an interest in any entity that is a competitor,
customer or supplier of the Company or that otherwise has material business
dealings with the Company.
3.24 Employee Matters. Set forth on Schedule 3.24 is a complete
list of all employees of the Company (other than clerical), including date of
employment, current title and compensation. The Company is in compliance in
all material respects with all applicable laws and regulations regarding
employment, wages, hours, equal opportunity, collective bargaining, unfair
labor practices and payment of Social Security and other taxes, and no
complaint alleging any violation of such laws or regulations by the Company has
been filed or, to the knowledge of the Company and the Owners, threatened to be
filed with or by any Governmental Body. The Company has not experienced, and
neither the Company nor any Owner knows or has reasonable grounds to know of
any basis for, any strike, material labor trouble, work stoppage, slow down or
other interference with or impairment of its business, including without
limitation, any such stoppage, slow down or interference as a result of any
announcement of or the consummation of the transactions contemplated hereby.
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3.25 Employee Benefit Plans.
(a) Schedule 3.25(a) lists all compensation and benefit
plans, contracts and arrangements maintained by or contributed to by the
Company (including, without limitation, all pension, profit sharing, savings
and thrift, bonus, incentive or deferred compensation, severance pay, stock
option, stock bonus, and parachute or special termination payments (including
any Section 280G payments) and medical, dental, disability, Section 125
cafeteria and life insurance plans, contracts and arrangements) in which any
employees of the Company or their respective dependents participate or have
participated, or with respect to which the Company may have any Liability
(collectively, the "Employee Benefit Plans").
(b) All Employee Benefit Plans in all material respects
are in compliance with and have been administered in compliance with all
applicable requirements of law, including but not limited to the Internal
Revenue Code of 1986, as amended (the "Code"), and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all contributions
required to be made to each such plan under the terms of such plan, ERISA or
the Code for all periods of time prior to the date hereof and the Closing Date
have been or will be, as the case may be, made.
(c) With respect to any Employee Benefit Plan which is
intended to qualify under Section 401(a) of the Code (a "Pension Plan"), a
favorable determination letter as to the qualification under Section 401(a) of
the Code has been issued and the related trust has been determined to be exempt
from taxation under Section 501(a) of the Code and any amendment made or event
relating to any Pension Plan subsequent to the date of such determination
letter has not adversely affected the qualified status of any such plan. The
Company does not provide or contribute to nor is required to maintain or
contribute to a Pension Plan subject to Title IV of ERISA. Except as set forth
in Schedule 3.25(c), no Employee Benefit Plan is an "employee pension benefit
plan" as defined in Section 3(2) of ERISA. The Company has performed all
material obligations required to be performed by it under, and is not in
default under or in violation of, the terms of any of the Employee Benefit
Plans in any material respect. To the knowledge of the Company and the Owners,
neither the Company nor any other "disqualified
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person" (as defined in Section 4975 of the Code) has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code), which could subject any
Employee Benefit Plan (or the related trust), the Company or any officer,
manager or employee of the Company to a tax or penalty imposed under Section
4975 of the Code.
(d) Except as otherwise set forth in Schedule 3.25(d),
the Company is not required to contribute to, or during the six year period
ending on the Closing Date will not have been required to contribute to, any
"multiemployer plan," as such term is defined in Section 4001(a)(3) of ERISA,
and the Company is not subject to any withdrawal or partial withdrawal
liability within the contemplation of Section 4201 of ERISA and will not become
subject thereto as a result of the transactions contemplated by this Agreement.
(e) Except as otherwise set forth in Schedule 3.25(e),
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due from the Company under any Employee Benefit Plan or any
collective bargaining agreement or otherwise, (ii) increase any compensation or
benefits otherwise payable under any such Employee Benefit Plan or collective
bargaining agreement, or (iii) result in the acceleration of the time of
payment or vesting of any such compensation or benefits.
(f) With respect to each of the Employee Benefit Plans,
the Company has furnished to Buyer true and correct copies of (i) the plan
documents and summary plan description; (ii) the most recent IRS determination
letter and any Form 5500 filed; (iii) the last three annual reports; (iv) all
related trust agreements, insurance contracts, or funding agreements; and (v)
all other documents, records or other plan-related material reasonably
requested by Buyer.
3.26 No Misrepresentations. The representations, warranties and
statements made by the Company and the Owners in or pursuant to this Agreement
(including the Schedules hereto) are true, complete and correct in all material
respects and do not contain any untrue statement of a material fact
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or omit to state any material fact necessary to make any such representation,
warranty or statement, under the circumstances in which it is made, not
misleading.
3.27 Construction of Certain Provisions. It is understood and
agreed that the specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Schedules is not intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
no party hereto will use the fact of the setting of such amounts or the fact of
the inclusion of any such item in the Schedules in any dispute or controversy
between the parties as to whether any obligation, item or matter not described
herein or included in a Schedule is or is not material for purposes of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND ISSUER
Buyer and Issuer each represent and warrant to the Company and the
Owners as follows:
4.1 Organization. Buyer and Issuer are corporations duly
organized, validly existing and in good standing under the laws of Texas.
4.2 Authority. Each of Buyer and Issuer have all requisite power
and authority to execute, deliver and perform under this Agreement and all
other agreements and instruments required to be executed and delivered by it
hereunder (together with this Agreement, as each may be amended, modified or
supplemented, the "Buyer Documents"). The execution, delivery and performance
by Buyer and Issuer of each Buyer Document to which it is a party have been
duly authorized by all necessary action, corporate or otherwise, on the part of
Buyer and Issuer. This Agreement has been, and at the Closing the other Buyer
Documents will be, duly executed and delivered by Buyer and Issuer (to the
extent each is a party thereto). This Agreement is, and, upon execution and
delivery by Buyer and Issuer (to the extent each is a party thereto) at the
Closing, each of the other Buyer
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Documents will be, a legal, valid and binding agreement of Buyer and Issuer (to
the extent each is a party thereto), enforceable against Buyer and Issuer in
accordance with their respective terms.
4.3 No Violation. The execution, delivery and performance of this
Agreement by Buyer and Issuer will not conflict with or result in the breach of
any term or provision of, or violate or constitute a default under any charter
provision, bylaw, agreement, instrument, order, law or regulation to which
Buyer or Issuer is a party or by which Buyer or Issuer is in any way bound or
obligated, other than the credit agreement of Issuer with Bank of America of
Texas, N.A. in effect on the date hereof (the "Credit Agreement").
4.4 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Body is required on the part of Buyer or Issuer
in connection with the transactions contemplated by this Agreement, other than
(a) Buyer's obtaining a license under the Perishable Agricultural Commodities
Act, (b) the filing of the notification and report form required by the HSR Act
and (c) the filing of registration statements with the Securities and Exchange
Commission (the "SEC") as contemplated by Section 11.3.
4.5 SEC Filings. Issuer has delivered to the Company and the
Owners true and complete copies (excluding exhibits) of the following
documents, in each case as filed with the SEC: (a) Issuer's Annual Report on
Form 10-K for its 1996 fiscal year; (b) Issuer's Quarterly Report on Form 10-Q
for the quarter ended September 26, 1997; and (c) Issuer's Proxy Statement for
its Annual Meeting of Shareholders held in 1997 (collectively, the "SEC
Filings"). The SEC Filings when made did not contain any untrue statement of a
material fact or omit to state any material fact necessary to make any
statement contained therein, under the circumstances in which it was made, not
misleading. Except as otherwise disclosed in writing to the Company and the
Owners, since September 26, 1997 there has been no change or effect that
individually or when taken together with all other such changes or effects,
would be materially adverse to the business, operations, assets, condition
(financial or otherwise), results of operations, liabilities or prospects of
Buyer or Issuer.
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4.6 No Misrepresentations. The representations, warranties and
statements made by Buyer and Issuer in or pursuant to this Agreement are true,
complete and correct in all material respects. None of such representations,
warranties or statements contains any untrue statement of a material fact or
omits to state any material fact necessary to make any such representation,
warranty or statement, under the circumstances in which it is made, not
misleading.
ARTICLE V
COVENANTS OF THE COMPANY AND THE OWNERS
5.1 Conduct of Business Prior to Closing. Prior to the Closing
Date, the Company will, and the Owners will cause the Company to, (a) operate
only in the ordinary course of business consistent with past practices and use
its best efforts to preserve the goodwill of the Company and of its employees,
customers, suppliers, distributors, Governmental Bodies and others having
business dealings with the Company; (b) not engage in any transaction outside
the ordinary course of business, including without limitation by making any
material expenditure, investment or commitment or entering into any Material
Agreement or arrangement of any kind; (c) maintain all insurance policies and
all Permits that are required for the Company to carry on its business; and (d)
maintain books of account and records in the usual, regular and ordinary manner
and consistent with past practices.
5.2 Access and Information. The Company and the Owners will
permit Buyer, Issuer and their representatives to have reasonable access to the
Company's officers, employees, agents, assets and properties and all relevant
books, records and documents of or relating to the Assets during normal
business hours and will furnish to Buyer and Issuer, at the cost and expense of
Buyer or Issuer, such information, financial records and other documents
relating to the Company and its operations and business as Buyer and Issuer may
reasonably request. The Company and the Owners will permit Buyer and Issuer
and their representatives reasonable access to the Company's accountants,
auditors, customers, suppliers and Governmental Bodies having dealings with the
Company for consultation or verification of any information obtained by Buyer
and Issuer and upon reasonable request, will use their respective best efforts
to cause such Persons to cooperate with Buyer and Issuer and their
representatives in such consultation and in verifying such information.
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5.3 Repair and Casualty. Prior to the Closing Date, the Company
will make all normal and customary repairs to the Assets. If any loss, damage,
destruction, theft or other casualty affecting any of the Assets occurs other
than normal wear and tear, the Company will promptly advise Buyer and Issuer
thereof and will commence and diligently pursue the repair or replacement of
such Assets with similar assets of like quality. If such repair or replacement
of any Assets with an aggregate fair market value equal to or in excess of
$10,000 is not completed prior to the Closing Date, Buyer may elect either to
terminate this Agreement or to proceed with the Closing. If Buyer elects to
proceed with the Closing or if other Assets with an aggregate fair market value
below $10,000 are not repaired or replaced, then, notwithstanding any contrary
provisions of this Agreement, the Cash Payment will be reduced by the full cost
of replacing any such Assets with similar assets of like quality as determined
by Buyer in good faith, and the Company will be entitled to retain the Assets
affected by such casualty and any insurance proceeds or other claims in respect
thereof.
5.4 WARN Act. Subject to Buyer's obligations in Section 6.4, the
Company will have full responsibility for providing any notice to its employees
and appropriate government officials which may be required pursuant to the
Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar state law with respect to any employees terminated by the Company prior
to or on the Closing Date. The Company will bear any Liability which may
accrue to such employees or any unit of local government under such Act or any
similar state law as a result of improper or untimely notice.
5.5 Supplemental Disclosure. From time to time prior to the
Closing, the Company and the Owners will promptly supplement or amend each of
the Schedules hereto with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date hereof, would have been required
to be set forth or listed in the Schedules hereto or which is necessary to
complete or correct any information in the Schedules; provided, that, for
purposes of determining the satisfaction of the conditions set forth in Section
8.1, no such supplement or amendment will be given effect.
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5.6 Further Assurances. At or promptly after the Closing, and
without further consideration, the Company and the Owners will execute and
deliver to Buyer and Issuer such further instruments of conveyance and transfer
as Buyer may reasonably request in order to more effectively convey and
transfer to Buyer any of the Assets or the Assumed Agreements, or for aiding,
assisting, collecting and reducing to possession any of the Assets and
exercising rights with respect thereto.
5.7 Name Change. From and after the Closing, neither the Company
nor any of its affiliates will employ the term "Francisco Distributing" or a
confusingly similar term in its business, and within five business days of the
Closing the Company will amend all necessary documents and make any necessary
filings to change its name to a name bearing no similarity to "Francisco
Distributing Company, LLC," including, without limitation, an amendment to the
Company's articles of organization.
5.8 Guaranty of Accounts Receivable. If any accounts receivable
constituting Assets are not collected by Buyer within ninety days after the
Closing Date in the ordinary course of business, without resort to third-party
collection efforts or litigation, then the Company and the Owners, jointly and
severally, will purchase such accounts receivable from Buyer for cash at a
purchase price equal to the difference of (a) the face amount thereof, less (b)
any portion previously collected by Buyer, less (c) the aggregate amount
reserved for uncollectible accounts on the Closing Date. The amount reserved
for uncollectible accounts on the Closing Date shall be calculated in
accordance with the same practice and procedures used to calculate such reserve
amount on the Latest Balance Sheet.
5.9 Information for Filings. Upon prior written request and at
the expense of Buyer and Issuer, the Owners and the Company will furnish Buyer
and Issuer with all information concerning the Company as is required for
inclusion in any application or filing made by Buyer or Issuer to the SEC or
any other Governmental Body in connection with the transactions contemplated by
this Agreement.
5.10 Nondisclosure. The Company and the Owners acknowledge and
agree that all customer, prospect and marketing lists, sales data, Intellectual
Property, proprietary information and
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trade secrets of the Company (collectively, the "Confidential Information") are
valuable, special and unique assets constituting part of the Assets and,
following the Closing, will be owned exclusively by Buyer. Prior to and after
the Closing, the Company and each Owner agree to treat the Confidential
Information as confidential and not to disclose any Confidential Information to
any Person or make use of any Confidential Information for its own purposes or
for the benefit of any other Person (other than Buyer or Issuer), except to the
extent required by applicable laws and regulations or by any subpoena or
similar legal process, or to the extent such Confidential Information becomes
publicly available (other than as a result of a breach of this Agreement).
ARTICLE VI
COVENANTS OF BUYER AND ISSUER
6.1 Conduct of Business After Closing. During the two fiscal
years of Buyer after the Closing, without the prior written consent of the
Owners, Buyer will not, and Issuer will cause Buyer not to, make any
acquisitions or investments out of the ordinary course of business inconsistent
with the Company's past practice.
6.2 Year End Balance Sheet. Promptly after receipt, Buyer will
deliver to the Company a true and complete copy of the Year End Balance Sheet
which will be prepared in accordance with generally accepted accounting
principles consistent with the Company's past practice.
6.3 Issuance of Shares. On the date that all or any portion of a
Contingent Payment is converted into shares of Common Stock, the Company will
be deemed for all purposes to be a holder of such shares of Common Stock
issuable to the Company. Promptly after the conversion date Issuer will
deliver to the Company the stock certificates evidencing the shares of Common
Stock issued to the Company on such date.
6.4 Employment. Effective as of the Closing Date, Buyer shall
offer employment to the employees of the Company at the same or higher salary
or wage rates and with medical insurance and other benefits that are in the
aggregate, comparable to (except as otherwise provided for in
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any employment agreements between any such employees and Buyer), those provided
by the Company to such employees as of the date of this Agreement. Neither
Buyer nor Issuer shall be liable for any severance payments asserted against
the Company, Buyer or Issuer by, or other liability, including, without
limitation, any liability with respect to health care continuation coverage
under COBRA, or obligation to, any employees or former employees of the Company
who do not accept such offers of employment from Buyer.
6.5 Payment of Certain Liabilities. Within three business days of
the Closing Date, Buyer or Issuer will pay in full the Assumed Liabilities
owing to National Bank of Southern California specifically identified on
Schedule 1.3(c).
ARTICLE VII
MUTUAL COVENANTS
7.1 Fulfillment of Conditions. Each of the parties hereto agree
not to take any action that would cause the conditions on the obligations of
the parties hereto to effect the transactions contemplated by this Agreement
not to be fulfilled, including without limitation by taking or causing to be
taken any action that would cause the representations and warranties made by
such party herein not to be true and correct as of the Closing. Each of the
parties hereto will take all reasonable steps within its power to cause to be
fulfilled the conditions precedent to the other parties' obligations to
consummate the transactions contemplated hereby that are dependent on the
actions of such party.
7.2 Publicity. Issuer will obtain the prior consent of the
Company (which consent will not be unreasonably withheld or delayed) before
issuing, or permitting any agent or affiliate to issue, any press release or
otherwise making, or permitting any agent or affiliate to make, any public
statements with respect to this Agreement and the transactions contemplated
hereby. The Company and the Owners will obtain the prior consent of Issuer
(which consent will not be unreasonably withheld or delayed) before issuing, or
permitting any agent or affiliate to issue, any press releases or otherwise
making, or permitting any agent or affiliate to make, any public statements
with respect to this Agreement and the transactions contemplated hereby.
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7.3 Transaction Costs. The Owners and the Company will pay all
attorneys', accountants', finders', brokers', financial advisors' investment
banking and other fees, costs and expenses incurred by the Company or the
Owners in connection with the preparation, negotiation, execution and
performance of this Agreement or any of the transactions contemplated by this
Agreement. Buyer and Issuer will pay all attorneys', accountants', finders',
brokers', financial advisors' investment banking and other fees, costs and
expenses incurred by Buyer or Issuer in connection with the preparation,
negotiation, execution and performance of this Agreement or any of the
transactions contemplated by this Agreement. Notwithstanding the foregoing,
Buyer and Issuer, on the one hand, and the Company and the Owners, on the other
hand, each agree to pay fifty percent of the filing fee required by the HSR Act
and all sales, use, transfer, excise or other taxes arising out of the sale of
the Assets. The parties hereto will promptly pay such fees and taxes after
written notice thereof. All sales, use, excise, transfer or other taxes
payable as a result of transferring the Assets to Buyer at the Closing are
described in Schedule 7.3.
7.4 Allocation of Purchase Price. Buyer and the Company agree
that the Purchase Price will be allocated among the Assets in accordance with
Schedule 7.4, and such allocation of the Purchase Price will be used, reported
and implemented by both the Company and Buyer for federal, state, local and
other tax purposes.
7.5 Confidentiality. Prior to the Closing, each of the parties to
this Agreement agrees to use all reasonable efforts to keep confidential any
information from time to time supplied to it by or on behalf of any of the
other parties hereto; provided, however, that the foregoing shall not apply:
(a) to any information already known to such party receiving the information at
the time of the receipt thereof, other than any such information which is
already known by virtue of any breach by any third party of any confidentiality
obligation; (b) to any information which is or becomes publicly available
(other than as a result of a breach of this Agreement); (c) to the extent the
receiving party is required to disclose the information in question pursuant to
applicable laws and regulations or by any subpoena or similar legal process; or
(d) to the extent that the receiving party needs to disclose the information in
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question for the protection or enforcement of any of its rights or interests
against the other parties hereto, whether under this Agreement or otherwise.
ARTICLE VIII
CLOSING CONDITIONS
8.1 Conditions to Obligations of Buyer and Issuer. The
obligations of Buyer and Issuer under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by Buyer and Issuer in
writing; provided, however, such waiver will not waive or diminish Buyer's or
Issuer's right for indemnification pursuant to Section 9.2, unless so stated:
(a) All representations and warranties of the Company and
the Owners contained in this Agreement are true and correct in all
material respects at and as of the Closing with the same effect as
though such representations and warranties were made at and as of the
Closing, except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be
true and correct in all material respects as of such date or time).
(b) The Company and the Owners have performed and
complied in all material respects with all the covenants and
agreements and satisfied all the conditions required by this Agreement
to be performed, complied with or satisfied by them at or prior to the
Closing, including without limitation the delivery of all the
documents specified in Section 2.2(c).
(c) There is no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against any
Owner, the Company, Buyer or Issuer to restrain or prohibit or obtain
damages or other relief with respect to this Agreement or the
consummation of the transactions contemplated hereby.
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(d) All necessary company, contractual and governmental
consents, approvals, orders, authorizations or notices have been
obtained or given, as applicable, on terms reasonably satisfactory to
Buyer and Issuer.
(e) All necessary consents, approvals or authorizations
from Bank of America of Texas, N.A. required to consummate the
transactions contemplated hereby without violating the Credit
Agreement have been obtained on terms satisfactory to Buyer and
Issuer.
(f) All applicable waiting periods under the HSR Act will
have expired or been terminated.
(g) Buyer, Issuer and Cancellieri have executed and
delivered an Employment Agreement substantially in the form of Exhibit
A.
(h) Buyer, Issuer and Vargas have executed and delivered
an Employment Agreement substantially in the form of Exhibit B.
(i) Issuer and Buyer will have received a legal opinion
from counsel to the Company and the Owners substantially in the form
of Exhibit C.
8.2 Conditions to Obligations of the Company and the Owners. The
obligations of the Company and the Owners under this Agreement are subject to
the satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived by the Company and the Owners
in writing; provided, however, such waiver will not waive or diminish the
Company's or the Owners' right for indemnification pursuant to Section 9.3
unless so stated:
(a) All representations and warranties of Buyer and
Issuer contained in this Agreement are true and correct in all
material respects at and as of the Closing with the same effect as
though such representations and warranties were made at and as of the
Closing, except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be
true and correct in all material respects as of such date or time).
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(b) Buyer and Issuer have performed and complied in all
material respects with all the covenants and agreements and satisfied
all the conditions required by this Agreement to be performed,
complied with or satisfied by them at or prior to the Closing,
including without limitation the delivery of the documents specified
in Sections 2.2(a) and (b).
(c) There is no pending or threatened litigation in any
court or any proceeding before or by any Governmental Body against any
Owner, the Company, Buyer or Issuer to restrain or prohibit or obtain
damages or other relief with respect to this Agreement or the
consummation of the transactions contemplated hereby.
(d) All necessary corporate, contractual and governmental
consents, approvals, orders, authorizations or notices have been
obtained or given, as applicable, on terms reasonably satisfactory to
the Company and the Owners.
(e) All necessary consents, approvals or authorizations
from Bank of America of Texas, N.A. required to consummate the
transactions contemplated hereby without violating the Credit
Agreement have been obtained.
(f) All applicable waiting periods under the HSR Act will
have expired or been terminated.
(g) The Company will have received a legal opinion from
counsel to Buyer and Issuer substantially in the form of Exhibit D.
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ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 Survival of Representations and Warranties. Notwithstanding
any investigation by the parties hereto, the representations and warranties
contained in this Agreement will survive the Closing for two years after the
Closing Date; provided, however, that the representations and warranties of the
Company and the Owners set forth in (a) Section 3.14 will survive until the
expiration of the applicable period of limitation; (b) Sections 3.17 and 3.25
will survive until four years after the Closing Date; and (c) Section 3.4 will
survive indefinitely after the Closing. If written notice of a Claim (as
defined in Section 9.2) has been given prior to the expiration of the
applicable representations and warranties, then such representations and
warranties will survive as to such Claim until such Claim has been finally
resolved.
9.2 Indemnification of Buyer and Issuer. The Company and each
Owner will jointly and severally indemnify and hold Buyer, Issuer and their
respective directors, officers, shareholders, employees and agents harmless
from any and all liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys' fees and costs of investigation (collectively,
"Claims") that any such Person may suffer or incur as a result of or relating
to:
(a) the breach or inaccuracy, or any allegation by a
third party that, if true, would constitute a breach or inaccuracy, of
any of the representations or warranties made by the Company or any
Owner in this Agreement or in the other Company Documents;
(b) the breach or inaccuracy, or any allegation by a
third party that if true, would constitute a breach or inaccuracy, of
any covenant or agreement made by the Company or any Owner in this
Agreement or in the other Company Documents; or
(c) any Liabilities of the Company or any Owner other
than the Assumed Liabilities.
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9.3 Indemnification of the Company and the Owners. Buyer and
Issuer will, jointly and severally, indemnify and hold the Company and each
Owner and their respective officers, employees and agents harmless from any and
all Claims that any such Person may suffer or incur as a result of or relating
to:
(a) the breach or inaccuracy, or any allegation by a
third party that, if true, would constitute a breach or inaccuracy, of
any of the representations or warranties made by Buyer or Issuer in
this Agreement;
(b) the breach or inaccuracy, or any allegation by a
third party that if true, would constitute a breach or inaccuracy, of
any covenant or agreement made by Buyer or Issuer in this Agreement;
or
(c) the Assumed Liabilities.
9.4 Limitations on Indemnification. Notwithstanding any contrary
provisions of Section 9.2, the Company and the Owners will not be obligated to
indemnify Buyer or Issuer with respect to any Claim unless the aggregate amount
of such Claims exceeds $75,000 and in such event, the Company and the Owners
will only be obligated for the amount in excess of $75,000, and the Company and
the Owners will not be obligated to indemnify Buyer or Issuer with respect to
any Claims, the aggregate amount of which exceeds $7,500,000.
9.5 Right of Setoff. The Company and the Owners hereby agree that
with respect to any Claim for indemnification under this Article IX or any
other breach of contract claim under this Agreement or any other Company
Document, Buyer and Issuer are hereby authorized to setoff and apply any and
all indemnifiable Claims owing to Buyer or Issuer against the obligations, if
any, owing to the Company under the Contingent Payments. Such setoff is not
the sole and exclusive remedy of Buyer or Issuer.
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<PAGE> 43
9.6 Exclusivity of Indemnification. The parties hereto agree that
the indemnification provisions of this Article IX will be the exclusive remedy
for Claims any party may have for misrepresentation, breach of warranty or
breach of covenant or agreement (except for such Claims arising under Section
5.8, Article X or Article XI or as a result of fraud or other intentional
misconduct) and each party hereby waives, to the extent it may do so, any other
rights or remedies that may arise under any applicable statute, rule or
regulation; provided, however, that the foregoing shall not limit the types of
remedies, including specific performance or other equitable remedies, which may
be sought by an indemnified party in connection with a breach of any covenant
or agreement contained herein.
ARTICLE X
NONCOMPETITION AGREEMENT
10.1 Noncompetition. The Company and the Owners hereby agree that
during the Noncompetition Period (as hereinafter defined) applicable to such
Person, none of the Company, the Owners or any Affiliate (as hereinafter
defined) of the Company or any such Owner will, directly or indirectly, on its
own behalf or as an employee or other agent of or an investor in another
Person:
(a) engage in the business of selling, distributing or
otherwise transporting fresh produce (collectively, the "Business") in
any geographic area where the Company has historically engaged in the
Business (the "Territory");
(b) influence or attempt to influence any customer or
supplier of Buyer or Issuer that is located, purchases or sells in the
Territory, as applicable, to purchase goods or services related to the
Business from any Person other than Buyer or Issuer; or
(c) employ or attempt to employ any individuals who are
then or have been during the preceding nine months employees of Buyer
or Issuer or influence or seek to influence any such employees to
leave Buyer's or Issuer's employment;
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<PAGE> 44
provided, however, that nothing herein shall preclude any Person from (x)
making an investment in Issuer or any other entity which may engage in the
Business so long as such investment interest in such other entity does not
exceed five percent of the outstanding voting securities of such entity, or (y)
investing and participating in the operation and affairs of PIC International,
LLC, which is engaged solely in the business of importing and exporting fresh
produce or (z) investing and participating in growing ventures so long as Buyer
or Issuer is offered the first opportunity to sell the fresh produce of such
growing ventures; provided, that, such investment and/or participation does not
require such Person making the investment and/or participation to provide
material services with respect to the operation and affairs of such other
entity and such investment and/or participation does not interfere with the
performance of any such Person's duties to either Issuer or Buyer as an
employee, if applicable.
If any provision of this Section 10.1 should be found by any court of
competent jurisdiction to be unenforceable by reason of its being too broad as
to the period of time, territory, and/or scope, then, and in that event, such
provision will nevertheless remain valid and fully effective, but will be
considered to be amended so that the period of time, territory, and/or scope
set forth will be changed to be the maximum period of time, the largest
territory, and/or the broadest scope, as the case may be, which would be found
enforceable by such court. Any violation of the provisions of this Section
10.1 shall automatically toll and suspend the Noncompetition Period for the
duration of such violation.
As used herein, "Noncompetition Period" means, (i) with respect to the
Company and Cancellieri, the period beginning on the Closing Date and ending on
the fifth anniversary of the Closing Date and (ii) with respect to Vargas, the
period beginning on the Closing Date and ending on the second anniversary of
the Closing Date, and "Affiliate" means, with respect to any Person, any other
Person controlling, controlled by, or under common control with such Person.
For purposes of this Agreement, the term "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with" as used
with respect to any Person) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person whether through ownership of voting securities, by contract or
otherwise.
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<PAGE> 45
10.2 Agreement and Acknowledgment. Each Owner and the Company
acknowledges that its obligations under Section 10.1 are a material inducement
and condition to Buyer's and Issuer's entering into this Agreement, purchasing
the Assets, assuming the Assumed Liabilities and performing the other
transactions contemplated hereby. Each Owner and the Company acknowledges and
agrees that the restrictions set forth in Section 10.1 are reasonable as to
time, geographic area and scope of activity and do not impose a greater
restraint than is necessary to protect the goodwill and other business
interests of Buyer and Issuer, and each Owner and the Company agree that Buyer
and Issuer are justified in believing the foregoing.
10.3 Specific Performance. In the event of a violation of this
Article X, Buyer and Issuer will be entitled to seek injunctive relief against
the Company or such Person in addition to any other legal or equitable remedies
that may be available.
ARTICLE XI
AGREEMENT TO REGISTER THE SHARES
11.1 Exemption. The Company and the Owners acknowledge that the
shares of Common Stock issuable to the Company on the Closing Date and the
shares of Common Stock issuable to the Company upon conversion of the
Contingent Payments (collectively, the "Shares") have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") in reliance upon
the exemption provided by Section 4(2) of the Securities Act for transactions
by an issuer not involving a public offering.
11.2 Investment Intent and Access. The Company and the Owners
hereby represent and warrant that (a) the Shares will be acquired for
investment for their accounts, not as nominees or agents, and not with a view
to the resale or distribution of any part thereof in a manner which would
violate the registration provisions of the Securities Act or any applicable
state securities laws, (b) the
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<PAGE> 46
Company and the Owners have received the SEC Filings from Issuer, and (c) the
Company and the Owners have had sufficient access to Issuer and its officers to
ask questions related to the SEC Filings and Issuer's business and operations
and to review such information, financial records and other documents relating
to the SEC Filings and the Issuer's operations and business as the Company or
the Owners have requested.
11.3 Registration. Issuer will register the Shares issuable at the
Closing for resale under the Securities Act on a shelf registration statement
on Form S-3 as promptly as practicable after receipt of the audited financial
statements of Seller that are required for such registration statement. After
the conversion of any Contingent Payment into Shares, the Company may request
that Issuer register such Shares pursuant to a shelf registration statement on
Form S-3 (the proposed registration statements are collectively, the
"Registration Statements"). Issuer may defer the filing (but not the
preparation) of a Registration Statement for a period of up to 120 days if at
the time Issuer or any of its subsidiaries is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration statement (but would not be required if
such registration statement were not filed), and the Board of Directors of
Issuer determines in good faith that such disclosure would be materially
detrimental to Issuer and its shareholders or would have a material adverse
effect on any such confidential negotiations or other confidential business
activities. Except as otherwise disclosed in writing to the Owners, Issuer
does not intend to be engaged in any such confidential negotiations or other
confidential business activities on the Closing Date. A deferral of the filing
of a Registration Statement will be lifted, and the Registration Statement
shall be filed forthwith, if the negotiations or other activities are disclosed
or terminated. In order to defer the filing of a Registration Statement,
Issuer will promptly (but in any event within 10 days), upon determining to
seek such deferral, deliver to the Company and the Owners a certificate signed
by an executive officer of Issuer setting forth a statement of the reason for
such deferral and an approximation of the anticipated delay, which information
the Company shall treat as confidential. Within 20 days after receiving such
certificate, the Company may withdraw such request by giving notice to Issuer.
11.4 Best Efforts. Issuer will use its reasonable best efforts to
cause the Registration Statements to be become effective as promptly after
filing as is practicable, and will use its reasonable
38
<PAGE> 47
best efforts to keep such Registration Statements current after it becomes
effective. Issuer may include shares of other shareholders having registration
rights in the Registration Statements.
11.5 Orderly Dispositions. The Company or the Owners will provide
Issuer with written notice at least three business days prior to any proposed
sale of Shares and, at Issuer's request, will delay such sale for up to 45 days
if necessary to insure that the disclosure in the Registration Statements is
current. If the Company and the Owners desire during any consecutive three
month period to collectively sell more than 25% of the aggregate number of
Shares issued pursuant to this Agreement (as determined at the date of such
proposed sale), the Company or the Owners will provide Issuer with reasonable
written notice prior to such proposed sale setting forth the amount of Shares
to be sold and method of sale, and will cooperate with Issuer to sell such
Shares in a manner consistent with maintaining an orderly market for the Common
Stock.
11.6 Cooperation and Expenses. The Company and the Owners will
cooperate with Issuer in the preparation and filing of the Registration
Statements and any amendments thereto. Issuer will pay all costs and expenses
incidental to preparing and filing the Registration Statements and any
amendments and supplements thereto, except that the Company and the Owners will
pay (a) underwriting discounts or selling commissions respecting sales of such
Shares, (b) all applicable stock transfer taxes relating to any Shares
transferred, and (c) all fees and expenses of their counsel, if any.
11.7 Indemnification. Issuer, the Company and the Owners selling
Shares under the Registration Statements agree, severally and jointly, that it
or they will indemnify and hold harmless the other parties and any underwriter
(as defined in the Securities Act), if any, against any losses, claims, damages
or liabilities, joint or several, to which it or the other parties may become
subject, whether under the Securities Act or otherwise, insofar as such are
caused by an untrue statement or alleged untrue statement of any material fact
contained in a Registration Statement filed pursuant to Section 11.3, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, to the extent that the inclusion or omission was with respect to
data relating to Issuer, for which Issuer will be responsible,
39
<PAGE> 48
or the Company or the Owners or its or their stock holdings or manner of sale,
for which the Company or the Owners will be responsible, as the case may be.
ARTICLE XII
MISCELLANEOUS
12.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing
Date by mutual written consent of Buyer and Issuer, on the one hand, and the
Company and the Owners, on the other hand; or (b) by Buyer and Issuer, on the
one hand, and the Company and the Owners, on the other hand, if a condition to
its performance hereunder has not been satisfied or waived prior to January 31,
1998. Notwithstanding the foregoing, a party may not terminate this Agreement
if the event giving rise to the termination right results from the willful
failure of such party to perform or observe any of the covenants or agreements
set forth herein to be performed or observed by such party or if such party is,
at such time, in material breach of this Agreement.
12.2 Notices. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
facsimile or by registered or certified mail, postage prepaid, to the parties
at the following addresses (or to the attention of such other person or such
other address as any party may provide to the other parties by notice in
accordance with this Section 12.2):
If to Buyer or Issuer:
Francisco Acquisition Corp.
Fresh America Corp.
6600 LBJ Freeway, Suite 180
Dallas, Texas 75240
Facsimile: (972) 774-0515
Attention: David I. Sheinfeld
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<PAGE> 49
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Facsimile: (214) 939-6100
Attention: Alan J. Bogdanow
If to the Company or the Owners:
Francisco Distributing Company, LLC
12840 Leyva Street
Norwalk, California 90650
Facsimile: (562) 921-8706
Attention: Jack Cancellieri
with a copy to:
Gibson, Dunn & Crutcher
4 Park Plaza
Irvine, California 92614
Facsimile: (714) 475-4648
Attention: Tom Magill
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or by facsimile
or, if mailed, when actually received.
12.3 Attorneys' Fees and Costs. If attorneys' fees or other costs
are incurred to secure performance of any obligations hereunder, or to
establish damages for the breach thereof or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party will be
entitled to recover reasonable attorneys' fees and costs incurred in connection
therewith. A party will be considered the prevailing party if (a) it initiated
the litigation and substantially obtains the relief it sought, either through a
judgment or arbitration award or the losing party's voluntary action before
arbitration, trial, or judgment, (b) the other party withdraws its action
without substantially obtaining the relief it sought, or (c) such party did not
initiate the litigation and judgment is entered into for any party, but without
substantially granting the relief sought by the initiating
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<PAGE> 50
party or granting more substantial relief to the non-initiating party with
respect to any counterclaim asserted by the non-initiating party in connection
with such litigation.
12.4 No Brokers. Except for the Company's agreement with National
Business Brokers, each party to this Agreement represents to the other parties
that it has not incurred and will not incur any liability for brokerage fees or
agents' commissions in connection with this Agreement or the transactions
contemplated hereby. Each party hereto agrees that it will indemnify and hold
harmless the other parties hereto against any claim for brokerage and finders'
fees or agents' commissions in connection with the negotiation or consummation
of the transactions contemplated by this Agreement.
12.5 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
12.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned or delegated by the
Company, any Owner, Buyer or Issuer, without the prior written consent of the
other parties; except that Buyer may assign its rights and obligations under
this Agreement to Issuer or any entity controlled by Issuer. This Agreement is
not intended to confer any rights or benefits to any Person (including without
limitation employees of the Company) other than the parties hereto.
12.7 Entire Agreement. This Agreement and the related documents
contained as Exhibits and Schedules hereto or expressly contemplated hereby
contain the entire understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof. This
Agreement cannot be modified or amended except in writing signed by the party
against whom enforcement is sought. The Exhibits and Schedules to this
Agreement are hereby incorporated by reference into and made a part of this
Agreement for all purposes.
12.8 Knowledge. Whenever a statement regarding the existence or
absence of facts in this Agreement is qualified by a phrase such as "to such
person's knowledge" or "known to such person" it
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<PAGE> 51
is intended by the parties that the information to be attributed to such person
is information actually or constructively known to (a) the person in the case
of an individual or (b) in the case of a corporation or other entity an officer
or members of senior management as a result of his/or her employment by the
employer. The person has constructive knowledge of those matters which the
individual involved could reasonably be expected to have as a result of
undertaking an investigation of such a scope and extent as a reasonably prudent
person would undertake concerning the particular subject matter.
12.9 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE
OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT
MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
12.10 Arbitration.
(a) To the extent that the parties hereto are unable to
resolve their disputes or controversies arising out of or relating to this
Agreement, or the performance, breach, validity, interpretation or enforcement
of this Agreement, through discussion and negotiation, all such disputes and
controversies will be resolved by binding arbitration in accordance with Title
9 of the United States Code (the Federal Arbitration Act) and the Commercial
Arbitration Rules of the America Arbitration Association (the "AAA"), and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. A party hereto may initiate arbitration by
sending written notice of its intention to arbitrate to the other parties
hereto and to the AAA office located in Dallas, Texas. Such written notice
will contain a description of the dispute and the remedy sought. The
arbitration will be conducted at the offices of the AAA in Dallas, Texas before
an independent and impartial arbitrator acceptable to all parties hereto. In
the event that the parties have not mutually agreed on an acceptable arbitrator
within thirty (30) days after the demand for arbitration is filed, the
arbitrator shall be appointed in the manner provided by Section 13 of the
Commercial Arbitration Rules of the AAA. The decision of the arbitrator
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<PAGE> 52
will be final and binding on the parties hereto and their successors and
assignees. The parties hereto intend that this agreement to arbitrate be
irrevocable.
(b) Notwithstanding the foregoing, in advance of the
institution of any arbitration proceeding, but in aid thereof, an application
may be filed for order or orders to be entered by any court of competent
jurisdiction (i) invoking the jurisdiction of the court over the controversy in
rem, by attachment, garnishment, sequestration, or (ii) seeking to restrain or
enjoin the destruction of the subject matter of the controversy or any
essential part thereof, or the destruction or alteration of books, records,
documents, or evidence needed for the arbitration proceeding. No such judicial
proceeding by a party shall be deemed a waiver of the party's right to
arbitrate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
FRANCISCO ACQUISITION CORP.
/s/ DAVID I. SHEINFELD
---------------------------------------------
David I. Sheinfeld,
Chairman of the Board
ISSUER:
FRESH AMERICA CORP.
/s/ DAVID I. SHEINFELD
---------------------------------------------
David I. Sheinfeld,
Chairman of the Board, Chief Executive
Officer and Secretary
COMPANY:
FRANCISCO DISTRIBUTING COMPANY, LLC
/s/ JACK CANCELLIERI
---------------------------------------------
Jack Cancellieri,
Managing Member
OWNERS:
F.J.V., INC.
/s/ FERNANDO VARGAS
---------------------------------------------
Fernando Vargas,
President
/s/ JACK CANCELLIERI
---------------------------------------------
Jack Cancellieri
/s/ FERNANDO VARGAS
---------------------------------------------
Fernando Vargas
45
<PAGE> 1
[BANK OF AMERICA LOGO] RESTATED BUSINESS LOAN AGREEMENT
================================================================================
This Agreement dated as of February 2, 1998, is between BANK OF AMERICA TEXAS,
N.A. (the "BANK") and FRESH AMERICA CORP., a Texas corporation (the
"BORROWER").
The Borrower and the Bank have entered into that certain Business Loan
Agreement dated as of July 23, 1997 (the "EXISTING LOAN AGREEMENT"), under
which the Bank extended credit to the Borrower not to exceed a total
outstanding principal amount of $14,000,000 (as that amount may be reduced by
certain Borrowing Base restrictions) to be used by the Borrower as provided
therein and allocated as (a) a revolving line of credit of up to $10,000,000,
and (b) a term loan of up to $4,000,000 to be funded by the Bank in one or more
advances.
The Borrower has requested that the Bank agree to restructure the credit
facilities under the Existing Loan Agreement and provide additional extensions
of credit so that the total credit extended by the Bank to the Borrower does
not exceed a total outstanding principal amount of $17,000,000 (as that amount
may be reduced by certain Borrowing Base restrictions) to be used by the
Borrower as provided herein and allocated as (a) a revolving line of credit of
up to $12,000,000, to be funded by the Bank from time to time in a combination
of advances and letters of credit, and (b) a bridge loan of $5,000,000 to be
funded by the Bank in a single advance on the date of this Agreement. The Bank
is willing to restructure the credit facilities under the Existing Loan
Agreement as described above on the terms and conditions of this Agreement.
ACCORDINGLY, for adequate and sufficient consideration, the Borrower and the
Bank agree to amend and completely restate the Existing Loan Agreement, as
follows:
1. DEFINITIONS. The following terms have the meanings indicated for the
purposes of this Agreement:
"ACCEPTABLE GROWER CONTRACT RECEIVABLE" means a Grower Contract
Receivable of any Company that satisfies the following requirements:
(a) The Grower Contract Receivable has risen from an enforceable
written contract executed by the debtor obligated upon such
receivable (and any guarantor), which (i) with respect to
advances generating a Grower Contract Receivable that is
$50,000 or less, sets forth the amount of the advance
generating such Grower Contract Receivable and the purpose for
such advance, the terms of repayment (including a date due
that is no more than 120 days after the date of the contract),
and acknowledgment by the debtor of such advance and terms,
and (ii) with respect to advances generating a Grower Contract
Receivable that is greater than $50,000, includes all of the
requirements contained in CLAUSE (I) above, together with
specific acknowledgment of an obligation to be repaid
regardless of circumstances.
(b) The Grower Contract Receivable is not in default. A Grower
Contract Receivable will be considered in default if (i) the
Grower Contract Receivable is not paid on or before its due
date, (ii) the debtor obligated upon the Grower Contract
Receivable suspends its business, makes a general assignment
for the benefit of creditors, or fails to pay its debts
generally as they come due, or (iii) any petition is filed by
or against the debtor obligated upon the Grower Contract
Receivable under any Debtor Law. If any Grower Contract
Receivable owed by a debtor is in default, no Grower Contract
Receivables upon which that debtor is obligated will be
included as Acceptable Grower Contract Receivables.
RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 2
(c) The Grower Contract Receivable, when added to all other Grower
Contract Receivables that are obligations of the same debtor
or any Affiliate of such debtor, does not cause the total
obligations of such debtor and its Affiliates to the Companies
to exceed $500,000.
(d) The debtor obligated upon the Grower Contract Receivable is
not (i) an Affiliate of any Company or any key employee of any
Company, or (ii) any entity in which any Company owns a
minority interest.
(e) The debtor upon the Grower Contract Receivable is not a Person
located in a foreign country.
(f) The Grower Contract Receivable is otherwise reasonably
acceptable to the Bank. The Bank will give the Borrower 10
days prior written notice before implementing any changes in
its eligibility criteria for Acceptable Grower Contract
Receivables.
"ACCEPTABLE INVENTORY" means inventory of any Company that satisfies
the following requirements:
(a) The inventory is owned by that Company free of any title
defects or any liens or interests of others except the
security interest in favor of the Bank and Permitted Liens
described in SECTION 10.10(B) and (E).
(b) The inventory is permanently located at locations which the
Borrower has disclosed to the Bank and which are acceptable to
the Bank. If the inventory is covered by a negotiable
document of title (such as a warehouse receipt) that document
must be delivered to the Bank. Inventory which is in transit
is not acceptable unless it is covered by a commercial letter
of credit issued by the Bank and the seller of the inventory
is required to present shipping or title documents to the Bank
as a condition to obtaining payment.
(c) The inventory is not placed on consignment.
(d) With respect to any Inventory located in any facility leased
by any Company either: (i) a properly executed landlord waiver
substantially in the form of ANNEX 3 to the Security Agreement
has been delivered and remains in effect; or (ii) the Company
has paid all rent due and owing under the applicable lease and
is not otherwise in default under the lease.
"ACCEPTABLE RECEIVABLE" means an account receivable of any Company
which satisfies the following requirements:
(a) The account has resulted from the sale of goods or the
performance of services by that Company in the ordinary course
of that Company's business.
(b) There are no conditions which must be satisfied before that
Company is entitled to receive payment of the account.
Accounts arising from COD sales, consignments or guaranteed
sales are not acceptable.
(c) The debtor upon the account does not claim any defense to
payment and has not asserted any counterclaims or offsets
against that Company, but only to the extent of such claim,
defense or offset.
2 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 3
(d) The account has arisen from an enforceable order or contract
for the absolute and final sale of the inventory or services
of that Company or accounts receivable for which the sales or
services have been fully performed in the ordinary course of
business of that Company.
(e) With respect to Sam's, that Company has either sent an invoice
to Sam's in the amount of the account or has recorded the sale
in its books and records and has other evidence that the sale
is final.
(f) The account is owned by that Company free of any title defects
or any liens or interests of others except the security
interest in favor of the Bank and Permitted Liens described in
SECTION 10.10(A), (B), and (E).
(g) The debtor upon the account is not an employee or Affiliate of
that Company.
(h) The debtor upon the account is not any state, county, city,
town or municipality, except to the extent that there are no
statutory defenses or administrative barriers to the Bank's
perfection of its security interest in such account or
collection of such account as a secured party.
(i) The debtor upon the account is not any person or entity
located in a foreign country other than Canada or Puerto Rico
unless the account is supported by a letter of credit issued
by a bank acceptable to the Bank, provided that accounts of
debtor's located in Canada or Puerto Rico shall only be
included as Acceptable Receivables to the extent that the
amounts owing under such accounts do not exceed $500,000 in
the aggregate.
(j) The debtor on the account is not a person or entity to whom
that Company is obligated for goods purchased by that Company
or for services performed for that Company, but only to the
extent of the amount payable by any Company to such debtor,
and only to the extent that such amount payable is not
deducted from the Adjusted Borrowing Base under CLAUSE (B) in
the definition of that term.
(k) The account is not in default. An account will be considered
in default if any of the following occur:
(i) The account is not paid within the 60 day period
starting on its invoice date;
(ii) The debtor obligated upon the account suspends
business, makes a general assignment for the benefit
of creditors, or fails to pay its debts generally as
they come due; or
(iii) Any petition is filed by or against the debtor
obligated upon the account under any Debtor Law.
(l) The account, when added to all other accounts that are
obligations of the same debtor, (other than Sam's) does not
cause that debtor's total obligations to the Companies to
exceed 20% of the balance due on all of the Companies'
accounts.
(m) The account is not the obligation of a debtor (other than
Sam's) who is in default (as defined in clause (j) above) on
20% more of the accounts upon which debtor is obligated.
(n) The account does not arise from the sale of goods which
remains in that Company's possession or under that Company's
control.
3 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 4
(o) The account is not evidenced by a promissory note or chattel
paper. This does not exclude accounts owing by Sam's that
have been recorded in the books of that Company as a final
sale, but have not yet been invoiced.
(p) The account is otherwise reasonably acceptable to the Bank.
The Bank will give the Borrower 10 days prior written notice
before implementing any changes in its eligibility criteria
for Acceptable Receivables.
Notwithstanding anything herein to the contrary, the Bank may, in its
sole discretion, with respect to accounts upon which the debtor is the U.S.
government or any agency or department of the U.S. government, expressly
require the applicable Company to comply with the procedures in the Federal
Assignment of Claims Act of 1940 with respect to the obligation, and if that
Company is not in compliance with such procedures thirty days after that
Company has received notice of such requirement, that account will be excluded
from Acceptable Receivables.
"ACM" is defined in SECTION 11.8 of this Agreement.
"ACT" is defined in SECTION 13.19 of this Agreement.
"ADJUSTED BORROWING BASE" means the lesser of: (a) the Revolving
Facility Commitment, as that amount may be reduced in accordance with the terms
of this Agreement, or (b) the Borrowing Base, minus any amounts the Companies
owe to growers of agricultural products that may have statutory rights against
certain assets of the Companies under PACA or any comparable state law.
"AFFILIATE" of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with that Person. For purposes of this definition (a) "control," "controlled
by," and "under common control with" means possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of voting securities or other interests, by contract, or
otherwise), and (b) the Companies are "Affiliates" of each other.
"APPLICABLE MARGIN" means (a) for amounts bearing interest at the
LIBOR Rate under the Revolving Facility Commitment, 1.75%, and (b) for amounts
bearing interest at the LIBOR Rate under the Bridge Loan Commitment, 2.625%.
"ARRANGER" is defined in SECTION 10.2 of this Agreement.
"ASSIGNEE" is defined in SECTION 13.5 of this Agreement.
"BANKING DAY" is defined in SECTION 7.4 of this Agreement.
"BORROWING BASE" means the sum of (a) 80% of the balance due on
Acceptable Receivables owed by any Person other than Sam's, plus (b) 85% of the
balance due on Acceptable Receivables owed by Sam's, plus (c) the lesser of (i)
$3,000,000 or (ii) 50% of the sum of (A) Acceptable Grower Contract
Receivables, plus (B) the value of Acceptable Inventory, provided that the
amount determined under this CLAUSE (C) may never exceed an amount equal to 25%
of the total Adjusted Borrowing Base.
In determining the value of Acceptable Inventory to be included in the
Borrowing Base, the Bank will use the lesser of (i) the applicable Company's
cost, or (ii) the applicable Company's estimated market value.
"BORROWING BASE REPORT" means a report substantially in the form of
EXHIBIT D-1.
4 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 5
"BORROWING NOTICE" means a notice substantially in the form of EXHIBIT
C-2.
"BRIDGE LOAN COMMITMENT" is defined in SECTION 3.1 of this Agreement.
"BRIDGE NOTE" means the promissory note substantially in the form of
EXHIBIT A-2.
"BRIDGE RATE" is defined in SECTION 4.2 of this Agreement.
"CAPITAL EXPENDITURE" means, for any period and any Person, all
expenditures by that Person during that period for property, plant, or
equipment (including renewals, improvements, replacements, and capitalized
repairs) that should be reflected as additions to property, plant, or equipment
on that Person's balance sheet prepared in conformity with GAAP, and, for
purposes of this definition (a) the purchase of equipment acquired concurrently
with the trade-in of existing equipment or acquired with insurance proceeds
shall be included in Capital Expenditures only to the extent of the gross
amount of the purchase price less the credit granted for the equipment traded
in or the amount of insurance proceeds, as the case may be, and (b) the
purchase price of equipment acquired in connection with the sale or other
disposition of capital assets being replaced or superseded shall be included in
Capital Expenditures only to the extent of the gross amount of the purchase
price less any cash received from that sale or other disposition.
"CAPITAL LEASE" means any capital lease or sublease that is required
by GAAP to be capitalized on a balance sheet.
"CHANGE OF CONTROL" is defined in SECTION 12.11 of this Agreement.
"CODE" is defined in SECTION 9.14(E)(I) of this Agreement.
"COLLATERAL" is defined in SECTION 6.2 of this Agreement.
"COMMITMENTS" is defined in SECTION 13.5 of this Agreement.
"COMPANIES" means, at any time, the Borrower and each of its
Subsidiaries.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT D-2 and signed by the Chief Executive Officer, Chief Financial
Officer, President, or Treasurer of the Borrower.
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement dated as of February 19, 1997, executed by and between the Borrower
and the Bank.
"CONSIGNEE" is defined in SECTION 10.27 of this Agreement.
"CPA" is defined in SECTION 10.3(A) of this Agreement.
"DEBT" means, for any Person, at any time, and without duplication,
the sum of (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or similar instruments, (c) all
obligations to pay the deferred purchase price of property or services except
trade accounts payable arising in the ordinary course of business, (d) all
obligations arising under acceptance facilities or facilities for the discount
or sale of accounts receivable, (e) all direct or contingent obligations in
respect of letters of credit, (f) liabilities secured (or for which the holder
of the Debt has an existing Right, contingent or otherwise, to be so secured)
by any Lien existing on property owned or acquired by that Person, other than
accounts payable secured by PACA Liens
5 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 6
(g) lease obligations that have been capitalized for financial reporting
purposes, and (h) all guaranties, endorsements, and other contingent
obligations for Debt of others.
"DEBTOR LAWS" means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar laws affecting creditors' Rights.
"DEFAULT" means the occurrence of any event described in SECTION 12 of
this Agreement.
"EBITDA" is defined in SECTION 10.4 of this Agreement.
"ERISA" is defined in SECTION 9.14(E)(II) of this Agreement.
"ERISA AFFILIATE" is defined in SECTION 9.14(E)(III) of this
Agreement.
"EURODOLLAR RATE" is defined in SECTION 4.3 of this Agreement.
"EXISTING LOAN AGREEMENT" is defined in the Recitals of this
Agreement.
"EXPIRATION DATE" is defined in SECTION 2.2 of this Agreement.
"FIXED CHARGE COVERAGE" is defined in SECTION 10.7 of this Agreement.
"FRANCISCO" means Francisco Distributing Company, LLC, a California
limited liability company, and, at any time after such acquisition, any Person
who acquires substantially all of such company's assets.
"FRANCISCO ACQUISITION AGREEMENT" means that certain Asset Purchase
Agreement executed by Borrower, as "Issuer," Francisco Acquisition Corp., as
"Buyer," Jack Cancellieri and Fernando Vargas, as "Owners," and Francisco, as
the "Company," as the same may be amended, modified, or supplemented from time
to time.
"FUNDED DEBT" is defined in SECTION 10.4 of this Agreement.
"GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
"GOVERNMENT SECURITIES" is defined in SECTION 10.13(A) of this
Agreement.
"GROWER CONTRACT RECEIVABLES" means payments made by any Company to
growers of fruits or vegetables in consideration of any such grower's promise
to (a) provide such grower's crop (after harvest) to such Company for
distribution and sale, and (b) reimburse the Company for such payment from
proceeds of the sale by the Company of such crop, provided that each of the
following applies to such payment:
(i) Reimbursement for the payment is due within 180 days
after the date such payment is made by the Company;
(ii) The grower to whom the payment is made is not (A) an
Affiliate of any Company or any key employee of any
Company or (B) any entity in which any Company or any
key employees of any Company owns a minority
interest;
6 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 7
(iii) The payment, when added to all Grower Contract
Receivables that are obligations of the same grower,
does not cause that grower's aggregate Grower
Contract Receivables to the Companies to exceed
$1,000,000; and
(iv) The grower to whom the payment is made is not in
default (as described in CLAUSE (B) of the definition
of "ACCEPTABLE GROWER CONTRACT RECEIVABLE" above)
with respect to any Grower Contract Receivable upon
which such grower is obligated to any Company on the
date the payment is made.
"GUARANTY" means a guaranty substantially in the form of EXHIBIT B.
"INCUMBENT BOARD" is defined in SECTION 12.11 of this Agreement.
"INELIGIBLE SECURITIES" is defined in SECTION 10.2 of this Agreement.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement
executed by Francisco, as Seller, Borrower, Francisco Acquisition Corp., and
the Bank, as the same may be amended, modified, or supplemented from time to
time.
"INTEREST COVERAGE" is defined in SECTION 10.6 of this Agreement.
"INTEREST EXPENSE" means, for any Person, for any period, and without
duplication, all interest on Funded Debt, whether paid in cash or accrued as a
liability and payable in cash during any subsequent period (including the
interest component of Capital Leases), as determined by GAAP, but excluding any
non-cash interest on Subordinated Debt so long as no cash interest is due and
payable on such Subordinated Debt prior to 90 days following the Expiration
Date.
"INVESTMENT" means, in respect of any Person, any loan, advance,
extension of credit, or capital contribution to that Person, any investment in
that Person, or any purchase or commitment to purchase (i) any equity
securities or Debt issued by that Person or (ii) substantially all of the
assets or a division or other business unit of that Person.
"LC REQUEST" means a request substantially in the form of EXHIBIT C-3.
"LIBOR RATE" is defined in SECTION 4.3(D) of this Agreement.
"LIEN" means any lien, mortgage, security interest, pledge,
assignment, charge, title retention agreement, or encumbrance of any kind and
any other arrangement for a creditor's claim to be satisfied from assets or
proceeds prior to the claims of other creditors or the owners (other than title
of the lessor under an operating lease).
"LOAN DOCUMENTS" means (a) this Agreement, certificates and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) all agreements, documents, and instruments in favor of the Bank ever
delivered under this Agreement, (c) all letters of credit issued under this
Agreement, and (e) all renewals, extensions, and restatements of, and
amendments and supplements to, any of the foregoing.
"LONDON RATE" is defined in SECTION 4.3(D)(I) of this Agreement.
"MATERIAL ADVERSE EVENT" means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Bank's commitment to fund under this Agreement is fully canceled or
terminated and the Companies' obligations under the Loan Documents are fully
paid and performed) in any (a) material impairment of (i) the ability of
Borrower to perform any of its payment or other material obligations under
7 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 8
any Loan Document, (ii) the Companies as a whole to perform any of their
payment or other material obligations under any Loan Document, or (iii) the
ability of the Bank to enforce any of those obligations or any of its Rights
under the Loan Documents, or (b) material and adverse effect on the financial
condition of the Companies as a whole as represented to the Bank in the
financial statements most recently delivered before the date of this Agreement.
"MAXIMUM RATE" is defined in SECTION 4.1 of this Agreement.
"NET INCOME" means, for any period and any Person, the amount that
should in accordance with GAAP be reflected on that Person's income statement
as net income for that period.
"O&M PLAN" is defined in SECTION 11.8 of this Agreement.
"PACA" means the Perishable Agricultural Commodities Act, 1930, as
amended from time to time, and any similar state statute or law.
"PACA LIEN" means any Lien (including constructive trusts) arising
under PACA asserted, perfected, or imposed by any supplier or suppliers of
agricultural products to any Company.
"PARTICIPANT" is defined in SECTION 13.4 of this Agreement.
"PERMITTED ACQUISITIONS" is defined in SECTION 10.14 of this
Agreement.
"PERMITTED CAPITAL EXPENDITURES" is defined in SECTION 10.11 of this
Agreement.
"PERMITTED LIENS" is defined in SECTION 10.10 of this Agreement.
"PERSON" means any individual, entity, or Governmental Authority.
"PGBC" is defined in SECTION 9.14(E)(IV) of this Agreement.
"PLAN" is defined in SECTION 9.14(E)(V) of this Agreement.
"POTENTIAL DEFAULT" means any event's occurrence or any circumstances'
existence that would upon any required notice, time lapse, or both, become a
Default.
"QUICK RATIO" is defined in SECTION 10.8 of this Agreement.
"REAL PROPERTY" is defined in SECTION 11.1(A) of this Agreement.
"REFERENCE RATE" is defined in SECTION 4.1 of this Agreement.
"RESERVE PERCENTAGE" is defined in SECTION 4.3(D)(II) of this
Agreement.
"REVOLVING FACILITY COMMITMENT" is defined in SECTION 2.1 of this
Agreement.
"REVOLVING NOTE" means the promissory note substantially in the form
of EXHIBIT A-1.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
8 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 9
"SAM'S" means Sam's Club, a division of Wal-Mart, Inc.
"SAM'S CONTRACT" is defined in SECTION 10.17(G) of this Agreement.
"SECURITY AGREEMENT" means a security agreement in substantially the
form of EXHIBIT C-1.
"SENIOR FUNDED DEBT" is defined in SECTION 10.4 of this Agreement.
"SUBORDINATED DEBT" is defined in SECTION 10.4 of this Agreement.
"SUBSIDIARY" of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person.
"SURVEY" is defined in SECTION 11.8 of this Agreement.
"TANGIBLE NET WORTH" is defined in SECTION 10.5 of this Agreement.
"TAXES" means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises, or assets.
2. REVOLVING FACILITY: LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT.
(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
$12,000,000, subject to Adjusted Borrowing Base restrictions
and reduction in accordance with the terms of this Agreement.
(b) This is a revolving line of credit with a subfacility for
letters of credit as described below. During the availability
period, the Borrower may repay principal amounts and reborrow
them.
(c) 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.
(d) Borrower may, upon giving at least five (5) Banking Days'
prior written irrevocable notice to the Bank, terminate all or
part of the Revolving Facility Commitment. Each partial
termination must be in an amount of not less than $100,000 or
a greater multiple of $50,000. At the time of the
termination, Borrower shall pay to the Bank, any principal
payment required to reduce the outstanding loans under the
Revolving Facility Commitment and undrawn letters of credit to
an amount not exceeding the reduced Revolving Facility
Commitment, all accrued and unpaid fees due and owing under
this Agreement, any interest attributable to the amount of the
reduction, and any related funding loss on advances bearing
interest at the Eurodollar Rate. Any part of the Revolving
Facility Commitment that is terminated may not be reinstated.
9 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 10
2.2 AVAILABILITY PERIOD. The line of credit is available between the date
of this Agreement and February 2, 2001 (the "EXPIRATION DATE"), unless a
Potential Default or Default has occurred and is continuing. Subject to
SECTION 4.3(B) regarding amounts borrowed under this Agreement bearing interest
at the Eurodollar Rate, each disbursement must be for at least $100,000 or a
greater integral multiple of $50,000 (or for the amount of remaining available
credit under the Revolving Facility Commitment, if less).
2.3 PURPOSE. The line of credit will be used for working capital and
general corporate purposes of the Companies, including Permitted Acquisitions.
2.4 REVOLVING NOTE AND REPAYMENT TERMS. Outstanding principal under the
Revolving Facility Commitment, including payments made by the Bank under a
letter of credit, is evidenced by the Revolving Note. Principal and interest
on the Revolving Note are payable as follows:
(a) The Borrower will pay interest on all amounts bearing interest
based on the Reference Rate on March 31, 1998, and on the last
day of each quarter thereafter until payment in full of any
principal outstanding under the Revolving Facility Commitment.
(b) Any amount bearing interest at the Eurodollar Rate (as
described below) will be repaid at the end of each applicable
interest period, provided that (i) no interest period may end
after the Expiration Date, and (ii) if any interest period is
greater than three months, then accrued interest is also due
and payable on the date three months after the commencement of
the applicable interest period.
(c) The Borrower will repay in full all principal and any unpaid
interest or other charges outstanding under the Revolving
Facility Commitment on the Expiration Date unless otherwise
accelerated pursuant to the terms hereof.
(d) The Borrower may prepay the line of credit in full or in part
at any time.
2.5 LETTERS OF CREDIT. This line of credit may be used for the issuing of
standby and commercial letters of credit with a maximum initial maturity of one
year but not to extend beyond the Expiration Date. Each commercial letter of
credit will require drafts payable at sight. The amount of letters of credit
outstanding at any one time (including amounts drawn on letters of credit and
not yet reimbursed) may not exceed $2,000,000. The letters of credit may
include customary provisions acceptable to the Bank, which provide for
automatic renewal unless the Bank gives prior notice of non-renewal of such
letter of credit.
The Borrower agrees:
(a) Any sum drawn under a letter of credit may, at the option of
the Bank, be added to the principal amount outstanding under
this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
(b) If any Potential Default or Default has occurred and is
continuing under this Agreement, to immediately, upon request
of the Bank, prepay or provide cash collateral to make the
Bank whole for any outstanding letters of credit.
(c) The issuance of any letter of credit and any amendment to a
letter of credit must be in the standard form of letter of
credit in effect from time to time, issued by the Bank.
10 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 11
(d) To provide the Bank with an LC Request and sign the Bank's
standard form of Application and Agreement for Standby Letter
of Credit or standard form of Application and Agreement for
Commercial Letter of Credit, as appropriate.
(e) To pay an issuance fee for issuing and processing letters of
credit equal to 1.75% per annum of the face amount of each
letter of credit issued under this Agreement.
2.6 APPLICATION OF PAYMENTS. Unless otherwise provided in this Agreement,
prior to the occurrence and continuation of any Potential Default or Default,
the Bank will apply payments on the obligations hereunder as directed by
Borrower. Thereafter, the Bank may apply payments received from the Borrower
to the obligations of the Borrower to the Bank hereunder in the order and the
manner as the Bank, in its sole discretion, may determine.
3. BRIDGE LOAN FACILITY: AMOUNT AND TERMS.
3.1 LOAN AMOUNT. The Bank agrees to provide a short-term bridge loan to
the Borrower in the maximum principal amount of $5,000,000 (the "BRIDGE LOAN
COMMITMENT"), to be made in a single disbursement on the date of this
Agreement.
3.2 PURPOSE. The bridge loan shall be used for general corporate
purposes, including Permitted Acquisitions.
3.3 BRIDGE NOTE AND REPAYMENT TERMS. Outstanding principal under the
Bridge Loan Commitment is evidenced by the Bridge Note. Principal and interest
on the Bridge Note are payable as follows:
(a) The Borrower will pay all accrued but unpaid interest on all
amounts bearing interest based on the Reference Rate on March
31, 1998, and on the last day of each quarter thereafter and
upon payment in full of any principal outstanding under the
Bridge Loan Commitment.
(b) Any amount bearing interest at the Eurodollar Rate (as
described below) will be repaid at the end of each applicable
interest period, provided that (i) no interest period may end
after September 30, 1998, and (ii) if any interest period is
greater than three months, then accrued interest is also due
and payable on the date three months after the commencement of
the applicable interest period.
(c) Subject to SECTION 3.3(D) below, the Borrower will repay the
outstanding principal balance under the Bridge Loan Commitment
in two equal installments, due and payable on March 31, 1998,
and on June 30, 1998, each in the amount of $312,500, with a
final payment of the remaining principal balance under the
Bridge Note plus any unpaid interest or other charges
outstanding under the Bridge Loan Commitment on September 30,
1998.
(d) So long as any amounts are outstanding under the Bridge Loan
Commitment, immediately upon receipt by any Company, the
Borrower shall make a mandatory prepayment equal to the lesser
of: (a) all amounts then outstanding under the Bridge Loan
Commitment, and (b) 100% of (i) net cash proceeds from the
issuance or funding of Subordinated Debt, and (ii) the net
cash (i.e., gross cash proceeds less usual customary
underwriting, placement, and other related costs and expenses)
proceeds of the issuance of any equity securities by the
Borrower after the date of this Agreement, such prepayments
under this SECTION 3.3(D) to be applied to amounts outstanding
under the Bridge Loan Commitment.
11 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 12
(e) The Borrower may prepay the principal outstanding under the
Bridge Loan Commitment in full or in part at any time without
premium or penalty (except that the Borrower must pay any
related funding loss on amounts bearing interest at the
Eurodollar Rate) in an amount not less than $100,000.
(f) Any repayment of the Bridge Loan Commitment must be
accompanied (i) by payment of all accrued and unpaid interest
on the portion of the Bridge Loan Commitment being repaid, and
(ii) calculations that demonstrate availability under the
Revolving Facility Commitment immediately after making such
repayment (after giving affect to any Borrowing Base
restrictions) is at least $2,000,000.
4. INTEREST RATES.
4.1 REVOLVING FACILITY COMMITMENT. Unless the Borrower elects the
Eurodollar Rate as described below, the interest rate on outstanding principal
amounts under the Revolving Facility Commitment is the lesser of (a) the
maximum lawful rate of interest permitted under applicable usury laws, now or
hereafter enacted (the "MAXIMUM RATE"), or (b) the rate that is equal to the
Bank's Reference Rate. The "REFERENCE RATE" is the rate of interest publicly
announced from time to time by the Bank in Irving, Texas, as its Reference
Rate. The Reference Rate is set by the Bank based on various factors,
including its costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans. The Bank may
price loans to its customers at, above, or below the Reference Rate. Any
change in the Reference Rate will take effect at the opening of business on the
day specified in the public announcement of a change in the Bank's Reference
Rate.
Notwithstanding the foregoing, if at any time the Reference Rate shall exceed
the Maximum Rate and thereafter the Reference Rate shall become less than the
Maximum Rate, the rate of interest payable shall be the Maximum Rate until the
Bank shall have received the amount of interest it otherwise would have
received if the interest payable had not been limited by the Maximum Rate
during the period of time the Reference Rate exceeded the Maximum Rate.
4.2 Bridge Loan Commitment. Unless the Borrower elects the Eurodollar
Rate as described below, the interest rate on outstanding principal amounts
under the Bridge Loan Commitment is the lesser of (a) the Maximum Rate, or (b)
the rate (the "BRIDGE RATE") that is equal to the sum of the Bank's Reference
Rate plus 1.375%.
Notwithstanding the foregoing, if at any time the Bridge Rate shall exceed the
Maximum Rate and thereafter the Bridge Rate shall become less than the Maximum
Rate, the rate of interest payable shall be the Maximum Rate until the Bank
shall have received the amount of interest it otherwise would have received if
the interest payable had not been limited by the Maximum Rate during the period
of time the Bridge Rate exceeded the Maximum Rate.
4.3 LIBOR RATE. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the principal
amounts borrowed under this Agreement bear interest at the LIBOR Rate plus the
Applicable Margin (the "EURODOLLAR RATE") during an interest period agreed to
by the Bank and the Borrower, provided that the Borrower shall not have the
option or right to elect to have all or any portion of the principal amounts
borrowed under this Agreement bear interest at the Eurodollar Rate when the
Eurodollar Rate exceeds the Maximum Rate. The Eurodollar Rate is a rate per
year. At the end of any interest period, the interest rate will revert to the
rate based on the Reference Rate, unless the Borrower has designated the
Eurodollar Rate and a new interest period for the portion.
12 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 13
Designation of a Eurodollar Rate portion is subject to the following
requirements:
(a) The interest period during which the Eurodollar Rate will be
in effect will be 1, 2, 3, or 6 months. The last day of the
interest period will be determined by the Bank using the
practices of the London inter-bank market.
(b) Each Eurodollar Rate portion will be for an amount not less
than Five Hundred Thousand Dollars ($500,000).
(c) The Borrower shall irrevocably request a Eurodollar Rate
portion no later than 9:00 a.m. San Francisco time three (3)
Banking Days before the commencement of the interest period.
(d) The "LIBOR RATE" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one
percent. (All amounts in the calculation will be determined
by the Bank as of the first day of the interest period.)
LIBOR Rate = London Rate
--------------------------------
(1.00 -- Reserve Percentage)
Where,
(i) "LONDON RATE" means the interest rate (rounded upward
to the nearest 1/16th of one percent) at which the
Bank's London Branch, London, Great Britain, would
offer U.S. dollar deposits for the applicable
interest period to other major banks in the London
inter-branch market at approximately 11:00 a.m.
London time two (2) Banking Days prior to the
commencement of the interest period.
(ii) "RESERVE PERCENTAGE" means the total of the maximum
reserve percentages for determining the reserves to
be maintained by member banks of the Federal Reserve
System for Eurocurrency Liabilities, as defined in
the Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will
include, but not be limited to, marginal, emergency,
supplemental, special and other reserve percentages.
(e) The Borrower may not elect a Eurodollar Rate with respect to
any portion of the principal balance outstanding under the
Revolving Facility Commitment or the Bridge Loan Commitment
that is scheduled to be repaid before the last day of the
applicable interest period.
(f) Any portion of the principal balance outstanding under the
Revolving Facility Commitment or the Bridge Loan Commitment
already bearing interest at the Eurodollar Rate will not be
converted to a different rate during its interest period.
(g) Each prepayment of a Eurodollar Rate portion, whether
voluntary, by reason of acceleration or otherwise, will be
accompanied by the amount of accrued interest on the amount
prepaid; and a prepayment fee equal to the amount (if any) by
which:
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the
last day of the interest period, exceeds
13 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 14
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the
London inter-bank market for a period starting on the
date on which it was prepaid and ending on the last
day of the interest period for such portion.
(h) The Bank will have no obligation to accept an election for a
Eurodollar Rate portion if any of the following described
events has occurred and is continuing, and the Bank is not
making loans based on Eurodollar Rates to its customers
generally:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of a Eurodollar
Rate portion are not available in the London
inter-bank market; or
(ii) the Eurodollar Rate does not accurately reflect the
cost of a Eurodollar Rate portion.
The Bank will give Borrower written notice as soon as
practicable upon the occurrence of either such events and
after such events no longer exist.
(i) If at any time during any applicable interest period the
Eurodollar Rate shall exceed the Maximum Rate and thereafter
the Eurodollar Rate shall become less than the Maximum Rate,
the rate of interest payable shall be the Maximum Rate until
the Bank shall have received the amount of interest it
otherwise would have received if the interest payable had not
been limited by the Maximum Rate during the period of time the
Eurodollar Rate exceeded the Maximum Rate.
5. FEES AND EXPENSES.
5.1 FEES.
(a) LOAN FEE. Subject to the provisions of SECTION 5.4 hereof,
the Borrower agrees to pay a loan fee in the amount of
$115,000. This fee is due and payable upon execution of this
Agreement.
(b) UNUSED COMMITMENT FEE. Subject to the provisions of SECTION
5.4 hereof, the Borrower agrees to pay a fee on any difference
between the Revolving Facility Commitment and the amount of
credit the Borrower actually uses under the Revolving Facility
Commitment, determined by the weighted average Revolving
Credit Facility loan balance and undrawn letter of credit
amounts maintained during the specified period. The fee will
be calculated at 0.25% per annum and is due and payable on the
last day of each calendar quarter, commencing March 31, 1998,
and continuing through the Expiration Date.
(c) BRIDGE LOAN DEFAULT FEE. Subject to the provisions of SECTION
5.4 hereof, if the Borrower fails or refuses to pay, in full,
the outstanding principal balance under the Bridge Loan
Commitment in accordance with SECTION 3.3 of this Agreement,
the Borrower shall pay a default fee of 2.00% of any such
amounts outstanding, or if less, the maximum nonusurious
amount permitted by applicable law. This fee is due and
payable, if applicable, on September 30, 1998.
5.2 EXPENSES.
(a) The Borrower agrees to promptly repay the Bank for reasonable
out-of-pocket expenses incurred under the Loan Documents that
include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees, and documentation
fees.
14 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 15
(b) The Borrower agrees to reimburse the Bank for any reasonable
out-of-pocket expenses it incurs in the preparation of this
Agreement and the other Loan Documents (including without
limitation attorneys' fees and expenses incurred through the
date of this Agreement, not to exceed $25,000, and reasonable
attorneys' fees and expenses incurred in connection with the
preparation of any documentation required to be delivered
after the date of this Agreement) and any amendments,
modifications and supplements hereto or thereto.
(c) If a Potential Default or Default has occurred and is
continuing under this Agreement, then the Borrower agrees to
reimburse the Bank for the reasonable cost of periodic audits
and appraisals of the Collateral at such intervals as the Bank
may reasonably require. The audits and appraisals may be
performed by employees of the Bank or by independent
appraisers.
5.3 DEPOSITS. The Borrower shall not be required to maintain any
compensating balances as a condition to the loan facilities provided herein.
5.4 NO EXCESS FEES. Notwithstanding anything to the contrary in this
SECTION 5, in no event shall any sum payable under this SECTION 5 (to the
extent, if any, constituting interest under any applicable laws), together with
all amounts constituting interest under applicable laws and payable in
connection with the credit evidenced hereby, exceed the Maximum Rate or the
maximum amount of interest permitted to be charged, taken, reserved, received
or contracted for under applicable usury laws.
6. SECURITY.
6.1 GUARANTY. The Borrower shall cause all of its present and future
Subsidiaries, whether now existing or in the future formed or acquired as
permitted by the Loan Documents, to unconditionally guarantee the full payment
and performance of the Borrower's obligations under this Agreement by execution
of the Guaranty or a supplement thereto.
6.2 COLLATERAL. The Borrower shall cause full payment and performance of
the Borrower's obligations under this Agreement to be secured by Liens in favor
of the Bank on all of the items and types of property (together with the cash
and non-cash proceeds of all of the foregoing, the "COLLATERAL") described in
the present and future Loan Documents creating those Liens, including, without
limitation:
(a) Present and future accounts receivable, inventory, machinery,
equipment, fixtures, contract rights, patents, trademarks,
licenses, other general intangibles, instruments, chattel
paper, and documents of each present and future 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;
(b) All of the present and future issued and outstanding capital
stock and other equity securities issued by all Subsidiaries
(which must be at least 90% of the issued and outstanding
capital stock and other equity securities of the Subsidiary)
owned by any Company, pursuant to the Security Agreement; and
(c) Fee simple interests of any present and future Company in any
Real Property (other than the real property owned by Lone Star
Produce Acquisition Corp. in which Bank One, Texas, N.A., has
a first lien), pursuant to mortgages or deeds of trust, as the
case may be, in form and substance acceptable to the Bank.
15 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 16
In addition, all personal property that is Collateral shall also secure all
other present and future obligations of the Borrower to the Bank under the Loan
Documents.
7. DISBURSEMENTS, PAYMENTS AND COSTS.
7.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing pursuant to a Borrowing Notice, or by another means acceptable
to the Bank.
7.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made to an account specified by Borrower;
(b) made in immediately available funds; and
(c) evidenced by records kept by the Bank.
7.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances,
repayments, or the designation of a Eurodollar Rate portion or
interest period given by any one of the individual signer(s)
of this Agreement or a person or persons authorized by the
Board of Directors of Borrower.
(b) The Borrower will provide telefax confirmation to the Bank of
any telephone instructions on the same day those instructions
are given. If there is a discrepancy and the Bank has already
acted on the telephone instructions, the telephone
instructions will prevail over the telefax confirmation.
(c) The Borrower indemnifies and excuses the Bank (including its
officers, employees, and agents) from all liability, loss, and
costs in connection with any act resulting from telephone
instructions it reasonably believes are made by a signer of
this Agreement or a person authorized by the Board of
Directors of Borrower. This indemnity and excuse will survive
this Agreement's termination.
7.4 BANKING DAYS. Unless otherwise provided in this Agreement, a "BANKING
DAY" is a day other than a Saturday or a Sunday on which the Bank is open for
business in Texas. For amounts bearing interest at the Eurodollar Rate (if
any), a Banking Day is a day other than a Saturday or a Sunday on which the
Bank is open for business in Texas and California and dealing in offshore
dollars. All payments and disbursements which would be due on a day which is
not a Banking Day will be due on the next Banking Day. All payments received
on a day which is not a Banking Day will be applied to the credit on the next
Banking Day.
7.5 TAXES. The Borrower will not deduct any taxes from any payments it
makes to the Bank. If any government authority imposes any taxes on any
payments made by the Borrower, the Borrower will pay the taxes. Upon request
by the Bank, the Borrower will confirm that it has paid the taxes by giving the
Bank official tax receipts (or notarized copies) within 30 days after the due
date. However, the Borrower will not pay the Bank's net income taxes.
7.6 ADDITIONAL COSTS. Subject to the provisions of SECTION 5.4 hereof,
the Borrower will promptly pay the Bank, for the Bank's documented costs or
losses arising from any statute or regulation, or any request or requirement of
a regulatory agency which is applicable to all national banks or a class of all
national banks which costs and losses are charged to other borrowers of the
Bank, and in a manner consistent with such application. The
16 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 17
costs and losses will be allocated to the loan in a manner determined by the
Bank and consistently allocated to other borrowers of the Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
The Bank will provide Borrower with a certificate certifying the calculation
and application of such amount, which will be binding on the Borrower absent
manifest error.
Notwithstanding the foregoing, in no event shall any sum payable under this
SECTION 7.6 (to the extent, if any, constituting interest under applicable
laws), together with all amounts constituting interest under applicable laws
and payable in connection with the credit evidenced hereby, exceed the Maximum
Rate or the maximum amount of interest permitted to be charged, taken,
reserved, received or contracted for under any applicable usury laws.
7.7 Interest Calculation. Except as otherwise stated in this Agreement,
all interest and fees, if any, will be computed on the basis of a 360 day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used. Notwithstanding the foregoing,
interest at the Maximum Rate will always be computed on the basis of a 365-day
year and the actual number of days elapsed.
7.8 DEFAULT RATE. Upon the occurrence and during the continuation of any
Default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at the lesser of (a) the Maximum Rate or (b) a rate
per annum which is 2.00% higher than the rate of interest otherwise provided
under this Agreement, provided that if such Default is a result of Borrower's
failure or refusal to pay, in full, the outstanding principal balance under the
Bridge Loan Commitment in accordance with SECTION 3.3 of this Agreement, all
amounts due and owing under the Bridge Loan Agreement will at the option of the
Bank bear interest at the lesser of (a) the Maximum Rate or (b) a rate per
annum equal to the Reference Rate plus 3.75% (with respect to amounts bearing
interest based on the Reference Rate) or the LIBOR Rate plus 5.00% (with
respect to amounts bearing interest based on the Eurodollar Rate). This will
not constitute a waiver of any Default.
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO INITIAL ADVANCE. The Bank must receive all of the items
described on the attached SCHEDULE 8 (except those items that are specifically
noted on that schedule as being required to be delivered by a date later than
the date of this Agreement), in form and content acceptable to the Bank, before
the Bank is required to make the initial advance or issue any letters of credit
to the Borrower under this Agreement, and in any event, the Bank shall not be
obligated to make an initial advance under the Revolving Facility Commitment in
an amount greater than the result of (a) the Adjusted Borrowing Base as of the
date of such initial advance, minus (b) $3,000,000.
8.2 ADDITIONAL CONDITIONS TO EACH EXTENSION OF CREDIT UNDER REVOLVING
FACILITY COMMITMENT. Before each extension of credit under the line of credit,
including the first, the Borrower will deliver the following to the Bank if
requested by the Bank:
(a) For advances, a Borrowing Notice; and
(b) For letters of credit, an LC Request and a fully executed form
of Application and Agreement for Standby Letter of Credit or
Application and Agreement for Commercial Letter of Credit, as
applicable, in accordance with SECTION 2.5 of this Agreement;
17 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 18
9. REPRESENTATIONS AND WARRANTIES. When the Borrower signs this
Agreement, and until the Bank is repaid in full, the Borrower makes the
following representations and warranties. Each request for an extension of
credit constitutes a renewed representation.
9.1 ORGANIZATION OF BORROWER. Each Company is duly formed and validly
existing under the laws of the state where organized.
9.2 SUBSIDIARIES AND NAMES. SCHEDULE 9.2, as supplemented from time to
time by an amendment to that schedule that is dated, executed, and delivered by
the Borrower to the Bank to reflect changes in that schedule as a result of
transactions permitted by the Loan Documents, describes (a) all of the
Borrower's direct and indirect Subsidiaries,(b) every name or trade name used
by each Company during the five-year period before the date of this Agreement,
and (c) every change of each Company's name during the four-month period before
the date of this Agreement. All of the outstanding shares of capital stock (or
similar voting interests) of the Borrower's Subsidiaries are (a) duly
authorized, validly issued, fully paid, and nonassessable, (b) owned of record
and beneficially as described in that schedule or those writings, free and
clear of any Liens, except Permitted Liens, and (c) not subject to any warrant,
option, or other acquisition Right of any Person or subject to any transfer
restriction except restrictions imposed by securities laws and general
corporate laws.
9.3 AUTHORIZATION. The execution and delivery by each Company of each Loan
Document to which it is a party and the performance by it of its obligations
under those Loan Documents (a) are within its corporate power, (b) have been
duly authorized by all necessary corporate action, and (c) do not violate any
provision of its charter or bylaws.
9.4 BINDING EFFECT. Upon execution and delivery by all parties to it,
each Loan Document will constitute a legal and binding obligation of each
Company party to it, enforceable against it in accordance with that Loan
Document's terms except as that enforceability may be limited by Debtor Laws
and general principles of equity.
9.5 GOOD STANDING. Each Company is in good standing in each state in
which it does business, is properly licensed, and, where required, is in
compliance with fictitious name statutes except where the failure to qualify or
comply would not constitute a Material Adverse Event.
9.6 NO CONFLICTS. No Loan Document conflicts with any material law,
agreement, or obligation by which any Company is bound.
9.7 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to the Bank regarding the Companies, including the
Companies' consolidated financial statements dated as of September 26, 1997 is,
and, to the best of Borrower's knowledge, all financial and other information
that has been supplied to the Bank regarding Francisco, including Francisco's
financial statements dated as of September 30, 1997 is:
(a) sufficiently complete to give the Bank accurate knowledge of
the Companies' consolidated financial condition; and
(b) in compliance with all government regulations that apply.
Since the date of the Companies' consolidated financial statements specified
above, no Material Adverse Event has occurred.
18 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 19
9.8 Lawsuits. There is no lawsuit, tax claim, pending assessments or
adjustments of any Taxes, or other dispute pending or threatened against any
Company, which constitutes a Material Adverse Event, other than as disclosed to
and consented to by the Bank.
9.9 COLLATERAL. The Collateral is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
Permitted Liens.
9.10 PERMITS, FRANCHISES, AND COMPLIANCE WITH REGULATIONS. Each Company
possesses all material permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights and
fictitious name rights material to the business in which it is now engaged, and
each Company is in compliance with all state and federal regulatory
requirements applicable to such Company, except where failure to comply would
not constitute a Material Adverse Event.
9.11 OTHER OBLIGATIONS. No Company is in default on any obligation for
borrowed money (and after the initial advance, such obligations in excess of
$250,000), any purchase money obligation (and after the initial advance, in
excess of $250,000) or any other material lease, commitment, contract,
instrument or obligation.
9.12 NO POTENTIAL DEFAULT OR DEFAULT. There is no Potential Default or
Default.
9.13 MERCHANTABLE INVENTORY. All inventory which is included in the
Borrowing Base is of good and merchantable quality and free from defects.
9.14 ERISA PLANS. Except as otherwise disclosed to and consented to by the
Bank:
(a) The Borrower and each ERISA Affiliate have fulfilled their
respective obligations, if any, under the minimum funding
standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and have not
incurred any liability with respect to any Plan under Title IV
of ERISA.
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(c) No action by the Borrower or any ERISA Affiliate to terminate
or withdraw from any Plan has been taken and no notice of
intent to terminate a Plan has been filed under Section 4041
of ERISA.
(d) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition
exists which might constitute grounds for the commencement of
such a proceeding.
(e) The following terms have the meanings indicated for purposes
of this Agreement:
(i) "CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "ERISA" means the Employee Retirement Income Act of
1974, as amended from time to time.
(iii) "ERISA AFFILIATE" means any Person that, for purposes
of Title IV of ERISA, is a member of Borrower's
controlled group or is under common control with
Borrower within the meaning of Section 414 of the
Code.
19 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 20
(iv) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of
ERISA.
(v) "PLAN" means any employee pension benefit plan
maintained or contributed to by the Borrower and
insured by the Pension Benefit Guaranty Corporation
under Title IV of ERISA.
9.15 REGULATION U. No Company is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, as amended. No part of
the proceeds of any letter of credit draft or drawing or advance under this
Agreement will be used, directly or indirectly, for a purpose that violates any
Law, including, without limitation, Regulation U.
9.16 LOCATION OF BORROWER. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
10. COVENANTS. So long as credit is available under this Agreement and
until the obligations owing to the Bank under the Loan Documents are repaid in
full, the Borrower covenants and agrees with the Bank as follows:
10.1 USE OF PROCEEDS. The Borrower shall use the proceeds of the credit
only for the purposes set forth in SECTIONS 2.3 and 3.2 of this Agreement.
10.2 USE OF PROCEEDS - INELIGIBLE SECURITIES. The Borrower may not use,
directly or indirectly, any portion of the proceeds of the credit (including
any letters of credit) for any of the following purposes:
(a) knowingly to purchase Ineligible Securities from BancAmerica
Robertson Stephens (the "ARRANGER") during any period in which
the Arranger makes a market in such Ineligible Securities; or
(b) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately
placed by the Arranger.
"INELIGIBLE SECURITIES" means securities which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. The
Arranger is a wholly-owned subsidiary of BankAmerica Corporation, and is a
registered broker-dealer which is permitted to underwrite and deal in certain
Ineligible Securities.
10.3 FINANCIAL INFORMATION. The Borrower shall provide the following
financial information and statements and such additional information as
requested by the Bank from time to time:
(a) Within 90 days after the last day of the Borrower's fiscal
year end, the Companies' consolidated and Borrower prepared
consolidating annual financial statements. The consolidated
financial statements must be audited (with an unqualified
opinion) by KPMG Peat Marwick, L.L.P. or any other national
Certified Public Accountant ("CPA").
(b) Within 45 days of the first three fiscal quarters, the
Companies' quarterly consolidated and consolidating financial
statements. These financial statements may be Borrower
prepared.
20 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 21
(c) Within 30 days after the last day of each month (except
December, which must be delivered within 45 days after
December 31), the Companies' monthly consolidated and
consolidating financial statements. These financial
statements may be Borrower prepared.
(d) Copies of each Company's Form 10-K Annual Report, Form 10-Q
Quarterly Report, Form 8-K Current Report and any other filing
made by any Company with the Securities and Exchange
Commission within 10 days after the date of filing with the
Securities and Exchange Commission.
(e) 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
each month, together with the calculation of the Adjusted
Borrowing Base. The Borrowing Base Report 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) Concurrently with the delivery of the financial statements
pursuant to SECTION 10.3(A) and (B), a Compliance Certificate
from the Borrower, certifying as to the Companies' compliance
with the terms, covenants, and other agreements contained in
the Loan Documents.
(g) Copies of all amendments, waivers, and modifications to and
renewals of the Sam's Contract and any notices relating to
default thereunder.
(h) Promptly upon the Bank's reasonable request, such other
statements, lists of property and accounts, budgets, forecasts
or reports that are already in existence as to the Companies'
obligations to the Bank as the Bank may reasonably request,
including without limitation copies of the invoices or the
record of invoices from each Company's sales journal for
Acceptable Receivables and copies of the delivery receipts,
purchase orders, shipping instructions, bills of lading and
other documentation pertaining to such Acceptable Receivables.
While a Default or Potential Default exists, the Borrower
shall deliver any such documentation described above to the
Bank, and so long as no Default or Potential Default exists,
the Borrower shall allow authorized representatives of the
Bank to enter onto the Borrower's premises and inspect and
make copies such documentation.
10.4 SENIOR FUNDED DEBT/EBITDA. The ratio, determined as of the end of each
fiscal quarter of the Borrower, of the Companies' consolidated Senior Funded
Debt to EBITDA may not exceed 2.00 to 1.00.
"SENIOR FUNDED DEBT" means, at any time, the Companies' consolidated
Funded Debt other than Subordinated Debt.
"FUNDED DEBT" means, at any time and for any Person, the sum (without
duplication) of (a) the principal amount of all Debt for borrowed money, (b)
the total amount capitalized on the balance sheet of that Person with respect
to Capital Leases, and (c) Debt under acceptance facilities or facilities for
the discount or sale of accounts receivable.
"SUBORDINATED DEBT" means, at any time, Debt of any Company (A)
incurred at a time when no Potential Default or Default has occurred and is
continuing under this Agreement, (B) the incurrence of which shall not cause a
Potential Default or Default under this Agreement (C) for which no scheduled or
mandatory principal payment or sinking fund payment is due on or before the
Expiration Date, (D) whose covenants are no more restrictive than those set
forth in this Agreement, and (E) the payment of which is subordinated to Debt
owed by the Companies to the Bank in a manner acceptable to the Bank.
21 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 22
"EBITDA" for any period means:
(a) the sum (without duplication) of the following for the
Companies on a consolidated basis and for that period taken as
a single-accounting period: (i) Net Income; minus (ii)
extraordinary gains; minus (iii) income attributable to
minority interests; plus (iv) cash dividends or distributions
attributable to minority interests, minus (v) income from
Subsidiaries, joint ventures and Investments recognized on a
consolidated basis which (A) the Subsidiary, joint venture or
Investment is restricted by authority, contract or law from
paying to the Company in the form of a dividend or other
distribution, and (B) the Company has not received in the form
of a cash dividend or other cash distribution, plus (vi) non-
cash extraordinary losses; plus (vii) to the extent included
in determining Net Income (A) income Taxes, (B) Interest
Expense, (C) depreciation, and (D) amortization; and
(b) Unless otherwise specified, is determined (i) for a period of
four-consecutive-fiscal quarters of that Person taken as a
single-accounting period, and (ii) exclusive of the EBITDA of
any entity (A) before it became a Subsidiary of a Company or
transferred substantially all of its assets to a Company other
than any entity acquired by any Company within such period,
which will be accounted for as a "pooling of interests," then
the most recent four fiscal quarters performance of such
entity will be used in such calculation, regardless of the
date of its acquisition by a Company, or (B) after it is
directly or indirectly disposed of by a Company
10.5 TANGIBLE NET WORTH. The Companies' consolidated Tangible Net Worth
determined as of the end of each fiscal quarter of the Borrower, may not be
less than the sum of (a) 80% of the Companies' Tangible Net Worth as of the
date of this Agreement, plus (b) 75% of the Companies' consolidated cumulative
Net Income (without deduction for losses) after December 31, 1997.
"TANGIBLE NET WORTH" means (a) the gross book value of the Companies'
consolidated assets (excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt discount and expense,
deferred research and development costs, deferred marketing expenses, and other
like intangibles), minus (b) total liabilities, including but not limited to
accrued and deferred income taxes, and any reserves against assets.
10.6 INTEREST COVERAGE. The Companies' consolidated Interest Coverage,
determined as of the end of each fiscal quarter of the Borrower, may not be
less than 3.00 to 1.00.
"INTEREST COVERAGE" means, for the Companies on a consolidated basis
and for the two most recently completed quarters, the ratio of (a) the sum of
(i) Net Income, (ii) Interest Expense, and (iii) income Taxes to (b) Interest
Expense.
10.7 FIXED CHARGE COVERAGE. The Companies' consolidated Fixed Charge
Coverage, determined as of the end of each fiscal quarter of the Borrower, may
not be less than 2.00 to 1.00 through the period ending December 31, 1999 and
3.00 to 1.00 thereafter.
"FIXED CHARGE COVERAGE" means, for the Companies on a consolidated
basis and for the four quarters ended on the date of determination, the ratio
of (a) the sum of EBITDA minus income Taxes actually paid during that period to
(b) the sum of (i) Interest Expense plus (ii) current maturities of long term
debt determined as of the end of that period, plus (iii) the result obtained
by dividing (A) the principal amount outstanding under the Bridge Loan
Commitment as of the end of that period, by (B) 4, plus (iv) the Francisco
Denominator Factor.
22 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 23
"FRANCISCO DENOMINATOR FACTOR" means the applicable denominator factor
for the applicable fiscal quarter then ending, based on Francisco's EBITDA (to
be determined for the last twelve months as included in Borrower's most
recently delivered financial statements), as provided in the following table:
<TABLE>
<CAPTION>
=============================================================================================================
Fiscal Quarter Ending EBITDA Applicable
Denominator Factor
=============================================================================================================
<S> <C> <C>
March 31, 1998 less than $700,000 $125,000
------------------------------------------------------------------------------------
greater than or equal to $700,000 but less than $875,000 $375,000
------------------------------------------------------------------------------------
greater than or equal to $875,000 but less than $1,000,000 $625,000
------------------------------------------------------------------------------------
greater than or equal to $1,000,000 $1,000,000
- -------------------------------------------------------------------------------------------------------------
June 30, 1998 less than $1,400,000 $250,000
------------------------------------------------------------------------------------
greater than or equal to $1400,000 but less than $1,750,000 $750,000
------------------------------------------------------------------------------------
greater than or equal to $1,750,000 but less than $2,000,000 $1,250,000
------------------------------------------------------------------------------------
greater than or equal to $2,000,000 $2,000,000
- -------------------------------------------------------------------------------------------------------------
September 30, 1998 less than $2,100,000 $375,000
------------------------------------------------------------------------------------
greater than or equal to $2,100,000 but less than $2,625,000 $1,125,000
------------------------------------------------------------------------------------
greater than or equal to $2,625,000 but less than $3,000,000 $1,875,000
------------------------------------------------------------------------------------
greater than or equal to $3,000,000 $3,000,000
- -------------------------------------------------------------------------------------------------------------
December 31, 1998 less than $2,800,000 $500,000
------------------------------------------------------------------------------------
greater than or equal to $2,800,000 but less than $3,500,000 $1,500,000
------------------------------------------------------------------------------------
greater than or equal to $3,500,000 but less than $4,000,000 $2,500,000
------------------------------------------------------------------------------------
greater than or equal to $4,000,000 $4,000,000
- -------------------------------------------------------------------------------------------------------------
March 31, 1999 less than $3,000,000 $750,000
------------------------------------------------------------------------------------
greater than or equal to $3,000,000 but less than $4,500,000 $1,800,000
------------------------------------------------------------------------------------
greater than or equal to $4,500,000 but less than $6,000,000 $3,000,000
------------------------------------------------------------------------------------
greater than or equal to $6,000,000 $4,300,000
- -------------------------------------------------------------------------------------------------------------
June 30, 1999 less than $3,000,000 $750,000
------------------------------------------------------------------------------------
greater than or equal to $3,000,000 but less than $4,500,000 $1,800,000
------------------------------------------------------------------------------------
greater than or equal to $4,500,000 but less than $6,000,000 $3,000,000
------------------------------------------------------------------------------------
greater than or equal to $6,000,000 $4,300,000
- -------------------------------------------------------------------------------------------------------------
September 30, 1999 less than $3,000,000 $750,000
------------------------------------------------------------------------------------
greater than or equal to $3,000,000 but less than $4,500,000 $1,800,000
------------------------------------------------------------------------------------
greater than or equal to $4,500,000 but less than $6,000,000 $3,000,000
------------------------------------------------------------------------------------
greater than or equal to $6,000,000 $4,300,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
23 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 24
<TABLE>
<CAPTION>
=============================================================================================================
Fiscal Quarter Ending EBITDA Applicable
Denominator Factor
=============================================================================================================
<S> <C> <C>
December 31, 1999 less than $3,000,000 $750,000
------------------------------------------------------------------------------------
greater than or equal to $3,000,000 but less than $4,500,000 $1,800,000
------------------------------------------------------------------------------------
greater than or equal to $4,500,000 but less than $6,000,000 $3,000,000
------------------------------------------------------------------------------------
greater than or equal to $6,000,000 $4,300,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
10.8 QUICK RATIO. The Companies' consolidated Quick Ratio, determined as
of the end of each fiscal quarter of the Borrower, may not be less than 1.30 to
1.00.
"QUICK RATIO" means, for the Companies on a consolidated basis and for
the most recently completed quarter, the ratio of (a) the cash, Investments
described in SECTION 10.13(A), (B), (C), (D), (E), (F), AND (G) below, net
receivables, and inventory of the Companies to (b) the current liabilities of
the Companies (excluding current maturities of long term debt and the
outstanding Bridge Loan Commitment).
10.9 OTHER DEBT. No Company shall have outstanding or incur any direct or
contingent Debt (other than to the Bank) or become liable (other than to the
Bank) for any Debt of others, in each case without the Bank's written consent.
This section does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade
credit.
(b) Endorsing negotiable instruments received in the usual course
of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debt in existence on the date of this Agreement as set forth
on SCHEDULE 10.9(D), including renewals and extensions of that
Debt but excluding principal increases to any of it.
(e) Incurring purchase money Debt to finance the purchase of
equipment for any Company so long as the outstanding principal
amount of that Debt for all of the Companies, when aggregated
with the outstanding principal amount of the Debt permitted
under SECTION 10.9(G) below, never exceeds $3,000,000.
(f) Any Company incurring Debt owed to any seller in connection
with a Permitted Acquisition so long as (i) such Debts are in
compliance with SECTION 10.14(D) of this Agreement, (ii) none
of such Debt has any scheduled or mandatory principal or
sinking fund payment due before the date 90 days after the
Expiration Date, and (iii) such Debt is unsecured.
(g) Any Company assuming Debt in connection with a Permitted
Acquisition so long as (i) that Debt is in compliance with
SECTION 10.14(D) of this Agreement, (ii) that Debt is not
secured by the Collateral, and (iii) that Debt does not cause
the limitation in SECTION 10.9(E) to be exceeded.
(h) Debt owed by any Company to any other Company that otherwise
complies with SECTION 10.14(H) of this Agreement.
(i) Subordinated Debt.
24 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 25
Notwithstanding anything in this SECTION 10.9 to the contrary, each indirect
Subsidiary of the Borrower shall be subject, in all respects, to the
limitations set forth in SECTION 10.15 of this Agreement.
10.10 OTHER LIENS. No Company shall enter into or permit to exist any
agreement or arrangement that directly or indirectly prohibits any Company from
creating or incurring any Lien on any of its assets or shall create, assume, or
allow any Lien (including judicial Liens) on property any Company now or later
owns except the following ("PERMITTED LIENS"):
(a) Liens in favor of the Bank.
(b) Liens for Taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in
writing to the Bank before the date of this Agreement,
including renewals and extensions of those Liens so long as
they secure only the Debt referred to in SECTION 10.9(D) of
this Agreement.
(d) Purchase money Liens granted in connection with transactions
permitted under SECTION 10.9(E) above and that never cover any
property except the property acquired with the related Debt.
(e) PACA Liens securing obligations of the Companies to creditors,
provided that no creditors of the Companies have asserted in
writing their rights under PACA, that, in the aggregate,
exceed $500,000.
(f) Liens incurred and pledges and deposits made by any Company in
the ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions and
other social security benefits (not including any Lien
described in Section 412(m) of the Internal Revenue Code of
1986, as amended).
(g) Liens imposed by law, such as carriers', warehousemen's,
mechanics, materialmen's and vendors' liens and other similar
liens, incurred in good faith in the ordinary course of the
business of any Company and securing obligations which are not
overdue.
(h) Zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on
the use of property of any Company or minor irregularities of
title with respect thereto (and with respect to leasehold
interest, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising
by, through or under a landlord or owner of the leased
property, with or without consent of the lessee) which do not
in the aggregate materially detract from the value of said
property or assets or materially impair the use thereof in the
operation of its business.
(i) Liens granted in connection with the Debt permitted by SECTION
10.9(G).
(j) Liens granted to the landlord of Borrower's facility located
at 1049 Avenue H, Arlington, Texas, so long as the Borrower
has paid all rent due and owing under the applicable lease and
is not otherwise in default under the lease.
10.11 CAPITAL EXPENDITURES. No Company shall make Capital Expenditures other
than Permitted Capital Expenditures. "PERMITTED CAPITAL EXPENDITURES" means
(a) Capital Expenditures made in connection with Permitted Acquisitions, or (b)
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) that does not exceed the
25 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 26
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".
10.12 DIVIDENDS. The Borrower shall not declare or pay any dividends on any
of its shares except dividends payable in capital stock of the Borrower, and
the Borrower shall not purchase, redeem or otherwise acquire for value any of
its shares, or create any sinking fund in relation thereto, provided that the
Borrower may repurchase common stock for a maximum aggregate consideration of
$250,000, solely for the purpose of complying with certain employment and stock
option agreements to which the Borrower is a party.
10.13 INVESTMENTS. No Company shall make any Investments except the
following:
(a) To the extent they mature within one year from the date in
question readily marketable (i) direct full faith and credit
obligations of the United States of America or obligations
guaranteed by the full faith and credit of the United States
of America, and (ii) obligations of an agency or
instrumentality of, or corporation owned, controlled, or
sponsored by, the United States of America that are generally
considered in the securities industry to be implicit
obligations of the United States of America ("GOVERNMENT
SECURITIES").
(b) Readily marketable direct obligations of any state of the
United States of America given on the date of such investment
a credit rating of at least A by Moody's Investors Service,
Inc., or A by Standard & Poor's Corporation, in each case due
within one year from the making of the Investment.
(c) Certificates of deposit issued by, bank deposits in,
Eurocurrency deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed
by (i) the Bank or (ii) any domestic bank or any domestic
branch or office of a foreign bank, in either case having on
the date of the investment a short-term certificate of deposit
credit rating of at least P-2 by Moody's Investors Service,
Inc., or A-2 by Standard & Poor's Corporation, in each case
due within one year after the date of the making of the
Investment.
(d) Repurchase agreements covering Government Securities executed
by a broker or dealer registered under Section 15(b) of the
Securities and Exchange Act of 1934, as amended, having on the
date of the investment capital of at least $100,000,000, due
within 30 days after the date of the making of the Investment,
so long as the maker of the Investment receives written
confirmation of the transfer to it of record ownership of the
Government Securities on the books of a "primary dealer" in
the Government Securities as soon as practicable after the
making of the Investment.
(e) Readily marketable commercial paper of domestic corporations
doing business in the United States of America or any of its
states or of any corporation that is the holding company for a
bank described in CLAUSE (C) above and having on the date of
the Investment a credit rating of at least P-1 by Moody's
Investors Service, Inc., or A-1 by Standard & Poor's
Corporation, in each case due within 90 days after the date of
the making of the Investment.
(f) "Money market preferred stock" issued by a domestic
corporation given on the date of the investment a credit
rating of at least AA by Moody's Investors Services, Inc., and
AA by Standard & Poor's Corporation, in each case having an
investment period not exceeding 50 days.
(g) A readily redeemable "money market mutual fund" sponsored by a
bank described in CLAUSE (C) above, or a registered broker or
dealer described in CLAUSE (D) above, that has and maintains
an investment policy limiting its investments primarily to
instruments of the types described in
26 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 27
CLAUSES (A) through (F) above and has on the date of those
investment total assets of at least $1,000,000,000.
(h) Investments by any Company in respect of Borrower or any other
Company so long as (i) no Potential Default or Default under
any Loan Document and no Material Adverse Event exists on that
date of the Investment or will occur as a result of the
Investment and (ii) that other Company has executed and
delivered to the Bank all of the guaranties and Lien
instruments required by the Loan Documents to be executed and
delivered by that other Company.
(i) Permitted Acquisitions.
(j) Investments in other Persons; provided that such Investments
do not in the aggregate exceed $1,250,000.
(k) Grower Contract Receivables which do not in the aggregate
exceed $5,000,000.
(l) Investments contemplated in the Francisco Acquisition
Agreement.
10.14 ACQUISITIONS. No Company shall consummate any acquisition of
substantially all of the stock (but in any event not less than 90%), assets, or
business (or part of a business) of a Person, other than Permitted Acquisitions
and the acquisition of the assets of Francisco Distributing Company, L.L.C.
"PERMITTED ACQUISITION" means an acquisition by a Company of substantially all
the business (or part of a business) of a Person, whether pursuant to an asset
acquisition or a stock purchase, or subject to SECTION 10.25(C), a merger; if:
(a) no Potential Default or Default exists on the date of the
acquisition or will exist as a result of it;
(b) the business to be acquired is within the Companies' current
line of business or directly or indirectly relates to the
business of wholesale distribution, brokerage, transportation,
repackaging, or processing of fresh produce, or the
distribution, brokerage, and transportation of other products
in conjunction with the fresh produce activities;
(c) at least 5 business days before the acquisition, the Borrower
gives to the Bank a written description of the acquisition,
which includes a reasonably-detailed calculation of (and
description of the funding sources, if applicable, for) the
total Investment or purchase price involved, including,
without limitation all Debt that is to be guaranteed, assumed,
or paid, by any Company if an asset acquisition or to remain
with the acquired business if a stock acquisition;
(d) without the prior approval of the Bank, the consideration to
be paid by any Company in connection with the 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;
(e) 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.
(f) the board of directors of the Person to be acquired has not
notified any Company that it opposes the offer by any Company
to acquire that Person and that opposition has not been
withdrawn;
27 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 28
(g) any new Subsidiary created in connection with the acquisition
complies with SECTIONS 6.1 and 6.2 and its capital stock or
other equity securities owned by any Company become subject to
the Liens required by SECTION 6.2;
(h) the Companies execute and deliver such other documents and
take such action the Bank may reasonably request in order to
effect the provisions of the Loan Documents; and
(i) concurrently with the closing of the acquisition, the Borrower
(A) provides the Bank with a certificate certifying that all
the conditions in this definition have been fulfilled for the
acquisition to be, and that it is, a "Permitted Acquisition";
and (B) provides calculations to the Bank that demonstrate
availability under the Revolving Facility Commitment
immediately after funding of the acquisition (after giving
affect to any Borrowing Base restrictions) is at least
$3,000,000.
10.15 SUBSIDIARIES. The Borrower shall cause each of its present and future
Subsidiaries (whether as a result of acquisition, creation, or otherwise) to
promptly and fully comply with SECTIONS 6.1 and 6.2 and shall cause its
accounts receivable, inventory, and capital stock or other equity securities
owned by any Company to become subject to the Liens required by SECTION 6.2.
Any Subsidiary of the Borrower formed or acquired after the date of this
Agreement must be a wholly-owned direct or indirect Subsidiary of the Borrower,
unless such Subsidiary is wholly owned by a direct Subsidiary or combination of
direct Subsidiaries of the Borrower.
10.16 LOANS TO OFFICERS. No Company shall make any loans, advances or other
extensions of credit to any of its executives, officers, directors, or
shareholders (or any relatives of any of the foregoing) exceeding $300,000 in
aggregate outstanding amount.
10.17 NOTICES TO BANK. The Borrower shall promptly notify the Bank in
writing of:
(a) Any lawsuit over $500,000 against any Company.
(b) Any substantial dispute between any Company and any government
authority that if adversely determined would have a Material
Adverse Effect.
(c) A Potential Default or Default.
(d) Any Material Adverse Event.
(e) Any change in any Company's name, legal structure, place of
business, or chief executive office if that Company has more
than one place of business.
(f) Any notices from creditors that are beneficiaries under PACA
that are asserting, perfecting, or preserving their rights
under PACA with respect to obligations exceeding $500,000 in
the aggregate.
(g) Any breach by any Company of any contract or agreement,
including without limitation any breach of the Agreement,
dated as of August 28, 1995, between Sam's and the Borrower
(the "SAM'S CONTRACT"), which breach could reasonably be
expected to cause a Material Adverse Event.
10.18 BOOKS AND RECORDS. Each Company shall maintain books, records, and
accounts necessary to prepare financial statements in accordance with GAAP.
10.19 AUDITS. Each Company shall allow the Bank and its agents to inspect
its properties and examine, audit, and make copies of books and records (other
than information subject to the attorney-client privilege or information
regarding the business or activity of any entity not owned or operated by any
Company) at any reasonable time. If any Company's properties, books or records
are in the possession of a third party, the Borrower shall request that third
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information (other than
information subject to the attorney-client privilege or information
28 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 29
regarding the business or activity of any entity not owned or operated by any
Company) concerning such properties, books and records. If no Potential
Default or Default has occurred and is continuing, then: (a) the Bank may only
audit the Companies' books and records two times in any 12-month period; (b)
the Bank will give the Companies no less than three Banking Days prior notice
of the audit; (c) all audits will be conducted during the Companies' normal
business hours; and (d) all expenses of the audits will be borne by the Bank.
10.20 COMPLIANCE WITH LAWS. Each Company shall comply with the material
laws, (including any fictitious name statute), regulations, and orders of any
government body with authority over its business, including, without
limitation, PACA.
10.21 PRESERVATION OF RIGHTS. Each Company shall maintain and preserve all
material rights, privileges, and franchises necessary for the conduct of its
business.
10.22 MAINTENANCE OF PROPERTIES. Each Company shall make any repairs,
renewals, or replacements to keep its properties in working condition.
10.23 COOPERATION. Each Company shall take any reasonable action reasonably
requested by the Bank to carry out the intent of this Agreement.
10.24 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. Each Company shall maintain
all risk property damage insurance policies covering the
tangible property comprising the Collateral. Each insurance
policy must be in an amount usual and customary for Persons in
that Company's business, but in no event less than the
collateral value for such tangible property determined by the
Bank and provided to the Borrower in writing.
(b) GENERAL BUSINESS INSURANCE. Each Company shall maintain
insurance covering property damage (including loss of use and
occupancy) to any of that Company's properties, public
liability insurance including coverage for contractual
liability, product liability and workers' compensation, and
any other insurance which is usual and customary for Persons
in that Company's business. Each insurance policy must be in
an amount usual and customary for Persons in that Company's
business.
(c) EVIDENCE OF INSURANCE. Each Company shall, upon the request
of the Bank, deliver to the Bank a copy of each insurance
policy or, if permitted by the Bank, a certificate of
insurance listing all insurance in force. The insurance
required under SECTIONS 10.24(A) and (B) must be issued by an
insurance company reasonably acceptable to the Bank. The
insurance required under SECTION 10.24(A) must include a
lender's loss payable endorsement in favor of the Bank in a
form reasonably acceptable to the Bank.
10.25 ADDITIONAL NEGATIVE COVENANTS. No Company shall, without the Bank's
written consent:
(a) Engage in any business activities other than the distribution,
brokerage, transportation, repackaging, or processing of fresh
produce, or the distribution, brokerage, and transportation of
other products in conjunction with the fresh produce
activities.
29 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 30
(b) Liquidate or dissolve that Company's business so long as it
does not have a Material Adverse Effect.
(c) Enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination other than any of the
following if no Potential Default or Default under any Loan
Document and no Material Adverse Event exists on the date of
any of the following or will exist as a result of any of the
following: (i) a merger or consolidation between Companies (so
long as, if the Borrower is involved, it is the survivor);
(ii) a merger or consolidation in connection with any
Permitted Acquisition if the survivor is, or concurrently with
that Permitted Acquisition becomes, a Subsidiary of the
Borrower; or (iii) joint ventures that do not cause the
limitation in SECTION 10.13(J) to be exceeded.
(d) Sell, assign, lease, transfer, or otherwise dispose of any of
its assets (including, without limitation, equity interests in
any other Company) except, without duplication (i) sales and
dispositions of inventory, (ii) sales of assets which are
obsolete or are no longer in use and which are not significant
to the continuation of that Company's business, (iii) sales of
assets (A) obtained as the result of mergers and
consolidations permitted under this Agreement and Permitted
Acquisitions and (B) which are unnecessary to that Company's
business operations, (iv) sales and dispositions from any
Company to any other Company, (v) dispositions of assets where
substantially similar assets have been or are being acquired,
and (vi) dispositions of assets, the net proceeds of which do
not exceed $500,000 in any fiscal year.
(e) Voluntarily suspend its business.
(f) Materially amend the Sam's Contract if such amendment would
have a Material Adverse Effect, or cancel the Sam's contract,
other than partial cancellations caused by Sam's exercise of
its option to remove up to 40 stores per year from that
agreement.
(g) Materially amend the Francisco Acquisition Agreement if such
amendment would have a Material Adverse Effect.
10.26 ERISA PLANS. The Borrower shall give prompt written notice to the
Bank of:
(a) The occurrence of any reportable event under Section 4043(b)
of ERISA for which the PBGC requires 30 day notice.
(b) Any action by the Borrower or any ERISA Affiliate to terminate
or withdraw from a Plan or the filing of any notice of intent
to terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
10.27 CONSIGNMENTS. The Borrower shall, prior to any Company placing any
inventory on consignment with any person ("CONSIGNEE"):
(a) Provide the Bank with all consignment agreements and other
documents to be used in connection with such consignment, all
of which must be acceptable to the Bank;
30 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 31
(b) Cause to be filed appropriate financing statements with
respect to the consigned inventory showing the Consignee as
debtor, the consigning Company as secured party, and the Bank
as assignee of secured party;
(c) Cause to be filed appropriate financing statements with
respect to the consigned inventory showing the consigning
Company as debtor and the Bank as secured party;
(d) After all financing statements referred to above have been
filed, conduct a search of all filings made against the
Consignee in all jurisdictions in which the consigned
inventory is to be located, and deliver to the Bank copies of
the results of all such searches; and
(e) Notify, or cancel the consigning Company to notify, in
writing, all creditors of the Consignee which are or may be
holders of security interests in the inventory to be consigned
that the consigning Company expects to deliver certain
inventory to the Consignee, all of which inventory shall be
described in such notice by item or type.
10.28 INDEMNIFICATION. The Borrower shall indemnify the Bank, and its
officers, directors, agents and attorneys, from and against any and all
liabilities, obligations, losses, damages, costs and expenses which may be
imposed on, or incurred by, or asserted against, any of such parties in any way
relating to or arising out of the Loan Documents, provided that the Borrower
shall not be liable for any portion of such items resulting from Bank's own
gross negligence or willful misconduct. IT IS EXPRESS INTENT OF BANK AND
BORROWER THAT THE FOREGOING INDEMNITY SHALL INDEMNIFY BANK, AND THE OTHER
PARTIES DESCRIBED ABOVE, FROM ALL SUCH ITEMS ARISING OR RESULTING FROM BANK'S
OR SUCH PARTIES' SOLE, JOINT, OR CONTRIBUTORY NEGLIGENCE.
10.29 POST-CLOSING DOCUMENTS. By the deadline noted for it on SCHEDULE 8,
the Borrower shall deliver to the Bank, or cause to be delivered to the Bank,
each item, if any, beside which is noted a deadline for delivery to the Bank
later than the date of this Agreement.
10.30 PAYMENTS UNDER INTERCREDITOR AGREEMENT. The Borrower shall not, at
any time during any 90 day postponement period described in Paragraph 2 of the
Intercreditor Agreement, make any payment of the "Seller Debt" (as defined in
the Intercreditor Agreement).
11. HAZARDOUS WASTE
11.1 INDEMNITY REGARDING HAZARDOUS SUBSTANCES. The Borrower shall
indemnify and hold the Bank harmless from and against all liabilities, claims,
actions, foreseeable and unforeseeable consequential damages, costs and
expenses (including sums paid in settlement of claims and all consultant,
expert and legal fees and expenses of the Bank's counsel) or loss directly or
indirectly arising out of or resulting from any of the following:
(a) Any hazardous substance being present at any time, whether
before, during or after any construction, in or around any
part of the real property that is Collateral (the "REAL
PROPERTY"), or in the soil, groundwater or soil vapor on or
under the Real Property, including those incurred in
connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work, or any
resulting damages or injuries to the person or property of any
third parties or to any natural resources.
(b) Any use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence
of a hazardous substance. This indemnity will apply whether
the hazardous
31 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 32
substance is on, under or about any of the Companies' property
or operations or property leased to any Company, whether or
not the property is Collateral.
Upon demand by the Bank, the Borrower will defend any investigation, action or
proceeding alleging the presence of any hazardous substance in any such
location, which affects the Real Property or which is brought or commenced
against the Bank, whether alone or together with any Company or any other
person, all at the Borrower's own cost and by counsel to be approved by the
Bank in the exercise of its reasonable judgment. In the alternative, the Bank
may elect to conduct its own defense at the expense of the Borrower.
11.2 Representation and Warranty Regarding Hazardous Substances. Before
signing this Agreement, the Borrower inquired into the previous uses and
ownership of the Real Property. Based on that due diligence, the Borrower
represents and warrants that to the best of its knowledge, no hazardous
substance has been disposed of or released or otherwise exists in, on, under or
onto the Real Property, in violation of any applicable law except as the
Borrower has disclosed to the Bank in writing.
11.3 COMPLIANCE REGARDING HAZARDOUS SUBSTANCES. To its knowledge, the
Borrower has complied, and will comply and cause all occupants of the Real
Property to comply, with all laws, regulations and ordinances governing or
applicable to hazardous substances as well as the recommendations of any
qualified environmental engineer or other expert which apply or pertain to the
Real Property or the operations of the Borrower. The Borrower acknowledges
that hazardous substances may permanently and materially impair the value and
use of the Real Property.
11.4 NOTICES REGARDING HAZARDOUS SUBSTANCES. Until full repayment of the
loans described in this Agreement, the Borrower will promptly notify the Bank
if it knows, suspects or believes there may be any hazardous substance in or
around the Real Property in violation of any applicable law, or in the soil,
groundwater or soil vapor on or under the Real Property, or that any Company or
the Real Property may be subject to any threatened or pending investigation by
any governmental agency under any law, regulation or ordinance pertaining to
any hazardous substance.
11.5 SITE VISITS, OBSERVATIONS AND TESTING. The Bank and its agents and
representatives will have the right at any time the Bank reasonably believes
any environmental problem exists on any Real Property, and upon not less than
three Banking Day's prior notice to Borrower, to enter and visit the Real
Property and any other place where any property is located for the purposes of
observing the Real Property, taking and removing soil or groundwater samples,
and conducting tests on any part of the Real Property. Representatives of the
Borrower may be present. The Bank is under no duty, however, to visit or
observe the Real Property or to conduct tests, and any such acts by the Bank
will be solely for the purposes of protecting the Bank's security and
preserving the Bank's rights under this Agreement. No site visit, observation
or testing by the Bank will result in a waiver of any Potential Default or
Default of any Company or impose any liability on the Bank. In no event will
any site visit, observation or testing by the Bank be a representation that
hazardous substances are or are not present in, on or under the Real Property,
or that there has been or will be compliance with any law, regulation or
ordinance pertaining to hazardous substances or any other applicable
governmental law. Neither any Company nor any other party is entitled to rely
on any site visit, observation or testing by the Bank. The Bank owes no duty
of care to protect any Company or any other party against, or to inform any
Company or any other party of, any hazardous substances or any other adverse
condition affecting the Real Property.
The Bank will not be obligated to disclose to the Borrower or any other party
any report or findings made as a result of, or in connection with, any site
visit, observation or testing by the Bank. In each instance, the Bank will
give the Borrower reasonable notice before entering the Real Property. The
Bank will make reasonable efforts to avoid interfering with the Borrower's use
of the Real Property or any other property in exercising any rights provided in
this Section.
32 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 33
11.6 CONTINUATION OF INDEMNITY. The Borrower's obligations to the Bank
under this Article, except the obligation to give notices to the Bank, shall
survive termination of this Agreement and repayment of the Borrower's
obligations to the Bank under this Agreement, and shall also survive as
unsecured obligations after any acquisition by the Bank of the collateral
securing this Agreement, including the Real Property or any part of it, by
foreclosure or any other means.
11.7 DEFINITION OF HAZARDOUS SUBSTANCE. For purposes of this Agreement,
the term "HAZARDOUS SUBSTANCES" means any substance which is or becomes
designated as "hazardous" or "toxic" under any federal, state or local law.
11.8 ASBESTOS OPERATIONS AND MAINTENANCE. Without limiting the generality
of the foregoing, the Borrower acknowledges that the Real Property includes no
improvement constructed prior to 1981. The Borrower agrees that at any point
in time the Borrower becomes aware that the Real Property may contain asbestos-
containing materials ("ACM"), the Borrower will engage at its own expense an
asbestos survey using a consultant acceptable to the Bank (the "SURVEY"). The
Borrower agrees, at the Borrower's sole expense, to follow any recommendations
in the Survey for an operations and maintenance plan (the "O&M PLAN") to keep
the ACM in safe condition and assure that the ACM will not be disturbed. At
the Borrower's expense, the Borrower agrees to have the Real Property
resurveyed each year while any credit is outstanding under this Agreement,
using a consultant satisfactory to the Bank, to ensure that the ACM remains in
a good and non-hazardous condition and to determine if the O&M Plan should be
revised or any other measures taken to ensure that the ACM does not pose a
hazard. The Borrower agrees, at the Borrower's sole expense, to follow all
recommendations of the asbestos consultants, as the same may be revised from
time to time.
12. DEFAULT If any of the following events occur, the Bank may do one or
more of the following: (i) declare the Borrower in default, (ii) stop making
any additional credit available to the Borrower, (iii) exercise any and all
Rights as may be available to the Bank under any of the Loan Documents, (iv)
exercise any and all Rights and remedies as may be available to the Bank at law
or in equity, and (v) declare the entire debt created and evidenced hereby to
be immediately due and payable in full, whereupon the entire unpaid principal
indebtedness evidenced hereby, and all accrued unpaid interest thereon, shall
at once mature and become due and payable without presentment, demand, protest,
grace or notice of any kind (including, without limitation, notice of intent to
accelerate, notice of acceleration or notice of protest), all of which are
hereby severally waived by the Borrower. If a Default occurs under SECTION
12.6, the entire debt outstanding under this Agreement will automatically
become due immediately.
12.1 FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement, and with respect solely to interest payments, such failure continues
for five days after the date when due.
12.2 NON-COMPLIANCE. (a) Any Company fails to meet the condition of, or
fails to perform any obligation under any Loan Document or any other agreement
any Company has with the Bank or any affiliate of the Bank other than as set
forth in SECTION 12.2(B) below; and (b) Any Company fails to comply with any
covenant set forth in SECTIONS 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.22, and
10.24(C) hereof for more than twenty days after such breach occurs.
12.3 SAM'S CONTRACT. Any default or material breach occurs under the Sam's
Contract.
12.4 LIEN PRIORITY. The Bank fails to have an enforceable first priority
Lien (except for PACA Liens, statutory or contractual landlord's liens that
have not been subordinated to the Bank's Liens, and any other prior Liens to
which the Bank has consented in writing) on or security interest in any of the
Collateral.
33 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 34
12.5 FALSE INFORMATION. The Companies have given the Bank information or
representations which were false and materially misleading when given.
12.6 DEBTOR RELIEF. Any Company (a) is not solvent, (b) fails to pay its
Debts generally as they become due, (c) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Law, or (d) becomes a party to or is
made the subject of any proceeding provided for by any Debtor Law (except as a
creditor or claimant) that could suspend or otherwise adversely affect the
Rights of the Bank granted in the Loan Documents (unless, if the proceeding is
involuntary, the applicable petition is dismissed within 60 days after its
filing).
12.7 RECEIVERS. A receiver or similar official is appointed for any
Company's business, or the business is terminated.
12.8 JUDGMENTS. Any judgments or arbitration awards are entered against
any Company and are not discharged or stayed pending appeal within thirty (30)
days, or any Company, enters into any settlement agreements with respect to any
litigation or arbitration, the aggregate uninsured amount of $750,000.
12.9 GOVERNMENT ACTION. Any governmental authority takes action that
constitutes a Material Adverse Event.
12.10 ERISA PLANS. The occurrence of any one or more of the following
events with respect to any Company, provided such event or events could
reasonably be expected, in the reasonable judgment of the Bank, to subject any
Company to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, constitute a Material Adverse Effect:
(a) A reportable event shall occur with respect to a Plan which
is, in the reasonable judgment of the Bank likely to result in
the termination of such Plan for purposes of Title IV of
ERISA.
(b) Any Plan termination (or commencement of proceedings to
terminate a Plan) or any Company's full or partial withdrawal
from a Plan.
12.11 CHANGE OF CONTROL. The occurrence of a Change of Control. "CHANGE OF
CONTROL" means the existence or occurrence of any of the following: (a) more
than ten percent (10%) of the capital stock of any Subsidiary of the Borrower
is owned by any Person other than the Borrower, except as permitted under
SECTION 10.14 of this Agreement; or (b) individuals who, as of the date of this
Agreement, constitute the Board of Directors of the Borrower (the "INCUMBENT
BOARD") cease for any reason to constitute at least a majority of the Board of
Directors of the Borrower, provided that any individual becoming a director of
the Borrower, subsequent to the date of this Agreement, whose election or
nomination for election by the Borrower's shareholders 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
promulgated under the Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or contest by or on behalf of a Person other
than the Board of Directors of the Borrower.
12.12 OTHER FUNDED DEBT. In respect of any Funded Debt (other than Funded
Debt owing to the Bank) individually or collectively of at least $750,000 (A)
any Company fails to make any payment when due and such failure continues
beyond the applicable grace or cure period, or (B) any default or other event
or condition occurs or exists beyond the applicable grace or cure period, the
effect of which is to cause or to permit any holder of that Funded Debt to
cause (whether or not it elects to cause) any of that Funded Debt to become due
before its stated maturity or regularly scheduled dates, or (C) any of that
Funded Debt is declared to be due and payable or required to be prepaid by any
Company before its stated maturity.
34 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 35
12.13 GUARANTY REVOCATION. Any Company party to the Guaranty revokes or
attempts to revoke the obligations under the Guaranty.
12.14 FRANCISCO ACQUISITION AGREEMENT. Any default or material breach by
Borrower or Francisco Acquisition Corp. occurs under the Francisco Acquisition
Agreement.
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS
13.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
13.2 TEXAS LAW. Unless otherwise stated in any Loan Document, the Laws of
the State of Texas and of the United States of America govern the Rights and
duties of the parties to the Loan Documents and the validity, construction,
enforcement, and interpretation of the Loan Documents.
13.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's
and the Bank's successors and assigns. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign the loans outstanding under the Revolving Facility
Commitment and Bridge Loan Commitment, and may exchange financial information
about the Companies with actual or potential participants or assigns, subject
to SECTION 14.4 and SECTION 14.5 below.
13.4 PARTICIPATIONS. The Bank may (subject to the provisions of this
section, in the ordinary course of its business, and at any time) sell to one
or more Persons (each a "PARTICIPANT") participating interests in all or a
portion of its Rights under the Loan Documents, provided that any potential
Participant (other than an Affiliate of the Bank) shall execute a
confidentiality agreement substantially in the form of the Confidentiality
Agreement prior to receiving any information regarding the Companies. The
Bank's obligations under the Loan Documents remain unchanged. The Bank remains
solely responsible for the performance of its obligations and remains the
holder of its share of the outstanding principal debt for all purposes under
the Loan Documents. Borrower shall continue to deal solely and directly with
the Bank in connection with the Bank's Rights and obligations under the Loan
Documents, and the Bank must retain the sole right and responsibility to
enforce due obligations of the Companies. Participants have no Rights under
the Loan Documents except the right to receive their respective percentage of
any amounts due under the Loan Documents and other Rights as provided below.
The Bank may not sell any participating interest under which the Participant
(other than an Affiliate of the Bank) has any Rights to approve any amendment,
modification, or waiver of any Loan Document except as to matters involving (a)
a decrease in fees or interest rate spreads, (b) an increase in commitment
amounts (but only if the commitment in which such Participant has an interest
is being increased), or (c) an extension of the Expiration Date.
13.5 ASSIGNMENTS. The Bank may assign to one or more assignees (each an
"ASSIGNEE") all or any part of its Rights and obligations under the Loan
Documents so long as (a) the Bank and Assignee obtain (unless the Assignee is
an Affiliate of the Bank or a Default has occurred and is continuing at the
time of such assignment) Borrower's consent to such assignment (that may not be
unreasonably withheld in any instance and is not required if the Assignee is an
Affiliate of the Bank or if a Default has occurred and is continuing), (b) the
assignment is for an identical percentage of the Bank's Rights and obligations
under each of the Revolving Facility Commitment and the Bridge Loan Commitment,
(c) the assignment must be for a minimum total amount of $5,000,000, (d) if no
Default or Potential Default exists the Bank will not cease to own at least 51%
of the outstanding Revolving Facility Commitment and Bridge Loan Commitment;
(e) any potential Assignee (other than an Affiliate of the Bank) shall execute
a confidentiality agreement substantially in the form of the Confidentiality
Agreement prior to receiving any information regarding the Companies, and (f)
in connection with the initial assignment hereunder, the Bank,
35 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 36
the Assignee, and Borrower will execute any appropriate amendments to the Loan
Documents to effect a proper syndication of the credit facilities and to make
the Assignee a party to this Agreement. Unless otherwise provided herein, any
amendment, waiver, or consent under this Agreement shall require the written
consent of lenders that in the aggregate hold at least 51% of the Bridge Loan
Commitment and the Revolving Loan Commitment (collectively, the "COMMITMENTS"),
and after the expiry or termination of the Commitments, hold at least 51% of
the aggregate unpaid principal amount of the Commitments, provided, however,
that no amendment, waiver, or consent shall, unless it is in writing and is
signed by all the lenders, do any of the following: (i) waive any of the
conditions specified in SECTIONS 8.1 or 8.2, (ii) increase the Commitments of
the lenders or subject the lenders to any additional obligations, (iii) reduce
the principal of, or interest on, any amounts outstanding hereunder, or any
fees or other amounts payable hereunder, (iv) postpone any date fixed for any
payment of principal of, or interest on, any amounts outstanding hereunder, (v)
make any change which would alter the percentage of the Commitments or of the
aggregate unpaid principal amount of the amounts payable hereunder, or the
number of lenders, which shall otherwise be required for the lenders or any of
them to take any action hereunder, or (vi) amend this SECTION 13.5. Once the
assignment is accepted, when necessary, by Borrower and the amendments
described in CLAUSE (F) above are executed and delivered, then, on and after
the date of such assignment and amendments, (a) the Assignee automatically
becomes a party to this Agreement and, to the extent provided in the assignment
and in the Loan Documents, as so amended, has the same Rights and obligations
of the Bank under the Loan Documents with respect to its assigned interest, (b)
the Bank, to the extent of the assigned interest and as otherwise provided in
the assignment and in the Loan Documents, as so amended, is released from its
obligations to make advances under this Agreement (c) Borrower shall execute
and deliver to the Bank and the Assignee the appropriate Revolving Notes and
Bridge Notes reflecting the transfer of the assigned interest, (d) upon
delivery of the notes under CLAUSE (C) preceding, the Bank shall return to
Borrower all notes previously delivered to the Bank by Borrower under this
agreement.
13.6 ARBITRATION.
(a) This Section concerns the resolution of any controversies or
claims between any Company and the Bank, including but not
limited to those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any other Loan Document;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business
conducted between any Company and the Bank, including
claims for injury to persons, property or business
interests (torts).
(b) At the request of the applicable Company or the Bank, any such
controversies or claims will be settled by arbitration in
accordance with the United States Arbitration Act. THE UNITED
STATES ARBITRATION ACT WILL APPLY EVEN THOUGH THIS AGREEMENT
PROVIDES THAT IT IS GOVERNED BY TEXAS LAW.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial
rules of arbitration.
(d) For purposes of the application of the statute of limitations,
the filing of an arbitration pursuant to this Section is the
equivalent of the filing of a lawsuit, and any claim or
controversy which may be arbitrated under this Section is
subject to any applicable statutes of limitations. The
arbitrators
36 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 37
will have the authority to decide whether any such claim or
controversy is barred by the statute of limitations and, if
so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable,
the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration proceeding may
be submitted to an authorized court of law to be confirmed and
enforced.
(g) This provision does not limit the right of any Company or the
Bank to:
(i) exercise self-help remedies such as set-off;
(ii) foreclose against or sell any Collateral; or
(iii) act in a court of law before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; or
(B) additional or supplementary remedies.
(h) The pursuit of a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does
not constitute a waiver of the right of any Company or the
Bank, including the suing party, to submit the controversy or
claim to arbitration if the other party contests the lawsuit.
13.7 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes an advance after Default. If the Bank waives a
Default, it may enforce a later Default. Any consent or waiver under this
Agreement must be in writing.
13.8 COSTS. If the Bank incurs any reasonable out-of-pocket expenses in
connection with enforcing this Agreement, or if the Bank takes collection
action under this Agreement, it is entitled to out-of-pocket costs and
reasonable attorneys' fees.
13.9 ATTORNEYS' FEES. In the event of a lawsuit or arbitration proceeding,
the prevailing party is entitled to recover costs and reasonable attorneys'
fees incurred in connection with the lawsuit or arbitration proceeding, as
determined by the court or arbitrator. A party shall be considered the
prevailing party if (a) it initiated the litigation and substantially obtains
the relief it sought, either through a judgment or arbitration award or the
losing party's voluntary action before arbitration, trial, or judgment, (b) the
other party withdraws its action without substantially obtaining the relief it
sought, or (c) such party did not initiate the litigation and judgment is
entered into for any party, but without substantially granting the relief
sought by the initiating party or granting more substantial relief to the non-
initiating party with respect to any counterclaim asserted by the non-
initiating party in connection with such litigation.
13.10 MULTIPLE BORROWERS. If two or more borrowers sign this Agreement,
each will be individually obligated to repay the Bank in full, and all will be
obligated together.
13.11 DESTRUCTION OF THE BORROWER'S DOCUMENTS. Subject to the terms of the
Confidentiality Agreement, the Bank will not be obligated to return any
schedules, invoices, statements, budgets, forecasts, reports or other papers
37 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 38
delivered by the Borrower. The Bank will destroy or otherwise dispose of such
materials at such time as the Bank, in its discretion, deems appropriate.
13.12 RETURNED MERCHANDISE. Until the Bank exercises its rights to collect
the accounts receivable as provided under any Security Agreement required under
this Agreement, each Company may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
applicable Company or upon such other disposition of the merchandise by the
debtor in accordance with that Company's instructions. If a credit adjustment
is made with respect to any Acceptable Receivable, the amount of such
adjustment shall no longer be included in the amount of such Acceptable
Receivable in computing the Borrowing Base.
13.13 VERIFICATION OF RECEIVABLES. The Bank may at any time prior to the
occurrence and continuation of any Potential Default or Default, upon three
Bank Day's notice to Borrower, and thereafter, at any time, either orally or in
writing, request confirmation from any debtor of the current amount and status
of the accounts receivable upon which such debtor is obligated.
13.14 INDEMNIFICATION. The Borrower agrees to indemnify the Bank against,
and hold the Bank harmless from, all claims, actions, losses, costs and
expenses (including attorneys' fees and allocated costs for in-house legal
services) incurred by the Bank and arising from any contention whether well-
founded or otherwise, that there has been a failure to comply with any law
regulating the Borrower's sales or leases to or performance of services for
debtors obligated upon the Borrower's accounts receivable and disclosures in
connection therewith. This indemnity will survive repayment of the Borrower's
obligations to the Bank and termination of this Agreement.
13.15 CONFIDENTIALITY. The Bank agrees to comply with the provisions of the
Confidentiality Agreement.
13.16 NOTICES. All notices required under this Agreement shall be: (a)
personally delivered; (b) sent by first class mail, postage prepaid, or (c)
sent by fax, when transmitted to the appropriate fax number (and all
communications sent by fax must be confirmed promptly thereafter by telephone;
but any requirement in this parenthetical shall not affect the date when the
fax shall be deemed to have been delivered) to the addresses on the signature
page of this Agreement, or to such other addresses as the Bank and the Borrower
may specify from time to time in writing.
13.17 HEADINGS. Article and Section headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
13.18 COUNTERPARTS. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
13.19 RENEWAL AND INCREASE. This Agreement is in renewal, extension,
modification, restatement, increase and amendment of the Existing Loan
Agreement and the loan documents executed in connection therewith, and all
liens and security interests securing payment thereof.
13.20 USURY LAWS. It is the intention of the parties to comply with
applicable usury laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Agreement or in any of the other Loan
Documents, in no event shall this Agreement or the other Loan Documents require
or permit the payment, contracting for, charging, taking, reserving or
receiving any sums constituting interest, as defined under applicable usury
laws, in excess of the maximum amount permitted by such laws. If any such
excess of interest is contracted for, paid, charged, taken, reserved or
received under this Agreement or under any of the other Loan Documents, on the
amount of principal actually outstanding from time to time shall exceed the
maximum amount of interest permitted by applicable usury laws, then in any such
event (i) the provisions of this Section shall govern and control; (ii) any
38 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 39
such excess shall be canceled automatically to the extent of such excess, and
shall not be collected or collectible; (iii) any such excess which is or has
been received shall be credited against the unpaid principal balance hereof or
refunded to the Borrower, at the Bank's option; and (iv) the effective rate of
interest shall be automatically reduced to the Maximum Rate. It is further
agreed that without limitation of the foregoing, all calculations of the rate
of interest calculated for, paid, charged, taken, reserved or received under
this Agreement or under any other Loan Document, shall be made, to the extent
permitted by applicable usury laws, by amortizing, prorating, allocating and
spreading in equal parts during the period of the full stated term of the
indebtedness, all interest at any time contracted for, paid, charged, taken,
reserved or received from the Borrower or otherwise by the holder or holders
thereof. The terms of this Section shall be deemed to be incorporated in every
Loan Document and communication relating to any Loan Document and the law
evidenced hereby. The term "applicable usury laws" shall mean such law of the
State of Texas or the laws of the United States; whichever laws allow the
higher rate of interest, as such laws now exist, provided that if such laws
shall hereafter allow higher rates of interest. then the applicable usury laws
shall be the laws allowing the higher rate to be effective as of the effective
date of such laws. To the extent that TEX. REV. STAT. ANN. art 5069-1D.001, as
amended (the "ACT"), is relevant to the Bank for the purposes of determining
the Maximum Rate, the parties elect to determine the Maximum Rate under the Act
pursuant to the "weekly ceiling" from time to time in effect, as referred to
and defined in article 1D.001 of the Act; subject, however, to any Right the
Bank may have subsequently under applicable law, to change the method of
determining the Maximum Rate.
13.21 NO ORAL AGREEMENTS. The Loan Documents represent the sum of the
understandings and agreements between the Bank and the Borrower concerning this
credit, replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit, and are intended by the Bank and the Borrower
as the final, complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other Loan
Document, this Agreement will prevail.
THE LOAN DOCUMENTS 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 PAGE FOLLOWS.
39 RESTATED BUSINESS LOAN AGREEMENT
<PAGE> 40
This Agreement is executed as of the date stated at the top of the first page.
<TABLE>
<S> <C>
BANK OF AMERICA TEXAS, N.A., FRESH AMERICA CORP.,
as the Bank as the Borrower
By: /s/ CONNOR J. DUFFEY By: /s/ ROBERT C. KIEHNLE
--------------------------------------- -------------------------------------------------
Connor J. Duffey, Vice President Robert C. Kiehnle, Executive Vice President
Address where notices to the Address where notices to the
Bank are to be sent: Borrower are to be sent:
Bank of America Texas, N.A. 6600 LBJ Freeway
1925 W. John Carpenter Freeway Suite 180
Irving, Texas 75063 Dallas, Texas 75240
Fax No: 972-444-7167 Fax No.: 972-774-0515
Phone No.: 972-444-5195 Phone No.: 972-774-0575
Attn: Connor Duffey, Vice President Attn: Chief Financial Officer
</TABLE>
ACKNOWLEDGMENT OF PREPAYMENT FEES. The Borrower acknowledges that prepayment
of any portion of the amounts borrowed under this Agreement bearing interest at
the Eurodollar Rate may result in the Bank incurring additional costs, expenses
and/or liabilities. The Borrower therefore agrees to pay the prepayment fee
described in the "Eurodollar Rate" section of this Agreement if the portion is
prepaid, whether voluntarily or by reason of acceleration, including
acceleration upon any sale of any real property that is Collateral. The
Borrower agrees that the method of calculating the fee represents a reasonable
estimate of the prepayment costs, expenses and liabilities of the Bank. The
Borrower further acknowledges that the Bank's willingness to offer an optional
interest rate to the Borrower is sufficient and independent consideration for
this Agreement to pay the fee.
X /s/ RK
------------------------------
INITIAL HERE
RESTATED BUSINESS LOAN AGREEMENT SIGNATURE PAGE
<PAGE> 41
EXHIBITS AND SCHEDULES
SCHEDULES
- ---------
Schedule 8 - Closing Documents
Schedule 9.2 - Companies and Names
Schedule 10.8(d) - Existing Debt
EXHIBITS
- --------
Exhibit A-1 - Revolving Note
Exhibit A-2 - Bridge Note
Exhibit B - Guaranty
Exhibit C-1 - Security Agreement
Exhibit C-2 - Borrowing Notice
Exhibit C-3 - LC Request
Exhibit D-1 - Borrowing Base Report
Exhibit D-2 - Compliance Certificate
Exhibit E - Opinion of Hughes & Luce, L.L.P.
RESTATED BUSINESS LOAN AGREEMENT
