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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
---------- ---------
Commission File Number 000-24124
FRESH AMERICA CORP.
(Exact name of registrant as specified in its charter)
Texas 76-0281274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6600 LBJ FREEWAY, SUITE 180, DALLAS, TX 75240
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (972) 774-0575
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At May 8, 2000, the Registrant had 5,243,404 shares of its Common Stock
outstanding.
Total number of pages in this report, including the cover page is 14. Exhibit
index on page 14.
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
FRESH AMERICA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,192 $ 3,197
Accounts receivable, net 48,733 58,885
Advances to growers 2,568 3,296
Inventories 9,098 10,624
Prepaid expenses 1,631 1,618
Income tax receivable 4,967 5,900
--------- ---------
Total current assets 70,189 83,520
Property, plant and equipment, net 23,747 24,440
Notes receivable from shareholders 359 359
Goodwill, net of amortization of $2,842 and $2,491, respectively 23,146 23,497
Other assets 2,796 2,665
--------- ---------
Total assets $ 120,237 $ 134,481
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt $ 31,266 $ 24,446
Accounts payable 33,026 39,277
Accrued salaries and wages 1,587 2,191
Other accrued expenses 5,903 5,360
--------- ---------
Total current liabilities 71,782 71,274
Long-term debt, less current portion 19,944 32,843
Deferred income taxes 292 295
Other liabilities 318 298
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Total liabilities 92,336 104,710
--------- ---------
Shareholders' Equity:
Common stock $.01 par value (authorized 10,000,000 shares;
issued 5,243,404 shares) 52 52
Additional paid-in capital 32,555 32,555
Foreign currency translation adjustment (17) (28)
Accumulated deficit (4,689) (2,808)
--------- ---------
Total shareholders' equity 27,901 29,771
Commitments and contingencies
--------- ---------
Total liabilities and shareholders' equity $ 120,237 $ 134,481
========= =========
</TABLE>
The notes to consolidated financial statements are an integral part of
these statements.
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FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------
MARCH 31, APRIL 2,
2000 1999
--------- ---------
<S> <C> <C>
Net sales $ 142,652 $ 173,427
Cost of sales 127,503 151,421
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Gross profit 15,149 22,006
--------- ---------
Selling, general and administrative expenses 13,998 17,083
Bad debt expense 229 159
Depreciation and amortization 1,512 1,515
--------- ---------
Total operating costs and expenses 15,739 18,757
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Operating income (loss) (590) 3,249
--------- ---------
Other income (expense):
Interest expense (1,405) (1,279)
Interest income 87 65
Other, net 216 147
--------- ---------
(1,102) (1,067)
--------- ---------
Income (loss) before income taxes (1,692) 2,182
Income tax expense 189 1,001
--------- ---------
Net income (loss) $ (1,881) $ 1,181
========= =========
Earnings (loss) per share:
Basic $ (.36) $ .23
========= =========
Diluted $ (.36) $ .22
========= =========
</TABLE>
The notes to consolidated financial statements are an integral part
of these statements.
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FRESH AMERICA CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
MARCH 31, APRIL 2,
2000 1999
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,881) $ 1,181
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Bad debt expense 229 159
Depreciation and amortization 1,512 1,515
Deferred income taxes -- 30
Other 206 102
Change in assets and liabilities
Accounts receivable 9,730 12,384
Advances to growers 107 (2,439)
Inventories 1,497 1,597
Prepaid expenses (13) (121)
Other assets 826 (465)
Accounts payable (5,660) (7,740)
Accrued expenses and other current liabilities (532) 1,813
-------- --------
Total adjustments 7,902 6,835
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Net cash provided by operating activities 6,021 8,016
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (652) (3,095)
Proceeds from sale of equipment 97 --
-------- --------
Net cash used in investing activities (555) (3,095)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit 10,755 43,563
Repayments of revolving line of credit (14,457) (41,753)
Proceeds from short-term indebtedness -- 29
Repayments of short-term indebtedness (1,434) (661)
Additions to long-term indebtedness -- 415
Payments of long-term indebtedness (338) (153)
Net proceeds from exercise of employee stock options -- 14
-------- --------
Net cash provided by (used in) financing activities (5,474) 1,454
-------- --------
Effect of exchange rate changes on cash 3 17
Net increase (decrease) in cash and cash equivalents (5) 6,392
Cash and cash equivalents at beginning of period 3,197 1,171
-------- --------
Cash and cash equivalents at end of period $ 3,192 $ 7,563
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 761 $ 514
Cash paid for income taxes $ 368 $ 604
</TABLE>
The notes to consolidated financial statements are an integral part of
these statements.
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FRESH AMERICA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Fresh America Corp. ("Fresh America", the "Company", "we", "us" or
"our") provides procurement, processing, repacking, warehousing and distribution
services of fresh produce and other refrigerated products for a wide variety of
customers in the retail, food service and food distribution businesses. The
Company was founded in 1989 and distributes throughout the United States and
Canada through 16 distribution and processing facilities.
Unaudited Interim Financial Information - The consolidated balance
sheet as of March 31, 2000, the consolidated statements of operations for the
quarters ended March 31, 2000 and April 2, 1999, the consolidated statements of
cash flow for the quarters ended March 31, 2000 and April 2, 1999, and related
notes have been prepared by the Company and are unaudited. In the opinion of the
Company, the interim financial information includes all adjustments (consisting
of only normal recurring adjustments) necessary for a fair statement of the
results of the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the interim financial
information. The interim financial information should be read in conjunction
with the Company's audited consolidated financial statements included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 1999. The
results for the periods ended March 31, 2000 and April 2, 1999 may not be
indicative of operating results for the full year.
The following are the significant accounting policies followed by the
Company in the preparation of the consolidated financial statements.
Principles of Consolidation - The consolidated financial statements
include the accounts of Fresh America Corp. and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
Earnings (Loss) Per Share - Basic earnings (loss) per share ("EPS") is
calculated by dividing net income (loss) by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. See Note 5.
Comprehensive Income - The Company provides disclosure required by
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting and
display of comprehensive income and its components. Components of comprehensive
income are net income and all other nonowner changes in equity such as the
change in the foreign currency translation adjustment. This statement requires
that an enterprise: (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a balance sheet. See Note 4.
New Accounting Standards - The Company is assessing the reporting and
disclosure requirements of SFAS No. 133, Accounting For Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities and will require the
Company to recognize all derivatives on its balance sheet at fair value. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the
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derivatives will either be offset against the change in fair value of the hedged
item through earnings, or recognized in other comprehensive income until the
hedged item is recognized in earnings. The Company expects to adopt SFAS No. 133
in the first quarter of fiscal 2001 and does not anticipate that the adoption
will have a material effect on the Company's results of operations or financial
position.
In March 2000, the Financial Accounting Standards Board (the "FASB")
issued Interpretation No. 44, "Accounting for Certain Transactions involving
Stock Compensation: an interpretation of Accounting Principles Board Opinion No.
25". Among other issues, Interpretation No. 44 clarifies the application of
Accounting Principles Board ("APB") Opinion No. 25 regarding (a) the definition
of employee for purposes of applying APB No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequences of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. The provisions of Interpretation
No. 44 affecting the Company are to be applied on a prospective basis effective
July 1, 2000. The Company does not anticipate that the adoption will have a
material effect on the Company's results of operations or financial position.
Foreign Currency Translation - The financial statements of all foreign
subsidiaries were prepared in their respective local currencies and translated
into U.S. dollars based on the current exchange rate at the end of the period
for the balance sheet and a weighted-average rate for the period for the
statement of operations. Translation adjustments are reflected in the foreign
currency translation adjustments in shareholders' equity and, accordingly, have
no effect on net income (loss). Exchange gains and losses for all foreign
subsidiaries are included in income for transactions denominated in currencies
other than the functional currency.
Segment and Related Information - The Company provides disclosure
required by SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," which establishes standards for the way public business
enterprises report information about products and services. Since each business
unit is similarly engaged in procurement, processing and distribution services,
the business units have been aggregated into one reportable segment for
reporting purposes. See Note 2 - "Agreement with Sam's Club" for discussion of
the Company's major customer.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Fiscal Year - The Company's fiscal year is a 52-week or 53-week period
ending on the last Friday in December. The quarters ended March 31, 2000 and
April 2, 1999 consisted of 13 weeks.
NOTE 2. AGREEMENT WITH SAM'S CLUB.
The Company's relationship with Sam's is governed by the terms and
conditions of a five-year agreement (the "Agreement"), which became effective
December 1, 1995 and expires on November 30, 2000. Sam's has elected to begin
internal distribution of produce for all its clubs beginning in December of
2000. Therefore, the Agreement will not be renewed.
Each year since 1997, Sam's has elected to exercise its existing option
under the Agreement to distribute produce directly with respect to 40 clubs,
thereby reducing the number of clubs to which the Company distributes.
Accordingly, the Company has conducted its operations assuming that Sam's would
withdraw 40 clubs per year.
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The Agreement transfers ownership of the product to Sam's as it enters
the clubs and complete operational authority within the produce departments of
each club. Accordingly, Sam's assumes all costs and liabilities related to the
operation of the departments, including all in-club personnel costs,
merchandising and sales costs, customer returns and credits, and product shrink.
Under the Agreement, the Company invoices Sam's for product delivered to the
clubs in accordance with purchase orders issued by Sam's.
NOTE 3. DEBT AND LIQUIDITY.
The Company is party to a senior secured revolving credit facility
agreement (the "Revolver") with a bank (the "Senior Lender") and a subordinated
note agreement with an insurance company (the "Subordinated Lender"). The
Company was not in compliance with certain covenants under the agreement with
the Senior Lender during fiscal 1999 and was not in compliance with certain
covenants under both agreements at December 31, 1999. On April 14, 2000, the
Company entered into an amendment (the tenth amendment to the Revolver) of the
agreement with the Senior Lender that waived the instances of noncompliance and
established new terms, including terms for repayment of the outstanding
borrowings, obtained waivers from the Subordinated Lender for instances of
noncompliance at December 31, 1999 and anticipated future instances of
noncompliance through January 1, 2001, and entered into an agreement with the
Subordinated Lender to provide additional financing through the purchase of $5.0
million of the Company's 12% redeemable cumulative preferred stock ("Preferred
Stock"), and to restructure the existing subordinated notes. The funding of the
Preferred Stock occurred on April 28, 2000. Dividends on the Preferred Stock are
payable semi-annually. The Preferred Stock is mandatorily redeemable in April
2007. The redemption price of the Preferred Stock is computed so that the
combined return from the Preferred Stock and the warrants referred to below is
not less than 18% per annum.
The Company's Revolver provided for borrowings of up to $22.0 million
as of December 31, 1999 with outstanding borrowings as of that date of $21.2
million. The available and outstanding Revolver balance was reduced to $21.0
million as of March 31, 2000. Available borrowings under the Revolver will be
further reduced by scheduled principal reductions of $1.0 million each on May
30, 2000, June 29, 2000, July 30, 2000, August 30, 2000, September 29, 2000,
October 30, 2000 and December 30, 2000. The monthly Revolver balance is further
limited to predetermined amounts in excess of a computed borrowing base. In
addition to the scheduled principal reductions described above, all proceeds
from any income tax refunds or disposition of assets or subsidiaries and a
minimum of one-half of any proceeds from the issuance of debt or equity
securities (other than the Preferred Stock) must be used to further permanently
reduce available and outstanding bank borrowings. Under the amended agreement,
interest will accrue at prime plus 3% (currently 12%) through the expiration of
the agreement in February 2001. The Company must also comply with certain
capital expenditure restrictions.
Repayment of the Revolver balance is due in February 2001. Accordingly,
the entire balance has been classified as a current liability in the
accompanying March 31, 2000 consolidated balance sheet. The Company intends to
arrange a new senior debt facility to replace the Revolver and has engaged
Rabobank International ("Rabobank") as its exclusive financial advisor to raise
additional capital through the private sale of equity or debt securities. There
can be no assurance that Rabobank will be able to raise additional capital or
that the Company will be able to arrange a new senior credit facility.
The Subordinated Lender holds notes totaling $20.0 million, bearing
interest at 12%, payable semi-annually in May and November. In conjunction with
the purchase and funding of the Preferred Stock, the repayment terms of the
subordinated notes were modified such that the entire balance is due in a single
lump-sum payment in April 2007. The remaining discount associated with the notes
will be amortized over the amended term of the notes. The terms of the agreement
also decreased the exercise price of 155,483 warrants previously issued to the
Subordinated Lender from $22.70 to $3.25 per share and extended the expiration
date of the warrants to approximate the modified maturity date of the
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subordinated notes. In connection with the purchase of the Preferred Stock, the
Subordinated Lender also received warrants to purchase additional common shares,
which were equal to approximately 7% of the Company's outstanding common stock
after exercise at $3.25 per share. The warrants are exercisable until August 31,
2007 and their term may be further extended under certain circumstances.
Failure of the Company to comply with the terms of the amended
agreement with the Senior Lender or the agreement with the Subordinated Lender
could result in a default under the terms of the agreements. Upon the occurrence
of an event of default, the lenders would be entitled to declare the amounts
outstanding, including accrued interest to be immediately due and payable. If
repayment of the Company's debt were to be accelerated, the Company cannot be
certain that its assets or liquidity would be sufficient to repay such debt.
Acceleration of such debt would also cause the Preferred Stock to become
immediately redeemable.
Additionally, OTF has a demand agreement with a Canadian bank to
provide revolving credit facilities (the "Canadian Revolver") of up to CDN $20.0
million ($13.8 million), subject to certain covenant and borrowing base
requirements. The Canadian Revolver is collateralized by substantially all
assets of OTF. Interest on borrowings accrues at U.S. prime plus 0.75% (9.75% at
March 31, 2000) or Canadian prime plus 0.75% (7.75%), depending on the
denomination of the borrowings. The Canadian Revolver had an outstanding balance
of CDN $8.4 million ($5.8 million) as of March 31, 2000.
Management believes that the combination of cash generated from ongoing
operating activities, the funding of the Preferred Stock, the realization of
recent reductions in overhead expenses, and the effects of the amendments to the
Revolver and the subordinated notes will enable the Company to meet its
obligations as they come due in 2000.
NOTE 4. COMPREHENSIVE INCOME (LOSS).
The following table reconciles the Company's net income (loss) to its
comprehensive income (loss) (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------
MARCH 1, APRIL 2,
2000 1999
-------- --------
<S> <C> <C>
Net income (loss) $(1,881) $ 1,181
Other comprehensive income - foreign currency translation adjustments 11 123
------- -------
Comprehensive income (loss) $(1,870) $ 1,304
======= =======
</TABLE>
NOTE 5. EARNINGS (LOSS) PER SHARE.
Shares used in calculating basic and diluted EPS are as follows (in
thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------
MARCH 31, APRIL 2,
2000 1999
-------- ---------
<S> <C> <C>
Weighted average common shares outstanding - basic 5,243 5,237
Dilutive securities:
Common stock options -- 143
Contingent shares related to acquisitions -- 191
----- -----
Weighted average common shares outstanding - diluted basis 5,243 5,571
===== =====
</TABLE>
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Options and warrants to purchase approximately 732,000 and 182,000
shares of common stock respectively, were outstanding during the quarters ended
March 31, 2000 and April 2, 1999, but were not included in the computation of
diluted earnings (loss) per share because their inclusion would have been
antidilutive.
NOTE 6. INCOME TAXES
Income tax expense for the quarter ended March 31, 2000 relates to the
earnings of OTF, the Company's Canadian subsidiary, and has been provided at an
effective rate of 45%, reflecting combined provincial and federal Canadian
income taxes. Based on the Company's assessment of its ability to carryback net
operating losses, scheduled reversals of taxable and deductible temporary
differences and future taxable income, a valuation allowance of $.8 million has
been recorded to eliminate the deferred tax asset related to the Company's loss
from U.S. operations. Income tax expense for the quarter ended April 2, 1999
exceeds the U.S. statutory rate of 35% due to the higher combined provincial and
federal rates in Canada applied to OTF's earnings and nondeductible goodwill
amortization.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the components of the consolidated
statements of operations as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------
MARCH 31, APRIL, 2
2000 1999
--------- --------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 89.4 87.3
----- -----
Gross profit 10.6 12.7
Selling, general and administrative expenses 9.8 9.8
Bad debt expense 0.2 0.1
Depreciation and amortization 1.0 0.9
----- -----
Operating income (loss) (0.4) 1.9
Other income (expense) 0.8 (0.6)
----- -----
Income (loss) before income taxes (1.2) 1.3
Income tax expense 0.1 0.6
----- -----
Net income (loss) (1.3)% 0.7%
===== =====
</TABLE>
COMPARISON OF QUARTER ENDED MARCH 31, 2000 TO QUARTER ENDED APRIL 2, 1999
Net sales. Net sales decreased $30.8 million, or 17.7%, to $142.7
million in the first quarter of 2000 from $173.4 million in the first quarter of
1999. The decrease in revenues is primarily attributable to the fourth quarter
1999 divestiture of some of the Company's direct food service distribution
operations and the closure of the Company's market operation in Los Angeles,
California in February 2000. As a percentage of net sales, Sam's represented
33.4% in the first quarter of 2000 as compared to 27.2% in the first quarter of
1999.
Cost of Sales. Cost of sales decreased $23.9 million, or 15.8% to
$127.5 million in the first quarter of 2000 from $151.4 million in the first
quarter of 1999. As a percentage of net sales, cost of sales increased to 89.4%
from 87.3%, which in turn decreased the Company's gross profit percentage to
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10.6% from 12.7%. The Company's gross profit was negatively affected by weak
commodity markets in the industry, a larger portion of revenue attributable to
Sam's and less direct delivery food service business.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") expenses decreased by $3.1 million, or 18.1% to
$14.0 million in the first quarter of 2000 from $17.1 million in the first
quarter of 1999. The decrease in SG&A is primarily attributable to decreased
salaries and related costs of $2.1 million resulting from the closing of poorly
performing operations in the later part of 1999. Additionally, included in the
first quarter of 1999 are transaction costs of $.3 million related to the then
pending merger with Fresh Point. There are no such costs in the first quarter of
2000.
Operating income (loss). The operating loss in the first quarter of
2000 includes approximately $1.1 million in costs related to the first quarter
closing of the Company's Los Angeles, California market operation. The first
quarter 2000 loss also includes approximately $.6 million of charges associated
with moving the Company's administrative offices to Dallas, Texas and
professional and legal fees related to the Company's renegotiation of its senior
secured credit facility. No such charges were incurred in the first quarter of
1999.
As a result of the foregoing factors, the Company incurred an
operating loss of $.6 million in the first quarter of 2000 compared to
operating income of $3.2 million in the first quarter of 1999, a decrease of
$3.8 million.
Income Tax Expense. Income tax expense for the first quarter of 2000
relates to the earnings of OTF, the Company's Canadian subsidiary, and has been
provided at an effective rate of 45%, reflecting combined provincial and federal
Canadian income taxes. Based on the Company's assessment of its ability to
carryback net operating losses, scheduled reversals of taxable and deductible
temporary differences and future taxable income, a valuation allowance of $.8
million has been recorded to eliminate the deferred tax asset related to the
Company's loss from U.S. operations. Income tax expense for the first quarter of
1999 exceeded the U.S. statutory rate of 35% due to the higher combined
provincial and federal tax rates in Canada applied to OTF's earnings and
nondeductible goodwill amortization.
Net income (loss). As a result of the foregoing factors, the Company
incurred a net loss of $1.9 million in the first quarter of 2000 compared to net
income of $1.2 million in the first quarter of 1999, a decrease of $3.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $6.0 million for the first
quarter of 2000 compared to $8.0 million for the first quarter of 1999. Cash
used in investing activities decreased $2.5 million to $.6 million in the first
quarter of 2000 from $3.1 million in the first quarter of 1999. The decrease
from the prior year is due primarily to a concerted effort by the Company's
management to reduce capital expenditures during 2000. Cash used in financing
activities was $5.5 million in the first quarter of 2000 compared to cash
provided of $1.5 million in the first quarter of 1999. The decrease in cash
flows from financing activities compared to the prior year is primarily due to
reductions in available funds through its senior secured revolving credit
facility agreement (the "Revolver") as well as the retirement of certain
short-term debt.
At March 31, 2000, the Company had negative working capital of $1.6
million compared to working capital of $12.2 million at April 2, 1999. The
decrease in working capital is primarily due to the classification of all
borrowing under the Company's Revolver as a current liability at March 31, 2000
as discussed in Note 3 to unaudited consolidated financial statements.
The Company is party to a senior secured revolving credit facility
agreement (the "Revolver") with a bank (the "Senior Lender") and a subordinated
note agreement with an insurance company (the "Subordinated Lender"). The
Company was not in compliance with certain covenants under the agreement with
the Senior Lender during fiscal 1999 and was not in compliance with certain
covenants under both agreements at December 31, 1999. On April 14, 2000, the
Company entered into an amendment (the tenth amendment to the Revolver) of the
agreement with the Senior Lender that waived
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the instances of noncompliance and established new terms, including terms for
repayment of the outstanding borrowings, obtained waivers from the Subordinated
Lender for instances of noncompliance at December 31, 1999 and anticipated
future instances of noncompliance through January 1, 2001, and entered into an
agreement with the Subordinated Lender to provide additional financing through
the purchase of $5.0 million of the Company's 12% redeemable cumulative
preferred stock ("Preferred Stock"), and to restructure the existing
subordinated notes. The funding of the Preferred Stock occurred on April 28,
2000. Dividends on the Preferred Stock are payable semi-annually. The Preferred
Stock is mandatorily redeemable in April 2007. The redemption price of the
Preferred Stock is computed so that the combined return from the Preferred Stock
and the warrants referred to below is not less than 18% per annum.
The Company's Revolver provided for borrowings of up to $22.0 million
as of December 31, 1999 with outstanding borrowings as of that date of $21.2
million. The available and outstanding Revolver balance was reduced to $21.0
million as of March 31, 2000. Available borrowings under the Revolver will be
further reduced by scheduled principal reductions of $1.0 million each on May
30, 2000, June 29, 2000, July 30, 2000, August 30, 2000, September 29, 2000,
October 30, 2000 and December 30, 2000. The monthly Revolver balance is further
limited to predetermined amounts in excess of a computed borrowing base. In
addition to the scheduled principal reductions described above, all proceeds
from any income tax refunds or disposition of assets or subsidiaries and a
minimum of one-half of any proceeds from the issuance of debt or equity
securities (other than the Preferred Stock) must be used to further permanently
reduce available and outstanding bank borrowings. Under the amended agreement,
interest will accrue at prime plus 3% (currently 12%) through the expiration of
the agreement in February 2001. The Company must also comply with certain
capital expenditure restrictions.
Repayment of the Revolver balance is due in February 2001. Accordingly,
the entire balance has been classified as a current liability in the
accompanying March 31, 2000 consolidated balance sheet. The Company intends to
arrange a new senior debt facility to replace the Revolver and has engaged
Rabobank as its exclusive financial advisor to raise additional capital through
the private sale of equity or debt securities.
The Subordinated Lender holds notes totaling $20.0 million, bearing
interest at 12%, payable semi-annually in May and November. In conjunction with
the purchase and funding of the Preferred Stock, the repayment terms of the
subordinated notes were modified such that the entire balance is due in a single
lump-sum payment in April 2007. The remaining discount associated with the notes
will be amortized over the amended term of the notes. The terms of the agreement
also decreased the exercise price of 155,483 warrants previously issued to the
Subordinated Lender from $22.70 to $3.25 per share and extended the expiration
date of the warrants to approximate the modified maturity date of the
subordinated notes. In connection with the purchase of the Preferred Stock, the
Subordinated Lender also received 420,651 warrants to purchase additional common
shares, which were equal to approximately 7% of the Company's outstanding common
stock after exercise at $3.25 per share. The warrants are exercisable until
August 31, 2007 and their term may be further extended under certain
circumstances.
Failure of the Company to comply with the terms of the amended
agreement with the Senior Lender or the agreement with the Subordinated Lender
could result in a default under the terms of the agreements. Upon the occurrence
of an event of default, the lenders would be entitled to declare the amounts
outstanding, including accrued interest to be immediately due and payable. If
repayment of the Company's debt were to be accelerated, the Company cannot be
certain that its assets or liquidity would be sufficient to repay such debt.
Acceleration of such debt would also cause the Preferred Stock to become
immediately redeemable.
11
<PAGE> 12
Additionally, OTF has a demand agreement with a Canadian bank to
provide revolving credit facilities (the "Canadian Revolver") of up to CDN $20.0
million ($13.8 million), subject to certain covenant and borrowing base
requirements. The Canadian Revolver is collateralized by substantially all
assets of OTF. Interest on borrowings accrues at U.S. prime plus 0.75% (9.75% at
March 31, 2000) or Canadian prime plus 0.75% (7.75%), depending on the
denomination of the borrowings. The Canadian Revolver had an outstanding balance
of CDN $8.4 million ($5.8 million) as of March 31, 2000.
Management believes that the combination of cash generated from ongoing
operating activities, the funding of the Preferred Stock, the realization of
recent reductions in overhead expenses, and the effects of the amendments to the
Revolver and the subordinated notes will enable the Company to meet its
obligations as they come due in 2000.
As discussed previously, the Company has retained Rabobank as its
exclusive financial advisor to raise additional capital through the private sale
of equity or debt securities. The Company expects that any such capital raised
would be used primarily to refinance existing debt and possibly the Preferred
Stock. The Company also intends to arrange a new senior debt facility to replace
the current facility which expires in February 2001. There can be no assurance
that Rabobank will be able to raise additional capital or that the Company will
be able to arrange a new senior credit facility.
QUARTERLY RESULTS AND SEASONALITY
The Company's business is somewhat seasonal, with its greatest
quarterly sales volume historically occurring in the fourth quarter. With the
change in the current mix of business resulting from the Company's divestitures
of certain specialty food service operations, the termination of the Sam's
agreement in November 2000 and the increasing effect of global sourcing,
seasonal fluctuations may diminish in future years. A substantial portion of the
Company's produce sales consists of staple items such as apples, oranges,
grapefruit, potatoes and onions, which are strongest during the fall, winter and
spring. The supply and quality of these items declines during the summer,
although lower sales of these items are partially replaced by more seasonal
products such as peaches, plums, nectarines, strawberries and melons. Sales of
refrigerated, prepackaged products, such as vegetable trays, are strongest
during the fourth quarter holiday season. In any given quarter, an adverse
development such as the unavailability of high quality produce or harsh weather
conditions could have a disproportionate impact on the Company's results of
operations for the full year.
INFLATION
Although the Company cannot determine the precise effects of inflation,
management does not believe inflation has had a material effect on the Company's
sales or results of operations. However, independent of normal inflationary
pressures, the Company's produce products are subject to fluctuating prices
which result from factors discussed in "Quarterly Results and Seasonality"
above.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk. Our Canadian operations are subject to foreign
currency risk; however, we have not experienced any material foreign currency
transaction gains or losses during the last three fiscal years. Foreign currency
translation adjustments are recorded in our consolidated shareholders' equity as
accumulated comprehensive income. We manage foreign currency risk by maintaining
portfolios of currency denominated in the currency which is required to make
payments.
Interest Rate Risk. Our senior credit facilities accrue interest at a
market rate at the time of borrowing plus an applicable margin on certain
borrowings. The interest rate is based on the lending bank's prime rate or the
Eurodollar rate. We manage our borrowings under our credit facilities each day
in order to minimize interest expense. The impact on the Company's results of
operations of a one-
12
<PAGE> 13
percentage point interest rate change on the outstanding balance of the variable
rate debt as of March 31, 2000 would be immaterial.
Commodity Pricing Risk. For reasons discussed previously, prices of
high quality produce can be extremely volatile. In order to reduce the impact of
these factors, we generally set our prices based on current delivered cost.
OUTLOOK AND UNCERTAINTIES
Certain information in this Quarterly Report on Form 10-Q may
contain "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are "forward-looking statements" for purposes of
these provisions, including any projections of earnings, revenues or other
financial items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products or services,
any statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. The Company's future financial condition and
results, as well as any forward-looking statements, are subject to inherent
risks and uncertainties, including, without limitation, potential limitations on
the Company's ability to pursue its business strategy and successfully integrate
acquired operations, the expiration of the agreement with its primary customer,
significant competition, general economic and market conditions, the
availability and cost of borrowed funds and limitations arising from the
Company's indebtedness, the ability to refinance its existing bank facility and
raise additional capital, government regulation, seasonality and dependence on
key management. Additional information concerning these and other risk factors
is contained in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, a copy of which may be obtained from the Company upon
request.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a) Exhibits
Exhibit 10.1 Amended and Restated Note Agreement
dated as of April 15, 2000 with respect to
note agreement dated as of May 4, 1998
between Fresh America Corp. and John Hancock
Mutual Life Insurance Company.
Exhibit 10.2 Amended and Restated Warrant Agreement
dated as of April 15, 2000 with respect to
warrant agreement dated as of May 4, 1998
between Fresh America Corp. and John Hancock
Mutual Life Insurance Company.
Exhibit 10.3 Omnibus Subordinated Guarantee (Including
Amendment and Restatement of Certain
Existing guarantees) dated as of April 15,
2000 between Fresh America Corp. and John
Hancock Mutual Life Insurance Company.
Exhibit 10.4 Securities Purchase Agreement dated as of
April 15, 2000 between Fresh America, Corp.
and John Hancock Mutual Life Insurance
Company.
Exhibit 27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
Items 1, 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
13
<PAGE> 14
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FRESH AMERICA CORP.
(Registrant)
/s/ John Gray Date: May 15, 2000
- -------------------------------
John Gray
Executive Vice President and Chief Financial Officer
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
Exhibit 10.1 Amended and Restated Note Agreement dated as of April 15,
2000 with respect to note agreement dated as of May 4,
1998 between Fresh America Corp. and John Hancock Mutual
Life Insurance Company.
Exhibit 10.2 Amended and Restated Warrant Agreement dated as of April
15, 2000 with respect to warrant agreement dated as of
May 4, 1998 between Fresh America Corp. and John Hancock
Mutual Life Insurance Company.
Exhibit 10.3 Omnibus Subordinated Guarantee (Including Amendment and
Restatement of Certain Existing guarantees) dated as of
April 15, 2000 between Fresh America Corp. and John
Hancock Mutual Life Insurance Company.
Exhibit 10.4 Securities Purchase Agreement dated as of April 15, 2000
between Fresh America, Corp. and John Hancock Mutual Life
Insurance Company.
Exhibit 27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
FRESH AMERICA CORP.
AMENDED AND RESTATED NOTE AGREEMENT
WITH RESPECT TO NOTE AGREEMENT DATED AS OF
MAY 4, 1998
DATED AS OF APRIL 15, 2000
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2007
<PAGE> 2
<TABLE>
<S> <C>
1. PAYMENTS....................................................................................................2
1.1 INTEREST PAYMENT.........................................................................................2
1.2 REQUIRED PRINCIPAL PAYMENTS..............................................................................2
1.3 OPTIONAL PRINCIPAL PAYMENTS..............................................................................2
1.4 OFFER TO PAY UPON CHANGE IN CONTROL......................................................................3
1.5 DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE...................................................6
1.6 PAYMENTS AMONG NOTEHOLDERS...............................................................................6
1.7 NOTATION OF NOTES ON PAYMENT.............................................................................6
1.8 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES.....................................................7
1.9 MANNER OF PAYMENTS.......................................................................................7
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...............................................................8
2.1 REGISTRATION OF NOTES....................................................................................8
2.2 EXCHANGE OF NOTES........................................................................................8
2.3 REPLACEMENT OF NOTES.....................................................................................9
2.4 ISSUANCE TAXES..........................................................................................10
3. GENERAL COVENANTS..........................................................................................10
3.1 PAYMENT OF TAXES AND CLAIMS.............................................................................10
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.....................................................10
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE..............................................................11
3.4 PENSION PLANS...........................................................................................12
3.5 PRIVATE OFFERING........................................................................................13
4. NEGATIVE AND FINANCIAL COVENANTS...........................................................................13
4.1 MERGERS AND CONSOLIDATIONS..............................................................................13
4.2 DISPOSITION OF ASSETS, RESTRICTED SUBSIDIARY STOCK......................................................14
4.3 LIENS...................................................................................................18
4.4 NET WORTH...............................................................................................22
4.5 FIXED CHARGE COVERAGE...................................................................................22
4.6 TOTAL DEBT..............................................................................................23
4.7 SENIOR DEBT.............................................................................................23
4.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS..........................................................23
4.9 SENIORITY TO FUTURE SUBORDINATED DEBT...................................................................25
4.10 DESIGNATION OF SUBSIDIARIES.............................................................................25
4.11 LINE OF BUSINESS........................................................................................26
4.12 TRANSACTIONS WITH AFFILIATES............................................................................27
4.13 SUBSIDIARY GUARANTEES...................................................................................27
4.14 CURRENT RATIO...........................................................................................28
5. REPORTING COVENANTS........................................................................................28
5.1 FINANCIAL AND BUSINESS INFORMATION......................................................................28
5.2 OFFICER'S CERTIFICATES..................................................................................32
5.3 ACCOUNTANTS' CERTIFICATES...............................................................................32
5.4 INSPECTION..............................................................................................33
6. EVENTS OF DEFAULT..........................................................................................33
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.1 EVENTS OF DEFAULT.......................................................................................33
6.2 DEFAULT REMEDIES........................................................................................36
6.3 ANNULMENT OF ACCELERATION OF NOTES......................................................................38
7. SUBORDINATION..............................................................................................39
7.1 GENERAL.................................................................................................39
7.2 INSOLVENCY..............................................................................................39
7.3 PROOFS OF CLAIM.........................................................................................39
7.4 ACCELERATION OF SENIOR DEBT.............................................................................40
7.5 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT...............................................................40
7.6 SIGNIFICANT NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT................................................41
7.7 STANDSTILL..............................................................................................42
7.8 TURNOVER OF PAYMENTS....................................................................................42
7.9 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS..............................................................43
7.10 WAIVER AND CONSENT......................................................................................44
7.11 REINSTATEMENT OF SUBORDINATION..........................................................................44
7.12 OBLIGATIONS NOT IMPAIRED................................................................................44
7.13 PAYMENT OF SENIOR DEBT; SUBROGATION.....................................................................45
7.14 RELIANCE OF HOLDERS OF SENIOR DEBT......................................................................45
7.15 IDENTITY OF HOLDERS OF SENIOR DEBT......................................................................45
7.16 AMENDMENTS TO SENIOR CREDIT FACILITY....................................................................46
8. INTERPRETATION OF THIS AGREEMENT...........................................................................46
8.1 TERMS DEFINED...........................................................................................46
8.2 ACCOUNTING PRINCIPLES...................................................................................78
8.3 DIRECTLY OR INDIRECTLY..................................................................................79
8.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.................................................79
8.5 GOVERNING LAW...........................................................................................79
8.6 GENERAL INTEREST PROVISIONS.............................................................................79
9. MISCELLANEOUS..............................................................................................81
9.1 COMMUNICATIONS..........................................................................................81
9.2 REPRODUCTION OF DOCUMENTS...............................................................................82
9.3 SURVIVAL; ENTIRE AGREEMENT..............................................................................82
9.4 SUCCESSORS AND ASSIGNS..................................................................................83
9.5 AMENDMENT AND WAIVER....................................................................................83
9.6 EXPENSES................................................................................................85
9.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC......................................................86
9.8 EXECUTION IN COUNTERPART................................................................................87
</TABLE>
Annex 1 - Addresses of Purchasers; Payment Information
Annex 2 - Address of Company
Annex 3 - Senior Credit Agreement Definitions
Attachment A - Form of Amended and Restated Note
ii
<PAGE> 4
AMENDED AND RESTATED NOTE AGREEMENT
WITH RESPECT TO NOTE AGREEMENT DATED AS OF
MAY 4, 1998
AMENDED AND RESTATED NOTE AGREEMENT, dated as of April 15, 2000, with
respect to the Note Agreement dated as of May 4, 1998, among FRESH AMERICA
CORP., a Texas corporation (together with its successors and assigns, the
"Company"), and JOHN HANCOCK LIFE INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY and SIGNATURE 1A (CAYMAN), LTD. (together with their
respective successors and assigns, the "HOLDERS").
RECITALS
WHEREAS, pursuant to the Initial Securities Purchase Agreement, the Holders
purchased from the Company, and the Company sold to the Holders, Twenty Million
Dollars ($20,000,000) in aggregate principal amount of the Initial Notes due May
4, 2003; and
WHEREAS, pursuant to the Securities Purchase Agreement, certain of the
Holders have agreed to purchase from the Company, and the Company has agreed to
sell to such Holders, 50,000 shares of Cumulative Preferred Stock and _____
Series B Warrants; and
WHEREAS, each Holder was a Purchaser under the Initial Securities Purchase
Agreement, and each Purchaser under the Initial Securities Purchase Agreement is
a Holder; and
WHEREAS, as a condition to the purchase and sale of the Cumulative
Preferred Stock and the Series B Warrants, the Company has requested and the
Holders have agreed to amend and restate the Initial Note Agreement on the terms
and in the manner set forth herein.
WHEREAS, by their execution and delivery hereof, the Company and the
Holders are entering into this Agreement to amend and restate the Initial Note
Agreement and to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein,
<PAGE> 5
(a) the Initial Note Agreement is hereby amended and restated as set forth
herein;
(b) the Initial Notes are hereby, and are hereby deemed to be, amended and
restated in the form of Note set forth in Attachment A hereto, and each Holder
may now or hereafter exchange any or all of the Initial Notes held by it for new
amended and restated Notes in the form of Attachment A, each such new Note to be
of a principal amount equal to the outstanding principal amount of the Initial
Note delivered in exchange, provided however, that the failure of a Holder to so
exchange any Initial Note for a new Note shall have no effect or consequence
hereunder, and each such Initial Note shall be deemed to be, and shall be
treated for all purposes hereunder, as being a new Note in the form of
Attachment A); and
(c) the parties to this Agreement hereby agree as provided in the various
Sections of this Agreement.
1. PAYMENTS
1.1 INTEREST PAYMENT
Interest on the Notes shall be computed and paid in the manner and on the
dates provided in the Notes.
1.2 REQUIRED PRINCIPAL PAYMENTS
There shall be no required principal prepayments with respect to the
Notes. The entire principal of the Notes outstanding on May 1, 2007, together
with interest accrued thereon, shall become due and payable on such date.
1.3 OPTIONAL PRINCIPAL PAYMENTS
(a) OPTIONAL PRINCIPAL PAYMENTS WITH PREPAYMENT COMPENSATION AMOUNT.
The Company may pay the principal amount of the Notes in whole or in part,
on any date in a minimum aggregate amount of Five Hundred Thousand Dollars
($500,000), or in any higher integral multiples of One Hundred Thousand
Dollars ($100,000) (or, if the aggregate outstanding principal amount of
the Notes is less than Five Hundred Thousand Dollars ($500,000) at such
time, then such principal amount), together with:
2
<PAGE> 6
(i) an amount equal to the Prepayment Compensation Amount due at
such time in respect of the principal amount of the Notes being so
paid; and
(ii) interest on such principal amount then being paid accrued to
the payment date.
(b) NOTICE OF OPTIONAL PAYMENT. The Company will give notice of any
optional payment of the Notes pursuant to this Section 1.3 to each holder
of Notes not less than thirty (30) days nor more than sixty (60) days
before the specified payment date, stating:
(i) the specified payment date;
(ii) that such payment is to be made pursuant to this Section
1.3;
(iii) the principal amount of each Note to be paid on such date;
(iv) the interest to be paid on each such Note, accrued to the
specified payment date; and
(v) the calculation (with details) of an estimated Prepayment
Compensation Amount, if any (calculated as if the date of such notice
was the date of payment), due in connection with such payment.
(c) Notice of payment having been so given, the aggregate principal
amount of the Notes to be paid stated in such notice, together with the
Prepayment Compensation Amount determined as of the specified payment date,
if any, and interest thereon accrued to the specified payment date, shall
become due and payable on the specified payment date. Two (2) Business Days
prior to the making of such payment, the Company shall deliver to each
holder of Notes by facsimile transmission (confirmed by nationwide
overnight courier) a certificate of a Senior Financial Officer specifying
the details of the calculation of the Prepayment Compensation Amount as of
the specified payment date, and including a copy of the source of interest
rate information used in the calculation thereof.
1.4 OFFER TO PAY UPON CHANGE IN CONTROL
(a) NOTICE OF CHANGE IN CONTROL NOTICE EVENT. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any Senior
Officer (including, without limitation, via the receipt of notice of a
Change in
3
<PAGE> 7
Control Notice Event from any holder of Notes), the Company will, within
five (5) Business Days after the occurrence of such event, give notice of
such Change in Control Notice Event to each holder of Notes. Each such
notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 1.4; and
(iv) specify, in reasonable detail, the nature and date of the
Change in Control Notice Event.
(b) OFFER IN RESPECT OF A CHANGE IN CONTROL. In the event of a Change
in Control, the Company will, within five (5) Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the
Company, at least twenty (20) days prior to such Change in Control), give
notice of such Change in Control to each holder of Notes. Such notice shall
contain an irrevocable separate offer to each holder of Notes to pay all,
but not less than all, of the principal of, and interest and Prepayment
Compensation Amount, if any, on the Notes held by such holder on a date
(the "CHANGE IN CONTROL PAYMENT DATE") specified in such notice that is not
less than twenty (20) days and not more than thirty (30) days after the
date of such notice. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the nature and date of the
Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note outstanding;
(vi) specify the interest that would be due on each Note offered
to be paid, accrued to the Change in Control Payment Date; and
4
<PAGE> 8
(vii) the calculation (with details) of an estimated Prepayment
Compensation Amount, if any (calculated as if the date of such notice
was the date of payment), due in connection with such payment.
(c) ACCEPTANCE, REJECTION. Each holder of Notes shall have the option
to accept or reject such offered payment. In order to reject such offered
payment, a holder of Notes shall cause a notice of such rejection to be
delivered to the Company at least five (5) days prior to the Change in
Control Payment Date. A failure to reject in writing such written offer of
payment as provided in this Section 1.4(c), or a written acceptance of such
offered prepayment, shall be deemed to constitute an acceptance of such
offer.
(d) DEFERRAL OF OBLIGATION TO PURCHASE. The obligation of the Company
to purchase Notes pursuant to the offers required by Section 1.4(b) and
accepted or deemed accepted in accordance with Section 1.4(c) is subject to
the occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control
does not occur prior to the Change in Control Payment Date in respect
thereof, such purchase shall be deferred until and shall be made on the
date on which such Change in Control occurs or, if the Company determines
that efforts to effect such Change in Control have ceased or have been
abandoned, then such offer, acceptances and obligation to purchase shall be
deemed to have been rescinded. The Company shall keep each holder of Notes
reasonably and timely informed of:
(i) any such deferral of the date of purchase;
(ii) the date on which such Change in Control and the purchase
are expected to occur; and
(iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned.
(iv) PAYMENT. The offered payment shall be made at one hundred
percent (100%) of the principal amount of the Notes to be prepaid,
together with interest and Prepayment Compensation Amount, if any, on
such Notes, accrued to and determined as of the Change in Control
Payment Date. Two (2) Business Days prior to the making of such
payment, the Company shall deliver to each holder of Notes by
facsimile transmission a certificate of a Senior Financial Officer
specifying the details of the calculation of the Prepayment
Compensation Amount as of
5
<PAGE> 9
the specified payment date, and including a copy of the source of
interest rate information used in such calculation.
1.5 DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE
The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the shares of Common
Stock issued upon exercise of the Warrants. Promptly following the receipt of
any Note so tendered, the Company shall promptly cancel and retire such
surrendered Note (and no such Note shall be reissued), and shall issue to the
holder thereof a new Note in the principal amount of such tendered Note
remaining after deduction of the principal amount thereof applied to payment of
the purchase price for the shares of Common Stock. For purposes of Rule 144
under the Securities Act, 17 C.F.R. Section 230.144, the Company and you agree
that a tender of Notes in payment of the exercise price in respect of the
Warrants shall not be deemed a prepayment of the Notes, but rather a conversion
of such Notes, pursuant to the terms of the Warrant Agreement and the Warrants,
into Common Stock.
1.6 PAYMENTS AMONG NOTEHOLDERS
If at the time any payment of the principal of the Notes made pursuant to
Section 1.2 or Section 1.3 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial payment of
the Notes shall be allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such outstanding
Notes.
1.7 NOTATION OF NOTES ON PAYMENT
Upon any partial payment of a Note, the holder of such Note may (but shall
not be required to), at its option:
(a) surrender such Note to the Company pursuant to Section 2.2 in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) make such Note available to the Company for notation thereon of
the portion of the principal so paid; or
(c) mark such Note with a notation thereon of the portion of the
principal so paid.
6
<PAGE> 10
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.8 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES
Except for payments of principal made in accordance with this Section 1.8,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes unless:
(a) the Company or such Subsidiary or Affiliate shall have offered in
writing to acquire Notes, pro rata, from all holders of the Notes upon the
same terms and at the same price, which price shall be clearly disclosed;
(b) such offer will remain open for at least ten (10) Business Days
from the date the offer is received by each holder of Notes;
(c) the Company will provide each holder of Notes with a calculation
of the estimated Prepayment Compensation Amount that would be due if the
Company were to pay, in accordance with Section 1.3, the amount of Notes in
respect of which such offer is being made; and
(d) the Company will promptly provide each holder of Notes with such
other information regarding such offer (including, without limitation, if
requested, a list of all holders of Notes indicating the amount of the
holdings of each and whether such holder shall have accepted or rejected
such offer, as of the most recent practicable time) as such holder shall
reasonably request. In the event that the Company acquires any Notes, such
Notes will thereafter be cancelled and no Notes will be issued in
substitution therefor.
1.9 MANNER OF PAYMENTS
(a) MANNER OF PAYMENT. The Company shall pay all amounts payable with
respect to each Note (without any presentment of such Notes and without any
notation of such payment being made thereon) by crediting, by federal funds
bank wire transfer, the account of the holder thereof in any bank in the
United States of America as may be designated in writing by such holder, or
in such other manner as may be reasonably directed or to such other address
in the United States of America as may be reasonably designated in writing
by such holder. Annex 1 shall be deemed to constitute notice, direction or
designation (as appropriate) by the Holder to the Company with respect to
7
<PAGE> 11
payments to be made to the Holder as aforesaid. In the absence of such
written direction, all amounts payable with respect to each Note shall be
paid by check mailed and addressed to the registered holder of such Note at
the address shown in the register maintained by the Company pursuant to
Section 2.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
to, any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment shall have so fallen due; provided that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, such interest shall
accrue and be payable to (but not including) the actual date of payment,
and the amount of the next succeeding interest payment shall be adjusted
accordingly.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to the holders of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available at such holder's bank
prior to the close of business of such bank, provided that interest for one
day at the non-default interest rate of the Notes shall be due on the
amount of any such payment that actually becomes available to such holder
at such holder's bank after 12:00 noon (local time of such bank).
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section 3.3, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 2.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
2.2 EXCHANGE OF NOTES.
(a) EXCHANGE OF NOTES. Upon surrender of any Note at the office of the
Company maintained pursuant to Section 3.3, duly endorsed or accompanied by
a written instrument of transfer duly executed by the registered holder of
such Note or such holder's attorney duly authorized in writing, the
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Company will execute and deliver, at the Company's expense (except as
provided in Section 2.2(b)), a new Note or Notes in exchange therefor, in
an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be registered in the name of
such Person as such holder may request and shall be substantially in the
form of Attachment A. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have
been paid thereon. Each such new Note shall carry the same rights to unpaid
interest and interest to accrue that were carried by the Note so exchanged
or transferred. Notes shall not be transferred in denominations of less
than Five Hundred Thousand Dollars ($500,000), provided that a holder of
Notes may transfer its entire holding of Notes regardless of the principal
amount of such holder's Notes.
(b) COSTS. The Company will pay the cost of delivering to or from such
holder's home office or custodian bank from or to the Company, the
surrendered Note and any Note issued in substitution or replacement for the
surrendered Note. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes.
2.3 REPLACEMENT OF NOTES.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company; provided, however, that if the holder of such
Note is a Holder, an institutional investor or a nominee either, the
unsecured agreement of indemnity of such Holder or institutional investor
(but not of any nominee therefor) shall be deemed to be satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
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2.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due (but not, in any event, income
taxes) in connection with and as the result of the initial issuance and sale of
the Notes, the amendment and restatement contemplated hereby and in connection
with any modification, waiver or amendment of this Agreement or the Notes and
shall save each holder of Notes harmless without limitation as to time against
any and all liabilities with respect to all such taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
3.1 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Restricted Subsidiary to, pay before
they become delinquent:
(a) all taxes, assessments and governmental charges or levies imposed
upon it or its Property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords, growers or suppliers of agricultural
products and other like Persons that, if unpaid, might result in the
creation of a statutory, regulatory or common law Lien (other than a Lien
expressly permitted pursuant to Section 4.3(a)(ii)(D)) upon its Property;
provided, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings and reasonable book reserves in accordance with GAAP have been
established and maintained with respect thereto.
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.
The Company shall, and will cause each Restricted Subsidiary to:
(a) PROPERTY - maintain its Property in good condition, ordinary wear
and tear and obsolescence excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto; provided,
however, that this Section 3.2(a) shall not prevent the Company or any
Restricted Subsidiary from discontinuing the operation or the maintenance
of
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any of its Properties if such discontinuance is desirable in the conduct of
its business and such discontinuance could not reasonably be expected to
have a Material Adverse Effect;
(b) INSURANCE - maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types and in such amounts as is
customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated;
(c) FINANCIAL RECORDS - keep proper books of record and account, in
which full and correct entries shall be made of all dealings and
transactions of or in relation to the Properties and business thereof, and
which will permit the production of financial statements in accordance with
GAAP;
(d) CORPORATE EXISTENCE AND RIGHTS - do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, corporate rights (charter and statutory) and corporate
franchises, except as permitted by Section 4.1; and
(e) COMPLIANCE WITH LAW - comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, any environmental protection law) and obtain all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties and the conduct
of its business except for such violations and failures to obtain that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Prepayment Compensation Amount, if any) on, the Notes, as and when
the same shall become due according to the terms hereof and of the Notes, and
will maintain an office at the address of the Company provided in Annex 2 where
notices, presentations and demands in respect hereof or the Notes may be made
upon it. Such office will be maintained at such address until such time as the
Company notifies the holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.
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3.4 PENSION PLANS.
(a) COMPLIANCE. The Company will, and will cause each ERISA Affiliate
to, at all times with respect to each Pension Plan, comply with all
applicable provisions of ERISA and the IRC, except for such failures to
comply that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) PROHIBITED ACTIONS. The Company will not, and will not permit any
ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the IRC) or
"reportable event" (as such term is defined in section 4043 of ERISA)
that could result in the imposition of a tax or penalty;
(ii) incur with respect to any Plan any "accumulated funding
deficiency" (as such term is defined in section 302 of ERISA), whether
or not waived;
(iii) terminate any Plan in a manner that could result in the
imposition of a Lien on the Property of the Company or any Restricted
Subsidiary pursuant to section 4068 of ERISA or the creation of any
liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515 of ERISA;
(v) incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan or any liability as a result of the
termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of any Lien on
the Property of the Company or any ERISA Affiliate, in either case
pursuant to Title I or Title IV of ERISA or pursuant to the penalty or
excise tax or security provisions of the IRC;
if the aggregate amount of the taxes, penalties, funding deficiencies, interest,
amounts secured by Liens, and other liabilities in respect of any of the
foregoing at any time could reasonably be expected to have a Material Adverse
Effect.
(c) FOREIGN PENSION PLANS. The Company will, and will cause each
Restricted Subsidiary to, at all times, comply in all material respects
with all
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laws, regulations and orders applicable to the establishment, operation,
administration and maintenance of all Foreign Pension Plans, and pay when
due all premiums, contributions and any other amounts required by
applicable Foreign Pension Plan documents or applicable laws, except where
the failure to comply with such laws, regulations and orders, and to make
such payments, in the aggregate for all such failures, could not reasonably
be expected to have a Material Adverse Effect.
3.5 PRIVATE OFFERING.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
4. NEGATIVE AND FINANCIAL COVENANTS
4.1 MERGERS AND CONSOLIDATIONS.
The Company will not, nor will it permit any Restricted Subsidiary to,
merge with or into or consolidate with any other Person, permit any other Person
to merge or consolidate with or into it or sell all or substantially all of its
Property to any other Person; provided, however, that the foregoing restriction
does not apply to the merger or consolidation of the Company with or into
another corporation or sale of all or substantially all of the Property of the
Company to any other Person if:
(a) the corporation that results from such merger or consolidation or
to which all or substantially all of the Property of the Company is sold
(the "SURVIVING CORPORATION") is organized under the laws of, and conducts
substantially all of its business and has substantially all of its
Properties within, the United States of America or any jurisdiction or
jurisdictions thereof;
(b) the Surviving Corporation (if not the Company) expressly assumes
the due and punctual payment of the principal of and Prepayment
Compensation Amount, if any, and interest on all of the Notes, according to
their tenor, and the due and punctual performance and observance of all the
covenants in the Notes, this Agreement and each other Financing Document to
be performed or observed by the Company, pursuant to such assumption
agreements and instruments in such forms as shall be approved by the
Required Holders, and the Company causes to be delivered to each holder of
Notes an opinion, satisfactory in form and substance to the Required
Holders, of
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independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms; and
(c) immediately prior to, and immediately after the consummation of
the transaction, and after giving effect thereto:
(i) no Default or Event of Default exists or would exist; and
(ii) the Surviving Corporation would be permitted by the
provisions of Section 4.6 to incur at least One Dollar ($1.00) of
additional Adjusted Debt, and of Section 4.7 to incur at least One
Dollar ($1.00) of additional Senior Debt, assuming that the financial
ratios set forth in Section 4.6 and Section 4.7 were recalculated on a
Pro Forma Adjusted Basis as of the last day of the fiscal quarter of
the Surviving Corporation then most recently ended.
Notwithstanding the foregoing, a Restricted Subsidiary may merge with or into,
or consolidate with, or Transfer all or substantially all of its Property to:
(A) the Company so long as the Company is the Surviving Corporation;
(B) a Wholly-Owned Restricted Subsidiary, so long as such Wholly-Owned
Restricted Subsidiary is the Surviving Corporation; and
(C) any Person other than the Company or a Restricted Subsidiary so
long as such Transfer complies in all respects with Section 4.2.
4.2 DISPOSITION OF ASSETS, RESTRICTED SUBSIDIARY STOCK.
(a) DISPOSITION OF ASSETS. The Company will not, and will not permit
any Restricted Subsidiary to Transfer any Property except:
(i) Transfers of inventory and of other Property no longer
necessary for the operation of, and that are individually and in the
aggregate immaterial to, the business of the Company and the
Restricted Subsidiaries, in each case in the ordinary course of
business of the Company or such Restricted Subsidiary;
(ii) Transfers from the Company to a Wholly-Owned Restricted
Subsidiary;
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(iii) Transfers from a Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary;
(iv) Transfers for Acceptable Consideration arising solely out of
Sale-Leaseback Transactions, so long as:
(A) the Property is both Transferred and concurrently or
thereafter leased by the Company or a Restricted Subsidiary
as lessee, in each case within one hundred eighty (180) days
after the construction of such Property or the initial
acquisition thereof by the Company or a Restricted
Subsidiary;
(B) within one hundred eighty (180) days after the
Transfer involved in such Sale-Leaseback Transaction, the
proceeds of such Transfer, net of reasonable and ordinary
transaction costs, expenses and income tax on any gain
related to such Transfer incurred and actually paid in
connection with such Transfer, are applied by the Company or
such Restricted Subsidiary to:
(I) purchase Tangible Property ; or
(II) pay, on or prior to its scheduled maturity,
an amount of Debt of the Company or any Restricted
Subsidiary (other than Debt owing to an Affiliate or
Debt subordinate to the Subordinated Notes); and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or
Event of Default would exist;
(v) any other Transfer at any time of any Property (other than in
connection with Sale-Leaseback Transactions) to a Person for an
Acceptable Consideration if:
(A) the sum of:
(I) the book value of such Property at the time of
Transfer; plus
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
after the Fiscal Year End Date immediately preceding
the date of such Transfer;
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would be less than fifteen percent (15%) of Consolidated
Total Assets measured as of the Fiscal Year End Date
immediately preceding the date of such Transfer;
(B) the sum of:
(I) the book value of such Property at the time of
Transfer; plus
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
since the Closing Date;
would be less than forty percent (40%) of Consolidated Total
Assets measured as of the most recent Fiscal Year End Date;
and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or
Event of Default would exist;
and
(vi) any other Transfer of Property (other than in a
Sale-Leaseback Transaction), but solely to the extent that, within one
hundred eighty (180) days after such Transfer, the proceeds of such
Transfer, net of reasonable and ordinary transaction costs, expenses
and income tax on any gain related to such Transfer incurred and
actually paid in connection with such Transfer, are applied by the
Company or such Restricted Subsidiary to:
(A) purchase Tangible Property; or
(B) pay, on or prior to its scheduled maturity, an
amount of Debt of the Company or any Restricted Subsidiary
(other than Debt owing to an Affiliate or Debt subordinate to
the Subordinated Notes).
(b) DISPOSITION OF RESTRICTED SUBSIDIARY STOCK. The Company will not,
and will not permit any Restricted Subsidiary to, sell or otherwise dispose
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of any shares of the stock or Rights of a Restricted Subsidiary (such stock
and Rights herein called "RESTRICTED SUBSIDIARY STOCK"), nor will any
Restricted Subsidiary issue, sell or otherwise dispose of any shares of, or
Rights to purchase shares of, its own Restricted Subsidiary Stock;
provided, however, that the foregoing restrictions do not apply to:
(i) Transfers by the Company or a Restricted Subsidiary of shares
of Restricted Subsidiary Stock to the Company or a Wholly-Owned
Restricted Subsidiary;
(ii) the issuance by a Restricted Subsidiary of shares of its own
Restricted Subsidiary Stock to the Company or a Wholly-Owned
Restricted Subsidiary;
(iii) the issuance by a Restricted Subsidiary of shares of its
own Restricted Subsidiary Stock to directors, Management or
Affiliates; provided, however, that at no time shall the total number
of shares of such Restricted Subsidiary Stock issued to or held by
Management and Affiliates as a group (including shares underlying
Rights) exceed twenty-five percent (25%) of the total number of shares
of such Restricted Subsidiary Stock outstanding following any such
issuance; and
(iv) the Transfer of all of the Restricted Subsidiary Stock of a
Restricted Subsidiary owned by the Company and its other Restricted
Subsidiaries if:
(A) such Transfer satisfies the requirements of Section
4.2(a)(v) or Section 4.2(a)(vi) or both;
(B) in connection with such Transfer, the entire
Investment (whether represented by stock, Debt, claims or
otherwise) of the Company and its other Restricted
Subsidiaries in such Restricted Subsidiary is Transferred to
a Person other than the Company or a Restricted Subsidiary
not being simultaneously disposed of; and
(C) the Restricted Subsidiary being disposed of has no
continuing Investment in any other Restricted Subsidiary not
being simultaneously disposed of or in the Company.
For purposes of determining the book value of assets constituting
Restricted Subsidiary Stock being Transferred as provided in clause (b)(iv)
above, such
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book value shall be deemed to be the aggregate book value of the net assets
of the Restricted Subsidiary that shall have issued such Restricted
Subsidiary Stock.
(c) RESTRICTED SUBSIDIARY MERGERS AND CONSOLIDATIONS. A merger or
consolidation of a Restricted Subsidiary in which a Person other than the
Company or a Wholly-Owned Restricted Subsidiary shall be the Surviving
Corporation shall be deemed to be a disposition of the Restricted
Subsidiary Stock of such Restricted Subsidiary and shall be subject to
Section 4.2(b).
4.3 LIENS.
(a) NEGATIVE PLEDGE. The Company will not, and will not permit any
Restricted Subsidiary to, cause or permit, or agree or consent to cause or
permit in the future (upon the happening of a contingency or otherwise),
any of their Property, whether now owned or hereafter acquired, at any time
to be subject to a Lien except:
(i) CLOSING DATE AND SENIOR DEBT LIENS -
(A) Liens in existence on the Closing Date and described
in PART 2.1(c) OF ANNEX 3; and
(B) Liens securing Senior Debt arising under the terms
of an Acceptable Revolving Credit Facility;
(ii) ORDINARY COURSE BUSINESS LIENS -
(A) PERFORMANCE BONDS - Liens incurred or deposits made
in the ordinary course of business to secure the performance
of letters of credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance bonds (of a
type other than set forth in Section 4.3(a)(iii)) and other
similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property;
(B) REAL ESTATE - Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real property;
provided, however, that such exceptions and encumbrances do
not in the aggregate
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materially detract from the value of said Properties or
materially interfere with the use of such Properties in the
ordinary conduct of the business of the Company and the
Subsidiaries;
(C) TAXES, WORKERS' COMPENSATION, ETC. -
(I) Liens securing taxes, assessments or
governmental charges which are either not yet due or
payable or which are being actively contested in good
faith and by appropriate proceedings, or
(II) pledges or deposits securing obligations
under worker's compensation, unemployment compensation
laws or similar legislation to secure public or
statutory obligations of the Company or any Restricted
Subsidiary; or
(III) levies or the claims or demands of
materialmen, mechanics, carriers, ware-housemen,
vendors, landlords and other like Persons;
provided, however, that the payment thereof is not required
by Section 3.1 and that adequate reserves have been made
against such claims; and
(D) PACA - any Lien (including any Lien arising out of
any constructive trust) arising under PACA which is asserted,
perfected or imposed by any growers or suppliers to the
Company or any Restricted Subsidiary of agricultural
products, so long as no creditors of the Company or any of
the Restricted Subsidiaries have asserted their rights under
PACA that, in the aggregate, exceed Five Hundred Thousand
Dollars ($500,000);
(iii) JUDICIAL LIENS - Liens arising from judicial attachments
and judgments, securing appeal bonds or supersedeas bonds, and arising
in connection with court proceedings (including, without limitation,
surety bonds and letters of credit or any other instrument serving a
similar purpose); provided, however, that the execution or other
enforcement of such Liens is effectively stayed, that the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings, that adequate reserves have been made against
such claims and that the aggregate amount so secured will not at any
time exceed Five Million Dollars ($5,000,000);
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(iv) INTERGROUP LIENS - Liens on Property of a Restricted
Subsidiary; provided, however, that such Liens secure only obligations
owing to the Company;
(v) PURCHASE MONEY LIENS - any Lien on Property acquired or owned
by the Company or any Restricted Subsidiary or leased by the Company
or any Restricted Subsidiary as lessee under any Capital Lease which
secures Debt (including Debt in respect of a Capital Lease) incurred
to pay all or a portion of the related purchase price or costs of
construction, extension or improvement of such Property, so long as:
(A) that such purchase price or costs of construction,
extension or improvement shall not exceed the Fair Market
Value of such Property, extension or improvement, as the case
may be, determined at the time of the creation of such Lien;
(B) such Lien is created contemporaneously with, or
within one hundred eighty (180) days of, such acquisition,
construction, extension or improvement;
(C) such Lien encumbers only Property so purchased,
acquired, constructed, extended or improved after the Closing
Date;
(D) such Lien is not, after the creation thereof,
extended to any other Property; and
(E) immediately prior to the incurrence of, and after
giving effect to the incurrence of, all Debt secured by the
Liens referred to in such clauses, no Default or Event of
Default exists or would exist;
(vi) ACQUISITION LIENS - any Lien (including, without limitation,
any Lien arising out of a Capital Lease) existing on Property at the
time of acquisition thereof by the Company or any Restricted
Subsidiary (whether or not the Debt secured thereby is assumed by the
Company or any Restricted Subsidiary), or existing on the Property of,
the Debt of or the Capital Stock of any Person (other than an
Unrestricted Subsidiary) at the time such Person became a Restricted
Subsidiary (whether by means of the acquisition of all or
substantially all of the Property of such
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Person, of the Capital Stock thereof or otherwise) or merges or
consolidates with the Company or any Restricted Subsidiary, so long
as:
(A) the aggregate principal amount of Debt secured
thereby does not exceed the acquisition cost of such
Property, the consideration paid for the acquisition of such
Person or the consideration paid in connection with such
merger or consolidation, as the case may be, as determined at
the date of the acquisition, merger or consolidation;
(B) such Lien shall not extend to or cover any Property
other than the Property subject to such Lien at the time of
any such acquisition; and
(C) immediately after, and after giving effect to, such
acquisition, merger or consolidation, and the assumption of
all such Liens no Default or Event of Default exists or would
exist; and
(vii) OTHER LIENS - Liens securing Debt of the Company or any
Restricted Subsidiary and not otherwise permitted by clauses (i)
through (vi), inclusive, of this Section 4.3(a) so long as,
immediately prior to, and immediately after giving effect to the
incurrence of such Debt:
(A) no Default or Event of Default exists or would
exist; and
(B) it would be permitted by the provisions of Section
4.6 to incur at least One Dollar ($1.00) of additional
Adjusted Debt, and, to the extent that such Liens secure
Senior Debt, of Section 4.7 to incur at least One Dollar
($1.00) of additional Senior Debt, assuming that the
financial ratios set forth in Section 4.6 and Section 4.7
were recalculated on a Pro Forma Basis as of the last day of
the fiscal quarter of the Company then most recently ended.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property shall
be subjected to a Lien in violation of Section 4.3(a), the Company will
forthwith make or cause to be made, to the fullest extent permitted by
applicable law, provision whereby the Notes will be secured equally and
ratably as to such Property with all other obligations secured thereby
pursuant to such agreements and instruments as shall be approved by the
Required Holders, and the Company will promptly cause to be delivered to
each holder of a Note an opinion of independent counsel satisfactory to the
Required Holders to the effect
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that such agreements and instruments are enforceable in accordance with
their terms, and in any event the Notes shall have the benefit, to the full
extent that, and with such priority as, the holders of Notes may be
entitled under applicable law, of an equitable Lien on such Property (and
any proceeds thereof) securing the Notes. Such violation of Section 4.3(a)
will constitute an Event of Default hereunder, whether or not any such
provision is made or any equitable Lien is created pursuant to this Section
4.3(b).
(c) CONSTRUCTION. Nothing in this Section 4.3 shall be construed to
permit the incurrence or existence of any Debt not otherwise permitted by
this Agreement. Nothing in this Agreement that permits the incurrence or
existence of any Debt shall be construed to permit the incurrence or
existence of a Lien securing such Debt unless such Lien is permitted by
Section 4.3(a).
4.4 NET WORTH.
The Company will not at any time permit Consolidated Net Worth to be less
than an amount equal to the sum of:
(a) Twenty-Four Million Dollars ($24,000,000); plus
(b) one hundred percent (100%) of the principal amount of any Debt of
the Company, other than Senior Debt, that is converted into Capital Stock
of the Company; plus
(c) for each fiscal year of the Company ending after the Restatement
Date, an amount equal to the greater of:
(i) Zero Dollars ($0); and
(ii) fifty percent (50%) of Consolidated Net Company Income
determined in respect of such fiscal year.
4.5 FIXED CHARGE COVERAGE.
The Company will not, at any time on or after March 31, 2001, permit the
Pro Forma Combined Fixed Charge Coverage Ratio for a period consisting of any
four (4) out of the five (5) then most recently ended full consecutive fiscal
quarters of the Company, measured as at the end of the most recently ended
fiscal quarter of the Company, to be less than 1.25 to 1.0.
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4.6 TOTAL DEBT.
The Company will not at any time permit the ratio of Consolidated Adjusted
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 4.5 to 1.0 at any time from the Closing Date through and including
December 31, 2001; or
(b) 4.0 to 1.0 at any time following December 31, 2001.
4.7 SENIOR DEBT.
The Company will not at any time permit the ratio of Consolidated Senior
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 3.0 to 1.0 at any time from the Closing Date through and including
February 1, 2001; or
(b) 2.5 to 1.0 at any time following February 1, 2001.
4.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
(a) LIMIT ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. Except as
permitted by Section 4.8(b), the Company will not, nor will it permit any
Restricted Subsidiary to, at any time, declare or make or incur any
liability to declare or make any Restricted Payment or make or authorize,
or permit any Restricted Subsidiary to make or authorize, any Restricted
Investment unless, immediately after and after giving effect to the
proposed Restricted Payment or Restricted Investment:
(i) the sum of
(A) the aggregate amount of Restricted Investments
(valued in each case at acquisition cost) made during the
period commencing on the Closing Date and ending on the date
of, and after giving effect to, such proposed Restricted
Payment or Restricted Investment; plus
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(B) the aggregate amount of Restricted Payments made
during the period commencing on the Closing Date and ending
on the date of, and after giving effect to, such proposed
Restricted Payment or Restricted Investment;
would not exceed an amount equal to the sum of:
(I) Five Hundred Thousand Dollars ($500,000); plus
(II) fifty percent (50%) of Consolidated Net
Company Income in respect of the period beginning on
January 2, 2000 and ending on the last day of the
fiscal quarter of the Company then most recently ended
(or minus one hundred percent (100%) of Consolidated
Net Company Income for such period if Consolidated Net
Company Income for such period is a loss); plus
(III) the aggregate amount of net cash proceeds
received by the Company from the sale of any Specified
Stock made after the Closing Date; plus
(IV) the aggregate amount of net cash proceeds
received after the Closing Date by the Company or any
Subsidiary from the sale or liquidation, or as a result
of the final maturity, of any Restricted Investment
made after the Closing Date; plus
(V) the aggregate principal amount of any Debt
(including the Notes) cancelled in exchange for or
converted into any Specified Stock after the Closing
Date; and
(ii) no Default or an Event of Default would exist.
(b) CUMULATIVE PREFERRED STOCK DIVIDENDS PERMITTED. Notwithstanding
the provisions of Section 4.8(a), the Company may make payments of cash
dividends to the holders of the Cumulative Preferred Stock which are
required by the terms of such Cumulative Preferred Stock. For the purpose
of making computations under Section 4.8(a), payments of cash dividends in
respect of the Cumulative Preferred Stock shall in each case be excluded.
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(c) OTHER MATTERS. For the purpose of making computations under
Section 4.8(a), Restricted Investments made solely by issuance of Specified
Stock of the Company shall in each case be excluded. Any Person that
becomes a Restricted Subsidiary after the Closing Date shall be deemed to
have made, at the time it becomes a Restricted Subsidiary, all Restricted
Investments of such Person existing immediately after it becomes a
Restricted Subsidiary.
4.9 SENIORITY TO FUTURE SUBORDINATED DEBT.
The Company shall not incur, create, assume or Guaranty any Debt which is
subordinated in right of payment to any other Debt of the Company unless such
Debt is also subordinated in right of payment, on the same terms, to the
obligations of the Company in respect of the Notes and this Agreement. The
Company shall not incur, create, assume or Guaranty any Debt owing to any
Subsidiary or any Affiliate unless such Debt is subordinated in right of
payment, on terms acceptable to the Required Holders, to the obligations of the
Company in respect of the Notes and this Agreement.
4.10 DESIGNATION OF SUBSIDIARIES.
(a) RIGHT OF DESIGNATION. Subject to the following sentence, each of
the Subsidiaries listed on Annex 3 shall be a Restricted Subsidiary so long
as it shall continue to satisfy the requirements of the definition of
Restricted Subsidiary. Subject to the satisfaction of the requirements of
Section 4.10(b), the Company shall have the right to designate as a
Restricted Subsidiary any Subsidiary which, following such designation,
would meet the definition of a "Restricted Subsidiary," and to designate
any Restricted Subsidiary as an Unrestricted Subsidiary, by delivering to
each holder of Notes a writing, signed by a Senior Officer, so designating
such Subsidiary. Any Subsidiary not designated as a Restricted Subsidiary
shall be deemed to be an Unrestricted Subsidiary.
(b) DESIGNATION CRITERIA.
(i) No Subsidiary shall at any time after the Closing Date be
designated as a Restricted Subsidiary unless:
(A) such Subsidiary at such time meets all of the
requirements of being a Restricted Subsidiary as set forth in
the definition thereof (other than clause (a) of such
definition);
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(B) immediately before and after, and after giving effect
to such designation, no Default or Event of Default exists or
would exist; and
(C) such Subsidiary shall not previously have been
designated as a Restricted Subsidiary on more than one (1)
other occasion.
(ii) No Restricted Subsidiary shall at any time after the Closing
Date be designated as an Unrestricted Subsidiary unless:
(A) immediately after, and after giving effect to such
designation, no Default or Event of Default exists or would
exist; and
(B) immediately prior to such designation, such
Restricted Subsidiary being so designated does not own,
directly or indirectly, any Capital Stock of any Restricted
Subsidiary not being simultaneously designated as an
Unrestricted Subsidiary.
(c) CONSEQUENCE OF DESIGNATION. By designating a Subsidiary as an
Unrestricted Subsidiary, the Company shall be deemed to have made an
Investment in such Subsidiary in an amount equal to the Fair Market Value
of its Investment in such Subsidiary on the date of such designation.
(d) EFFECTIVENESS. Any designation under this Section 4.10 that
satisfies all of the conditions set forth in this Section 4.10 shall become
effective, for purposes of this Agreement, on the day that notice thereof
shall have been delivered by the Company to each holder of Notes in
accordance with Section 9.1.
4.11 LINE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business if, as a result, the general nature of the business in
which the Company and the Restricted Subsidiaries, taken as a whole, would then
be engaged would be substantially changed from the general nature of the
business in which the Company and the Restricted Subsidiaries, taken as a whole,
are engaged on the Closing Date as described in the Annual Report on Form 10-K
of the Company for the fiscal year ended January 1, 1999.
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4.12 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any transaction, including, without limitation, the purchase, sale,
lease or exchange of Property or the rendering of any service, with any
Affiliate, except for:
(a) relocation loans (including, without limitation, short-term bridge
financing in connection with the purchase of a principal residence) to any
executive or employee of the Company or any Restricted Subsidiary not
exceeding at any time Five Hundred Thousand Dollars ($500,000);
(b) other loans, advances and other extensions of credit to any
executive, officer, director or stockholder (or any relative of any of the
foregoing) not exceeding at any time the sum of:
(i) Three Hundred Thousand Dollars ($300,000) in the aggregate at
any time outstanding; plus
(ii) one percent (1%) of Consolidated Net Company Income in
respect of the period beginning on the first day of the fiscal quarter
of the Company commencing after the Closing Date and ending on the
last day of the fiscal quarter of the Company then most recently ended
(or minus one percent (1%) of Consolidated Net Company Income for such
period if Consolidated Net Company Income for such period is a loss);
and
(c) transactions in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
4.13 SUBSIDIARY GUARANTEES.
The Company will not at any time permit any Subsidiary to incur,
create, assume, Guaranty or otherwise become liable in respect of any Debt in
respect of any Senior Credit Facility (whether as primary obligor, guarantor,
surety or otherwise) after the Closing Date unless such Subsidiary, upon or
prior to such incurrence, creation, assumption, Guaranty or otherwise becoming
liable in respect of any such Debt, shall enter into an unconditional
subordinated Guaranty (as amended and restated on the Restatement Date and as
further amended from time to time, the "SUBSIDIARY GUARANTEE") in favor of the
holders of the Notes in substantially the form of Exhibit 4.5(c) to the
Securities Purchase Agreement. The Company will cause
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each Subsidiary which entered into a Subsidiary Guarantee on the Closing Date,
and each Subsidiary subsequently entering into a Subsidiary Guarantee pursuant
to this Section 4.13, to maintain such Subsidiary Guarantee for so long as such
Subsidiary remains liable in respect of any such Debt.
4.14 CURRENT RATIO
The Company will not at any time permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities to be less than 1.15 to 1.0.
5. REPORTING COVENANTS
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(a) QUARTERLY FINANCIAL STATEMENTS - as soon as practicable after the
end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year), and
in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end of such quarter;
and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending with
such quarter;
for the Company and the Restricted Subsidiaries, setting forth in each
case, in comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by a Senior Financial
Officer, and accompanied by the certificate required by Section 5.2;
provided, that delivery of copies of the Company's Quarterly Report on Form
10-Q filed with the SEC within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.1(a) so long as such
Quarterly Report contains or is accompanied by the information specified in
this Section 5.1(a);
(b) ANNUAL FINANCIAL STATEMENTS - as soon as practicable after the end
of each fiscal year of the Company, and in any event within one hundred
twenty (120) days thereafter:
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(i) a consolidated balance sheet as at the end of such year; and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows for such year;
for the Company and the Restricted Subsidiaries, setting forth, in
comparative form, the financial statement for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and accompanied by:
(A) an audit report thereon of independent certified
public accountants of recognized national standing, which
report shall state without qualification (including, without
limitation, qualifications related to the scope of the audit,
the compliance of the audit with generally accepted auditing
standards, or the ability of the Company or a material
subsidiary thereof to continue as a going concern), that such
financial statements have been prepared and are in conformity
with GAAP; and
(B) the certificates required by Section 5.2 and Section
5.3;
provided, that delivery of the Company's Annual Report on Form 10-K for such
fiscal year filed with the SEC within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.1(b) so long as such Annual
Report contains or is accompanied by the reports and other information otherwise
specified in this Section 5.1(b);
(c) SEC AND OTHER REPORTS - promptly upon their becoming available,
and in any event within fifteen (15) days thereafter:
(i) each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally;
(ii) each regular or periodic report (including, without
limitation, each Form 10-K, Form 10-Q and Form 8-K), any registration
statement which shall have become effective, and each final prospectus
and all amendments thereto filed by the Company or any Restricted
Subsidiary with the SEC; and
(iii) all press releases and other statements made available by
the Company or any Restricted Subsidiary to the public concerning
material developments in the business of the Company or the Restricted
Subsidiaries;
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(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT - within two (2) Business
Days of becoming aware:
(i) of the existence of any condition or event which constitutes
a Default or an Event of Default; or
(ii) that the holder of any Note, any lender or creditor in
respect of a Senior Credit Facility or any holder of any other Debt in
a principal amount of Two Hundred Fifty Thousand Dollars ($250,000) or
more, shall have given notice or taken any other action with respect
to a claimed Default, Event of Default or default or event of default;
a notice specifying the nature of the claimed Default, Event of Default or
default or event of default and the notice given or action taken (if any)
by such holder and what action the Company is taking or proposes to take
with respect thereto;
(e) ERISA -
(i) within two (2) Business Days of becoming aware of the
occurrence of any "reportable event" (as such term is defined in
section 4043 of ERISA) for which notice thereof has not been waived
pursuant to regulations of the DOL or "prohibited transaction" (as
such term is defined in section 406 of ERISA or section 4975 of the
IRC) in connection with any Plan or any trust created thereunder, a
notice specifying the nature thereof, what action the Company is
taking or proposes to take with respect thereto, and, when known, any
action taken by the Internal Revenue Service, the DOL or the PBGC with
respect thereto; and
(ii) prompt notice of and, where applicable, a description of:
(A) any notice from the PBGC in respect of the
commencement of any proceedings pursuant to section 4042 of
ERISA to terminate any Plan or for the appointment of a
trustee to administer any Plan, and any distress termination
notice delivered to the PBGC under section 4041 of ERISA in
respect of any Plan, and any determination of the PBGC in
respect thereof;
(B) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA, any
Multiemployer
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Plan becoming "insolvent" (as such term is defined in section
4245 of ERISA) under Title IV of ERISA, or the whole or
partial withdrawal of the Company or any ERISA Affiliate from
any Multiemployer Plan and the withdrawal liability incurred
in connection therewith; or
(C) the occurrence of any event, transaction or condition
that could result in the incurrence of any liability of the
Company or any ERISA Affiliate or the imposition of a Lien on
the Property of the Company or any ERISA Affiliate, in either
case pursuant to Title I or Title IV of ERISA or pursuant to
the penalty or excise tax or security provisions of the IRC;
provided, however, that the Company shall not be required to deliver any such
notice at any time when the aggregate amount of the actual or potential
liability of the Company and the Restricted Subsidiaries in respect of all such
events at such time could not reasonably be expected to have a Material Adverse
Effect;
(f) AUDITOR'S REPORTS - each report or, upon the request of any holder
of Notes, any management letter submitted to the Company or any Restricted
Subsidiary by independent accountants in connection with any annual,
interim or special audit made of the books of the Company or any
Subsidiary;
(g) ACTIONS, PROCEEDINGS - promptly after the commencement of any
action or proceeding relating to the Company or any Subsidiary in any court
or before any governmental authority or arbitration board or tribunal as to
which there is a reasonable possibility of an adverse determination and
that, if adversely determined, is reasonably likely to have a Material
Adverse Effect, a notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto;
(h) OTHER CREDITORS - promptly upon the reasonable request of any
holder of Notes, copies of any statement, report or certificate furnished
to any holder of Debt to the extent that the information contained in such
statement, report or certificate has not already been delivered to each
holder of Notes;
(i) RULE 144A - promptly upon the request of any holder of Notes,
information required to permit the holder to comply with 17
C.F.R. Section 230.144A, as amended from time to time, in connection with a
transfer of any Note; and
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(j) REQUESTED INFORMATION - with reasonable promptness, such other
data and information as from time to time may be reasonably requested by
any holder of Notes.
5.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes pursuant
to Section 5.1(a) or Section 5.1(b) shall be accompanied by a certificate of a
Senior Financial Officer, setting forth:
(a) COVENANT COMPLIANCE - the financial information (including
detailed calculations) required in order to establish whether the Company
was in compliance with the requirements of Section 4 (in each case where
such Section imposes numerical financial requirements) as of the end of the
period covered by the financial statements then being furnished (including
with respect to such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Section, and the calculation of the
amount, ratio or percentage then in existence); and
(b) EVENT OF DEFAULT - a statement that the signer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision or authority, a review of the transactions and conditions of
the Company and the Subsidiaries from the beginning of the accounting
period covered by the income statements being delivered therewith to the
date of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.
5.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section
5.1(b) shall be accompanied by a certificate of the accountants who were engaged
to audit such financial statements, stating that they have reviewed Section
4.2(a)(v)(A), Section 4.2(a)(v)(B) and Section 4.4 through Section 4.8(a)(i),
inclusive, and the corresponding definitions of financial terms used therein and
defined in Section 8.1, and stating further, whether, in making their audit,
such accountants have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if such accountants are aware
that any such condition or event then exists, specifying the nature and period
of existence thereof.
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5.4 INSPECTION.
The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the Restricted
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Restricted Subsidiaries) all at such reasonable times, upon such
reasonable notice and as often as may be reasonably requested. At all times
during which there exists a Default or Event of Default, expenses incurred by
the holders of the Notes in connection with this Section 5.4 shall be paid in
accordance with Section 9.6 and otherwise such expenses will be borne by such
holder.
6. EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(a) PAYMENTS ON NOTES -
(i) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT PAYMENTS - the
Company fails to make any payment of principal or Prepayment
Compensation Amount on any Note on or before the date such payment is
due; or
(ii) INTEREST PAYMENTS - the Company fails to make any payment of
interest on any Note on or before five (5) Business Days after the
date such payment is due;
(b) OTHER DEFAULTS -
(i) NEGATIVE AND FINANCIAL COVENANT DEFAULTS - the Company or any
Restricted Subsidiary fails to comply with any provision of Section 4;
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(ii) OTHER DEFAULTS - the Company or any Restricted Subsidiary
fails to comply with any other provision hereof, and such failure
continues for more than thirty (30) days after such failure shall
first become known to any Senior Officer;
provided, however, that the failure of the Company or any Restricted
Subsidiary to comply with the provisions of Section 4.6 or Section 4.7
during the period commencing on April 15, 2000 and ending on April 1, 2001
shall not constitute a Default or Event of Default unless the Company or
any Restricted Subsidiary incurs any Debt (other than Senior Debt) during
such period;
(c) WARRANTIES OR REPRESENTATIONS - any warranty, representation or
other statement by or on behalf of the Company contained in the Initial
Securities Purchase Agreement or the Securities Purchase Agreement or any
other Financing Document, in any written amendment, supplement,
modification or waiver with respect to any Financing Document or in any
instrument furnished in compliance herewith or in reference hereto, shall
have been false or misleading in any material respect when made;
(d) ACCELERATION OF DEBT -
(i) the Company or any Restricted Subsidiary fails to make, when
due, at maturity or otherwise, any payment or payments in an amount
aggregating in excess of Two Million Dollars ($2,000,000) in respect
of any Debt; or
(ii) any event shall occur or any condition shall exist in
respect of Debt, or under any agreement securing or relating to such
Debt:
(A) as a result of which the maturity of such Debt, or a
portion thereof, is accelerated; or
(B) that requires the Company or any Restricted
Subsidiary to repurchase such Debt from the holders thereof;
provided that the aggregate amount of all obligations in respect of all such
Debt exceeds at such time Two Million Dollars ($2,000,000);
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(e) INSOLVENCY -
(i) INVOLUNTARY BANKRUPTCY PROCEEDINGS -
(A) a receiver, liquidator, custodian or trustee of the
Company or any Restricted Subsidiary, or of all or any
substantial part of the Property of either, is appointed by
court order and such order remains in effect for more than
sixty (60) days; or an order for relief is entered with
respect to the Company or any Restricted Subsidiary, or the
Company or any Restricted Subsidiary is adjudicated a
bankrupt or insolvent;
(B) all or any substantial part of the Property of the
Company or any Restricted Subsidiary is sequestered by court
order and such order remains in effect for more than sixty
(60) days; or
(C) a petition is filed against the Company or any
Restricted Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter
in effect, and is not dismissed within sixty (60) days after
such filing;
(ii) VOLUNTARY PETITIONS - the Company or any Restricted
Subsidiary- files a voluntary petition in bankruptcy or seeks relief
under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or consents to
the filing of any petition against it under any such law; or
(iii) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. - the Company or
a Restricted Subsidiary makes an assignment for the benefit of its
creditors, or admits in writing its inability, or fails, to pay its
debts generally as they become due, or consents to the appointment of
a receiver, liquidator or trustee of the Company or a Restricted
Subsidiary or of all or a substantial part of its Property;
(f) UNDISCHARGED FINAL JUDGMENTS - a final, non-appealable judgment or
final, non-appealable judgments for the payment of money aggregating more
than Two Million Dollars ($2,000,000) in excess of all applicable insurance
coverage which has not been contested by the relevant insurer or insurers
is or are outstanding against one or more of the Company
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and the Restricted Subsidiaries and any one of such judgments shall have
been outstanding for more than sixty (60) days from the date of its entry
and shall not have been discharged in full or stayed; or
(g) SUBSIDIARY GUARANTY - any Subsidiary Guaranty shall cease to be in
full force and effect or shall be declared by a court or other Governmental
Authority of competent jurisdiction to be void, voidable or unenforceable
against any Subsidiary Guarantor; the validity or enforceability of any
Subsidiary Guaranty against any Subsidiary Guarantor shall be contested by
such Subsidiary Guarantor, the Company or any Affiliate; or any Subsidiary
Guarantor, the Company or any Affiliate shall deny that such Subsidiary
Guarantor has any further liability or obligation under any Subsidiary
Guaranty.
6.2 DEFAULT REMEDIES.
(a) ACCELERATION OF MATURITY OF NOTES.
(i) ACCELERATION ON EVENT OF DEFAULT.
(A) AUTOMATIC. If any Event of Default specified in
Section 6.1(e) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable together with interest accrued thereon and, to the
extent permitted by law, the Prepayment Compensation Amount
at such time with respect to the principal amount of such
Notes, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
(B) BY ACTION OF HOLDERS. Subject to Section 7.7, if any
Event of Default shall exist, the Required Holders may
exercise any right, power or Remedy permitted to such holder
or holders by law, and shall have, in particular, without
limiting the generality of the foregoing, the right to
declare the entire principal of, and all interest accrued on,
all the Notes then outstanding to be, and such Notes shall
thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on,
the Notes and, to the extent permitted by law, the Prepayment
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Compensation Amount at such time with respect to such
principal amount of such Notes.
(ii) ACCELERATION ON PAYMENT DEFAULT. Subject to Section 7.7,
during the existence of an Event of Default described in Section
6.1(a), and irrespective of whether the Notes then outstanding shall
have become due and payable pursuant to Section 6.2(a)(i)(B), any
holder of Notes who or which shall have not consented to any waiver
with respect to such Event of Default may, at his or its option, by
notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due and
payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Company shall forthwith pay to
such holder the entire principal of and interest accrued on such Notes
and, to the extent permitted by law, the Prepayment Compensation
Amount at such time with respect to such principal amount of such
Notes.
(b) VALUABLE RIGHTS. The Company acknowledges, and the parties hereto
agree, that the right of each holder to maintain its investment in the
Notes free from repayment by the Company (except as herein specifically
provided for) is a valuable right and that the provision for payment of a
Prepayment Compensation Amount by the Company in the event that the Notes
are prepaid or are accelerated as a result of an Event of Default is
intended to provide compensation for the deprivation of such right under
such circumstances.
(c) OTHER REMEDIES. During the existence of an Event of Default and
irrespective of whether the Notes then outstanding shall become due and
payable pursuant to Section 6.2(a), and irrespective of whether any holder
of Notes then outstanding shall otherwise have pursued or be pursuing any
other rights or Remedies, subject to Section 7.7, any holder of Notes may
proceed to protect and enforce its rights hereunder and under such Notes by
exercising such Remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or
both, whether for specific performance of any agreement contained herein or
in aid of the exercise of any power granted herein; provided, however, that
the maturity of such holder's Notes may be accelerated only in accordance
with Section 6.2(a).
(d) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise
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prejudice such holder's rights, powers and Remedies. All rights and
Remedies of each holder of Notes hereunder and under applicable law are
cumulative to, and not exclusive of, any other rights or Remedies any such
holder of Notes would otherwise have.
(e) SUBORDINATION. The rights of the holders of the Notes to receive
payments in respect of this Agreement and the Notes, and to exercise any
Remedies, solely as between the holders of the Notes and the holders of the
Senior Debt, shall be subject in all respects to the provisions of Section
7; provided, however, that all such rights shall remain unconditional and
absolute as between the holders of the Notes and the Company.
6.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 6.2(a)(i)(B), then and in
every such case, the holders of sixty-six and two-thirds percent (66 and 2/3%)
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by any one or more of the Company, any Restricted Subsidiary or any
Affiliate) may, by written instrument filed with the Company, rescind and annul
such declaration, and the consequences thereof; provided, however, that at the
time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of the other
sums payable hereunder and under the Notes (except any principal of, or
interest or Prepayment Compensation Amount on, the Notes which shall have
become due and payable by reason of such declaration under Section
6.2(a)(i)(B)) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 9.5 or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
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7. SUBORDINATION
7.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to all
Senior Debt to the extent provided in this Section 7.
7.2 INSOLVENCY.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its Property;
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(c) any assignment by the Company for the benefit of creditors; or
(d) any other marshalling of the assets of the Company;
all Senior Debt shall first be paid in full, in cash or cash equivalents, before
any payment or distribution, whether in cash, Securities or other Property,
shall be made to any holder of any Subordinated Debt on account of any
Subordinated Debt. Any payment or distribution, whether in cash, Securities or
other Property (other than Securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinated, at least to the extent provided in this Section 7 with respect to
Subordinated Debt, to the payment of all Senior Debt at the time outstanding and
to any Securities issued in respect thereof under any such plan of
reorganization or readjustment), which would otherwise (but for this Section 7)
be payable or deliverable in respect of Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt shall have
been paid in full, in cash or cash equivalents.
7.3 PROOFS OF CLAIM.
If any holder of Subordinated Debt does not file a proper claim or proof of
debt therefor prior to ten (10) days before the expiration of the time to file
such claim or
39
<PAGE> 43
proof, then the Senior Agent is hereby authorized and empowered (but not
obligated) as the agent and attorney-in-fact for such holder for the specific
and limited purpose set forth in this paragraph, to file such claim or proof for
or on behalf of such holder; provided, however, that the Senior Agent shall
have, prior to taking any such action, given fifteen (15) days prior written
notice (which notice may be given up to sixty (60) days prior to the expiration
of the time to file such claim) to such holder of Subordinated Debt that they
intend to file such claim or proof of debt. In no event may the Senior Agent or
any holder of the Senior Debt vote any claim on behalf of any holder of the
Subordinated Debt, and such agency and appointment of attorney-in-fact shall not
extend to any such right to vote any such claim.
7.4 ACCELERATION OF SENIOR DEBT.
In the event that the holders of any Senior Debt, or any trustee or agent
acting on behalf of any such holders, accelerate the maturity of such Senior
Debt or demand that the Company repurchase the same, then, and in each such
case, no direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt until such time as such Senior Debt has been
paid in full in cash or cash equivalents. The Company shall give prompt written
notice to each holder of Subordinated Debt of its knowledge of the acceleration
of the maturity of any Senior Debt.
7.5 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
If: the Company shall default in the payment of any principal of or
premium, if any, or interest on any Senior Debt (a "SENIOR PAYMENT DEFAULT")
when the same becomes due and payable, whether at maturity or at a date fixed
for prepayment or otherwise; and
(a) the Company receives from the Senior Agent written notice (a
"PAYMENT DEFAULT NOTICE") of the happening of such Senior Payment Default
stating that such notice is a payment blockage notice pursuant to this
Section 7.5;
then no direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt unless and until such Senior Payment Default
shall have been cured or waived or otherwise shall have ceased to exist.
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<PAGE> 44
The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any Payment Default Notice under this Section 7.5.
7.6 SIGNIFICANT NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
If:
(a) any Significant Nonpayment Default shall have occurred; and
(b) the Company receives from the Senior Agent written notice (a
"NONPAYMENT DEFAULT NOTICE") of the happening of such Significant
Nonpayment Default, stating that such notice is a payment blockage notice
pursuant to Section 7.6 of this Agreement;
then no direct or indirect payment (in cash, property or Securities or by
set-off or otherwise) shall be made or agreed to be made for or on account of
any Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in
respect of any redemption, retirement, repurchase, prepayment, purchase or other
acquisition or payment of any Subordinated Debt, for a period (each, a "PAYMENT
BLOCKAGE PERIOD") commencing on the date the Nonpayment Default Notice is
delivered to the Company and ending on the Payment Blockage Period Termination
Date; provided, however, that:
(i) only one such Payment Blockage Period may arise in any period
of three hundred sixty (360) consecutive days;
(ii) no more than three (3) Payment Blockage Periods may be
instituted pursuant to this Section 7.6; and
(iii) no Payment Blockage Period may be imposed as a result of
any Significant Nonpayment Default which served as the basis for or
was continuing during a previous Payment Blockage Period.
All payments in respect of Subordinated Debt postponed during any Payment
Blockage Period shall be immediately due and payable upon the termination
thereof (together with such additional interest as is provided for herein and in
the Notes for late payment of principal, Prepayment Compensation Amount and
interest).
The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any Nonpayment Default Notice under this Section 7.6.
41
<PAGE> 45
7.7 STANDSTILL.
Notwithstanding anything contained in this Agreement or any other Financing
Document to the contrary, for so long as any amount is outstanding under a
Senior Credit Facility, no holder of any Subordinated Debt may exercise any
Remedies in respect thereof (and no acceleration or purported acceleration
pursuant to Section 6.2(a)(i)(B) or Section 6.2(a)(ii) shall become effective)
during any period (a "STANDSTILL PERIOD") commencing on the first date the
holders of the Subordinated Debt, but for the provisions of this Section 7,
would have been entitled to accelerate the maturity of the Subordinated Debt
pursuant to Section 6.2(a)(i)(B) or Section 6.2(a)(ii) and ending upon the
earliest of:
(a) the date which is:
(i) if any Event of Default described in Section 6.1(a) has
occurred and is continuing, ninety (90) days; and
(ii) if no Event of Default described in Section 6.1(a) has
occurred or is continuing, one hundred twenty (120) days;
in each case, after the commencement of such Standstill Period;
(b) the date that any holder of any Senior Debt commences the exercise
of any Remedies in respect of such Debt; and
(c) the first date upon which any of the Events of Default described
in Section 6.1(e) shall have occurred and be continuing beyond any period
of grace specified therein; and, in such event, the automatic acceleration
of the Notes contemplated in respect of such Event of Default pursuant to
Section 6.2(a)(i)(A) shall occur immediately upon the termination of the
Standstill Period.
7.8 TURNOVER OF PAYMENTS
If:
(a) any payment or distribution shall be paid to or collected or
received by any holders of Subordinated Debt in contravention of any of the
terms of this Section 7; and
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<PAGE> 46
(b) the Senior Agent shall have notified the holders of Subordinated
Debt of the facts by reason of which such payment or collection or receipt
so contravenes this Section 7 or constituted a Significant Nonpayment
Default;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents, to the Senior Agent, on behalf of the holders of the
Senior Debt, and, until so delivered, the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
If any amount is delivered to the Senior Agent pursuant to this Section 7.8,
whether or not such amounts have been applied to the payment of Senior Debt, and
the outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, by the Company or otherwise other than pursuant to this Section
7.8, the holders of Senior Debt shall return to such holders of Subordinated
Debt an amount equal to the amount delivered to such holders of Senior Debt
pursuant to this Section 7.8, so long as after the return of such amounts the
Senior Debt shall remain paid in full, in cash or cash equivalents.
7.9 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.
The rights set forth in this Section 7 of the holders of the Senior Debt as
against each holder of Subordinated Debt shall remain in full force and effect
without regard to, and shall not be impaired by:
(a) any act or failure to act on the part of the Company;
(b) any change in the manner, place or terms of payment of, or any
extension or indulgence in respect of, any payment or prepayment of the
Senior Debt or any part thereof or in respect of any other amount payable
to any holder of Senior Debt;
(c) any amendment, modification, restatement, renewal, refinancing or
waiver of, or addition or supplement to, or deletion from, or compromise,
release, consent or other action in respect of, any of the terms of any
Senior Debt or any other agreement relating to any Senior Debt, other than
such as would cause all or any portion of such Debt to fail to meet the
definition of "Senior Debt;"
(d) any sale, exchange, release or other dealing with any Property
which is the subject of any Lien securing any Senior Debt, or any failure
or delay in the perfection of any such Lien;
43
<PAGE> 47
(e) any release of any Person liable in any manner (including, without
limitation, by virtue of any Guaranty) for the payment or collection of the
Senior Debt;
(f) any exercise or non-exercise by any holder of Senior Debt of any
right, power, privilege or remedy under or in respect of any Senior Debt or
Subordinated Debt or any waiver of any such right, power, privilege or
remedy or any default in respect of any Senior Debt or the Subordinated
Debt, any dealing with or action against any collateral security therefor
or any receipt by any holder of Senior Debt of any security, or any failure
by any holder of Senior Debt to perfect a security interest in, or any
release by any such holder of Senior Debt of, any security for the payment
of any Senior Debt;
(g) any merger or consolidation of the Company or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
Person, or any Transfer of any or all of the Property of the Company or any
of its Subsidiaries to any other Person; or
(h) the absence of any notice to, or knowledge of, any holder of
Subordinated Debt of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (a) through (g).
7.10 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 7 or of the creation, renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.
7.11 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the provisions
set forth in this Section 7 shall continue to be effective, or be reinstated, as
the case may be, as to any payment in respect of any Senior Debt that is
rescinded or must otherwise be returned by the holder of such Senior Debt upon
the occurrence or as a result of any bankruptcy or judicial proceeding, all as
though such payment had not been made.
7.12 OBLIGATIONS NOT IMPAIRED.
Nothing contained in this Section 7 shall impair, as between the Company
and any holder of Subordinated Debt, the obligation of the Company to pay to
such holder the principal thereof and Prepayment Compensation Amount, if any,
and interest thereon as and when the same shall become due and payable in
accordance with the
44
<PAGE> 48
terms thereof and to comply with each and every provision of the Notes and this
Agreement or prevent any holder of any Subordinated Debt from exercising all
rights, powers and remedies otherwise permitted by applicable law or under this
Agreement, all subject to the rights of the holders of the Senior Debt to
receive cash, Securities or other Property otherwise payable or deliverable to
the holders of Subordinated Debt.
7.13 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full of all Senior Debt, the holders of Subordinated
Debt shall be subrogated to all rights of any holder of Senior Debt to receive
any further payments or distributions applicable to the Senior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property which otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of Subordinated Debt.
7.14 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be deemed
to acknowledge and agree that the foregoing subordination provisions are, and
are intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt. Each such holder of Senior Debt is
intended to be, and is, a third party beneficiary of this Section 7. Each holder
of Subordinated Debt acknowledges and agrees that the provisions set forth in
this Section 7 shall be enforceable against such Persons by the holders of the
Senior Debt. Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, none of the provisions of this Section 7
(including, without limitation, this Section 7.14) may, directly or indirectly,
be amended, modified, supplemented or waived without the prior written consent
of the Senior Agent, on behalf of the holders of the Senior Debt.
7.15 IDENTITY OF HOLDERS OF SENIOR DEBT.
Upon the request of any holder of Subordinated Debt, the Company shall
deliver to such holder a list of all holders of Senior Debt outstanding at such
time, providing the name and address of each such holder of Senior Debt and the
principal amount of
45
<PAGE> 49
Senior Debt held by each such holder; provided, however, that, if any holder of
Senior Debt shall have appointed an agent or other representative with respect
to the Senior Debt held by it, the Company may provide the name and address of
such agent or representative in lieu of the name and address of such holder of
Senior Debt.
7.16 AMENDMENTS TO SENIOR CREDIT FACILITY.
Notwithstanding the other provisions of this Section 7, no amendment to or
refinancing, replacement or refunding of the Senior Debt or any agreement or
instrument related thereto shall be effective as to the holders of the
Subordinated Debt or be entitled to the benefits of this Section 7 without the
consent of each holder of Notes to the extent that such amendment, refinancing,
replacement or refunding would directly prohibit the Company or any Subsidiary
from making scheduled or required payments in respect of the Subordinated Debt
in any manner which is not specifically set forth in the Senior Credit
Agreement, as in effect on the Closing Date. The holders of the Senior Debt may
restrict the right of the Company to make, or prohibit the Company from making,
optional prepayments of the Notes in accordance with the provisions of Section
1.3 or Section 1.4 or other optional repurchases of the Notes.
8. INTERPRETATION OF THIS AGREEMENT
8.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
ACCEPTABLE CONSIDERATION - means, with respect to any Transfer of any
Property of the Company or any Restricted Subsidiary, cash consideration,
promissory notes or such other consideration (or any combination of the
foregoing) as is, in each case for the Fair Market Value thereof and in each
case in which the value of the Property so Transferred is equal to or greater
than One Million Dollars ($1,000,000), determined by the Board of Directors, in
its good faith opinion, to be in the best interests of the Company and to
reflect the Fair Market Value of such Property.
ACCEPTABLE REVOLVING CREDIT FACILITY - means and includes a revolving
credit agreement or similar agreement:
(a) pursuant to which the lender commits to permit the Company,
subject to the conditions therein, to obtain from time to time thereunder
loans or advances of cash, letters of credit or bankers acceptances and
periodically repay the same; and
46
<PAGE> 50
(b) the obligations under which are not, by its terms or the terms of
any ancillary agreement, expressed to be subordinated in right of payment
to any other Debt of the Company or any Subsidiary; and
(c) the obligations under which are not owing to the Company, any
Affiliate or any Subsidiary.
ACQUIRED BUSINESS - means and includes, in connection with any computation
of Pro Forma Combined Income Available for Fixed Charges, Pro Forma Combined
EBITDA or Pro Forma Combined Fixed Charges for any period, any Person (other
than an Unrestricted Subsidiary) all the Capital Stock of which or substantially
all of the Property of which was acquired by the Company or a Restricted
Subsidiary, or which shall have merged into or consolidated with the Company
(with the Company being the Surviving Corporation) or which shall have merged
with or into or consolidated with a Restricted Subsidiary with the result that
the Surviving Corporation became a Restricted Subsidiary, in each case, during
such period, if, but only if:
(a) Consolidated EBITDA, Consolidated Rental Expense and Consolidated
Fixed Charges and for such acquired Persons for such Period can be
determined on a basis reasonably acceptable to the holders of Notes for
such period, and Consolidated Debt and Consolidated Senior Debt for such
acquired Persons can be determined on a basis reasonably acceptable to the
holders of Notes as at the relevant time of determination; and
(b) concurrently with any such determination, the Company shall have
delivered to the holders of the Notes audited financial statements (to the
extent available) and other financial information prepared in accordance
with GAAP and reasonably satisfactory to the holders of the Notes with
respect to such acquired Person, which financial statements and information
demonstrates the basis for such determination to an extent reasonably
satisfactory to the holders of the Notes.
ADJUSTED DEBT - with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:
(a) BORROWED MONEY - borrowed money;
(b) SECURED LIABILITIES - borrowed money secured by any Lien existing
on Property owned by such Person (whether or not such liabilities have been
assumed);
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(c) CAPITAL LEASES - Capital Leases of such Person; and
(d) GUARANTEES - any Guaranty of such Person of any obligation or
liability of another Person of obligations of the type listed in clause (a)
through clause (c) of this definition of Adjusted Debt.
Adjusted Debt shall not include letters of credit, surety bonds or similar
instruments.
AFFILIATE - means and includes, at any time, each Person (other than a
Restricted Subsidiary):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds ten percent (10%) or more of any
class of the Voting Stock of the Company;
(c) ten percent (10%) or more of the Voting Stock (or in the case of a
Person that is not a corporation, ten percent (10%) or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary; or
(d) that is an officer or director of the Company or that is an
Initial Manager Affiliate;
at such time; provided, however, that none of the Holders nor any affiliate of
any Holder shall be deemed to be an "Affiliate," and no Person holding any one
or more of the Notes or Warrants shall be deemed to be an "Affiliate" solely by
virtue of the ownership of such securities. As used in this definition:
control - means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS - and references thereto shall mean this Note Agreement as
it may from time to time be amended or supplemented.
ANNEX 3 - means Annex 3 to the Securities Purchase Agreement.
APPLICABLE INTEREST LAW - means any present or future law (including,
without limitation, the laws of the State of New York and the United States of
48
<PAGE> 52
America) which has application to the interest and other charges pursuant to
this Agreement and the Notes.
BANK OF AMERICA - means Bank of America Texas, N.A.
BOARD OF DIRECTORS - means, at any time, the board of directors of the
Company or any committee thereof that, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
BORROWING BASE - means:
(a) for so long as the Senior Credit Agreement (as amended, renewed or
extended) remains in effect, the "Adjusted Borrowing Base," as defined in
the Senior Credit Agreement, as in effect on the date hereof, and as set
forth on Annex 3 hereto; provided, however, that if clause (b) of the
definition of "Adjusted Borrowing Base" in the Senior Credit Agreement is
amended (including, without limitation, in connection with a renewal or
extension of the Senior Credit Facility) to remove the PACA Adjustment
deduction from the "Borrowing Base" (as defined in the Senior Credit
Agreement as in contained therein, then such amendment shall be given
effect for purposes of calculating the Borrowing Base; and
(b) thereafter, any substantially similar formulation contained in any
other Acceptable Revolving Credit Facility at such time, so long as:
(i) if such formulation contains a PACA Adjustment, such
formulation would yield an amount no higher than the amount calculated
in accordance with the definition of "Adjusted Borrowing Base" as set
forth in the Senior Credit Agreement, as in effect on the date hereof;
and
(ii) if such formulation does not contain a PACA Adjustment, such
formulation would yield an amount no higher than the amount calculated
in accordance with the definition of "Adjusted Borrowing Base" as set
forth in the Senior Credit Agreement, as in effect on the date hereof
but assuming that such definition did not contain a PACA Adjustment;
and, in either case, which formulation is provided to each holder of the Notes
in writing disclosing that the Company intends to use such formulation as the
"Borrowing Base."
49
<PAGE> 1
EXHIBIT 10.2
FRESH AMERICA CORP.
AMENDED AND RESTATED WARRANT AGREEMENT
WITH RESPECT TO WARRANT AGREEMENT DATED
AS OF MAY 4, 1998
DATED AS OF APRIL 15, 2000
155,483 SERIES A WARRANTS TO PURCHASE COMMON STOCK
420,651 SERIES B WARRANTS TO PURCHASE COMMON STOCK
<PAGE> 2
<TABLE>
<S> <C> <C>
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES........................................................2
1.1. FORMS OF WARRANT CERTIFICATES............................................................................2
1.2. EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS....................................................3
1.3. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT CERTIFICATES; LOST OR STOLEN WARRANT
CERTIFICATES...................................................................................................3
1.4. SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES..............................................................4
1.5. EFFECT OF ISSUANCE IN REGISTERED FORM....................................................................5
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE.............................................................5
2.1. EXERCISE OF WARRANTS.....................................................................................5
2.2. ISSUANCE OF COMMON STOCK.................................................................................8
2.3. UNEXERCISED WARRANTS.....................................................................................8
2.4. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES.....................................................9
2.5. NOTICE OF EXPIRATION.....................................................................................9
2.6. FRACTIONAL SHARES........................................................................................9
3. AGREEMENTS OF THE COMPANY...................................................................................9
3.1. RESERVATION OF COMMON STOCK..............................................................................9
3.2. COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND NONASSESSABLE.............................10
3.3. TRANSFER TAXES..........................................................................................10
3.4. COMMON STOCK RECORD DATE................................................................................11
3.5. RIGHTS IN RESPECT OF COMMON STOCK.......................................................................11
3.6. CUSIP NUMBER............................................................................................11
3.7. RIGHT OF ACTION.........................................................................................11
3.8. RIGHT TO RECEIVE DISTRIBUTION OF SPINOFF WARRANTS.......................................................12
4. ANTIDILUTION ADJUSTMENTS...................................................................................14
4.1. MECHANICAL ADJUSTMENTS..................................................................................14
4.2. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS..........................................................14
4.3. DIVIDENDS AND DISTRIBUTIONS.............................................................................15
4.4. REPURCHASES OF COMMON STOCK OR RIGHTS...................................................................16
4.5. ISSUANCES OF ADDITIONAL COMMON STOCK OR RIGHTS..........................................................17
4.6. EXPIRATION OF RIGHTS....................................................................................18
4.7. SPINOFF.................................................................................................18
4.8. CONSOLIDATION; MERGER; SALE; RECLASSIFICATION...........................................................19
4.9. DE MINIMIS CHANGES IN PURCHASE PRICE....................................................................20
4.10. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS.........................................20
4.11. MISCELLANEOUS........................................................................................21
4.12. OTHER SECURITIES.....................................................................................21
4.13. ADDITIONAL AGREEMENTS OF THE COMPANY.................................................................21
5. REPORTING COVENANTS........................................................................................23
5.1. FINANCIAL AND BUSINESS INFORMATION......................................................................23
5.2. INFORMATION CONCERNING ANTIDILUTION ADJUSTMENTS.........................................................24
6. REGISTRATION RIGHTS........................................................................................25
6.1. SHELF REGISTRATION......................................................................................25
6.2. INCIDENTAL REGISTRATION.................................................................................28
6.3. COMPANIES REGISTRATION..................................................................................29
6.4. REGISTRATION PROCEDURES.................................................................................30
6.5. REASONABLE INVESTIGATION................................................................................34
6.6. REGISTRATION EXPENSES...................................................................................35
6.7. INDEMNIFICATION; CONTRIBUTION...........................................................................35
6.8. HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS......................................................38
6.9. OTHER REGISTRATION OF COMMON STOCK......................................................................39
</TABLE>
-1-
<PAGE> 3
<TABLE>
<S> <C> <C>
6.10. AVAILABILITY OF INFORMATION.............................................................................39
7. INTERPRETATION OF THIS AGREEMENT...........................................................................40
7.1. CERTAIN DEFINED TERMS...................................................................................40
7.2. DESCRIPTIVE HEADINGS....................................................................................59
7.3. GOVERNING LAW...........................................................................................59
8. MISCELLANEOUS..............................................................................................59
8.1. EXPENSES................................................................................................59
8.2. AMENDMENT AND WAIVER....................................................................................60
8.3. DIRECTLY OR INDIRECTLY..................................................................................61
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............................................61
8.5. SUCCESSORS AND ASSIGNS..................................................................................62
8.6. NOTICES.................................................................................................62
8.7. SATISFACTION REQUIREMENT................................................................................62
8.8. SEVERABILITY............................................................................................63
8.9. COUNTERPARTS............................................................................................63
8.10. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC...................................................63
</TABLE>
Annex 1 - Address of Holders
Annex 2 - Address of Company
Attachment A1 - Form of Series A Warrant Certificate
Attachment A2 - Form of Series B Warrant Certificate
-ii-
<PAGE> 4
AMENDED AND RESTATED WARRANT AGREEMENT
AMENDED AND RESTATED WARRANT AGREEMENT (as amended from time to time,
this "AGREEMENT") with respect to the Warrant Agreement dated as of May 4, 1998,
dated as of April 15, 2000, among FRESH AMERICA CORP., a Texas corporation
(together with its successors and assigns, the "COMPANY"), and JOHN HANCOCK LIFE
INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY, SIGNATURE 1A
(CAYMAN), LTD. and INVESTORS PARTNER LIFE INSURANCE COMPANY (together with their
respective successors and assigns, the "HOLDERS").
RECITALS:
WHEREAS, pursuant to the Securities Purchase Agreement dated as of May
4, 1998 (the "INITIAL SECURITIES PURCHASE AGREEMENT"), the Company sold to John
Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance
Company and Signature 1A (Cayman), Ltd. (collectively, the "INITIAL PURCHASERS")
155,483 warrants to purchase Common Stock (the "INITIAL WARRANTS"), the terms of
which were governed by a warrant agreement dated as of May 4, 1998 (as amended
from time to time and as in effect immediately prior to the effectiveness
hereof, the "INITIAL WARRANT AGREEMENT").
WHEREAS, pursuant to the Securities Purchase Agreement dated as of
April 15, 2000 (the "SECURITIES PURCHASE AGREEMENT"), the Company sold to John
Hancock Life Insurance Company, John Hancock Variable Life Insurance Company and
Investors Partner Life Insurance Company (collectively, the "PURCHASERS")
warrants to purchase Common Stock (the "SERIES B WARRANTS"), the terms of which
are governed by this Agreement.
WHEREAS, the Initial Purchasers, as holders of all of the Initial
Warrants on the date hereof, and the Purchasers, as the purchasers and holders
of the Additional Warrants on the date hereof, have entered into this Agreement
to amend and restate the Initial Warrant Agreement, to govern the terms and
conditions of the Initial Warrants and the Additional Warrants, to provide for
the amendment and restatement of the Initial Warrants and to provide for the
Additional Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein,
(a) the Initial Warrant Agreement is hereby amended and restated as set
forth herein;
<PAGE> 5
(b) the Initial Warrants are hereby, and are hereby deemed to be,
amended and restated in the form of Series A Warrant set forth in Attachment A1
hereto (as so amended and restated, collectively, the "SERIES A WARRANTS"), and
each Initial Purchaser or subsequent holder may now or hereafter exchange any or
all of the Initial Warrants held by it for new amended and restated Series A
Warrants to be evidenced in the form of Attachment A1, each such new Series A
Warrant to be in respect of the same number of shares as the Initial Warrant so
delivered in exchange, provided however, that the failure of an Initial
Purchaser or a subsequent holder to so exchange any Initial Warrant for a new
Series A Warrant shall have no effect or consequence hereunder, and each such
Initial Warrant shall be deemed to be, and shall be treated for all purposes
hereunder, as being a new Series A Warrant to be evidenced by a warrant
certificate in the form of Attachment A1;
(c) the Series A Warrants and the Series B Warrants shall be referred
to herein, collectively, as the "WARRANTS" and other than as expressly set forth
herein, each Warrant shall be subject to the same terms and conditions, and have
available the same benefits and privileges, as each other Warrant, without
regard to the Series thereof; and
(d) the Initial Purchasers, the Purchasers and the Company hereby agree
as provided in the various Sections of this Agreement.
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES.
1.1. FORMS OF WARRANT CERTIFICATES.
The warrant certificates evidencing the Series A Warrants (in the form
of Attachment A1 as provided in this Section, individually, a "SERIES A WARRANT
CERTIFICATE" and, collectively, the "SERIES A WARRANT CERTIFICATES"), and the
warrant certificates evidencing the Series B Warrants (in the form of Attachment
A2 as provided in this Section, individually, a "SERIES B WARRANT CERTIFICATE"
and, collectively, the "SERIES B WARRANT CERTIFICATES"; the Series A Warrant
Certificates and the Series B Warrant Certificates are herein collectively
referred to as the "WARRANT CERTIFICATES"), and the forms of assignment and of
election to purchase shares to be attached to such certificates, shall be
substantially in the form set forth in Attachment A1 hereto (with respect to
Series A Warrants) and Attachment A2 hereto (with respect to Series B Warrants)
and may have such letters, numbers or other marks of identification or
designation as may be required to comply with any law or with any rule or
regulation of any governmental authority, stock exchange or self-regulatory
organization. Each Warrant Certificate shall be dated the date of issuance
thereof by the Company, either upon initial issuance or upon transfer or
exchange, and on its face shall initially entitle the
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<PAGE> 6
holder thereof to purchase a number of shares of Common Stock equal to the
number of Warrants specified on the face of such Warrant Certificate at a price
per share equal to the Purchase Price, but the number of such shares and the
Purchase Price shall be subject to adjustment as provided herein.
1.2. EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS.
(a) EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by an officer
of the Company authorized by the Board of Directors. In case the
officer of the Company who shall have signed any Warrant Certificate
shall cease to be such an officer of the Company before issuance and
delivery by the Company of such Warrant Certificate, such Warrant
Certificate nevertheless may be issued and delivered with the same
force and effect as though the individual who signed such Warrant
Certificate had not ceased to be such an officer of the Company, and
any Warrant Certificate may be signed on behalf of the Company by any
individual who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this
Agreement any such individual was not such an officer.
(b) REGISTRATION BOOKS. The Company will keep or cause to be
kept at its office maintained at the address of the Company set forth
in Section 8.6 hereof or at such other office of the Company in the
United States of America of which the Company shall have given notice
to each holder of Warrant Certificates, books for registration and
transfer of the Warrant Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of the Warrant
Certificates, the registration number and the number of Warrants
evidenced on its face by each of the Warrant Certificates, the Series
of the Warrants evidenced by each of the Warrant Certificates and the
date of each of the Warrant Certificates.
1.3. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT
CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES.
(a) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or
without other Warrant Certificates representing Warrants of the same
Series, may be transferred, split up, combined or exchanged for another
Warrant Certificate or Warrant Certificates representing Warrants of
the same Series entitling the holder to purchase a minimum of one
thousand (1,000) shares of the Common Stock or, if less, the entire
number of Warrants represented by the Warrant Certificate so
surrendered, entitling the registered holder or Transferee thereof to
purchase a like number of shares of Common Stock as the Warrant
Certificate or Warrant Certificates surrendered then entitled
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<PAGE> 7
such registered holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Warrant Certificate shall
make such request in writing delivered to the Company, and shall
surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined or exchanged at the office of the
Company referred to in Section 1.2(b) hereof, whereupon the Company
shall deliver promptly to the Person entitled thereto a Warrant
Certificate or Warrant Certificates, as the case may be, as so
requested.
(b) LOSS, THEFT, ETC. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate (which evidence
shall be, in the case of any Holder or another institutional investor,
notice from such institutional investor of such ownership (or of
ownership by such institutional investor's nominee) and such loss,
theft, destruction or mutilation), and:
(i) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company; provided,
however, that if the holder of such Warrant Certificate is an
institutional investor or a Holder, or a nominee of an
institutional investor or a Holder, such Holder's or
institutional investor's own unsecured agreement of indemnity
shall be deemed to be satisfactory; or
(ii) in the case of mutilation, upon surrender and
cancellation thereof;
the Company at its own expense will execute and deliver, in lieu
thereof, a new Warrant Certificate, dated the date of such lost,
stolen, destroyed or mutilated Warrant Certificate, evidencing the same
Series and of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant Certificate.
1.4. SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES.
Subsequent to the original issuance in connection with the Initial
Securities Purchase Agreement and the Initial Warrant Agreement and the issuance
in connection with the Securities Purchase Agreement and this Agreement, no
Warrant Certificates shall be issued except:
(a) Warrant Certificates issued upon any transfer,
combination, split up or exchange of Warrants pursuant to Section
1.3(a) hereof;
(b) Warrant Certificates issued in replacement of mutilated,
destroyed, lost or stolen Warrant Certificates pursuant to Section
1.3(b) hereof; and
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<PAGE> 8
(c) Warrant Certificates issued pursuant to Section 2.3 hereof
upon the partial exercise of any Warrant Certificate to evidence the
unexercised portion of such Warrant Certificate.
1.5. EFFECT OF ISSUANCE IN REGISTERED FORM.
Every holder of a Warrant Certificate by accepting the same consents
and agrees with the Company and with every other holder of a Warrant Certificate
that:
(a) the Warrant Certificates are transferable only on the
registry books of the Company if surrendered at the office of the
Company referred to in Section 1.2(b) hereof, duly endorsed or
accompanied by an instrument of transfer (in the form attached hereto)
and payment of any applicable transfer tax or stamp tax; and
(b) the Company may deem and treat the Person in whose name
each Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates made by anyone other
than the Company) for all purposes whatsoever, and the Company shall
not be affected by any notice to the contrary.
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE.
2.1. EXERCISE OF WARRANTS.
(a) MANNER OF EXERCISE. At any time and from time to time on
or prior to the Expiration Date, the holder of any Warrant Certificate
may exercise the Warrants evidenced thereby, in whole or in part (but
not, in the case of any exercise in part, to the extent that such
exercise would result in the issuance of the lesser of one hundred
(100) whole shares of Common Stock and such lesser number of shares as
is issuable by virtue of exercise of all the Warrants held by such
holder), by surrender of such Warrant Certificate, with an election to
purchase (a form of which is attached to each Warrant Certificate)
attached thereto duly executed, to the Company at its office referred
to in Section 1.2(b) hereof, together with payment of the Purchase
Price for each share of Common Stock with respect to which the Warrants
are then being exercised. Such Purchase Price shall be payable either:
(i) in cash pursuant to Section 2.1(b) hereof;
(ii) by a tender of Notes pursuant to Section 2.1(c)
hereof;
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<PAGE> 9
(iii) by a tender of shares of Series C Preferred
Stock pursuant to Section 2.1(d) hereof;
(iv) by a tender of cash pursuant Section 2.1(b)
hereof and either Notes pursuant to Section 2.1(c) hereof or
shares of Series C Preferred Stock pursuant to Section 2.1(d)
hereof; or
(v) by delivery of Warrant Certificates pursuant to
Section 2.1(e) hereof.
(b) PAYMENT IN CASH. Upon exercise of any Warrants, the holder
of a Warrant Certificate may pay the Purchase Price (and shall pay the
excess of the Purchase Price for the Warrants being exercised over the
amounts so deemed to be paid by tender of Notes pursuant to Section
2.1(c) or by tender of shares of Series C Preferred Stock pursuant to
Section 2.1(d)) in cash or by certified or official bank check payable
to the order of the Company or by wire transfer of immediately
available funds to the account of the Company.
(c) PAYMENT IN NOTES. To the extent that any holder of any
Warrant Certificate surrenders with such Warrant Certificate any Note
then held by such holder, such holder shall be deemed to have paid that
portion of the Purchase Price equal to one hundred percent (100%) of
the principal of such Note which the holder thereof directs the Company
to accept as payment of the Purchase Price, which Note shall be
cancelled and not reissued. To the extent that the principal amount of
such tendered Note is greater than the amount of the Purchase Price
paid by surrender thereof, the Company shall deliver a new Note to the
tendering holder thereof, in accordance with the provisions of the Note
Agreement, in the principal amount equal to the amount not so applied
to payment of the Purchase Price. At the time of the issuance of the
shares of Common Stock pursuant to the exercise of the Warrants of any
holder, the Company shall pay all accrued and unpaid interest on the
principal amount of any Note of such holder cancelled pursuant to this
Section 2.1(c) up to but excluding the date of such issuance. For
purposes of Rule 144, the Company and the Holders agree that a tender
of the principal of any Notes in payment of the exercise price in
respect of the Warrants shall not be deemed a prepayment of the Notes,
but rather a conversion of such Notes, pursuant to the terms of the
Notes, the Note Agreement, this Agreement and the Warrants, into Common
Stock.
(d) PAYMENT IN SHARES OF SERIES C PREFERRED STOCK. To the
extent that any holder of any Warrant Certificate surrenders with such
Warrant Certificate any certificate or certificates representing shares
of Series C Preferred Stock then held by such holder, such holder shall
be deemed to have paid that portion of the Purchase Price equal to one
hundred percent
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<PAGE> 10
(100%) of the Redemption Price of such shares of Series C Preferred
Stock which the holder thereof directs the Company to accept as payment
of the Purchase Price, which shares shall be cancelled and not
reissued. To the extent that the Redemption Price of such tendered
shares of Series C Preferred Stock is greater than the amount of the
Purchase Price paid by surrender thereof, the Company shall deliver a
new share certificate to the tendering holder thereof representing the
whole number of shares not so applied to payment of the Purchase Price.
For purposes of Rule 144, the Company and the Holders agree that a
tender of shares of the Series C Preferred Stock in payment of the
Purchaser Price in respect of the Warrants shall not be deemed a
redemption of such shares, but rather a conversion of such shares,
pursuant to the terms of the Charter, this Agreement and the Warrants,
into Common Stock.
(e) NET EXERCISE. In the event that any holder of Warrant
Certificates delivers such Warrant Certificates to the Company and
notifies the Company in writing that such holder intends to exercise
all, or any portion of, the Warrants represented by such Warrant
Certificates to satisfy its obligation to pay the Purchase Price in
respect thereof by virtue of the provisions of this Section 2.1(e),
such holder shall become entitled to receive, instead of the number of
shares of Common Stock such holder would have received had the Purchase
Price been paid pursuant to Section 2.1(b), Section 2.1(c) or Section
2.1(d) hereof, a number of shares of Common Stock in respect of the
exercise of such Warrants equal to the product of:
(i) the number of shares of Common Stock issuable
upon such exercise of such Warrant Certificate (or, if only a
portion of such Warrant Certificate is being exercised,
issuable upon the exercise of such portion); multiplied by
(ii) the quotient of:
(A) the difference of:
(I) the Market Price per share of
Common Stock at the time of such exercise;
minus
(II) the Purchase Price per share
of Common Stock at the time of such
exercise;
divided by
(B) the Market Price per share of Common
Stock at the time of such exercise.
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<PAGE> 11
The Company shall not be required to issue fractional shares by virtue
of this Section 2.1(e), but shall pay the exercising holder cash in
lieu of such fractional share in accordance with Section 2.6 hereof.
For purposes of Rule 144 under the Securities Act, 17 C.F.R. Section
230.144, the Company and the Holders agree that the exercise of any
Warrants in accordance with this Section 2.1(e) shall be deemed to be a
conversion of such Warrants, pursuant to the terms of this Agreement
and the Warrants, into Common Stock.
2.2. ISSUANCE OF COMMON STOCK.
Upon timely receipt of a Warrant Certificate, with the form of election
to purchase duly executed, accompanied by payment of the Purchase Price for each
of the shares to be purchased in the manner provided in Section 2.1(a) hereof
and an amount equal to any applicable transfer tax (if not payable by the
Company as provided in Section 3.3 hereof), the Company shall thereupon promptly
cause certificates representing the number of whole shares of Common Stock then
being purchased to be delivered to or upon the order of the registered holder of
such Warrant Certificate, registered in such name or names as may be designated
by such holder, and, promptly after such receipt deliver the cash, if any, to be
paid in lieu of fractional shares pursuant to Section 2.6 hereof to or upon the
order of the registered holder of such Warrant Certificate. For the avoidance of
doubt, subsequent to the creation or issuance of any Share Purchase Rights and
prior to the Share Purchase Right Detachment Date, each share of Common Stock
issued upon the exercise of any Warrant or Warrants shall in each case include
the attached Share Purchase Rights; and subsequent to any Share Purchase Right
Detachment Date and prior to the Share Purchase Right Termination Date, the
Company shall issue, in addition to the shares of Common Stock issuable upon
exercise of the Warrants, such Share Purchase Rights as would have been attached
to such shares of Common Stock had such exercise of the Warrants and issuance of
Common Stock occurred immediately prior to the Share Purchase Right Detachment
Date.
2.3. UNEXERCISED WARRANTS.
In case the registered holder of any Warrant Certificate shall exercise
less than all the Warrants evidenced thereby, a new Warrant Certificate
evidencing Warrants of the same Series equal in number to the number of Warrants
remaining unexercised shall be issued by the Company to the registered holder of
such Warrant Certificate or to its duly authorized assigns.
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<PAGE> 12
2.4. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES.
All Warrant Certificates surrendered to the Company for the purpose of
exercise, exchange, substitution or transfer shall be cancelled by it, and no
Warrant Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall cancel
and retire any other Warrant Certificates purchased or acquired by the Company
otherwise than upon the exercise thereof.
2.5. NOTICE OF EXPIRATION.
All Warrants that have not been exercised or purchased in accordance
with the provisions of this Agreement shall expire and all rights of holders of
such Warrants shall terminate and cease on the Expiration Date. The Company
agrees to notify each holder of Warrants, not less than forty-five (45) days but
not more than one hundred twenty (120) days, prior to the Expiration Date in
writing, of the Expiration Date and that, on the Expiration Date, all Warrants
remaining unexercised shall expire and all rights of holders of such Warrants
shall terminate and cease.
2.6. FRACTIONAL SHARES.
The Company shall not be required to issue fractional shares of Common
Stock upon the exercise of any Warrant. Upon the exercise of any Warrant, there
shall be paid to the holder thereof, in lieu of any fractional share of Common
Stock resulting therefrom, an amount of cash equal to the product of:
(a) the fractional amount of such share; times
(b) the Market Price, as determined on the trading day immediately
prior to the date of exercise of such Warrant.
3. AGREEMENTS OF THE COMPANY.
3.1. RESERVATION OF COMMON STOCK.
The Company covenants and agrees that it will at all times cause to be
reserved and kept available out of its authorized and unissued shares of Common
Stock such number of shares of Common Stock as will be sufficient to permit the
exercise in full of all Warrants issued hereunder and all other Rights
exercisable or convertible into Common Stock. In addition, at all times
subsequent to the creation or issuance of any Share Purchase Rights and prior to
the Share Purchase Right Termination Date, the Company shall reserve a
sufficient number of Share Purchase Rights as will be sufficient to permit all
shares of Common Stock issuable
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<PAGE> 13
upon exercise in full of all Warrants issued hereunder and all other Rights
exercisable or convertible into Common Stock to be issued together with the
attached or detached Share Purchase Rights.
3.2. COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND
NONASSESSABLE.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock delivered upon the
exercise of any Warrants, at the time of delivery of the certificates
representing such shares, shall be duly and validly authorized and issued and
fully paid and nonassessable, free of any preemptive rights in favor of any
Person in respect of such issuance and free of any Lien created by, or arising
out of actions of, the Company, any Subsidiary or any Affiliate.
3.3. TRANSFER TAXES.
The Company covenants and agrees that it will pay when due and payable
any and all federal and state transfer taxes and charges that may be payable in
respect of the initial issuance or delivery (including, without limitation, the
delivery pursuant to the Initial Securities Purchase Agreement, the Initial
Warrant Agreement, the Securities Purchase Agreement or this Agreement) of:
(a) each Warrant Certificate;
(b) each Warrant Certificate issued in exchange for any other
Warrant Certificate pursuant to Section 1.3(a) or Section 2.3 hereof;
and
(c) each share of Common Stock issued upon the exercise of any
Warrant.
The Company shall not, however, be required to:
(i) pay any transfer tax that may be payable in respect of
the transfer or delivery of certificates representing Warrants or
shares of Common Stock in a name other than that of the registered
holder of the certificate surrendered for exercise, conversion,
transfer or exchange (any such tax being payable by the holder of
such certificate at the time of surrender); or
(ii) issue or deliver any such certificates referred to in
the foregoing clause (i) until any such tax referred to in the
foregoing clause (i) shall have been paid.
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<PAGE> 14
3.4. COMMON STOCK RECORD DATE.
Each Person in whose name any certificate for shares of Common Stock is
issued upon the exercise of Warrants shall for all purposes be deemed to have
become the holder of record of the Common Stock represented thereby on, and such
certificate shall be dated, the date upon which the Warrant Certificate
evidencing such Warrants was duly surrendered with an election to purchase
attached thereto duly executed and payment of the aggregate Purchase Price (and
any applicable transfer taxes, if payable by such Person) was made.
3.5. RIGHTS IN RESPECT OF COMMON STOCK.
Except as otherwise set forth herein, prior to the exercise of the
Warrants evidenced thereby, the holder of a Warrant Certificate shall not be
entitled to any rights of a stockholder in the Company with respect to shares
for which the Warrants shall be exercisable, including, without limitation, the
right to vote in respect of any matter upon which the holders of Common Stock
may vote or the right to receive dividends or other distributions and, except as
expressly set forth herein, and shall not be entitled to receive any notice of
any proceedings of the Company. Prior to the exercise of the Warrants evidenced
thereby, the holders of the Warrant Certificates shall not have any obligation
or any liability as stockholders of the Company, whether such obligation or
liabilities are asserted by the Company or by creditors of the Company.
3.6. CUSIP NUMBER.
The Company covenants and agrees to maintain:
(a) a private placement number in respect of the Warrants of
each Series; and
(b) a CUSIP number in respect of the Common Stock;
in each case, from the CUSIP Service Bureau of Standard & Poor's, a division of
McGraw-Hill, Inc.
3.7. RIGHT OF ACTION.
All rights of action in respect of the Warrants are vested in the
respective registered holders of the Warrant Certificates, and any registered
holder of any Warrant Certificate, without the consent of the holder of any
other Warrant Certificate, may, on its own behalf and for its own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, its right to exercise
the Warrants evidenced
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<PAGE> 15
by such Warrant Certificate in the manner provided in such Warrant Certificate
and in this Agreement.
3.8. RIGHT TO RECEIVE DISTRIBUTION OF SPINOFF WARRANTS.
(a) RIGHT TO RECEIVE SPINOFF WARRANTS. In the event of a Spinoff,
the Company shall, or shall cause the Distributed Entity to, distribute
to each Person who was a registered holder of Warrants on the date of
the Spinoff such holder's ratable share (based on the number of
Warrants held by such holder on the date of the Spinoff) of an
aggregate number of warrants to purchase Spinoff Shares of the
Distributed Entity (the "Spinoff Warrants") equal to the Spinoff
Warrant Number. The distribution of the Spinoff Warrants shall occur on
a date fixed by the Company which is not later than five (5) Business
Days after the Spinoff Calculation Date. The Spinoff Warrants shall:
(i) be immediately exercisable on the date of issuance
thereof;
(ii) expire on the later of the Expiration Date and the
date forty-five (45) days after the issuance thereof;
(iii) each represent (subject to adjustment as provided in
the Spinoff Warrant Agreement) the right to purchase one (1)
validly issued, fully paid and non-assessable Spinoff Share at a
purchase price (subject to adjustment as provided in the Spinoff
Warrant Agreement) equal to the Spinoff Warrant Purchase Price,
payable (as set forth in the Spinoff Warrant Agreement) in cash,
in Notes or in Spinoff Warrants (but not in Warrants); and
(iv) otherwise have terms and provisions substantially
identical to those of the Warrants.
(b) NOTICE OF DECLARATION. In the event of a Spinoff, the Company
shall give written notice thereof to each holder of Warrants (or former
holder of Warrants) entitled to receive a distribution of the Spinoff
Warrants, within five (5) days after the declaration of the dividend or
distribution or the announcement of such reclassification or other
similar arrangement giving rise to such Spinoff, which notice shall:
(i) provide a detailed description of the Spinoff;
(ii) state the date the Spinoff will occur;
(iii) state the Spinoff Calculation Date;
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(iv) explain that the Spinoff Warrant Number and the
Spinoff Warrant Purchase Price shall be determined as of the
Spinoff Calculation Date;
(v) state the date fixed for distribution of the Spinoff
Warrants;
(vi) state the aggregate number of Spinoff Shares to be
distributed, dividended, issued or deemed issued per share of
Common Stock;
(vii) state the number of shares of Common Stock into which
each Warrant is then exercisable; and
(viii) describe the right described in Section 3.8(a).
(c) SPINOFF WARRANT AGREEMENT. On or prior to the date of the
Spinoff, the Company shall cause the Distributed Entity to enter into a
warrant agreement (the "SPINOFF WARRANT AGREEMENT") to govern the terms
of the Spinoff Warrants. The terms and provisions of the Spinoff
Warrant Agreement shall be substantially identical to those set forth
in this Warrant Agreement, including, without limitation, substantially
identical antidilution provisions and agreements of the Distributed
Entity as contained herein with respect to the Company, and shall be in
form acceptable to those holders of Warrants (or former holders of
Warrants) entitled to receive a distribution of the majority of the
Spinoff Warrants. The Company shall also cause to be delivered to each
such holder or former holder an opinion, satisfactory in form and
substance to those holders of Warrants (or former holders of Warrants)
entitled to receive a distribution of the majority of the Spinoff
Warrants, of independent counsel to the effect that such warrant
agreement and the certificates representing the Spinoff Warrants to be
issued thereunder are enforceable in accordance with their terms, that
upon payment of the purchase price therefor the Distributed Entity's
common stock to be issued upon exercise thereof shall be validly
issued, fully paid and non-assessable, free and clear of any lien or
encumbrance created by the Company or the Distributed Entity and as to
such other matters as are customarily addressed in connection with an
issuance of warrants as such holders may reasonably request.
(d) NOTICE OF DISTRIBUTION. Two (2) Business Days following the
Spinoff Calculation Date, the Company shall, or shall cause the
Distributed Entity to, provide a written notice to each holder of
Warrants (or former holder of Warrants) entitled to receive a
distribution of the Spinoff Warrants, which notice shall:
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<PAGE> 17
(i) state the date fixed for distribution of the Spinoff
Warrants;
(ii) state the Spinoff Warrant Number and the Spinoff
Warrant Purchase Price, together with a detailed calculation of
each;
(iii) provide a detailed calculation of the Market
Capitalization of the Company, the Market Capitalization of the
Distributed Entity, the Market Capitalization Percentage of the
Company and the Market Capitalization Percentage of the
Distributed Entity;
(iv) provide a detailed calculation of the Pre-Spinoff
Ownership Percentage; and
(v) state the number of Spinoff Warrants being issued to
each such holder.
The Company shall, or shall cause the Distributed Entity to, distribute
the Spinoff Warrants to each holder of Warrants (or former holder of Warrants)
entitled to receive a distribution of the Spinoff Warrants on the date fixed
therefor.
(e) DIVIDENDS PAID PARTLY IN SPINOFF SHARES. For purposes of this
Section 3.8 and Section 4 hereof, any dividend or distribution declared
or paid partly in Spinoff Shares and partly in Common Stock, other
Securities or other Property shall be deemed to be a Spinoff subject to
the provisions of this Section 3.8 to the extent made in Spinoff Shares
and a separate dividend of Common Stock, other Securities or Property
subject to the provisions of Section 4 hereof to the extent payable in
Property other than Spinoff Shares.
4. ANTIDILUTION ADJUSTMENTS.
4.1. MECHANICAL ADJUSTMENTS.
The number of shares of Common Stock purchasable upon the exercise of
each Warrant, and the Purchase Price, shall be subject to adjustment as set
forth in this Section 4.
4.2. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS.
In the event that the Company shall, on or after the date hereof:
(a) pay a dividend in shares of Additional Common Stock or make a
distribution in shares of Additional Common Stock;
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(b) reclassify by subdivision its outstanding shares of Common
Stock into a greater number of shares; or
(c) reclassify by combination its outstanding shares of Common
Stock into a smaller number of shares;
then, and in each such case, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision or
combination shall be adjusted to that price determined by multiplying the
Purchase Price in effect immediately prior to such event by the quotient of:
(i) the total number of outstanding shares of Common Stock
immediately prior to such event; divided by
(ii) the total number of outstanding shares of Common Stock
immediately after such event.
An adjustment made pursuant to this Section 4.2 shall become effective on the
effective date of such event.
4.3. DIVIDENDS AND DISTRIBUTIONS.
In the event that the Company shall make or pay any dividend of, or
distribute to holders of shares of Common Stock (including, without limitation,
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) shares of capital stock (other than
Common Stock, which shall be subject to Section 4.2 and other than Spinoff
Shares, which shall be subject to Section 3.8) or rights, warrants or options
exercisable into such capital stock (other than Rights, which shall be subject
to Section 4.5 and other than Spinoff Shares, which shall be subject to Section
3.8), other Securities, evidences of its indebtedness or any of its Property
(other than cash dividends payable out of current net income or retained
earnings), then, in each case, the Purchase Price in effect after the record
date in respect of which such stock, rights, warrants, options, other
Securities, indebtedness or Property were dividended or distributed shall be
adjusted by multiplying the Purchase Price in effect immediately prior to such
record date by the quotient of:
(a) the difference of:
(i) the Market Price on such record date; minus
(ii) the quotient of:
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(A) the then fair value (as determined by the
Valuation Agent, whose determination, if so made, shall be
conclusive) of the shares of stock, rights, warrants,
options, other Securities, evidences of indebtedness or
Property so dividended or distributed; divided by
(B) the number of shares of Common Stock outstanding
on the record date;
divided by
(b) the Market Price on such record date.
Such adjustment shall be made whenever any such dividend or distribution is
made, and shall become effective on the date of such dividend or distribution.
4.4. REPURCHASES OF COMMON STOCK OR RIGHTS.
In the event that the Company shall repurchase, redeem, retire or
otherwise acquire shares of Common Stock or Rights for a Consideration Per Share
greater than the Closing Price in effect on the date immediately preceding the
date of such repurchase, redemption, retirement or acquisition, then the
Purchase Price in effect immediately after such event shall be adjusted by
multiplying the Purchase Price in effect immediately prior to such event by the
quotient of:
(a) the difference of:
(i) the product of:
(A) the number of shares of Common Stock (calculated
on a Fully-Diluted Basis) immediately prior to such event;
multiplied by
(B) the Closing Price in effect on the date
immediately preceding such event;
minus
(ii) the Aggregate Consideration Paid;
divided by
(b) the product of:
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(i) the Closing Price in effect on the date immediately
preceding such event; multiplied by
(ii) the difference of:
(A) the number of shares of Common Stock (calculated
on a Fully-Diluted Basis) immediately prior to such event;
minus
(B) the number of shares of Common Stock (or
initially issuable pursuant to such Rights) so repurchased,
redeemed, retired or otherwise acquired.
In the event that any of the Aggregate Consideration Paid consists of
Property other than cash, the value of such Property for purposes of computing
the Aggregate Consideration Paid shall be determined by the Valuation Agent as
of a date not more than thirty (30) days prior to the date of determination
thereof and shall be set forth in a written certificate of the Valuation Agent
which shall be delivered to the holders of the Warrants in the manner
contemplated by Section 8.6.
4.5. ISSUANCES OF ADDITIONAL COMMON STOCK OR RIGHTS.
In the event that the Company shall issue or sell shares of Additional
Common Stock or Rights (excluding Excluded Securities) for no consideration or
at a Consideration Per Share lower than the Market Price in effect on the date
of such issuance or sale, then the Purchase Price in effect immediately after
such event shall be adjusted by multiplying the Purchase Price in effect
immediately prior to such event by the quotient of:
(a) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the quotient of:
(A) the Aggregate Consideration Receivable; divided
by
(B) the Market Price;
in each case immediately prior to such event;
divided by
(b) the sum of:
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(i) the number of shares of Common Stock outstanding
immediately prior to such event; plus
(ii) the number of shares of Additional Common Stock so
issued or sold (or initially issuable pursuant to such Rights).
In the event that any of the Aggregate Consideration Receivable
consists of Property other than cash, the value of such Property for purposes of
computing the Aggregate Consideration Receivable shall be determined by the
Valuation Agent as of a date not more than thirty (30) days prior to the date of
determination thereof and shall be set forth in a written certificate of the
Valuation Agent which shall be delivered to the holders of the Warrants in the
manner contemplated by Section 8.6.
4.6. EXPIRATION OF RIGHTS.
Upon the expiration of any Rights in respect of the issuance of which
adjustment was made pursuant to Section 4.5, without the exercise thereof, the
Purchase Price and the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and shall
thereafter be such Purchase Price and such number of shares of Common Stock as
would have been had such Purchase Price and such number of shares of Common
Stock been originally adjusted (or had the original adjustment not been
required, as the case may be) as if:
(a) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise of such
Rights; and
(b) such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise
plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all of such Rights, whether
or not exercised; provided that no such readjustment shall have the
effect of increasing the Purchase Price by an amount in excess of the
amount of the reduction initially made in respect of the issuance,
sale, or grant of such Rights.
4.7. SPINOFF.
In the event of a Spinoff, the Purchase Price of the Warrants in effect
immediately prior to the Spinoff Calculation Date shall be adjusted, effective
on the Spinoff Calculation Date, by multiplying the Purchase Price of the
Warrants in effect immediately prior to the Spinoff Calculation Date by the
Market
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Capitalization Percentage of the Company, calculated as of the Spinoff
Calculation Date.
4.8. CONSOLIDATION; MERGER; SALE; RECLASSIFICATION.
In the event that there shall be:
(a) any consolidation of the Company with, or merger of the
Company with or into, another corporation in which either:
(i) the Company is not the surviving corporation;
(ii) the shares of Common Stock outstanding immediately
prior to such merger or consolidation are reclassified or
substantially changed); or
(iii) the holders of the Common Stock immediately prior to
such consolidation or merger are issued cash, Securities of any
Person other than the Company or Property (other than Securities
of the Company) and the holder or holders of the common stock of
the Person with whom the Company consolidates or merges become, as
a result of such transaction, the holders of the Common Stock;
(b) any sale or conveyance to another corporation of the Property
of the Company substantially as an entirety;
(c) any reclassification of the Common Stock that results in the
issuance of other Securities of the Company; or
(d) any detachment from the Common Stock of any Share Purchase
Rights;
in each case, other than in a Spinoff, then, in each such case, lawful provision
shall be made as a part of the terms of such transaction so that the holders of
Warrants shall thereafter have the right to purchase the number and kind of
shares of stock, other Securities, Share Purchase Rights, cash, Property and
Rights receivable upon such consolidation, merger, sale, conveyance,
reclassification or detachment by a holder of such number of shares of Common
Stock as the holder of a Warrant would have had the right to acquire upon the
exercise of such Warrant immediately prior to such consolidation, merger, sale,
conveyance or reclassification, at the Purchase Price then in effect, and,
without further action on the part of any Person, each Warrant will thereafter
represent the right to receive, upon payment of the Purchase Price, such shares
of stock, other Securities, Share Purchase Rights, cash, Property and Rights as
are so receivable. The Company agrees that, as a condition
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of proceeding with such consolidation, merger or sale, it shall cause the Person
surviving such merger or consolidation, the Person or Persons holding the shares
of the Common Stock of the Company immediately after such transaction or the
Person to whom such sale or conveyance is made, as the case may be, at the time
of such consolidation, merger or sale, to expressly assume the due and punctual
observance and performance of each and every provision of this Agreement and all
obligations and liabilities of the Company hereunder (subject to the foregoing
sentence), in each case, pursuant to such agreements and instruments as are
reasonably acceptable to the Required Warrantholders.
4.9. DE MINIMIS CHANGES IN PURCHASE PRICE.
No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Purchase Price; provided that any adjustments that, at the time of the
calculation thereof, are less than one percent (1%) of the Purchase Price at
such time and by reason of this Section 4.9 are not required to be made at such
time shall be carried forward and added to any subsequent adjustment or
adjustments for purposes of determining whether such subsequent adjustment or
adjustments, as so supplemented, exceed the one percent (1%) amount set forth in
this Section 4.9 and, if any such subsequent adjustment, as so supplemented or
otherwise, should exceed such one percent (1%) amount, all adjustments deferred
prior thereto and not previously made shall then be made. All calculations shall
be made to the nearest cent ($0.01).
4.10. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS.
Upon each adjustment of the Purchase Price as a result of any
calculations made pursuant to Section 4.2, Section 4.3, Section 4.4, Section 4.5
or Section 4.13, each Warrant outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of shares of Common Stock (calculated to the nearest
share) obtained by multiplying the number of shares of Common Stock covered by
such Warrant immediately prior to such adjustment by the quotient of:
(a) the Purchase Price in effect immediately prior to such
adjustment, divided by
(b) the Purchase Price in effect immediately after such
adjustment.
All Warrants originally issued by the Company hereunder shall, subsequent to any
adjustment made to the Purchase Price hereunder, evidence the right to purchase,
at the adjusted Purchase Price, the number of shares of Common Stock determined
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to be purchasable from time to time hereunder upon exercise of such Warrants,
all subject to further adjustment as provided herein. Each such adjustment shall
be valid and binding upon the Company and the holders of Warrants irrespective
of whether the Warrant Certificates theretofore and thereafter issued express
the Purchase Price per share of Common Stock and the number of shares of Common
Stock that were expressed upon the initial Warrant Certificates issued
hereunder.
4.11. MISCELLANEOUS.
(a) Adjustments shall be made pursuant to this Section 4
successively whenever any of the events referred to in Section 4.2
through Section 4.8, inclusive, shall occur.
(b) If any Warrant shall be exercised subsequent to the record
date for any of the events referred to in Section 4.2 through Section
4.8, inclusive, but prior to the effective date thereof, appropriate
adjustments shall be made immediately after such effective date so that
the holder of such Warrant on such record date shall have received, in
the aggregate, the kind and number of shares of Common Stock or other
Securities or Property that it would have owned or been entitled to
receive on such effective date had such Warrant been exercised prior to
such record date.
(c) Shares of Common Stock owned by or held for the account of the
Company or any Subsidiary shall not, for purposes of the adjustments
set forth in this Section 4, be deemed outstanding.
4.12. OTHER SECURITIES.
In the event that at any time, as a result of an adjustment made
pursuant to this Section 4, each holder of Warrants shall become entitled to
purchase any Securities of the Company other than shares of Common Stock, the
number or amount of such other Securities so purchasable and the Purchase Price
of such Securities shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions contained in
Section 4.2 through Section 4.8, inclusive, hereof, and all other relevant
provisions of this Section 4 that are applicable to shares of Common Stock shall
be applicable to such other Securities.
4.13. ADDITIONAL AGREEMENTS OF THE COMPANY.
The Company covenants and agrees that:
(a) The Company shall not, by amendment to its Charter as in
effect on the date hereof, or through any reorganization, transfer of
assets,
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consolidation, merger, dissolution, liquidation, issuance or sale of
Securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Company, or which would have the effect of
circumventing or avoiding the provisions of this Section 4, but shall
at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such actions as
may be necessary or appropriate in order to protect the rights of the
holders of the Warrant Certificates against dilution or other
impairment.
(b) Before taking any action that would result in an adjustment to
the then current Purchase Price to a price that would be below the then
current par value of Common Stock issuable upon exercise of any
Warrant, the Company will take or cause to be taken any and all
necessary corporate or other action that may be necessary in order that
the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon payment of such Purchase Price as so
adjusted.
(c) If the Company shall amend the provisions of any Rights (other
than the Warrants), including, without limitation, the Outstanding
Warrant or any outstanding stock options, or make any adjustment
thereto (either in violation of this Section 4.13(c) or pursuant to any
antidilution provision) so as to reduce the Consideration Per Share
applicable thereto, increase the number of shares issuable upon
exercise thereof or otherwise change the economic terms (such as the
purchase price, exercise price, conversion price or conversion ratio)
thereof, then the Company shall make appropriate adjustment, as nearly
as practical to those that would be required by the provisions of
Section 4.2 through Section 4.5, inclusive, most nearly analogous to
the effect of such amendment, to the Purchase Price, and, pursuant to
Section 4.10, to the number of shares of Common Stock issuable upon
exercise of the Warrants, as shall be fair and equitable, such
adjustment to be determined by the Valuation Agent.
(d) In the event that any of the events described in any of
Section 4.2 through Section 4.5, inclusive, give rise to an adjustment
to the purchase, exercise or conversion price or conversion ratio, or
number of shares of Common Stock issuable upon conversion or exercise,
of any Rights (other than the Warrants), including, without limitation,
the Outstanding Warrant or any outstanding stock options, then the
adjustments provided for in Section 4.2 through Section 4.5, inclusive,
in respect of such event shall give effect both to the event giving
rise to such adjustment under this Agreement and to all such
adjustments made in respect of such other Rights; provided, however,
that no such adjustment shall duplicate any adjustment required to be
made in respect thereof by virtue of the provisions of Section 4.13(c).
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5. REPORTING COVENANTS
5.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Warrants:
(a) QUARTERLY FINANCIAL STATEMENTS - as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each such
fiscal year), and in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end of such
quarter; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such quarter and (in the
case of the second and third quarters) for the portion of the
fiscal year ending with such quarter;
for the Company and the Subsidiaries, setting forth in each case, in
comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared
in accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by the chief financial
officer of the Company; provided, that delivery of copies of the
Company's Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.1(a) so long as
such Quarterly Report contains or is accompanied by the information
specified in this Section 5.1(a);
(b) ANNUAL FINANCIAL STATEMENTS - as soon as practicable after the
end of each fiscal year of the Company, and in any event within one
hundred twenty (120) days thereafter:
(i) a consolidated balance sheets as at the end of such
year; and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows for such year;
for the Company and the Subsidiaries, setting forth in comparative
form, the financial statement for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and accompanied by
an audit report thereon of independent certified public accountants of
recognized national
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standing, which report shall state without qualification (including,
without limitation, qualifications related to the scope of the audit,
the compliance of the audit with generally accepted auditing standards,
or the ability of the Company or a material subsidiary thereof to
continue as a going concern), that such financial statements have been
prepared and are in conformity with GAAP; provided, that the delivery
of the Company's Annual Report on Form 10-K for such fiscal year filed
with the Securities and Exchange Commission within the time period
specified above shall be deemed to satisfy the requirements of this
Section 5.1(b) so long as such Annual Report contains or is accompanied
by the reports and other information otherwise specified in this
Section 5.1(b);
(c) SEC and Other Reports - promptly upon their becoming
available:
(i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to stockholders
generally; and
(ii) each regular or periodic report (including, without
limitation, each Form 10-K, Form 10-Q and Form 8-K), and each
amendment thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission (and any successor agency); and
(d) REQUESTED INFORMATION - with reasonable promptness, such other
data and information as from time to time may be requested by any
holder of Warrants.
5.2. INFORMATION CONCERNING ANTIDILUTION ADJUSTMENTS.
(a) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common
Stock issuable upon the exercise of Warrants is adjusted or the
Purchase Price in respect thereof is adjusted, as herein provided, the
Company shall promptly give to each holder of Warrants notice of such
adjustment or adjustments and shall promptly deliver to each holder of
Warrants a certificate of the chief financial officer of the Company
setting forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares
after such adjustment;
(ii) a brief statement of the facts requiring such
adjustment; and
(iii) the computation by which such adjustment was made.
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(b) ANNUAL CERTIFICATE. So long as any Warrant is outstanding,
within one hundred twenty (120) days of the end of each fiscal year of
the Company, the Company shall deliver to each holder of Warrants a
certificate of the chief financial officer of the Company setting
forth:
(i) the number of shares of Common Stock issuable upon the
exercise of each Warrant and the Purchase Price of such shares as
of the end of such fiscal year;
(ii) a brief statement of the facts requiring each
adjustment, if any, required to be made in such fiscal year; and
(iii) the computation by which each such adjustment was
made.
(c) CONFIRMATION BY ACCOUNTANTS. At the request of a holder of
Warrants in connection with any dispute concerning the accuracy or
validity of any certificate of the chief financial officer pursuant to
Section 5.2(a) or Section 5.2(b), such certificate shall be confirmed
by a certificate from the independent certified public accountants of
the Company.
(d) NOTICES OF CERTAIN EVENTS. Whenever the Company shall publicly
announce the authorization of any Notice Event, the Company shall, not
less than fifteen (15) days prior to the record date with respect to
such event (or, if no record date for the same shall be fixed, not less
than fifteen (15) days prior to the occurrence of such Notice Event),
give to each holder of Warrants, written notice of such event setting
forth any change in the number of shares of Common Stock the Company
estimates will be issuable upon the exercise of each Warrant, the
estimated Purchase Price after any adjustment required to be made
hereunder and a brief statement of the facts requiring such adjustment
and the computation by which the Company expects such adjustment will
be made. Notwithstanding the foregoing, no failure of the Company to
give any such notice shall affect the validity of the action taken
unless such failure was in bad faith.
6. REGISTRATION RIGHTS.
6.1. SHELF REGISTRATION.
(a) FILING AND EFFECTIVENESS. On or prior to the Shelf Filing
Date, the Company will file a "shelf" registration statement (the
"SHELF REGISTRATION") on form S-3 or such other appropriate form
pursuant to Rule 415 under the Securities Act or any similar rule that
may be adopted by the SEC with respect to dispositions of all of the
Registrable Securities in such manner or manners specified by the
holders thereof. The Company agrees to
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cause the Shelf Registration to be declared effective as promptly as is
practicable after such filing (and in any event, prior to the Shelf
Effective Date) and agrees to keep the Shelf Registration effective
(and to take any and all other actions necessary in order to permit
public resale of the Registrable Securities covered by the Shelf
Registration) for a period (the "SHELF EFFECTIVE PERIOD") beginning on
the date such Shelf Registration shall first be declared effective
under the Securities Act and ending upon the Shelf Termination Date,
subject to the terms and conditions set forth in this Agreement. The
Company further agrees, if necessary, to supplement or make amendments
to such Shelf Registration, if required by the registration form
utilized by the Company for the Shelf Registration or by the
instructions applicable to such registration form or by the Securities
Act, and the Company agrees to furnish to the holders of the
Registrable Securities covered by the Shelf Registration copies of any
such supplement or amendment prior to its being used or filed with the
SEC.
(b) APPROVAL OF SHELF REGISTRATIONS. If the Requisite Holders
shall have approved the filing of any Shelf Registration as provided in
Section 6.4(a), but any holder of Registrable Securities objects to
such filing on the grounds that the disclosure contained in the Shelf
Registration contains any misstatement of a material fact or omits to
state a fact required to be stated therein or necessary to make the
statements therein not misleading, then such holder shall have the
right, in its sole discretion, to withdraw from the Shelf Registration.
If the Company receives notice of such withdrawal from any holder
wishing to withdraw from the Shelf Registration, then the Company shall
not name such holder in the registration statement or, in the case of
withdrawal in connection with any amendment or supplement to a
registration statement in which such holder is already named, shall
amend such registration statement to delete references to such holder,
and to withdraw the Registrable Securities of such holder, from the
registration statement. The Shelf Registration shall not be considered
effective with respect to any such withdrawing holder.
(c) SELECTION OF UNDERWRITERS. If any offering pursuant to a Shelf
Registration is in the form of an underwritten offering, the
underwriters of such offering shall be one or more underwriting firms
of recognized standing selected by the Requisite Holders and reasonably
acceptable to the Company. In the event of an underwritten offering
pursuant to the Shelf Registration, no securities of the Company (other
than the Registrable Securities) shall be included in any such offering
without the prior written consent of all holders of Registrable
Securities participating in such offering.
(d) TEMPORARY SUSPENSION OF USE OF REGISTRATION STATEMENT.
Notwithstanding anything to the contrary in this Section 6, if at any
time
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and from time to time after the first date of effectiveness of the
Shelf Registration, the Company may notify the holders of Registrable
Securities in writing in the manner contemplated by Section 8.6 hereof
of a Potential Material Event, which notice shall inform the holders of
Registrable Securities that they shall not offer or sell any
Registrable Securities as described in the following sentence. From the
time of receipt of such notice to the earliest to occur of:
(i) the public disclosure by the Company of the Potential
Material Event;
(ii) receipt of written notice from the Company that such
Potential Material Event no longer exists; and
(iii) the date thirty (30) days after the date of the
notice of such Potential Material Event;
the holders of Registrable Securities shall not offer or sell any
Registrable Securities pursuant to the Shelf Registration; provided,
however, that the Company may not:
(A) deliver more than one (1) notice of a Potential
Material Event in respect of any one (1) Potential Material
Event; or
(B) deliver any notice of a Potential Material
Event for a period of sixty (60) days following the
expiration or earlier termination of any other period
during which the holders of Registrable Securities may not
by virtue of the provisions of this Section 6.11 sell or
offer to sell Registrable Securities.
The Company shall promptly (and in no event more than two (2) Business
Days after the occurrence of such event) notify each holder of the
occurrence of any event described in Section 6.1(d)(i) or Section
6.1(d)(iii); and any such notice and any notice given pursuant to
Section 6.1(d)(ii) shall state that each holder of Registrable
Securities may resume offers and sales of the Registrable Securities
under the Shelf Registration. If any amended prospectus or prospectus
supplement shall be necessary as a result of the occurrence of the
Potential Material Event so that the prospectus does not contain any
untrue statement of any material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Company shall supply such amended prospectus or
prospectus supplement to each holder of Registrable Securities together
with
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such notice, and such notice shall inform the holders of Registrable
Securities concerning use of such amended prospectus or prospectus
supplement. The Company shall file each amended prospectus or
prospectus with the SEC in compliance with the provisions of Rule 424
under the Securities Act.
6.2. INCIDENTAL REGISTRATION.
(a) FILING OF REGISTRATION STATEMENT. If the Company at any time
proposes to register any of its Common Stock (an "INCIDENTAL
REGISTRATION") under the Securities Act (other than pursuant to a
registration statement on Form S-4 or Form S-8 or any successor forms
thereto, in connection with an offer made solely to existing Security
holders or employees of the Company), for sale in an underwritten
Public Offering, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so, which
notice shall be given to all such holders at least fifteen (15)
Business Days prior to the date that a registration statement relating
to such registration is proposed to be filed with the SEC. Upon the
written request of any such holder to include its shares under such
registration statement (which request shall be made within ten (10)
Business Days after the receipt of any such notice and shall specify
the Registrable Securities intended to be disposed of by such holder),
the Company will use its best efforts to effect the registration of all
Registrable Securities that the Company has been so requested to
register by such holder; provided, however, that if, at any time after
giving written notice of its intention to register any Securities for
sale in connection with an underwritten Public Offering and prior to
the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not
to register such Securities, the Company may, at its election, give
written notice of such determination to each such holder and,
thereupon, shall be relieved of its obligation to register any
Registrable Securities of such Persons in connection with such
registration.
(b) SELECTION OF UNDERWRITERS. Notice of the Company's intention
to register such Securities shall designate the proposed underwriters
of such offering (which shall be one or more underwriting firms of
recognized standing) and shall contain the Company's agreement to use
its best efforts, if requested to do so, to arrange for such
underwriters to include in such underwriting the Registrable Securities
that the Company has been so requested to register pursuant to this
Section 6.2, it being understood that the holders of Registrable
Securities shall have no right to select different underwriters for the
disposition of their Registrable Securities.
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(c) PRIORITY ON INCIDENTAL REGISTRATIONS. If the managing
underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting sale) that, in such
underwriter's opinion, the number of shares or Securities requested to
be included in such Incidental Registration exceeds the number that can
be sold in such offering within a price range acceptable to the Company
(such writing to state the basis of such opinion and the approximate
number of shares or Securities that may be included in such offering
without such effect), the Company will include in such Incidental
Registration, to the extent of the number of shares of Securities that
the Company is so advised can be sold in such offering:
(i) in the case of any registration initiated by the
Company for the purpose of selling Securities for its own account:
(A) first, shares that the Company proposes to
issue and sell for its own account; and
(B) second, Registrable Securities requested to be
sold by the holders thereof pursuant to this Section 6.2
and all Securities proposed to be registered by the Other
Stockholders, pro rata among such holders on the basis of
the number of shares requested to be so registered by such
holders; and
(ii) in the case of a registration initiated by any Other
Stockholder pursuant to demand or required registration rights in
favor of such Other Stockholder:
(A) first, Securities requested to be sold by the
Other Stockholders requesting such Registration;
(B) second, Registrable Securities requested to be
sold by the holders thereof pursuant to this Section 6.2
and all Securities proposed to be registered by the Other
Stockholders (other than those referred to in Section
6.2(c)(ii)(A)), pro rata among such holders on the basis of
the number of shares requested to be so registered by such
holders; and
(C) third, shares that the Company proposes to
issue and sell for its own account.
6.3. COMPANIES REGISTRATION.
If the Securities Act (whether by statutory amendment, amendment of the
rules and regulations thereunder or both) is amended after the date hereof to
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provide for a Companies Registration Scheme, and the Company is or becomes
eligible to participate in the Companies Registration Scheme, then the Company,
promptly following the request of the Required Holders, shall use its reasonable
best efforts to register promptly under the Companies Registration Scheme so as
to facilitate the resale under the registration statement contemplated by such
Companies Registration Scheme of the Registrable Securities in accordance with
the method or methods of distribution contemplated by the Holders.
6.4. REGISTRATION PROCEDURES.
The Company will use its best efforts to effect each Registration, and
to cooperate with the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and the
Company will as expeditiously as possible:
(a) subject, in the case of an Incidental Registration, to the
proviso to Section 6.2(a), prepare and file with the SEC the
registration statement and use its best efforts to cause the
Registration to become effective; provided, however, that:
(i) before the initial filing of any registration
statement, the Company will furnish to the holders of the
Registrable Securities covered by such registration statement,
their counsel, and the underwriters, if any, and their counsel,
copies of all such documents proposed to be filed at least ten
(10) days prior thereto, which documents will be subject to the
reasonable review, within such ten (10) day period, of such
holders, their counsel and the underwriters; and
(ii) before filing any prospectus or any amendments or
supplements to any registration statement or prospectus, the
Company will furnish to the holders of the Registrable Securities
covered by such registration statement, their counsel, and the
underwriters, if any, and their counsel, copies of all such
documents proposed to be filed a reasonable period of time (in
light of the nature of the amendments or changes contained
therein, which shall in every event be at least one (1) day and
shall never be required to be more than ten (10) days) prior
thereto, which documents will be subject to the reasonable review,
within such period, of such holders, their counsel and the
underwriters;
(b) subject, in the case of an Incidental Registration, to the
proviso to Section 6.2(a), prepare and file with the SEC such
amendments and post-effective amendments to any registration statement
and any prospectus used
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in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
(c) furnish to each holder of Registrable Securities included in
such Registration and the underwriter or underwriters, if any, without
charge, at least one signed copy of the registration statement and any
post-effective amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the prospectus
(including each preliminary prospectus and each prospectus filed under
Rule 424 under the Securities Act), any amendments or supplements
thereto and any documents incorporated by reference therein, as such
holder or underwriter may reasonably request in order to facilitate the
disposition of the Registrable Securities being sold by such holder (it
being understood that the Company consents to the use of the prospectus
and any amendment or supplement thereto by each holder of Registrable
Securities covered by such registration statement and the underwriter
or underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any amendment
or supplement thereto);
(d) notify each holder of the Registrable Securities of any stop
order or other order suspending the effectiveness of any registration
statement, issued or threatened by the SEC in connection therewith, and
take all reasonable actions required to prevent the entry of such stop
order or to remove it or obtain withdrawal of it at the earliest
possible moment if entered;
(e) if requested by the managing underwriter or underwriters, if
any, or any holder of Registrable Securities in connection with any
sale pursuant to a registration statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information
relating to such underwriting as the managing underwriter or
underwriters, if any, or such holder reasonably requests to be included
therein; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of
the matters incorporated in such prospectus supplement or
post-effective amendment;
(f) on or prior to the date on which a Registration is declared
effective, use its best efforts to register or qualify, and cooperate
with the holders of Registrable Securities included in such
Registration, the underwriter or underwriters, if any, and their
counsel, in connection with any necessary registration or qualification
of the Registrable Securities covered by such
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Registration for offer and sale under the securities or "blue sky" laws
of each state and other jurisdiction of the United States as any such
holder or the managing underwriter, if any, reasonably requests in
writing; use its best efforts to keep each such registration or
qualification effective, including through new filings, or amendments
or renewals, during the period such registration statement is required
to be kept effective; and do any and all other acts or things necessary
or advisable to enable the disposition in all such jurisdictions
reasonably requested of the Registrable Securities covered by such
Registration; provided, however, that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to
general service of process in any such jurisdiction where it is not
then so subject;
(g) in connection with any sale pursuant to a Registration,
cooperate with the holders of Registrable Securities and the managing
underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Securities to be sold under such Registration,
and enable such Securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if any, or
such holders may request;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities within the United States and having jurisdiction over the
Company or any Subsidiary as may reasonably be necessary to enable the
seller or sellers thereof or the underwriter or underwriters, if any,
to consummate the disposition of such Securities;
(i) enter into such agreements (including underwriting agreements
in customary form) and take such other actions as the Requisite Holders
shall reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each Registration, a
"comfort letter" from the Company's independent certified public
accountants covering such matters of the type customarily covered
by "cold comfort letters" as the Requisite Holders and the
underwriters reasonably request; and
(ii) at the time of any underwritten sale pursuant to the
registration statement, a "bring-down comfort letter," dated as of
the date of such sale, from the Company's independent certified
public
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accountants covering such matters of the type customarily covered
by comfort letters as the Requisite Holders and the underwriters
reasonably request;
(k) use its best efforts to obtain, at the time of any
underwritten sale pursuant to each Registration, an opinion or
opinions, favorable to the Requisite Holders in form and scope, from
counsel for the Company in customary form;
(l) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such Registration, as
then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and promptly
prepare, file with the SEC and furnish to such seller or holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers or prospective purchasers of such Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they are made;
(m) otherwise comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders (as
contemplated by Section 11(a) under the Securities Act) an earnings
statement satisfying the provisions of Rule 158 under the Securities
Act no later than ninety (90) days after the end of the twelve (12)
month period beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the registration
statement, which statement shall cover said twelve (12) month period;
(n) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by each Registration
from and after a date not later than the effective date of such
Registration; and
(o) obtain and maintain the registration of the Common Stock under
either section 12(b) or section 12(g) of the Exchange Act; and use its
best efforts to cause all Registrable Securities covered by each
Registration to be listed subject to notice of issuance, prior to the
date of first sale of such Registrable Securities pursuant to such
Registration, on:
(i) either the New York Stock Exchange, Inc., or the NASDAQ
National Market; and
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(ii) each other securities exchange, if any, on which the
Common Stock is then listed.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by applicable laws or regulations.
6.5. REASONABLE INVESTIGATION.
The Company shall:
(a) give the holders of Registrable Securities, their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of the registration
statement, each prospectus included therein or filed with the SEC and
each amendment thereof or supplement thereto;
(b) give each such holder and underwriter reasonable opportunities
to discuss the business of the Company with its officers, counsel and
the independent public accountants who have certified its financial
statements;
(c) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating
in any disposition pursuant to any Registration, and any attorney,
accountant or other agent retained by any such seller or underwriter,
all financial and other records, pertinent corporate documents and
properties of the Company reasonably requested by any such Person; and
(d) cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Person in
connection with such Registration;
in each such case, as shall be reasonably necessary, in the good faith opinion
of such holder or such underwriter, to enable it to conduct a "reasonable
investigation" within the meaning of section 11(b)(3) of the Securities Act and
to satisfy the requirement of reasonable care imposed by section 12(a)(2) of the
Securities Act.
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6.6. REGISTRATION EXPENSES.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities, including, without limitation, any such
registration not effected by the Company.
6.7. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
to the fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors and agents, if any, and each
Person, if any, who controls such holder within the meaning of section
15 of the Securities Act, against all losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act or common law or otherwise), joint or several, resulting
from any violation by the Company of the provisions of the Securities
Act or any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus (and as
amended or supplemented if amended or supplemented) or any preliminary
prospectus or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus, in light of
the circumstances under which they were made) not misleading, except to
the extent that such losses, claims, damages, liabilities (or
proceedings in respect thereof) or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any omission
or alleged omission from information concerning any holder furnished in
writing to the Company by such holder expressly for use therein. If the
offering pursuant to any registration statement provided for under this
Section 6 is made through underwriters, no action or failure to act on
the part of such underwriters (whether or not such underwriter is an
Affiliate of any holder of Registrable Securities) shall affect the
obligations of the Company to indemnify any holder of Registrable
Securities or any other Person pursuant to the preceding sentence. If
the offering pursuant to any registration statement provided for under
this Section 6 is made through underwriters, the Company agrees, to the
extent required by such underwriters, to enter into an underwriting or
other agreement providing for indemnity of such underwriters, their
officers, directors and agents, if any, and each Person, if any, who
controls such underwriters within the meaning of section 15 of the
Securities Act to the same extent as hereinbefore provided with respect
to the indemnification of the holders of Registrable Securities;
provided that the Company shall not be required to indemnify any such
underwriter, or any officer or director of such underwriter or any
Person who controls such underwriter within the meaning of section 15
of the Securities Act, to the extent that the loss, claim, damage,
liability (or proceedings in respect
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thereof) or expense for which indemnification is claimed results from
such underwriter's failure to send or give a copy of an amended or
supplemented final prospectus to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected
in such amended or supplemented final prospectus prior to such written
confirmation and the underwriter was provided with such amended or
supplemented final prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall
indemnify, to the fullest extent permitted by law, the Company, each
underwriter (if the underwriter so requires) and their respective
officers, directors and agents, if any, and each Person, if any, who
controls the Company or such underwriter within the meaning of section
15 of the Securities Act, against any losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses resulting
from any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or necessary
to make the statements therein (in the case of any prospectus, in light
of the circumstances under which they were made) not misleading, but
only to the extent that such untrue statement is contained in or such
omission is from information so concerning a holder furnished in
writing by such holder expressly for use therein; provided, however,
that such holder's obligations hereunder shall be limited to an amount
equal to the proceeds to such holder of the Registrable Securities sold
pursuant to such registration statement.
(c) CONTROL OF DEFENSE. Any Person entitled to indemnification
under the provisions of this Section 6.7 shall give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, permit such
indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party; and if such defense
is so assumed, such indemnifying party shall not enter into any
settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and such
indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be unreasonably
withheld); and any underwriting agreement entered into with respect to
any registration statement provided for under this Section 6 shall so
provide. In the event an indemnifying party shall not be entitled, or
elects not, to assume the defense of a claim, such
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indemnifying party shall not be obligated to pay the fees and expenses
of more than one counsel or firm of counsel for all parties indemnified
by such indemnifying party in respect of such claim, unless in the
reasonable judgment of any such indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties in respect to such claim.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unenforceable, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such
losses, claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnifying party on the one hand and
the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any
other relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities
shall be required to contribute any amount in excess of the amount such
holder would have been required to pay to an indemnified party if the
indemnity under Section 6.7(b) hereof was enforceable. No Person guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The obligation
of any Person to contribute pursuant to this Section 6.7 shall be
several and not joint.
(e) ADVANCEMENT OF EXPENSES. An indemnifying party shall make
payments of all amounts required to be made pursuant to the foregoing
provisions of this Section 6.7 to or for the account of the indemnified
party from time to time promptly upon receipt of bills or invoices
relating thereto or when otherwise due or payable. Without limiting the
generality of the foregoing, each indemnifying party, as an interim
measure during the pendency of any claim, action, investigation,
inquiry or proceeding arising out of or based upon any matter or
subject for which indemnity (or contribution in lieu thereof) would be
available to any indemnified party under any provision of this Section
6.7, shall promptly reimburse each indemnified
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party, as often as invoiced therefor (but in no event more often than
monthly), for all reasonable legal or other expenses incurred in
connection with the investigation or defense of any such claim, action,
investigation, inquiry or proceeding, notwithstanding the absence of
any judicial determination as to the propriety or enforceability of the
indemnifying party's obligation to reimburse the indemnified party for
such expenses and notwithstanding the possibility that the obligations
to pay such expenses might later have been held to be improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement is held to be improper, the indemnified party agrees to
promptly return the amount so advanced to the indemnifying party,
together with interest, compounded monthly, at the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents
the base rate on corporate loans posted by a substantial majority of
the nation's thirty (30) largest banks. Any such interim reimbursement
payments which are not made to the indemnified party within thirty (30)
days of a request therefor shall bear interest at such prime rate from
the date of such request to the extent such reimbursement payments are
ultimately determined to be proper obligations of the indemnifying
party. To the extent required by any underwriter in connection with the
execution of any underwriting agreement pursuant to which the holders
of Registrable Securities shall be selling any shares of Common Stock,
the Company shall agree to advancement of the expenses of such
underwriter to at least the same extent as provided in this Section
6.7(e).
(f) SURVIVAL. The indemnity and contribution agreements contained
in this Section 6.7 shall remain in full force and effect regardless of
any investigation made by or on behalf of a participating holder of
Registrable Securities, its officers, directors, agents or any Person,
if any, who controls such holder as aforesaid, and shall survive the
transfer of such Securities by such holder.
6.8. HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of Registrable
Securities, the Company agrees, and each holder of Registrable
Securities by acquisition of such Registrable Securities agrees, to
enter into customary holdback agreements concerning sale or
distribution of Registrable Securities and other equity Securities of
the Company, except, in the case of any holder of Registrable
Securities, to the extent that such holder is prohibited by applicable
law or exercise of fiduciary duties from agreeing to withhold
Registrable Securities from sale or is acting in its capacity as a
fiduciary or investment adviser. Without limiting the scope of the term
"fiduciary," a holder shall be deemed to be acting as a fiduciary or an
investment adviser if
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its actions or the Registrable Securities proposed to be sold are
subject to the Employee Retirement Income Security Act of 1974, as
amended, or the Investment Company Act of 1940, as amended, or if such
Registrable Securities are held in a separate account under applicable
insurance law or regulation.
(b) If the Company shall at any time after the date hereof provide
to any holder of any Securities of the Company rights with respect to
the registration of such Securities under the Securities Act, such
rights shall not be in conflict with or adversely affect any of the
rights provided in this Section 6 to the holders of Registrable
Securities.
6.9. OTHER REGISTRATION OF COMMON STOCK.
If any shares of Common Stock required to be reserved for purposes of
exercise of Warrants or conversion of any class of Common Stock into any other
class of Common Stock require registration with or approval of any governmental
authority under any federal or state law (other than the Securities Act) before
such shares may be issued upon conversion, the Company will, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be.
6.10. AVAILABILITY OF INFORMATION.
At any time that any class of the Common Stock is registered under
section 12(b) or section 12(g) of the Exchange Act, the Company will comply with
the reporting requirements of sections 13 and 15(d) of the Exchange Act (whether
or not it shall be required to do so pursuant to such Sections) and will comply
with all other public information reporting requirements of the SEC from time to
time in effect. In addition, the Company shall file such reports and
information, and shall make available to the public and to the holders of
Registrable Securities such information, as shall be necessary to permit such
holders to offer and sell Registrable Securities pursuant to the provisions of
Rules 144 promulgated under the Securities Act. The Company will also cooperate
with each such holder in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the SEC as a condition to the availability of an exemption
from the registration provisions of the Securities Act in connection with the
sale of any Registrable Securities. The Company will furnish to each such
holder, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the SEC.
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7. INTERPRETATION OF THIS AGREEMENT.
7.1. CERTAIN DEFINED TERMS.
For the purpose of this Agreement, the following terms shall have the
meanings set forth below or set forth in the Section hereof following such term:
ACQUIRING PERSON - means and includes, with respect to any Share
Purchase Rights, any holders of Common Stock or other persons (as such term is
used in Section 13(d) and Section 14(d)(2) of the Exchange Act as in effect on
the date hereof) or related persons constituting a group (as such term is used
in Rule 13d-5 under the Exchange Act as in effect on the date hereof)
participating in or sponsoring one or more Share Purchase Triggering Events
specified in the Share Purchase Rights Plan.
ADDITIONAL COMMON STOCK - means Common Stock, including treasury
shares, issued after the date hereof, except Common Stock issued upon the
exercise of any one or more Warrants.
AFFILIATE - means, at any time, a Person (other than a Subsidiary or
the Holders):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds ten percent (10%) or more of
any class of the Voting Stock of the Company; or
(c) ten percent (10%) or more of the Voting Stock (or in the case
of a Person that is not a corporation, ten percent (10%) or more of the
equity interest) of which is beneficially owned or held by the Company
or any Subsidiary;
at such time.
As used in this definition,
control - means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS - and references thereto shall mean this Warrant
Agreement as it may from time to time be amended or supplemented.
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AGGREGATE CONSIDERATION PAID - means, in the case of a repurchase,
redemption, retirement or acquisition of shares of Common Stock, the aggregate
amount paid by the Company in connection therewith and, in the case of a
repurchase, redemption, retirement or acquisition of Rights, the sum of:
(a) the aggregate amount paid by the Company for such Rights; plus
(b) the aggregate consideration or premiums stated in such Rights
to be payable for the shares of Common Stock covered thereby.
For purposes of clause (a) above, in the event of the repurchase,
redemption, retirement or acquisition of any Rights together with other
Securities or obligations of the Company or any other Person in which the
purchase price for the Rights and such other Securities or obligations is
expressed as a single purchase price (including, without limitation, upon the
issuance or sale of Preferred Stock or debt Securities which are convertible
into Common Stock), the aggregate amount paid by the Company for such Rights
shall include only the portion of such single purchase price attributable to
such Rights, and not the portion attributable to such other Securities or
obligations. The portion of such purchase price attributable to such Rights in
such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of such other
Securities or obligations (computed using the Black-Scholes option pricing model
or such other pricing model as the Valuation Agent determines is appropriate,
and applying such reasonable assumptions concerning price variances with respect
to the Common Stock and such other variables as the Valuation Agent considers
appropriate); divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other Securities or
obligations (computed using such methodology and making such assumptions as the
Valuation Agent determines is appropriate).
AGGREGATE CONSIDERATION RECEIVABLE - means, in the case of an issuance
or sale of shares of Additional Common Stock, the aggregate amount paid to the
Company in connection therewith and, in the case of an issuance or sale of
Rights, or any amendment thereto, the sum of:
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(a) the aggregate amount paid to the Company for such Rights; plus
(b) the aggregate consideration or premiums stated in such Rights
to be payable for the shares of Additional Common Stock covered thereby;
in each case without deduction for any fees, expenses or underwriters discounts.
For purposes of clause (a) above, in the event of the issuance or sale
of any Rights together with other Securities or obligations of the Company or
any other Person in which the purchase price for the Rights and such other
Securities or obligations is expressed as a single purchase price (including,
without limitation, upon the issuance or sale of Preferred Stock or debt
Securities which are convertible into Common Stock), the aggregate amount paid
to the Company for such Rights shall include only the portion of such single
purchase price attributable to such Rights, and not the portion attributable to
such other Securities or obligations. The portion of such purchase price
attributable to such Rights in such case shall be equal to the product of:
(i) such single purchase price; multiplied by
(ii) the quotient of:
(A) the fair market value (as determined by the
Valuation Agent) of such Right, independent of the value of such other
Securities or obligations (computed using the Black-Scholes option pricing model
or such other pricing model as the Valuation Agent determines is appropriate,
and applying such reasonable assumptions concerning price variances with respect
to the Common Stock and such other variables as the Valuation Agent considers
appropriate); divided by
(B) the fair market value (as determined by the
Valuation Agent) of such Right together with such other Securities or
obligations (computed using such methodology and making such assumptions as the
Valuation Agent determines is appropriate).
AGREEMENT, THIS - shall have the meaning specified in the introductory
paragraph hereof.
BOARD OF DIRECTORS - means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
BUSINESS DAY - means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than
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a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CHARTER - means the Restated Articles of Incorporation of the Company.
CLOSING PRICE - means, on any date with respect to any share of common
stock of any Person:
(a) the last sale price, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and asked prices
on such date, in each case as officially reported on the principal national
securities exchange on which such common stock is then listed or admitted to
trading; and
(b) if no such common stock is then listed or admitted to trading
on any national securities exchange, but is listed on the NASDAQ National Market
or the NASDAQ SmallCap Market, as the case may be, the last trading price of
such common stock on such date as reported by NASDAQ, or if there shall have
been no trading on such date, the average of the reported closing bid and asked
prices on such date as shown by NASDAQ.
When used in this Agreement without reference to a particular Person or common
stock, "Closing Price" means the Closing Price of the Common Stock.
COMMON STOCK - means the Common Stock, par value $0.01 per share, of
the Company; provided, however, that subsequent to any creation or issuance by
the Company of any Share Purchase Rights and prior to the earlier of the Share
Purchase Right Detachment Date and the Share Purchase Right Termination Date,
the term "Common Stock," and references to any shares thereof, shall in each
case include the attached Share Purchase Rights.
COMPANIES REGISTRATION SCHEME - means an amendment or amendment to the
Securities Act (whether by statutory amendment, amendment of the rules and
regulations thereunder or both), such as, without limitation, as proposed in the
Report of the Advisory Committee on the Capital Formation and Regulatory
Processes of the Securities and Exchange Commission, dated July 24, 1996,
pursuant to which:
(a) issuers of Securities are permitted to register all issuances
of securities on an integrated company registration statement; and
(b) under the provisions of such amendment, such registration
could cover the re-offering or resale by the holders thereof of shares of Common
Stock issued upon the exercise of the Warrants, if any, outstanding at such
time.
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COMPANY - shall have the meaning specified in the introductory
paragraph hereof.
CONSIDERATION PER SHARE - means, with respect to shares of Common Stock
or Rights, the quotient of:
(a) the Aggregate Consideration Paid (in the case of a repurchase,
redemption, retirement or other acquisition for value of Common Stock or Rights)
or the Aggregate Consideration Receivable (in the case of an issuance or sale of
Common Stock or Rights by the Company), as the case may be, in respect of such
shares of Common Stock or such Rights; divided by
(b) the total number of such shares of Common Stock or, in the
case of Rights, the total number of shares of Common Stock into which such
Rights are exercisable or convertible.
DISTRIBUTED ENTITY - means any subsidiary or other Person in which the
Company owns any ownership interest at any time, the capital stock, the Spinoff
Shares of which are dividended or otherwise distributed (including, without
limitation, in any recapitalization) to the stockholders of the Company in
respect of the Common Stock in a Spinoff.
EXCHANGE ACT - means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCLUDED SECURITIES - means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.2 through Section 4.8, inclusive, hereof,
and in respect of which an adjustment has been made pursuant to such Section;
(b) the Series A Warrants and the Series B Warrants, shares of
Common Stock issuable upon exercise of the Warrants or any other Rights
(including, without limitation, the Outstanding Warrant and outstanding stock
options) outstanding on the date hereof;
(c) shares of Common Stock issued to the public in a bona fide
public offering registered under the Securities Act to Persons other than:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or Rights;
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provided, however, that a bona fide public offering sold through an underwriter
and held open to the public generally shall not fail to meet the requirements of
this clause (c) merely by virtue of the fact that one or more Affiliates,
employees or existing holders of Common Stock or Rights may have been purchasers
from the underwriters therein so long as no pre-existing arrangement or
agreement to so purchase shares in connection with such offering was in
existence or in effect; and
(d) shares of Common Stock issued as the consideration in
a transaction involving a bona fide acquisition by the Company of another Person
(whether by acquisition of capital stock of such Person or all or substantially
all of the Property of such Person, or by merger or consolidation of such Person
into the Company or any Subsidiary) so long as the economic terms of such
acquisition were negotiated at arm's length and so long as neither such Person
nor the Person or Persons to whom such Common Stock is issued are:
(i) Affiliates;
(ii) employees of the Company; or
(iii) existing holders of Common Stock or Rights;
provided, however, that in the event that the acquired Person is a
corporation the common stock of which is registered under either section 12(b)
or section 12(g) of the Exchange Act, the issuance of shares of Common Stock to
all stockholders of the acquired Person in a bona fide acquisition shall not
fail to meet the requirements of this clause (d) merely by virtue of the fact
that one or more Affiliates, employees or existing holders of Common Stock or
Rights may have been the beneficial owners (as such term is defined in Rule
13d-3 under the Exchange Act, 17 C.F.R. Section 240.13d-3) of five percent (5%)
or less of the common stock of such acquired Person and so long as no
pre-existing arrangement or agreement to so issue shares in connection with such
offering was in existence or in effect;
(e) Rights consisting of stock options granted with an
exercise price not less than the Closing Price thereof as of the date of the
grant issued to employees, consultants or independent contractors of the Company
pursuant to any stock option plan approved by the Board of Directors at any
time, so long as, and to the extent that:
(i) the aggregate number of shares of Common Stock
issuable upon exercise of all such outstanding stock options (whether or not
then currently exercisable) does not at any time exceed fifteen percent (15%) of
the aggregate number of shares of Common Stock on a Fully Diluted Basis at such
time,
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such number of shares to be appropriately adjusted in respect of the occurrence
of any of the events described in Section 4 hereof; and
(ii) no other holder of any Rights or any other Securities
of the Company shall have the right to any preemptive, subscription or similar
right in respect of such issuance;
and shares of Common Stock issuable upon the exercise of such stock
options; provided, however, that the Company may at any time reduce the exercise
price of any such options to a price which, on the date of such reduction, is
not less than the Closing Price calculated as of such date; and
(f) Share Purchase Right Securities issued or sold by the
Company or any Acquiring Person upon exercise of any Share Purchase Rights in
accordance with the provisions of any Share Purchase Right Agreement, and any
Common Stock, if any, issued upon the exercise or conversion of any such Share
Purchase Right Securities in accordance with the provisions of the Share
Purchase Rights and the Share Purchase Right Agreement.
EXPIRATION DATE - means the later to occur of:
(a) August 31, 2007; and
(b) the date that is one hundred twenty (120) days after
the first date upon which the entire then-remaining principal amount of the
Notes, together with all accrued and unpaid interest thereon and all other
amounts due in respect thereof, is fully and finally paid in cash, and all
amounts in respect of the Series C Preferred Stock (including the Redemption
Price) and all accrued and unpaid dividends with respect thereto are fully and
finally paid in cash.
FAIR VALUE - means, with respect to any share of common stock of any
Person at any time, the quotient of:
(a) the difference of:
(i) the sum of:
(A) the fair salable value of such Person as a going
concern, giving effect to all Property thereof and subject to all liabilities
thereof, that would be realized in an arm's length sale between an informed and
willing buyer and an informed and willing seller, under no compulsion to buy or
sell, respectively, as of a date that is within fifteen (15) days of the date as
of which the determination is to be made, determined by agreement among the
holders of the Warrants and the Company and, if, in the Company's view after
reasonable
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negotiation no such agreement can be reached, by the Valuation Agent, such
determination in either case to be made without regard to the absence of a
liquid or ready market for such common stock; plus
(B) the aggregate exercise or conversion price of all
Warrants and all other Valuable Rights of such Person (including, without
limitation, Valuable Rights of such Person in respect of any shares of Preferred
Stock convertible at such time into shares of common stock of such Person) in
existence and remaining unexercised on such date;
minus
(ii) if there shall then exist any outstanding shares of
Preferred Stock (other than Preferred Stock convertible at such time into shares
of common stock of such Person, which shares represent Valuable Rights of such
Person at such time), the aggregate liquidation preference of (or, if less, the
aggregate price, if any, at which such Person could elect to redeem) such shares
of Preferred Stock (together with all accrued and unpaid dividends thereon);
divided by
(b) the sum of:
(i) the total number of shares of common stock then
outstanding; plus
(ii) the aggregate number of shares of common stock
issuable in respect of all Valuable Rights of such Person (including, without
limitation, Valuable Rights of such Person in respect of any shares of Preferred
Stock convertible at such time into shares of common stock of such Person) at
such time.
FULLY DILUTED BASIS - means, with respect to any calculation of the
number of shares of common stock of any Person at any time, the sum of:
(a) the number of shares of common stock of such Person
outstanding at such time; plus
(b) the aggregate number of shares of common stock of
such Person issuable upon the exercise, conversion or exchange, as the case may
be, of all Rights of such Person outstanding at such time, regardless of whether
such Rights of such Person are then exercisable, convertible or exchangeable
and, with respect to any Rights of such Person, regardless of whether the
consideration given up by the holder of such Right of such Person in connection
with the exercise, conversion or
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exchange thereof would exceed the value of the common stock of such Person
received upon such exercise, conversion or exchange.
GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
HOLDERS - shall have the meaning specified in the introductory
paragraph hereto.
INCIDENTAL REGISTRATION - Section 6.2.
INITIAL PURCHASE PRICE - means Three Dollars and Twenty-Five Cents
($3.25) per share.
INITIAL PURCHASERS - shall have the meaning specified in the Recitals
hereto.
INITIAL SECURITIES PURCHASE AGREEMENT - shall have the meaning
specified in the Recitals hereto.
INITIAL WARRANT AGREEMENT - shall have the meaning specified in the
Recitals hereto.
INITIAL WARRANTS - shall have the meaning specified in the Recitals
hereto.
INITIATING HOLDERS - means, at any time, the holders (other than the
Company or any Affiliate thereof) of at least fifty-one percent (51%) (by number
of shares) of the Registrable Securities at such time (excluding any Registrable
Securities held directly or indirectly by the Company or any Affiliate thereof).
LIEN - means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property (for purposes of
this definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes, and the filing of any financing statement
under the Uniform Commercial Code of any jurisdiction, or an agreement to give
any of the foregoing;
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(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting real Property;
(c) stockholder agreements, voting trust agreements,
buy-back agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner
evidenced by a conditional sale agreement, capitalized lease or other
arrangement pursuant to which title to such Property has been retained by or
vested in some other Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
MARKET CAPITALIZATION - means, with respect to any Person, at any time
of determination, the product of:
(a) the Market Price of the common stock of such Person at
such time of determination; multiplied by
(b) the number of shares of the common stock of such
Person outstanding at such time.
MARKET CAPITALIZATION PERCENTAGE - means, with respect to any Person,
at any time of determination, the quotient of:
(a) the Market Capitalization of such Person as of the Spinoff
Calculation Date; divided by
(b) the sum of:
(i) the Market Capitalization of the Distributed Entity as
of the Spinoff Calculation Date; plus
(ii) the Market Capitalization of the Company as of the
Spinoff Calculation Date.
MARKET PRICE - means, per share of common stock of any Person, as of
any date of determination, the arithmetic mean of the daily Closing Prices for
the twenty (20) consecutive trading days before such date of determination;
provided that if such common stock is then neither listed or admitted to trading
on any
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national securities exchange, the NASDAQ National Market or the NASDAQ SmallCap
Market, then "Market Price" means the Fair Value of one share of such common
stock, as determined by the Valuation Agent as of the date of determination.
When used in this Agreement without reference to a particular Person or common
stock, "Market Price" means the Market Price of the Common Stock.
NASD - means the National Association of Securities Dealers, Inc.
NASDAQ - means the NASDAQ Stock Market, Inc., a subsidiary of the NASD.
NASDAQ NATIONAL MARKET - has the meaning ascribed thereto in Rule
4200(r) of NASDAQ.
NASDAQ SMALLCAP MARKET - has the meaning ascribed thereto in Rule
4200(t) of NASDAQ.
NOTE AGREEMENT - means the Amended and Restated Note Agreement, dated
as of the date hereof, among the Company and the Initial Purchasers, pursuant to
which the Notes were issued.
NOTES - means the 12% Senior Subordinated Notes due May 1, 2007 issued
pursuant to the Initial Securities Purchase Agreement and the Note Agreement, as
amended, restated or modified from time to time.
NOTICE EVENT - means any event that would require an adjustment in the
Purchase Price pursuant to Section 4 hereof.
OTHER STOCKHOLDERS - means and includes, at any time, all holders of
Securities of the Company at such time (other than the holders of Registrable
Securities).
OUTSTANDING WARRANT - means that certain warrant to purchase five
thousand (5,000) shares of the Common Stock issued to Henri Morris & Associates.
PERSON - means an individual, partnership, corporation, limited
liability company, joint venture, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
POTENTIAL MATERIAL EVENT shall mean and include the following:
(a) the possession by the Company of material undisclosed
information not ripe for disclosure in a registration statement; or
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(b) any undisclosed material engagement or material
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
registration statement at such time.
PREFERRED STOCK - means and includes, with respect to any Person, all
capital stock of such Person of any class which is preferred as to payment upon
a liquidation or dissolution of such Person or both, over the common stock of
such Person.
PRE-SPINOFF OWNERSHIP PERCENTAGE - means, with respect to any Spinoff,
the quotient, expressed as a percentage, of:
(a) the number of shares of Common Stock issuable
immediately prior to the Spinoff upon exercise of all Warrants remaining
outstanding at such time; divided by
(b) the aggregate number of shares of Common Stock at such
time calculated on a Fully Diluted Basis.
PROPERTY - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
PUBLIC OFFERING - shall mean any sale of Common Stock in a transaction
either registered under, or requiring registration under, section 5 of the
Securities Act.
PURCHASE PRICE - means, prior to any adjustment pursuant to Section 4
of this Agreement, the Initial Purchase Price and thereafter, the Initial
Purchase Price as thereafter successively adjusted and readjusted from time to
time.
PURCHASERS - shall have the meaning specified in the Recitals hereto.
REDEMPTION PRICE - means the redemption price of the Series C Preferred
Stock as set forth in the Charter.
REGISTRABLE SECURITIES - means, at any time:
(a) any shares of Common Stock that have been issued upon the
exercise of any Warrant;
(b) any shares of Common Stock into which such shares of
Common Stock shall have been converted at any time; and
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(c) any shares of Common Stock that are issuable upon the
exercise of the Warrants or the conversion of Common Stock referred to in clause
(a) or clause (b) above.
For purposes of Section 6 hereof and the definitions of "Initiating Holders" and
"Requisite Holders" herein, holders of Warrants at any time shall be deemed to
be holders of Registrable Securities described in clauses (b) and (c) of this
definition that are at such time issuable upon exercise in full of such
Warrants, whether or not such holders are then entitled so to exercise such
Warrants pursuant to the terms thereof.
As to any particular Registrable Securities once issued, such
Securities shall cease to be Registrable Securities:
(i) when a registration statement with respect to the sale
of such Securities shall have become effective under the Securities Act and such
Securities shall have been disposed of in accordance with such registration
statement;
(ii) when they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act;
(iii) when they shall have been otherwise transferred and
subsequent disposition of them shall not require registration or qualification
under the Securities Act or any similar state law then in force; or
(iv) when they shall have ceased to be outstanding or
(with respect to Registrable Securities described in clause (c) of this
definition) issuable upon exercise of the Warrants.
REGISTRATION - means the Shelf Registration and each Incidental
Registration.
REGISTRATION EXPENSES - means all expenses incident to the Company's
performance of or compliance with Section 6.1 through Section 6.5, inclusive,
including, without limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities);
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(c) expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depositary Trust Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties);
(f) fees and disbursements of counsel for the Company and
its independent certified public accountants (including the expenses of any
management review, cold comfort letters or any special audits required by or
incident to such performance and compliance);
(g) securities acts liability insurance (if the Company elects
to obtain such insurance);
(h) the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration;
(i) fees and expenses of other Persons retained by the
Company; and
(j) reasonable fees and expenses of counsel for holders of
Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or fees and expenses of more than one
counsel representing the holders of Registrable Securities or any other selling
expenses, discounts or commissions incurred in connection with the sale of
Registrable Securities.
REQUIRED WARRANTHOLDERS - means, at any time, the holders of at least
fifty-one percent (51%) of all Warrants outstanding (excluding any Warrants
directly or indirectly held by the Company, any Subsidiary or any Affiliate) at
such time.
REQUISITE HOLDERS - means, with respect to any registration or proposed
registration of Registrable Securities pursuant to Section 6 hereof, any holder
or holders (other than the Company or any Affiliate or Subsidiary) holding at
least fifty-one percent (51%) of the shares of Registrable Securities (excluding
any shares of Registrable Securities directly or indirectly held by the Company
or any Affiliate or Subsidiary) to be so registered.
RIGHT - means and includes:
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(a) any warrant (including, without limitation, in the
case of the Company, any Warrant and the Outstanding Warrant) or any option
(including, without limitation, employee stock options) to acquire common stock
of such Person;
(b) any right issued to holders of the common stock of
such Person, or any class thereof, permitting the holders thereof to subscribe
to shares of Additional Common Stock (in the case of the Company) or additional
common stock or additional Rights of such Person (pursuant to a rights offering
or otherwise);
(c) any right to acquire common stock of such Person
pursuant to the provisions of any Security convertible or exchangeable into such
common stock; and
(d) any similar right permitting the holder thereof to
subscribe for or purchase shares of common stock of such Person.
References in this Agreement to a Right or Rights of a Person means a Right or
Rights, regardless of whether or not issued by such Person, relating to the
common stock of such Person. When used in this Agreement without reference to a
particular Person, "Right" means a Right of the Company.
RULE 144 - means Rule 144 under the Securities Act, 17 C.F.R.
Section 230.144, and any similar successor provision; and references to
subsections of Rule 144 (e.g., "Rule 144(k)") shall be to the indicated
subsection of such Rule 144.
SECURITIES PURCHASE AGREEMENT - shall have the meaning specified in the
Recitals hereto.
SERIES C PREFERRED STOCK - means the Series C Cumulative Redeemable
Preferred Stock, par value $1.00 per share, with a stated value of $100.00 per
share, of the Company.
SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT - means the Securities Act of 1933, as amended.
SECURITY - shall have the meaning specified in section 2(1) of the
Securities Act.
SERIES - means the series of the Series A Warrants and/or the Series B
Warrants.
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SERIES A WARRANT - shall have the meaning specified in the Recitals
hereto.
SERIES A WARRANT CERTIFICATE - shall have the meaning specified in
Section 1.1 hereof.
SERIES B WARRANT - shall have the meaning specified in the Recitals
hereto.
SERIES B WARRANT CERTIFICATE - shall have the meaning specified in
Section 1.1 hereof.
SHARE PURCHASE RIGHT - means any Right created by the Company after the
date hereof which meets the following criteria:
(a) such Right is distributed to each holder of the Common
Stock as of the record date for the distribution thereof;
(b) such Right remains attached to each share of Common
Stock (including, without limitation, shares issued on or after the record date
for the distribution thereof but prior to any date of detachment thereof)
pending the occurrence of one or more Share Purchase Triggering Events;
(c) such Right shall become detached from, and may be
transferred separately from, the shares of Common Stock upon the occurrence of
one or more Share Purchase Triggering Events; and
(d) such Right shall become exercisable by all holders
thereof other than an Acquiring Person, upon the occurrence of one or more Share
Purchase Triggering Events (which may or may not be the Share Purchase giving
rise to the detachment of the Share Purchase Rights) specified in the Share
Purchase Rights Plan, into Share Purchase Right Securities.
SHARE PURCHASE RIGHT DETACHMENT DATE - means the date upon which any
Share Purchase Right becomes detached from, and may be transferred separately
from, the shares of Common Stock.
SHARE PURCHASE RIGHT TERMINATION DATE - means the earlier to occur of
the expiration, termination or redemption by the Company of all Share Purchase
Rights.
SHARE PURCHASE RIGHT PLAN - means the plan or agreement pursuant to
which the Share Purchase Rights are issued and governing the terms thereof.
SHARE PURCHASE RIGHT SECURITIES - means and includes any of the
following Securities issuable upon exercise of a Share Purchase Right:
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(a) shares of Common Stock or Rights of the Company, or
Securities containing Rights of the Company;
(b) shares of other capital stock of the Company or other
Securities convertible or exchangeable into capital stock of the Company; or
(c) shares of capital stock of an Acquiring Person or any
Affiliate thereof or other Securities convertible or exchangeable into any such
capital stock.
SHARE PURCHASE TRIGGERING EVENT - means and includes any and all of the
following:
(a) the acquisition by any Acquiring Person of a percentage of
the outstanding Common Stock specified in the Share Purchase Right Plan (but in
no event less than ten percent (10%) of the outstanding Common Stock);
(b) the making by any Acquiring Person of a tender offer for
the Common Stock or any substantial portion thereof;
(c) the commencement of, or the occurrence of any event in
furtherance of, any actual or threatened election contest (as contemplated by
Rule 14a-11 under the Exchange Act) or other actual or threatened solicitation
of proxies or contest by or on behalf of a Person other than the Board of
Directors which, if fully completed, would result in a majority of the directors
of the Company following consummation of such contest or proposal and the
election or elections of directors at which such contest or proposal is directed
being Persons who were not directors immediately prior to the commencement of
such contest or proposal; or
(d) any similar or other action which would, if completed,
result in an Acquiring Person either owning a majority of the Common Stock or
controlling the Board of Directors.
SHELF EFFECTIVE DATE - means July 31, 2000.
SHELF EFFECTIVE PERIOD - Section 6.1(a).
SHELF FILING DATE - means May 31, 2000.
SHELF REGISTRATION - Section 6.1(a).
SHELF TERMINATION DATE - means the earliest to occur of:
(a) April 30, 2009;
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(b) such date after May 1, 2002 on which the Company shall
deliver to each holder of Registrable Securities an opinion of Hughes &
Luce, LLP, or other nationally recognized securities counsel to the
effect that each such holder may freely resell all shares of Common
Stock issued or issuable upon exercise of the Warrants without
restriction pursuant to Rule 144(k) so long as the Purchase Price is
made pursuant to Section 2.1(c), Section 2.1(d) or Section 2.1(e);
provided, however, that such opinion shall not make any assumption or
contain any qualification concerning whether any holder of Warrants of
Common Stock issued upon the exercise thereof is an "affiliate," as
defined in Rule 144(a)(1), of the Company; and
(c) such date as no Registrable Securities shall remain.
SPINOFF - means and includes:
(a) any payment or making of any dividend in, or making of any
distribution of, any Spinoff Shares to the stockholders of the Company in
respect of the Common Stock; or
(b) any reclassification of the Common Stock in any
manner or other similar arrangement such that Spinoff Shares are issued to or
deemed issued to the Company's stockholders.
SPINOFF CALCULATION DATE - means, with respect to any Spinoff, the
thirtieth (30th) trading day following the consummation of such Spinoff.
SPINOFF SHARES - means and includes any capital stock, partnership or
membership interest, or warrant, option or other right to acquire any such
capital stock, partnership or membership interests, or other similar equity
interest of any Distributed Entity, in each case, which is dividended or
otherwise distributed (including, without limitation, in any recapitalization)
to the stockholders of the Company in respect of the Common Stock in a Spinoff.
SPINOFF WARRANT AGREEMENT - Section 3.8(c).
SPINOFF WARRANT NUMBER - means, at any time, with respect to any
Spinoff, the quotient of:
(a) the product of:
(i) the Pre-Spinoff Ownership Percentage; multiplied by
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(ii) the aggregate number of Spinoff Shares, calculated as
of the Spinoff Calculation Date on a Fully Diluted Basis (but prior to giving
effect to the issuance of the Spinoff Warrants);
divided by
(b) the difference of:
(i) one hundred percent (100%); minus
(ii) the Pre-Spinoff Ownership Percentage.
SPINOFF WARRANT PURCHASE PRICE - means, on any date of determination,
with respect to any Spinoff, the quotient of:
(a) the product of:
(i) the Market Capitalization Percentage of the
Distributed Entity as of such date; multiplied by
(ii) the number of Warrants outstanding on such date;
multiplied by
(iii) the Purchase Price on such date prior to giving
effect to any adjustment in the Purchase Price (including, without limitation,
that required by Section 4.7) resulting from the Spinoff;
divided by
(b) the Spinoff Warrant Number.
SPINOFF WARRANTS - Section 3.8(a).
SUBSIDIARY - means, at any time, each corporation, association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time.
TRANSFEREE - means any registered transferee of all or any part of any
one or more Warrant Certificates acquired by any Initial Purchaser or Holder
under this Agreement.
VALUABLE RIGHT - means, with respect to any Person at any time, a
Right, the effective conversion, exercise or purchase price of which on the date
of
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determination is less than the Market Price in respect of the shares of common
stock of such Person issuable upon conversion, exercise or purchase pursuant to
such Right on such date.
VALUATION AGENT - means the Board of Directors, unless the Required
Warrantholders shall disagree in good faith with the determination of the Board
of Directors, in which case the determination shall be made by a firm of
independent certified public accountants, an investment banking firm or
appraisal firm (which firm shall own no material amount of Securities of, and
shall not be an Affiliate, Subsidiary or a related Person of, the Company) of
recognized national standing retained by the Company and reasonably acceptable
to the Required Warrantholders.
VOTING STOCK - means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency), and, in the case of the Company, shall include the Common Stock.
WARRANTS - shall have the meaning specified in the Recitals hereto.
WARRANT CERTIFICATE - Section 1.1.
7.2. DESCRIPTIVE HEADINGS.
The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
7.3. GOVERNING LAW.
THIS AGREEMENT AND THE WARRANT CERTIFICATES SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
8. MISCELLANEOUS.
8.1. EXPENSES.
The Company agrees to pay, and save the Holders and any Transferees
harmless against liability for the payment of, all out-of-pocket expenses
(including, without limitation, the reasonable fees and disbursements of special
counsel for the
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<PAGE> 63
Holders and any Transferee) arising in connection with the transactions herein
contemplated, including, without limitation:
(a) the cost, if any, of complying with Section 3.6 hereof;
(b) any subsequent proposed modification of, or proposed consent
requested or initiated by or on behalf of the Company under, this
Agreement, the Warrant Certificates or the Warrants, whether or not
such proposed modification shall be effected or proposed consent
granted (including, without limitation, all document production and
duplication charges and the reasonable fees and expenses of one special
counsel engaged by the holders of Warrants in connection therewith);
and
(c) the enforcement of (or determination of whether or how to
enforce) any rights under this Agreement, the Warrant Certificates or
the Warrants or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement
or the transactions contemplated hereby or by reason of the Holders' or
any Transferee's having acquired any Warrant Certificate, including,
without limitation, the reasonable fees and expenses of one special
counsel engaged by the holders of the Warrants and incurred by the
holders of the Warrants and the costs and expenses incurred in any
bankruptcy case involving the Company or any Subsidiary.
The obligations of the Company under this Section 8.1 shall survive the transfer
of any Warrant Certificate or portion thereof or interest therein by any Holder
or any Transferee and the exercise or expiration of any Warrant.
8.2. AMENDMENT AND WAIVER.
This Agreement may be amended, and the observance of any term of this
Agreement may be waived, with and only with the written consent of the Company
and:
(a) in the case of Section 1 through Section 5, Section 7.2,
Section 7.3 or Section 8 hereof (other than this Section 8.2), or of
any term defined in Section 7.1 to the extent used therein, the written
consent of the Required Warrantholders;
(b) the provisions of Section 6 hereof, and of any term defined
in Section 7.1 hereof as used in Section 6 hereof, may be amended,
modified or supplemented only by a writing duly executed by or on
behalf of the Initiating Holders and the Company; provided, however,
that compliance by
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<PAGE> 64
the Company with the provisions of Section 6 hereof, with respect to
any particular registration, may be waived by the Requisite Holders;
and
(c) in the case of this Section 8.2, or of any term defined in
Section 7.1 to the extent used herein, the written consent of all
holders of Warrants then outstanding and all Registrable Securities
then outstanding (excluding any Warrants or Registrable Securities
directly or indirectly held by the Company, any Subsidiary or any
Affiliate);
provided, however, that:
(i) no such amendment or waiver of any of the provisions of
this Agreement pertaining to the Purchase Price or the number or
kind of shares of Common Stock that may be purchased upon exercise
of each Warrant; and
(ii) no change or accelerating the occurrence of the
Expiration Date;
shall be effective as to the holder of any Warrant unless consented to in
writing by such holder.
8.3. DIRECTLY OR INDIRECTLY.
Where any provision in this Agreement refers to any action to be taken
by any Person, or that such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person, including actions taken by or on behalf of any partnership in which such
Person is a general partner.
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein and in the
Securities Purchase Agreement in connection herewith shall survive the execution
and delivery of this Agreement and the Warrant Certificates, the transfer by any
Holder of any Warrant Certificate or portion thereof or interest therein and the
exercise or expiration of any Warrant, and may be relied upon by the Holders or
any Transferee, regardless of any investigation made at any time by or on behalf
of such Holder or Transferee. Subject to the preceding sentence, this Agreement
and the Warrant Certificates embody the entire agreement and understanding among
the Company and the Holders, and supersede all prior agreements and
under-standings, relating to the subject matter hereof.
-61-
<PAGE> 65
8.5. SUCCESSORS AND ASSIGNS.
All covenants and other agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not. Notwithstanding the
foregoing sentence, the Company may not assign any of its rights, duties or
obligations hereunder or under the Warrants without the prior written consent of
all holders of the Warrants then outstanding.
8.6. NOTICES.
All communications hereunder or under the Warrants shall be in writing
and shall be delivered either by national overnight courier or by facsimile
transmission (confirmed by delivery by national overnight courier sent on the
day of the sending of such facsimile transmission), and shall be addressed to
the following addresses:
(a) if to a Holder, at its address set forth on Annex 1 to this
Agreement, or at such other address as such Holder shall have specified
to the Company in writing;
(b) if to any other holder of any Warrant Certificate, addressed
to such other holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall
not have so specified an address to the Company, then addressed to such
other holder in care of the last holder of such Warrant Certificate
that shall have so specified an address to the Company; and
(c) if to the Company, at the address set forth on Annex 2 to
this Agreement, or at such other address as the Company shall have
specified to each holder of Warrants in writing.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
8.7. SATISFACTION REQUIREMENT.
If any agreement, certificate or other writing, or any action taken or
to be taken, is by the terms of this Agreement required to be satisfactory to
the Holders or to any holder or holders of Warrant Certificates, the
determination of such satisfaction shall, unless specifically required herein in
any instance to be "reasonable" or words to similar effect, be made by such
Holders, holder or holders,
-62-
<PAGE> 66
as the case may be, in the sole and exclusive judgment (exercised in good faith)
of the Person or Persons making such determination.
8.8. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.9. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument.
8.10. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE WARRANTS OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE WARRANTS OR ANY OF
THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH UNDER THIS AGREEMENT, THE WARRANTS OR ANY
DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY
IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR
ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH
PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND
AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION, AS A DEFENSE OR
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<PAGE> 67
OTHER-WISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY
BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE WARRANTS
OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY
PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED
STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
[Remainder of page intentionally left blank; next page is a signature page.]
-64-
<PAGE> 68
WITNESS the signature of a proper officer of the Company as of the date
first above written.
FRESH AMERICA CORP.
By:
-----------------------------------
Name: John H. Gray
Title: Executive Vice President
[SIGNATURE PAGE TO AMENDED AND RESTATED WARRANT AGREEMENT]
<PAGE> 69
JOHN HANCOCK LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
[SIGNATURE PAGE TO AMENDED AND RESTATED WARRANT AGREEMENT]
<PAGE> 70
JOHN HANCOCK VARIABLE
LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
[SIGNATURE PAGE TO AMENDED AND RESTATED WARRANT AGREEMENT]
<PAGE> 71
SIGNATURE (1A) CAYMAN, LTD.
BY: JOHN HANCOCK LIFE INSURANCE
COMPANY, PORTFOLIO ADVISOR
By:
-----------------------------------
Name:
Title:
[SIGNATURE PAGE TO AMENDED AND RESTATED WARRANT AGREEMENT]
<PAGE> 72
INVESTORS PARTNER LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
[SIGNATURE PAGE TO AMENDED AND RESTATED WARRANT AGREEMENT]
<PAGE> 73
ANNEX 1
ADDRESSES OF PURCHASERS
<PAGE> 74
ANNEX 2
ADDRESS OF COMPANY
Fresh America Corp.
6600 LBJ Freeway, Suite 180
Dallas, Texas 75240
Attention: John H. Gray,
Executive Vice President and Chief Financial Officer
Telephone: (972) 774-0575
Facsimile: (972) 774-0515
<PAGE> 75
ATTACHMENT A1
[FORM OF SERIES A WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
SERIES A WARRANT CERTIFICATE
FRESH AMERICA CORP.
No. WRA-___ ________ Warrants
Date: ________ PPN: 35803R 2* 5
This Warrant Certificate certifies that ___________________, or
registered assigns, is the registered holder of ___________ (________) Warrants.
Each Warrant entitles the owner thereof to purchase at any time on or prior to
the Expiration Date, one (1) fully paid and nonassessable share of Common Stock,
par value $0.01 per share (the "Common Stock"), of FRESH AMERICA CORP., a Texas
corporation (together with its successors and assigns, the "Company"), at a
Purchase Price (subject to adjustment as provided therein) of Three Dollars and
Twenty-Five Cents ($3.25) per share upon presentation and surrender of this
Warrant Certificate with a form of election to purchase duly executed and
delivery to the Company of the payment of the Purchase Price in the manner set
forth in the Warrant Agreement. The number of shares of Common Stock that may be
purchased upon exercise of each Warrant and the Purchase Price are the number
and the Purchase Price as of the date hereof, and are subject to adjustment as
referred to below.
The Series A Warrants are issued pursuant to the Amended and Restated
Warrant Agreement (as it may from time to time be amended or supplemented, the
"Warrant Agreement"), dated as of April 15, 2000, among the Company and the
investors named therein, and are subject to all of the terms, provisions and
conditions thereof, which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, obligations, duties and
immunities of the Company and the holders of the Warrant Certificates.
Capitalized terms used, but not defined, herein have the respective meanings
ascribed to them in the Warrant Agreement.
<PAGE> 76
As provided in the Warrant Agreement, the Purchase Price and the number
of shares of Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. Except as otherwise set
forth in, and subject to, the Warrant Agreement, the Expiration Date of this
Warrant Certificate is August 31, 2007.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time (but not, in the case
of any exercise in part, to the extent such exercise would result in the
issuance of the lesser of one hundred (100) whole shares of Common Stock and
such lesser number of shares as is issuable by virtue of the exercise of all
Warrants held by such holder). If this Warrant Certificate shall be exercised in
part, the holder shall be entitled to receive, upon surrender hereof, another
Warrant Certificate or Warrant Certificates for the number of Warrants not
exercised. Subject to the provisions of the Warrant Agreement, this Warrant
Certificate, with or without other Warrant Certificates representing Warrants of
the same Series, upon surrender in the manner set forth in the Warrant
Agreement, may be exchanged for another Warrant Certificate or Warrant
Certificates of like tenor evidencing Warrants of the same Series entitling the
holder to purchase a like aggregate number of shares of Common Stock as the
Warrants evidenced by the Warrant Certificate or Warrant Certificates
surrendered shall have entitled such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of
this Warrant Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Common Stock or of any other
Securities of the Company that may at any time be issued upon the exercise
hereof, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
holder of a share of Common Stock in the Company or any right to vote upon any
matter submitted to holders of shares of Common Stock at any meeting thereof, or
to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of Securities, change of
par value, consolidation, merger, conveyance, or otherwise), or to receive
dividends or subscription rights, or otherwise, until the Warrant or Warrants
evidenced by this Warrant Certificate shall have been exercised as provided in
the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
-2-
<PAGE> 77
WITNESS the signature of a proper officer of the Company as of the date
first above written.
FRESH AMERICA CORP.
By:
----------------------------------
Name: John H. Gray
Title: Executive Vice President
<PAGE> 78
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee.)
the accompanying Series A Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint:
- --------------------------------------------------------------------------------
attorney, to transfer the accompanying Series A Warrant Certificate on the books
of the Company with full power of substitution.
Dated: , .
-------------------- --------
[HOLDER]
By
---------------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE> 79
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To FRESH AMERICA CORP.:
The undersigned hereby irrevocably elects to exercise
______________________________ Series A Warrants represented by the accompanying
Warrant Certificate to purchase the shares of Common Stock issuable upon the
exercise of such Warrants and requests that certificates for such shares be
issued in the name of:
- ------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
The undersigned is paying the Purchase Price for the shares of Common Stock to
be issued on exercise of the foregoing Warrants:
[ ] in cash pursuant to Section 2.1(a)(i) of the Warrant Agreement;
<PAGE> 80
[ ] in Notes (as defined in the Warrant Agreement) pursuant to
Section 2.1(a)(ii) of the Warrant Agreement;
[ ] in shares of Series C Preferred Stock (as defined in the Warrant
Agreement) pursuant to Section 2.1(a)(iii) of the Warrant Agreement;
[ ] in cash in the amount of $____________ , a principal amount of
Notes equal to $___________ and/or _________ shares of Series C Preferred Stock
having a Redemption Price equal to $___________ pursuant to Section 2.1 (a)(iv)
of the Warrant Agreement; or
[ ] by net exercise of the Warrants being exercised pursuant to
Section 2.1(a)(v) of the Warrant Agreement.
Dated: , .
------------------ ------
[HOLDER]
By
----------------------------------
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
-2-
<PAGE> 81
ATTACHMENT A2
[FORM OF SERIES B WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
SERIES B WARRANT CERTIFICATE
FRESH AMERICA CORP.
No. WRB-___ ________ Warrants
Date: ________ PPN:
This Warrant Certificate certifies that ___________________, or
registered assigns, is the registered holder of ___________ (________) Warrants.
Each Warrant entitles the owner thereof to purchase at any time on or prior to
the Expiration Date, one (1) fully paid and nonassessable share of Common Stock,
par value $0.01 per share (the "Common Stock"), of FRESH AMERICA CORP., a Texas
corporation (together with its successors and assigns, the "Company"), at a
Purchase Price (subject to adjustment as provided therein) of Three Dollars and
Twenty-Five Cents ($3.25) per share upon presentation and surrender of this
Warrant Certificate with a form of election to purchase duly executed and
delivery to the Company of the payment of the Purchase Price in the manner set
forth in the Warrant Agreement. The number of shares of Common Stock that may be
purchased upon exercise of each Warrant and the Purchase Price are the number
and the Purchase Price as of the date hereof, and are subject to adjustment as
referred to below.
The Series B Warrants are issued pursuant to the Amended and Restated
Warrant Agreement (as it may from time to time be amended or supplemented, the
"Warrant Agreement"), dated as of April 15, 2000, among the Company and the
investors named therein, and are subject to all of the terms, provisions and
conditions thereof, which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, obligations, duties and
immunities of the Company and the holders of the Warrant Certificates.
Capitalized terms used, but not defined, herein have the respective meanings
ascribed to them in the Warrant Agreement.
<PAGE> 82
As provided in the Warrant Agreement, the Purchase Price and the number
of shares of Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. Except as otherwise set
forth in, and subject to, the Warrant Agreement, the Expiration Date of this
Warrant Certificate is August 31, 2007.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time (but not, in the case
of any exercise in part, to the extent such exercise would result in the
issuance of the lesser of one hundred (100) whole shares of Common Stock and
such lesser number of shares as is issuable by virtue of the exercise of all
Warrants held by such holder). If this Warrant Certificate shall be exercised in
part, the holder shall be entitled to receive, upon surrender hereof, another
Warrant Certificate or Warrant Certificates for the number of Warrants not
exercised. Subject to the provisions of the Warrant Agreement, this Warrant
Certificate, with or without other Warrant Certificates representing Warrants of
the same Series, upon surrender in the manner set forth in the Warrant
Agreement, may be exchanged for another Warrant Certificate or Warrant
Certificates of like tenor evidencing Warrants of the same Series entitling the
holder to purchase a like aggregate number of shares of Common Stock as the
Warrants evidenced by the Warrant Certificate or Warrant Certificates
surrendered shall have entitled such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of
this Warrant Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Common Stock or of any other
Securities of the Company that may at any time be issued upon the exercise
hereof, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
holder of a share of Common Stock in the Company or any right to vote upon any
matter submitted to holders of shares of Common Stock at any meeting thereof, or
to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of Securities, change of
par value, consolidation, merger, conveyance, or otherwise), or to receive
dividends or subscription rights, or otherwise, until the Warrant or Warrants
evidenced by this Warrant Certificate shall have been exercised as provided in
the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
-2-
<PAGE> 83
WITNESS the signature of a proper officer of the Company as of the date
first above written.
FRESH AMERICA CORP.
By:
----------------------------
Name:
Title:
-3-
<PAGE> 84
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee.)
the accompanying Series B Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint:
- --------------------------------------------------------------------------------
attorney, to transfer the accompanying Series B Warrant Certificate on the books
of the Company with full power of substitution.
Dated: , .
------------------ ------
[HOLDER]
By
----------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE> 85
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To FRESH AMERICA CORP.:
The undersigned hereby irrevocably elects to exercise
______________________________ Series B Warrants represented by the accompanying
Warrant Certificate to purchase the shares of Common Stock issuable upon the
exercise of such Warrants and requests that certificates for such shares be
issued in the name of:
- --------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
The undersigned is paying the Purchase Price for the shares of Common Stock to
be issued on exercise of the foregoing Warrants:
[ ] in cash pursuant to Section 2.1(a)(i) of the Warrant Agreement;
<PAGE> 86
[ ] in Notes (as defined in the Warrant Agreement) pursuant to
Section 2.1(a)(ii) of the Warrant Agreement;
[ ] in shares of Series C Preferred Stock (as defined in the
Warrant Agreement) pursuant to Section 2.1(a)(iii) of the Warrant Agreement;
[ ] in cash in the amount of $____________ , a principal amount of
Notes equal to $___________ and/or _________ shares of Series C Preferred Stock
having a Redemption Price equal to $___________ pursuant to Section 2.1(a)(iv)
of the Warrant Agreement; or
[ ] by net exercise of the Warrants being exercised pursuant to
Section 2.1(a)(v) of the Warrant Agreement.
Dated: , .
------------------ ------
[HOLDER]
By
----------------------------------
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
-2-
<PAGE> 1
EXHIBIT 10.3
------------------------------
OMNIBUS SUBORDINATED GUARANTEE
(INCLUDING AMENDMENT AND RESTATEMENT
OF CERTAIN EXISTING GUARANTEES)
------------------------------
DATED AS OF APRIL 15, 2000
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2007
ISSUED BY FRESH AMERICA CORP.
<PAGE> 2
<TABLE>
<S> <C> <C>
1. PRELIMINARY STATEMENT.......................................................................................1
2. JOINT AND SEVERAL GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS...............................................3
2.1 GUARANTEED OBLIGATIONS...................................................................................3
2.2 PERFORMANCE UNDER THE NOTE AGREEMENT.....................................................................4
2.3 RELEASES.................................................................................................4
2.4 WAIVERS..................................................................................................5
2.5 CERTAIN WAIVERS OF SUBROGATION, REIMBURSEMENT AND INDEMNITY..............................................8
2.6 INVALID PAYMENTS.........................................................................................8
2.7 MARSHALING...............................................................................................8
2.8 SUBORDINATION OF AFFILIATE OBLIGATIONS...................................................................9
2.9 SETOFF, COUNTERCLAIM OR OTHER DEDUCTIONS.................................................................9
2.10 ELECTION BY GUARANTOR TO PERFORM OBLIGATIONS..........................................................9
2.11 NO ELECTION OF REMEDIES BY NOTEHOLDERS................................................................9
2.12 SEPARATE ACTION; OTHER ENFORCEMENT RIGHTS............................................................10
2.13 NOTEHOLDER SETOFF....................................................................................10
2.14 DELAY OR OMISSION; NO WAIVER.........................................................................10
2.15 RESTORATION OF RIGHTS AND REMEDIES...................................................................11
2.16 CUMULATIVE REMEDIES..................................................................................11
2.17 NOTICES IN RESPECT OF PAYMENTS.......................................................................11
2.18 LIMITATION ON GUARANTIED OBLIGATIONS.................................................................11
2.19 CONFIRMATION OF GUARANTEE............................................................................12
2.20 JOINT AND SEVERAL OBLIGATIONS........................................................................12
3. INTERPRETATION OF THIS GUARANTEE...........................................................................12
3.1 TERMS DEFINED...........................................................................................12
3.2 PARAGRAPH HEADINGS AND CONSTRUCTION.....................................................................12
4. WARRANTIES AND REPRESENTATIONS.............................................................................12
4.1 REPRESENTATIONS AND WARRANTIES IN SECURITIES PURCHASE AGREEMENT.........................................13
4.2 DUE AUTHORIZATION; ENFORCEABILITY.......................................................................13
4.3 GOVERNMENTAL CONSENT....................................................................................14
4.4 NATURE OF BUSINESS OF COMPANY AND GUARANTOR.............................................................14
4.5 SOLVENCY................................................................................................14
5. SUBORDINATION TO SENIOR OBLIGATIONS........................................................................15
6. GENERAL COVENANTS..........................................................................................16
6.1 UNDERTAKINGS IN NOTE AGREEMENT..........................................................................16
6.2 PAYMENT OF NOTES AND MAINTENANCE OF OFFICES.............................................................16
6.3 FURTHER ASSURANCES......................................................................................16
7. MISCELLANEOUS..............................................................................................16
7.1 SUCCESSORS AND ASSIGNS..................................................................................16
7.2 PARTIAL INVALIDITY......................................................................................17
7.3 COMMUNICATIONS..........................................................................................17
7.4 GOVERNING LAW...........................................................................................17
7.5 EFFECTIVE DATE..........................................................................................17
7.6 BENEFITS OF GUARANTEE RESTRICTED TO NOTEHOLDERS.........................................................17
7.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................................18
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
7.8 EXPENSES................................................................................................18
7.9 AMENDMENT...............................................................................................18
7.10 SURVIVAL.............................................................................................18
7.11 ENTIRE AGREEMENT.....................................................................................19
7.12 DUPLICATE ORIGINALS..................................................................................19
7.13 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC...................................................19
</TABLE>
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<PAGE> 4
OMNIBUS SUBORDINATED GUARANTEE
(INCLUDING AMENDMENT AND RESTATEMENT
OF CERTAIN EXISTING GUARANTEES)(1)
This OMNIBUS SUBORDINATED GUARANTEE (INCLUDING AMENDMENT AND
RESTATEMENT OF CERTAIN EXISTING GUARANTEES), dated as of April 15, 2000 (as
amended or restated from time to time, this "GUARANTEE"), is entered into by
each of the Persons executing the signature pages attached hereto (each of such
signatories herein referred to as a "GUARANTOR" and all of such signatories,
collectively, herein referred to as the "GUARANTORS") in favor of each of the
Noteholders (as such term is hereinafter defined).
1. PRELIMINARY STATEMENT
(a) Fresh America Corp., a Texas corporation (together with
its successors and assigns, the "COMPANY"), previously issued its 12%
Senior Subordinated Notes due May 1, 2003 in the aggregate principal
amount of Twenty Million Dollars ($20,000,000) (as amended from time to
time and as in effect immediately prior to the date hereof, the
"INITIAL NOTES"), pursuant to that certain Note Agreement, dated as of
May 4, 1998 (as amended from time to time and as in effect immediately
prior to the date hereof, the "INITIAL NOTE AGREEMENT"), between the
Company and the purchasers listed on Annex 1 attached thereto (the
"PURCHASERS").
(b) In order to induce the Purchasers to purchase the Initial
Notes from the Company, the Company caused the Persons identified on
Annex 1 hereto (collectively, the "INITIAL GUARANTORS")(2) to severally
guaranty unconditionally all of the obligations of the Company under
and in respect of the Initial Notes and the Initial Note Agreement
pursuant to the terms and provisions of those certain subordinated
guarantees.
- -----------------------
(1) Guarantee may require additional changes if any Guarantor is
organized under the laws of a jurisdiction other than a state of the United
States.
(2) Is each of the Initial Guarantors still in existence and is each
still a guarantor? Have any other parties guaranteed the Notes since the
original closing in May 1998?
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(c) The Company has requested, and the Purchasers have agreed
(subject to the satisfaction of certain conditions, including without
limitation, the delivery of this Guarantee), to enter into an Amended
and Restated Note Agreement, dated as of April 15, 2000 (as amended
from time to time, the "NOTE AGREEMENT") which amends and restates the
Company's obligations in respect of the Initial Note Agreement, and
which also amends and restates the Initial Notes (including, without
limitation, extending the maturity of the date of such notes until May
1, 2007) (as so amended and restated, and as amended from time to time
thereafter, the "NOTES").
(d) In connection with the amendment and restatement
represented by the Note Agreement and the Notes, (a) the Initial
Guarantors are entering into this Guarantee to jointly and severally
guaranty unconditionally all of the obligations of the Company under
and in respect of, and to amend and restate their prior guarantee
obligations in respect of, the Note Agreement and the Notes (including,
without limitation, the Initial Note Agreement and the Initial Notes),
and (b) the Persons identified on Annex 2 hereto (collectively, the
"ADDITIONAL GUARANTORS") are entering into this Guarantee to jointly
and severally guaranty unconditionally all of the obligations of the
Company under and in respect of the Notes and the Note Agreement. The
Initial Guarantors and the Additional Guarantors are herein referred to
individually as a "GUARANTOR" and collectively as the "GUARANTORS."
(e) The Company owns, directly or indirectly, a majority of
the capital stock of each Guarantor. The Guarantors and the Company are
operated as part of one consolidated business group and are directly
dependent upon each other for and in connection with their respective
business activities and their respective financial resources. Each of
the Guarantors will receive direct and indirect economic, financial and
other benefits from the indebtedness incurred under the Note Agreement
and the Notes by the Company, and under this Guarantee by each of the
Guarantors, and the incurrence of such indebtedness is in the best
interests of each Guarantor. The Company and the Guarantors have
induced the Purchasers to amend and restate the Note Agreement and the
Notes, and provide the Company and the Guarantors the benefits
represented thereby, based on the consolidated financial condition of
the Guarantors and the Company.
(f) All acts and proceedings required by law and by the
articles of incorporation or certificate of incorporation and bylaws of
each Guarantor necessary to constitute this Guarantee a valid and
binding agreement of such Guarantor for the uses and purposes set forth
herein in accordance with its
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<PAGE> 6
terms have been done and taken, and the execution and delivery hereof
has been in all respects duly authorized.
2. JOINT AND SEVERAL GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS
2.1 GUARANTEED OBLIGATIONS.
Each Guarantor, in consideration of the execution and delivery of the
amendment and restatement evidenced by the Note Agreement, the purchase of the
Initial Notes by the Purchasers and the amendment and restatement evidenced by
the Notes, hereby irrevocably, unconditionally and absolutely guarantees (and,
in the case of the Initial Guarantors, acknowledges and confirms its guarantee),
jointly and severally, on a continuing basis, to each holder of Notes from time
to time (each such holder being referred to herein as a "NOTEHOLDER" and,
collectively, as the "NOTEHOLDERS"), whether such Note has been issued, is being
issued on the date hereof or is hereafter issued in compliance with the
provisions of the Note Agreement, as and for each Guarantor's own debt, until
final and indefeasible payment has been made in cash:
(a) the due and punctual payment by the Company of the
principal of, and interest and the Prepayment Compensation Amount (if
any) on, the Notes at any time outstanding and the due and punctual
payment of all other amounts payable, and all other indebtedness owing,
by the Company to the Noteholders under the Note Agreement and the
Notes, in each case when and as the same shall become due and payable,
whether at maturity, pursuant to mandatory or optional prepayment, by
acceleration or otherwise, all in accordance with the terms and
provisions hereof and thereof; it being the intent of each Guarantor
that the guaranty set forth herein shall be a continuing guaranty of
payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping,
observance, and fulfillment by the Company of all duties, agreements,
covenants and obligations of the Company contained in the Note
Agreement and the Notes.
All of the obligations set forth in subparagraph (a) and subparagraph (b) of
this paragraph 2.1 are referred to herein as the "GUARANTEED OBLIGATIONS" and
the joint and several guaranty thereof contained herein is referred to herein as
the "UNCONDITIONAL GUARANTEE". The Unconditional Guarantee is a primary,
original and immediate obligation of each Guarantor and is an absolute,
unconditional, continuing and irrevocable guaranty of payment and performance
and shall remain in full force and effect until the full, final and indefeasible
payment in cash of the Guaranteed Obligations.
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<PAGE> 7
2.2 PERFORMANCE UNDER THE NOTE AGREEMENT.
In the event the Company fails to pay, perform, keep, observe, or
fulfill any Guaranteed Obligation in the manner provided in the Notes or in the
Note Agreement, each Guarantor shall cause forthwith to be paid the moneys, or
to be performed, kept, observed, or fulfilled each of such obligations, in
respect of which such failure has occurred in accordance with the terms and
provisions of the Note Agreement and the Notes. In furtherance of the foregoing,
if an Event of Default shall exist, the Guaranteed Obligations shall, in the
manner and subject to the limitations provided in the Note Agreement for the
acceleration of the Notes, forthwith become due and payable without notice,
regardless of whether the acceleration of the Notes shall be stayed, enjoined,
delayed or otherwise prevented.
2.3 RELEASES.
Each Guarantor consents and agrees that, without notice to or by such
Guarantor and without impairing, releasing, abating, deferring, suspending,
reducing, terminating or otherwise affecting the obligations of such Guarantor
hereunder, each Noteholder, in the manner provided herein, by action or
inaction, may:
(a) compromise or settle, renew or extend the period of
duration or the time for the payment, or discharge the performance of,
or may refuse to, or otherwise not, enforce, or may, by action or
inaction, release all or any one or more parties to, any one or more of
the Notes, the Note Agreement, any other guaranty thereof or agreement
or instrument related thereto or hereto;
(b) assign, sell or transfer, or otherwise dispose of, any one
or more of the Notes;
(c) grant waivers, extensions, consents and other indulgences
to the Company or any other guarantor in respect of any one or more of
the Notes, the Note Agreement, any other guaranty thereof or any
agreement or instrument related thereto or hereto;
(d) amend, modify or supplement in any manner and at any time
(or from time to time) any one or more of the Notes, the Note
Agreement, any other guaranty thereof or any agreement or instrument
related hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guaranteed Obligations whether parties hereto or not;
and
(f) sell, exchange, release, surrender or enforce, by action
or inaction, any property at any time pledged or granted as security in
respect of
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<PAGE> 8
the Guaranteed Obligations, whether so pledged or granted by the
Company, such Guarantor or another guarantor of the Company's
obligations under the Note Agreement, the Notes, any other guaranty
thereof or any agreement or instrument related hereto.
2.4 WAIVERS.
To the fullest extent permitted by law, each Guarantor does hereby
waive:
(a) any notice of:
(i) acceptance of the Unconditional Guarantee;
(ii) any purchase of the Notes under the Note
Agreement, or the creation, existence or acquisition of any of
the Guaranteed Obligations, or the amount of the Guaranteed
Obligations, subject to such Guarantor's right to make inquiry
of each Noteholder to ascertain the amount of the Guaranteed
Obligations owing to such Noteholder at any reasonable time;
(iii) any adverse change in the financial condition
of the Company or any other fact that might increase, expand
or affect such Guarantor's risk hereunder;
(iv) presentment for payment, demand, protest, and
notice thereof as to the Notes or any other instrument;
(v) any Default or Event of Default; and
(vi) any notice or demand of any kind or nature
whatsoever to which such Guarantor might otherwise be entitled
(except if such notice or demand is specifically otherwise
required to be given to such Guarantor pursuant to the terms
of this Guarantee);
(b) any right, by statute or otherwise, to require any
Noteholder to institute suit against the Company or any other guarantor
or to exhaust the rights and remedies of any Noteholder against the
Company or any other guarantor, such Guarantor being bound to the
payment of each and all Guaranteed Obligations, whether now existing or
hereafter accruing, as fully as if such Guaranteed Obligations were
directly owing to the Noteholders by the Guarantor;
(c) the benefit of any stay (except in connection with a
pending appeal), valuation, appraisal, redemption or extension law now
or at any time
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<PAGE> 9
hereafter in force which, but for this waiver, might be applicable to
any sale of property of such Guarantor made under any judgment, order
or decree based on this Guarantee, and such Guarantor covenants that it
will not at any time insist upon or plead, or in any manner claim or
take the benefit or advantage of, such law;
(d) any defense or objection to the absolute, primary,
continuing nature, or the validity, enforceability or amount, of the
Unconditional Guarantee, including, without limitation, any defense
based on (and the primary, continuing nature, and the validity,
enforceability and amount, of the Unconditional Guarantee shall be
unaffected by), any of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect to
the issuance or assumption of any obligations (including,
without limitation, the Note Agreement, the Notes or any
agreement or instrument related hereto) by the Company or any
other Person;
(iv) the execution and delivery of any agreement at
any time hereafter (including, without limitation, the Note
Agreement, the Notes or any agreement or instrument related
hereto) of the Company or any other Person;
(v) the genuineness, validity, regularity or
enforceability of any of the Guaranteed Obligations;
(vi) any default, failure or delay, willful or
otherwise, in the performance of any obligations by the
Company or such Guarantor;
(vii) any creditors' rights, bankruptcy, receivership
or other insolvency proceeding of the Company or such
Guarantor, or sequestration or seizure of any property of the
Company or such Guarantor, or any merger, consolidation,
reorganization, dissolution, liquidation or winding up or
change in corporate constitution or corporate identity or loss
of corporate identity of the Company or such Guarantor;
(viii) any disability or other defense of the Company
or such Guarantor to payment and performance of all Guaranteed
Obligations other than the defense that the Guaranteed
Obligations shall have been fully and finally performed and
indefeasibly paid in cash;
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<PAGE> 10
(ix) the cessation from any cause whatsoever of the
liability of the Company or such Guarantor in respect of the
Guaranteed Obligations (other than as provided herein), and
any other defense that such Guarantor may otherwise have
against the Company or any Noteholder;
(x) impossibility or illegality of performance on the
part of the Company or such Guarantor under the Note
Agreement, the Notes or this Guarantee;
(xi) any change of the circumstances of the Company,
such Guarantor or any other Person, whether or not foreseen or
foreseeable, whether or not imputable to the Company or such
Guarantor, including, without limitation, impossibility of
performance through fire, explosion, accident, labor
disturbance, floods, droughts, embargoes, wars (whether or not
declared), civil commotions, acts of God or the public enemy,
delays or failure of suppliers or carriers, inability to
obtain materials, economic or political conditions, or any
other causes affecting performance, or any other force
majeure, whether or not beyond the control of the Company or
such Guarantor and whether or not of the kind hereinbefore
specified;
(xii) any attachment, claim, demand, charge, Lien,
order, process, encumbrance or any other happening or event or
reason, similar or dissimilar to the foregoing, or any
withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or
any claims, demands, charges, Liens or encumbrances of any
nature, foreseen or unforeseen, incurred by any Person, or
against any sums payable under the Note Agreement or the Notes
or any agreement or instrument related hereto so that such
sums would be rendered inadequate or would be unavailable to
make the payment as herein provided;
(xiii) any change in the ownership of the equity
securities of the Company, such Guarantor or any other Person
liable in respect of the Notes; or
(xiv) any other action, happening, event or reason
whatsoever that shall delay, interfere with, hinder or
prevent, or in any way adversely affect, the performance by
the Company or such Guarantor
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<PAGE> 11
of any of its obligations under the Note Agreement, the Notes
or this Guarantee.
2.5 CERTAIN WAIVERS OF SUBROGATION, REIMBURSEMENT AND INDEMNITY.
Each Guarantor hereby acknowledges and agrees that:
(a) such Guarantor shall not have any right of subrogation,
contribution, reimbursement, or indemnity whatsoever in respect of the
Guaranteed Obligations, and no right of recourse to or with respect to
any assets or property of the Company;
(b) it will not file any claims against the Company or the
estate of the Company in the course of any proceeding under any
applicable bankruptcy or insolvency law in respect of the rights
referred to in this paragraph 2.5; and
(c) each holder of Notes may specifically enforce the
provisions of this paragraph 2.5.
2.6 INVALID PAYMENTS.
Each Guarantor further agrees that, to the extent the Company makes a
payment or payments to any Noteholder, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required, for any of the foregoing reasons or for any other reason,
to be repaid or paid over to a custodian, trustee, receiver or any other party
or officer under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction, state
or federal law, or any common law or equitable cause, or is paid over to any
Person by operation of the provisions of Section 7 of the Note Agreement or
Section 5 of this Guarantee, then to the extent of such payment or repayment,
the obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made and such
Guarantor shall be primarily liable for such obligation.
2.7 MARSHALING.
Each Guarantor consents and agrees that each Noteholder, and each
Person acting for the benefit of each Noteholder, shall be under no obligation
to marshal any assets in favor of such Guarantor or against or in payment of any
or all of the Guaranteed Obligations.
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<PAGE> 12
2.8 SUBORDINATION OF AFFILIATE OBLIGATIONS.
In the event that, for any reason whatsoever, the Company or a Person
obligated in respect of the Guaranteed Obligations pursuant to another guaranty,
is now or hereafter becomes indebted to any Guarantor in any manner (an
"AFFILIATE OBLIGATION"), such Guarantor agrees that the amount of such Affiliate
Obligation, interest thereon, and all other amounts due with respect thereto,
shall, at all times during the existence of a Default or an Event of Default, be
subordinate as to time of payment and in all other respects to all the
Guaranteed Obligations, and that such Guarantor shall not be entitled to enforce
or receive payment thereof until all sums then due and owing to the Noteholders
in respect of the Guaranteed Obligations shall have been paid in full, except
that such Guarantor may enforce any obligations in respect of any such Affiliate
Obligation owing to such Guarantor from the Company or such indebted Person so
long as all proceeds in respect of any recovery from such enforcement, to the
extent of all amounts owing with respect to this Guarantee, shall be held by
such Guarantor in trust for the benefit of the Noteholders. If any other
payment, other than pursuant to the immediately preceding sentence, shall have
been made to such Guarantor by the Company or such indebted Person on any such
Affiliate Obligation during any time that a Default or an Event of Default
exists and there are Guaranteed Obligations outstanding, such Guarantor shall
hold in trust all such payments, to the extent of all amounts owing with respect
to this Guarantee, for the benefit of the Noteholders.
2.9 SETOFF, COUNTERCLAIM OR OTHER DEDUCTIONS.
Except as otherwise required by law, each payment by any Guarantor
shall be made without setoff, counterclaim or other deduction.
2.10 ELECTION BY GUARANTOR TO PERFORM OBLIGATIONS.
Any election by any Guarantor to pay or otherwise perform any of the
obligations of the Company under the Notes, the Note Agreement or any agreement
or instrument related hereto shall not release the Company, such Guarantor, any
other Guarantor or any other guarantor from such obligations or any of such
Person's other obligations under the Notes, the Note Agreement or any agreement
or instrument related hereto.
2.11 NO ELECTION OF REMEDIES BY NOTEHOLDERS.
Each Noteholder shall, individually or collectively, have the right to
seek recourse against each Guarantor to the fullest extent provided for herein
for such Guarantor's obligations under this Guarantee in respect of the
Guaranteed Obligations. No election to proceed in one form of action or
proceeding, or against
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<PAGE> 13
any party, or on any obligation, shall constitute a waiver of such Noteholder's
right to proceed in any other form of action or proceeding or against other
parties unless such Noteholder has expressly waived such right in writing.
Specifically, but without limiting the generality of the foregoing, no action or
proceeding by any Noteholder against the Company or such Guarantor under any
document or instrument evidencing obligations of the Company or such Guarantor
to such Noteholder shall serve to diminish the liability of such Guarantor under
this Guarantee, except to the extent that such Noteholder finally and
unconditionally shall have realized payment by such action or proceeding.
2.12 SEPARATE ACTION; OTHER ENFORCEMENT RIGHTS.
Each of the rights and remedies granted under this Guarantee to each
Noteholder in respect of the Notes held by such Noteholder may be exercised by
such Noteholder with notice by such Noteholder to, but without the consent of or
any other action by, any other Noteholder; provided, however, that the maturity
of the Notes may only be accelerated in accordance with the provisions of the
Note Agreement or operation of law. Each Noteholder may proceed to protect and
enforce the Unconditional Guarantee by suit or suits or proceedings in equity,
at law or in bankruptcy, and whether for the specific performance of any
covenant or agreement contained herein or in execution or aid of any power
herein granted or for the recovery of judgment for the obligations hereby
guarantied or for the enforcement of any other proper, legal or equitable remedy
available under applicable law.
2.13 NOTEHOLDER SETOFF.
Each Noteholder shall have, to the fullest extent permitted by law and
this Guarantee, a right of set-off against any and all credits and any and all
other property of each or all of any Guarantor or any other Person, now or at
any time whatsoever, with or in the possession of, such Noteholder, or anyone
acting for such Noteholder, to ensure the full performance of any and all
obligations of all Guarantors hereunder.
2.14 DELAY OR OMISSION; NO WAIVER.
No course of dealing on the part of any Noteholder and no delay or
failure on the part of any such Person to exercise any right hereunder shall
impair such right or operate as a waiver of such right or otherwise prejudice
such Person's rights, powers and remedies hereunder. Every right and remedy
given by the Unconditional Guarantee or by law to any Noteholder may be
exercised from time to time as often as may be deemed expedient by such Person.
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<PAGE> 14
2.15 RESTORATION OF RIGHTS AND REMEDIES.
If any Noteholder shall have instituted any proceeding to enforce any
right or remedy under the Unconditional Guarantee or under any Note held by such
Noteholder, and such proceeding shall have been dismissed, discontinued or
abandoned for any reason, or shall have been determined adversely to such
Noteholder, then and in every such case each such Noteholder, the Company and
each Guarantor shall, except as may be limited or affected by any determination
(including, without limitation, any determination in connection with any such
dismissal) in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid, the rights and remedies of such Noteholders shall continue as though
no such proceeding had been instituted.
2.16 CUMULATIVE REMEDIES.
No remedy under this Guarantee, the Note Agreement or the Notes is
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given pursuant to this
Guarantee, the Note Agreement or the Notes.
2.17 NOTICES IN RESPECT OF PAYMENTS.
If any Guarantor shall pay to any Noteholder any amount in respect of
the Guaranteed Obligations, such Guarantor, within five (5) Business Days after
making such payment, shall provide notice of such payment to each other
Noteholder.
2.18 LIMITATION ON GUARANTIED OBLIGATIONS.
Notwithstanding anything in Section 2.1 or elsewhere in this Guarantee
or any other Financing Document to the contrary, the obligations of each
Guarantor hereunder shall at each point in time be limited to an aggregate
amount equal to the greatest amount that would not result in such obligations
being subject to avoidance, or otherwise result in such obligations being
unenforceable, at such time under applicable law (including, without limitation,
to the extent, and only to the extent, applicable to such Guarantor, Section 548
of the Bankruptcy Code of the United States of America) and any comparable
provisions of the law of any other jurisdiction, any capital preservation law of
any jurisdiction and any other law of any jurisdiction that at such time limits
the enforceability of the obligations of such Guarantor hereunder.
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<PAGE> 15
2.19 CONFIRMATION OF GUARANTEE.
Promptly following the request of any holder of Notes in connection
with any issuance of additional Notes pursuant to the terms of the Note
Agreement, each Guarantor agrees to confirm in writing that the Unconditional
Guarantee hereunder extends to the obligations of the Company evidenced by such
newly issued Notes, and that such Notes are Guaranteed Obligations hereunder.
Each Initial Guarantor by its execution hereof confirms and acknowledges that
this Guarantee is an amendment and restatement of its previously delivered
guaranty of the Note Agreement and the Notes.
2.20 JOINT AND SEVERAL OBLIGATIONS.
The obligations of the Guarantors hereunder shall be joint and several
in all respects.
3. INTERPRETATION OF THIS GUARANTEE
3.1 TERMS DEFINED.
As used in this Guarantee, the capitalized terms have the meaning
specified in the Note Agreement unless otherwise set forth in this Guarantee
(such definitions, unless otherwise expressly provided, to be equally applicable
to both the singular and plural forms of the terms defined).
3.2 PARAGRAPH HEADINGS AND CONSTRUCTION.
(a) PARAGRAPH HEADINGS, ETC. The titles of the paragraphs
appear as a matter of convenience only, do not constitute a part hereof
and shall not affect the construction hereof. The words "herein,"
"hereof," "hereunder" and "hereto" refer to this Guarantee as a whole
and not to any particular paragraph or other subdivision.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
4. WARRANTIES AND REPRESENTATIONS
Each Guarantor warrants and represents, as of the date hereof, as
follows:
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4.1 REPRESENTATIONS AND WARRANTIES IN SECURITIES PURCHASE
AGREEMENT.
Each of the warranties and representations made by the Company in
Section 2 of the Securities Purchase Agreement with respect to such Guarantor
generally are true with respect to such Guarantor on the date hereof.
4.2 DUE AUTHORIZATION; ENFORCEABILITY.
(a) UNCONDITIONAL GUARANTEE IS LEGAL AND AUTHORIZED. The
execution and delivery of the Unconditional Guarantee by such Guarantor
and compliance by such Guarantor with all of the provisions hereof:
(i) is within the corporate powers of such Guarantor;
and
(ii) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default
under, or result in the creation of any Lien upon any Property
of such Guarantor under the provisions of:
(A) any agreement, charter instrument, bylaw
or other instrument to which such Guarantor is a
party or by which such Guarantor is or may be bound;
(B) any order, judgment, decree, or ruling
of any court, arbitrator or Governmental Authority
applicable to such Guarantor or any of its Property;
or
(C) any statute or other rule or regulation
of any Governmental Authority applicable to the
Company or any of its Property.
(b) OBLIGATIONS ARE ENFORCEABLE. The Unconditional Guarantee
has been duly authorized by all necessary action on the part of such
Guarantor, has been executed and delivered by one or more duly
authorized officers of such Guarantor, and constitutes a legal, valid
and binding obligation of such Guarantor, enforceable in accordance
with its terms, except that:
(i) the enforceability thereof may be limited by
applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium, fraudulent conveyance or other similar
laws affecting the enforceability of creditors' rights
generally and subject to the availability of equitable
remedies; and
13
<PAGE> 17
(ii) rights to indemnity and contribution contained
therein may be limited by applicable law or public policy.
4.3 GOVERNMENTAL CONSENT.
(a) Neither the execution and delivery of this Guarantee by
such Guarantor, nor the performance of the obligations of such
Guarantor hereunder, is such as to require a consent, approval or
authorization of, or pre-filing, registration or qualification with,
any Governmental Authority on the part of such Guarantor as a condition
hereto, except for such consents, approvals, authorizations,
pre-filings, registrations and qualifications as have been obtained on
or prior to the date hereof.
(b) Neither the execution and delivery of this Guarantee by
such Guarantor, nor the incurrence of obligations represented hereby,
nor the performance of its obligations hereunder:
(i) is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts of
the United States of America (49 U.S.C.), as amended, or the
Federal Power Act, as amended; or
(ii) violates any provision of any statute or other
rule or regulation of any Governmental Authority applicable to
such Guarantor.
4.4 NATURE OF BUSINESS OF COMPANY AND GUARANTOR.
The Company has sought and obtained the Note Agreement, the sale of the
Notes and the related transactions based upon the consolidated financial
position of the Company, such Guarantor and the other Subsidiaries and such
Guarantor understands that the Purchasers are relying upon the consolidated
financial condition of the Company and the Subsidiaries an the Unconditional
Guarantee made in this Guarantee in purchasing the Notes.
4.5 SOLVENCY.
The fair value of the business and assets of each of the Company, each
Guarantor and any other guaranteeing Subsidiary of the Company exceeds the
amount that will be required to pay the Company's liabilities (including,
without limitation, contingent, subordinated, unmatured and unliquidated
liabilities on existing debts, as such liabilities may become absolute and
matured), in each case
14
<PAGE> 18
after giving effect to the transactions contemplated by the Note Agreement, the
Notes and this Guarantee. Neither the Company nor any of the Guarantors, after
giving effect to the transactions contemplated by the Note Agreement, the Notes
and this Guarantee, will be insolvent or will be engaged in any business or
transaction, or about to engage in any business or transaction, for which such
Person has unreasonably small assets or capital (within the meaning of the
Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act and
Section 548 of Title 11 of the United States Code), and neither any Guarantor
nor the Company has any intent to hinder, delay or defraud any entity to which
it is, or will become, on or after the Closing Date, indebted or incur debts
that would be beyond its ability to pay as they mature.
5. SUBORDINATION TO SENIOR OBLIGATIONS
The Guaranteed Obligations with respect to each Guarantor are
subordinate and junior in right of payment to any and all:
(a) Guaranties or other indebtedness of such Guarantor owing
to the holders of Senior Debt in respect of the Senior Debt; and
(b) indebtedness or Securities of such Guarantor payable to
the Company and pledged as collateral security for the repayment of
Senior Debt;
in each case, to the same extent and on the same terms as the Subordinated Debt
is subordinated to the Senior Debt pursuant to the provisions of Section 7 of
the Note Agreement. The provisions of Section 7 of the Note Agreement and the
defined terms set forth in Section 8.1 of the Note Agreement, to the extent used
in such Section 7, are hereby incorporated in their entirety herein, mutatis
mutandis, by this reference thereto. Each Noteholder shall be deemed to
acknowledge and agree that the these subordination provisions are, and are
intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt. Notwithstanding anything contained in this
Guarantee or any other Financing Document to the contrary, this Section 5 may
not, directly or indirectly, be amended, modified, supplemented or waived
without the prior written consent of the Senior Agent, on behalf of the Senior
Lenders, for so long as the Senior Credit Agreement shall exist, and,
thereafter, the holders of the Senior Debt.
15
<PAGE> 19
6. GENERAL COVENANTS
Each Guarantor covenants and agrees that on and after the date hereof
and so long as any of the Guaranteed Obligations shall be outstanding:
6.1 UNDERTAKINGS IN NOTE AGREEMENT.
Such Guarantor will comply with each of the undertakings of the Company
in the Note Agreement in respect of which the Company undertakes to cause such
Guarantor to comply with such undertakings, as if such undertakings (as they
apply to such Guarantor) were set forth at length herein as the undertakings of
such Guarantor.
6.2 PAYMENT OF NOTES AND MAINTENANCE OF OFFICES.
Such Guarantor will punctually pay, or cause to be paid, all of the
Guaranteed Obligations when due and all other payment obligations required of it
hereunder and will maintain an office at its address as set forth in paragraph
7.3 where notices, presentations and demands in respect of this Guarantee may be
made upon it. Such office will be maintained at such address until such time as
such Guarantor shall notify the Noteholders of any change of location of such
office.
6.3 FURTHER ASSURANCES.
Such Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Required Holders shall reasonably
request to carry out, to the reasonable satisfaction of the Required Holders,
the transactions contemplated by this Guarantee and the other Financing
Documents.
7. MISCELLANEOUS
7.1 SUCCESSORS AND ASSIGNS.
(a) Whenever any Guarantor or any of the parties to the Note
Agreement is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all the covenants, promises
and agreements contained in this Guarantee by or on behalf of any
Guarantor shall bind the successors and assigns of such Guarantor and
shall inure to the benefit of each of the Noteholders from time to time
whether so expressed or not and whether or not an assignment of the
rights hereunder shall have been delivered in connection with any
assignment or other transfer of Notes.
(b) Each Guarantor agrees to take such action as may be
reasonably requested by any Noteholder in connection with the purchase
by such
16
<PAGE> 20
Noteholder or the transfer of the Notes of such Noteholder in
accordance with the requirements of the Note Agreement in connection
with providing an executed copy of this Guarantee to the new Noteholder
or Noteholders of such Notes; provided, however, that no additional
obligations of any Guarantor shall thereby be created (beyond what is
provided by this Guarantee).
7.2 PARTIAL INVALIDITY.
The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions contained herein
unenforceable or invalid.
7.3 COMMUNICATIONS.
All communications to the Noteholders or the Company hereunder shall be
in writing, shall be delivered in the manner, to the addresses, and with the
effect, as provided by the Note Agreement. All communications to any Guarantor
shall be made in care of the Company in the manner, to the address and with the
effect provided in the Note Agreement.
7.4 GOVERNING LAW.
THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7.5 EFFECTIVE DATE.
This Guarantee shall be effective as of the date first written above,
provided however that the guarantees of the Note Agreement and the Notes made
previously by the Initial Guarantors have been effective from the date such
guarantees were first executed and delivered and this Guarantee merely amends
and restates the obligations of such Persons in respect thereof.
7.6 BENEFITS OF GUARANTEE RESTRICTED TO NOTEHOLDERS.
Nothing express or implied in this Guarantee is intended or shall be
construed to give to any Person other than the Guarantors and the Noteholders
any legal or equitable right, remedy or claim under or in respect hereof or any
covenant, condition or provision therein or herein contained; and all such
covenants, conditions and provisions are and shall be held to be for the sole
and exclusive benefit of the Guarantors and the Noteholders.
17
<PAGE> 21
7.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein or made in writing
by any Guarantor in connection herewith shall survive the execution and delivery
hereof.
7.8 EXPENSES.
(a) The Guarantors shall, jointly and severally, pay when
billed the reasonable costs and expenses (including reasonable
attorneys' fees) incurred by the Noteholders in connection with the
consideration, negotiation, preparation or execution of any amendments,
waivers, consents, standstill agreements and other similar agreements
with respect hereto (whether or not any such amendments, waivers,
consents, standstill agreements or other similar agreements are
executed).
(b) At any time when any of the Company or any Guarantor and
the Noteholders are conducting restructuring or workout negotiations in
respect hereof, or a Default or Event of Default exists, the Guarantors
shall, jointly and severally, pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and the reasonable fees
of professional advisors) incurred by the Noteholders in connection
with the assessment, analysis or enforcement of any rights or remedies
that are or may be available to the Noteholders. (c) If any Guarantor
shall fail to pay when due any principal of, or Prepayment Compensation
Amount or interest on, any Note, the Guarantors shall, jointly and
severally, pay to each Noteholder, to the extent permitted by law, such
amounts as shall be sufficient to cover the costs and expenses,
including but not limited to reasonable attorneys' fees, incurred by
such Noteholder in collecting any sums due on the Notes.
7.9 AMENDMENT.
This Guarantee may be amended only in a writing executed by the
Guarantors and the Required Holders.
7.10 SURVIVAL.
So long as the Guaranteed Obligations and all payment obligations of
the Guarantors hereunder shall not have been fully and finally performed and
indefeasibly paid, the obligations of the Guarantors hereunder shall survive the
transfer and payment of any Note and the payment in full of all the Notes.
18
<PAGE> 22
7.11 ENTIRE AGREEMENT.
This Guarantee constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
7.12 DUPLICATE ORIGINALS.
Two or more duplicate counterpart originals hereof may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
7.13 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS GUARANTEE OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTEE, OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS GUARANTEE OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW YORK
STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS
SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
GUARANTEE, THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO
THE NONEXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN
ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
19
<PAGE> 23
THIS GUARANTEE OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED
HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
[REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
20
<PAGE> 24
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be
executed on its behalf by a duly authorized officer of such Guarantor.
ALLIED - PERRICONE, INC
COLUMBIA MARKETING SERVICES, INC.
THE ELEANOR CORPORATION
FRANCISCO ACQUISITION CORP.
FRESH AMERICA ARIZONA, INC.
FRESH AMERICA FLORIDA, INC.
FRESH AMERICA LOUISIANA, INC.
JNC ACQUISITION CORP.
TORONTO CORPORATION, INC.
HEREFORD HAVEN, INC.
By
---------------------------------
Name: John H. Gray
Title: Vice President
[Signature page to Omnibus Guarantee]
<PAGE> 25
[FORM OF]
SUBSIDIARY GUARANTOR
ACCESSION AGREEMENT
Reference is made to (a) the Amended and Restated Note Agreement, dated
as of April 15, 2000 (as amended, the "Note Agreement"), between Fresh America
Corp., a Texas corporation (the "Company"), and each of the other parties
thereto, governing the Company's 12% Senior Subordinated Notes due May 1, 2007
(as amended, the "Notes") and (b) the Omnibus Subordinated Guarantee (Including
Amendment and Restatement of Certain Existing Guarantees), dated as of April 15,
2000 (as amended, the "Subsidiary Guarantee"), by certain Subsidiaries of the
Company in favor of the holders from time to time of the Notes issued by the
Company. All terms used herein and not defined herein have the respective
meanings assigned to such terms pursuant to the Note Agreement.
The Note Agreement requires certain Subsidiaries of the Company to
provide guarantees of, inter alia, the Company's obligations in respect of the
Notes and the Note Agreement. The undersigned, a ________ (the "Additional
Subsidiary Guarantor"), by its execution and delivery of this Subsidiary
Guarantor Accession Agreement, does hereby agree to become, and does hereby
become, (a) a party to the Subsidiary Guarantee and (b) bound by the terms and
conditions of the Subsidiary Guarantee, including, without limitation, becoming
jointly and severally liable with the Subsidiary Guarantors for the Guaranteed
Obligations (as defined in the Subsidiary Guarantee) and for the due and
punctual performance and observance of all the covenants in the Notes and the
Note Agreement to be performed or observed by the Company, all as more
particularly provided for in the Subsidiary Guarantee. As of the date of
execution and delivery of this Subsidiary Guarantor Accession Agreement, the
Subsidiary Guarantee is hereby, without any further action, amended to add the
Additional Subsidiary Guarantor as a "Guarantor" and signatory to the Subsidiary
Guarantee.
IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused this
Subsidiary Guarantor Accession Agreement to be executed on its behalf by a duly
authorized officer or agent thereof as of the date first above written.
[ADDITIONAL SUBSIDIARY GUARANTOR]
By
------------------------------
Name:
Title:
<PAGE> 26
ANNEX 1
INITIAL GUARANTORS
<PAGE> 27
ANNEX 2
ADDITIONAL GUARANTORS
<PAGE> 1
EXHIBIT 10.4
- -------------------------------------------------------------------------------
FRESH AMERICA CORP.
-----------------------------
SECURITIES PURCHASE AGREEMENT
-----------------------------
DATED AS OF APRIL 15, 2000
50,000 SHARES SERIES C CUMULATIVE PREFERRED STOCK
420,651 SERIES B WARRANTS TO PURCHASE COMMON STOCK
- -------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C> <C>
SECTION 1. PURCHASE AND SALE OF SECURITIES.................................................................1
1.1 ISSUE OF SECURITIES BY THE COMPANY.......................................................................1
1.2 THE CLOSING..............................................................................................2
1.3 ALLOCATION OF TAX BASIS..................................................................................3
SECTION 2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY...................................................3
2.1 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE......................................................3
2.2 SUBSIDIARIES AND AFFILIATES..............................................................................5
2.3 TITLE TO PROPERTIES......................................................................................5
2.4 TAXES....................................................................................................6
2.5 PENDING LITIGATION.......................................................................................6
2.6 CORPORATE ORGANIZATION AND AUTHORITY.....................................................................7
2.7 CHARTER INSTRUMENTS, OTHER AGREEMENTS....................................................................7
2.8 RESTRICTIONS ON THE COMPANY..............................................................................7
2.9 COMPLIANCE WITH LAW......................................................................................8
2.10 PENSION PLANS.........................................................................................8
2.11 ENVIRONMENTAL COMPLIANCE.............................................................................10
2.12 DUE AUTHORIZATION; ENFORCEABILITY; DUE ISSUANCE, ETC.................................................10
2.13 GOVERNMENTAL CONSENT TO SALE OF PURCHASED SECURITIES.................................................12
2.14 HART-SCOTT-RODINO COMPLIANCE.........................................................................13
2.15 NO DEFAULTS..........................................................................................13
2.16 PRIVATE OFFERING OF PURCHASED SECURITIES.............................................................13
2.17 USE OF PROCEEDS......................................................................................14
2.18 CAPITALIZATION.......................................................................................14
2.19 SOLVENCY.............................................................................................15
2.20 FULL DISCLOSURE......................................................................................16
SECTION 3. REPRESENTATIONS OF THE PURCHASERS..............................................................16
3.1 PURCHASE FOR INVESTMENT.................................................................................16
3.2 ERISA...................................................................................................16
SECTION 4. CLOSING CONDITIONS.............................................................................18
4.1 OPINIONS OF COUNSEL.....................................................................................18
4.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE.........................................................19
4.3 OFFICERS' CERTIFICATES..................................................................................19
4.4 ORGANIC DOCUMENTS.......................................................................................19
4.5 LEGALITY................................................................................................20
4.6 FINANCING DOCUMENTS.....................................................................................20
4.7 RESERVATION OF SHARES...................................................................................21
4.8 CERTAIN CONSENTS........................................................................................21
4.9 PRIVATE PLACEMENT NUMBERS...............................................................................22
4.10 FEES AND EXPENSES....................................................................................22
4.11 OTHER PURCHASERS.....................................................................................22
4.12 PROCEEDINGS SATISFACTORY.............................................................................22
SECTION 5. INTERPRETATION OF THIS AGREEMENT...............................................................23
5.1 TERMS DEFINED...........................................................................................23
5.2 OTHER DEFINITIONS.......................................................................................26
5.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.................................................27
5.4 GOVERNING LAW...........................................................................................27
SECTION 6. MISCELLANEOUS..................................................................................27
6.1 COMMUNICATIONS..........................................................................................27
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
6.2 REPRODUCTION OF DOCUMENTS...............................................................................28
6.3 SURVIVAL................................................................................................28
6.4 SUCCESSORS AND ASSIGNS..................................................................................29
6.5 AMENDMENT AND WAIVER....................................................................................29
6.6 EXPENSES................................................................................................29
6.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC......................................................29
6.8 INDEMNIFICATION OF EACH PURCHASER.......................................................................31
6.9 ENTIRE AGREEMENT........................................................................................31
6.10 EXECUTION IN COUNTERPART.............................................................................32
Annex 1 - Information as to Purchasers
Annex 2 - Payment Instructions; Address of Company for Notices
Annex 3 - Information as to Company
Exhibit 1.1(a) - Form of Certificate of Designation
Exhibit 1.1(b) - Form of Amended and Restated Warrant Agreement
Exhibit 4.1(a) - Form of Opinion of Company Counsel
Exhibit 4.1(b) - Form of Opinion of Purchasers' Counsel
Exhibit 4.3(a) - Form of Officers' Certificate
Exhibit 4.3(b) - Form of Secretary's Certificate - Company
Exhibit 4.3(c) - Form of Secretary's Certificate - Guarantors
Exhibit 4.6(a) - Form of Amended and Restated Note Agreement
Exhibit 4.6(e) -- Form of Amended and Restated Guarantee
</TABLE>
-iii
<PAGE> 4
FRESH AMERICA CORP.
SECURITIES PURCHASE AGREEMENT
50,000 SHARES SERIES C CUMULATIVE PREFERRED STOCK
420,651 SERIES B WARRANTS TO PURCHASE COMMON STOCK
Dated as of April 15, 2000
To the Purchaser Listed on
Annex 1 attached hereto
Ladies and Gentlemen:
FRESH AMERICA CORP. (together with any successors and assigns who
become such in accordance herewith, the "COMPANY"), a Texas corporation, hereby
agrees with you as set forth below.
SECTION 1. PURCHASE AND SALE OF SECURITIES.
1.1 ISSUE OF SECURITIES BY THE COMPANY.
(a) ISSUE OF CUMULATIVE PREFERRED STOCK. The Company will
authorize the issue of Fifty Thousand (50,000) shares of its Series C
Cumulative Redeemable Preferred Stock, par value $1.00 per share (all
such stock, whether initially issued, or issued in exchange or
substitution for, any such stock, in each case in accordance with the
Certificate of Designation, collectively, the "CUMULATIVE PREFERRED
STOCK"). The Cumulative Preferred Stock shall have a stated value of
One Hundred Dollars ($100) per share and shall be issued pursuant to,
and shall have the terms as provided in, the Certificate of
Designation substantially in the form of Exhibit 1.1(a) (the
"CERTIFICATE OF DESIGNATION").
(b) ISSUE OF WARRANTS. The Company will authorize the issue
of an aggregate of Four Hundred Twenty Thousand Six Hundred Fifty-One
(420,651) Series B Warrants (the "SERIES B WARRANTS") to purchase
shares of Common Stock. The Series B Warrants shall be issued pursuant
to an Amended and Restated Warrant Agreement dated as of April 15,
2000 (as
1
<PAGE> 5
may be amended, restated or otherwise modified from time to time, the
"AMENDED AND RESTATED WARRANT AGREEMENT") in the form of Exhibit
1.1(b). The certificates representing the Series B Warrants (the
"SERIES B WARRANT CERTIFICATES") shall be in the form of Attachment B
to the Amended and Restated Warrant Agreement, and the Series B
Warrants shall have the terms provided in the Series B Warrant
Certificates and the Amended and Restated Warrant Agreement.
1.2 THE CLOSING.
(a) PURCHASE AND SALE OF PURCHASED SECURITIES. The Company
hereby agrees to sell to you and you hereby agree to purchase from the
Company, in accordance with the provisions hereof, the aggregate
number of shares of Series C Cumulative Preferred Stock set forth
below your name on Annex 1 and the aggregate number of Series B
Warrants set forth below your name on Annex 1, at an aggregate
purchase price for such Series C Cumulative Preferred Stock and Series
B Warrants equal to one hundred percent (100%) of the Stated Value of
the Cumulative Preferred Stock to be purchased.
(b) THE CLOSING. The closing (the "CLOSING") of the sale of
the Purchased Securities will be held at 10:00 a.m., local time, on
April 28, 2000, or such other time and date as the Other Purchasers,
the Company and you shall agree (the "CLOSING DATE"), at the offices
of Bingham Dana LLP, One State Street, Hartford, Connecticut 06103. At
the Closing:
(i) the Company will deliver to you one or more
certificates evidencing the shares of the Series C Cumulative
Preferred Stock (as set forth below your name on Annex 1), in
the denominations indicated on Annex 1, in the aggregate
principal amount of your purchase, dated the Closing Date and
registered in the name of the holder indicated on Annex 1;
and
(ii) the Company will deliver to you one or more Series B
Warrant Certificates (as set forth below your name on Annex
1), representing the number of Series B Warrants indicated on
such Annex 1, and registered in the name of the holder
indicated on Annex 1;
against payment by federal funds wire transfer in immediately
available funds of the purchase price therefor, as directed by the
Company on Annex 2, which shall be an account at a bank located in the
United States of America.
(c) OTHER PURCHASERS. Contemporaneously with the execution
and delivery hereof, the Company is entering into a separate
Securities Purchase
-2-
<PAGE> 6
Agreement identical (except for the name and signature of the
purchaser) to this Agreement (this Agreement and such other separate
Securities Purchase Agreements, each as from time to time amended or
modified, being herein sometimes referred to as the "SECURITIES
PURCHASE AGREEMENTS") with each other purchaser (individually, an
"OTHER PURCHASER," and collectively, the "OTHER PURCHASERS") listed on
Annex 1, providing for the sale to each Other Purchaser of the
Purchased Securities set forth below its name on such Annex. The sales
of the Purchased Securities to you and to each Other Purchaser are
separate sales.
1.3 ALLOCATION OF TAX BASIS.
You and the Company agree, for accounting and income tax purposes, and
all purposes hereunder, of the Five Million Dollar ($5,000,000) aggregate
purchase price for the Purchased Securities, Four Million Nine Hundred
Ninety-Five Thousand Seven Hundred Ninety-Three and 49/100 Dollars
($4,995,793.49) shall be allocated to the purchase price of the Cumulative
Preferred Stock and Four Thousand Two Hundred Six and 51/100 Dollars
($4,206.51) shall be allocated to the purchase price of the Series B Warrants.
You and the Company agree to use the foregoing as your basis in the Cumulative
Preferred Stock and the Series B Warrants for all United States federal, state
and local income tax purposes with respect to the transactions contemplated
hereby and by the other Financing Documents.
SECTION 2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
To induce you to enter into this Agreement and to purchase and pay for
the Purchased Securities to be delivered to you at each Closing, the Company
warrants and represents, as of the Closing Date, as follows:
2.1 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE.
(a) FINANCIAL STATEMENTS. The Company has provided you with
the financial statements of the Company described on Part 2.1(a) of
Annex 3. Such financial statements present fairly in all material
respects the financial position of the Company and the Subsidiaries on
a consolidated basis as of the respective dates specified in such Part
and the results of their consolidated operations and cash flows for
the respective periods so specified in conformity with GAAP applied on
a consistent basis throughout the periods involved.
(b) DEBT. PART 2.1(b) OF ANNEX 3 lists, after giving effect
to the transactions contemplated hereby and by the other Financing
Documents, all
-3-
<PAGE> 7
Debt of the Company and the Subsidiaries which has either an
outstanding principal amount or, in the case of a revolving credit or
similar facility, a commitment or commitments, of One Million Dollars
($1,000,000) or more, and provides the following information with
respect to each item of such Debt: the obligor, each guarantor thereof
and each other Person similarly liable in respect thereof, the holder
thereof, the outstanding amount as of March 31, 2000, the current
portion of the outstanding amount as at such date, the final maturity,
required sinking fund payments, and a description of the collateral
securing such Debt.
(c) LIENS. PART 2.1(c) OF ANNEX 3 lists, after giving effect
to the transactions contemplated hereby and by the other Financing
Documents, all Liens securing Debt of the Company and the Subsidiaries
which has either an outstanding principal amount or, in the case of a
revolving credit or similar facility, a commitment or commitments, of
One Million Dollars ($1,000,000) or more, and provides the following
information with respect to each Lien: the holder thereof, the Debt or
other obligations secured by such Lien, the outstanding amount thereof
and a description of the collateral.
(d) CONTINGENT OBLIGATIONS. There are no Guaranties or other
contingent obligations in respect of which disclosure is required, or
for which provisions are required to be made, in the consolidated
financial statements of the Company and the Subsidiaries in accordance
with GAAP, other than those so disclosed, and for which such provision
has been made, in the financial statements of the Company previously
delivered to you.
(e) MATERIAL ADVERSE CHANGE. Except as set forth in the 1999
Form 10-K or in PART 2.1(e) OF ANNEX 3, since December 31, 1999, there
has been no change in the business, operations, profits, financial
condition, Properties or business prospects of the Company and the
Subsidiaries, except changes that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(f) PROJECTIONS. The Company has delivered to you projected
financial statements of the Company contained in PART 2.1(f) OF ANNEX
3 (collectively, the "PROJECTIONS"). The assumptions used in
preparation of the Projections were reasonable when made. Such
Projections were prepared by the executive and financial personnel of
the Company and the Subsidiaries in the light of the business of the
Company and the Subsidiaries. Such Projections were prepared in good
faith, had a reasonable basis and represented the good faith opinion
of the Company as to the projected results of the operations of the
Company and the Subsidiaries as of the date thereof.
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2.2 SUBSIDIARIES AND AFFILIATES.
(a) OWNERSHIP OF SUBSIDIARIES. PART 2.2(a) OF ANNEX 3 sets
forth for each Subsidiary:
(i) its full legal name;
(ii) its jurisdiction of incorporation or organization;
(iii) the percentage of the Voting Stock of which is held
by the Company and each other Subsidiary.
(b) AFFILIATES. PART 2.2(b) OF ANNEX 3 sets forth the name of
each Affiliate (other than members of the families of officers and
directors of the Company) and the nature of the affiliation of such
Affiliate.
(c) IDENTIFICATION OF CERTAIN SUBSIDIARIES. PART 2.2(c) OF
ANNEX 3 sets forth the identity of each Subsidiary which is liable (as
a guarantor, borrower, co-obligor or otherwise) in respect of any of
the obligations of the Company under the Senior Credit Agreement, as
in effect on the Closing Date.
2.3 TITLE TO PROPERTIES.
(a) GENERAL. Each of the Company and the Subsidiaries has
good and marketable title to all of the Property reflected in the most
recent balance sheet referred to in Section 2.1 (except as sold or
otherwise disposed of in the ordinary course of business), free from
Liens not otherwise permitted by provisions of the Amended and
Restated Note Agreement. Each of the Company and the Subsidiaries has
maintained and kept, or caused to be maintained and kept, its
respective properties in good repair, working order and condition
(ordinary wear and tear excepted), so that the business to be carried
on in connection therewith may be properly conducted at all times.
(b) LEASES. All leases necessary for the conduct of the
business of the Company and the Subsidiaries are valid and subsisting
and are in full force and effect, except for such failures to be valid
and subsisting that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect. Each lease
of real Property grants to the Company or the Subsidiary party thereto
the right to the quiet enjoyment of the premises leased thereunder
during the term thereof.
(c) INTELLECTUAL PROPERTY. Each of the Company and the
Subsidiaries owns, possesses or has the right to use all of the
licenses,
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permits, franchises, patents, copyrights, trademarks, service marks
and trade names necessary for the present and currently planned future
conduct of its business, without any known conflict with the rights of
others, except for such failures to own, possess, or have the right to
use, that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect.
2.4 TAXES.
(a) RETURNS FILED; TAXES PAID. All material tax returns
required to be filed by the Company, any Subsidiary and each other
Person with which the Company or any Subsidiary files or has filed a
consolidated return in any jurisdiction have in fact been filed on a
timely basis. All taxes, assessments, fees and other governmental
charges upon the Company and any such Person, and upon any of their
respective Properties, income or franchises, that are due and payable
have been paid, except for such failures to pay that, in the aggregate
for all such Persons, could not reasonably be expected to have a
Material Adverse Effect. Except for the tax matters set forth on PART
2.4 OF ANNEX 3, the Company knows of no proposed additional tax
assessment against it or any such Person that could reasonably be
expected to have a Material Adverse Effect.
(b) BOOK PROVISIONS ADEQUATE. The amount of the liability for
taxes reflected in each of the statements of financial condition
referred to in Section 2.1(a) is in each case an adequate provision in
all material respects for taxes as of the dates of such statements of
financial condition (including, without limitation, any payment due
pursuant to any tax sharing agreement) as are or may become payable by
any one or more of the Company and the other Persons consolidated with
the Company in such financial statements in respect of all tax periods
ending on or prior to such dates.
2.5 PENDING LITIGATION.
(a) PENDING LITIGATION. There are no proceedings, actions or
investigations pending or threatened, against or affecting the Company
or any of the Subsidiaries in any court or before any Governmental
Authority or arbitration board or tribunal that, in the aggregate for
all such proceedings, actions and investigations, could reasonably be
expected to have a Material Adverse Effect.
(b) NO VIOLATIONS. Neither the Company nor any Subsidiary is
in violation of any judgment, order, writ, injunction or decree of any
court, Governmental Authority, arbitration board or tribunal that, in
the aggregate
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for all such violations, could reasonably be expected to have a
Material Adverse Effect.
2.6 CORPORATE ORGANIZATION AND AUTHORITY.
Each of the Company and each Subsidiary:
(a) is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
(b) has all corporate power and authority necessary to own
and operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have
such licenses, certificates, permits, franchises and other
governmental authorizations, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect;
and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in each
other jurisdiction where it is required to do so, except where the
failure to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could not reasonably
be expected to have a Material Adverse Effect.
2.7 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
Neither the Company is nor any Subsidiary is in violation in any
respect of:
(a) any term of any charter instrument or bylaw; or
(b) any term in any agreement or other instrument to which it
is a party or by which it or any of its Property may be bound, except
for such violations that, in the aggregate for all such violations,
could not reasonably be expected to have a Material Adverse Effect.
2.8 RESTRICTIONS ON THE COMPANY.
Neither the Company nor any Subsidiary:
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(a) is a party to any contract or agreement, or subject to
any charter or other corporate restriction that, in the aggregate for
all such contracts, agreements, and charter and corporate
restrictions, is reasonably likely to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts
its right or ability to incur Debt or to issue Rights of the Company,
as the case may be, other than the Financing Documents and the
agreements listed on PART 2.8(b) OF ANNEX 3, none of which restricts
the issuance and sale of the Series C Cumulative Preferred Stock or
the Series B Warrants or the execution and delivery of, or compliance
with this Agreement or the other Financing Documents by the Company or
any Guarantor; and
(c) has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its
Property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by the provisions of the Amended and Restated Note
Agreement.
True, correct and complete copies of each of the agreements, if any, listed on
PART 2.8(b) OF ANNEX 3 have been provided to you.
2.9 COMPLIANCE WITH LAW.
Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
2.10 PENSION PLANS.
(a) OPERATION OF PLANS; LIABILITIES. The Company and each
ERISA Affiliate have operated and administered each Plan in compliance
with all applicable laws except for such instances of noncompliance as
have not resulted in and could not reasonably be expected to result in
a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax pro-visions of the IRC relating to employee
benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably
be expected to result in the incurrence of any such liability by the
Company or any ERISA Affiliate, or in the imposition of any Lien on
any of the rights, Properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to section 401(a)(29) or 412
of the IRC,
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other than such liabilities or Liens as individually or in the
aggregate would not have a Material Adverse Effect.
(b) RELATIONSHIP OF BENEFIT LIABILITIES TO PLAN ASSETS. The
present value of the aggregate benefit liabilities under each of the
Plans, if any, as is subject to Title IV of ERISA (other than
Multiemployer Plans), determined as of the end of such Plan's most
recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities, except as
could not reasonably be expected to have a Material Adverse Effect or
result in the imposition of any fine, penalty or forfeiture or in any
Lien upon any Property of the Company or any Subsidiary or ERISA
Affiliate. The term "BENEFIT LIABILITIES" has the meaning specified in
section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT
VALUE" have the meaning specified in section 3 of ERISA.
(c) WITHDRAWAL LIABILITIES. The Company and its ERISA
Affiliates have not incurred withdrawal liabilities (and are not
subject to contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multi-employer Plans, other than such
liabilities as individually or in the aggregate would not have a
Material Adverse Effect.
(d) POSTRETIREMENT BENEFIT OBLIGATIONS. The expected
postretirement benefit obligation (determined as of the last day of
the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by
section 4980B of the IRC) of the Company will not have a Material
Adverse Effect.
(e) PROHIBITED TRANSACTIONS. The execution and delivery of
this Agreement and the other Financing Documents and the issuance and
sale of the Purchased Securities hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of
ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the IRC. The representation by the
Company in the foregoing sentence is made in reliance upon and subject
to the accuracy of your representation in Section 3.2 as to the
Sources of the funds used to pay the purchase price of the Purchased
Securities to be purchased by you.
(f) FOREIGN PENSION PLANS. Other than as set forth in PART
2.10(f) OF ANNEX 3, the Company does not have or maintain, and is not
required to contribute to, any Foreign Pension Plan.
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2.11 ENVIRONMENTAL COMPLIANCE.
(a) COMPLIANCE - Except as disclosed on PART 2.11(a) OF ANNEX
3, each of the Company and the Subsidiaries is in compliance with all
Environmental Protection Laws in effect in each jurisdiction where it
is presently doing business or is located, other than any
non-compliance which could not reasonably be expected to have a
Material Adverse Effect.
(b) LIABILITY - Except as disclosed on PART 2.11(b) OF ANNEX
3, neither the Company nor any Subsidiary is subject to any liability
under any Environmental Protection Law that, individually or in the
aggregate, could be reasonably expected to have a Material Adverse
Effect.
(c) NOTICES - Except as disclosed on PART 2.11(c) OF ANNEX 3,
neither the Company nor any Subsidiary has received any:
(i) written notice from any Governmental Authority
by which any of its present or previously-owned or leased
real Properties has been designated, listed, or identified in
any manner by any Governmental Authority charged with
administering or enforcing any Environmental Protection Law
as a hazardous substance disposal or removal site, "Super
Fund" clean-up site, or candidate for removal or closure
pursuant to any Environmental Protection Law;
(ii) written notice of any Lien arising under or in
connection with any Environmental Protection Law that has
attached to any revenues of, or to, any of its owned or
leased real Properties; or
(iii) summons, citation, notice, directive, letter, or
other written communication from any Governmental Authority
concerning any intentional or unintentional action or
omission by the Company or any Subsidiary in connection with
its ownership or leasing of any real Property resulting in
the releasing, spilling, leaking, pumping, pouring, emitting,
emptying, dumping, or otherwise disposing of any hazardous
substance into the environment resulting in any material
violation of any Environmental Protection Law;
which, in any such case, relates to or makes reference to an event or
condition which could reasonably be expected to have a Material
Adverse Effect.
2.12 DUE AUTHORIZATION; ENFORCEABILITY; DUE ISSUANCE, ETC.
(a) SALE OF PURCHASED SECURITIES IS LEGAL AND AUTHORIZED. The
issuance, sale and delivery of the Series C Cumulative Preferred Stock
and
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the Series B Warrants by the Company, the execution and delivery by
each Obligor of the Financing Documents to which it is a party and
compliance by each Obligor with all of the provisions of each
Financing Document to which it is a party:
(i) is within the corporate powers of such Obligor; and
(ii) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default
under, or result in the creation of any Lien upon any
Property of any Obligor under the provisions of:
(A) any agreement, charter instrument, bylaw or other
instrument to which such Obligor is a party or by which
such Obligor is or may be bound;
(B) any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to
such Obligor or any of its Property; or
(C) any statute or other rule or regulation of any
Governmental Authority applicable to such Obligor or any
of its Property.
(b) OBLIGATIONS ARE ENFORCEABLE. Each Obligor has duly
authorized by all necessary action on its part each of the Financing
Documents to which it is a party. Each of the Financing Documents has
been executed and delivered by one or more duly authorized officers of
each Obligor which is a party thereto. Each Transaction Document
constitutes a legal, valid and binding obligation of such Obligor,
enforceable in accordance with its terms, except that:
(i) the enforceability thereof may be limited by
applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium, or other similar laws affecting the
enforceability of creditors' rights generally and subject to
the availability of equitable remedies; and
(ii) rights to indemnity and contribution contained
therein may be limited by applicable law or public policy.
(c) DUE ISSUANCE, ETC. The Certificate of Incorporation has
authorized one million shares of preferred stock, par value $1.00 per
share, the designations, preferences and relative rights of which may
be fixed by resolution of the board of directors of the Company. The
Company has duly authorized the creation of the Series C Cumulative
Preferred Stock, the filing of the Certificate of Designation with the
Secretary of State of the State of
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Texas and the issuance and sale of the shares of Series C Cumulative
Preferred Stock, and no approval on the part of the stockholders of
the Company is required in connection with such authorization filing,
issuance or sale. Upon payment by the Purchaser of the purchase price
therefor pursuant to Section 1.2, the shares of Cumulative Preferred
Stock issued to the Purchaser will be duly authorized, fully paid and
non-assessable and free and clear of any Lien created by the Company.
There are no preemptive rights, subscription rights, or other
contractual rights similar in nature to preemptive rights with respect
to such shares of Cumulative Preferred Stock.
2.13 GOVERNMENTAL CONSENT TO SALE OF PURCHASED SECURITIES.
(a) Neither the nature of any Obligor nor of any of its
businesses or Properties, nor any relationship between any Obligor and
any other Person, nor any circumstance in connection with the offer,
issuance, sale or delivery of the Series C Cumulative Preferred Stock
or the Series B Warrants and the execution and delivery of this
Agreement or any other Financing Document, nor the performance of the
obligations of any Obligor thereunder, is such as to require a
consent, approval or authorization of, or pre-filing, registration or
qualification with, any Governmental Authority on the part of such
Obligor as a condition thereto, except for:
(i) to the extent required, registration under the
Securities Act of resales of the Common Stock issuable upon
exercise of the Warrants as required pursuant to the
provisions of the Amended and Restated Warrant Agreement; and
(ii) such consents, approvals, authorizations,
pre-filings, registrations and qualifications described on
PART 2.13(a) OF ANNEX 3, all of which have been obtained on
or prior to the Closing Date.
(b) Each of the issuance and sale of the Cumulative Preferred
Stock and the Series B Warrants, the incurrence of the obligations
represented thereby, the execution and delivery of this Agreement and
the other Financing Documents by each Obligor which is a party thereto
and the performance of the obligations of each Obligor hereunder and
thereunder, by such Obligor:
(i) is not subject to regulation under the
Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the
Transportation Acts of the United States of America (49
U.S.C.), as amended, or the Federal Power Act, as amended;
and
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(ii) does not violate any provision of any statute
or other rule or regulation of any Governmental Authority
applicable to such Obligor.
2.14 HART-SCOTT-RODINO COMPLIANCE.
The Series C Cumulative Preferred Stock is not a "voting security," as
such term is defined in 16 C.F.R. Section 801.1(f)(1). The Warrants are
"convertible voting securities" as such term is defined in 16 C.F.R. Section
801.1(f)(2) which do not entitle the Purchaser to presently vote in respect of
the election of directors of the Company. Assuming that Warrants were all
exercised on the Closing Date, the Purchaser would not "hold" (as such term is
defined in 16 C.F.R. Section 801.1(c)) on the Closing Date either:
(a) fifteen percent (15%) or more of the total number of
shares of the Common Stock of the Company; or
(b) Common Stock having a Fair Market Value of Fifteen
Million Dollars ($15,000,000) or more.
2.15 NO DEFAULTS.
No event has occurred and no condition exists that, upon the execution
and delivery of this Agreement and the other Financing Documents and the
issuance and sale of the Purchased Securities, would constitute a Default or an
Event of Default.
2.16 PRIVATE OFFERING OF PURCHASED SECURITIES.
(a) NUMBER OF OFFEREES. Neither the Company nor any other
Person acting on behalf of the Company has offered any of the
Purchased Securities or any Security of the Company similar to either
the Series C Cumulative Preferred Stock or the Series B Warrants for
sale to, or solicited offers to buy any thereof from, or otherwise
approached or negotiated with respect thereto with, any prospective
purchaser, other than the number of institutional "accredited
investors" (as defined in Regulation D under the Securities Act)
(including you) set forth on PART 2.16(a) OF ANNEX 3, each of whom was
offered all or a portion of the Purchased Securities at private sale
for investment.
(b) CONDUCT OF SALE. Neither the Company nor any Person
acting on behalf b of the Company in connection with the transactions
contemplated by this Agreement or the other Financing Documents
(including, without limitation, the offering and sale of the Purchased
Securities) has engaged in any conduct or entered into any agreements
or understandings so as to
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subject the transactions contemplated hereby and by the other
Financing Documents to the registration provisions of section 5 of the
Securities Act, the provisions of the Trust Indenture Act of 1939, as
amended, or to the registration, qualification or other similar
provisions of any securities or "blue sky" law of any applicable
state.
2.17 USE OF PROCEEDS.
(a) USE OF PROCEEDS. The Company shall apply the proceeds
from the sale of the Purchased Securities as specified on PART 2.17 OF
ANNEX 3.
(b) MARGIN REGULATIONS. None of the transactions contemplated
in any of the Financing Documents (including, without limitation, the
use of the proceeds from the sale of the Purchased Securities)
violates, will violate or will result in a violation of section 7 of
the Exchange Act, or any regulation issued pursuant thereto,
including, without limitation, Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.
(c) ABSENCE OF FOREIGN OR ENEMY STATUS. Neither the sale of
the Purchased Securities nor the use of proceeds from the sale thereof
will result in a violation of any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended), or any ruling issued thereunder or any
enabling legislation or Presidential Executive Order in connection
therewith.
2.18 CAPITALIZATION.
(a) CAPITALIZATION. PART 2.18(a) OF ANNEX 3 correctly sets
forth, after giving effect to the issuance of the Purchased Securities
and the consummation of all other transactions contemplated by this
Agreement on the Closing Date:
(i) the authorized and outstanding shares of the Capital
Stock, Rights and other Securities of the Company (specifying
the type, class or series of all such Capital Stock and other
Securities and whether such Capital Stock and other
Securities are voting or non-voting) and, in the case of any
Rights, the number of shares of Common Stock into which such
Rights are currently exercisable or convertible; and
(ii) all obligations (contingent or otherwise) of
the Company to repurchase or otherwise acquire or retire any
shares of Capital Stock or Rights of the Company.
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All such outstanding shares of Capital Stock have been duly authorized
and validly issued and are fully paid, non-assessable and free and
clear of any Lien created by the Company. There are no preemptive
rights, subscription rights, or other contractual rights similar in
nature to preemptive rights with respect to any Capital Stock of the
Company.
(b) RESERVATION OF COMMON STOCK. The Company has authorized
and unissued, and has reserved for issuance, a sufficient number of
shares of Common Stock to permit, after giving effect to the
transactions contemplated by the Financing Documents, the exercise of
all of the Warrants and all other Rights (including, without
limitation, the Outstanding Warrants) exercisable or convertible into
Common Stock. Each share of Common Stock reserved for issuance upon
exercise of the Warrants, when issued, will be fully paid and
nonassessable, free and clear of any Lien and not subject to any
preemptive rights.
(c) STOCKHOLDERS AGREEMENTS. Other than the Amended and
Restated Warrant Agreement and as specified on PART 2.18(c) OF ANNEX
3, there is no other agreement or understanding known to the Company
between or among any holders of the Capital Stock or Rights of the
Company regarding the Capital Stock of the Company. The Company has
provided you with true, accurate and complete copies of all agreements
referred to in Part 2.18(c) of Annex 3.
2.19 SOLVENCY.
(a) ASSETS GREATER THAN LIABILITIES. The fair value of the
business and assets of the Company, of each Subsidiary and of the
Company and the Subsidiaries, on a consolidated basis exceeds, as of
and after giving effect to the transactions consummated on the Closing
Date, the liabilities of such Person or group of Persons (including,
without limitation, the Notes, the Amended and Restated Subsidiary
Guarantees and all other Debt of such Person or group of Persons) as
of such time.
(b) MEETING LIABILITIES. After giving effect to the
transactions contemplated by the Financing Documents, the Company,
each Guarantor and the Company and the Subsidiaries, on a consolidated
basis:
(i) will not be engaged in any business or
transaction, or about to engage in any business or
transaction, for which such Person or group of Persons has
unreasonably small assets or capital (within the meaning of
the Uniform Fraudulent Transfer Act, the Uniform Fraudulent
Conveyance Act and section 548 of the Federal Bankruptcy
Code); and
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<PAGE> 19
(ii) will be able to pay its debts as they mature.
(c) INTENT. The Obligors are entering into the Financing
Documents with no intent to hinder, delay, or defraud either current
creditors or future creditors of any Obligor.
2.20 FULL DISCLOSURE.
Neither the statements made in this Agreement, the financial
statements referred to in Section 2.1, nor any other written statement
furnished by or on behalf of the Company to you in connection with the
negotiation or the closing of the sale of the Purchased Securities, taken as a
whole, contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein and herein, taken as a
whole, not misleading.
SECTION 3. REPRESENTATIONS OF THE PURCHASERS
3.1 PURCHASE FOR INVESTMENT.
You represent to the Company that you are a financially sophisticated
institutional investor that is experienced in financial matters and you are
purchasing the Purchased Securities listed on Annex 1 below your name for your
own account, or for the account of one or more separate accounts maintained by
you, for investment and with no present intention of, or view to, distributing
such Purchased Securities or any part thereof except in compliance with the
Securities Act, but without prejudice to your right at all times to:
(a) sell or otherwise dispose of all or any part of the
Purchased Securities under a registration statement filed under the
Securities Act, or in a transaction exempt from the registration
requirements of such Act; and
(b) have control over the disposition of all of your assets
to the fullest extent required by any applicable law.
It is understood that, in making the representations set out in
Section 2.12(a) and Section 2.13, the Company is relying, to the extent
applicable, upon your representation as aforesaid.
3.2 ERISA.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Purchased Securities:
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(a) GENERAL ACCOUNT - you are an insurance company and the
Source is an "insurance company general account," as such term is
defined in DOL Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTCE 95-60"), and there is no employee benefit plan,
treating as a single plan all plans maintained by the same employer
(and affiliates thereof as defined in section V(a)(1) of PTCE 95-60)
or by the same employee organization, with respect to which the amount
of the general account reserves and liabilities for all contracts held
by or on behalf of such plan, exceeds 10% of the total reserves and
liabilities of such general account as determined under PTCE 95-60
(exclusive of separate account liabilities) plus surplus, as set forth
in the National Association of Insurance Commissioners Annual
Statement filed with your state of domicile; or
(b) SEPARATE ACCOUNT - the Source is a separate account:
(i) 10% POOLED SEPARATE ACCOUNT - that is an
insurance company pooled separate account, within the meaning
of DOL Prohibited Transaction Class Exemption 90-1 (issued
January 29, 1990) ("PTCE 90-1") and with respect to which the
requirements of PTCE 90-1 are otherwise met, and to the
extent that there are any plans whose assets in such separate
account exceed ten percent (10%) of the assets of such
separate account, you have disclosed the names of such plans
to the Company in writing; or
(ii) IDENTIFIED PLAN ASSETS - that is comprised of
employee benefit plans identified by you in writing and with
respect to which the Company hereby warrants and represents
that, as of the Closing Date, neither the Company nor any
ERISA Affiliate is a "party in interest" (as defined in
section 3 of ERISA) or a "disqualified person" (as defined in
section 4975 of the Code) with respect to any plan so
identified; or
(iii) GUARANTIED SEPARATE ACCOUNT - that is
maintained solely in connection with fixed contractual
obligations of an insurance company, under which any amounts
payable, or credited, to any employee benefit plan having an
interest in such account and to any participant or
beneficiary of such plan (including an annuitant) are not
affected in any manner by the investment performance of the
separate account (as provided by 29 CFR Section
2510.3-101(h)(1)(iii)); or
(c) QPAM - the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed by
a "qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are
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<PAGE> 21
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed twenty percent (20%) of
the total client assets man-aged by such QPAM, the conditions of Part
I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor
a person controlling or controlled by the QPAM (applying the
definition of "control" in section V(e) of the QPAM Exemption) owns a
five percent (5%) or more interest in the Company and:
(i) the identity of such QPAM; and
(ii) the names of all employee benefit plans whose
assets are included in such in-vestment fund
have been disclosed to the Company in writing; or
(d) EXEMPT PLANS - the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of
ERISA and IRC Section 4975.
As used in this Section 3.2, the terms "EMPLOYEE BENEFIT PLAN" and "SEPARATE
ACCOUNT" shall have the respective meanings as-signed to such terms in Section
3 of ERISA.
It is understood that, in making the representations set out in
Section 2.12(a), Section 2.13 and Section 2.10(e), the Company is relying, to
the extent applicable, upon your representation as aforesaid.
SECTION 4. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation,
the obligation to purchase and pay for the Purchased Securities, are subject to
the following conditions precedent, and the failure by the Company to satisfy
all such conditions shall relieve you, at your election, of all such
obligations.
4.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Hughes & Luce, L.L.P., special counsel for the Company;
and
(b) Bingham Dana LLP, your special counsel;
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<PAGE> 22
closing opinions, each dated as of the Closing Date, and substantially in the
respective forms set forth in Exhibit 4.1(a) and Exhibit 4.1(b). This Section
4.1 shall constitute direction by the Company to such counsel named in Section
4.1(a) to deliver such closing opinion to you.
4.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true on the Closing
Date with the same effect as though made on and as of that date.
(b) COMPLIANCE WITH THIS AGREEMENT AND FINANCING DOCUMENTS.
The Company shall have performed and complied with all agreements and
conditions contained herein and in the other Financing Documents that
are required to be performed or complied with by the Company on or
prior to the Closing Date, and such performance and compliance shall
remain in effect on the Closing Date.
4.3 OFFICERS' CERTIFICATES.
You shall have received:
(a) OFFICERS' CERTIFICATE - a certificate dated the Closing
Date and signed (on behalf of the Company) by two (2) Senior Officers
of the Company, substantially in the form of Exhibit 4.3(a); and
(b) SECRETARY'S CERTIFICATE - COMPANY - a certificate dated
the Closing Date and signed on behalf of the Company by the Secretary
or an Assistant Secretary of the Company, substantially in the form of
Exhibit 4.3(b).
(c) SECRETARY'S CERTIFICATE - GUARANTORS - a certificate
dated the Closing Date and signed on behalf of each Guarantor by the
Secretary or an Assistant Secretary of the Company, substantially in
the form of Exhibit 4.3(c).
4.4 ORGANIC DOCUMENTS.
You shall have received:
(a) COMPANY GOOD STANDING CERTIFICATE - a long-form
certificate of good standing or equivalent certificate or certificates
of the Secretary of State of the State of Texas, certifying the due
incorporation, good standing and satisfactory tax status of the
Company and listing all charter documents
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<PAGE> 23
with respect to the Company on file with the Secretary of State of the
State of Texas (including, without limitation, the Certificate of
Designation); and
(b) COMPANY CHARTER - copies of all charter documents on file
with the Secretary of State of the State of Texas with respect to the
Company, certified by the Secretary of State of the State of Texas to
be true, correct and complete.
(c) GOOD STANDING CERTIFICATES - GUARANTORS - for each
Guarantor, a certificate of good standing certificate or certificates
of the Secretary of State or similar authority of its state or other
jurisdiction of incorporation, certifying the due incorporation, good
standing and satisfactory tax status of such Guarantor and listing all
charter documents with respect to such Guarantor on file with such
Secretary of State (including, without limitation, the Certificate of
Designation); and
(d) CHARTERS - GUARANTORS - for each Guarantor, all charter
documents or equivalents on file with the Secretary of State or
similar authority of its state or other jurisdiction of incorporation,
certified by such Secretary of State or equivalent or by an authorized
officer of such Guarantor to be true, correct and complete.
4.5 LEGALITY.
The Series C Cumulative Preferred Stock and the Series B Warrants
shall on the Closing Date qualify as a legal investment for you under
applicable insurance law, and the acquisition thereof shall not subject you to
any penalty or other onerous condition pursuant to any such law or regulation,
and you shall have received such evidence as you may reasonably request to
establish compliance with this condition.
4.6 FINANCING DOCUMENTS.
(a) AMENDED AND RESTATED NOTE AGREEMENT; AMENDED AND RESTATED
NOTES. The Company shall have executed and delivered to each Purchaser
an Amended and Restated Note Agreement substantially in the form of
Exhibit 4.6(a) (as amended from time to time, the "AMENDED AND
RESTATED NOTE AGREEMENT"). The Company shall have issued to each such
Purchaser amended and restated notes substantially in the form
attached to the Amended and Restated Note Agreement (as amended from
time to time, the "NOTES") in exchange for the Existing Notes held by
each of them, in the respective principal amounts of such Existing
Notes.
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<PAGE> 24
(b) AMENDED AND RESTATED WARRANT AGREEMENT; SERIES B
WARRANTS. The Company shall have executed and delivered to each
Purchaser the Amended and Restated Warrant Agreement. The Company
shall have issued to each such Purchaser Series B Warrants in the
respective amounts set forth below such Purchaser's name on Annex 1.
(c) CERTIFICATE OF DESIGNATION. The Company shall have
approved and adopted the Certificate of Designation and the
Certificate of Designation shall have been filed and accepted for
filing with the Texas Secretary of State.
(d) CUMULATIVE PREFERRED STOCK. The Company shall have
executed and delivered to each Purchaser the certificates representing
the shares of Cumulative Preferred Stock set forth below such
Purchaser's name on Annex 1.
(e) AMENDMENT AND RESTATEMENT OF SUBSIDIARY GUARANTY. Each
Guarantor (whether or not such Guarantor was a Subsidiary Guarantor on
or prior to the date hereof) shall have executed and delivered to you
an Amended and Restated Subsidiary Guarantee substantially in the form
of Exhibit 4.6(e) (as amended from time to time, the "AMENDED AND
RESTATED SUBSIDIARY GUARANTEE").
4.7 RESERVATION OF SHARES.
The shares of Common Stock issuable upon exercise of each Series B
Warrant shall have been duly authorized and reserved for issuance.
4.8 CERTAIN CONSENTS.
(a) SENIOR AGENT. The Senior Agent shall have executed and
delivered to you a consent, in form and substance acceptable to you,
to the transactions contemplated hereby and by the Financing
Documents, permitting the Company to incur and have outstanding the
indebtedness and all other obligations in respect of the Amended and
Restated Note Agreement, the Amended and Restated Warrant Agreement,
the Notes, the Series A Warrants, the Series B Warrants, the
Cumulative Preferred Stock, the issuance and sale of the Series B
Warrants and the issuance of Common Stock to the holders of the
Warrants upon exercise of the Warrants, permitting each Guarantor to
incur and have outstanding the indebtedness and all other obligations
in respect of the Amended and Restated Subsidiary Guarantee, and
waiving any default or event of default which might have occurred by
virtue of the execution and delivery of this Agreement and the other
documents and instruments contemplated hereby.
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<PAGE> 25
(b) OTHER EQUITY HOLDERS. No consent of the holder of the
Outstanding Warrant or of any other class of Capital Stock or Rights
shall be required to enter into the transactions contemplated hereby
and by the other Financing Documents or having any anti-dilution,
preemptive right, redemption right or similar right in respect of any
of the transactions contemplated hereby or by the other Financing
Documents (other than the consent of the holders of the Series A
Warrants, which consent shall have been obtained).
4.9 PRIVATE PLACEMENT NUMBERS.
The Company shall have obtained or caused to be obtained private
placement numbers for the certificates evidencing the Cumulative Preferred
Stock and the Series B Warrants from the CUSIP Service Bureau of Standard &
Poor's, a division of McGraw-Hill, Inc. and you shall have been informed of
such private placement numbers. The Company shall have informed the Purchasers
in writing of the CUSIP number for the Common Stock issuable upon exercise of
the Series B Warrants.
4.10 FEES AND EXPENSES.
All fees and disbursements required to be paid pursuant to Section 6.6
shall have been paid in full.
4.11 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to execute and deliver
a Securities Purchase Agreement, the Amended and Restated Note Agreement, the
Amended and Restated Warrant Agreement or any other Financing Document to be
executed and delivered by it, or to accept delivery of or make payment for the
Purchased Securities.
4.12 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Purchased Securities and all documents and papers relating thereto shall be
reasonably satisfactory to you and your special counsel. You and your special
counsel shall have received copies of such documents and papers as you or they
may reasonably request in connection therewith or in connection with your
special counsel's closing opinion, all in form and substance reasonably
satisfactory to you and your special counsel.
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<PAGE> 26
SECTION 5. INTERPRETATION OF THIS AGREEMENT
5.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
1999 FORM 10-K - means the Form 10-K Annual Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended
December 31, 1999, filed by the Company as registrant, with the Securities and
Exchange Commission.
AGREEMENT, THIS - means this Securities Purchase Agreement, as it may
be amended, restated or otherwise modified from time to time.
AMENDED AND RESTATED NOTE AGREEMENT - Section 4.6(a).
AMENDED AND RESTATED WARRANT AGREEMENT - Section 1.1(b).
CERTIFICATE OF DESIGNATION - Section 1.1(a).
CERTIFICATE OF INCORPORATION - means the Amended and Restated
Certificate of Incorporation of the Company, as amended through the date
hereof.
CLOSING - Section 1.2(b).
CLOSING DATE - Section 1.2(b).
COMPANY - has the meaning specified in the introductory sentence.
ENVIRONMENTAL PROTECTION LAW - means any law, statute or regulation
enacted by any Governmental Authority in connection with or relating to the
protection or regulation of the environment, including, without limitation,
those laws, statutes and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing or
transporting of Hazardous Materials and any applicable orders, decrees or
judgments issued by any court of competent jurisdiction in connection with any
of the foregoing.
EQUITY DOCUMENTS - means the Series C Cumulative Preferred Stock, the
certificates representing the shares of Cumulative Preferred Stock, the
Certificate of Incorporation and the Certificate of Designation.
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<PAGE> 27
EXISTING NOTES - means the notes issued and outstanding under the
Amended and Restated Note Agreement immediately prior to the effectiveness
thereof.
FINANCING DOCUMENTS - means and includes the Transaction Documents and
the Equity Documents.
GOVERNMENTAL AUTHORITY - means:
(a) the government of:
(i) the United States of America and any state or
other political subdivision thereof; or
(ii) any other jurisdiction in which the Company or
any Subsidiary conducts all or any part of its business, or that asserts any
jurisdiction over the conduct of the affairs of, or the Property of, the Company
or any such Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
HAZARDOUS MATERIAL - means all or any of the following:
(a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Environmental Protection Laws as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances" or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, "TLCP toxicity"
or "EP toxicity";
(b) oil, petroleum or petroleum derived substances, natural
gas, natural gas liquids or synthetic gas and drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources;
(c) any flammable substances or explosives or any radioactive
materials;
(d) asbestos or urea formaldehyde in any form; and
(e) dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
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<PAGE> 28
NOTES - Section 4.6(a).
OBLIGORS - means and includes the Company and each Guarantor.
OTHER PURCHASERS - Section 1.2(c).
OUTSTANDING WARRANT - means that certain warrant to purchase five
thousand (5,000) shares of the Common Stock issued to Henri Morris &
Associates.
PROJECTIONS - Section 2.1(f).
PTCE 95-60 - Section 3.2(a).
PURCHASED SECURITIES - means the Cumulative Preferred Stock and the
Series B Warrants to be purchased by the Purchasers pursuant to Section 1.2 of
this Agreement.
PURCHASERS - means you and the Other Purchasers.
QPAM EXEMPTION - means Prohibited Transaction Class Exemption 84-14
issued by the DOL.
RULE 144A - means Rule 144A promulgated under the Securities Act, 17
C.F.R. Section 230.144A, as such rule may be amended from time to time.
SECURITIES PURCHASE AGREEMENT - Section 1.2(d).
SERIES A WARRANTS - has the meaning ascribed to it in the Amended and
Restated Warrant Agreement.
SERIES B WARRANT CERTIFICATES - Section 1.1(b).
SERIES B WARRANTS - Section 1.1(b).
SERIES C CUMULATIVE PREFERRED STOCK - Section 1.1(c).
SOURCE - Section 3.2.
STATED VALUE - means, with respect to each share of Series C
Cumulative Preferred Stock, $100 per share.
TRANSACTION DOCUMENTS - means and includes this Agreement, the
identical Securities Purchase Agreements executed by the Other Purchasers, the
Amended and Restated Note Agreement, the Notes, the Amended and Restated
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<PAGE> 29
Warrant Agreement, the Series A Warrants, the certificates representing the
Series A Warrants, the Series B Warrants, the Series B Warrant Certificates,
the Amended and Restated Guarantee and the other agreements, certificates and
instruments to be executed pursuant to the terms of each of the foregoing, as
each may be amended, restated or otherwise modified from time to time.
WARRANTS - means, collectively, the Series A Warrants and the Series B
Warrants.
5.2 OTHER DEFINITIONS.
The following terms shall have the respective meanings ascribed to
such terms in the Note Agreement:
Affiliate
Applicable Interest Law
Bank of America
Business Day
Capital Stock
Common Stock
Debt
Default
DOL
ERISA
ERISA Affiliate
Event of Default
Exchange Act
Fair Market Value
Foreign Pension Plan
GAAP
Investments
IRC
Lien
Material Adverse Effect
Maximum Legal Rate of Interest
Multiemployer Plan
Offering Memorandum
Person
Plan
Property
Restricted Investment
Rights
Securities Act
Security
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Senior Agent
Senior Credit Agreement
Senior Officer
Subsidiary
Subsidiary Guarantee
Subsidiary Guarantor
Voting Stock
5.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles
of the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement
as a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits
attached to this Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
5.4 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 6. MISCELLANEOUS
6.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder shall be in
writing and shall be delivered either by nationwide overnight courier
or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2, or at such other address of which the Company shall
have notified each Purchaser. Communications to the Purchasers shall
be addressed as set forth on Annex.
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(b) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any
communication not so addressed and delivered shall be ineffective.
(c) SERVICE OF PROCESS. Notwithstanding the foregoing
provisions of this Section 6.1, service of process in any suit, action
or proceeding arising out of or relating to this Agreement or any
document, agreement or transaction contemplated hereby shall be
delivered in the manner provided in Section 6.7(c).
6.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Purchased
Securities (except the Purchased Securities themselves), and financial
statements, certificates and other information previously or hereafter
furnished to any Purchaser, may be reproduced by the Company or any Purchaser
by any photographic, photostatic, microfilm, micro-card, miniature
photographic, digital or other similar process and each Purchaser may destroy
any original document so reproduced. Any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Company or such Purchaser in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. Nothing in this Section
6.2 shall prohibit the Company or any Purchaser from contesting the accuracy or
validity of any such reproduction.
6.3 SURVIVAL.
All warranties, representations, certifications and covenants made by
the Company herein or in any certificate or other instrument delivered by the
Company on behalf of the Company hereunder shall be considered to have been
relied upon by you and shall survive the delivery to you of the Purchased
Securities regardless of any investigation made by you or on your behalf. All
statements in any certificate or other instrument delivered by or on behalf of
the Company pursuant to the terms hereof shall constitute warranties and
representations by the Company hereunder.
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<PAGE> 32
6.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of the Purchasers and their successors and
assigns, and shall be enforceable by any such Purchaser, successor or assignee
whether or not an express assignment of rights hereunder shall have been made
by you or your successor or assign. Anything contained in this Section 7.4
notwithstanding, the Company may not assign any of its respective rights,
duties or obligations hereunder or under any of the other Financing Documents
without the prior written consent of all Purchasers.
6.5 AMENDMENT AND WAIVER.
This Agreement may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Company and you.
6.6 EXPENSES.
Whether or not the Series C Cumulative Preferred Stock and the Series
B Warrants are sold, the Company shall pay, at the Closing (if the Series C
Cumulative Preferred Stock and the Series B Warrants are sold, and otherwise
upon receipt of any statement or invoice therefor), all reasonable
out-of-pocket fees, expenses and costs attributable to legal and accounting
services incurred by you relating hereto, including, without limitation, the
statement presented at the Closing by your special counsel for reasonable fees
and disbursements incurred in connection herewith, each additional statement
for reasonable fees and disbursements (promptly upon receipt thereof) of your
special counsel rendered after the Closing in connection with the issuance of
the Series C Cumulative Preferred Stock and the Series B Warrants and all
expenses incurred by you or on your behalf or the Company's behalf in complying
with each of the conditions to the Closing set forth in Section 4.
6.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS
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<PAGE> 33
AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE
BROUGHT BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW
YORK CITY, NEW YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK
CITY, NEW YORK AS SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY
THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NONEXCLUSIVE IN PERSONAM
JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE
ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM
THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH
COURT. IN ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY
SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT
THE ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE
EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE
CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY
THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
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<PAGE> 34
(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
6.8 INDEMNIFICATION OF EACH PURCHASER.
From and at all times after the date of this Agreement, and in
addition to all of your other rights and remedies against the Company, the
Company agrees to indemnify and hold harmless you and each of your directors,
officers, employees, agents, investment advisors and affiliates against any and
all claims (whether valid or not), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs and expenses), incurred by or asserted
against you or any such director, officer, employee, agent, investment advisor
or affiliate, from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement or the other Financing Documents or any transactions contemplated
herein or therein, or any of the transactions contemplated hereunder, whether
or not such you or any such director, officer, employee, agent, investment
advisor or affiliate is a party to any such action, proceeding, suit or the
target of any such inquiry or investigation; provided, however, that no
indemnified party shall have the right to be indemnified hereunder for any
liability resulting from the willful misconduct or gross negligence of such
indemnified party or breach by such indemnified party of its own obligations
under this Agreement. All of your foregoing losses, damages, costs and expenses
shall be payable as and when incurred upon the demand of the indemnified party.
The obligations of the Company and your rights under this Section 6.8 shall
survive the termination of this Agreement.
6.9 ENTIRE AGREEMENT.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
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6.10 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall
be effective when at least one counterpart shall have been executed by each
party hereto, and each set of counterparts that, collectively, show execution
by each party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
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<PAGE> 36
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
FRESH AMERICA CORP.
By:
--------------------------------------
Name: John H. Gray
Title: Executive Vice President
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
<PAGE> 37
ANNEX 1
INFORMATION AS TO PURCHASERS
<TABLE>
<CAPTION>
======================================== ===================================================
PURCHASER NAME JOHN HANCOCK LIFE INSURANCE COMPANY
- ---------------------------------------- ---------------------------------------------------
<S> <C>
Name in which shares of Series C JOHN HANCOCK LIFE INSURANCE COMPANY
Cumulative Preferred Stock and
Series B Warrants are Registered
- ---------------------------------------- ---------------------------------------------------
Certificate Numbers for Series C
Cumulative Preferred Stock
Series B Warrant Certificates
Registration Numbers; Number of
Warrants
- ---------------------------------------- ---------------------------------------------------
Address for Notices John Hancock Life Insurance Company
200 Clarendon Street
Boston, MA 02117
Attn: Bond and Corporate Finance Group, T-57
- ---------------------------------------- ---------------------------------------------------
Other Instructions Signature Page Format:
JOHN HANCOCK LIFE INSURANCE COMPANY
By
----------------------------------
Name:
Title:
- ---------------------------------------- ---------------------------------------------------
Instructions re: Delivery of Note and Law Department of Purchaser
Warrant Certificate
- ---------------------------------------- ---------------------------------------------------
Tax Identification Number 04-1414660
======================================== ===================================================
</TABLE>
<PAGE> 38
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING;
ADDRESS OF COMPANY FOR NOTICES
Payment Instructions for Wire of Purchase Price for Purchased Securities:
Name of Bank: Bank of America N.A.
Address: Bank of America N.A.
Global Client Services
333 S. Beaudry Ave.
Los Angeles, California 90017
Contact Name: Joyce Emery
Phone No.: 1 800 847 6314 x 56534
ABA (routing) no.: 121 000 358
Account No.: 1233170473
Account Name: Fresh America Corp.
Address of Company for Notices:
Fresh America Corp.
6600 LBJ Freeway, Suite 180
Dallas, Texas 75240
Attention: John H. Gray
Executive Vice President and Chief Financial Officer
Telephone: (972) 774-0575
Facsimile: (972) 774-0515
<PAGE> 39
ANNEX 3
INFORMATION AS TO COMPANY
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,192
<SECURITIES> 0
<RECEIVABLES> 51,269
<ALLOWANCES> (2,536)
<INVENTORY> 9,098
<CURRENT-ASSETS> 70,189
<PP&E> 39,100
<DEPRECIATION> (15,353)
<TOTAL-ASSETS> 120,237
<CURRENT-LIABILITIES> 71,782
<BONDS> 0
0
0
<COMMON> 52
<OTHER-SE> 27,849
<TOTAL-LIABILITY-AND-EQUITY> 120,237
<SALES> 142,652
<TOTAL-REVENUES> 142,652
<CGS> 127,503
<TOTAL-COSTS> 15,739
<OTHER-EXPENSES> 216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,405
<INCOME-PRETAX> (1,692)
<INCOME-TAX> 189
<INCOME-CONTINUING> (1,881)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,881)
<EPS-BASIC> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
