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EXHIBIT 10(r)
WAIVER AND AMENDMENT NO. 1
TO LOAN AND SECURITY AGREEMENT
This Waiver and Amendment No. 1 to Loan and Security Agreement (this
"Amendment") is dated as of the 10th day of September, 1998 and is by and among
▇▇▇▇▇▇ Financial, Inc., as a Lender and as Collateral Agent (the "Collateral
Agent") and Documentation Agent (the "Documentation Agent") for the Lenders,
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch, as a Lender and as Administrative Agent (the "Administrative
Agent") for the Lenders, ▇▇▇▇▇▇ Trust and Savings Bank, as a Lender and as
Co-Agent (the "Co-Agent") for the Lenders, the other Lenders party thereto and
Thorn Apple Valley, Inc., as Borrower ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower, Collateral Agent, Documentation Agent,
Administrative Agent, Co-Agent and the Lenders signatory thereto from time to
time are parties to that certain Loan and Security Agreement dated as of
April 16, 1998 (as amended or otherwise modified from time to time, the "Loan
Agreement"; capitalized terms used and not defined herein shall have the
meanings ascribed to such terms in the Loan Agreement), pursuant to which Agents
and Lenders agreed to provide certain loans and other financial accommodations
to Borrower;
WHEREAS, Borrower has advised Agents and Lenders that Borrower is (i)
in breach of subsection 6.4 (Fixed Charge Coverage) of the Loan Agreement for
failure to maintain the required minimum Fixed Charge Coverage as of the last
Fiscal Period of the 1998 Fiscal Year and (ii) in breach of subsection 6.5
(Availability) of the Loan Agreement for failure to maintain the required Excess
Availability as of the last day of each week prior to the date hereof;
WHEREAS, such breaches constitute Events of Default under
subsection 8.1(C) of the Loan Agreement (collectively, the "Existing Event of
Default");
WHEREAS, the Existing Events of Default remain in existence as of the
date hereof;
WHEREAS, Borrower has requested that Requisite Lenders agree to waive
the Existing Events of Default;
WHEREAS, in connection with such waiver, Borrower has agreed with
Requisite Lenders to (a) make a $5,000,000 prepayment of the Term Loan,
(b) amend the Loan Agreement to make a $15,000,000 reduction in the Revolving
Loan Limit, the Revolving Loan Commitment of each Lender and the aggregate
Revolving Loan Commitments of all Requisite Lenders, (c) amend the Loan
Agreement to change the maturity date thereof, and (d) otherwise amend the Loan
Agreement in certain respects, as more fully set forth herein;
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WHEREAS, Requisite Lenders have agreed to such waivers and amendments
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Requisite Lenders and Borrower hereby agree as follows:
1. Waiver of Existing Events of Default. Requisite Lenders hereby waive
the Existing Events of Default and further waive any rights of Lenders and
Agents under the Loan Agreement, the other Loan Documents and applicable law in
respect of the Existing Events of Default. Other than as specifically described
herein, the waiver contained herein shall not constitute a consent to any
departure from, or the waiver of any breach of, or Default or Event of Default
under, the Loan Agreement or any other Loan Document, or of any rights that any
Lender or any Agent may have under the Loan Agreement, any other Loan Document
or applicable law with respect thereto, all of which rights are expressly
reserved hereby.
2. Amendments to Loan Agreement. In reliance on the representations and
warranties set forth in Section 4 of this Amendment, the Loan Agreement is
hereby amended as follows:
(a) Subsection 1.1 of the Loan Agreement is hereby amended, as follows:
(i) The first clause of the definition of the term "Applicable Non-Use
Fee Margin" up to, but not including the proviso, is hereby amended and
restated in its entirety, as follows:
"'Applicable Non-Use Fee Margin' means a rate equal to one-half of
one percent (0.50%);"
(ii) The first two clauses of the definition of the term "Applicable
Revolving Loan Margin" up to, but not including the proviso, are hereby
amended and restated in their entirety, as follows:
"'Applicable Revolving Loan Margin' means (a) with respect to Base
Rate Revolving Loans, a rate equal to one-half of one percent (0.50%)
and (b) with respect to LIBOR Revolving Loans, a rate equal to three
percent (3.00%);"
(iii) The first two clauses of the definition of the term "Applicable
Term Loan Margin" up to, but not including the proviso, are hereby amended
and restated in their entirety, as follows:
"'Applicable Term Loan Margin' means (a) with respect to Base Rate Term
Loans, a rate equal to one percent (1.00%) and (b) with
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respect to LIBOR Term Loans, a rate equal to three and one-quarter percent
(3.25%);"
(iv) The definition of the term "Revolving Loan Limit" is hereby amended
and restated in its entirety, as follows:
"'Revolving Loan Limit' means an amount equal to (a) $70,000,000 during
the period from February 1 to and including August 1 of each year and
(b) $80,000,000 at all other times."
(v) The definition of the term "Subordinated Debt" is hereby amended by
(A) deleting the word "and" immediately prior to clause (c) thereof and
(B) inserting the following immediately after clause (c) and immediately before
the period:
"; and (d) all Indebtedness owing by Borrower under a certain 6-1/2%
Convertible Debenture dated September 10, 1998 executed by Borrower in
favor of IBP, Inc. (the "IBP Debenture")"
(b) Subsection 2.1(E) of the Loan Agreement is hereby amended by
inserting the following at the end thereof:
"The Revolving Notes and the Term Notes, each dated as of June 1, 1998
and each executed by Borrower in favor of a Lender, shall continue to
evidence the Revolving Loans and the Term Loans, respectively, owing to
such Lender, notwithstanding (i) the $5,000,000 prepayment of the Term
Loans made by Borrower on September 11, 1998 (the "Term Loan Prepayment")
or (ii) the $15,000,000 reduction in each of the Revolving Loan Limit,
the Revolving Loan Commitment of each Lender and the aggregate Revolving
Loan Commitments of all Lenders on September 11, 1998 (the "Revolving
Loan Reduction")."
(c) New subsections 2.3(G) and (H) are hereby inserted into the Loan
Agreement, as follows:
"(G) Restructuring Fee.
Borrower shall pay to Collateral Agent, for the benefit of Lenders,
a fee (the "Restructuring Fee") in connection with that certain Waiver
and Amendment No. 1 to Loan and Security Agreement dated as of September
10, 1998 (the "Amendment"), equal to $750,000, of which (i) $375,000
shall be due and payable, and shall be deemed fully earned, on the date
of execution of the Amendment and (ii) $375,000 shall be due and payable,
and shall be deemed fully earned, on February 1, 1999, unless the
Obligations have been repaid in full and the Loan Agreement terminated
prior to such date.
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(H) Special Fees.
Borrower shall pay to Collateral Agent, for the benefit of Lenders,
additional special fees (collectively, the "Special Fees") in the amounts
set forth below for each date set forth below, which Special Fees shall
be deemed earned on the applicable date set forth below:
Payment Date Special Fee Date Earned
April 30, 1999 $500,000 June 30, 1999
June 30, 1999 $1,000,000 August 31, 1999
August 31, 1999 $1,500,000 August 31, 1999
At Borrower's option, exercised at the payment date of each Special Fee,
each Special Fee shall be payable in cash, through the issuance by
Borrower of warrants for the purchase of nonvoting common stock of
Borrower (collectively, the "Warrants") or through a combination of cash
and Warrants. If Borrower elects to make all or any portion of any
Special Fee payment through the issuance of Warrants, such Warrants shall
be (i) exerciseable for the number of shares of Borrower's nonvoting
common stock which, when multiplied by the "Determination Price" (as
defined in the Warrant), equals the non-cash portion of the applicable
Special Fee payment, (ii) issued by Borrower to the individual Lenders in
proportion to their respective Pro Rata Shares and delivered by Borrower
to Collateral Agent, on behalf of Lenders, (iii) in the form attached
hereto as Exhibit J and (iv) by their terms, exerciseable by the holder
thereof only on or after the date that the applicable Special Fee is
deemed earned, as set forth above. Notwithstanding the foregoing,
Borrower shall not be entitled to opt to issue Warrants in respect of any
Special Fee to the extent that any Lender is unable to hold or receive
the applicable Warrant because of regulatory constraints applicable to
such Lender, whether under the Bank Holding Company Act or otherwise. All
cash paid to Collateral Agent hereunder shall be held by Collateral Agent
as cash Collateral for the Obligations until such time as such cash is
deemed earned hereunder; all Warrants delivered to Collateral Agent
hereunder shall be held by Collateral Agent for the benefit of Lenders
until deemed earned hereunder. If the Obligations are repaid in full and
the Loan Agreement terminated prior to the date that a Special Fee that
has been delivered to Collateral Agent is deemed to have been earned,
Collateral Agent will promptly return such Special Fee to Borrower (and,
in the case of any applicable Warrants, such Warrant shall be
cancelled)."
(d) The first three sentences of subsection 2.5 of the Loan Agreement are
hereby amended and restated in their entirety, as follows:
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"This Agreement shall be effective until August 31, 1999 (the
"Original Term")."
(e) Subsection 6.1 of the Loan Agreement is hereby amended and restated
in its entirety, as follows:
"6.1 Net Worth.
Borrower shall maintain (a) as of the last day of the first Fiscal
Quarter of the 1999 Fiscal year, Net Worth of at least $25,000,000 (the
"Base Net Worth") and (b) as of the last day of the second Fiscal Quarter
of the 1999 Fiscal Year and the last day of such Fiscal Quarter
thereafter, Net Worth of at least the sum of (i) the Base Net Worth plus
(ii) fifty percent (50%) of positive Net Income (if any) for each
complete Fiscal Quarter after the first Fiscal Quarter of the 1999 Fiscal
Year. The foregoing computation shall not take into account any negative
Net Income for any Fiscal Quarter."
(f) Subsection 6.2 of the Loan Agreement is hereby amended and restated
in its entirety, as follows:
"6.2 Intentionally omitted."
(g) The table contained in subsection 6.4 of the Loan Agreement is hereby
amended and restated in its entirety, as follows:
"Period Ratio
Fiscal Periods 1-4 in 1999 Fiscal Year 0.75:1.0
Fiscal Periods 1-7 in 1999 Fiscal Year 1.00:1.0
Fiscal Periods 1-10 in 1999 Fiscal Year 1.00:1.0
13 consecutive Fiscal Periods ending on the
last day of 1999 Fiscal Year 1.00:1.0
(h) Subsection 7.1 of the Loan Agreement is hereby amended by
(i) deleting the word "and" immediately prior to clause (h) thereof and
(ii) inserting the following immediately after clause (h) thereof and
immediately before the period:
"; and (i) Subordinated Debt of up to $10,000,000 owing by Borrower to
IBP, Inc. in respect of the IBP Debenture."
(i) Clause (b) of subsection 7.5 of the Loan Agreement is hereby amended
and restated in its entirety, as follows:
"(b) Borrower may make payments on the Subordinated Debt
(i) evidenced by the Indenture, in accordance with the terms of the
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subordination provisions contained in the Indenture (as it exists on the
date hereof), (ii) evidenced by the IBP Debenture, in accordance with the
terms of the certain Subordination Agreement dated as of September 10,
1998 between IBP, Inc. and Collateral Agent and (iii) evidenced by any
agreement other than the Indenture or the IBP Debenture, in accordance
with the terms of any subordination agreement or other subordination
provisions relating thereto, as applicable."
(j) A new clause (S) is hereby inserted in subsection 8.1 of the Loan
Agreement, as follows:
"(s) Repayment Event.
The occurrence of a "Repayment Event" pursuant to, and as defined in
the IBP Debenture."
(k) The first sentence of subsection 9.1(E) of the Loan Agreement is
hereby amended by inserting the following at the end thereof, immediately before
the period:
"; and provided further, that no Lender shall be liable for any such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements unless either (i) the
applicable Agent has requested reimbursement by Borrower in respect of
such amounts and Borrower has failed to reimburse such Agent within 30
days after such request or (ii) Borrower is not required, pursuant to the
terms of the Loan Agreement and the other Loan Documents, to reimburse
such Agent in respect of such amounts."
(l) Clause (vi) of subsection 9.4(A) of the Loan Agreement is hereby
amended by inserting the following at the end thereof, immediately before the
semi-colon:
", or amend any of the definitions used in the definition of Borrowing
Base, other than a reduction of the percentage used in the definition of
Applicable Eligible Meat Inventory Percentage;"
(m) The Commitments of each Lender contained on the signature pages to
the Loan Agreement are hereby amended and restated in their entirety, as
follows:
"COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
Revolving Loan Commitment: $12,026,250
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Term Loan Commitment: $10,522,750
Total Commitments: $22,549,000
▇▇▇▇▇▇ FINANCIAL, INC.
Revolving Loan Commitment: $14,313,700
Term Loan Commitment: $12,524,500
Total Commitments: $26,838,200
COMERICA BANK, N.A.
Revolving Loan Commitment: $ 9,411,500
Term Loan Commitment: $ 8,235,500
Total Commitments: $17,647,000
SANWA BUSINESS
CREDIT CORPORATION
Revolving Loan Commitment: $ 9,673,250
Term Loan Commitment: $ 8,464,150
Total Commitments: $ 18,137,400
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
Revolving Loan Commitment $ 12,222,200
Term Loan Commitment: $ 10,694,400
Total Commitments $ 22,916,600
NATIONAL CITY BANK
Revolving Loan Commitment: $ 4,706,200
Term Loan Commitment: $ 4,117,400
Total Commitments: $ 8,823,600
OLD KENT BANK & TRUST COMPANY
Revolving Loan Commitment: $ 3,529,200
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Term Loan Commitment: $ 3,088,400
Total Commitments: $ 6,617,600
TRANSAMERICA BUSINESS CREDIT
CORPORATION
Revolving Loan Commitment: $ 4,706,200
Term Loan Commitment: $ 4,117,400
Total Commitments: $ 8,823,600
FIRST SOURCE FINANCIAL, INC.
Revolving Loan Commitment: $ 9,411,500
Term Loan Commitment: $ 8,235,500
Total Commitments: $ 17,647,000"
(n) A new Exhibit J-Form of Warrant for Special Fees is added to the Loan
Agreement in the form attached hereto as Exhibit J.
3. References; Effectiveness. Requisite Lenders and Borrower hereby agree
that all references to the Loan Agreement which are contained in any of the
other "Loan Documents " (as that term is defined in the Loan Agreement) shall
refer to the Loan Agreement as amended by this Amendment.
4. Representations and Warranties. To induce Requisite Lenders to enter
into this Amendment, Borrower hereby represents and warrants to Agents and
Lenders that:
(a) The execution, delivery and performance by Borrower of this Amendment
are within its corporate power, have been duly authorized by all necessary
corporate action, have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law applicable to Borrower, the articles of incorporation and
by-laws of Borrower, any order, judgment or decree of any court or governmental
agency, or any agreement, instrument or document binding upon Borrower or any of
its property;
(b) Each of the Loan Agreement and the other Loan Documents, as amended
by this Amendment, are the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with their terms;
(c) The representations and warranties contained in the Loan Agreement
and the other Loan Documents are true and accurate as of the date hereof with
the same force and effect as if such had been made on and as of the date hereof;
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(d) Borrower has performed all of its obligations under the Loan
Agreement and the Loan Documents to be performed by it on or before the date
hereof and, as of the date hereof, Borrower is in compliance with all applicable
terms and provisions of the Loan Agreement and each of the Loan Documents to be
observed and performed by it and no event of default or other event which, upon
notice or lapse of time or both, would constitute an event of default has
occurred.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment.
6. Continued Effectiveness. Except as amended hereby, the Loan Agreement
and each of the Loan Documents shall continue in full force and effect according
to its terms.
7. Costs and Expenses. Borrower hereby agrees that all expenses incurred
by each Agent in connection with the preparation, negotiation and closing of the
transactions contemplated hereby, including, without limitation, reasonable
attorneys' fees and expenses, shall be part of the Obligations.
8. Conditions to Effectiveness. This Amendment shall be effective
immediately upon the completion of the following conditions, each in a manner
satisfactory to each Agent:
(a) delivery to Documentation Agent of this Amendment, executed by
Borrower and Requisite Lenders and accepted by each Corporate Guarantor;
(b) delivery to Documentation Agent of amendments to the Mortgages on
file in Forrest City, Arkansas; Shreveport, Louisiana; Detroit, Michigan; Grand
Rapids, Michigan; Walker, Michigan; ▇▇▇▇▇ Ridge, North Carolina and Ponca City,
Oklahoma, executed by Borrower, reflecting the change in the maturity date of
the Obligations, all in form and substance satisfactory to each Agent;
(c) receipt by Documentation Agent of copies of the fully executed IBP
Debenture, the Supply Agreement between IBP, inc. and Borrower, the Settlement
Agreement between IBP, inc. and Borrower and all related agreements, instruments
and documents, all in form and substance satisfactory to each Agent;
(d) receipt by Documentation Agent of a subordination agreement executed
by IBP, inc. in favor of Collateral Agent, in form and substance satisfactory to
each Agent;
(e) receipt by Collateral Agent of $10,000,000 cash proceeds of
Subordinated Debt loaned by IBP, inc. to Borrower pursuant to the IBP Debenture,
and
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application of (i) $5,000,000 of such proceeds to installments of the Term Loan,
in the inverse order of their maturity and (ii) $5,000,000 of such proceeds to
the Revolving Loans;
(f) receipt by Collateral Agent of the $375,000 portion of the
Restructuring Fee due and payable on the effective date of this Amendment;
(g) delivery to Documentation Agent of a certified copy of resolutions of
the board of directors of Borrower, authorizing the execution of the Amendment
and the other documents and agreements described herein;
(h) receipt by Collateral Agent of a certificate of Borrower's good
standing in the State of Michigan, certified as of a recent date; and
(i) delivery to Documentation Agent of an executed legal opinion of
Honigman, Miller, ▇▇▇▇▇▇▇▇ and ▇▇▇▇ addressed to Agents and Lenders and relating
to the Amendment and related transactions, in form and substance satisfactory to
each Agent.
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IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first written above.
▇▇▇▇▇▇ FINANCIAL, INC.,
as a Lender and as Collateral Agent and as Documentation Agent
for the Lenders
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its Vice President
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COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"Rabobank Nederland", New York Branch, as a Lender and as
Administrative Agent for the Lenders
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its Senior V.P.
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By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Its V.P.
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▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as a Lender and as Co-Agent for
the Lenders
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Its V.P.
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COMERICA BANK, N.A., as a Lender
By
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Its
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SANWA BUSINESS CREDIT CORPORATION, as a Lender
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
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Its First V.P.
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NATIONAL CITY BANK, as a Lender
By
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Its
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OLD KENT BANK AND TRUST COMPANY, as a Lender
By
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Its
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TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender
By
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Its
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FIRST SOURCE FINANCIAL LLP, as a Lender
By First Source Financial, Inc.
Its Agent/Manager
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its Senior V.P.
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THORN APPLE VALLEY, INC., as Borrower
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Its Executive Vice President
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Acknowledgment and Acceptance of Corporate Guarantors
Each of the undersigned, in its capacity as a Corporate Guarantor of the
Obligations of Borrower to Agents and Lenders under the Loan Agreement pursuant
to a certain Master Guaranty of Payment dated as of April 16, 1998 (the
"Guaranty"), hereby acknowledges receipt of the foregoing Amendment, accepts and
agrees to be bound by the terms thereof, ratifies and confirms all of its
obligations under the Guaranty and agrees that the Guaranty shall continue in
full force and effect as to it, notwithstanding such amendment.
Dated: September 10, 1998
COAST REFRIGERATED TRUCKING CO., INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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▇▇▇▇▇▇▇▇▇ LAKEVIEW FARMS, LTD.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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CROWN WEST, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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▇▇▇▇▇▇▇▇▇ HOLDINGS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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GUNSBERG CORNED BEEF COMPANY
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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MILLERS TRANSPORT INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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NATIONAL FOOD EXPRESS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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PONCA HOLDINGS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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THORN APPLE VALLEY FOREIGN SALES CORPORATION
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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THORN APPLE VALLEY HOLDINGS OF INDIANA, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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▇▇▇▇▇▇▇ HOLDINGS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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TRI-▇▇▇▇▇▇ PACKING CO.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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TRI-▇▇▇▇▇▇ TRANSPORTATION COMPANY
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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TAV BRANDS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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TAV SWINE BUYING STATIONS, INC.
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Its V.P. and Controller
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EXHIBIT J
Form of Warrant for Special Fees
Attached.
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EXHIBIT J
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. THE EXERCISE OF THIS WARRANT IS SUBJECT TO COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THORN APPLE VALLEY, INC.
WARRANT TO PURCHASE _______ NON-VOTING COMMON SHARES
THIS CERTIFIES THAT, for value received, ____________________ (the
"Holder") is entitled to subscribe for and purchase _______ of the fully paid
and nonassessable non-voting common shares (as adjusted pursuant to Section 2
hereof, the "Shares") of Thorn Apple Valley, Inc., a Michigan corporation (the
"Company"), at the price of $0.01 per Share (such price and such other price as
shall result, from time to time, from the adjustments specified in Section 2
hereof, is herein referred to as the "Warrant Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. Any permitted assignee
of this Warrant, by acceptance hereof assumes and agrees to the rights and
restrictions set forth herein.
1. Term. This Warrant is issued on _________________ (the "Issue
Date"). The purchase right represented by this Warrant is exercisable in whole
or in part, at any time and from time to time, from ________________ (the
"Effective Date") through the date that is ten (10) years after the Effective
Date.
2. Adjustment of Warrant Price and Number of Shares. The Warrant Price
and the number of Shares issuable upon the exercise of this Warrant shall be
subject to adjustment from time to time, and the Company agrees to provide
notice upon the happening of certain events as follows:
(a) Reclassification, etc. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter permit the Holder to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the class of the Company's capital stock for which this
Warrant is being exercised are subdivided or combined into a greater or smaller
number of shares, the Warrant Price and the Determination Price (as defined
below) shall be proportionately reduced in case of subdivision of shares or
proportionately increased in the case of combination of shares, in both cases by
the ratio which the total number of shares of such class to be outstanding
immediately after such event bears to the total number of shares of such class
outstanding immediately prior to such event.
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(b) Adjustment for Dividends in Shares. In case at any time or
from time to time on or after the Issue Date the holders of the common shares of
the Company (or any other shares or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional shares of the
Company by way of dividend, then and in each case, the Holder shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional shares of the Company which
such Holder would hold on the date of such exercise had it been the holder of
record of such Shares on the Issue Date and had thereafter, during the period
from the Issue Date to and including the date of such exercise, retained such
shares and/or all other additional shares receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
paragraphs (a) and (b) of this Section 2.
(c) Adjustment for Certain Issuances. If the Company shall, at
any time or from time to time prior to the expiration date of this Warrant, (i)
issue any common shares and the consideration received by the Company shall be
less than $7.50 per common share (as adjusted from time to time as set forth
herein, the "Determination Price"), or (ii) issue any securities which by their
terms are convertible into or exchangeable for common shares of the Company
(herein "Convertible Securities") or represent the right to purchase common
shares or Convertible Securities and the sum of the consideration per common
share receivable upon conversion or exchange of such Convertible Securities or
upon exercise of such purchase rights, plus the consideration per share received
by the Company upon the issuance of such Convertible Securities or purchase
rights, shall be less than the Determination Price at the date of issuance, the
aggregate exercise price of this Warrant shall remain unchanged but the number
of Shares receivable upon the exercise of this Warrant shall be increased as
follows: the number of shares receivable upon the exercise of this Warrant
immediately prior to the issue of such common shares (or such Convertible
Securities or purchase rights, as the case may be) shall be multiplied by a
fraction, of which (x) the numerator shall be the number of common shares (on a
fully diluted basis assuming the exercise of all warrants or options to purchase
common shares and the conversion of all Convertible Securities) outstanding
immediately prior to such issue plus the number of common shares issued (or the
maximum number of common shares issuable upon conversion or exchange of such
Convertible Securities or exercise of such purchase rights at their initial
conversion, exchange or exercise price or rate, as the case may be), and of
which (y) the denominator shall be the number of common shares outstanding
immediately prior to such issue (on a fully diluted basis assuming the exercise
of all warrants or options to purchase common shares and the conversion of all
Convertible Securities) plus the number of common shares which the aggregate
consideration received by the Company upon the issuance of such common shares
(or the aggregate consideration received by the Company upon the issuance of
such Convertible Securities or purchase rights plus the aggregate consideration
receivable upon exercise of all such Convertible Securities or purchase rights,
as the case may be) would purchase at the Determination Price. If the Company
issues any common shares or issues any Convertible Securities or rights to
purchase common shares or Convertible Securities for a consideration per share
less than the Determination Price, then the Determination Price shall be
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adjusted by multiplying the then-current Determination Price by a fraction, the
numerator of which is the number of common shares for which this Warrant could
be exercised immediately prior to such issuance and the denominator of which is
the number of common shares for which this Warrant could be exercised
immediately following such issuance.
(d) Certificate of Adjustment. Whenever the Warrant Price or
number or type of securities issuable upon exercise of this Warrant is adjusted,
as herein provided, upon the request of the Holder, the Company shall promptly
deliver to the Holder a certificate of an officer of the Company setting forth
the nature of such adjustment and a brief statement of the facts requiring such
adjustment.
3. No Shareholder Rights. This Warrant, by itself as distinguished from
the Shares purchasable hereunder, shall not entitle the Holder to any of the
rights of a shareholder of the Company.
4. Authorization and Reservation of Stock. The Company will reserve
from its authorized and unissued non-voting common shares a sufficient number of
shares to provide for the issuance of the Shares upon the exercise of this
Warrant. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing certificates to
execute and issue the necessary certificates for the Shares upon the exercise of
this Warrant.
5. Exercise of Warrant; Net Exercise.
(a) Exercise of Warrant. Subject to compliance with applicable
federal and state securities laws, this Warrant may be exercised in whole or in
part by the Holder at any time by the surrender of this Warrant, together with
the Notice of Exercise and Investment Representation Statement attached hereto
as Exhibits A and B, respectively, duly completed and executed, at the principal
office of the Treasurer of the Company, accompanied by payment in full of the
Warrant Price in cash or by check with respect to the Shares being purchased
(except with respect to any purchase in accordance with Section 5(b) below).
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the Shares issuable upon such exercise shall
be treated for all purposes as the holder of such Shares of record as of the
close of business on such date. As promptly as practicable after such date, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full common shares issuable
upon such exercise. Upon any partial exercise of this Warrant, the Company will
issue to the Holder a new warrant for the number of the Shares as to which this
Warrant was not exercised.
(b) Net Exercise. In lieu of exercising this Warrant or any
portion thereof and paying the exercise price by cash or check, the Holder shall
have the right to convert this Warrant or any portion thereof into the number of
Shares to be computed using the following formula:
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X = (P) (Y) (A-B)
-------------
A
where X = the number of Shares to be issued to the Holder for the portion of
this Warrant being converted,
P = the portion of this Warrant being converted (expressed as a
decimal),
Y = the total number of Shares issuable upon exercise of this Warrant
in full,
A = the closing price of one common share as reported by the New
York Stock Exchange on the date of exercise of this Warrant,
and
B = the exercise price of the Shares on the date of receipt by
the Company of the notice of conversion.
Upon such conversion, the portion of this Warrant represented by the variable
"P" above shall be cancelled.
(c) Fractional Shares. No fractional common shares will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the common shares on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.
6. Registration Rights.
6.1 Registration Obligations. The securities entitled to the benefit of
this Section 6 are the Shares acquired by the Holder upon exercise of this
Warrant and owned by the Holder following conversion as provided in the next
sentence of this Section 6.1 (the "Registerable Shares"). Upon the exercise of
this Warrant, the non-voting common shares shall be convertible, on a
one-for-one basis, into voting common shares of the Company for purposes of the
Registration Rights granted to the Holder under this Section 6. Upon any request
of the Holder, the Company shall file a "shelf" registration statement under the
Securities Act to register any or all of the Holder's Registerable Shares under
the Securities Act of 1933, as amended (the "Securities Act"). The Company will
pay all registration expenses in connection with any requested registration of
Registerable Shares under this Section 6. The registration expenses referred to
in the preceding sentence include the fees and expenses of counsel to the
Company and of the Company's accountants, the costs and expenses incident to the
preparation, printing and filing by the Company of the registration statement
(including the financial statements included in, and all amendments and exhibits
to, the registration statement), the preliminary prospectus and the final
prospectus and any amendment or supplement to any of the foregoing, the filing
fees of the Securities and Exchange Commission (the "SEC"), the National
Association of Securities Dealers, Inc., and of any state securities or blue sky
authorities, the fees and expenses of counsel in connection with the
qualification of the securities under state
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securities or blue sky laws, any fees relating to the listing of the securities
on the National Association of Securities Dealers, Inc. Automated Quotation
System or in any other market in which the Company's securities are traded, the
cost of printing certificates representing the securities being offered, and any
fees of the transfer agent. The Holder shall be solely responsible for any
underwriting discounts or commissions applicable to the Holder's securities sold
in the offering.
6.2 Registration Procedures. If and whenever the Company is requested
to effect the registration of any Registerable Shares under the Securities Act
as provided in Section 6.1, the Company will promptly:
(a) prepare and file with the SEC a registration statement
with respect to such Registerable Securities and use its reasonable
efforts to cause such registration statement to become effective;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the Holder as set forth in such registration statement;
(c) furnish to the Holder such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with
the requirements of the Securities Act, and such other documents, as
the Holder may reasonably request in order to facilitate the
disposition of the Registerable Shares owned by the Holder;
(d) use its reasonable efforts to register or qualify such
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the Holder shall
reasonably request, and do any and all other acts and things which may
be necessary or advisable to enable the Holder to consummate the
disposition in such jurisdictions of the Registerable Shares owned by
the Holder, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified, or to consent to
general service of process in any such jurisdiction;
(e) notify the Holder of Registerable Shares covered by such
registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such
registration statement, as then in effect, is known by the Company to
include an untrue statement of material fact or to omit to state any
material fact required to be stated therein or necessary to make
statements therein not misleading in the light of the circumstances
then
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existing (provided that the period during which such a condition may
occur shall not be permitted by the Company to persist for longer than
30 days nor shall two or more such periods be permitted by the Company
to persist for an aggregate of longer than 60 days during any year of
the term of such registration), and prepare and furnish to the Holder a
reasonable number of copies of a supplement to, or an amendment of,
such prospectus as may be necessary so that, as delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) advise the Holder as to the time when such registration
statement becomes effective and as to the issuance by the SEC of any
stop order suspending the effectiveness of such registration statement
or the institution of any proceedings for that purpose, and use its
best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible the lifting thereof, if issued; and
(g) indemnify and hold harmless the Holder, and any
underwriter or broker in respect thereto, or any controlling person of
the Holder or any such underwriter or broker, against any losses,
claims, damages or liabilities, joint or several, to which the Holder
or such underwriter, broker or controlling person may become subject,
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in
the registration statement, the prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out
of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading and will reimburse the Holder and each such
underwriter, broker or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action
(provided, however, that the Company will not be liable to the Holder
(or to a controlling person of the Holder) in any case to the extent
that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any such document or amendment or
supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by, or on behalf of, the Holder
specifically for use therein), and provide the Holder with customary
contribution in the event that such indemnification shall be
unavailable for any reason.
The Company may require the Holder to furnish to the Company information
regarding the Holder and the distribution of the Registerable Securities as
the Company may from time to time reasonably request.
7. No Transfer of Warrant. This Warrant may not be assigned, sold,
pledged, hypothecated or otherwise transferred unless and until the Holder
hereof provides the Company with an opinion of counsel satisfactory to the
Company and the Company's counsel that appropriate action necessary for
compliance with all applicable federal and state securities laws
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has been taken or an exemption from the requirements of such securities laws is
available and that such transfer will not violate any of such securities laws.
8. Miscellaneous. This Warrant shall be governed by the internal laws
of the State of Michigan. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the Holder. All notices and other communications from the
Company to the Holder shall be delivered personally or mailed by first class
mail, postage prepaid, to the address furnished to the Company in writing by the
last Holder of this Warrant who shall have furnished an address to the Company
in writing, and if mailed shall be deemed given three days after deposit in the
United States mail.
ISSUED this _____ day of __________, _____.
THORN APPLE VALLEY, INC.
By:_____________________________
Its:_________________________
Accepted and agreed to:
By:__________________________
Its:______________________
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EXHIBIT A
NOTICE OF EXERCISE
TO: THORN APPLE VALLEY, INC.
1. The undersigned hereby:
/ / elects to purchase ________________ non-voting
common shares of Thorn Apple Valley, Inc. pursuant to
the terms of the attached Warrant, and tenders
herewith payment of the purchase price in full, or
/ / elects to exercise its net issuance rights pursuant
to Section 5(b) of the attached Warrant with respect
to non-voting common shares.
2. Please issue a certificate or certificates representing said
non-voting common shares in the name of the undersigned or in such other name as
is specified below:
_________________________________
(Name)
_________________________________
(Address)
____________________________ ________________________________________
(Date) (Name of Warrant Holder)
By: _________________________________
Title: _________________________________
(name of purchaser, and title and
signature of authorized person)
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EXHIBIT B
INVESTMENT SUITABILITY AND REPRESENTATION STATEMENT
__________ Non-Voting Common Shares of Thorn Apple Valley, Inc.
In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Thorn Apple Valley, Inc. (the "Company") as
follows:
Investment Representation.
(a) The undersigned understands that the shares of stock to be received
upon the exercise of the Warrant (the "Securities") at the time of issuance may
not be registered under the Securities Act of 1933, as amended (the "Act"), and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering, and
that the Company's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(b) The undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
the Securities shall have been registered under the Act or (ii) it shall have
furnished the Company with an opinion of counsel satisfactory to the Company and
the Company's counsel to the effect that (A) appropriate action necessary for
compliance with the Act and any applicable state securities laws has been taken
or an exemption from the registration requirements of the Act and such laws is
available, and (B) that the proposed transfer will not violate any of said laws.
(c) The undersigned represents that it is able to fend for itself in
the transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investments, and has the ability to bear the economic
risks (including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(d) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless registered under the
Act or an exemption from such registration is available. The undersigned is
aware of the provisions of Rule 144 promulgated under the Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
through a "broker's transaction" or in transactions directly with a "market
26
maker" (as provided by Rule 144(f)) and the number of shares being sold during
any three-month period not exceeding specified limitations.
Dated:____________________
______________________________________
(Signature)
______________________________________
(Typed or Printed Name)
______________________________________
(Title)
2