Exhibit 10.2
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
BY AND AMONG
COLOR SPOT NURSERIES, INC.,
COLOR SPOT CHRISTMAS TREES, INC.,
LONE STAR, INC.,
LSGR HOLDINGS, INC.,
LONE STAR GROWERS, L.P.,
ODA NURSERY, INC.
AND
CATALYST EQUITY FUND, L.P.
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$12,000,000 PRINCIPAL AMOUNT
SECURED SENIOR SUBORDINATED NOTE DUE 2003
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DATED AS OF NOVEMBER 20, 2001
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TABLE OF CONTENTS
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1. DEFINITIONS; COLLATERAL DEFINITIONS; ACCOUNTING TERMS....................................................2
1.1 Definitions.....................................................................................2
1.2 Accounting Terms and Computations..............................................................18
1.3 Covenants......................................................................................18
1.4 Captions; Construction and Interpretation......................................................18
1.5 Determinations.................................................................................18
2. PURCHASE AND SALE OF THE NOTE...........................................................................18
2.1 Authorization..................................................................................18
2.2 Purchase of the Note; Issue Price..............................................................19
2.3 Closing........................................................................................19
2.4 Use of Proceeds................................................................................19
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS........................................19
3.1 Organization and Qualification.................................................................20
3.2 Corporate or Other Power.......................................................................20
3.3 Authorization; Binding Obligations.............................................................20
3.4 Subsidiaries...................................................................................20
3.5 Conflict with Other Instruments; Existing Defaults.............................................21
3.6 Governmental and Other Third Party Consents....................................................21
3.7 Capitalization.................................................................................22
3.8 Names; Business Locations......................................................................22
3.9 Financial Statements...........................................................................23
3.10 Absence of Certain Changes.....................................................................23
3.11 Existing Indebtedness; Existing Liens; Investments.............................................24
3.12 Litigation.....................................................................................25
3.13 Transactions With Affiliates...................................................................26
3.14 Compliance with Laws; Permits..................................................................26
3.15 Real Property..................................................................................27
3.16 Employee Benefit Plans; ERISA..................................................................27
3.17 Taxes..........................................................................................28
3.18 Title to Property; Liens.......................................................................29
3.19 Environmental Matters..........................................................................29
3.20 Intellectual Property..........................................................................30
3.21 Labor Relations................................................................................30
3.22 Insurance......................................................................................31
3.23 Business Relationships.........................................................................31
3.24 Solvency.......................................................................................31
3.25 Depository and Other Accounts..................................................................31
3.26 Brokers; Certain Expenses......................................................................32
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3.27 No Event of Default............................................................................32
3.28 Financial Sophistication.......................................................................32
3.29 Equipment......................................................................................32
3.30 Senior Status..................................................................................33
3.31 10 1/2% Notes..................................................................................33
3.32 Inventory......................................................................................33
3.33 Accounts.......................................................................................33
3.34 SEC Filings....................................................................................33
3.35 Disclosure.....................................................................................33
3.36 Survival of Representations and Warranties.....................................................34
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................................34
4.1 Investment Intent..............................................................................34
4.2 Accredited Investor Status.....................................................................34
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER..........................................................34
5.1 Closing Date...................................................................................35
5.2 Representations and Warranties; No Default.....................................................35
5.3 Payment of Fees...............................................................................35
5.4 Purchase Permitted By Applicable Laws..........................................................35
5.5 No Injunction, Order or Suit...................................................................35
5.6 Delivery of Certain Closing Documents..........................................................36
5.7 Senior Credit Facility.........................................................................36
5.8 Opinion of Counsel.............................................................................36
5.9 Delivery of Corporate Documents................................................................37
5.10 Insurance......................................................................................37
5.11 Third-Party Consents...........................................................................37
5.12 Financial Statements...........................................................................38
5.13 Exchange Offer.................................................................................38
5.14 Restructuring of ▇▇▇▇▇▇ Note...................................................................38
5.15 Restructuring of Series A Preferred Stock......................................................38
5.16 Proceedings Satisfactory.......................................................................38
6. ACTIONS AND DOCUMENTS RELATING TO THE COLLATERAL........................................................38
7. INDEMNIFICATION; FEES AND EXPENSES......................................................................39
7.1 Transfer Taxes.................................................................................39
7.2 Losses.........................................................................................39
7.3 Indemnification Procedures.....................................................................40
7.4 Contribution...................................................................................41
7.5 Commitment Fee.................................................................................41
7.6 Reimbursement of Deal-Related Costs and Expenses...............................................41
7.7 Costs and Expenses.............................................................................42
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8. AFFIRMATIVE COVENANTS...................................................................................43
8.1 Payment of Note and Other Obligations..........................................................43
8.2 Performance of Investment Documents............................................................43
8.3 Visits and Inspections; Lender Meeting.........................................................43
8.4 Notices........................................................................................43
8.5 Financial Statements...........................................................................44
8.6 Guarantor Financial Statements.................................................................45
8.7 Landlord and Storage Agreements................................................................45
8.8 Projections....................................................................................45
8.9 Subsidiaries...................................................................................45
8.10 Compliance with Laws; Consents.................................................................46
8.11 Legal Existence................................................................................46
8.12 Books and Records..............................................................................46
8.13 Maintenance of Properties......................................................................46
8.14 Insurance......................................................................................46
8.15 Payment of Obligations.........................................................................47
8.16 Compliance with Material Contracts.............................................................48
8.17 Environmental Matters..........................................................................48
8.18 Future Information.............................................................................48
8.19 Further Assurances.............................................................................48
8.20 Financial Covenants............................................................................49
8.21 Senior Status..................................................................................50
8.22 10 1/2% Notes..................................................................................50
8.23 Lien on Realty.................................................................................50
8.24 Opinions.......................................................................................51
8.25 Delivery of Collateral.........................................................................51
9. NEGATIVE COVENANTS......................................................................................51
9.1 Mergers; Consolidations; Acquisitions; Structural Changes......................................51
9.2 Loans..........................................................................................51
9.3 Total Indebtedness.............................................................................52
9.4 Affiliate Transactions.........................................................................52
9.5 Limitation on Liens............................................................................53
9.6 Payments and Amendments of Subordinated Debt...................................................53
9.7 Amendments Regarding Preferred Stock...........................................................54
9.8 Amendments of Bank Credit Documents............................................................54
9.9 Distributions..................................................................................54
9.10 Capital Expenditures...........................................................................54
9.11 Disposition of Assets..........................................................................55
9.12 Additional Securities..........................................................................55
9.13 ▇▇▇▇-and-Hold Sales, Etc.......................................................................55
9.14 Restricted Investment..........................................................................55
9.15 Subsidiaries and Joint Ventures................................................................55
9.16 Tax Consolidation..............................................................................55
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9.17 Fiscal Year End................................................................................56
9.18 Limitations on Payment Restrictions Affecting Subsidiaries.....................................56
9.19 Change in Business.............................................................................56
9.20 Subordination..................................................................................56
9.21 Accounting Changes.............................................................................56
9.22 Hazardous Substances...........................................................................56
10. DEFAULTS AND REMEDIES...................................................................................56
10.1 Events of Default..............................................................................56
10.2 Acceleration...................................................................................59
10.3 Set Off and Sharing of Payments................................................................60
10.4 Other Remedies.................................................................................60
10.5 Appointment of Receiver........................................................................60
10.6 Waiver of Past Defaults........................................................................60
11. WAIVER..................................................................................................60
12. POWER OF ATTORNEY.......................................................................................61
13. MISCELLANEOUS...........................................................................................61
13.1 Survival of Representations and Warranties; Purchaser Investigation............................61
13.2 Consent to Amendments..........................................................................61
13.3 Entire Agreement...............................................................................62
13.4 Severability...................................................................................62
13.5 Successors and Assigns; Assignments............................................................62
13.6 Certain Agreements of the Company Parties......................................................62
13.7 Notices........................................................................................63
13.8 Counterparts...................................................................................64
13.9 Governing Law..................................................................................64
13.10 Limitation of Liability........................................................................64
13.11 Publicity......................................................................................65
13.12 Waiver of Trial by Jury........................................................................65
13.13 Cumulative Effect; Conflict of Terms...........................................................65
13.14 Time of Essence................................................................................65
13.15 Interpretation.................................................................................65
13.16 Consent to Forum...............................................................................65
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TABLE OF CONTENTS (Continued)
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TABLE OF CONTENTS (Continued)
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TABLE OF CONTENTS (Continued)
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EXHIBITS
Exhibit A -- Form of Secured Senior Subordinated Note
Exhibit B -- Form of Guarantee
Exhibit C -- Form of Compliance Certificate
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SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT is entered into as of November 20,
2001 (this "AGREEMENT"), by and among COLOR SPOT NURSERIES, INC., a Delaware
corporation (the "COMPANY"), COLOR SPOT CHRISTMAS TREES, INC., a Delaware
corporation and wholly-owned subsidiary of the Company ("CSCT"), LONE STAR,
INC., a Delaware corporation and wholly-owned subsidiary of the Company ("LONE
STAR"), LSGR HOLDINGS, INC., a Delaware corporation and wholly-owned subsidiary
of the Company ("LSGR"), LONE STAR GROWERS, L.P., a Delaware limited partnership
and indirect wholly-owned subsidiary of the Company ("LONE STAR GROWERS"), ODA
NURSERY, INC., a California corporation and wholly-owned subsidiary of the
Company (collectively, the "GUARANTORS"), and CATALYST EQUITY FUND, L.P., a
Delaware limited partnership (the "PURCHASER"). The Company, the Guarantors and
each of their respective present and future Subsidiaries may be individually
referred to as a "COMPANY PARTY" and collectively referred to as the "COMPANY
PARTIES".
R E C I T A L S
A. The Company is a wholesale nursery engaged in the business of
providing plants and merchandising services primarily to home centers, mass
merchants, independent garden centers and commercial landscapers.
B. The Company is restructuring a substantial portion of its existing
indebtedness (the "REFINANCING").
C. In connection with the Refinancing, the Company has authorized the
issuance and sale of a Note (as defined in SECTION 2.1) to the Purchaser,
immediately upon the consummation of the Refinancing, as provided herein, in the
aggregate principal amount of $12,000,000, and the Purchaser is willing to
purchase the Note on the terms and subject to the conditions set forth herein.
Concurrently with the issuance of the Note, and as further inducement to the
Purchaser to purchase the Note and as consideration therefor, the Company and
the Purchaser will enter into certain Collateral Documents.
D. To further induce the Purchaser to purchase the Note, and in
consideration therefor, each Guarantor has agreed to issue an absolute and
unconditional guarantee, in substantially the form of EXHIBIT B, of all of the
obligations of the Company under this Agreement, the other Investment Documents
and the Note (the "GUARANTEE"), secured by a lien on all of each Guarantor's
right, title and interest in all of its respective assets, subordinated only to
the prior lien of the Bank under the Bank Credit Documents. Concurrently with
the execution and delivery of the Guarantee, and as further inducement to the
Purchaser to purchase the Note and as consideration therefor, the Company and
the Guarantors will enter into certain Collateral Documents.
E. Concurrently with the sale of the Note, the Company is entering into
a $55,000,000 Amended and Restated Loan and Security Agreement of even date
herewith with Fleet Capital Corporation, as agent for the financial institutions
party thereto as Lenders (the "BANK") and the lenders from time to time party
thereto, as the same may be amended, restated, supplemented or otherwise
modified from time to time (the "BANK CREDIT AGREEMENT").
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS; COLLATERAL DEFINITIONS; ACCOUNTING TERMS.
1.1 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to the
singular and the plural forms thereof):
"ACCOUNT DEBTOR" shall mean any Person who is or may become
obligated under or on account of an Account.
"ACCOUNTS" shall mean all accounts, contract rights, chattel
paper, instruments and documents, whether now owned or hereafter created or
acquired by the Company or any of its Subsidiaries, or in which the Company or
any of its Subsidiaries now has or hereafter acquires any interest.
"AGENT" shall have the meaning specified in the Bank Credit
Agreement (as in effect on the date hereof).
"AFFILIATE" shall mean a person (other than a Subsidiary): (i)
which directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 10% or more of any class of the Voting Stock of a
Person; or (iii) 10% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
"AGREEMENT" shall mean this Agreement, together with the
Exhibits and the Disclosure Schedules hereto, in each case as amended, restated,
supplemented or otherwise modified from time to time.
"APPLICABLE LAWS" shall mean all applicable provisions of all
(i) constitutions, treaties, statutes, laws, rules, regulations and ordinances
of any Governmental Authority and all
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common law duties, (ii) Consents of any Governmental Authority and (iii) orders,
decisions, rulings, judgments, directives or decrees of any Governmental
Authority.
"ASSIGNEE" shall have the meaning specified in SECTION 13.5.
"ASSIGNMENT" shall mean an assignment or other transfer of any
Note pursuant to the terms of such Note.
"BANK" shall have the meaning specified in Recital E.
"BANK CREDIT AGREEMENT" shall have the meaning specified in
Recital E.
"BANK CREDIT DOCUMENTS" shall mean the Bank Credit Agreement
(as in effect on the date hereof) and all notes and other instruments,
guaranties, security agreements, pledge agreements and other documents
contemplated by the Bank Credit Agreement (as in effect on the date hereof) and
executed and delivered in connection therewith.
"BANKRUPTCY LAWS" shall mean Title 11 of the United States
Code (11 U.S.C. Section 101, ET SEQ.), as amended from time to time, and any
other federal or state law relating to bankruptcy, insolvency or reorganization
or for the relief of debtors.
"BENEFIT PLAN" shall mean any of the following: (i) each
termination or severance agreement involving any Company Party, on the one hand,
and any of its respective employees whose annual compensation is at a base rate
equal to or exceeding $125,000, on the other hand, (ii) all employee benefit
plans, as defined in ERISA Section 3(3), and (iii) all other profit-sharing,
bonus, stock option, stock purchase, stock bonus, restricted stock, stock
appreciation right, phantom stock, vacation pay, holiday pay, tuition
reimbursement, scholarship, severance, dependent care assistance, excess
benefit, incentive compensation, salary continuation, supplemental retirement,
employee loan or loan guarantee program, split dollar, cafeteria plan, and other
compensation arrangements (provided, that such compensation arrangements require
payments of at least $125,000 per year); in each case maintained or contributed
to by the Company or Guarantor for the benefit of their respective employees (or
former employees) and/or their beneficiaries. An arrangement will not fail to be
a Benefit Plan simply because it only covers one individual, or because the
Company's obligations under such arrangement arise by reason of its being a
"successor employer" under Applicable Laws. Furthermore, a Voluntary Employees'
Beneficiary Association under Section 501(c)(9) of the Code will be considered a
Benefit Plan for this purpose.
"BOARD OF DIRECTORS" shall mean, with respect to any Person,
the board of directors (or similar governing body) of such Person.
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"BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or a day on which banking institutions in the city of New York, New York
or in the city of Roseland,
New Jersey are authorized or required by law to
close.
"CAPITAL EXPENDITURES" shall mean expenditures made or
liabilities incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year, including the total principal portion of Capitalized Lease
Obligations.
"CAPITAL LEASE" shall mean any lease or agreement of the
Company Parties for the right to use property (whether real, personal or mixed)
which has been or is required to be capitalized on the consolidated balance
sheet of the Company Parties in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" shall mean any indebtedness
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CHANGE IN CONTROL" shall mean the occurrence of one or more
of the following events:
(i) any sale, lease, exchange or other transfer (in
any one transaction or a series of related transactions) of all or substantially
all of the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "GROUP"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Agreement);
(ii) the approval by the holders of the capital stock
of the Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Agreement);
(iii) any Person or Group (other than KCSN
Acquisition Company, L.P. and its Affiliates, Kohlberg & Company, LLC and its
Affiliates, Kohlberg Management IV, LLC and its Affiliates, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and his Affiliates, SunAmerica Asset Management Corp., AIG Global Investment
Corp., Ares Management, L.P., TCW/Crescent Mezzanine, LLC, or the holders of the
10 1/2% Notes (immediately prior to the issuance of the 13% Notes) or any
combination of such entities and their respective Affiliates) shall become the
owner, directly or indirectly, beneficially or of record, of more than 35% of
the shares of the issued and outstanding capital stock of the Company that is
generally entitled to vote for the election of directors (other than the Series
A Preferred Stock or the Series B Preferred Stock, but not the Series B-1
Preferred Stock);
(iv) the replacement of a majority of the Company's
directors over a two-year period from the directors who constituted the
directors of the Company at the beginning
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of such period, and such replacement shall not have been approved by any of (A)
the Purchaser, (B) the holders of a majority of the issued and outstanding
shares of Series B Preferred Stock, but not the Series B-1 Preferred Stock, but
not the Series B-1 Preferred Stock, or (C) the vote of a majority of the
directors of the Company then still in office who either were directors at the
beginning of such period or whose election as a director was previously so
approved;
(v) (Intentionally omitted);
(vi) the occurrence of any "Change of Control" under
and as defined in the 13% Indenture, or the Certificates of Designation for the
Series A Preferred Stock or the Series B Preferred Stock, but not the Series B-1
Preferred Stock;
(vii) either (x) ▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases for any reason
whatsoever to be the chief executive officer of the Company and is not replaced
within sixty (60) days by a chief executive officer reasonably acceptable to the
Purchaser or (y) ▇▇▇▇▇▇▇ ▇▇▇▇▇ ceases for any reason whatsoever to be the chief
financial officer of the Company and is not replaced within sixty (60) days by a
chief financial officer reasonably acceptable to the Purchaser; or
(viii) if ▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases for any reason
whatsoever to be the chief executive officer of the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇
ceases for any reason whatsoever to be the chief financial officer of the
Company within a six (6) month period.
"CLOSING" shall have the meaning specified in SECTION 2.3.
"CLOSING DATE" shall have the meaning specified in SECTION
2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute, and the treasury regulations promulgated
thereunder, as in effect from time to time.
"COLLATERAL" shall mean the collateral under the Collateral
Documents, however defined.
"COLLATERAL DOCUMENTS" shall mean, collectively, the Company
Security Agreement, the Company Intellectual Property Security Agreement, the
Company Pledge Agreement, the Guarantee, the Guarantor Security Agreement, the
Guarantor Intellectual Property Security Agreement, the Guarantor Pledge
Agreement, the fee and leasehold mortgages, the landlord waivers and consents,
the notices of security interest in deposit accounts, the UCC financing
statements, any fixture filings, patent, trademark and copyright filings,
assignments, acknowledgments and any other agreements, instruments and documents
delivered from time to time in connection therewith or otherwise to secure the
Obligations or any other obligations of the Company Parties or any other Person
under this Agreement, the Note or any other Investment
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Document, in each case as amended, restated, supplemented or otherwise modified
from time to time.
"COMPANY" shall have the meaning specified in the preamble.
"COMPANY INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean
that certain Trademark Security Agreement of even date herewith by and between
the Company and the Purchaser.
"COMPANY PARTY" and "COMPANY PARTIES" shall have the meaning
specified in the preamble.
"COMPANY PLEDGE AGREEMENT" shall mean that certain Pledge
Agreement of even date herewith by and between the Company and the Purchaser.
"COMPANY SECURITY AGREEMENT" shall mean that certain Security
Agreement of even date herewith by and between the Company and the Purchaser.
"CONDITIONAL SALES PROGRAM" shall mean the Company Parties'
rebate program for certain of its Account Debtors as heretofore conducted in the
ordinary course of business.
"CONSENT" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, license, exemption or order of, or any
registration, certificate, qualification, declaration or filing with, or any
notice to, any Person, including, without limitation, any Governmental
Authority.
"CONSOLIDATED" means the consolidation in accordance with GAAP
of the accounts or other items as to which such term applies.
"CONSOLIDATED ADJUSTED NET EARNINGS" shall mean with respect
to any fiscal period, the Consolidated net earnings (or loss) after the
provision for income taxes, but before the deduction for non-cash preferred
stock dividends, for such fiscal period of the Company, as reflected in the
financial statements of the Company supplied to the Purchaser pursuant to
SECTION 8.5 of the Agreement, but excluding (to the extent included in the
calculation of Consolidated net earnings (or loss)):
(i) any gain or loss from asset dispositions (other
than sales of inventory);
(ii) any gain arising from any write-up of assets;
(iii) the income (or loss) of any Person accrued
prior to the date it became a Subsidiary of the Company or is merged into or
consolidated with the Company;
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(iv) the income (or loss) of any Person (other than a
Subsidiary of the Company) in which the Company or any of its wholly-owned
Subsidiaries has an ownership interest unless received in a cash distribution or
requiring the payment of cash;
(v) extraordinary gains as defined under GAAP and
extraordinary non-cash losses, net of the related tax effects; and
(vi) non-cash gains or losses due to changes in GAAP.
"CONTINGENT OBLIGATIONS" shall mean, with respect to any
Person, any obligation, or arrangement, direct or indirect, contingent or
otherwise, of such Person (i) with respect to any Indebtedness, lease, dividend,
letter of credit or other obligation ("PRIMARY OBLIGATIONS") of another Person,
including, without limitation, any direct or indirect guarantee of such
Indebtedness (other than any endorsement for collection or deposit in the
ordinary course of business) or any other direct or indirect obligation, by
agreement or otherwise, to purchase or repurchase any such Primary Obligation or
any property constituting direct or indirect security therefor, or to provide
funds for the payment or discharge of any such Primary Obligation (whether in
the form of loans, advances, or purchases of property, securities or services,
capital contributions, dividends or otherwise), letters of credit and
reimbursement obligations for letters of credit, (ii) to provide funds to
maintain the financial condition of any other Person, (iii) otherwise to
indemnify or hold harmless the holders of Primary Obligations of another Person
against loss in respect thereof or (iv) in connection with any synthetic lease
or other off-balance sheet lease transaction. The amount of any Contingent
Obligation under clauses (i) and (ii) above shall be the maximum amount
guaranteed or otherwise supported by the Contingent Obligation.
"CONVERTIBLE SECURITIES" shall mean, with respect to any
Person, any securities or other obligations issued or issuable by such Person or
any other Person that are exercisable or exchangeable for, or convertible into,
any Securities of such Person.
"DEFAULT" shall mean any Event of Default or any event or
condition which, with the giving of notice or the lapse of time or both, becomes
an Event of Default.
"DERIVATIVE OBLIGATIONS" shall mean every obligation of a
Person under any forward contract, futures contract, swap, option or other
financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices.
"DISCLOSURE SCHEDULES" shall have the meaning specified in the
introductory paragraph of SECTION 3.
"DISTRIBUTION" shall mean and include, in respect of any
Person, (i) the payment of any dividends or other distributions on Securities
(except distributions in such Securities), (ii) the
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redemption or acquisition of Securities of such Person, as the case may be, and
(iii) any payment or prepayment of principal of, premium (if any) or interest,
fees or other charges on or with respect to or any redemption, purchase or other
acquisition for value, retirement, defeasance or sinking fund or similar payment
with respect to any Indebtedness or any payment in violation of the
subordination provisions of any Indebtedness except regularly scheduled or
required principal payments (other than any required change of control or asset
proceeds payments) or interest payments of the Indebtedness permitted under
SECTION 9.3 of this Agreement.
"EBITDA" shall mean with respect to any fiscal period, the sum
of the Company's Consolidated Adjusted Net Earnings plus amounts deducted in
determining Consolidated Adjusted Net Earnings in respect of: (i) any provision
for (or less any benefit from) income taxes whether current or deferred; (ii)
amortization and depreciation expenses; (iii) Interest Expense for such period,
all as determined in accordance with GAAP and (iv) the lesser of (a) the fees,
costs and expenses incurred in connection with the closing of the Bank Credit
Agreement (as in effect on the date hereof) and the transactions contemplated
thereby in the amounts, and for the fiscal periods, set forth in Attachment 1 to
Exhibit 8.3 of the Bank Credit Agreement (as in effect on the date hereof) and
(b) the fees, costs and expenses actually incurred in connection with the
closing of the Bank Credit Agreement (as in effect on the date hereof) and the
transactions contemplated thereby in the actual amounts and during the actual
periods incurred.
"ENVIRONMENTAL CONDITIONS" shall mean any Release of any
Hazardous Materials (whether or not such Release constituted at the time thereof
a violation of any Environmental Laws) or any violation of any Environmental Law
as a result of which any Environmental Person has or may become liable to any
Person or by reason of which the business, condition or operations of such
Environmental Person or any of its assets or properties may suffer or be
subjected to any Lien or liability.
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating
to Hazardous Materials or the protection of human health or the environment,
including all requirements pertaining to reporting, permitting, investigating or
remediating Releases or threatened Releases of Hazardous Materials into the
environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
Without limiting the generality of the foregoing, the term "ENVIRONMENTAL LAWS"
shall include the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601, ET SEQ.) ("CERCLA"), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.), the Federal
Clean Water Act (33 U.S.C. Section 1251, ET SEQ.), the Clean Air Act (42 U.S.C.
Section 7401, ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section
2601, ET SEQ.) and the Occupational Safety and Health Act (29 U.S.C. Section
651, ET SEQ.), as such laws may be amended from time to time, and any other
present or future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or request or binding
determination of, or agreement with, any Governmental Authority relating to or
imposing liability or establishing standards of conduct for the protection of
human health or safety or the environment.
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"ENVIRONMENTAL PERSONS" shall mean, collectively, (i) all
Company Parties and any of their respective Affiliates, (ii) any other Person in
which any of the Persons listed in clause (i) above was at any time, or is, a
partner, joint venturer, member or other participant, and (iii) any predecessor
or former partnership, joint venture, trust, association, corporation, limited
liability company or other Person, whether in existence as of the date hereof or
at any time prior to the date hereof, the assets, properties, liabilities or
obligations of which have been acquired or assumed by any of the Persons listed
in clause (i) above or to which any of the Persons listed in clause (i) above
has succeeded.
"EQUIPMENT" shall have the meaning ascribed to such term under
the UCC.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute, including the rules and
regulations promulgated thereunder, in each case as amended from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION
10.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations promulgated
thereunder.
"FISCAL QUARTER" shall mean any of the four quarters of a
Fiscal Year.
"FISCAL YEAR" shall mean with respect to each Company Party,
the 52-week period ending on December 31 in each calendar year.
"FIXED CHARGE COVERAGE RATIO" shall mean with respect to any
fiscal period, the ratio of (i) Consolidated EBITDA for such period minus the
income taxes payable in cash during such period minus non-financed Capital
Expenditures for such period to (ii) Consolidated Fixed Charges of the Company
and its Subsidiaries.
"FIXED CHARGES" shall mean with respect to any fiscal period,
scheduled principal payments and Interest Expense required to be paid in cash by
the Company or any of its Subsidiaries on a Consolidated basis during such
period with respect to Indebtedness for Money Borrowed.
"FULLY DILUTED BASIS" shall mean, at any time, a basis that
includes all Securities of a Person issued and outstanding at such time and all
additional Securities of that Person which would be issued upon the conversion,
purchase, exchange or exercise of all Securities of the Person outstanding at
such time.
"GAAP" shall mean generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial
9
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, all as in
effect from time to time on the date hereof, applied on a basis consistent with
prior periods.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
and any state or political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including, without limitation, the Securities Exchange
Commission, the United States Environmental Protection Agency and the Federal
Trade Commission), and any court, tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
"GUARANTEE" shall have the meaning specified in Recital D.
"GUARANTORS" shall have the meaning specified in the preamble.
"GUARANTOR INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall
mean that certain Trademark Security Agreement of even date herewith by and
between the Guarantors and the Purchaser.
"GUARANTOR PLEDGE AGREEMENT" shall mean that certain Pledge
Agreement of even date herewith by and among Lone Star, LSGR and the Purchaser.
"GUARANTOR SECURITY AGREEMENT" shall mean that certain
Security Agreement of even date herewith by and between the Guarantors and the
Purchaser.
"HAZARDOUS MATERIALS" or "HAZARDOUS SUBSTANCES"shall mean any
substance (i) the presence of which requires investigation or remediation under
any Applicable Laws, (ii) that is defined or becomes defined as a "hazardous
waste" or "hazardous substance" under any Applicable Laws (including, without
limitation, all Environmental Laws), (iii) that is toxic, explosive, corrosive,
inflammable, infectious, radioactive, carcinogenic, mutagenic, biohazardous or
otherwise hazardous and is or becomes regulated by any Governmental Authority,
(iv) the presence of which on any real property causes or threatens to cause a
nuisance upon the real property or to adjacent properties or poses or threatens
to pose a hazard to any real property or to the health or safety of Persons on
or about any real property, or (v) that contains gasoline or other petroleum
hydrocarbons, polychlorinated biphenyls or asbestos.
"HOLDER" shall mean any Person (including, without limitation,
the Purchaser) in whose name any Note is registered in the register required to
be maintained by the Company pursuant to Section 8 of the Note.
"IMMEDIATE FAMILY" of a Person includes such Person's spouse,
and the parents, children, grandchildren and siblings of such Person or his or
her spouse and their spouses and
10
other Persons related to the foregoing by blood, adoption or marriage within the
second degree of kinship.
"INDEBTEDNESS" shall mean, with respect to any Person and
without duplication:
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is to be
determined including, without limitation, Capitalized Lease Obligations;
(ii) all obligations of other Persons which such
Person has guaranteed;
(iii) all reimbursement obligations in connection
with letters of credit or letter of credit guarantees issued for the account of
such Person;
(iv) Derivative Obligations; and
(v) in the case of the Company (without duplication),
the Obligations.
"INDEMNIFIED PARTIES" shall have the meaning specified in
SECTION 7.2.
"INTERCREDITOR AGREEMENT" shall mean the Subordination
Agreement between the Bank and the Purchaser, and acknowledged by the Company.
"INTEREST COVERAGE RATIO" shall mean with respect to any
fiscal period, the ratio of (i) Consolidated EBITDA for such period to (ii)
Consolidated Interest Expense of the Company and its Subsidiaries, excluding
interest paid-in-kind for such period as provided under the Subordinated Debt
note agreements, and amortization of deferred financing fees, all as determined
in accordance with GAAP.
"INTEREST EXPENSE" shall mean with respect to any fiscal
period, the interest expenses payable in cash by the Company or its Subsidiaries
on a Consolidated basis for such period.
"INVESTMENT DOCUMENTS" shall mean, collectively, this
Agreement, the Note, the Guarantee, the Collateral Documents, the Intercreditor
Agreement, and all other agreements, instruments, certificates, closing and
other letters and other documents executed and/or delivered in connection
herewith or therewith, in each case as amended, restated, supplemented or
otherwise modified from time to time.
"INVESTMENTS" shall mean, as applied to any Person, (i) any
direct or indirect acquisition by such Person of Securities, other securities or
other interests of, or investments in, any other Person, or all or any
substantial part of the business or assets of any other Person, and
11
(ii) any direct or indirect loan, gift, advance or capital contribution by such
Person to any other Person.
"JUDGMENT LIENS" shall mean any money judgments, writs of
attachment or similar processes (collectively, "JUDGMENTS"), which are issued or
rendered against the Company or any Subsidiary of the Company or Guarantor or
any Subsidiary of Guarantor, or any of their respective Property (i) in the case
of money Judgments, in an amount of $250,000 or more for any single judgment,
attachment or process or $500,000 or more for all such judgments, attachments or
processes in the aggregate, in each case in excess of any applicable insurance
with respect to which the insurer has admitted liability, and (ii) in the case
of non-monetary Judgments, such Judgment or Judgments (in the aggregate) would
reasonably be expected to have a material adverse effect on the business of any
of the Company Parties, in each case which Judgment is not stayed, released,
insured, bonded or discharged within forty-five (45) days of filing.
"LENDERS" shall mean the financial institutions from time to
time party to the Bank Credit Agreement (as in effect on the date hereof), as
lenders.
"LIEN" shall mean any lien (statutory or other), pledge,
mortgage, deed of trust, assignment, deposit arrangement, priority, security
interest, charge or encumbrance or other preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a lessor under
a Capital Lease having substantially the same economic effect), any agreement to
give or refrain from giving any lien, pledge, mortgage, security interest,
charge or other encumbrance of any kind, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing or existence
of any financing statement or other similar form of notice under the laws of any
jurisdiction or any security agreement authorizing any Person to file such a
financing statement, whether arising by contract, operation of law, or
otherwise.
"LOSSES" shall have the meaning specified in SECTION 7.2.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall
mean any event, matter, condition or circumstance which individually or in the
aggregate (i) has or would reasonably be expected to have a material adverse
effect on or material adverse change in, as the case may be, the business,
assets, condition (financial or otherwise), properties (whether real, personal
or otherwise), operations or performance of the Company Parties, taken as a
whole, (ii) would materially impair or reasonably be expected to impair the
ability of any Company Party to perform or observe its obligations under this
Agreement or any other Investment Document or Bank Credit Document to which it
is a party or (iii) affects the legality, binding effect, validity or
enforceability of this Agreement or any other Investment Document or the
perfection or priority of any Lien granted to the Purchaser under any Collateral
Document or the Bank under the Bank Credit Documents.
12
"MONEY BORROWED" shall mean, without duplications, (i)
Indebtedness arising from the lending of money by any Person to any Company
Party, (ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to any Company Party, (A) which is represented by
notes payable or drafts accepted that evidence extensions of credit, (B) which
constitute obligations evidenced by bonds, debentures, notes or similar
instruments, or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment for
Property, (iii) Indebtedness that constitutes a Capitalized Lease Obligation,
(iv) reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of any Company Party under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof, if owed directly by such Company Party.
"MORTGAGES" shall mean the mortgages, deeds of trust and
leasehold mortgages executed by the Company Parties in favor of the Purchaser
and by which the Company Parties grant and convey to the Purchaser, as security
for the Obligations, a Lien upon the Real Property of the Company Parties.
"MULTIEMPLOYER PLAN" shall have the meaning ascribed to such
term by ERISA.
"NEW ▇▇▇▇▇▇ NOTE" shall mean that certain 8% Subordinated
Promissory Note due 2005, made by the Company as of the date hereof in favor of
▇▇▇▇▇▇ Equity Capital Corporation.
"NOTE" shall have the meaning set forth in SECTION 2.1, and
shall also include, where applicable, any additional note or notes issued by the
Company in connection with any Assignments.
"OBLIGATIONS" shall mean any and all present and future loans,
advances, Indebtedness, claims, guarantees, liabilities or obligations of the
Company Parties, or of any other Person for or on behalf of the Company Parties,
owing to the Purchaser, any Affiliate of the Purchaser or any Indemnified Party,
of whatever nature, character or description, arising under or in connection
with this Agreement, the Note, the Collateral Documents, and any other
Investment Document or otherwise, any and all agreements, instruments or other
documents heretofore or hereafter executed or delivered in connection with any
of the foregoing, in each case whether due or not due, direct or indirect, joint
and/or several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, amended,
renewed, extended, replaced, exchanged, restated, refinanced, refunded or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether for principal, interest, premiums,
fees, costs, expenses (including, without limitation, attorneys' fees) or other
amounts incurred for administration, collection, enforcement or otherwise,
whether or not arising after the commencement of any proceeding under the
Bankruptcy Laws (including, without limitation, post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding, and
whether or not recovery of any such
13
obligation or liability may be barred by any statute of limitations or such
Indebtedness, claim, liability or obligation may otherwise be unenforceable.
"ODA NOTE" shall mean that certain $1,000,000 Note due 2004,
made by the Company as of September 5, 1997 in favor of ▇▇▇▇▇▇▇ ▇▇▇.
"OPERATING LICENSES" shall mean, collectively, all licenses,
franchises, permits, consents, approvals, registrations, certificates and
authorizations of all Governmental Authorities necessary or advisable to the
conduct of the businesses of any of the Company Parties.
"ORGANIZATIONAL I.D. NUMBER" shall mean, with respect to any
Company Party, the organizational identification number assigned to such Company
Party by the applicable governmental unit or agency of the jurisdiction of
organization of such Company Party.
"OTHER DEBT DOCUMENT" shall mean any agreement, instrument or
other document evidencing or governing any Indebtedness of any Company Party,
other than the Note and any other Investment Document, but including, without
limitation, the Bank Credit Documents, the 10 1/2% Notes, the 13% Notes, the
▇▇▇▇▇▇ Note and the Oda Note.
"PERMITTED LIENS", with respect to the Company, shall have the
meaning set forth in SECTION 9.5.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" shall mean Purchase
Money Indebtedness of the Company Parties incurred after the date hereof which
is secured by a Purchase Money Lien and the principal amount of which, when
aggregated with the principal amount of all other such Indebtedness and
Capitalized Lease Obligations of the Company Parties at the time outstanding,
does not exceed $6,600,000. For the purposes of this definition, the principal
amount of any Purchase Money Indebtedness consisting of capitalized leases (as
opposed to operating leases) shall be computed as a Capitalized Lease
Obligation.
"PERSON" shall mean any individual, trustee, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, limited liability
partnership and other entity or any Governmental Authority.
"PREMISES" shall mean any and all real property, including all
buildings and improvements now or hereafter located thereon and all
appurtenances thereto, now or hereafter owned, leased, occupied or used by the
Company Parties.
"PROJECTIONS" means the Company's forecasted Consolidated (i)
balance sheets, (ii) profit and loss statements, (iii) cash flow statements,
(iv) capitalization statements, and (v) calculation of the financial covenants
under SECTION 8.20 of this Agreement, all prepared on a consistent basis with
the historical financial statements of the Company, together with appropriate
supporting details and a statement of underlying assumptions.
14
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"PURCHASE PRICE" shall have the meaning specified in SECTION
2.2.
"PURCHASER" shall have the meaning specified in the preamble.
"PURCHASE MONEY INDEBTEDNESS" shall mean and include (i)
Indebtedness (other than the Obligations) for the payment of all or any part of
the purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or after
the acquisition of any fixed assets for the purpose of financing all or any part
of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.
"PURCHASE MONEY LIEN" shall mean a Lien upon fixed assets
which secures Purchase Money Indebtedness, but only if such Lien shall at all
times be confined solely to the fixed assets the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness secured by
such Lien.
"RATE CONTRACTS" shall mean forward contracts, futures
contracts, swaps, options or other similar financial products designed to
provide protection against fluctuations in interest, currency or exchange rates,
commodities or other indices.
"REAL PROPERTY" shall mean any and all real property now or
hereafter owned, leased or operated by any Company Party.
"RELEASE" shall mean any release (whether threatened or
actual), migration, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, seeping, leaching, dumping or disposing into
the environment or the workplace of any Hazardous Materials, and otherwise as
defined in any Environmental Laws.
"REPORTABLE EVENT" shall mean any of the events set forth in
Section 4043 of ERISA.
"RESTRICTED INVESTMENTS" shall mean any investment made in
cash or by delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or capital
contribution, or otherwise, or in any Property except the following: (i)
investments by the Company, to the extent existing on the Closing Date, in one
or more Subsidiaries of the Company, (ii) Property to be used in the ordinary
course of business, (iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of the Company or any of its
Subsidiaries, (iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States of
America, PROVIDED that such obligations mature within one year from the date of
acquisition
15
thereof, (v) investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized under
the laws of the United States or any state thereof having capital surplus and
undivided profits aggregating at least $100,000,000, and (vi) investments in
commercial paper given the highest rating by a national credit rating agency and
maturing not more than 270 days from the date of creation thereof.
"SALE AND LEASEBACK TRANSACTION" shall mean any transaction in
which any Company Party becomes liable, directly or indirectly, with respect to
any lease, whether an operating lease or a Capital Lease, of any property
(whether real, personal or mixed), whether now owned or hereafter acquired, (i)
which any Company Party has sold or transferred or is to sell or transfer to any
other Person or (ii) which any Company Party intends to use for substantially
the same purposes as any other property which has been or is to be sold or
transferred by any Company Party to any other Person in connection with such
lease.
"SECURITY" shall mean all shares of stock, partnership
interests, membership interests or units or other ownership interests in any
other Person and all warrants, options or other rights to subscribe for or
purchase, or obligations to issue, the same, any Convertible Securities of such
Person, including, without limitation, any options or similar rights issued or
issuable under any employee stock option plan, pension plan or other employee
benefit plan of such Person, or any plan for, or other rights to, phantom stock
or other arrangement intended to result in payments by such Person which track
or reflect the value (or change in value) of the same.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, all as the same
shall be in effect at the time.
"SERIES A PREFERRED STOCK" shall mean the Company's 13% Series
A Cumulative Preferred Stock.
"SERIES B PREFERRED STOCK" shall mean, collectively, the
Company's 13% Series B Cumulative Preferred Stock and 12% Series B-1 Cumulative
Preferred Stock.
"SITE" shall mean any real property previously, currently or
hereafter owned, leased or operated by any Environmental Person.
"SOLVENT" shall mean, with respect to any Person, on the date
of determination, that (i) the present fair saleable value of the assets of such
Person in an arm's-length transaction will exceed the amount that will be
required to be paid on or with respect to the probable liability on the existing
debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed
or contingent) of such Person as they become absolute and matured, (ii) the sum
of the debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of such Person will not exceed all of the
property of such Person at a fair valuation, (iii) the capital of such Person
will not be unreasonably small for such Person to carry on its businesses, and
16
(iv) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay such debts and
liabilities as they mature. For purposes of the preceding sentence, the amount
of Contingent Obligations at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time, represents
the amount that are reasonably expected to become an actual or matured
liability.
"SUBORDINATED DEBT" shall mean any Indebtedness of the Company
that is subordinated to the Obligations in a manner satisfactory to Purchaser
and contains terms, including, without limitation, payment terms, satisfactory
to Purchaser. The term "Subordinated Debt" shall include, without limitation,
the Indebtedness evidenced by the 13% Notes, the New ▇▇▇▇▇▇ Note and the Oda
Note.
"SUBSIDIARY" and "SUBSIDIARIES" shall mean, with respect to
any specified Person, any other Person of which more than fifty percent (50%) of
the total voting power of Securities entitled to vote (without regard to the
occurrence of any contingency) in the election of directors (or other Persons
performing similar functions) are at the time directly or indirectly owned by
such specified Person. Unless otherwise indicated, the term "SUBSIDIARY" refers
to a Subsidiary of the Company or the Guarantors, whether directly or indirectly
owned.
"TAX" or "TAXES" shall mean any present and future income,
excise, sales, use, stamp or franchise taxes and any other taxes, fees, duties,
levies, with Guarantors or other charges of any nature whatsoever imposed by any
taxing authority, whether federal, state, local or foreign, together with any
interest and penalties and additions to tax.
"10 1/2% INDENTURE" shall mean that certain Indenture, dated
as of December 24, 1997, between the Company and U.S. Trust Company of
California, N.A., as Trustee, with respect to the 10 1/2% Notes.
"10 1/2% NOTES" shall mean the Company's existing 10 1/2%
Senior Subordinated Notes due 2007 issued under the 10 1/2% IndenturE.
"13% INDENTURE" shall mean that certain Indenture, of even
date herewith, between the Company and The Bank of New York, as Trustee, with
respect to the 13% Notes.
"13% NOTES" shall mean the Company's 13% Senior Subordinated
Notes due 2005 issued under the 13% Indenture.
"TYPE OF ORGANIZATION" means with respect to any Company
Party, the kind or type of entity by which any Company Party is organized, such
as a corporation or limited liability company.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of California from time to time.
17
"VOTING STOCK" of a Person shall mean all classes of
Securities of such Person then outstanding and normally entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees (or persons performing similar functions) thereof.
1.2 ACCOUNTING TERMS AND COMPUTATIONS. For purposes of this Agreement,
(i) all accounting terms used in this Agreement that are not expressly defined
herein have the meanings given to them under GAAP, (ii) all computations made
pursuant to this Agreement or any other Investment Document shall be made in
accordance with GAAP, (iii) all financial statements and other financial
information to be delivered by the Company Parties hereunder or under any other
Investment Document shall be prepared in accordance with GAAP, except that any
interim financial statements or other financial information which are unaudited
may be subject to year-end audit adjustments and may omit footnotes and (iv) all
computations, financial statements and other financial information of the
Company Parties hereunder shall be determined on a consolidated basis in
accordance with GAAP.
1.3 COVENANTS. To the extent that this Agreement contains any covenants
or agreements of any Company Party not a signatory hereto, the Company shall
cause such Company Party to comply with such covenants and agreements. All
covenants and agreements under this Agreement shall each be given independent
effect so that if a particular action or condition is not permitted by any such
covenant, the fact that it would be permitted by another covenant, by an
exception thereto, or be otherwise within the limitations thereof, shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.
1.4 CAPTIONS; CONSTRUCTION AND INTERPRETATION. The captions in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and are not to be considered in construing or interpreting this
Agreement. All section, preamble, recital, exhibit, schedule, disclosure
schedule, annex, clause and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Agreement for purposes of construing the provisions of this Agreement, and all
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
1.5 DETERMINATIONS. Any determination or calculation contemplated by
this Agreement or any other Investment Document that is made by the Purchaser
shall be final and conclusive and binding upon the Company Parties in the
absence of manifest error.
20 PURCHASE AND SALE OF THE NOTE.
2.1 AUTHORIZATION. The Company has authorized the issuance and sale to
the Purchaser of a Secured Senior Subordinated Note Due 2003 in the principal
amount of $12,000,000, in substantially the form of EXHIBIT A (as the same may
be amended, restated, supplemented, modified, renewed, replaced, refinanced or
restructured from time to time, the "NOTE"). The Company has also authorized the
grant to the Purchaser of a security interest in all
18
of the assets of the Company in accordance with the Company Security Agreement
and the Company Intellectual Property Agreement, subject only to Permitted
Liens. Each Guarantor has authorized the issuance of an absolute and
unconditional Guarantee, in substantially the form of EXHIBIT B, of all of the
obligations of the Company under this Agreement, the other Investment Documents
and the Note, secured by a lien on all of its right, title and interest in all
of its respective assets in accordance with the Guarantor Security Agreement and
the Guarantor Intellectual Property Security Agreement, subject only to
Permitted Liens.
2.2 PURCHASE OF THE NOTE; ISSUE PRICE. Subject to the terms and
conditions contained herein and in the other Investment Documents, and in
reliance upon the representations, warranties, covenants and agreements
contained herein and therein, at the Closing, the Company shall issue and sell
to the Purchaser the Note, and the Purchaser shall purchase the Note from the
Company. The aggregate purchase price to be paid by the Purchaser for the Note
(the "PURCHASE PRICE") shall be $12,000,000, payable as provided in SECTION 2.3.
2.3 CLOSING. The closing of the issuance and sale of the Note under
this Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other place
as the parties may mutually agree on the date hereof or as soon as practicable
thereafter immediately following the satisfaction or waiver of the conditions
precedent set forth in SECTION 5 and SECTION 6 and concurrently with the
consummation of the Refinancing (such date being referred to as the "CLOSING
DATE"), subject to SECTION 11. At the Closing, the Company shall deliver to the
Purchaser, among other things, the Note, duly executed by the Company against
delivery by the Purchaser of the Purchase Price (net of amounts permitted to be
withheld pursuant to SECTION 5.3), at the direction and on behalf of the
Company, by wire transfer in immediately available funds to such bank as the
Company may request in writing at least two (2) Business Days prior to the
Closing for credit to an account designated in writing by the Company.
2.4 USE OF PROCEEDS. The Company Parties shall use the proceeds from
the issuance and sale of the Notes as contemplated hereunder solely in
connection with the Refinancing, for general operating capital needs of the
Company in a manner consistent with the provisions of this Agreement and
applicable law, and the payment of fees in connection with this Agreement.
30 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS. In
connection with the following representations and warranties, the Company and
the Guarantors have delivered to Purchaser disclosure schedules as attached
hereto (the "DISCLOSURE SCHEDULES"), arranged in numbered parts corresponding to
the numbering in this Agreement of the following representations and warranties.
The information disclosed in any numbered part shall be deemed to relate to and
to qualify only the particular representation or warranty set forth in the
corresponding numbered section in this Agreement and shall not be deemed to
relate to or to qualify any other representation or warranty. To induce the
Purchaser to purchase the Note under this Agreement, the Company and the
Guarantors, jointly and severally,
19
represent and warrant to the Purchaser that, except as expressly set forth in
the respective Disclosure Schedules:
3.1 ORGANIZATION AND QUALIFICATION. Except for Lone Star Growers, the
Company and each Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. Lone Star
Growers is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company and each Guarantor
has all requisite power and authority, and all Operating Licenses, necessary to
own or lease and operate its properties and assets and to carry on its business
as now conducted and as proposed to be conducted, and is duly qualified or
licensed to do business in each jurisdiction in which the character of the
properties or assets owned, leased or operated by it or the nature of the
activities conducted makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed could not reasonably be
expected to result in a Material Adverse Effect.
3.2 CORPORATE OR OTHER POWER. The Company and each Guarantor have the
requisite power and authority to execute, deliver, carry out and perform their
respective obligations under this Agreement and all other Investment Documents
to which they are a party, including, without limitation, the power and
authority to issue, sell and deliver the Note to be issued and sold by the
Company to the Purchaser hereunder and grant the security interests and guaranty
the obligations as set forth herein.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. The execution, delivery and
performance of this Agreement and each of the other Investment Documents to
which either the Company or the Guarantors is a party, the issuance, sale and
delivery by the Company of the Note as contemplated hereunder and the
consummation of the other transactions contemplated hereby and thereby have been
duly authorized by all requisite action on the part of the Company and the
Guarantors, as applicable, and by the stockholders, partners, Board of Directors
and officers of each entity, as applicable. This Agreement has been duly
executed and delivered by the Company and each Guarantor and, at the Closing,
each of the other Investment Documents will be duly executed and delivered by
the Company and the Guarantors to the extent that any of them is a party
thereto. This Agreement is, and each other Investment Document will at the
Closing be, a legal, valid and binding obligation of the Company and the
Guarantors to the extent that any of them is a party thereto, enforceable
against the Company and the Guarantors in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
3.4 SUBSIDIARIES. The Company does not own or hold any Securities of
any Person other than the Guarantors, and has no other Subsidiaries. Other than
Lone Star's 1% partnership interest in Lone Star Growers and LSGR's 99%
partnership interest in Lone Star Growers, no Guarantor owns or holds any
Securities of any other Person and has no Subsidiaries. The Company Parties do
not have any joint venture relationships.
20
3.5 CONFLICT WITH OTHER INSTRUMENTS; EXISTING DEFAULTS.
(a) The execution, delivery and performance of this Agreement
by the Company and the Guarantors and of each other Investment Document to which
any Company Party is a party, the issuance, sale and delivery by the Company of
the Note and the consummation of the other transactions contemplated hereby and
thereby do not and will not (i) violate or conflict with (A) the charter, bylaws
or organizational documents of the Company or the Guarantors, in each case as in
effect on the date hereof, (B) any term of any lease, credit agreement,
indenture, note, mortgage, instrument or other agreement to which any Company
Party is a party or by which any of its or their properties or assets are bound
(including, without limitation, any material contract or Other Debt Document),
or any agreement with respect to intellectual property, the violation of which
would reasonably be expected to have a Material Adverse Effect, or (C) any
Applicable Laws, the violation of which would reasonably be expected to have a
Material Adverse Effect, or (ii) result in, or require, the creation or
imposition of any Lien upon or with respect to any of the assets or properties
now owned or hereafter acquired by any Company Party, except for Liens under the
Bank Credit Agreement (as in effect on the date hereof) and this Agreement.
(b) After giving effect to the consummation of the
transactions contemplated hereby, neither the Company nor any Guarantor is in
default, breach or violation of (i) its charter, bylaws or organizational
documents, as in effect as of the date hereof, (ii) any material lease, credit
agreement, indenture, note, mortgage, instrument or other agreement to which it
is a party or by which any of its properties or assets are bound (including,
without limitation, any material contract or Other Debt Document or any
agreement with respect to intellectual property) or (iii) any Applicable Laws,
the violation of which would reasonably be expected to have a Material Adverse
Effect. Without limiting the generality of the foregoing, after giving effect to
the consummation of the transactions contemplated hereby, there does not exist
any "default" or "event of default" (in each case as defined in any Other Debt
Document) or any default under the Bank Credit Agreement (as in effect on the
date hereof) or any other credit or financing agreement to which the Company or
any Guarantor is a party or by which any of their respective properties or
assets are bound.
(c) Except as set forth on SCHEDULE 3.5, no Indebtedness for
Money Borrowed of the Company or any Guarantor ranks senior to or pari passu
with the Indebtedness evidenced by the Note or the Guarantee, other than the
Indebtedness under the Bank Credit Documents and the 10 1/2% Notes.
3.6 GOVERNMENTAL AND OTHER THIRD PARTY CONSENTS. Except for the
Consents listed in SCHEDULE 3.6, neither the Company nor any Guarantor is
required to obtain any Consent from, or is required to make any declaration or
filing with, any Governmental Authority or any other Person (including
stockholders or partners) in connection with the execution, delivery and
performance of this Agreement or any other Investment Document, including,
without limitation, the issuance, sale and delivery of the Notes, or for the
purpose of maintaining in full force and
21
effect any Operating Licenses. Each of the Consents which have been obtained or
made in connection with the execution, delivery and performance of this
Agreement or any other Investment Document is in full force and effect. The time
within which any administrative or judicial appeal, reconsideration, rehearing
or other review of any such Consent may be taken or instituted has lapsed, and
no such appeal, reconsideration or rehearing or other review has been taken or
instituted.
3.7 CAPITALIZATION. SCHEDULE 3.7 sets forth a true, correct and
complete description of the authorized Securities of each Company Party and the
number of shares or securities of each class of Securities that is issued and
outstanding or partnership interest, as appropriate, with respect to each
Company Party as of the date hereof. All of the issued and outstanding shares of
capital stock of each Company Party have been duly authorized and are validly
issued, fully paid and non-assessable, and are free and clear of any Liens and
other restrictions including any restrictions on the right to vote, sell or
otherwise dispose of such capital stock other than restrictions under applicable
securities laws and of any preemptive or other similar rights to subscribe for
or to purchase any such capital stock. Except as set forth on SCHEDULE 3.7,
there are (i) no voting trusts or other agreements or undertakings with respect
to the voting of the Securities of any Company Party to which any Company Party
is a party or of which any Company Party has knowledge, and (ii) no agreements
to which the Company Parties, any of their respective directors or officers, is
a party granting any other Person any rights of first offer or first refusal,
registration rights or "drag-along," "tag-along" or similar rights with respect
to any transfer of any Securities of the Company Parties to which any Company
Party is a party or of which any Company Party has knowledge. All Securities of
the Company Parties that have been issued have been issued and offered in
compliance in all material respects with all applicable federal and state
securities laws. No obligations (whether fixed or contingent) on the part of any
Company Party, any of their respective directors or officers, or any other
Person exist with respect to the purchase, repurchase or redemption of any
outstanding Securities of any Company Party. No additional shares of Capital
Stock of the Company Parties will become issuable to any Person pursuant to any
"anti-dilution" provisions of any such issued and outstanding Security of the
Company on account of the issuance of the Note.
3.8 NAMES; BUSINESS LOCATIONS.
(a No Company Party has been known as or has used any legal,
fictitious or trade names except those listed on SCHEDULE 3.8 hereto. Except as
set forth on SCHEDULE 3.8, since January 1, 1997, no Company Party has been the
surviving entity of a merger or consolidation or has acquired all or
substantially all of the assets of any Person. The Company Parties' respective
states of incorporation or organization and type of organization are set forth
on SCHEDULE 3.8. The respective exact legal names of each Company Party are set
forth on SCHEDULE 3.8.
(b Each Company Party's chief executive office and other
places of business as of the date hereof are as listed on SCHEDULE 3.8 hereto as
updated from time to time by the
22
Company. During the preceding one-year period, none of the Company Parties has
had an office or place of business other than as listed on SCHEDULE 3.8. Except
as shown on SCHEDULE 3.8, as of the date hereof, no Inventory is stored with a
bailee, distributor, warehouseman or similar party, nor is any Inventory
consigned to any Person.
3.9 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser
true and complete copies of (i) the consolidated balance sheets of the Company
as at December 31, 2000, and June 30, 2000 and 1999, and the related
consolidated statements of income and cash flows for the fiscal years then
ended, each audited by an independent accounting firm, and (ii) the unaudited
consolidated balance sheet of the Company as of June 30, 2001, and related
consolidated statement of income for the fiscal period then ended (collectively,
the "FINANCIAL STATEMENTS"). The Financial Statements (a) present fully and
fairly the financial position and results of operations of the Company and the
Guarantors, as applicable, as of the respective dates of such statements and for
the periods covered thereby and (b) were prepared in accordance with GAAP,
applied on a consistent basis throughout the periods covered thereby, except
that the June 30, 2001 financial statements do not contain all GAAP adjustments
or footnotes required by GAAP. Except as set forth on SCHEDULE 3.9 or except as
not required to be disclosed on the Financial Statements by GAAP, there is no
Contingent Obligation or other liability material to the Company or Guarantor
that is not reflected on the face of the consolidated balance sheet of the
Company and Guarantor at June 30, 2001.
3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.10
or with respect to the transactions set forth in this Agreement (including,
without limitation, the transactions contemplated by the Bank Credit Agreement
(as in effect on the date hereof), the 10 1/2% Notes, the 13% Notes, the Series
A Preferred Stock, the Series B Preferred Stock and the New ▇▇▇▇▇▇ Note), since
June 30, 2001 through the date of this Agreement, there has not been:
(a Any transaction involving the Company or any Guarantor not
in the ordinary course of business, including, without limitation, any sale of
any assets or properties (other than inventory in the ordinary course of
business);
(b Any declaration, setting aside or payment of any dividend
or other distribution or payment (whether in cash, stock or property) with
respect to the Securities of the Company or any Guarantor, or any redemption,
purchase or other acquisition of securities of the Company or any Guarantor, or
any payment to any stockholder or partner of the Company or any Guarantor not in
his, her or its capacity as a stockholder or partner;
(c Any damage, destruction or loss, whether or not covered by
insurance, to any material assets or properties of the Company or any Guarantor;
(d Any Material Adverse Change (after giving effect to the
Refinancing);
23
(e Any Indebtedness for Money Borrowed incurred by the Company
or any Guarantor or any commitment to incur Indebtedness for Money Borrowed
entered into by the Company or any Guarantor;
(f Any payment, satisfaction, discharge or cancellation of any
material debts or claims of the Company or any Guarantor other than in the
ordinary course of business consistent with past practices;
(g Any mortgage, pledge or Lien encumbering any of the assets
or properties of the Company or any Guarantor, or any assumption of, or taking
any assets or properties subject to, any liability;
(h Any offer, issuance or sale of any shares of Securities of
the Company or any Guarantor;
(i Any alteration or change in the Company's or any
Guarantor's credit guidelines and policies, charge-off policies or accounting
methods, quality control procedures or policies or manner of preparing its
financial statements or maintaining its books of account;
(j Any settlement of any litigation, entry of a consent decree
or entry of any judgment against the Company or any Guarantor with a value of
$100,000 or more;
(k Any revaluation by the Company or any Guarantor of any of
their respective assets, including without limitation, any write-offs, increases
in any reserves except in the ordinary course of business consistent with past
practice or any write-up or write-down of the value of inventory, property,
plant, equipment or any other asset;
(l Any proceeding or other steps for the dissolution, winding
up, reorganization or bankruptcy by the Company or any Guarantor;
(m Any revaluation or repricing of any Securities of the
Company or any Guarantor; or
(n Any agreement to do any of the foregoing.
3.11 EXISTING INDEBTEDNESS; EXISTING LIENS; INVESTMENTS.
(a SCHEDULE 3.11 sets forth a true, correct and complete list,
and describes, as of the date or dates indicated therein, as applicable:
(i0 all Indebtedness for Money Borrowed of the
Company Parties on a consolidated and consolidating basis which will be
outstanding immediately after the Closing
24
Date, showing, as to each Indebtedness, the payee thereof and the total amount
outstanding (by principal, interest and other amounts, if applicable);
(ii0 all Liens (except Permitted Liens) in respect of
any property or assets of the Company and/or any Guarantor which will exist
immediately after the Closing Date, showing, as to each Lien, the name of the
grantor and secured party, the Indebtedness secured thereby, the name of the
debtor (if different from the grantor) and the assets or other property covered
by such Lien;
(iii0 all Investments of the Company and the
Guarantors immediately after the Closing Date, if any; and
(iv0 all UCC financing statements existing as of
November 15, 2001, naming the Company or any Guarantor as a debtor, showing, as
to each financing statement, the basis for the filing.
(b The Company has previously delivered to the Purchaser a
true and correct trade payables aging schedule for the Company and the
Guarantors as of November 15, 2001.
(c Neither the Company nor any Guarantor has on the date
hereof any material Contingent Obligations, liabilities for Taxes, liabilities
for product defects or under warranties, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments. No Company Party is obligated as surety or indemnitor under any
surety or similar bond or other contract issued or entered into to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person. Except for the Bank Credit Agreement (as in effect on
the date hereof) and the 10 1/2% Indenture, 13% Indenture, the Series A
Preferred Stock and the Series B Preferred Stock, no Company Party is a party or
subject to any contract or agreement which restricts its right or ability to
incur Indebtedness, none of which prohibit the execution of or compliance with
this Agreement or the other Investment Documents.
(d Immediately following the Closing, neither the Company nor
any Guarantor will have any Indebtedness, for Money Borrowed whether accrued,
absolute, contingent or otherwise (whether individually or in the aggregate),
except for the Indebtedness for Money Borrowed set forth on SCHEDULE 3.11.
3.12 LITIGATION. Except as set forth on SCHEDULE 3.12, there are no
actions, suits, arbitration proceedings, investigations, inquiries or other
proceedings, whether governmental or non-governmental, before any Governmental
Authority pending or, to the knowledge of the Company Parties, threatened
against, relating to or affecting any Company Party, or any officer, director or
employee thereof in his or her capacity as such, or any of its or their
respective assets, properties or businesses which could reasonably be expected
to have a Material Adverse Effect. Except as set forth on SCHEDULE 3.12, there
is not in effect any order, judgment, decree, injunction
25
or ruling of any Governmental Authority against, relating to or affecting any of
the Company Parties or any officer, director or employee thereof in his or her
capacity as such. None of the Company Parties is in default under any order,
judgment, decree, injunction or ruling of any Governmental Authority, or is
subject to or a party to any order, judgment, decree or ruling arising out of
any action, suit or proceeding under any Applicable Laws.
3.13 TRANSACTIONS WITH AFFILIATES.
(a Except as set forth on SCHEDULE 3.13(a) or as contemplated
by this Agreement, immediately following the Closing Date:
(i0 neither the Company nor any Guarantor will be
indebted, directly or indirectly, to any of its own officers or directors, the
officers or directors of its Affiliates, or to any members of the Immediate
Families of such officers or directors, except for, in the case of officers,
compensation payable in the ordinary course of business and reasonable travel
advances accrued in the ordinary course of business consistent with past
practices;
(ii0 no officer or director of the Company or any
Guarantor, and no member or members of their Immediate Families, will (A) be
indebted to the Company or any Guarantor in any amount whatsoever or (B) have
any direct or indirect ownership interests in any Person which competes,
directly or indirectly, with the Company or any Guarantor; and
(iii0 there are no voting or similar agreements
between or among the stockholders or partners of any Company Party to which any
Company Party is a party or of which any Company Party has knowledge.
(b Immediately following the Closing Date, and except for
interests in employee benefit plans, no officer, director or employee of any
Company Party, and no member, or Affiliate of a member, or of the Immediate
Families of any of the foregoing, will have any direct or indirect interest in
any contract, commitment, license, agreement, obligation or arrangement to which
any Company Party is a party, other than employment agreements described in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000 and as
set forth on SCHEDULE 3.13(b).
3.14 COMPLIANCE WITH LAWS; PERMITS. Each of the Company Parties and its
respective properties, operations and assets, is in material compliance with all
Applicable Laws (including, without limitation, securities laws). There have
been no citations, notices or orders of noncompliance issued to any Company
Party with respect to any pending or uncured violation, potential violation, or
alleged violation of any Applicable Law. Each of the Company Parties has
established and maintains an adequate monitoring system to insure that it
remains in compliance in all material respect with all federal, state and local
rules, laws and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. Section 201, ET SEQ.), as
amended. None of the Company Parties is an "investment company" or a company
26
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. Each of the Company Parties has all material
Operating Licenses required under Applicable Laws to own their respective assets
or conduct their respective businesses as now conducted and as proposed to be
conducted. All such Operating Licenses of the Company Parties are validly issued
and in full force and effect, and each of the Company Parties have fulfilled and
performed in all material respects their obligations with respect thereto and
have full power and authority to operate thereunder.
3.15 REAL PROPERTY.
(a SCHEDULE 3.15 sets forth Real Property owned by any Company
Party.
(b SCHEDULE 3.15 sets forth a complete and correct description
of leases, subleases or licenses of any real property to which the Company and
any Guarantor will be a party immediately after the Closing. The Company and the
Guarantors have delivered to the Purchaser true, correct and complete copies of
the leases listed on SCHEDULE 3.15. Neither the Company nor any Guarantor leases
or otherwise holds or uses any other real property. With respect to each such
lease:
(i) there are no disputes, oral agreements or
forbearance programs in effect as to any such lease, sublease or license; and
(ii) except with respect to the Bank Credit Agreement
(as in effect on the date hereof), neither the Company nor any Guarantor has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest therein.
(c Except for landlord consents in connection with the actions
described in SECTION 8.23, no Consent of any party to such lease is required in
connection with the consummation of the transactions contemplated by this
Agreement, the Note or the other Investment Documents, including, without
limitation, the issuance and sale of the Securities, and no such event shall be
prohibited by, or shall constitute a default under, such lease.
3.16 EMPLOYEE BENEFIT PLANS; ERISA.
(a SCHEDULE 3.16 sets forth a true, correct and complete list
of all Benefit Plans of the Company and the Guarantors as of the date hereof;
(b The Company Parties are in compliance in all material
respects with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Benefit Plan. No fact or situation that would
reasonably be expected to result in a Material Adverse Change in the financial
condition of the Company Parties exists in connection with any Benefit Plan.
27
(c All costs of administering and contributions required to be
made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code,
or any other Applicable Law have been timely made by the Company Parties and are
fully deductible in the year for which they were paid. All other amounts that
should be accrued to date as liabilities of the Company Parties under or with
respect to each Benefit Plan (including administrative expenses and incurred but
not reported claims) for the current plan year of each such plan have been
recorded on the books of the Company. There is and will be no material liability
of any Company Party (i) with respect to any Benefit Plan that has previously
been terminated by a Company Party or any predecessor Person under any
Multiemployer Plan or (ii) under any insurance policy or similar arrangement
procured in connection with any Benefit Plan in the nature of a retroactive rate
adjustment, loss sharing arrangement, or other liability.
(d No circumstance exists and no event (including any action
or any failure to take any action) has occurred with respect to any Benefit Plan
currently or formerly maintained by the Company Parties, or any predecessor
Persons, or to which the Company Parties or any predecessor Persons is or has
been required to contribute, that could subject the Company Parties to any
liability (including any penalty for failure to timely file any required report
with any governmental agency) or Lien under ERISA or the Code which would
reasonably be expected to have a Material Adverse Effect, nor will the
transactions contemplated by this Agreement or the Refinancing give rise to any
such liability or Lien.
3.17 TAXES.
(a The Company Parties have each filed within the required
time periods (after giving effect to any permitted extensions) all federal,
state and other Tax returns required to have been filed by it or them, and have
each paid all Taxes which were due and payable by it or them, other than Taxes
that are being contested in good faith and for which reserves have been properly
established. The Company Parties' respective federal tax identification numbers
are set forth on SCHEDULE 3.17. The provision for taxes on the books of the
Company Parties is adequate for all years not closed by applicable statutes, and
for the current fiscal year.
(b The Company Parties have each withheld and paid all Taxes
required to be withheld and paid by it or them in connection with amounts paid
or owing to any employee, creditor, stockholder, partner or other third party.
(c (i) Since January 1, 1996, none of the Company Parties has
been advised that any Tax returns have been or are being audited by any
Governmental Authority, (ii) there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the assessment
of any Taxes or deficiency against the Company Parties, (iii) there are no
actions, suits, proceedings or claims now pending by or against any Company
Party in respect of any Taxes or assessments, and (iv) there is no pending or,
to the best knowledge of any Company Party, threatened audit or investigation of
any Company Party by any Governmental Authority
28
relating to any Taxes or assessments, or any claims for additional Taxes or
assessments asserted by any Governmental Authority.
(d No Company Party is a party to or bound by any tax sharing,
tax indemnity or tax allocation agreement or other similar arrangement.
3.18 TITLE TO PROPERTY; LIENS. Each of the Company Parties has good and
marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its Real Property, and good title to all of the
Collateral and all of its other Property, in each case, free and clear of all
Liens except Permitted Liens. Each Company Party has paid or discharged all
lawful claims which, if unpaid, might become a Lien against any of the Company
Parties' Properties that is not a Permitted Lien. The Liens granted to the
Purchaser under the Collateral Documents are second priority Liens, subject only
to Permitted Liens. Each of the Company Parties holds valid leasehold interests
in all real property occupied or otherwise used in connection with its business
and good and merchantable title to its Property, and no such Property is subject
to any Lien except for the Permitted Liens. Each of the Company Parties enjoys
quiet possession under all leases to which they are parties as lessees, and all
of such leases are valid, subsisting and in full force and effect. None of such
leases contain any provision restricting the incurrence of indebtedness by the
lessee or any unusual or burdensome provision adversely affecting the current
and proposed operations of the Company Parties taken as a whole. Immediately
after the Closing, the Company Parties will have the assets, properties, rights
and Operating Licenses necessary to conduct the business that is being conducted
and as proposed to be conducted by the Company Parties.
3.19 ENVIRONMENTAL MATTERS.
(a Except as set forth in SCHEDULE 3.19:
(i0 Each Environmental Person and each Site is in
material compliance with all, and no Environmental Person has any material
liability under, any Environmental Laws, and no Hazardous Materials are being
used by the Company or any Guarantor on any Real Property in violation of any
Environmental Law;
(ii0 No material Release has occurred at any Site,
and there are no present or past Environmental Conditions in any way relating to
any Environmental Person, any Site or the business or operations of any
Environmental Person;
(iii0 No Environmental Person is a "potentially
responsible party" within the meaning of CERCLA with respect to any federal,
state, local or foreign environmental clean-up site or with respect to
investigations or corrective actions under any Environmental Laws for such a
clean-up site;
29
(iv0 No Environmental Person has received notice of
any pending or uncured alleged, actual or potential responsibility, inquiry,
investigation or administrative or judicial proceeding regarding (A) any Release
by any Environmental Person at any Site or other location or (B) any violation
of or non-compliance by any Environmental Person with the conditions of any
license or permit required under any Environmental Laws or the provisions of any
Environmental Laws. No Environmental Person has received notice of any other
claim, demand or action by any Person alleging any pending or uncured actual or
threatened injury or damage to any Person, property, natural resources or the
environment arising from or relating to any Release, transportation or disposal
of any Hazardous Materials; and
(v0 Each Environmental Person has furnished all
notices and warnings, made all reports and has kept and maintained all records
required by, and in material compliance with, all Environmental Laws, including,
without limitation, any notices and Consents required under any Environmental
Laws in connection with the consummation of the transactions contemplated by the
Investment Documents.
(b SCHEDULE 3.19 sets forth a true, correct and complete list
of all environmental site assessments, audits, studies or reports relating to
any Environmental Condition or relating to the business, condition or operations
of all Environmental Persons since January 1, 1995. The Company has delivered to
the Purchaser true, correct and complete copies of all such environmental site
assessments, audits, studies or reports.
(c None of the items set forth on SCHEDULE 3.19 shall
individually or in the aggregate have a material effect on the Company or on any
Company Party to which such item relates.
3.20 INTELLECTUAL PROPERTY. The Company and each of its Subsidiaries
owns or possesses all the patents, trademarks, service marks, trade names,
copyrights and licenses necessary for the present and planned future conduct of
its business without any known conflict with the rights of others. All such
patents, trademarks, service marks, trade names, copyrights, licenses and other
similar rights are set forth on SCHEDULE 3.20.
3.21 LABOR RELATIONS.
(a Except as would not reasonably be expected to have a
Material Adverse Effect, each of the Company Parties is in material compliance
with the Fair Labor Standards Act (29 U.S.C. Section 201, ET SEQ.), all state
wage and hour laws and all workers' compensation laws and other Applicable Laws
relating to employment and is not engaged in any unfair labor practice.
(b There is no labor strike, slowdown, work stoppage or charge
of unfair labor practice, and there are no material labor disputes, grievances,
complaints or arbitration proceedings, pending or materially affecting the
Company or any Guarantor nor, to the knowledge of any Company Party, is there
any basis therefor or threat thereof.
30
(c Except as set forth in SCHEDULE 3.21, none of the Company
Parties is bound by or subject to any written or oral, express or implied,
contract, commitment or arrangement with any labor union or other employee
organization, and no labor union or other employee organization has requested or
sought to represent any of the employees, representatives or agents of any
Company Party.
(d There are no petitions pending before the National Labor
Relations Board in connection with any pending claim for union representation.
3.22 INSURANCE. SCHEDULE 3.22 sets forth a true and complete list of
all liability and other insurance coverage (including, without limitation,
product liability and product recall insurance) insuring the Company and any
Guarantor against losses arising out of or related to their respective
businesses), which list accurately describes the coverage carried and the
expiration dates of such policies). The Company and the Guarantors are covered
by insurance in scope and amount customary and reasonable for the business in
which they are engaged and will be so covered after consummation of the
transactions contemplated hereby and under the Agreement. The insurance policies
listed on SCHEDULE 3.22 constitute insurance protection against all liability,
claims and risks occurring in the ordinary course of business customarily
included within comprehensive liability coverage and at amounts and levels
customarily maintained for a business of this type. All such policies are in
full force and effect.
3.23 BUSINESS RELATIONSHIPS. After giving effect to the consummation of
the transactions contemplated hereby and the Refinancing, there exists no actual
or, to the knowledge of the Company or any Guarantor, threatened termination,
cancellation or limitation of, or any adverse modification or change in, the
business relationship proposed to be conducted by the Company or any Guarantor
with any material suppliers, or customers of the Company or any Guarantor, and
to the knowledge of the Company or any Guarantor there exists no present
condition or state of facts or circumstances which could materially and
adversely affect the Company or any Guarantor or prevent the Company or any
Guarantor from conducting business with such suppliers and customers after the
consummation of the transactions contemplated by this Agreement in substantially
the same manner in which it has been heretofore conducted.
3.24 SOLVENCY. After giving effect to the consummation of the
transactions contemplated hereby and the Refinancing, each of the Company and
the Guarantors will be Solvent. No transfer of property is being made and no
obligation is being incurred in connection with the transactions contemplated by
this Agreement and the other Investment Documents with the intent to hinder,
delay or defraud either present or future creditors of the Company or any
Guarantor.
3.25 DEPOSITORY AND OTHER ACCOUNTS. SCHEDULE 3.25 sets forth a true and
complete list of all banks and other financial institutions and depositories at
which the Company Parties maintain, or will maintain, deposit accounts, spread
accounts, yield supplement reserve accounts, operating accounts, trust accounts,
trust receivable accounts or other accounts of any
31
kind or nature into which funds of the Company Parties are deposited from time
to time. SCHEDULE 3.25 correctly identifies the name and address of each such
bank, financial institution and depository, the name in which each account is
held, the purpose of the account, the account number, the contact person at such
bank, financial institution and depository and such contact person's telephone
number. The Company and the Guarantors will notify the Purchaser and supplement
SCHEDULE 3.25 as new accounts are established within two (2) Business Days
thereof.
3.26 BROKERS; CERTAIN EXPENSES. Except as set forth in SCHEDULE 3.26,
neither the Company nor any Guarantor, nor any Affiliate of the Company or any
Guarantor, has paid or is obligated to pay any fee or commission to any broker,
finder, investment banker or other intermediary, in connection with this
Agreement, any other Investment Document or any of the transactions contemplated
hereby or thereby. Except as set forth in SCHEDULE 3.26, neither the Company nor
any Guarantor, nor any Affiliate of the Company or any Guarantor, is bound by
any agreement or commitment for the provision of investment banking or financial
advisory services with respect to any recapitalization, issuance of debt or
equity securities or other capital or financing transactions involving the
Company or any Guarantor that would operate to restrict or prevent the Closing.
3.27 NO EVENT OF DEFAULT. No event has occurred and no condition exists
that would upon or after execution of this Agreement, the Bank Credit Documents
and the other Investment Documents constitute a "Default" or an "Event of
Default" under this Agreement, the Bank Credit Documents, the other Investment
Documents or any Other Debt Document. Except as set forth on SCHEDULE 3.27,
after giving effect to the closing on the date hereof of the transactions
contemplated by this Agreement, neither the Company nor any of its Subsidiaries
is in default in (and no event has occurred and no condition exists which
constitutes, or which with the passage of time or the giving of notice or both
would constitute, a default in) the payment of any Indebtedness to any Person
for Money Borrowed.
3.28 FINANCIAL SOPHISTICATION. Each of the Company Parties, by reason
of its own business and financial experience or that of its professional
advisors, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of
issuing the Note and the Guarantee, as applicable, and has the capacity to
protect its own interests in connection with the transactions contemplated by
this Agreement.
3.29 EQUIPMENT. The Equipment of the Company Parties is in good
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the operating efficiency thereof shall be
maintained and preserved, reasonable wear and tear excepted, except where the
failure to so maintain the same would not reasonably be expected to have a
Material Adverse Effect. No Company Party will permit any Equipment to become
affixed to any real Property leased to a Company Party so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form reasonable acceptable to the Purchaser, and no
Company Party will permit any of the Equipment to become an
32
accession to any personal Property other than Equipment that is subject to first
priority (except for Permitted Liens) Liens in favor of the Purchaser.
3.30 SENIOR STATUS. The Obligations constitute "Senior Debt" as defined
in the New ▇▇▇▇▇▇ Note and the 13% Indenture. The Obligations constitute
"Designated Senior Debt" as defined in the 13% Indenture.
3.31 10 1/2% NOTES. The Obligations are pari passu with the
indebtedness under the 10 1/2% Notes. The aggregate principal amount of the 10
1/2% Notes outstanding at the Closing will not be more than $5,000,000.
3.32 INVENTORY. After considering reserves, all inventories of raw
material, purchased parts materials, work in process, finished products, goods,
spare parts, replacement and component parts, and office and other supplies used
or to be distributed, licensed or sold in connection with the business of the
Company Parties consistent with past practices ("INVENTORY") (a) was acquired in
the ordinary course of business, (b) is of good and merchantable quality, and
(c) consists substantially of a quality, quantity and condition useable,
leasable or saleable in the ordinary course of business.
3.33 ACCOUNTS. All Accounts of the Company Parties represent amounts
due for services performed or sales actually made in the ordinary course of
business and properly reflect the amounts due.
3.34 SEC FILINGS. The reports, statements and registration statements
(including, without limitation, any financial statements or schedules or other
information incorporated by reference therein) filed by the Company with the
Securities and Exchange Commission under the Securities Act and the Exchange Act
are referred to in this Agreement as the "SEC FILINGS." As of the respective
times such documents were filed or, as applicable, became effective, the SEC
Filings complied as to form and content, in all material respects, with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations promulgated thereunder. Taken as a whole, the SEC
Filings do not contain any untrue statement of a 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. There are no contracts or documents which are required under the
Securities Act or the Exchange Act to be described in the SEC Filings or to be
filed as exhibits thereto which have not been so described and filed as
required.
3.35 DISCLOSURE.
(a Neither this Agreement, the Disclosure Schedules, nor any
other Investment Document, nor any certificate, report, questionnaire, statement
or document (but excluding financial projections, which are covered by clause
(b) below) furnished by or on behalf of any Company Party, nor any
representation, warranty or statement contained in any of the
33
foregoing, whether included in any materials provided to the Purchaser prior to
the date hereof or included in this Agreement or any other Investment Document
or in any Exhibit or Disclosure Schedule or in any other document or instrument
delivered at any time, taken as a whole, is, or will be, untrue with respect to
any material fact or omits, or will omit, to state a material fact necessary in
order to make the statement made herein or therein, in light of the
circumstances in which such statement was made, not misleading.
(b All assumptions underlying all financial projections
furnished by or on behalf of the Company Parties, whether included in any
materials provided to the Purchaser prior to the date hereof or included in this
Agreement or any other Investment Document or in any Exhibit or Disclosure
Schedule or in any other document or instrument delivered at any time, were made
in good faith and are reasonable under the circumstances and neither the Company
nor any Guarantor is aware of any facts or information that would lead it to
believe that such projections are incorrect or misleading in any respect. After
giving effect to the Refinancing, to the knowledge of any Company Party, and
except for facts or circumstances relating to the economy in general, there are
no facts or circumstances existing which could reasonably be expected to have a
Material Adverse Effect, either individually or in the aggregate.
3.36 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Company Parties contained in this Agreement or any of the
other Investment Documents shall survive the execution, delivery and acceptance
thereof by the Purchaser and the Closing.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows:
4.1 INVESTMENT INTENT. The Purchaser is acquiring the Note for its own
account, for investment purposes, and not with a view to or for sale in
connection with any distribution thereof in violation of the law. The Purchaser
understands that the Note has not been registered under the Securities Act or
registered or qualified under any state securities laws in reliance upon
specific exemptions therefrom, which exemptions may depend upon, among other
things, the BONA FIDE nature of its investment intent as expressed herein.
Therefore, the Note is a "restricted security" which cannot be sold without
registration under the Securities Act or pursuant to an exemption therefrom, and
may have to be held indefinitely.
4.2 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
investor" (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act). By reason of its business and financial experience, the
Purchaser has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
investment in the Note, has the capacity to protect its own interests and is
able to bear the economic risk of such investment.
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligations of the
Purchaser to consummate the transactions contemplated hereby, including, without
34
limitation, to purchase the Note as provided herein, are subject to the
satisfaction, prior to or at the Closing, of the conditions set forth in this
SECTION 5; PROVIDED, HOWEVER, that any or all of such conditions may be waived,
in whole or in part, by the Purchaser in its sole and absolute discretion:
5.1 CLOSING DATE. The Closing Date shall have occurred on or before
November 21, 2001.
5.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Each representation and
warranty made by the Company and the Guarantors in this Agreement shall be true
and correct in all respects as of the date made, and shall be true and correct
in all respects as of the Closing Date, with the same effect as if made on and
as of the Closing Date. Each of the covenants, agreements and obligations of the
Company and the Guarantors under this Agreement to be performed or satisfied by
it or them on or prior to the Closing Date shall have been performed or
satisfied by it or them on or before the date hereof. No Default or Event of
Default shall exist or result from the issuance and sale of the Note or the
other transactions contemplated by this Agreement or the Bank Credit Documents.
The Company and the Guarantors shall each have delivered to the Purchaser an
officers' certificate, signed by the Chief Executive Officer or the Chief
Financial Officer of the Company and each Guarantor, respectively, dated as of
the Closing Date, on behalf of the Company and each Guarantor, to such effect
and to the effect that each of the conditions set forth in this SECTION 5 has
been satisfied and fulfilled.
5.3 PAYMENT OF FEES. The Company authorizes the Purchaser to pay on the
Company's behalf the commitment fee payable to Catalyst Equity Partners, L.L.C.,
in the amount of $1,200,000 and to deduct such amount from the proceeds to be
delivered by the Purchaser against delivery of the Note.
5.4 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order, decree or ruling. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal securities and
state securities or "blue sky" laws.
5.5 NO INJUNCTION, ORDER OR SUIT. There shall not have been issued any
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents,
and there shall not be any action, suit, proceeding or investigation pending or,
to the best knowledge of the Company and the Guarantors, threatened that (i)
draws into question the validity, legality or enforceability of this Agreement
or the other Investment Documents or the consummation of the transactions
contemplated hereby or thereby or (ii) might result, in the judgment of the
Purchaser, (A) in the imposition of a penalty if the Note was delivered as
contemplated hereunder or (B) in any Material Adverse Change.
35
5.6 DELIVERY OF CERTAIN CLOSING DOCUMENTS. The Company and the
Guarantors shall have delivered to the Purchaser the following closing
documents, each dated as of the Closing Date and in form and substance
satisfactory to the Purchaser:
(a This Agreement, duly executed by the Company and the
Guarantors, together with the Exhibits and Disclosure Schedules;
(b The Note, in substantially the form of EXHIBIT A, duly
executed by the Company;
(c The Guarantee, in substantially the form of EXHIBIT B, duly
executed by the Guarantors;
(d The Collateral Documents, duly executed by the Company and
the Guarantors, as described in SECTION 6;
(e The Intercreditor Agreement, duly executed by the Bank and
the Company;
(f A compliance certificate signed by the Chief Executive
Officer or the Chief Financial Officer of the Company, certifying on behalf of
the Company that they have reviewed this Agreement and the other Investment
Documents and that, after giving effect to (i) the Refinancing, (ii) the
incurrence of indebtedness under the Bank Credit Agreement (as in effect on the
date hereof) and the New Notes, (iii) the incurrence of Indebtedness hereunder,
and (iv) all the transactions contemplated hereby and thereby, the Company is in
compliance with the covenants contained in this Agreement and the Bank Credit
Agreement; and
(g Such other documents as the Purchaser may reasonably
request.
5.7 SENIOR CREDIT FACILITY. The transactions contemplated by the Bank
Credit Agreement shall have been consummated, including, but not limited to,
entering into a senior credit facility in an amount of at least $55,000,000, and
the Company shall have delivered copies of all of the Bank Credit Documents,
certified by the Secretary of the Company, in form and substance reasonably
acceptable to the Purchaser, the Company shall have Availability (as defined in
the Bank Credit Agreement) of a seasonal overadvance in an amount not less than
$10,000,000 and the Company shall have Availability at Closing of $7,000,000 as
evidenced by delivery to the Purchaser of a borrowing base certificate as
provided for in the Bank Credit Agreement.
5.8 OPINION OF COUNSEL. The Purchaser shall have received an opinion
letter of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to the Company and the
Guarantors, dated as of the Closing Date and addressed to the Purchaser, in form
and substance satisfactory to the Purchaser and its legal counsel.
36
5.9 DELIVERY OF CORPORATE DOCUMENTS. The Company and the Guarantors
shall have delivered to the Purchaser the following for each of the Company and
the Guarantors:
(a) Certified copies of its charter or similar organizational
documents as amended through the Closing Date, certified by its Secretary as
being in full force and effect as of the Closing Date;
(b) A good standing certificate, issued by the Secretary of
State of its state of incorporation or organization, dated as of the most recent
practicable date prior to the Closing Date;
(c) Good standing certificates from each jurisdiction in which
it is required to be qualified to transact business as a foreign corporation or
other entity, in each case dated as of the most recent practicable date prior to
the Closing Date;
(d) Copies of its bylaws or similar governing document as
amended through the Closing Date, certified by its Secretary as being in full
force and effect as of the Closing Date;
(e) Resolutions of its Board of Directors (or similar
governing body), approving and authorizing the execution, delivery and
performance of this Agreement and the other Investment Documents to which it is
a party, and approving and authorizing the execution, issuance, sale and
delivery of the Note, certified by its Secretary as being in full force and
effect as of the Closing Date;
(f) Incumbency certificates of its officers or general
partners who are authorized to execute, deliver and perform this Agreement, the
other Investment Documents and any other agreements, instruments, certificate or
other documents required to be executed by it in connection herewith; and
(g) Such other documents as the Purchaser may reasonably
request.
5.10 INSURANCE. The Company shall deliver to the Purchaser certificates
of liability insurance with respect to the insurance policies required to be
maintained by the Company and the Guarantors as of the Closing Date pursuant to
SECTION 8.14, together with additional insured and lender's loss payable
endorsements in favor of the Purchaser, all in form and substance reasonably
satisfactory to the Purchaser.
5.11 THIRD-PARTY CONSENTS. The Company and the Guarantors shall have
obtained all other Consents required to be obtained from all Governmental
Authorities and other Persons in connection with the transactions contemplated
by this Agreement (including, without limitation, the Consents listed on
SCHEDULE 3.6), and the Purchaser shall have approved the terms and conditions
thereof, and all applicable waiting periods shall have expired.
37
5.12 FINANCIAL STATEMENTS. The Purchaser shall have received and been
satisfied with its review of the unaudited financial statements for the nine
months ended September 30, 2001.
5.13 EXCHANGE OFFER. The Company shall have successfully completed an
exchange offer and consent solicitation, on the terms specified in the Company's
Exchange Offer and Consent Solicitation dated September 24, 2001, as amended by
the First Supplement dated November 1, 2001 and the Second Supplement dated
November 15, 2001, for at least 95% of the aggregate principal amount of the 10
1/2% Notes.
5.14 RESTRUCTURING OF ▇▇▇▇▇▇ NOTE. That certain 8% Convertible
Subordinated Pay-in-Kind Note due 2004, made by the Company on or about December
31, 1996 in favor of ▇▇▇▇▇▇ Equity Capital Corporation, shall have been
exchanged for the New ▇▇▇▇▇▇ Note and Series B-1 Preferred Stock pursuant to
documentation acceptable to the Purchaser. The terms and conditions of the New
▇▇▇▇▇▇ Note (including, without limitation, subordination terms applicable to
the same) shall be acceptable to the Purchaser.
5.15 RESTRUCTURING OF SERIES A PREFERRED STOCK. The Series A Preferred
Stock shall have been restructured pursuant to terms and conditions satisfactory
to the Purchaser.
5.16 PROCEEDINGS SATISFACTORY. All proceedings taken prior to or at the
Closing in connection with the issuance and sale of the Note and the
consummation of the other transactions contemplated hereby, and all papers and
other documents relating thereto, shall be in form and substance reasonably
satisfactory to the Purchaser and its counsel, and the Purchaser shall have
received copies of such documents and papers, all in form and substance
reasonably satisfactory to the Purchaser and its counsel, all such documents,
where appropriate, to be counterpart originals and/or certified by proper
authorities, corporate officials and other Persons. Without limiting the
generality of the foregoing, the Company and the Guarantors shall have made such
arrangements as may be requested by the Purchaser to ensure that the proceeds
from the issuance and sale of the Note are applied in the manner set forth in
SECTION 2.4, including, without limitation, provision for the direct payment of
the obligations of the Company to be paid from such proceeds as provided in
SECTION 5.3.
6. ACTIONS AND DOCUMENTS RELATING TO THE COLLATERAL. On or prior to the Closing
Date, Purchaser shall have received the following in form and substance
reasonably satisfactory to it:
(a) The Company Security Agreement, the Guarantor Security
Agreement, the Company Intellectual Property Security Agreement, the Guarantor
Intellectual Property Security Agreement, the Company Pledge Agreement and the
Guarantor Pledge Agreement, each duly executed by the Company and the
Guarantors, as appropriate, together with the exhibits and schedules thereto;
38
(b) UCC-1 Financing Statements, naming the Company or a
Guarantor as debtor, as applicable, duly authorized or executed by the Company
or such Guarantor, as applicable, as requested by the Purchaser;
(c) Except as provided in SECTION 8.23, evidence that all
filings, registrations and recordings have been made in the appropriate
governmental offices, and all other action has been taken, which shall be
necessary to create, in favor of the Purchaser, a perfected second priority Lien
on the Collateral (subject only to the first priority Lien of the Bank and other
Permitted Liens), and filing of completed UCC financing statements, in each
case, in the appropriate governmental offices;
(d) Evidence that no Liens on the Collateral exist other than
the Permitted Liens and the Liens created by the execution of the Investment
Documents, such evidence including, without limitation, the results of searches
conducted in the UCC filing records in each of the governmental offices in which
UCC financing statements have been, or shall be, filed;
(e) Such other documents relating to the Collateral as the
Purchaser may reasonably request; and
(f) Each of the conditions precedent in the Collateral
Documents shall have been satisfied.
7. INDEMNIFICATION; FEES AND EXPENSES.
7.1 TRANSFER TAXES. The Company and the Guarantors shall pay all
present or future stamp, documentary, excise, property, transfer and other
similar Taxes (together in each case with interest and penalties, if any)
payable or determined to be payable in connection with the execution and
delivery of this Agreement, any payment made hereunder, or the issuance and sale
of the Note and shall hold harmless the Purchaser from and against any and all
liabilities with respect to or resulting from any delay in paying, or omission
to pay, such Taxes.
7.2 LOSSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated, the Company and the Guarantors shall jointly and
severally indemnify, defend and save and hold harmless the Purchaser and its
Affiliates, and their respective employees, partners, officers, directors,
representatives, agents, attorneys, successors and assigns (the "INDEMNIFIED
PARTIES"), from and against, and shall pay on demand, any and all losses,
claims, damages, liabilities, judgments, expenses and costs, including, without
limitation, attorneys' fees and other fees and expenses incurred in, and the
costs of preparing for, investigating or defending any matter (collectively,
"LOSSES"), incurred by or asserted or awarded against such Indemnified Party in
connection with, by reason of, or arising from:
39
(i) The failure of any Company Party to fulfill any
of its respective covenants, agreements or undertakings under this Agreement or
any other Investment Document (or any other document or instrument executed
herewith or pursuant hereto);
(ii) Any third party actions, suits, proceedings or
claims brought against any Indemnified Party in connection with, arising out of
or with respect to (A) any other matters arising out of or in connection with
the transactions contemplated by this Agreement, the Note or any other
Investment Document or the Collateral or (B) the business, operations or affairs
of the Company Parties (including, without limitation, any litigation in which
any Company Party is involved); or
(iii) The actual or alleged presence of Hazardous
Materials on any property of any Company Party or any Environmental Condition;
PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall have any
liability to any Indemnified Party for any Loss to the extent that such Loss has
been caused by such Indemnified Party's willful misconduct.
(b) The Company and the Guarantors shall either pay directly
all Losses which they are required to pay hereunder or reimburse any Indemnified
Party within ten (10) days after any written request for such payment. The
obligations of the Company and the Guarantors to the Indemnified Parties under
this SECTION 7 shall be separate obligations to each Indemnified Party, and the
liability of the Company and the Guarantors to such Indemnified Parties
hereunder shall not be extinguished solely because any Indemnified Party is not
entitled to indemnity hereunder.
(c) The obligations of the Company and the Guarantors to the
Indemnified Parties under this SECTION 7 shall survive (i) the repayment of the
Note (whether at maturity, by prepayment or acceleration or otherwise), (ii) any
transfer of the Note or any interest therein and (iii) the termination of this
Agreement or any other Investment Document.
7.3 INDEMNIFICATION PROCEDURES. Any Person entitled to indemnification
under this SECTION 7 shall (i) give prompt written notice to the Company of any
claim with respect to which it is entitled to seek indemnification (provided
that the failure to so notify the Company shall not relieve the Company from any
liability which it may have under this SECTION 7 except to the extent that the
Company is materially prejudiced by such failure) and (ii) permit the Company to
assume the defense of such claim with counsel selected by the Company and
reasonably acceptable to such Person; PROVIDED, HOWEVER, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim and the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
Company has agreed to pay such fees or expenses, (b) the Company has failed to
notify such Person in writing within ten (10) days of its receipt of such
written notice to the Company that it will assume the defense of such claim and
employ counsel reasonably acceptable to such Person, or (c) a conflict of
interest exists between such Person, on the one
40
hand, and the Company or any Guarantor, on the other hand, with respect to such
claims (in which case, if the Person notifies the Company in writing that such
Person elects to employ separate counsel at the expense of the Company, the
Company shall not have the right to assume the defense of such claim on behalf
of such Person). The Company and the Guarantors will not be subject to any
liability for any settlement made without their respective consent (but such
consent may not be unreasonably withheld). No Indemnified Party may, without the
consent of the Company and the Guarantors (which consent will not be
unreasonably withheld), consent to the entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the Company and the Guarantors of a release from
all liability in respect of such claim or litigation.
7.4 CONTRIBUTION. If the indemnification provided for in this SECTION 7
is unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company and the Guarantors, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Company Parties on the one
hand, and such Indemnified Party, on the other hand, in connection with the
actions, statements or omissions which resulted in such Losses, as well as any
other relevant equitable considerations. The relative fault of the Company
Parties, on the one hand, and such Indemnified Party, on the other hand, shall
be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been taken by, or
relates to information supplied by, any of the Company Parties or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The parties agree that it would not be just and equitable if
contribution pursuant to this SECTION 7.4 were determined by PRO RATA allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above. 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.
7.5 COMMITMENT FEE. At the Closing, the Company shall pay a commitment
fee of $1,200,000 to Catalyst Equity Partners L.L.C. in connection with the
transactions contemplated by this Agreement.
7.6 REIMBURSEMENT OF DEAL-RELATED COSTS AND EXPENSES. Notwithstanding
anything to the contrary contained herein or otherwise, whether or not the
transactions contemplated by this Agreement are consummated or this Agreement is
terminated for any reason, and in addition to all other amounts due or owing to
the Purchaser hereunder, under any other Investment Document or otherwise, the
Company and the Guarantors shall be jointly and severally responsible, and
jointly and severally agree to promptly reimburse the Purchaser, for all costs
and expenses of every type and nature (including, without limitation, all
reasonable fees and expenses of counsel, accounting fees and expenses and other
deal-related costs and expenses) incurred by or on behalf of the Purchaser, in
connection with the Purchaser's due diligence investigation of
41
the Company, the Guarantors and their Affiliates, the preparation, negotiation,
execution, delivery and enforcement of this Agreement, the Note, and the other
Investment Documents and the consummation of the transactions contemplated
hereby. At the Purchaser's request and direction, at or prior to the Closing,
the Company and the Guarantors shall reimburse third party providers of the
Purchaser directly for all of such reasonable costs and expenses. After the
Closing, the Purchaser shall deliver an invoice to the Company detailing its
costs and expenses, which shall be credited against the $75,000 deposit
previously paid by the Company. Any balance due shall be paid by the Company
within five (5) days. If costs and expenses are less than the deposit, such
amount shall be refunded to the Company.
7.7 COSTS AND EXPENSES. The Company and the Guarantors jointly and
severally agree to pay to the Purchaser on demand all reasonable costs and
expenses of every type and nature (including, without limitation, all reasonable
fees and expenses of attorneys, accountants and other experts and all due
diligence, collateral review, appraisal, search, filing and recording fees and
expenses) which are expended or incurred by or on behalf of the Purchaser in
connection with (i) the administration of this Agreement or the Investment
Documents and the collection and enforcement of the Obligations, whether or not
any action, suit or other proceeding is commenced, (ii) any actions for
declaratory relief in any way related to the Obligations, (iii) the protection
or preservation of any rights, powers or remedies of the Purchaser under this
Agreement or any other Investment Document, (iv) any actions taken by the
Purchaser in negotiating any amendment, waiver, consent or release of or under
this Agreement, the Note or any other Investment Document, (v) any actions taken
in reviewing the Company Parties' business and financial affairs, which actions
shall include, but not be limited to, (A) inspecting the facilities of any
Company Party or the Collateral or conducting audits or appraisals of the
financial condition of any Company Party for which the Company Parties shall be
obligated to pay an audit fee of $750 per day, per auditor, which fee shall be
subject to reasonable change from time to time by the Purchaser without notice,
(B) having an accounting or other firm selected by the Purchaser review the
books and records of any Company Party and perform a thorough and complete
examination thereof, (C) interviewing the Company Parties' employees, attorneys,
accountants, customers and any other Persons related to the Company Parties
which the Purchaser believes may have relevant information concerning the
business, condition (financial or otherwise), results of operations or prospects
of any of the Company Parties, (D) attending board or committee meetings as an
observer, and (E) undertaking any other action which the Purchaser believes is
necessary to assess accurately the financial condition and prospects of the
Company Parties; (vi) any refinancing, restructuring (whether in the nature of a
"work out" or otherwise), bankruptcy or insolvency proceeding involving any
Company Party or Affiliates, including, without limitation, any refinancing or
restructuring of this Agreement, the Note or any other Investment Documents,
(vii) any actions taken to verify, maintain, perfect and protect any Lien
granted to the Purchaser by any Company Party or any other Person under the
Investment Documents, (viii) any effort by the Purchaser to protect, assemble,
complete, collect, sell, liquidate or otherwise dispose of any collateral,
including in connection with any case under Bankruptcy Laws, or (ix) having
counsel advise the Purchaser as to its rights and responsibilities, the
perfection, protection or preservation of rights or interests under the
Investment Documents,
42
with respect to negotiations with any Company Party or with other creditors of
any Company Party or with respect to any proceeding under any Bankruptcy Law.
The Company and the Guarantors hereby consent to the taking of the foregoing
actions by the Purchaser. All amounts chargeable to the Company Parties under
this Agreement shall be Obligations secured by all of the Collateral, shall be
payable on demand and shall bear interest from the date demand was made or such
amount is due, as applicable, until paid in full at the rate applicable to the
Note at that time. Unless an Event of Default has occurred and is continuing,
the Purchaser shall not conduct, or retain any third party to conduct, more than
two (2) audits in any calendar year.
8. AFFIRMATIVE COVENANTS. The Company and the Guarantors jointly and severally
covenant and agree, so long as any Obligations under the Note remain
outstanding, as to the following affirmative covenants:
8.1 PAYMENT OF NOTE AND OTHER OBLIGATIONS. The Company Parties shall
fully and timely pay all Obligations owing pursuant to the terms of this
Agreement, the Note (including, without limitation, all principal thereof,
premium, if any, annual renewal fees and interest thereon), the Guarantee and
the other Investment Documents to which they are parties, in each case on the
dates and in the manner provided for herein and therein.
8.2 PERFORMANCE OF INVESTMENT DOCUMENTS. The Company Parties shall
perform, comply with and observe all of their obligations under this Agreement,
the Note, the Guarantee and each other Investment Document.
8.3 VISITS AND INSPECTIONS; LENDER MEETING. The Company Parties shall
permit representatives of the Purchaser, from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit and
inspect the Properties of each Company Party, inspect, audit and make extracts
from its books and records, and discuss with its officers, its employees and its
independent accountants, its business, assets, liabilities, financial condition,
business prospects and results of operations.
8.4 NOTICES. The Company Parties shall promptly notify the Purchaser in
writing of the occurrence of any event or the existence of any fact which
renders any representation or warranty in this Agreement or any of the other
Investment Documents inaccurate, incomplete or misleading in any material
respect as of the date made or remade. In addition, the Company agrees to
provide the Purchaser with (i) ten (10) Business Days' prior written notice of
(A) any change in the legal name or jurisdiction of organization or
incorporation of any Company Party, (B) the adoption by any Company Party of any
new fictitious name or tradename and (C) any change in the chief executive
office of any Company Party, (ii) prompt written notice of any change in the
information disclosed in any exhibit hereto and (iii) as soon as possible (and
in any event within five (5) Business Days) after any Company Party obtains
knowledge thereof, written notice of (A) the occurrence of any event, act,
development or condition which constitutes a Default or Event of Default or any
"default" or "event of default" under the terms of any Other Debt Documents; or
(B) any other event or development has resulted in or which could
43
reasonably be expected to have a Material Adverse Effect. Each such notice shall
specify in reasonable detail the nature of the event, act, condition, Default,
Event of Default, default, event of default, litigation or investigation or
other proceeding and what action the Company Party or any other Person is taking
or proposes to take to cure the same.
8.5 FINANCIAL STATEMENTS. The Company Parties shall keep, and cause
each of their respective Subsidiaries to keep, adequate records and books of
account with respect to its business activities in which proper entries are made
in accordance with customary accounting practices reflecting all its financial
transactions; and cause to be prepared and furnished to the Purchaser, the
following, all to be prepared in accordance with GAAP applied on a consistent
basis, unless the Company's certified public accountants concur in any change
therein and such change is disclosed to the Purchaser and is consistent with
GAAP:
(a) not later than ninety (90) days after the close of each
fiscal year of the Company, unqualified (except for a qualification for a change
in accounting principles with which the accountant concurs) audited financial
statements of the Company Parties as of the end of such year, on a Consolidated
and consolidating basis, certified by independent certified public accountants
of nationally recognized standing selected by the Company and acceptable to the
Purchaser;
(b) not later than thirty (30) days after the end of each
month hereafter, including the last month of the Company's fiscal year,
unaudited interim financial statements of the Company Parties (which shall
consist of an income statement, statement of cash flows and a balance sheet) as
of the end of such month and of the portion of the fiscal year then elapsed, on
a Consolidated and consolidating basis, certified by the Chief Financial Officer
of the Company as prepared in accordance with GAAP and fairly presenting the
Consolidated financial position and results of operations of the Company Parties
for such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(c) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports which
the Company has made available to its security holders and copies of any
regular, periodic and special reports or registration statements which the
Company or any of its Subsidiaries files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
any national securities exchange;
(d) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Benefit Plan;
(e) new appraisals on the fixed assets and Inventory shall be
completed annually for fixed assets and semi-annually for Inventory, to be
received on or prior to September 30th of each year for fixed assets and
Inventory and on or prior to March 31st of each year for Inventory; and
44
(f) such other data and information (financial and otherwise)
as the Purchaser, from time to time, may reasonably request, bearing upon or
related to the Collateral or the Company's financial condition or results of
operations.
Concurrently with the delivery of the financial statements described in
paragraph (a) of this SECTION 8.5, the Company shall forward to the Purchaser a
copy of the accountants' letter to the Company's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to the Purchaser a certificate of the aforesaid certified
public accountants certifying to the Purchaser that, based upon their
examination of the financial statements of the Company Parties performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such Default
or Event of Default, specifying the nature thereof, and acknowledging, in a
manner satisfactory to the Purchaser, that they are aware that the Purchaser is
relying on such financial statements in making its decisions with respect to the
Note. Concurrently with the delivery of the financial statements described in
paragraphs (a) and (b) of this SECTION 8.5, or more frequently if requested by
the Purchaser, the Company shall cause to be prepared and furnished to the
Purchaser a Compliance Certificate in the form of EXHIBIT C hereto executed by
the Chief Financial Officer of the Company.
8.6 GUARANTOR FINANCIAL STATEMENTS. The Company Parties shall deliver
or cause to be delivered to Purchaser financial statements for each Guarantor
(to the extent not delivered pursuant to SECTION 8.5 hereof) in form and
substance satisfactory to Purchaser at such intervals and covering such time
periods as Purchaser may request.
8.7 LANDLORD AND STORAGE AGREEMENTS. The Company Parties shall provide
the Purchaser with copies of all agreements between any Company Party and any
landlord or warehouseman which owns any premises at which any Inventory may,
from time to time, be kept.
8.8 PROJECTIONS. The Company Parties shall, no later than thirty (30)
days prior to the end of each Fiscal Year of the Company, deliver to the
Purchaser Projections of the Company Parties for the forthcoming Fiscal Year,
month by month. Notwithstanding the foregoing, with respect to the Fiscal Year
ending December 31, 2001, such Projections shall be delivered by December 15,
2001.
8.9 SUBSIDIARIES. Promptly upon the creation or acquisition of each new
Subsidiary, the Company Parties shall cause such Subsidiary to execute and
deliver to the Purchaser a guaranty agreement and a security agreement (or
agreements) pursuant to which such Subsidiary guaranties the payment of all
Obligations and grants to the Purchaser a first priority Lien (subject only to
Permitted Liens) on all of its Properties. Additionally, the parent Company
Party shall execute and deliver to the Purchaser a pledge agreement pursuant to
which such Company Party grants to Lender a first priority Lien (subject only to
Permitted Liens) with respect to all of the issued and outstanding securities of
each such Subsidiary. Within five (5) days after the date
45
such Subsidiary becomes a Subsidiary, the applicable Company Party shall cause
such Subsidiary to have executed (if necessary) and filed any UCC-1 financing
statements furnished by the Purchaser in each jurisdiction in which such filing
is necessary to perfect the security interest of the Purchaser in the Collateral
of such Subsidiary and in which the Purchaser requests that such filing be made.
Additionally, the applicable Company Party and such Subsidiary shall have
executed and delivered to the Purchaser such other items as reasonably requested
by the Purchaser in connection with the foregoing, including resolutions,
incumbency and officers' certificates, opinions of counsel, search reports and
other certificates and documents.
8.10 COMPLIANCE WITH LAWS; CONSENTS. The Company Parties shall comply
in all respects with the requirements of all Applicable Laws, rules, regulations
and orders of any Governmental Authority (including all Environmental Laws) and
the terms of any indenture, contract or other instrument to which it may be a
party or under which it or its properties may be bound in each case, to the
extent that the failure to so comply would reasonably be expected to have a
Material Adverse Effect as to the Company Party (it being understood that a
violation of a financial covenant under the Bank Credit Agreement which does not
also constitute a violation of the corresponding financial covenant under this
Agreement would not reasonably be expected to have a Material Adverse Effect for
this purpose). Each Company Party shall obtain and maintain all material
licenses, authorizations, consents, filings, exemptions, registrations and other
governmental approvals necessary in connection with the execution, delivery and
performance of the Investment Documents, the consummation of the transactions
therein contemplated or the operation and conduct of its business and ownership
of its properties.
8.11 LEGAL EXISTENCE. Each of the Company Parties shall maintain and
preserve its legal existence, its material Operating Licenses and its other
material rights to transact business in each jurisdiction where transacting
business or its properties are located and all other material rights, franchises
and privileges necessary or desirable in the normal course of its business and
operations and the ownership of its properties.
8.12 BOOKS AND RECORDS. Each of the Company Parties shall keep adequate
records and books of account, in which complete and accurate entries shall be
made in accordance with GAAP and all Applicable Laws, reflecting all financial
and other material transactions of the Company Parties.
8.13 MAINTENANCE OF PROPERTIES. Each of the Company Parties shall
maintain and preserve all of its properties necessary or useful in the proper
conduct of its business in good working order and condition in accordance with
the general practice of other corporations of similar character and size,
ordinary wear and tear excepted.
8.14 INSURANCE. The Company Parties shall carry and maintain in full
force and effect, at their own expense and with financially sound and reputable
insurance companies, insurance in such amounts, with such deductibles and
covering such risks as is customarily carried by companies engaged in the same
or similar businesses and owning similar properties in the
46
localities where any Company Party operates, including product liability,
comprehensive general liability, fire, extended coverage, business interruption,
public liability, property damage, worker's compensation and directors and
officers liability insurance. Insurance on the Collateral shall name the
Purchaser as additional insured and as loss payee, and, from and after the time
that all obligations of the Company Parties to the Bank under the Bank Credit
Agreement have been paid in full, with respect to any casualty or loss, provide
that the full amount of insurance proceeds shall be payable to the Purchaser.
Notwithstanding the foregoing, after such time as all obligations under the Bank
Credit Agreement have been paid in full, if the proceeds of insurance (net of
costs and taxes incurred) with respect to any loss or destruction of Equipment,
Inventory or real Property (i) are less than $500,000, unless an Event of
Default is then in existence, the Purchaser shall remit such proceeds to the
Company for use in replacing or repairing the damaged Collateral or (ii) are
equal to or greater than $500,000 the Company may request that the Purchaser
permit the Company Parties to repair or replace the damaged Collateral. If the
Purchaser agrees, in its reasonable judgment, to permit such repair or
replacement under such clause (ii), such amount shall, unless an Event of
Default is in existence, be remitted to the Company for use in replacing or
repairing the damaged Collateral, such amount shall be applied to the payment of
accrued interest and principal on the Note. Upon the request of the Purchaser,
each Company Party shall furnish the Purchaser from time to time with full
information as to the insurance carried by it and, if so requested, copies of
all such insurance policies. Each Company Party shall also furnish to the
Purchaser from time to time upon the request of the Purchaser a certificate of
its insurance broker or other insurance specialist stating that all premiums
then due on the policies relating to insurance on the Collateral have been paid,
that such policies are in full force and effect and that such insurance coverage
and such policies comply with all the requirements of this Section. All
insurance policies required under this Section shall provide that they shall not
be terminated or canceled nor shall any such policy be materially changed
without at least thirty (30) days' prior written notice to the Company and the
Purchaser. Receipt of notice of termination or cancellation of any such
insurance policies or reduction of coverages or amounts thereunder shall entitle
the Purchaser to renew any such policies, cause the coverages and amounts
thereof to be maintained at levels required pursuant to the first sentence of
this SECTION 8.14 or otherwise to obtain similar insurance in place of such
policies, in each case at the expense of the Company Parties.
8.15 PAYMENT OF OBLIGATIONS. Each of the Company Parties shall pay and
discharge (i) all Taxes, fees, assessments and governmental charges or levies
imposed upon it or upon its properties or assets prior to the date on which
penalties attach thereto, and all lawful claims for labor, materials and
supplies which, if unpaid, might become a Lien upon any properties or assets of
the any Company Party, except to the extent such taxes, fees, assessments or
governmental charges or levies, or such claims, are being contested in good
faith by appropriate proceedings and are adequately reserved against in
accordance with GAAP, (ii) all lawful claims which, if unpaid, would by law
become a Lien upon its property not constituting a Permitted Lien, and (iii)
subject to the terms of this Agreement and the terms of any applicable
subordination or intercreditor agreement, all Indebtedness, as and when due and
payable (subject to any applicable grace period with respect thereto).
47
8.16 COMPLIANCE WITH MATERIAL CONTRACTS. The Company Parties shall
perform, comply with and observe all material terms and provisions of each of
its material contracts to be performed, complied with or observed by it,
maintain each material contract in full force and effect and enforce each
material contract in accordance with its terms; PROVIDED, that the foregoing
shall not apply to any violation of a financial covenant under the Bank Credit
Agreement (as in effect on the date hereof) which does not constitute a
violation of the corresponding financial covenant under this Agreement.
8.17 ENVIRONMENTAL MATTERS. The Company Parties shall, upon becoming
aware of the presence of any Hazardous Substance in violation of any
Environmental Laws or the existence of any environmental liability under
applicable Environmental Laws with respect to the Premises, take all actions, at
their cost and expense, as shall be necessary or advisable to investigate and
clean up the condition of the Premises, including all removal, containment and
remedial actions, and restore the Premises to a condition in compliance with
applicable Environmental Laws.
8.18 FUTURE INFORMATION. All data, certificates, reports, statements,
documents and other information furnished to the Purchaser by or on behalf of
the Company Parties, any of their respective representatives or agents in
connection with this Agreement, the other Investment Documents or the
transactions contemplated hereby and thereby, at the time the information is so
furnished, taken as a whole, shall not contain any untrue statement of a
material fact, shall be complete and correct in all material respects to the
extent necessary to give the Purchaser sufficient and accurate knowledge of the
subject matter thereof, and shall not omit to state a material fact necessary in
order to make the statements contained therein not misleading in light of the
circumstances under which such information is furnished.
8.19 FURTHER ASSURANCES. Promptly after request by the Purchaser, from
time to time after the date hereof, each of the Company Parties shall execute
and deliver, and shall cause any other Persons who are required to give their
Consent to execute and deliver, such instruments, certificates and documents,
and will take all such actions, for the purposes of implementing or effectuating
the provisions of this Agreement, the Note, the Guarantee and the other
Investment Documents. Upon exercise by the Purchaser of any power, right,
privilege or remedy pursuant to this Agreement or any other Investment Document
which requires any Consent, each of the Company Parties will execute and
deliver, and will cause any other Persons to execute and deliver, all
applications, certifications, instruments and other documents and papers that
may be required to be obtained for such Consent. Promptly upon request by the
Purchaser, each of the Company Parties shall correct any material defect or
error that may exist or be discovered in this Agreement, the Note, the Guarantee
or any other Investment Document or in the execution, acknowledgment, filing or
recordation thereof. Promptly upon request by the Purchaser, each of the Company
Parties shall do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, deeds,
conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, notices
of assignment, transfers, certificates, assurances and other instruments as the
Purchaser may require from time to time in order to (i) carry out more
effectively the purposes of the Investment Documents, (ii) to the fullest extent
permitted by
48
applicable law, subject each Company Parties' properties, assets, rights or
interest to the Liens now or hereafter intended to be covered by any of the
Collateral Documents, (iii) perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and any of the Liens intended to be
created thereunder and (iv) assure, convey, grant, assign, transfer, preserve,
protect and confirm more effectively unto the rights granted or now or hereafter
intended to be granted to the Purchaser under any Investment Document or under
any other instrument executed in connection with any Investment Document to
which any Company Party is to be a party.
8.20 FINANCIAL COVENANTS.
(a) INTEREST COVERAGE RATIO. The Company shall not permit the
Interest Coverage Ratio for any period set forth below to be less than the ratio
set forth opposite such period below:
PERIOD RATIO
------ -----
Twelve (12) month period ending on December 31, 2001 1.35 to 1.00
Twelve (12) month period ending on March 31, 2002 1.44 to 1.00
Twelve (12) month period ending on June 30, 2002 1.49 to 1.00
Twelve (12) month period ending on September 30, 2002 1.49 to 1.00
Twelve (12) month period ending on December 31, 2002 1.49 to 1.00
Twelve (12) month period ending on March 31, 2003 1.53 to 1.00
Twelve (12) month period ending on June 30, 2003 1.62 to 1.00
Twelve (12) month period ending on September 30, 2003 1.62 to 1.00
(b) FIXED CHARGE COVERAGE RATIO. The Company shall not permit
the Fixed Charge Coverage atio for any period set forth below to be less than
the ratio set forth opposite such period below:
PERIOD RATIO
------ -----
Twelve (12) month period ending on December 31, 2001 0.85 to 1.00
Twelve (12) month period ending on March 31, 2002 1.04 to 1.00
Twelve (12) month period ending on June 30, 2002 1.08 to 1.00
Twelve (12) month period ending on September 30, 2002 1.08 to 1.00
49
PERIOD RATIO
------ -----
Twelve (12) month period ending on December 31, 2002 1.08 to 1.00
Twelve (12) month period ending on March 31, 2003 1.08 to 1.00
Twelve (12) month period ending on June 30, 2003 1.08 to 1.00
Twelve (12) month period ending on September 30, 2003 1.08 to 1.00
(c) MINIMUM EBITDA. The Company shall achieve EBITDA for each
period set forth below of not less than the amount set forth opposite such
period below:
PERIOD AMOUNT
------ ------
Twelve (12) month period ending on December 31, 2001 $ 13,500,000
Twelve (12) month period ending on March 31, 2002 $ 13,950,000
Twelve (12) month period ending on June 30, 2002 $ 15,300,000
Twelve (12) month period ending on September 30, 2002 $ 16,200,000
Twelve (12) month period ending on December 31, 2002 $ 16,650,000
Twelve (12) month period ending on March 31, 2003 $ 17,100,000
Twelve (12) month period ending on June 30, 2003 $ 18,000,000
Twelve (12) month period ending on September 30, 2003 $ 18,000,000
8.21 SENIOR STATUS. The Obligations shall constitute "Senior Debt" as
defined in the New ▇▇▇▇▇▇ Note and the 13% Indenture. The Obligations shall
constitute "Designated Senior Debt" as defined in the 13% Indenture.
8.22 10 1/2% NOTES. It is mutually agreed that the Obligations rank
pari passu with the Indebtedness evidenced by the 10 1/2% NoteS.
8.23 LIEN ON REALTY. The due and punctual payment and performance of
the Obligations shall also be secured by the Lien created by Mortgages upon all
Real Property of the Company Parties now or hereafter owned. No later than
thirty (30) days after the Closing, (i) the Company Parties shall execute,
deliver and cause to be recorded, Mortgages on each of the Real Properties owned
by the Company Parties, and (ii) the Company Parties shall cause the title
company to issue to Purchaser, mortgagee title insurance policies with respect
to such Mortgages satisfying the requirements set forth below. The Company
Parties shall deliver to Purchaser, at the Company Parties' expense, mortgagee
title insurance policies issued by a title insurance
50
company satisfactory to the Purchaser, which policies shall be in form and
substance satisfactory to the Purchaser and shall insure a valid second Lien in
favor of the Purchaser, on the Real Property covered by each Mortgage, subject
only to those exceptions reasonably acceptable to the Purchaser and its counsel.
The Company Parties shall exercise their respective reasonable best efforts to
obtain lien waivers and entry agreements, all in form and substance reasonably
satisfactory to the Purchaser, from the landlords and licensors of all Real
Property leased or licensed to any of the Company Parties (the "LIEN WAIVERS").
The Company Parties shall exercise their respective reasonable best efforts to
deliver to Purchaser, Lien Waivers, satisfying the requirements set forth above,
from the landlords and licensors of each of the Real Properties set forth on
SCHEDULE 3.16. The Company Parties shall deliver to the Purchaser such other
documents, including, without limitation, as-built survey prints of the Real
Property, as the Purchaser and its counsel may request relating to the Real
Property subject to the Mortgages.
8.24 OPINIONS. No later than thirty (30) days after Closing, the
Company Parties shall deliver to the Purchaser opinions of legal counsel in the
states of California and Texas in form and substance as may reasonably be
required by the Purchaser with respect to the Mortgages on the Real Property of
the Company Parties.
8.25 DELIVERY OF COLLATERAL. Upon the termination of the Bank Credit
Documents, the Company will deliver to the Purchaser any property constituting
"Collateral" as collateral for the Obligations that had been held by the Bank.
9. NEGATIVE COVENANTS. The Company and Guarantor jointly and severally covenant
and agree, so long as any Obligations remain outstanding, as to the following
negative covenants:
9.1 MERGERS; CONSOLIDATIONS; ACQUISITIONS; STRUCTURAL CHANGES. No
Company Party shall (i) be acquired, merge, consolidate or amalgamate, or permit
any Subsidiary to be acquired, merge, consolidate or amalgamate, with or into
any Person or permit any Person to acquire control of any Company Party, (ii)
acquire, or permit any of their respective Subsidiaries to acquire, all or any
substantial part of the Properties of any Person, (iii) change, or permit any
Subsidiary to change, its state of incorporation or organization or Type of
Organization, or (iv) change, or permit any Subsidiary to change, its legal
name, except for (a) mergers of any Subsidiary of the Company into the Company
or another Subsidiary of Company and (b) acquisitions of assets consisting of
fixed assets or real property that constitute Capital Expenditures permitted
under SECTION 9.10.
9.2 LOANS. No Company Party shall make, or permit any Subsidiary to
make, any loans or other advances of money (other than for salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business and advance payments made for Christmas tree
purchases in the ordinary course of business) to any Person other than
Subsidiary Loans (as provided for and defined in the Bank Credit Agreement (as
in effect on the date hereof)).
51
9.3 TOTAL INDEBTEDNESS. No Company Party shall create, incur, assume,
or suffer to exist, or permit any Subsidiary to create, incur or suffer to
exist, any Indebtedness for Money Borrowed, except:
(a) Obligations under the Note;
(b) Obligations owing to the Bank under the Bank Credit
Agreement in a principal amount of up to $55,000,000 (plus, to the extent added
to principal, (i) interest with respect to such principal amount and (ii) the
costs described in Sections 2.9 and 12.2 of the Bank Credit Agreement (as in
effect on the date hereof)), minus the amount of all mandatory principal
payments and permanent commitment reductions actually made;
(c) Indebtedness evidenced by the 13% Notes in an aggregate
principal amount not to exceed $52,900,000;
(d) Indebtedness evidenced by the New ▇▇▇▇▇▇ Note;
(e) (Intentionally omitted);
(f) Indebtedness existing on the date of this Agreement as set
forth on SCHEDULE 9.3;
(g) Indebtedness of any Subsidiary of the Company resulting
from a Subsidiary Loan (as provided for and defined in the Bank Credit
Agreement, as in effect on the date hereof);
(h) Permitted Purchase Money Indebtedness;
(i) Obligations incurred in connection with interest rate
protection arrangements; and
(j) Unsecured Indebtedness for Money Borrowed in an aggregate
principal amount not to exceed at any time in the aggregate $1,000,000.
9.4 AFFILIATE TRANSACTIONS. No Company Party shall enter into, or be a
party to, or permit any Subsidiary to enter into or be a party to, any
transaction with any Affiliate of any Company Party, except (i) in the ordinary
course of and pursuant to the reasonable requirements of such Company Party's
business and upon fair and reasonable terms which are fully disclosed to the
Purchaser and are no less favorable to the Company Party than would be obtained
in a comparable arms-length transaction with a Person not an Affiliate of the
Company Party and (ii) usual and customary employment agreements and
indemnification arrangements contained in a Company Party's or a Subsidiary's
formation documents in effect on the date hereof.
52
9.5 LIMITATION ON LIENS. No Company Parties shall create or suffer to
exist, or permit any Subsidiary to create or suffer to exist, any Lien upon any
of its Property, income or profits, whether now owned or hereafter acquired,
except the following (each a "PERMITTED LIEN"):
(a) Liens at any time granted in favor of Purchaser;
(b) Liens at any time granted in favor of Bank under the Bank
Credit Agreement (as in effect on the date hereof);
(c) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the manner
described in SECTION 3.17, but only if in the Purchaser's reasonable judgment
such Lien does not adversely affect the Purchaser's rights or the priority of
the Purchaser's Lien in the Collateral;
(d) Liens arising in the ordinary course of the business of a
Company Party by operation of law or regulation, but only if payment in respect
of any such Lien is not at the time required and such Liens do not, in the
aggregate, materially detract from the value of the Property of the Company
Parties or materially impair the use thereof in the operation of the business of
the Company Parties;
(e) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(f) Such other Liens existing on the date of this Agreement
and listed on SCHEDULE 9.5 hereto;
(g) So long as no Event of Default has occurred and is
continuing, attachment, judgment and other similar non-tax Liens arising in
connection with court proceedings, but only if and for so long as the execution
or other enforcement of such Liens is and continues to be effectively stayed and
bonded on appeal, the validity and amount of the claims secured thereby are
being actively contested in good faith and by appropriate lawful proceedings and
such Liens do not, in the aggregate, materially detract from the value of the
Property of the Company Parties or materially impair the use thereof in the
operation of the Company Parties' businesses;
(h) Reservations, exceptions, easements, rights of way and
other similar encumbrances affecting Real Property; provided that, in
Purchaser's sole judgment, such exceptions do not in the aggregate materially
detract from the value of such Property or materially interfere with the use of
such Property in the ordinary course of the Company Parties' business, and if
such Property constitutes Collateral, Purchaser has consented thereto; and
(i) Such other Liens as the Purchaser may hereafter approve in
writing.
9.6 PAYMENTS AND AMENDMENTS OF SUBORDINATED DEBT. No Company Parties
shall:
53
(a) Make or permit any Subsidiary to make any payment of any
part or all of any Subordinated Debt, the New ▇▇▇▇▇▇ Note or any principal on
the Oda Note or take any other action or omit to take any other action in
respect of any Subordinated Debt, the ▇▇▇▇▇▇ Note or the Oda Note except in
accordance with the subordination agreement relative thereto (or in the case of
the 13% Notes, the subordination provisions set forth in the 13% Indenture); or
(b) Without Purchaser's prior written consent, agree to (i)
any amendment or other modification of the subordination provisions of any
documentation evidencing or relating to any Subordinated Debt or (ii) any other
amendment or other modification to any documentation evidencing any Subordinated
Debt that would increase the interest rate applicable thereto, accelerate the
maturity date of any payment owing in respect thereof (including any redemption,
prepayment or defeasance provision or the Company's obligation to pay cash
interest) or otherwise modify any of the provisions of such Subordinated Debt in
any manner that adversely affects the Company or the Purchaser.
9.7 AMENDMENTS REGARDING PREFERRED STOCK. Without the Purchaser's prior
written consent, agree to any amendment or other modification to the
documentation relating to the Series A Preferred Stock, the Series B Preferred
Stock or the Series B-1 Preferred Stock that would increase the interest or
dividend rate applicable thereto, accelerate the maturity date of any payment
owing in respect thereof (including any redemption, prepayment or defeasance
provision or the Company's obligation to pay cash dividends) or otherwise modify
any of the provisions of such preferred stock in any manner that adversely
affects the Company or the Purchaser.
9.8 AMENDMENTS OF BANK CREDIT DOCUMENTS. No Company Party shall amend
or modify any Bank Credit Document with respect to the total amount of the
overadvance facility under the Bank Credit Agreement (as in effect on the date
hereof) and the amount outstanding under such overadvance facility shall not
exceed $10,000,000 at any point in time.
9.9 DISTRIBUTIONS. No Company Parties shall declare or make, or permit
any Subsidiary to declare or make, any Distributions (other than Distributions
made when no Default or Event of Default exists to the Company by a Subsidiary)
except for redemptions of stock or options issued to employees whose employment
has been terminated, provided that (i) such redemptions shall not exceed
$300,000 in the aggregate and (ii) Availability (as provided for and defined in
the Bank Credit Agreement (as in effect on the date hereof)) equals or exceeds
$3,000,000 after giving effect to any such redemptions. The Company Parties
shall elect, as provided in the New ▇▇▇▇▇▇ Note, to capitalize all interest
payments and shall not elect to make any interest payments in cash with respect
to the New ▇▇▇▇▇▇ Note.
9.10 CAPITAL EXPENDITURES. No Company Parties shall make Capital
Expenditures (including, without limitation, by way of capitalized leases),
excluding any reinvestments in Equipment as described in the Collateral
Documents and any casualty insurance proceeds received by the Company or any of
its Subsidiaries which are spent to replace Collateral which is
54
lost or destroyed, which, in the aggregate, as to the Company and all of its
Subsidiaries, exceed (i) $6,050,000 for the Fiscal Year ending December 31,
2001, and (ii) $6,600,000 for each other Fiscal Year commencing with the Fiscal
Year ending December 31, 2002, except that any unused portion of the Capital
Expenditure allowance for any Fiscal Year may be carried over to the immediately
succeeding Fiscal Year to be used in such succeeding Fiscal Year after all of
the Capital Expenditure allowance for that Fiscal Year has been used.
9.11 DISPOSITION OF ASSETS. No Company Parties shall sell, lease or
otherwise dispose of any of, or permit any Subsidiary to sell, lease or
otherwise dispose of any of, its Properties, including any disposition of
Property as part of a Sale and Leaseback Transaction or securitization
transaction or the sale of any stock of a Subsidiary, to or in favor of any
Person, except for:
(a) so long as no Event of Default has occurred and is
continuing, sales of Inventory in the ordinary course of business;
(b) transfers of Property to the Company by a Subsidiary of
the Company; and
(c) dispositions of Equipment pursuant to Section 6.4.2 of the
Bank Credit Agreement (as in effect on the date hereof).
9.12 ADDITIONAL SECURITIES. The Company shall not permit any other
Company Party or Subsidiary to issue any additional Securities except director's
qualifying shares. No Company Party shall issue or create any Security that
provides for redemption, right to repurchase exercisable at the holder's option,
creation of a sinking fund or cash dividend payable prior to the maturity of the
Note.
9.13 ▇▇▇▇-AND-HOLD SALES, ETC. Except pursuant to the Conditional Sales
Program, no Company Parties shall make, or permit any Subsidiary to make, a sale
to any customer on a ▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on
approval or consignment basis or any sale on a repurchase or return basis.
9.14 RESTRICTED INVESTMENT. No Company Parties shall make or have, or
permit any Subsidiary to make or have, any Restricted Investment.
9.15 SUBSIDIARIES AND JOINT VENTURES. No Company Parties shall create,
acquire or otherwise suffer to exist any Subsidiary or joint venture arrangement
other than the Company's ownership of the Guarantors.
9.16 TAX CONSOLIDATION. No Company Parties shall file or consent to the
filing of any consolidated income tax return with any Person (other than
Company).
9.17 FISCAL YEAR END. No Company Parties shall change, or permit any
Subsidiary to change, its Fiscal Year.
55
9.18 LIMITATIONS ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. No
Company Parties shall permit any Subsidiary to grant or otherwise agree to or
suffer to exist any consensual restrictions on the ability of such Subsidiary to
pay dividends and make other distributions to the Company, or to pay any
Indebtedness owed to the Company or transfer properties and assets to the
Company.
9.19 CHANGE IN BUSINESS. The Company Parties shall not engage in any
material line of business substantially different from those lines of business
carried on by it at the date hereof.
9.20 SUBORDINATION. The Company Parties shall not, without the prior
written consent of the Purchaser, directly or indirectly, contingently or
otherwise, create, incur, assume, guaranty, suffer to exist or become or remain
liable with respect to any Indebtedness that is pari passu with or senior in
right of payment to the Indebtedness for Money Borrowed evidenced by the Note
and the Guarantee, except for the obligations under the Bank Credit Documents
(as in effect on the date hereof) or with respect to up to $5,000,000 in
principal amount of the 10 1/2% Notes.
9.21 ACCOUNTING CHANGES. No Company Party shall make any significant
change in accounting treatment or reporting practices, except as required or
permitted by GAAP.
9.22 HAZARDOUS SUBSTANCES. No Company Party shall use, generate,
manufacture, install, treat, Release, store or dispose of any Hazardous
Substances, except in material compliance with all applicable Environmental
Laws.
10. DEFAULTS AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default (each
an "EVENT OF DEFAULT"):
(a) The Company shall fail to pay as and when due (whether at
stated maturity, upon acceleration or demand or required prepayment or
otherwise) any principal, premium, if any, interest (in the case of interest
payments only, such failure continues for five (5) days after the date thereof)
and annual renewal fee payable under the Note or any Company Party shall fail to
make any other payment of any other amounts (including, without limitation,
fees, costs or expenses) payable under this Agreement, the Note, the Guarantee
or any other Investment Document (whether at stated maturity, upon acceleration
or demand or required prepayment or otherwise) and with respect to such other
amounts shall fail to make payments within ten (10) day's written notice
thereof;
(b) Any Company Party shall breach or fail to perform, comply
with or observe any agreement, covenant or obligation required to be performed
by it under SECTION 8.4, SECTION 8.20 or SECTION 9;
56
(c) Any Company Party shall breach or fail to perform, comply
with or observe any agreement, covenant or obligation required to be performed
by it under this Agreement, the Note or any other Collateral Documents and other
Investment Document (other than the agreements, covenants or obligations
expressly covered by clauses (a) and (b) of SECTION 10.1 and, if such breach or
failure can be cured, such breach or failure continues and shall not have been
remedied within thirty (30) calendar days after the first occurrence of such
breach or failure;
(d) Any representation, warranty or other statement made or
furnished to the Purchaser by or on behalf of the Company, any Subsidiary or any
Guarantor under this Agreement or any other Investment Document or any
instrument, certificate or financial statement furnished in compliance with or
in reference thereto shall be false or misleading or incorrect in any material
respect when made (or deemed made);
(e) Any of the Bank Credit Documents shall terminate (other
than mortgages released under the Bank Credit Agreement) or the Bank shall
notify the Company of the termination of its Revolving Loan Commitment (as
defined in the Bank Credit Agreement);
(f) (i) Any Company Party shall default in the payment
(whether at stated maturity, upon acceleration or demand or required prepayment
or otherwise), beyond any period of grace provided therefor, of any principal of
or interest on any other Indebtedness for Money Borrowed with a principal amount
in excess of $500,000, individually or in the aggregate, or (ii) any other
breach or default (or other event or condition) shall occur under any agreement,
indenture or instrument evidencing or governing any such other Indebtedness or
Other Debt Document, if (a) the payment or maturity of such Indebtedness is
accelerated in consequence of such Event of Default, (b) demand for payment of
such Indebtedness is made, or (c) any collection action in respect thereof is
commenced.
(g) Any Investment Document, or any material provision
thereof, shall cease to be of full force and effect, valid and enforceable, for
any reason other than in accordance with its terms, or any Company Party shall
contest or purport to repudiate or disavow any of its obligations under or the
validity or enforceability of any Investment Document or any material provision
thereof, including by operation of law, or any Collateral Document or financing
statement shall for any reason (other than pursuant to the terms thereof) cease
to create a valid and perfected priority lien (subject only to Permitted Liens)
and on security interest on the Collateral purported to be covered thereby;
(h) Any Company Party shall cease to be Solvent or there shall
be commenced against any Company Party an involuntary case seeking the
liquidation or reorganization of such Person under the Bankruptcy Laws or any
similar proceeding under any other Applicable Laws or an involuntary case or
proceeding seeking the appointment of a receiver, custodian, trustee or similar
official for it, or to take possession of all or a substantial portion of its
property or to operate all or a substantial portion of its business, and any of
the following events occur: (i) any
57
such Person consents to such involuntary case or proceeding or fails to
diligently contest it in good faith, (ii) the petition commencing the
involuntary case or proceeding is not timely controverted, (iii) the petition
commencing the involuntary case or proceeding remains undismissed and unstayed
for a period of sixty (60) days, or (iv) an order for relief shall have been
issued or entered therein or a receiver, custodian, trustee or similar official
appointed;
(i) Any Company Party (i) shall make any offer of settlement,
extension or composition to its unsecured creditors generally, or institute a
voluntary case seeking liquidation or reorganization under the Bankruptcy Laws
or any similar proceeding under any other Applicable Laws, or shall consent
thereto, (ii) shall consent to the conversion of an involuntary case to a
voluntary case, (iii) shall file a petition, answer a complaint or otherwise
institute any proceeding seeking, or shall consent or acquiesce to the
appointment of, a receiver, custodian, trustee or similar official for it, or to
take possession of all or a substantial portion of its property or to operate
all or a substantial portion of its business, (iv) shall make a general
assignment for the benefit of creditors, (v) shall generally not pay its debts
as they become due or shall admit in writing its inability to pay its debts
generally, or (vi) the Board of Directors of any such Person (or any committee
thereof) adopts any resolution or otherwise authorizes action to approve any of
the foregoing;
(j) Any Company Party shall suffer any Judgment Lien;
(k) There shall occur any material loss, theft, damage or
destruction of any of the Collateral such that the aggregate value of such
Collateral MINUS the amount of such Collateral covered by insurance exceeds
$500,000;
(l) (i) There shall occur a cessation of a substantial part of
the business of any Company Party for a period which significantly and adversely
affects such Company Party's capacity to continue its business on a profitable
basis; or any Company Party shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by such Company Party which is
necessary to the continued or lawful operation of its business; or any Company
Party shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
its business affairs; or any material lease or agreement pursuant to which any
Company Party leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any material part of
the Collateral shall be taken through condemnation or the value of such Property
shall be impaired through condemnation.
(m) A Reportable Event shall occur which, in the Purchaser's
determination, constitutes grounds for the termination by the Pension Benefit
Guaranty Corporation of any Benefit Plan or for the appointment by the
appropriate United States district court of a trustee for any Benefit Plan, or
if any Benefit Plan shall be terminated or any such trustee shall be requested
or appointed, or if any Company Party is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from such Company Party's
58
complete or partial withdrawal from such Benefit Plan and any such event would
reasonably be expected to have a Material Adverse Effect;
(n) Any Company Party shall be criminally indicted or
convicted under any law that could lead to a forfeiture of any Property of any
Company Party which shall be reasonably expected to have a Material Adverse
Effect or a material and adverse impact on the reputation or goodwill of any
Company Party;
(o) There shall occur any Change in Control;
(p) Any order, decree, fine or penalty shall be entered
against or imposed upon any of the Company Parties or any of the Real Properties
with respect to an Environmental Condition where the cost of compliance or the
amount of such fine or penalty is reasonably expected, individually or in the
aggregate, to exceed $250,000;
(q) Any inquiry, investigation or administrative or judicial
proceeding is commenced against any of the Company Parties with respect to any
Environmental Conditions which is reasonably expected, individually or in the
aggregate, to result in a liability equal to or in excess of $250,000; or
(r) Any Tax assessment Lien equal to or in excess of $250,000
shall be entered against any Company Party.
Any adjustments in the interest rate under the Note or other remedies
available to the Purchaser hereunder or thereunder shall begin to apply
immediately upon the occurrence of an Event of Default or, in the case of
clauses (h) and (i) above, immediately prior to an Event of Default.
10.2 ACCELERATION. If any Event of Default (other than an Event of
Default specified in clause (h) or (i) of SECTION 10.1) occurs and is
continuing, the Purchaser may, by written notice to the Company, declare all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Note, and all other Obligations, to be due and
payable. Upon any such declaration of acceleration, such principal, premium, if
any, interest and other amounts shall become immediately due and payable. If an
Event of Default specified in clause (h) or (i) of SECTION 10.1 occurs, all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Note, and all other Obligations, shall become
immediately due and payable without any declaration or other act on the part of
the Purchaser. The Company Parties hereby waive all presentment for payment,
demand and notice of demand, protest, notice of protest and notice of dishonor,
notice of nonpayment, diligence and all other notices of any kind to which it
may be entitled under Applicable Laws or otherwise.
10.3 SET OFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under any Applicable Law and not by way of limitation of any
such rights, during the
59
continuance of any Event of Default, the Purchaser is hereby authorized by the
Company at any time or from time to time, with reasonably prompt subsequent
notice to the Company (any prior or contemporaneous notice to Company being
hereby expressly waived) to set off and to appropriate and to apply any and all
(i) balances held by the Purchaser at any of its offices for the account of any
Company Party (regardless of whether such balances are then due to such Company
Party), and (ii) other property at any time held or owing by the Purchaser to or
for the credit or for the account of any Company Party, against and on account
of any of the Obligations.
10.4 OTHER REMEDIES. If any Default or Event of Default shall occur and
be continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any other Investment Document by exercising
all rights and remedies available under this Agreement, any other Investment
Document or Applicable Laws (including, without limitation, the UCC), either by
suit in equity or by action at law, or both, whether for the collection of
principal of or interest on the Note, to enforce the specific performance of any
covenant or other term contained in this Agreement or any other Investment
Document. No remedy conferred in this Agreement upon the Purchaser is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
10.5 APPOINTMENT OF RECEIVER. In addition to all other rights, powers
and remedies that the Purchaser has under this Agreement, any other Investment
Document or Applicable Laws, the Purchaser shall, upon the occurrence of an
Event of Default, be entitled (to the extent permitted by Applicable Laws), and
the Company Parties hereby consent in advance, to the appointment of a receiver
by any court of competent jurisdiction to take control of the Company Parties
for the purpose of operating and thereafter selling any Company Party to satisfy
obligations to creditors, including the Purchaser.
10.6 WAIVER OF PAST DEFAULTS. The Purchaser may, by written notice to
the Company, waive any specified Default or Event of Default and its
consequences with respect to this Agreement, the Note or any other Investment
Document; PROVIDED, HOWEVER, that no such waiver will extend to any subsequent
or other Default or Event of Default or impair any rights of the Purchaser which
may arise as a result of such other Default or Event of Default.
11. WAIVER. The Purchaser may (a) extend the time for the performance of any of
the obligations or other acts of the Company Parties, (b) waive any inaccuracies
in the representations or warranties of the Company Parties or (c) waive
compliance with any of the conditions, covenants or agreements of the Company
Parties contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument signed by the Purchaser. Any waiver of the breach of
any term or condition shall not be construed as a waiver of any other breach or
as a subsequent waiver of the same term or condition, or as a waiver of any
other term or condition of this Agreement, the Note or any other Investment
Document. The failure by the Purchaser to assert, or any delay by Purchaser in
asserting any of its rights under this Agreement, the Note, or any other
Investment Document shall not constitute a waiver of any such rights and
60
no single or partial exercise of any such right shall preclude any other or
further exercise thereof or the exercise of any other right.
12. POWER OF ATTORNEY. The Company and the Guarantors hereby irrevocably
designate, make, constitute and appoint the Purchaser (and all Persons
designated by the Purchaser) as the Company's and each Guarantor's true and
lawful attorney (and the agent-in-fact), to endorse the Company's and any
Guarantor's name on any checks, notes, acceptances, drafts, money orders or any
other evidence of payment or proceeds of the Collateral which come into the
possession of the Purchaser or under the Purchaser's control, at such time or
times as the Purchaser or said agent, in its sole discretion, may determine
without notice to the Company or the Guarantors, but at the cost and expense of
the Company and the Guarantors. The power of attorney granted hereby shall
constitute a power coupled with an interest and shall be irrevocable.
13. MISCELLANEOUS.
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; PURCHASER
INVESTIGATION. All representations, warranties, covenants and agreements of the
Company Parties (or any one of them) contained herein, or made in writing by or
on behalf of them pursuant hereto or in connection herewith, shall survive the
execution and delivery of this Agreement, the issuance, sale and delivery of the
Notes, the repayment of the Note and the due diligence or other investigation of
the Company Parties and their Affiliates made by and on behalf of the Purchaser.
The Company and the Guarantors hereby agree that neither the Purchaser's review
of the books and records or condition (financial or otherwise), business,
assets, properties, operations or prospects of any Person, nor any other due
diligence investigation conducted by or on behalf of the Purchaser, shall be
deemed to modify the representations and warranties of the Company and the
Guarantors contained in this Agreement or any other Investment Document or to
constitute knowledge by the Purchaser of the existence or absence of any facts
or any other matters so as so reduce the Purchaser's right to rely on the
accuracy of the representations and warranties of the Company and the Guarantors
contained in this Agreement or any other Investment Document.
13.2 CONSENT TO AMENDMENTS. No amendment, supplement or other
modification to this Agreement or any other Investment Document shall be
effective unless in writing and signed by the Purchaser, and the Company Parties
may take any action herein prohibited, or omit to perform any act herein
required to be performed by them, if, and only if, the Company Parties shall
have obtained the prior written consent of the Purchaser to such action or
omission. No course of dealing between the Company Parties, on the one hand, and
the Purchaser (or any successor or assignee thereof), on the other hand, nor any
delay in exercising any rights hereunder or under the Note or any other
Investment Document shall operate as a waiver of any rights of the Purchaser (or
any other Holder).
13.3 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and
the Disclosure Schedules which are all incorporated herein by this reference and
are an integral part of this
61
Agreement, the Note and the other Investment Documents constitute the full and
entire agreement and understanding between the Purchaser, on the one hand, and
the Company Parties, on the other hand, relating to the subject matter hereof
and thereof, and supersede all prior oral and written, and all contemporaneous
oral agreements and understandings relating to the subject matter hereof,
including, without limitation, the Letter dated November 7, 2001 between the
Company and the Purchaser. If any words have been added or deleted in this
Agreement or any related document as compared to any prior draft thereof, this
Agreement and the related documents shall be construed without reference to such
prior drafts and no implication shall be made regarding any such additions or
deletions.
13.4 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
13.5 SUCCESSORS AND ASSIGNS; ASSIGNMENTS. This Agreement shall inure to
the benefit of, and be binding upon, the parties and their respective successors
and permitted assigns. No Company Party shall assign any of its rights and
obligations hereunder or any interest herein or therein without the prior
written consent of the Purchaser. The Purchaser may, at any time and from time
to time without the consent of the Company or any Guarantor, assign, transfer or
delegate to one or more Persons (each an "ASSIGNEE") all or any part of its
right, title and interest in and to this Agreement and the other Investment
Documents, including, without limitation, all or any part of the Obligations,
subject to compliance with applicable federal and state securities laws;
PROVIDED, HOWEVER, that, in any privately negotiated transaction involving a
sale or assignment of any such right, title or interest, the transferor shall
obtain from the Assignee in writing investment intent representations which
would be customarily obtained in transactions of such nature; and PROVIDED
FURTHER, that the Company Parties shall continue to deal solely and directly
with the transferor in connection with any right, title or interest so assigned
until written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Company. Notwithstanding the foregoing, the Purchaser may not
assign any of its rights and obligations hereunder, or any interest herein or
therein, to any Person that, by virtue of its primary line of business, is a
direct competitor of the Company.
13.6 CERTAIN AGREEMENTS OF THE COMPANY PARTIES. Each Company Party
agrees that (i) it will use its best efforts to assist and cooperate with the
Purchaser in any manner reasonably requested by the Purchaser to effect the sale
of participation in or assignments of any of the Investment Documents or any
portion thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents and making members of
management available at reasonable times to meet with and answer questions of
potential assignees and participants, and (ii) the Purchaser may disclose credit
information regarding any Company Party to any potential participant or
assignee.
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13.7 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given (i) if transmitted by telecopier with
receipt acknowledged, or (ii) upon delivery, if delivered personally or by
recognized commercial courier with receipt acknowledged, or (iii) the next
Business Day, if sent by a nationally recognized overnight courier for next
Business Day delivery, addressed as follows:
If to the Purchaser, to:
Catalyst Equity Fund, L.P.
c/o Catalyst Equity Partners, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. France
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Catalyst Equity Fund, L.P.
c/o Catalyst Equity Partners, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With an additional copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
63
If to the Company Parties (or any one of
them), to:
c/o Color Spot Nurseries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇ Hyatt & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this SECTION
13.7.
13.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
13.9 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW
JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD
TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
13.10 LIMITATION OF LIABILITY. No claim shall be made by any Company
Party or any of its or their Affiliates against the Purchaser, or any
Affiliates, partners, directors, officers, employees, agents, representatives,
attorneys, accountants or advisors of the Purchaser, for any special, indirect,
consequential, incidental or punitive damages in respect of any claim for breach
of contract or under any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Investment
Document, or any act, omission or event occurring in connection therewith. Each
of the Company Parties hereby waives, releases and agrees not to ▇▇▇ upon any
claim for such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
64
13.11 PUBLICITY. The Company Parties and their Affiliates will consult
with the Purchaser before issuing, and provide the Purchaser reasonably ample
time and opportunity to review and comment upon, and use reasonable efforts to
agree on the form and substance of, any press release or other public statement
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make such other public announcement prior to
such consultation, except as required under Applicable Laws. The parties agree
that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties. The Company Parties hereby consent to the preparation and publication
by the Purchaser of an advertisement "tombstone" publicly disclosing the closing
of the transactions contemplated by this Agreement.
13.12 WAIVER OF TRIAL BY JURY. EACH OF THE COMPANY PARTIES AND THE
PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS
AGREEMENT, ANY OTHER INVESTMENT DOCUMENT, THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY, OR THE ACTIONS OF PURCHASER IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF, REGARDLESS OF WHICH PARTY INITIATES SUCH
ACTION OR ACTIONS.
13.13 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the
Investment Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in any of the other Investment Documents
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Investment Documents, the
provision contained in this Agreement shall govern and control.
13.14 TIME OF ESSENCE. Time is of the essence of this Agreement, the
Note, the Guarantee, and the other Investment Documents and Collateral
Documents.
13.15 INTERPRETATION. No provision of this Agreement or any of the
other Investment Documents or Collateral Documents shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of such party having or being
deemed to have structured or dictated such provision.
13.16 CONSENT TO FORUM. AS PART OF THE CONSIDERATION FOR NEW VALUE
RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF
BUSINESS OF THE COMPANY PARTIES OR THE PURCHASER, EACH OF THE COMPANY PARTIES
HEREBY CONSENTS AND AGREES THAT THE STATE COURTS OF
NEW JERSEY, OR, AT THE
PURCHASER'S OPTION, THE UNITED STATES DISTRICT COURT OF NEW
65
JERSEY, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY PARTIES ON THE ONE HAND AND THE PURCHASER ON THE
OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT. THE COMPANY PARTIES EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND THE COMPANY PARTIES HEREBY WAIVE ANY OBJECTION WHICH THE COMPANY PARTIES MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY PARTIES HEREBY WAIVE
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY
PARTIES AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH COMPANY PARTY'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT
THE RIGHT OF THE PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE PURCHASER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
66
IN WITNESS WHEREOF, the parties have caused this
Securities Purchase
Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.
COMPANY:
COLOR SPOT NURSERIES, INC.,
a Delaware corporation
By:
---------------------------------------------
Name:
Title:
GUARANTORS:
COLOR SPOT CHRISTMAS TREES, INC.,
a Delaware corporation
LONE STAR, INC.,
a Delaware corporation
LSGR HOLDINGS, INC.,
a Delaware corporation
ODA NURSERY INC.,
a California corporation
By:
---------------------------------------------
Name:
Title:
LONE STAR GROWERS, L.P.,
a Delaware limited partnership
By: LONE STAR, INC.
Its: General Partner
By:
------------------------------------
Name:
Title:
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
PURCHASER:
CATALYST EQUITY FUND, L.P.,
a Delaware limited partnership
By: CATALYST EQUITY FUND PARTNERS, L.L.C.,
a Delaware limited liability company
By:
---------------------------------
Name:
Title:
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
EXHIBIT C
COMPLIANCE CERTIFICATE
[Letterhead of the Company]
, 200__
The undersigned, the chief financial officer of Color Spot Nurseries,
Inc., a Delaware corporation (the "Company"), on behalf of the Company in his
capacity as Chief Financial Officer, gives this certificate to Catalyst Equity
Fund, L.P., a Delaware limited partnership (the "Purchaser"), in accordance with
the requirements of Section 8.5 of that certain
Securities Purchase Agreement,
dated November 20, 2001, by and among the Company, the Purchaser and the
Guarantors listed therein ("Purchase Agreement"). Capitalized terms used in this
Certificate, unless otherwise defined herein, shall have the meanings ascribed
to them in the Purchase Agreement.
1. Based upon my review of the balance sheet and statements of income
of Borrower for the [fiscal year] [quarterly period] ending _________________,
20__, copies of which are attached hereto, I hereby certify that:
(i) The Interest Coverage Ratio is _____ to _____;
(ii) The Fixed Charge Coverage Ratio is _____ to _____;
(iii) EBITDA is $__________; and
(iv) Capital Expenditures during the period and for the
fiscal year to date total $________ and $_________, respectively.
[LIST OTHERS, IF ANY]
2. No Default exists on the date hereof, other than:___________________
___________________________ [if none, so state]; and
3. No Event of Default exists on the date hereof, other than __________
_________________________ [if none, so state].
Very truly yours,
___________________________
Chief Financial Officer
