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EXHIBIT 10.1
FRESH AMERICA CORP.
AMENDED AND RESTATED NOTE AGREEMENT
WITH RESPECT TO NOTE AGREEMENT DATED AS OF
MAY 4, 1998
DATED AS OF APRIL 15, 2000
$20,000,000 12% SENIOR SUBORDINATED NOTES DUE MAY 1, 2007
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1. PAYMENTS....................................................................................................2
1.1 INTEREST PAYMENT.........................................................................................2
1.2 REQUIRED PRINCIPAL PAYMENTS..............................................................................2
1.3 OPTIONAL PRINCIPAL PAYMENTS..............................................................................2
1.4 OFFER TO PAY UPON CHANGE IN CONTROL......................................................................3
1.5 DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE...................................................6
1.6 PAYMENTS AMONG NOTEHOLDERS...............................................................................6
1.7 NOTATION OF NOTES ON PAYMENT.............................................................................6
1.8 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES.....................................................7
1.9 MANNER OF PAYMENTS.......................................................................................7
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...............................................................8
2.1 REGISTRATION OF NOTES....................................................................................8
2.2 EXCHANGE OF NOTES........................................................................................8
2.3 REPLACEMENT OF NOTES.....................................................................................9
2.4 ISSUANCE TAXES..........................................................................................10
3. GENERAL COVENANTS..........................................................................................10
3.1 PAYMENT OF TAXES AND CLAIMS.............................................................................10
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.....................................................10
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE..............................................................11
3.4 PENSION PLANS...........................................................................................12
3.5 PRIVATE OFFERING........................................................................................13
4. NEGATIVE AND FINANCIAL COVENANTS...........................................................................13
4.1 MERGERS AND CONSOLIDATIONS..............................................................................13
4.2 DISPOSITION OF ASSETS, RESTRICTED SUBSIDIARY STOCK......................................................14
4.3 LIENS...................................................................................................18
4.4 NET WORTH...............................................................................................22
4.5 FIXED CHARGE COVERAGE...................................................................................22
4.6 TOTAL DEBT..............................................................................................23
4.7 SENIOR DEBT.............................................................................................23
4.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS..........................................................23
4.9 SENIORITY TO FUTURE SUBORDINATED DEBT...................................................................25
4.10 DESIGNATION OF SUBSIDIARIES.............................................................................25
4.11 LINE OF BUSINESS........................................................................................26
4.12 TRANSACTIONS WITH AFFILIATES............................................................................27
4.13 SUBSIDIARY GUARANTEES...................................................................................27
4.14 CURRENT RATIO...........................................................................................28
5. REPORTING COVENANTS........................................................................................28
5.1 FINANCIAL AND BUSINESS INFORMATION......................................................................28
5.2 OFFICER'S CERTIFICATES..................................................................................32
5.3 ACCOUNTANTS' CERTIFICATES...............................................................................32
5.4 INSPECTION..............................................................................................33
6. EVENTS OF DEFAULT..........................................................................................33
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6.1 EVENTS OF DEFAULT.......................................................................................33
6.2 DEFAULT REMEDIES........................................................................................36
6.3 ANNULMENT OF ACCELERATION OF NOTES......................................................................38
7. SUBORDINATION..............................................................................................39
7.1 GENERAL.................................................................................................39
7.2 INSOLVENCY..............................................................................................39
7.3 PROOFS OF CLAIM.........................................................................................39
7.4 ACCELERATION OF SENIOR DEBT.............................................................................40
7.5 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT...............................................................40
7.6 SIGNIFICANT NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT................................................41
7.7 STANDSTILL..............................................................................................42
7.8 TURNOVER OF PAYMENTS....................................................................................42
7.9 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS..............................................................43
7.10 WAIVER AND CONSENT......................................................................................44
7.11 REINSTATEMENT OF SUBORDINATION..........................................................................44
7.12 OBLIGATIONS NOT IMPAIRED................................................................................44
7.13 PAYMENT OF SENIOR DEBT; SUBROGATION.....................................................................45
7.14 RELIANCE OF HOLDERS OF SENIOR DEBT......................................................................45
7.15 IDENTITY OF HOLDERS OF SENIOR DEBT......................................................................45
7.16 AMENDMENTS TO SENIOR CREDIT FACILITY....................................................................46
8. INTERPRETATION OF THIS AGREEMENT...........................................................................46
8.1 TERMS DEFINED...........................................................................................46
8.2 ACCOUNTING PRINCIPLES...................................................................................78
8.3 DIRECTLY OR INDIRECTLY..................................................................................79
8.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.................................................79
8.5 GOVERNING LAW...........................................................................................79
8.6 GENERAL INTEREST PROVISIONS.............................................................................79
9. MISCELLANEOUS..............................................................................................81
9.1 COMMUNICATIONS..........................................................................................81
9.2 REPRODUCTION OF DOCUMENTS...............................................................................82
9.3 SURVIVAL; ENTIRE AGREEMENT..............................................................................82
9.4 SUCCESSORS AND ASSIGNS..................................................................................83
9.5 AMENDMENT AND WAIVER....................................................................................83
9.6 EXPENSES................................................................................................85
9.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC......................................................86
9.8 EXECUTION IN COUNTERPART................................................................................87
Annex 1 - Addresses of Purchasers; Payment Information
Annex 2 - Address of Company
Annex 3 - Senior Credit Agreement Definitions
Attachment A - Form of Amended and Restated Note
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AMENDED AND RESTATED NOTE AGREEMENT
WITH RESPECT TO NOTE AGREEMENT DATED AS OF
MAY 4, 1998
AMENDED AND RESTATED NOTE AGREEMENT, dated as of April 15, 2000, with
respect to the Note Agreement dated as of May 4, 1998, among FRESH AMERICA
CORP., a Texas corporation (together with its successors and assigns, the
"Company"), and XXXX XXXXXXX LIFE INSURANCE COMPANY, XXXX XXXXXXX VARIABLE LIFE
INSURANCE COMPANY and SIGNATURE 1A (CAYMAN), LTD. (together with their
respective successors and assigns, the "HOLDERS").
RECITALS
WHEREAS, pursuant to the Initial Securities Purchase Agreement, the Holders
purchased from the Company, and the Company sold to the Holders, Twenty Million
Dollars ($20,000,000) in aggregate principal amount of the Initial Notes due May
4, 2003; and
WHEREAS, pursuant to the Securities Purchase Agreement, certain of the
Holders have agreed to purchase from the Company, and the Company has agreed to
sell to such Holders, 50,000 shares of Cumulative Preferred Stock and _____
Series B Warrants; and
WHEREAS, each Holder was a Purchaser under the Initial Securities Purchase
Agreement, and each Purchaser under the Initial Securities Purchase Agreement is
a Holder; and
WHEREAS, as a condition to the purchase and sale of the Cumulative
Preferred Stock and the Series B Warrants, the Company has requested and the
Holders have agreed to amend and restate the Initial Note Agreement on the terms
and in the manner set forth herein.
WHEREAS, by their execution and delivery hereof, the Company and the
Holders are entering into this Agreement to amend and restate the Initial Note
Agreement and to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein,
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(a) the Initial Note Agreement is hereby amended and restated as set forth
herein;
(b) the Initial Notes are hereby, and are hereby deemed to be, amended and
restated in the form of Note set forth in Attachment A hereto, and each Holder
may now or hereafter exchange any or all of the Initial Notes held by it for new
amended and restated Notes in the form of Attachment A, each such new Note to be
of a principal amount equal to the outstanding principal amount of the Initial
Note delivered in exchange, provided however, that the failure of a Holder to so
exchange any Initial Note for a new Note shall have no effect or consequence
hereunder, and each such Initial Note shall be deemed to be, and shall be
treated for all purposes hereunder, as being a new Note in the form of
Attachment A); and
(c) the parties to this Agreement hereby agree as provided in the various
Sections of this Agreement.
1. PAYMENTS
1.1 INTEREST PAYMENT
Interest on the Notes shall be computed and paid in the manner and on the
dates provided in the Notes.
1.2 REQUIRED PRINCIPAL PAYMENTS
There shall be no required principal prepayments with respect to the
Notes. The entire principal of the Notes outstanding on May 1, 2007, together
with interest accrued thereon, shall become due and payable on such date.
1.3 OPTIONAL PRINCIPAL PAYMENTS
(a) OPTIONAL PRINCIPAL PAYMENTS WITH PREPAYMENT COMPENSATION AMOUNT.
The Company may pay the principal amount of the Notes in whole or in part,
on any date in a minimum aggregate amount of Five Hundred Thousand Dollars
($500,000), or in any higher integral multiples of One Hundred Thousand
Dollars ($100,000) (or, if the aggregate outstanding principal amount of
the Notes is less than Five Hundred Thousand Dollars ($500,000) at such
time, then such principal amount), together with:
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(i) an amount equal to the Prepayment Compensation Amount due at
such time in respect of the principal amount of the Notes being so
paid; and
(ii) interest on such principal amount then being paid accrued to
the payment date.
(b) NOTICE OF OPTIONAL PAYMENT. The Company will give notice of any
optional payment of the Notes pursuant to this Section 1.3 to each holder
of Notes not less than thirty (30) days nor more than sixty (60) days
before the specified payment date, stating:
(i) the specified payment date;
(ii) that such payment is to be made pursuant to this Section
1.3;
(iii) the principal amount of each Note to be paid on such date;
(iv) the interest to be paid on each such Note, accrued to the
specified payment date; and
(v) the calculation (with details) of an estimated Prepayment
Compensation Amount, if any (calculated as if the date of such notice
was the date of payment), due in connection with such payment.
(c) Notice of payment having been so given, the aggregate principal
amount of the Notes to be paid stated in such notice, together with the
Prepayment Compensation Amount determined as of the specified payment date,
if any, and interest thereon accrued to the specified payment date, shall
become due and payable on the specified payment date. Two (2) Business Days
prior to the making of such payment, the Company shall deliver to each
holder of Notes by facsimile transmission (confirmed by nationwide
overnight courier) a certificate of a Senior Financial Officer specifying
the details of the calculation of the Prepayment Compensation Amount as of
the specified payment date, and including a copy of the source of interest
rate information used in the calculation thereof.
1.4 OFFER TO PAY UPON CHANGE IN CONTROL
(a) NOTICE OF CHANGE IN CONTROL NOTICE EVENT. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any Senior
Officer (including, without limitation, via the receipt of notice of a
Change in
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Control Notice Event from any holder of Notes), the Company will, within
five (5) Business Days after the occurrence of such event, give notice of
such Change in Control Notice Event to each holder of Notes. Each such
notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 1.4; and
(iv) specify, in reasonable detail, the nature and date of the
Change in Control Notice Event.
(b) OFFER IN RESPECT OF A CHANGE IN CONTROL. In the event of a Change
in Control, the Company will, within five (5) Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the
Company, at least twenty (20) days prior to such Change in Control), give
notice of such Change in Control to each holder of Notes. Such notice shall
contain an irrevocable separate offer to each holder of Notes to pay all,
but not less than all, of the principal of, and interest and Prepayment
Compensation Amount, if any, on the Notes held by such holder on a date
(the "CHANGE IN CONTROL PAYMENT DATE") specified in such notice that is not
less than twenty (20) days and not more than thirty (30) days after the
date of such notice. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the nature and date of the
Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note outstanding;
(vi) specify the interest that would be due on each Note offered
to be paid, accrued to the Change in Control Payment Date; and
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(vii) the calculation (with details) of an estimated Prepayment
Compensation Amount, if any (calculated as if the date of such notice
was the date of payment), due in connection with such payment.
(c) ACCEPTANCE, REJECTION. Each holder of Notes shall have the option
to accept or reject such offered payment. In order to reject such offered
payment, a holder of Notes shall cause a notice of such rejection to be
delivered to the Company at least five (5) days prior to the Change in
Control Payment Date. A failure to reject in writing such written offer of
payment as provided in this Section 1.4(c), or a written acceptance of such
offered prepayment, shall be deemed to constitute an acceptance of such
offer.
(d) DEFERRAL OF OBLIGATION TO PURCHASE. The obligation of the Company
to purchase Notes pursuant to the offers required by Section 1.4(b) and
accepted or deemed accepted in accordance with Section 1.4(c) is subject to
the occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control
does not occur prior to the Change in Control Payment Date in respect
thereof, such purchase shall be deferred until and shall be made on the
date on which such Change in Control occurs or, if the Company determines
that efforts to effect such Change in Control have ceased or have been
abandoned, then such offer, acceptances and obligation to purchase shall be
deemed to have been rescinded. The Company shall keep each holder of Notes
reasonably and timely informed of:
(i) any such deferral of the date of purchase;
(ii) the date on which such Change in Control and the purchase
are expected to occur; and
(iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned.
(iv) PAYMENT. The offered payment shall be made at one hundred
percent (100%) of the principal amount of the Notes to be prepaid,
together with interest and Prepayment Compensation Amount, if any, on
such Notes, accrued to and determined as of the Change in Control
Payment Date. Two (2) Business Days prior to the making of such
payment, the Company shall deliver to each holder of Notes by
facsimile transmission a certificate of a Senior Financial Officer
specifying the details of the calculation of the Prepayment
Compensation Amount as of
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the specified payment date, and including a copy of the source of
interest rate information used in such calculation.
1.5 DELIVERY OF NOTES IN PAYMENT OF WARRANT PURCHASE PRICE
The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the shares of Common
Stock issued upon exercise of the Warrants. Promptly following the receipt of
any Note so tendered, the Company shall promptly cancel and retire such
surrendered Note (and no such Note shall be reissued), and shall issue to the
holder thereof a new Note in the principal amount of such tendered Note
remaining after deduction of the principal amount thereof applied to payment of
the purchase price for the shares of Common Stock. For purposes of Rule 144
under the Securities Act, 17 C.F.R. Section 230.144, the Company and you agree
that a tender of Notes in payment of the exercise price in respect of the
Warrants shall not be deemed a prepayment of the Notes, but rather a conversion
of such Notes, pursuant to the terms of the Warrant Agreement and the Warrants,
into Common Stock.
1.6 PAYMENTS AMONG NOTEHOLDERS
If at the time any payment of the principal of the Notes made pursuant to
Section 1.2 or Section 1.3 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial payment of
the Notes shall be allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such outstanding
Notes.
1.7 NOTATION OF NOTES ON PAYMENT
Upon any partial payment of a Note, the holder of such Note may (but shall
not be required to), at its option:
(a) surrender such Note to the Company pursuant to Section 2.2 in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) make such Note available to the Company for notation thereon of
the portion of the principal so paid; or
(c) xxxx such Note with a notation thereon of the portion of the
principal so paid.
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In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.8 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES
Except for payments of principal made in accordance with this Section 1.8,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes unless:
(a) the Company or such Subsidiary or Affiliate shall have offered in
writing to acquire Notes, pro rata, from all holders of the Notes upon the
same terms and at the same price, which price shall be clearly disclosed;
(b) such offer will remain open for at least ten (10) Business Days
from the date the offer is received by each holder of Notes;
(c) the Company will provide each holder of Notes with a calculation
of the estimated Prepayment Compensation Amount that would be due if the
Company were to pay, in accordance with Section 1.3, the amount of Notes in
respect of which such offer is being made; and
(d) the Company will promptly provide each holder of Notes with such
other information regarding such offer (including, without limitation, if
requested, a list of all holders of Notes indicating the amount of the
holdings of each and whether such holder shall have accepted or rejected
such offer, as of the most recent practicable time) as such holder shall
reasonably request. In the event that the Company acquires any Notes, such
Notes will thereafter be cancelled and no Notes will be issued in
substitution therefor.
1.9 MANNER OF PAYMENTS
(a) MANNER OF PAYMENT. The Company shall pay all amounts payable with
respect to each Note (without any presentment of such Notes and without any
notation of such payment being made thereon) by crediting, by federal funds
bank wire transfer, the account of the holder thereof in any bank in the
United States of America as may be designated in writing by such holder, or
in such other manner as may be reasonably directed or to such other address
in the United States of America as may be reasonably designated in writing
by such holder. Annex 1 shall be deemed to constitute notice, direction or
designation (as appropriate) by the Holder to the Company with respect to
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payments to be made to the Holder as aforesaid. In the absence of such
written direction, all amounts payable with respect to each Note shall be
paid by check mailed and addressed to the registered holder of such Note at
the address shown in the register maintained by the Company pursuant to
Section 2.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
to, any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment shall have so fallen due; provided that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, such interest shall
accrue and be payable to (but not including) the actual date of payment,
and the amount of the next succeeding interest payment shall be adjusted
accordingly.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to the holders of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available at such holder's bank
prior to the close of business of such bank, provided that interest for one
day at the non-default interest rate of the Notes shall be due on the
amount of any such payment that actually becomes available to such holder
at such holder's bank after 12:00 noon (local time of such bank).
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section 3.3, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 2.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
2.2 EXCHANGE OF NOTES.
(a) EXCHANGE OF NOTES. Upon surrender of any Note at the office of the
Company maintained pursuant to Section 3.3, duly endorsed or accompanied by
a written instrument of transfer duly executed by the registered holder of
such Note or such holder's attorney duly authorized in writing, the
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Company will execute and deliver, at the Company's expense (except as
provided in Section 2.2(b)), a new Note or Notes in exchange therefor, in
an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be registered in the name of
such Person as such holder may request and shall be substantially in the
form of Attachment A. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have
been paid thereon. Each such new Note shall carry the same rights to unpaid
interest and interest to accrue that were carried by the Note so exchanged
or transferred. Notes shall not be transferred in denominations of less
than Five Hundred Thousand Dollars ($500,000), provided that a holder of
Notes may transfer its entire holding of Notes regardless of the principal
amount of such holder's Notes.
(b) COSTS. The Company will pay the cost of delivering to or from such
holder's home office or custodian bank from or to the Company, the
surrendered Note and any Note issued in substitution or replacement for the
surrendered Note. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Notes.
2.3 REPLACEMENT OF NOTES.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company; provided, however, that if the holder of such
Note is a Holder, an institutional investor or a nominee either, the
unsecured agreement of indemnity of such Holder or institutional investor
(but not of any nominee therefor) shall be deemed to be satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
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2.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due (but not, in any event, income
taxes) in connection with and as the result of the initial issuance and sale of
the Notes, the amendment and restatement contemplated hereby and in connection
with any modification, waiver or amendment of this Agreement or the Notes and
shall save each holder of Notes harmless without limitation as to time against
any and all liabilities with respect to all such taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
3.1 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Restricted Subsidiary to, pay before
they become delinquent:
(a) all taxes, assessments and governmental charges or levies imposed
upon it or its Property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords, growers or suppliers of agricultural
products and other like Persons that, if unpaid, might result in the
creation of a statutory, regulatory or common law Lien (other than a Lien
expressly permitted pursuant to Section 4.3(a)(ii)(D)) upon its Property;
provided, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings and reasonable book reserves in accordance with GAAP have been
established and maintained with respect thereto.
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.
The Company shall, and will cause each Restricted Subsidiary to:
(a) PROPERTY - maintain its Property in good condition, ordinary wear
and tear and obsolescence excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto; provided,
however, that this Section 3.2(a) shall not prevent the Company or any
Restricted Subsidiary from discontinuing the operation or the maintenance
of
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any of its Properties if such discontinuance is desirable in the conduct of
its business and such discontinuance could not reasonably be expected to
have a Material Adverse Effect;
(b) INSURANCE - maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types and in such amounts as is
customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated;
(c) FINANCIAL RECORDS - keep proper books of record and account, in
which full and correct entries shall be made of all dealings and
transactions of or in relation to the Properties and business thereof, and
which will permit the production of financial statements in accordance with
GAAP;
(d) CORPORATE EXISTENCE AND RIGHTS - do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, corporate rights (charter and statutory) and corporate
franchises, except as permitted by Section 4.1; and
(e) COMPLIANCE WITH LAW - comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, any environmental protection law) and obtain all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties and the conduct
of its business except for such violations and failures to obtain that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Prepayment Compensation Amount, if any) on, the Notes, as and when
the same shall become due according to the terms hereof and of the Notes, and
will maintain an office at the address of the Company provided in Annex 2 where
notices, presentations and demands in respect hereof or the Notes may be made
upon it. Such office will be maintained at such address until such time as the
Company notifies the holders of the Notes of any change of location of such
office, which will in any event be located within the United States of America.
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3.4 PENSION PLANS.
(a) COMPLIANCE. The Company will, and will cause each ERISA Affiliate
to, at all times with respect to each Pension Plan, comply with all
applicable provisions of ERISA and the IRC, except for such failures to
comply that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(b) PROHIBITED ACTIONS. The Company will not, and will not permit any
ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the IRC) or
"reportable event" (as such term is defined in section 4043 of ERISA)
that could result in the imposition of a tax or penalty;
(ii) incur with respect to any Plan any "accumulated funding
deficiency" (as such term is defined in section 302 of ERISA), whether
or not waived;
(iii) terminate any Plan in a manner that could result in the
imposition of a Lien on the Property of the Company or any Restricted
Subsidiary pursuant to section 4068 of ERISA or the creation of any
liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515 of ERISA;
(v) incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan or any liability as a result of the
termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of any Lien on
the Property of the Company or any ERISA Affiliate, in either case
pursuant to Title I or Title IV of ERISA or pursuant to the penalty or
excise tax or security provisions of the IRC;
if the aggregate amount of the taxes, penalties, funding deficiencies, interest,
amounts secured by Liens, and other liabilities in respect of any of the
foregoing at any time could reasonably be expected to have a Material Adverse
Effect.
(c) FOREIGN PENSION PLANS. The Company will, and will cause each
Restricted Subsidiary to, at all times, comply in all material respects
with all
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laws, regulations and orders applicable to the establishment, operation,
administration and maintenance of all Foreign Pension Plans, and pay when
due all premiums, contributions and any other amounts required by
applicable Foreign Pension Plan documents or applicable laws, except where
the failure to comply with such laws, regulations and orders, and to make
such payments, in the aggregate for all such failures, could not reasonably
be expected to have a Material Adverse Effect.
3.5 PRIVATE OFFERING.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
4. NEGATIVE AND FINANCIAL COVENANTS
4.1 MERGERS AND CONSOLIDATIONS.
The Company will not, nor will it permit any Restricted Subsidiary to,
merge with or into or consolidate with any other Person, permit any other Person
to merge or consolidate with or into it or sell all or substantially all of its
Property to any other Person; provided, however, that the foregoing restriction
does not apply to the merger or consolidation of the Company with or into
another corporation or sale of all or substantially all of the Property of the
Company to any other Person if:
(a) the corporation that results from such merger or consolidation or
to which all or substantially all of the Property of the Company is sold
(the "SURVIVING CORPORATION") is organized under the laws of, and conducts
substantially all of its business and has substantially all of its
Properties within, the United States of America or any jurisdiction or
jurisdictions thereof;
(b) the Surviving Corporation (if not the Company) expressly assumes
the due and punctual payment of the principal of and Prepayment
Compensation Amount, if any, and interest on all of the Notes, according to
their tenor, and the due and punctual performance and observance of all the
covenants in the Notes, this Agreement and each other Financing Document to
be performed or observed by the Company, pursuant to such assumption
agreements and instruments in such forms as shall be approved by the
Required Holders, and the Company causes to be delivered to each holder of
Notes an opinion, satisfactory in form and substance to the Required
Holders, of
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independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms; and
(c) immediately prior to, and immediately after the consummation of
the transaction, and after giving effect thereto:
(i) no Default or Event of Default exists or would exist; and
(ii) the Surviving Corporation would be permitted by the
provisions of Section 4.6 to incur at least One Dollar ($1.00) of
additional Adjusted Debt, and of Section 4.7 to incur at least One
Dollar ($1.00) of additional Senior Debt, assuming that the financial
ratios set forth in Section 4.6 and Section 4.7 were recalculated on a
Pro Forma Adjusted Basis as of the last day of the fiscal quarter of
the Surviving Corporation then most recently ended.
Notwithstanding the foregoing, a Restricted Subsidiary may merge with or into,
or consolidate with, or Transfer all or substantially all of its Property to:
(A) the Company so long as the Company is the Surviving Corporation;
(B) a Wholly-Owned Restricted Subsidiary, so long as such Wholly-Owned
Restricted Subsidiary is the Surviving Corporation; and
(C) any Person other than the Company or a Restricted Subsidiary so
long as such Transfer complies in all respects with Section 4.2.
4.2 DISPOSITION OF ASSETS, RESTRICTED SUBSIDIARY STOCK.
(a) DISPOSITION OF ASSETS. The Company will not, and will not permit
any Restricted Subsidiary to Transfer any Property except:
(i) Transfers of inventory and of other Property no longer
necessary for the operation of, and that are individually and in the
aggregate immaterial to, the business of the Company and the
Restricted Subsidiaries, in each case in the ordinary course of
business of the Company or such Restricted Subsidiary;
(ii) Transfers from the Company to a Wholly-Owned Restricted
Subsidiary;
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(iii) Transfers from a Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary;
(iv) Transfers for Acceptable Consideration arising solely out of
Sale-Leaseback Transactions, so long as:
(A) the Property is both Transferred and concurrently or
thereafter leased by the Company or a Restricted Subsidiary
as lessee, in each case within one hundred eighty (180) days
after the construction of such Property or the initial
acquisition thereof by the Company or a Restricted
Subsidiary;
(B) within one hundred eighty (180) days after the
Transfer involved in such Sale-Leaseback Transaction, the
proceeds of such Transfer, net of reasonable and ordinary
transaction costs, expenses and income tax on any gain
related to such Transfer incurred and actually paid in
connection with such Transfer, are applied by the Company or
such Restricted Subsidiary to:
(I) purchase Tangible Property ; or
(II) pay, on or prior to its scheduled maturity,
an amount of Debt of the Company or any Restricted
Subsidiary (other than Debt owing to an Affiliate or
Debt subordinate to the Subordinated Notes); and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or
Event of Default would exist;
(v) any other Transfer at any time of any Property (other than in
connection with Sale-Leaseback Transactions) to a Person for an
Acceptable Consideration if:
(A) the sum of:
(I) the book value of such Property at the time of
Transfer; plus
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
after the Fiscal Year End Date immediately preceding
the date of such Transfer;
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would be less than fifteen percent (15%) of Consolidated
Total Assets measured as of the Fiscal Year End Date
immediately preceding the date of such Transfer;
(B) the sum of:
(I) the book value of such Property at the time of
Transfer; plus
(II) the aggregate book value of all other
Property Transferred (other than in Excluded Transfers)
since the Closing Date;
would be less than forty percent (40%) of Consolidated Total
Assets measured as of the most recent Fiscal Year End Date;
and
(C) immediately before and after the consummation of the
Transfer, and after giving effect thereto, no Default or
Event of Default would exist;
and
(vi) any other Transfer of Property (other than in a
Sale-Leaseback Transaction), but solely to the extent that, within one
hundred eighty (180) days after such Transfer, the proceeds of such
Transfer, net of reasonable and ordinary transaction costs, expenses
and income tax on any gain related to such Transfer incurred and
actually paid in connection with such Transfer, are applied by the
Company or such Restricted Subsidiary to:
(A) purchase Tangible Property; or
(B) pay, on or prior to its scheduled maturity, an
amount of Debt of the Company or any Restricted Subsidiary
(other than Debt owing to an Affiliate or Debt subordinate to
the Subordinated Notes).
(b) DISPOSITION OF RESTRICTED SUBSIDIARY STOCK. The Company will not,
and will not permit any Restricted Subsidiary to, sell or otherwise dispose
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of any shares of the stock or Rights of a Restricted Subsidiary (such stock
and Rights herein called "RESTRICTED SUBSIDIARY STOCK"), nor will any
Restricted Subsidiary issue, sell or otherwise dispose of any shares of, or
Rights to purchase shares of, its own Restricted Subsidiary Stock;
provided, however, that the foregoing restrictions do not apply to:
(i) Transfers by the Company or a Restricted Subsidiary of shares
of Restricted Subsidiary Stock to the Company or a Wholly-Owned
Restricted Subsidiary;
(ii) the issuance by a Restricted Subsidiary of shares of its own
Restricted Subsidiary Stock to the Company or a Wholly-Owned
Restricted Subsidiary;
(iii) the issuance by a Restricted Subsidiary of shares of its
own Restricted Subsidiary Stock to directors, Management or
Affiliates; provided, however, that at no time shall the total number
of shares of such Restricted Subsidiary Stock issued to or held by
Management and Affiliates as a group (including shares underlying
Rights) exceed twenty-five percent (25%) of the total number of shares
of such Restricted Subsidiary Stock outstanding following any such
issuance; and
(iv) the Transfer of all of the Restricted Subsidiary Stock of a
Restricted Subsidiary owned by the Company and its other Restricted
Subsidiaries if:
(A) such Transfer satisfies the requirements of Section
4.2(a)(v) or Section 4.2(a)(vi) or both;
(B) in connection with such Transfer, the entire
Investment (whether represented by stock, Debt, claims or
otherwise) of the Company and its other Restricted
Subsidiaries in such Restricted Subsidiary is Transferred to
a Person other than the Company or a Restricted Subsidiary
not being simultaneously disposed of; and
(C) the Restricted Subsidiary being disposed of has no
continuing Investment in any other Restricted Subsidiary not
being simultaneously disposed of or in the Company.
For purposes of determining the book value of assets constituting
Restricted Subsidiary Stock being Transferred as provided in clause (b)(iv)
above, such
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book value shall be deemed to be the aggregate book value of the net assets
of the Restricted Subsidiary that shall have issued such Restricted
Subsidiary Stock.
(c) RESTRICTED SUBSIDIARY MERGERS AND CONSOLIDATIONS. A merger or
consolidation of a Restricted Subsidiary in which a Person other than the
Company or a Wholly-Owned Restricted Subsidiary shall be the Surviving
Corporation shall be deemed to be a disposition of the Restricted
Subsidiary Stock of such Restricted Subsidiary and shall be subject to
Section 4.2(b).
4.3 LIENS.
(a) NEGATIVE PLEDGE. The Company will not, and will not permit any
Restricted Subsidiary to, cause or permit, or agree or consent to cause or
permit in the future (upon the happening of a contingency or otherwise),
any of their Property, whether now owned or hereafter acquired, at any time
to be subject to a Lien except:
(i) CLOSING DATE AND SENIOR DEBT LIENS -
(A) Liens in existence on the Closing Date and described
in PART 2.1(c) OF ANNEX 3; and
(B) Liens securing Senior Debt arising under the terms
of an Acceptable Revolving Credit Facility;
(ii) ORDINARY COURSE BUSINESS LIENS -
(A) PERFORMANCE BONDS - Liens incurred or deposits made
in the ordinary course of business to secure the performance
of letters of credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance bonds (of a
type other than set forth in Section 4.3(a)(iii)) and other
similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property;
(B) REAL ESTATE - Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real property;
provided, however, that such exceptions and encumbrances do
not in the aggregate
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materially detract from the value of said Properties or
materially interfere with the use of such Properties in the
ordinary conduct of the business of the Company and the
Subsidiaries;
(C) TAXES, WORKERS' COMPENSATION, ETC. -
(I) Liens securing taxes, assessments or
governmental charges which are either not yet due or
payable or which are being actively contested in good
faith and by appropriate proceedings, or
(II) pledges or deposits securing obligations
under worker's compensation, unemployment compensation
laws or similar legislation to secure public or
statutory obligations of the Company or any Restricted
Subsidiary; or
(III) levies or the claims or demands of
materialmen, mechanics, carriers, ware-housemen,
vendors, landlords and other like Persons;
provided, however, that the payment thereof is not required
by Section 3.1 and that adequate reserves have been made
against such claims; and
(D) PACA - any Lien (including any Lien arising out of
any constructive trust) arising under PACA which is asserted,
perfected or imposed by any growers or suppliers to the
Company or any Restricted Subsidiary of agricultural
products, so long as no creditors of the Company or any of
the Restricted Subsidiaries have asserted their rights under
PACA that, in the aggregate, exceed Five Hundred Thousand
Dollars ($500,000);
(iii) JUDICIAL LIENS - Liens arising from judicial attachments
and judgments, securing appeal bonds or supersedeas bonds, and arising
in connection with court proceedings (including, without limitation,
surety bonds and letters of credit or any other instrument serving a
similar purpose); provided, however, that the execution or other
enforcement of such Liens is effectively stayed, that the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings, that adequate reserves have been made against
such claims and that the aggregate amount so secured will not at any
time exceed Five Million Dollars ($5,000,000);
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(iv) INTERGROUP LIENS - Liens on Property of a Restricted
Subsidiary; provided, however, that such Liens secure only obligations
owing to the Company;
(v) PURCHASE MONEY LIENS - any Lien on Property acquired or owned
by the Company or any Restricted Subsidiary or leased by the Company
or any Restricted Subsidiary as lessee under any Capital Lease which
secures Debt (including Debt in respect of a Capital Lease) incurred
to pay all or a portion of the related purchase price or costs of
construction, extension or improvement of such Property, so long as:
(A) that such purchase price or costs of construction,
extension or improvement shall not exceed the Fair Market
Value of such Property, extension or improvement, as the case
may be, determined at the time of the creation of such Lien;
(B) such Lien is created contemporaneously with, or
within one hundred eighty (180) days of, such acquisition,
construction, extension or improvement;
(C) such Lien encumbers only Property so purchased,
acquired, constructed, extended or improved after the Closing
Date;
(D) such Lien is not, after the creation thereof,
extended to any other Property; and
(E) immediately prior to the incurrence of, and after
giving effect to the incurrence of, all Debt secured by the
Liens referred to in such clauses, no Default or Event of
Default exists or would exist;
(vi) ACQUISITION LIENS - any Lien (including, without limitation,
any Lien arising out of a Capital Lease) existing on Property at the
time of acquisition thereof by the Company or any Restricted
Subsidiary (whether or not the Debt secured thereby is assumed by the
Company or any Restricted Subsidiary), or existing on the Property of,
the Debt of or the Capital Stock of any Person (other than an
Unrestricted Subsidiary) at the time such Person became a Restricted
Subsidiary (whether by means of the acquisition of all or
substantially all of the Property of such
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Person, of the Capital Stock thereof or otherwise) or merges or
consolidates with the Company or any Restricted Subsidiary, so long
as:
(A) the aggregate principal amount of Debt secured
thereby does not exceed the acquisition cost of such
Property, the consideration paid for the acquisition of such
Person or the consideration paid in connection with such
merger or consolidation, as the case may be, as determined at
the date of the acquisition, merger or consolidation;
(B) such Lien shall not extend to or cover any Property
other than the Property subject to such Lien at the time of
any such acquisition; and
(C) immediately after, and after giving effect to, such
acquisition, merger or consolidation, and the assumption of
all such Liens no Default or Event of Default exists or would
exist; and
(vii) OTHER LIENS - Liens securing Debt of the Company or any
Restricted Subsidiary and not otherwise permitted by clauses (i)
through (vi), inclusive, of this Section 4.3(a) so long as,
immediately prior to, and immediately after giving effect to the
incurrence of such Debt:
(A) no Default or Event of Default exists or would
exist; and
(B) it would be permitted by the provisions of Section
4.6 to incur at least One Dollar ($1.00) of additional
Adjusted Debt, and, to the extent that such Liens secure
Senior Debt, of Section 4.7 to incur at least One Dollar
($1.00) of additional Senior Debt, assuming that the
financial ratios set forth in Section 4.6 and Section 4.7
were recalculated on a Pro Forma Basis as of the last day of
the fiscal quarter of the Company then most recently ended.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any Property shall
be subjected to a Lien in violation of Section 4.3(a), the Company will
forthwith make or cause to be made, to the fullest extent permitted by
applicable law, provision whereby the Notes will be secured equally and
ratably as to such Property with all other obligations secured thereby
pursuant to such agreements and instruments as shall be approved by the
Required Holders, and the Company will promptly cause to be delivered to
each holder of a Note an opinion of independent counsel satisfactory to the
Required Holders to the effect
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that such agreements and instruments are enforceable in accordance with
their terms, and in any event the Notes shall have the benefit, to the full
extent that, and with such priority as, the holders of Notes may be
entitled under applicable law, of an equitable Lien on such Property (and
any proceeds thereof) securing the Notes. Such violation of Section 4.3(a)
will constitute an Event of Default hereunder, whether or not any such
provision is made or any equitable Lien is created pursuant to this Section
4.3(b).
(c) CONSTRUCTION. Nothing in this Section 4.3 shall be construed to
permit the incurrence or existence of any Debt not otherwise permitted by
this Agreement. Nothing in this Agreement that permits the incurrence or
existence of any Debt shall be construed to permit the incurrence or
existence of a Lien securing such Debt unless such Lien is permitted by
Section 4.3(a).
4.4 NET WORTH.
The Company will not at any time permit Consolidated Net Worth to be less
than an amount equal to the sum of:
(a) Twenty-Four Million Dollars ($24,000,000); plus
(b) one hundred percent (100%) of the principal amount of any Debt of
the Company, other than Senior Debt, that is converted into Capital Stock
of the Company; plus
(c) for each fiscal year of the Company ending after the Restatement
Date, an amount equal to the greater of:
(i) Zero Dollars ($0); and
(ii) fifty percent (50%) of Consolidated Net Company Income
determined in respect of such fiscal year.
4.5 FIXED CHARGE COVERAGE.
The Company will not, at any time on or after March 31, 2001, permit the
Pro Forma Combined Fixed Charge Coverage Ratio for a period consisting of any
four (4) out of the five (5) then most recently ended full consecutive fiscal
quarters of the Company, measured as at the end of the most recently ended
fiscal quarter of the Company, to be less than 1.25 to 1.0.
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4.6 TOTAL DEBT.
The Company will not at any time permit the ratio of Consolidated Adjusted
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 4.5 to 1.0 at any time from the Closing Date through and including
December 31, 2001; or
(b) 4.0 to 1.0 at any time following December 31, 2001.
4.7 SENIOR DEBT.
The Company will not at any time permit the ratio of Consolidated Senior
Debt at such time to Pro Forma Combined EBITDA, as determined in respect of the
then most recently ended period of four (4) full consecutive fiscal quarters of
the Company, to exceed:
(a) 3.0 to 1.0 at any time from the Closing Date through and including
February 1, 2001; or
(b) 2.5 to 1.0 at any time following February 1, 2001.
4.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
(a) LIMIT ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. Except as
permitted by Section 4.8(b), the Company will not, nor will it permit any
Restricted Subsidiary to, at any time, declare or make or incur any
liability to declare or make any Restricted Payment or make or authorize,
or permit any Restricted Subsidiary to make or authorize, any Restricted
Investment unless, immediately after and after giving effect to the
proposed Restricted Payment or Restricted Investment:
(i) the sum of
(A) the aggregate amount of Restricted Investments
(valued in each case at acquisition cost) made during the
period commencing on the Closing Date and ending on the date
of, and after giving effect to, such proposed Restricted
Payment or Restricted Investment; plus
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(B) the aggregate amount of Restricted Payments made
during the period commencing on the Closing Date and ending
on the date of, and after giving effect to, such proposed
Restricted Payment or Restricted Investment;
would not exceed an amount equal to the sum of:
(I) Five Hundred Thousand Dollars ($500,000); plus
(II) fifty percent (50%) of Consolidated Net
Company Income in respect of the period beginning on
January 2, 2000 and ending on the last day of the
fiscal quarter of the Company then most recently ended
(or minus one hundred percent (100%) of Consolidated
Net Company Income for such period if Consolidated Net
Company Income for such period is a loss); plus
(III) the aggregate amount of net cash proceeds
received by the Company from the sale of any Specified
Stock made after the Closing Date; plus
(IV) the aggregate amount of net cash proceeds
received after the Closing Date by the Company or any
Subsidiary from the sale or liquidation, or as a result
of the final maturity, of any Restricted Investment
made after the Closing Date; plus
(V) the aggregate principal amount of any Debt
(including the Notes) cancelled in exchange for or
converted into any Specified Stock after the Closing
Date; and
(ii) no Default or an Event of Default would exist.
(b) CUMULATIVE PREFERRED STOCK DIVIDENDS PERMITTED. Notwithstanding
the provisions of Section 4.8(a), the Company may make payments of cash
dividends to the holders of the Cumulative Preferred Stock which are
required by the terms of such Cumulative Preferred Stock. For the purpose
of making computations under Section 4.8(a), payments of cash dividends in
respect of the Cumulative Preferred Stock shall in each case be excluded.
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(c) OTHER MATTERS. For the purpose of making computations under
Section 4.8(a), Restricted Investments made solely by issuance of Specified
Stock of the Company shall in each case be excluded. Any Person that
becomes a Restricted Subsidiary after the Closing Date shall be deemed to
have made, at the time it becomes a Restricted Subsidiary, all Restricted
Investments of such Person existing immediately after it becomes a
Restricted Subsidiary.
4.9 SENIORITY TO FUTURE SUBORDINATED DEBT.
The Company shall not incur, create, assume or Guaranty any Debt which is
subordinated in right of payment to any other Debt of the Company unless such
Debt is also subordinated in right of payment, on the same terms, to the
obligations of the Company in respect of the Notes and this Agreement. The
Company shall not incur, create, assume or Guaranty any Debt owing to any
Subsidiary or any Affiliate unless such Debt is subordinated in right of
payment, on terms acceptable to the Required Holders, to the obligations of the
Company in respect of the Notes and this Agreement.
4.10 DESIGNATION OF SUBSIDIARIES.
(a) RIGHT OF DESIGNATION. Subject to the following sentence, each of
the Subsidiaries listed on Annex 3 shall be a Restricted Subsidiary so long
as it shall continue to satisfy the requirements of the definition of
Restricted Subsidiary. Subject to the satisfaction of the requirements of
Section 4.10(b), the Company shall have the right to designate as a
Restricted Subsidiary any Subsidiary which, following such designation,
would meet the definition of a "Restricted Subsidiary," and to designate
any Restricted Subsidiary as an Unrestricted Subsidiary, by delivering to
each holder of Notes a writing, signed by a Senior Officer, so designating
such Subsidiary. Any Subsidiary not designated as a Restricted Subsidiary
shall be deemed to be an Unrestricted Subsidiary.
(b) DESIGNATION CRITERIA.
(i) No Subsidiary shall at any time after the Closing Date be
designated as a Restricted Subsidiary unless:
(A) such Subsidiary at such time meets all of the
requirements of being a Restricted Subsidiary as set forth in
the definition thereof (other than clause (a) of such
definition);
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(B) immediately before and after, and after giving effect
to such designation, no Default or Event of Default exists or
would exist; and
(C) such Subsidiary shall not previously have been
designated as a Restricted Subsidiary on more than one (1)
other occasion.
(ii) No Restricted Subsidiary shall at any time after the Closing
Date be designated as an Unrestricted Subsidiary unless:
(A) immediately after, and after giving effect to such
designation, no Default or Event of Default exists or would
exist; and
(B) immediately prior to such designation, such
Restricted Subsidiary being so designated does not own,
directly or indirectly, any Capital Stock of any Restricted
Subsidiary not being simultaneously designated as an
Unrestricted Subsidiary.
(c) CONSEQUENCE OF DESIGNATION. By designating a Subsidiary as an
Unrestricted Subsidiary, the Company shall be deemed to have made an
Investment in such Subsidiary in an amount equal to the Fair Market Value
of its Investment in such Subsidiary on the date of such designation.
(d) EFFECTIVENESS. Any designation under this Section 4.10 that
satisfies all of the conditions set forth in this Section 4.10 shall become
effective, for purposes of this Agreement, on the day that notice thereof
shall have been delivered by the Company to each holder of Notes in
accordance with Section 9.1.
4.11 LINE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business if, as a result, the general nature of the business in
which the Company and the Restricted Subsidiaries, taken as a whole, would then
be engaged would be substantially changed from the general nature of the
business in which the Company and the Restricted Subsidiaries, taken as a whole,
are engaged on the Closing Date as described in the Annual Report on Form 10-K
of the Company for the fiscal year ended January 1, 1999.
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4.12 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any transaction, including, without limitation, the purchase, sale,
lease or exchange of Property or the rendering of any service, with any
Affiliate, except for:
(a) relocation loans (including, without limitation, short-term bridge
financing in connection with the purchase of a principal residence) to any
executive or employee of the Company or any Restricted Subsidiary not
exceeding at any time Five Hundred Thousand Dollars ($500,000);
(b) other loans, advances and other extensions of credit to any
executive, officer, director or stockholder (or any relative of any of the
foregoing) not exceeding at any time the sum of:
(i) Three Hundred Thousand Dollars ($300,000) in the aggregate at
any time outstanding; plus
(ii) one percent (1%) of Consolidated Net Company Income in
respect of the period beginning on the first day of the fiscal quarter
of the Company commencing after the Closing Date and ending on the
last day of the fiscal quarter of the Company then most recently ended
(or minus one percent (1%) of Consolidated Net Company Income for such
period if Consolidated Net Company Income for such period is a loss);
and
(c) transactions in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
4.13 SUBSIDIARY GUARANTEES.
The Company will not at any time permit any Subsidiary to incur,
create, assume, Guaranty or otherwise become liable in respect of any Debt in
respect of any Senior Credit Facility (whether as primary obligor, guarantor,
surety or otherwise) after the Closing Date unless such Subsidiary, upon or
prior to such incurrence, creation, assumption, Guaranty or otherwise becoming
liable in respect of any such Debt, shall enter into an unconditional
subordinated Guaranty (as amended and restated on the Restatement Date and as
further amended from time to time, the "SUBSIDIARY GUARANTEE") in favor of the
holders of the Notes in substantially the form of Exhibit 4.5(c) to the
Securities Purchase Agreement. The Company will cause
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each Subsidiary which entered into a Subsidiary Guarantee on the Closing Date,
and each Subsidiary subsequently entering into a Subsidiary Guarantee pursuant
to this Section 4.13, to maintain such Subsidiary Guarantee for so long as such
Subsidiary remains liable in respect of any such Debt.
4.14 CURRENT RATIO
The Company will not at any time permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities to be less than 1.15 to 1.0.
5. REPORTING COVENANTS
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(a) QUARTERLY FINANCIAL STATEMENTS - as soon as practicable after the
end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year), and
in any event within fifty (50) days thereafter:
(i) a consolidated balance sheet as at the end of such quarter;
and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending with
such quarter;
for the Company and the Restricted Subsidiaries, setting forth in each
case, in comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by a Senior Financial
Officer, and accompanied by the certificate required by Section 5.2;
provided, that delivery of copies of the Company's Quarterly Report on Form
10-Q filed with the SEC within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.1(a) so long as such
Quarterly Report contains or is accompanied by the information specified in
this Section 5.1(a);
(b) ANNUAL FINANCIAL STATEMENTS - as soon as practicable after the end
of each fiscal year of the Company, and in any event within one hundred
twenty (120) days thereafter:
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(i) a consolidated balance sheet as at the end of such year; and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows for such year;
for the Company and the Restricted Subsidiaries, setting forth, in
comparative form, the financial statement for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and accompanied by:
(A) an audit report thereon of independent certified
public accountants of recognized national standing, which
report shall state without qualification (including, without
limitation, qualifications related to the scope of the audit,
the compliance of the audit with generally accepted auditing
standards, or the ability of the Company or a material
subsidiary thereof to continue as a going concern), that such
financial statements have been prepared and are in conformity
with GAAP; and
(B) the certificates required by Section 5.2 and Section
5.3;
provided, that delivery of the Company's Annual Report on Form 10-K for such
fiscal year filed with the SEC within the time period specified above shall be
deemed to satisfy the requirements of this Section 5.1(b) so long as such Annual
Report contains or is accompanied by the reports and other information otherwise
specified in this Section 5.1(b);
(c) SEC AND OTHER REPORTS - promptly upon their becoming available,
and in any event within fifteen (15) days thereafter:
(i) each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally;
(ii) each regular or periodic report (including, without
limitation, each Form 10-K, Form 10-Q and Form 8-K), any registration
statement which shall have become effective, and each final prospectus
and all amendments thereto filed by the Company or any Restricted
Subsidiary with the SEC; and
(iii) all press releases and other statements made available by
the Company or any Restricted Subsidiary to the public concerning
material developments in the business of the Company or the Restricted
Subsidiaries;
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(d) NOTICE OF DEFAULT OR EVENT OF DEFAULT - within two (2) Business
Days of becoming aware:
(i) of the existence of any condition or event which constitutes
a Default or an Event of Default; or
(ii) that the holder of any Note, any lender or creditor in
respect of a Senior Credit Facility or any holder of any other Debt in
a principal amount of Two Hundred Fifty Thousand Dollars ($250,000) or
more, shall have given notice or taken any other action with respect
to a claimed Default, Event of Default or default or event of default;
a notice specifying the nature of the claimed Default, Event of Default or
default or event of default and the notice given or action taken (if any)
by such holder and what action the Company is taking or proposes to take
with respect thereto;
(e) ERISA -
(i) within two (2) Business Days of becoming aware of the
occurrence of any "reportable event" (as such term is defined in
section 4043 of ERISA) for which notice thereof has not been waived
pursuant to regulations of the DOL or "prohibited transaction" (as
such term is defined in section 406 of ERISA or section 4975 of the
IRC) in connection with any Plan or any trust created thereunder, a
notice specifying the nature thereof, what action the Company is
taking or proposes to take with respect thereto, and, when known, any
action taken by the Internal Revenue Service, the DOL or the PBGC with
respect thereto; and
(ii) prompt notice of and, where applicable, a description of:
(A) any notice from the PBGC in respect of the
commencement of any proceedings pursuant to section 4042 of
ERISA to terminate any Plan or for the appointment of a
trustee to administer any Plan, and any distress termination
notice delivered to the PBGC under section 4041 of ERISA in
respect of any Plan, and any determination of the PBGC in
respect thereof;
(B) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA, any
Multiemployer
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Plan becoming "insolvent" (as such term is defined in section
4245 of ERISA) under Title IV of ERISA, or the whole or
partial withdrawal of the Company or any ERISA Affiliate from
any Multiemployer Plan and the withdrawal liability incurred
in connection therewith; or
(C) the occurrence of any event, transaction or condition
that could result in the incurrence of any liability of the
Company or any ERISA Affiliate or the imposition of a Lien on
the Property of the Company or any ERISA Affiliate, in either
case pursuant to Title I or Title IV of ERISA or pursuant to
the penalty or excise tax or security provisions of the IRC;
provided, however, that the Company shall not be required to deliver any such
notice at any time when the aggregate amount of the actual or potential
liability of the Company and the Restricted Subsidiaries in respect of all such
events at such time could not reasonably be expected to have a Material Adverse
Effect;
(f) AUDITOR'S REPORTS - each report or, upon the request of any holder
of Notes, any management letter submitted to the Company or any Restricted
Subsidiary by independent accountants in connection with any annual,
interim or special audit made of the books of the Company or any
Subsidiary;
(g) ACTIONS, PROCEEDINGS - promptly after the commencement of any
action or proceeding relating to the Company or any Subsidiary in any court
or before any governmental authority or arbitration board or tribunal as to
which there is a reasonable possibility of an adverse determination and
that, if adversely determined, is reasonably likely to have a Material
Adverse Effect, a notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto;
(h) OTHER CREDITORS - promptly upon the reasonable request of any
holder of Notes, copies of any statement, report or certificate furnished
to any holder of Debt to the extent that the information contained in such
statement, report or certificate has not already been delivered to each
holder of Notes;
(i) RULE 144A - promptly upon the request of any holder of Notes,
information required to permit the holder to comply with 17
C.F.R. Section 230.144A, as amended from time to time, in connection with a
transfer of any Note; and
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(j) REQUESTED INFORMATION - with reasonable promptness, such other
data and information as from time to time may be reasonably requested by
any holder of Notes.
5.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes pursuant
to Section 5.1(a) or Section 5.1(b) shall be accompanied by a certificate of a
Senior Financial Officer, setting forth:
(a) COVENANT COMPLIANCE - the financial information (including
detailed calculations) required in order to establish whether the Company
was in compliance with the requirements of Section 4 (in each case where
such Section imposes numerical financial requirements) as of the end of the
period covered by the financial statements then being furnished (including
with respect to such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Section, and the calculation of the
amount, ratio or percentage then in existence); and
(b) EVENT OF DEFAULT - a statement that the signer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision or authority, a review of the transactions and conditions of
the Company and the Subsidiaries from the beginning of the accounting
period covered by the income statements being delivered therewith to the
date of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and what
action the Company shall have taken or proposes to take with respect
thereto.
5.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section
5.1(b) shall be accompanied by a certificate of the accountants who were engaged
to audit such financial statements, stating that they have reviewed Section
4.2(a)(v)(A), Section 4.2(a)(v)(B) and Section 4.4 through Section 4.8(a)(i),
inclusive, and the corresponding definitions of financial terms used therein and
defined in Section 8.1, and stating further, whether, in making their audit,
such accountants have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if such accountants are aware
that any such condition or event then exists, specifying the nature and period
of existence thereof.
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5.4 INSPECTION.
The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the Restricted
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Restricted Subsidiaries) all at such reasonable times, upon such
reasonable notice and as often as may be reasonably requested. At all times
during which there exists a Default or Event of Default, expenses incurred by
the holders of the Notes in connection with this Section 5.4 shall be paid in
accordance with Section 9.6 and otherwise such expenses will be borne by such
holder.
6. EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(a) PAYMENTS ON NOTES -
(i) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT PAYMENTS - the
Company fails to make any payment of principal or Prepayment
Compensation Amount on any Note on or before the date such payment is
due; or
(ii) INTEREST PAYMENTS - the Company fails to make any payment of
interest on any Note on or before five (5) Business Days after the
date such payment is due;
(b) OTHER DEFAULTS -
(i) NEGATIVE AND FINANCIAL COVENANT DEFAULTS - the Company or any
Restricted Subsidiary fails to comply with any provision of Section 4;
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(ii) OTHER DEFAULTS - the Company or any Restricted Subsidiary
fails to comply with any other provision hereof, and such failure
continues for more than thirty (30) days after such failure shall
first become known to any Senior Officer;
provided, however, that the failure of the Company or any Restricted
Subsidiary to comply with the provisions of Section 4.6 or Section 4.7
during the period commencing on April 15, 2000 and ending on April 1, 2001
shall not constitute a Default or Event of Default unless the Company or
any Restricted Subsidiary incurs any Debt (other than Senior Debt) during
such period;
(c) WARRANTIES OR REPRESENTATIONS - any warranty, representation or
other statement by or on behalf of the Company contained in the Initial
Securities Purchase Agreement or the Securities Purchase Agreement or any
other Financing Document, in any written amendment, supplement,
modification or waiver with respect to any Financing Document or in any
instrument furnished in compliance herewith or in reference hereto, shall
have been false or misleading in any material respect when made;
(d) ACCELERATION OF DEBT -
(i) the Company or any Restricted Subsidiary fails to make, when
due, at maturity or otherwise, any payment or payments in an amount
aggregating in excess of Two Million Dollars ($2,000,000) in respect
of any Debt; or
(ii) any event shall occur or any condition shall exist in
respect of Debt, or under any agreement securing or relating to such
Debt:
(A) as a result of which the maturity of such Debt, or a
portion thereof, is accelerated; or
(B) that requires the Company or any Restricted
Subsidiary to repurchase such Debt from the holders thereof;
provided that the aggregate amount of all obligations in respect of all such
Debt exceeds at such time Two Million Dollars ($2,000,000);
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(e) INSOLVENCY -
(i) INVOLUNTARY BANKRUPTCY PROCEEDINGS -
(A) a receiver, liquidator, custodian or trustee of the
Company or any Restricted Subsidiary, or of all or any
substantial part of the Property of either, is appointed by
court order and such order remains in effect for more than
sixty (60) days; or an order for relief is entered with
respect to the Company or any Restricted Subsidiary, or the
Company or any Restricted Subsidiary is adjudicated a
bankrupt or insolvent;
(B) all or any substantial part of the Property of the
Company or any Restricted Subsidiary is sequestered by court
order and such order remains in effect for more than sixty
(60) days; or
(C) a petition is filed against the Company or any
Restricted Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter
in effect, and is not dismissed within sixty (60) days after
such filing;
(ii) VOLUNTARY PETITIONS - the Company or any Restricted
Subsidiary- files a voluntary petition in bankruptcy or seeks relief
under any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, or consents to
the filing of any petition against it under any such law; or
(iii) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. - the Company or
a Restricted Subsidiary makes an assignment for the benefit of its
creditors, or admits in writing its inability, or fails, to pay its
debts generally as they become due, or consents to the appointment of
a receiver, liquidator or trustee of the Company or a Restricted
Subsidiary or of all or a substantial part of its Property;
(f) UNDISCHARGED FINAL JUDGMENTS - a final, non-appealable judgment or
final, non-appealable judgments for the payment of money aggregating more
than Two Million Dollars ($2,000,000) in excess of all applicable insurance
coverage which has not been contested by the relevant insurer or insurers
is or are outstanding against one or more of the Company
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and the Restricted Subsidiaries and any one of such judgments shall have
been outstanding for more than sixty (60) days from the date of its entry
and shall not have been discharged in full or stayed; or
(g) SUBSIDIARY GUARANTY - any Subsidiary Guaranty shall cease to be in
full force and effect or shall be declared by a court or other Governmental
Authority of competent jurisdiction to be void, voidable or unenforceable
against any Subsidiary Guarantor; the validity or enforceability of any
Subsidiary Guaranty against any Subsidiary Guarantor shall be contested by
such Subsidiary Guarantor, the Company or any Affiliate; or any Subsidiary
Guarantor, the Company or any Affiliate shall deny that such Subsidiary
Guarantor has any further liability or obligation under any Subsidiary
Guaranty.
6.2 DEFAULT REMEDIES.
(a) ACCELERATION OF MATURITY OF NOTES.
(i) ACCELERATION ON EVENT OF DEFAULT.
(A) AUTOMATIC. If any Event of Default specified in
Section 6.1(e) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable together with interest accrued thereon and, to the
extent permitted by law, the Prepayment Compensation Amount
at such time with respect to the principal amount of such
Notes, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
(B) BY ACTION OF HOLDERS. Subject to Section 7.7, if any
Event of Default shall exist, the Required Holders may
exercise any right, power or Remedy permitted to such holder
or holders by law, and shall have, in particular, without
limiting the generality of the foregoing, the right to
declare the entire principal of, and all interest accrued on,
all the Notes then outstanding to be, and such Notes shall
thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on,
the Notes and, to the extent permitted by law, the Prepayment
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Compensation Amount at such time with respect to such
principal amount of such Notes.
(ii) ACCELERATION ON PAYMENT DEFAULT. Subject to Section 7.7,
during the existence of an Event of Default described in Section
6.1(a), and irrespective of whether the Notes then outstanding shall
have become due and payable pursuant to Section 6.2(a)(i)(B), any
holder of Notes who or which shall have not consented to any waiver
with respect to such Event of Default may, at his or its option, by
notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due and
payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and the Company shall forthwith pay to
such holder the entire principal of and interest accrued on such Notes
and, to the extent permitted by law, the Prepayment Compensation
Amount at such time with respect to such principal amount of such
Notes.
(b) VALUABLE RIGHTS. The Company acknowledges, and the parties hereto
agree, that the right of each holder to maintain its investment in the
Notes free from repayment by the Company (except as herein specifically
provided for) is a valuable right and that the provision for payment of a
Prepayment Compensation Amount by the Company in the event that the Notes
are prepaid or are accelerated as a result of an Event of Default is
intended to provide compensation for the deprivation of such right under
such circumstances.
(c) OTHER REMEDIES. During the existence of an Event of Default and
irrespective of whether the Notes then outstanding shall become due and
payable pursuant to Section 6.2(a), and irrespective of whether any holder
of Notes then outstanding shall otherwise have pursued or be pursuing any
other rights or Remedies, subject to Section 7.7, any holder of Notes may
proceed to protect and enforce its rights hereunder and under such Notes by
exercising such Remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or
both, whether for specific performance of any agreement contained herein or
in aid of the exercise of any power granted herein; provided, however, that
the maturity of such holder's Notes may be accelerated only in accordance
with Section 6.2(a).
(d) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise
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prejudice such holder's rights, powers and Remedies. All rights and
Remedies of each holder of Notes hereunder and under applicable law are
cumulative to, and not exclusive of, any other rights or Remedies any such
holder of Notes would otherwise have.
(e) SUBORDINATION. The rights of the holders of the Notes to receive
payments in respect of this Agreement and the Notes, and to exercise any
Remedies, solely as between the holders of the Notes and the holders of the
Senior Debt, shall be subject in all respects to the provisions of Section
7; provided, however, that all such rights shall remain unconditional and
absolute as between the holders of the Notes and the Company.
6.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 6.2(a)(i)(B), then and in
every such case, the holders of sixty-six and two-thirds percent (66 and 2/3%)
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by any one or more of the Company, any Restricted Subsidiary or any
Affiliate) may, by written instrument filed with the Company, rescind and annul
such declaration, and the consequences thereof; provided, however, that at the
time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of the other
sums payable hereunder and under the Notes (except any principal of, or
interest or Prepayment Compensation Amount on, the Notes which shall have
become due and payable by reason of such declaration under Section
6.2(a)(i)(B)) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 9.5 or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
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7. SUBORDINATION
7.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to all
Senior Debt to the extent provided in this Section 7.
7.2 INSOLVENCY.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its Property;
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(c) any assignment by the Company for the benefit of creditors; or
(d) any other marshalling of the assets of the Company;
all Senior Debt shall first be paid in full, in cash or cash equivalents, before
any payment or distribution, whether in cash, Securities or other Property,
shall be made to any holder of any Subordinated Debt on account of any
Subordinated Debt. Any payment or distribution, whether in cash, Securities or
other Property (other than Securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinated, at least to the extent provided in this Section 7 with respect to
Subordinated Debt, to the payment of all Senior Debt at the time outstanding and
to any Securities issued in respect thereof under any such plan of
reorganization or readjustment), which would otherwise (but for this Section 7)
be payable or deliverable in respect of Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt shall have
been paid in full, in cash or cash equivalents.
7.3 PROOFS OF CLAIM.
If any holder of Subordinated Debt does not file a proper claim or proof of
debt therefor prior to ten (10) days before the expiration of the time to file
such claim or
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proof, then the Senior Agent is hereby authorized and empowered (but not
obligated) as the agent and attorney-in-fact for such holder for the specific
and limited purpose set forth in this paragraph, to file such claim or proof for
or on behalf of such holder; provided, however, that the Senior Agent shall
have, prior to taking any such action, given fifteen (15) days prior written
notice (which notice may be given up to sixty (60) days prior to the expiration
of the time to file such claim) to such holder of Subordinated Debt that they
intend to file such claim or proof of debt. In no event may the Senior Agent or
any holder of the Senior Debt vote any claim on behalf of any holder of the
Subordinated Debt, and such agency and appointment of attorney-in-fact shall not
extend to any such right to vote any such claim.
7.4 ACCELERATION OF SENIOR DEBT.
In the event that the holders of any Senior Debt, or any trustee or agent
acting on behalf of any such holders, accelerate the maturity of such Senior
Debt or demand that the Company repurchase the same, then, and in each such
case, no direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt until such time as such Senior Debt has been
paid in full in cash or cash equivalents. The Company shall give prompt written
notice to each holder of Subordinated Debt of its knowledge of the acceleration
of the maturity of any Senior Debt.
7.5 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
If: the Company shall default in the payment of any principal of or
premium, if any, or interest on any Senior Debt (a "SENIOR PAYMENT DEFAULT")
when the same becomes due and payable, whether at maturity or at a date fixed
for prepayment or otherwise; and
(a) the Company receives from the Senior Agent written notice (a
"PAYMENT DEFAULT NOTICE") of the happening of such Senior Payment Default
stating that such notice is a payment blockage notice pursuant to this
Section 7.5;
then no direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt unless and until such Senior Payment Default
shall have been cured or waived or otherwise shall have ceased to exist.
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The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any Payment Default Notice under this Section 7.5.
7.6 SIGNIFICANT NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
If:
(a) any Significant Nonpayment Default shall have occurred; and
(b) the Company receives from the Senior Agent written notice (a
"NONPAYMENT DEFAULT NOTICE") of the happening of such Significant
Nonpayment Default, stating that such notice is a payment blockage notice
pursuant to Section 7.6 of this Agreement;
then no direct or indirect payment (in cash, property or Securities or by
set-off or otherwise) shall be made or agreed to be made for or on account of
any Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in
respect of any redemption, retirement, repurchase, prepayment, purchase or other
acquisition or payment of any Subordinated Debt, for a period (each, a "PAYMENT
BLOCKAGE PERIOD") commencing on the date the Nonpayment Default Notice is
delivered to the Company and ending on the Payment Blockage Period Termination
Date; provided, however, that:
(i) only one such Payment Blockage Period may arise in any period
of three hundred sixty (360) consecutive days;
(ii) no more than three (3) Payment Blockage Periods may be
instituted pursuant to this Section 7.6; and
(iii) no Payment Blockage Period may be imposed as a result of
any Significant Nonpayment Default which served as the basis for or
was continuing during a previous Payment Blockage Period.
All payments in respect of Subordinated Debt postponed during any Payment
Blockage Period shall be immediately due and payable upon the termination
thereof (together with such additional interest as is provided for herein and in
the Notes for late payment of principal, Prepayment Compensation Amount and
interest).
The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any Nonpayment Default Notice under this Section 7.6.
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7.7 STANDSTILL.
Notwithstanding anything contained in this Agreement or any other Financing
Document to the contrary, for so long as any amount is outstanding under a
Senior Credit Facility, no holder of any Subordinated Debt may exercise any
Remedies in respect thereof (and no acceleration or purported acceleration
pursuant to Section 6.2(a)(i)(B) or Section 6.2(a)(ii) shall become effective)
during any period (a "STANDSTILL PERIOD") commencing on the first date the
holders of the Subordinated Debt, but for the provisions of this Section 7,
would have been entitled to accelerate the maturity of the Subordinated Debt
pursuant to Section 6.2(a)(i)(B) or Section 6.2(a)(ii) and ending upon the
earliest of:
(a) the date which is:
(i) if any Event of Default described in Section 6.1(a) has
occurred and is continuing, ninety (90) days; and
(ii) if no Event of Default described in Section 6.1(a) has
occurred or is continuing, one hundred twenty (120) days;
in each case, after the commencement of such Standstill Period;
(b) the date that any holder of any Senior Debt commences the exercise
of any Remedies in respect of such Debt; and
(c) the first date upon which any of the Events of Default described
in Section 6.1(e) shall have occurred and be continuing beyond any period
of grace specified therein; and, in such event, the automatic acceleration
of the Notes contemplated in respect of such Event of Default pursuant to
Section 6.2(a)(i)(A) shall occur immediately upon the termination of the
Standstill Period.
7.8 TURNOVER OF PAYMENTS
If:
(a) any payment or distribution shall be paid to or collected or
received by any holders of Subordinated Debt in contravention of any of the
terms of this Section 7; and
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(b) the Senior Agent shall have notified the holders of Subordinated
Debt of the facts by reason of which such payment or collection or receipt
so contravenes this Section 7 or constituted a Significant Nonpayment
Default;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents, to the Senior Agent, on behalf of the holders of the
Senior Debt, and, until so delivered, the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
If any amount is delivered to the Senior Agent pursuant to this Section 7.8,
whether or not such amounts have been applied to the payment of Senior Debt, and
the outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, by the Company or otherwise other than pursuant to this Section
7.8, the holders of Senior Debt shall return to such holders of Subordinated
Debt an amount equal to the amount delivered to such holders of Senior Debt
pursuant to this Section 7.8, so long as after the return of such amounts the
Senior Debt shall remain paid in full, in cash or cash equivalents.
7.9 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.
The rights set forth in this Section 7 of the holders of the Senior Debt as
against each holder of Subordinated Debt shall remain in full force and effect
without regard to, and shall not be impaired by:
(a) any act or failure to act on the part of the Company;
(b) any change in the manner, place or terms of payment of, or any
extension or indulgence in respect of, any payment or prepayment of the
Senior Debt or any part thereof or in respect of any other amount payable
to any holder of Senior Debt;
(c) any amendment, modification, restatement, renewal, refinancing or
waiver of, or addition or supplement to, or deletion from, or compromise,
release, consent or other action in respect of, any of the terms of any
Senior Debt or any other agreement relating to any Senior Debt, other than
such as would cause all or any portion of such Debt to fail to meet the
definition of "Senior Debt;"
(d) any sale, exchange, release or other dealing with any Property
which is the subject of any Lien securing any Senior Debt, or any failure
or delay in the perfection of any such Lien;
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(e) any release of any Person liable in any manner (including, without
limitation, by virtue of any Guaranty) for the payment or collection of the
Senior Debt;
(f) any exercise or non-exercise by any holder of Senior Debt of any
right, power, privilege or remedy under or in respect of any Senior Debt or
Subordinated Debt or any waiver of any such right, power, privilege or
remedy or any default in respect of any Senior Debt or the Subordinated
Debt, any dealing with or action against any collateral security therefor
or any receipt by any holder of Senior Debt of any security, or any failure
by any holder of Senior Debt to perfect a security interest in, or any
release by any such holder of Senior Debt of, any security for the payment
of any Senior Debt;
(g) any merger or consolidation of the Company or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
Person, or any Transfer of any or all of the Property of the Company or any
of its Subsidiaries to any other Person; or
(h) the absence of any notice to, or knowledge of, any holder of
Subordinated Debt of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (a) through (g).
7.10 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 7 or of the creation, renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.
7.11 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the provisions
set forth in this Section 7 shall continue to be effective, or be reinstated, as
the case may be, as to any payment in respect of any Senior Debt that is
rescinded or must otherwise be returned by the holder of such Senior Debt upon
the occurrence or as a result of any bankruptcy or judicial proceeding, all as
though such payment had not been made.
7.12 OBLIGATIONS NOT IMPAIRED.
Nothing contained in this Section 7 shall impair, as between the Company
and any holder of Subordinated Debt, the obligation of the Company to pay to
such holder the principal thereof and Prepayment Compensation Amount, if any,
and interest thereon as and when the same shall become due and payable in
accordance with the
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terms thereof and to comply with each and every provision of the Notes and this
Agreement or prevent any holder of any Subordinated Debt from exercising all
rights, powers and remedies otherwise permitted by applicable law or under this
Agreement, all subject to the rights of the holders of the Senior Debt to
receive cash, Securities or other Property otherwise payable or deliverable to
the holders of Subordinated Debt.
7.13 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full of all Senior Debt, the holders of Subordinated
Debt shall be subrogated to all rights of any holder of Senior Debt to receive
any further payments or distributions applicable to the Senior Debt until the
Subordinated Debt shall have been paid in full, and such payments or
distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property which otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of Subordinated Debt.
7.14 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be deemed
to acknowledge and agree that the foregoing subordination provisions are, and
are intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt. Each such holder of Senior Debt is
intended to be, and is, a third party beneficiary of this Section 7. Each holder
of Subordinated Debt acknowledges and agrees that the provisions set forth in
this Section 7 shall be enforceable against such Persons by the holders of the
Senior Debt. Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, none of the provisions of this Section 7
(including, without limitation, this Section 7.14) may, directly or indirectly,
be amended, modified, supplemented or waived without the prior written consent
of the Senior Agent, on behalf of the holders of the Senior Debt.
7.15 IDENTITY OF HOLDERS OF SENIOR DEBT.
Upon the request of any holder of Subordinated Debt, the Company shall
deliver to such holder a list of all holders of Senior Debt outstanding at such
time, providing the name and address of each such holder of Senior Debt and the
principal amount of
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Senior Debt held by each such holder; provided, however, that, if any holder of
Senior Debt shall have appointed an agent or other representative with respect
to the Senior Debt held by it, the Company may provide the name and address of
such agent or representative in lieu of the name and address of such holder of
Senior Debt.
7.16 AMENDMENTS TO SENIOR CREDIT FACILITY.
Notwithstanding the other provisions of this Section 7, no amendment to or
refinancing, replacement or refunding of the Senior Debt or any agreement or
instrument related thereto shall be effective as to the holders of the
Subordinated Debt or be entitled to the benefits of this Section 7 without the
consent of each holder of Notes to the extent that such amendment, refinancing,
replacement or refunding would directly prohibit the Company or any Subsidiary
from making scheduled or required payments in respect of the Subordinated Debt
in any manner which is not specifically set forth in the Senior Credit
Agreement, as in effect on the Closing Date. The holders of the Senior Debt may
restrict the right of the Company to make, or prohibit the Company from making,
optional prepayments of the Notes in accordance with the provisions of Section
1.3 or Section 1.4 or other optional repurchases of the Notes.
8. INTERPRETATION OF THIS AGREEMENT
8.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
ACCEPTABLE CONSIDERATION - means, with respect to any Transfer of any
Property of the Company or any Restricted Subsidiary, cash consideration,
promissory notes or such other consideration (or any combination of the
foregoing) as is, in each case for the Fair Market Value thereof and in each
case in which the value of the Property so Transferred is equal to or greater
than One Million Dollars ($1,000,000), determined by the Board of Directors, in
its good faith opinion, to be in the best interests of the Company and to
reflect the Fair Market Value of such Property.
ACCEPTABLE REVOLVING CREDIT FACILITY - means and includes a revolving
credit agreement or similar agreement:
(a) pursuant to which the lender commits to permit the Company,
subject to the conditions therein, to obtain from time to time thereunder
loans or advances of cash, letters of credit or bankers acceptances and
periodically repay the same; and
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(b) the obligations under which are not, by its terms or the terms of
any ancillary agreement, expressed to be subordinated in right of payment
to any other Debt of the Company or any Subsidiary; and
(c) the obligations under which are not owing to the Company, any
Affiliate or any Subsidiary.
ACQUIRED BUSINESS - means and includes, in connection with any computation
of Pro Forma Combined Income Available for Fixed Charges, Pro Forma Combined
EBITDA or Pro Forma Combined Fixed Charges for any period, any Person (other
than an Unrestricted Subsidiary) all the Capital Stock of which or substantially
all of the Property of which was acquired by the Company or a Restricted
Subsidiary, or which shall have merged into or consolidated with the Company
(with the Company being the Surviving Corporation) or which shall have merged
with or into or consolidated with a Restricted Subsidiary with the result that
the Surviving Corporation became a Restricted Subsidiary, in each case, during
such period, if, but only if:
(a) Consolidated EBITDA, Consolidated Rental Expense and Consolidated
Fixed Charges and for such acquired Persons for such Period can be
determined on a basis reasonably acceptable to the holders of Notes for
such period, and Consolidated Debt and Consolidated Senior Debt for such
acquired Persons can be determined on a basis reasonably acceptable to the
holders of Notes as at the relevant time of determination; and
(b) concurrently with any such determination, the Company shall have
delivered to the holders of the Notes audited financial statements (to the
extent available) and other financial information prepared in accordance
with GAAP and reasonably satisfactory to the holders of the Notes with
respect to such acquired Person, which financial statements and information
demonstrates the basis for such determination to an extent reasonably
satisfactory to the holders of the Notes.
ADJUSTED DEBT - with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:
(a) BORROWED MONEY - borrowed money;
(b) SECURED LIABILITIES - borrowed money secured by any Lien existing
on Property owned by such Person (whether or not such liabilities have been
assumed);
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(c) CAPITAL LEASES - Capital Leases of such Person; and
(d) GUARANTEES - any Guaranty of such Person of any obligation or
liability of another Person of obligations of the type listed in clause (a)
through clause (c) of this definition of Adjusted Debt.
Adjusted Debt shall not include letters of credit, surety bonds or similar
instruments.
AFFILIATE - means and includes, at any time, each Person (other than a
Restricted Subsidiary):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds ten percent (10%) or more of any
class of the Voting Stock of the Company;
(c) ten percent (10%) or more of the Voting Stock (or in the case of a
Person that is not a corporation, ten percent (10%) or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary; or
(d) that is an officer or director of the Company or that is an
Initial Manager Affiliate;
at such time; provided, however, that none of the Holders nor any affiliate of
any Holder shall be deemed to be an "Affiliate," and no Person holding any one
or more of the Notes or Warrants shall be deemed to be an "Affiliate" solely by
virtue of the ownership of such securities. As used in this definition:
control - means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS - and references thereto shall mean this Note Agreement as
it may from time to time be amended or supplemented.
ANNEX 3 - means Annex 3 to the Securities Purchase Agreement.
APPLICABLE INTEREST LAW - means any present or future law (including,
without limitation, the laws of the State of New York and the United States of
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America) which has application to the interest and other charges pursuant to
this Agreement and the Notes.
BANK OF AMERICA - means Bank of America Texas, N.A.
BOARD OF DIRECTORS - means, at any time, the board of directors of the
Company or any committee thereof that, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
BORROWING BASE - means:
(a) for so long as the Senior Credit Agreement (as amended, renewed or
extended) remains in effect, the "Adjusted Borrowing Base," as defined in
the Senior Credit Agreement, as in effect on the date hereof, and as set
forth on Annex 3 hereto; provided, however, that if clause (b) of the
definition of "Adjusted Borrowing Base" in the Senior Credit Agreement is
amended (including, without limitation, in connection with a renewal or
extension of the Senior Credit Facility) to remove the PACA Adjustment
deduction from the "Borrowing Base" (as defined in the Senior Credit
Agreement as in contained therein, then such amendment shall be given
effect for purposes of calculating the Borrowing Base; and
(b) thereafter, any substantially similar formulation contained in any
other Acceptable Revolving Credit Facility at such time, so long as:
(i) if such formulation contains a PACA Adjustment, such
formulation would yield an amount no higher than the amount calculated
in accordance with the definition of "Adjusted Borrowing Base" as set
forth in the Senior Credit Agreement, as in effect on the date hereof;
and
(ii) if such formulation does not contain a PACA Adjustment, such
formulation would yield an amount no higher than the amount calculated
in accordance with the definition of "Adjusted Borrowing Base" as set
forth in the Senior Credit Agreement, as in effect on the date hereof
but assuming that such definition did not contain a PACA Adjustment;
and, in either case, which formulation is provided to each holder of the Notes
in writing disclosing that the Company intends to use such formulation as the
"Borrowing Base."
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