UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended May 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-14202
MORRISON FRESH COOKING, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 63-1155967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
The Hartsfield Colonnade
4893 Riverdale Road, Suite 260
Atlanta, Georgia 30337
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770)991-0351
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
$0.01 par value Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing sale
price of Common Stock on August 8, 1997 as reported on the New
York Stock Exchange, was approximately $43,353,352. Shares of
Common Stock held by each executive officer and director and by
each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares of the Registrant's common stock outstanding
at August 8, 1997 was 9,248,715.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended May 31, 1997 are incorporated by reference
into Parts I and II.
Portions of the Registrant's definitive proxy statement dated
August 20, 1997 are incorporated by reference into Part III.
INDEX
PART I
Page
Number
Item 1. Business 4 - 10
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Executive Officers of the Company 12 - 13
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 14
PART III
Item 10. Directors and Executive Officers of the
Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial
Owners and Management 15
Item 13. Certain Relationships and Related Transactions 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 16 - 20
PART I
Item 1. Business.
__________________________________________________________________
Introduction
Morrison Fresh Cooking, Inc. (the "Company" or "MFCI"),
incorporated in 1995 in Atlanta, Georgia, owns and operates
cafeterias, buffets and mall food court locations in the
southeastern and mid-Atlantic regions of the United States. As of
May 31, 1997, the Company operated a total of 154 units,
consisting of 129 traditional cafeterias, 11 small cafeterias, 11
mall food court units and three buffets located in 13 states,
making it one of the largest cafeteria companies in the
Southeast.
Prior to March 1996, the Company comprised the family dining
business of Morrison Restaurants Inc. ("MRI"). On March 7, 1996,
the shareholders of MRI approved the distribution of the common
stock of MFCI to its shareholders (the "Distribution"). The
effective date of the Distribution was March 9, 1996; MRI
shareholders received one share of the Company's common stock for
every four shares of MRI common stock then held.
In connection with the Distribution, the Company filed a
Registration Statement with the SEC on Form 10 (together with
subsequent amendments, the "Form 10") under the Securities
Exchange Act of 1934 with respect to the Company's common stock.
The Form 10 became effective on March 4, 1996, and the Company
stock commenced trading on the New York Stock Exchange on March
11, 1996.
___________________________________________________________________
Background
MRI, the former parent company, was founded in 1920 as a unique
cafeteria concept in Mobile, Alabama. In 1928, with just eight
cafeterias, the company had its first and only public stock
offering. The first cash dividend on the common shares was
declared in 1936, and dividends have been paid continuously for
61 years.
___________________________________________________________________
Concept
The Company operates in the "home-meal replacement" (also known
as "comfort" food) segment of the restaurant industry. The
Company's services appeal to customers seeking complete meals at
affordable prices, in a convenient and home-like setting. While
industry observers have labeled "home-meal replacement" as a
trend of the 1990's, Morrison Fresh Cooking, Inc. has been
operating in this market segment for 77 years.
___________________________________________________________________
Strategy
Morrison Fresh Cooking, Inc.'s business strategy is to:
Emphasize future growth beyond existing mall-based units
into convenient free-standing locations. New units will generally
be smaller, more labor and energy efficient, and will be designed
to evoke a contemporary and comfortable environment.
Re-engineer its cost-structure through state-of-the-art
technology in information services, cooking equipment and quality
control.
Emphasize more health-conscious and contemporary menu items
without losing focus on traditional southern menu favorites.
Achieve operational excellence through competitive pricing,
variety of menu items and employee training.
Focus growth in the southeast and mid-Atlantic regions to
capitalize on existing brand-equity and name-recognition.
___________________________________________________________________
Operations
The Company serves in excess of 42 million meals a year to a
customer base in the southeast and mid-Atlantic regions. In the
1997 American Bus Association's annual survey of tour operators,
the Company was rated as one of the Association's most favorite
restaurant chains. In addition, the National Motor Coach Network
rated the Company second in their 1997 survey. MFCI's meals are
classic, all-American and freshly prepared, and are made from
scratch according to their time tested recipes. Each day's menu
offers the customer a wide variety of selections: fresh salads,
home-style entrees, freshly prepared vegetables, daily baked
breads, and home-baked pies or other desserts.
MFCI's units offer a tremendous variety of menu items including 8-
11 salads, 12 entrees, 12-15 vegetables, 6 types of breads, and
12-15 desserts. Complete or "bundled" meals can be purchased at
prices ranging from $3.99 to $5.89 per meal. In excess of 70% of
MFCI's customers select bundled meals. Menus are rotated daily to
provide a varied dining experience and are adjusted to include
seasonal favorites. This variety encourages customer loyalty and
repeat business. The Company's typical customer visits the
restaurants an average of 3.8 times per month.
The traditional cafeteria, located in a shopping mall or on a
free-standing site (both convenient to shopping and business
developments as well as to residential areas), is approximately
10,000 square feet and seats approximately 250 customers. The new
smaller cafeteria offers a contemporary appearance, featuring a
new serpentine serving area that creates an open, airy
environment to enhance viewing of the menu items by the customer.
The small cafeterias are built in a contemporary design ranging
from 6,200 to 6,800 square feet and seat approximately 180
guests. The dining area, accompanied by booths and wooden tables
and chairs, creates a comfortable at-home atmosphere, and is
intended to appeal to a broader, younger market. The small
cafeterias are designed to provide convenient, customer-friendly
take-out services.
The mall food court units or quick service restaurants ("QSRs")
are 600 to 1,200 square foot dining facilities, located primarily
in the mid-Atlantic states. They feature many traditional menu
selections for which MFCI is more commonly known, along with some
new items. The QSRs offer several bundled value meal combinations
in addition to a la carte pricing for selected items.
The Company is undergoing a modernization program for its
existing core cafeterias in order to improve their appeal to a
larger customer base and increase the efficiency and customer-
friendliness of the cafeterias' service lines. MFCI intends to
continue remodeling efforts by concentrating on its units in
demographic areas where this enhanced atmosphere would achieve
the greatest results.
___________________________________________________________________
Research and Development
The Company does not engage in any material research and
development activities. Numerous studies are made, however, on a
continuing basis, to improve menus, equipment, and methods of
operations, including planning for new food-service concepts. In
addition, the Company holds regular "focus group" discussions
with existing, former and potential customers to determine ways
to exceed customer expectations and increase customer
satisfaction.
___________________________________________________________________
Raw Materials
Raw materials essential to the operation of the Company's
business are obtained principally through national food
distributors. Because of the relatively short storage life of
inventories, limited storage facilities at the restaurants
themselves, MFCI's requirement for freshness and the numerous
sources of goods, a minimum amount of inventory is maintained at
the units. If necessary, all essential food, beverage and
operational products are available and can be obtained from
alternative suppliers in all cities in which the Company
operates.
The Company, Morrison Health Care, Inc. ("MHCI") and Ruby
Tuesday, Inc. ("RTI"), successor to MRI, have formed MRT
Purchasing, LLC, a Georgia limited liability company ("MRT"), to
serve as a purchasing cooperative, to maintain the volume
purchasing bargaining position enjoyed by MRI prior to the
Distribution by pooling their collective purchasing power and
coordinating the purchase of certain food, equipment and
services. Pursuant to MRT's Operating Agreement, MRT serves as
the purchasing agent for the three companies by arranging for the
purchase of products to be made directly between each of the
three companies and suppliers. MRT has complete discretion to
select vendors and brands for certain designated products ("core
products") and to negotiate terms of purchasing arrangements for
core products, including long-term contracts. To the extent
feasible, MRT concludes purchasing arrangements under which each
of the three companies has independent rights and obligations.
With respect to any arrangement where each company's liabilities
are not independent, RTI, MHCI and the Company cross indemnify
MRT and each other with respect to their allocated share of
liability for obligations to be performed and payment for goods
purchased.
RTI, MHCI and the Company are obligated to purchase all core
products through MRT arrangements; non-core products may be
purchased independently. The three companies are committed to
these purchasing arrangements for an initial term of five years
from the date of Distribution, which will automatically renew for
additional five year terms. RTI, MHCI or the Company may
terminate its participation in these purchasing arrangements upon
six months prior notice, provided, however, that it will continue
to honor its commitments under any then existing contract
extending beyond the termination date. Approximately 92% of the
total products purchased by the Company during fiscal 1997 would
have constituted "core products" under the MRT purchasing
cooperative.
Each of RTI, MHCI and the Company have an equal equity interest
in MRT. It is not intended, however, that MRT will generate
income or profits. Employees are loaned by one of the three
companies and all expenses incurred in connection with operating
MRT are shared among the three companies pro rata, based on the
relative value of time spent and expenses incurred by MRT on
behalf of each of the companies.
Existing long term purchasing arrangements are managed through
MRT, which acts as agent for RTI, MHCI and the Company. In each
case, purchasing obligations are allocated among the three
companies based on past practice. To the extent feasible, MRT
will seek to amend such arrangements to formalize the allocation
of responsibilities and liabilities. In particular, MRI amended
its agreement ("Supply Agreement") with PYA/Monarch, Inc. ("PYA")
to allocate to the appropriate company certain divisional
obligations to purchase from PYA a minimum percentage of produce,
foodstuff and other supplies. In addition, the aggregate annual
minimum dollar amount of purchases under the Supply Agreement has
been allocated among RTI, MHCI and the Company.
_______________________________________________________________
Trademarks of the Company
The Company has registered trademarks and service marks with the
United States Patent and Trademark Office, including the
Morrison's trademark. MFCI believes that this and other related
marks are of material importance to the Company's business.
Registrations of the trademark Morrison's expire in 2005,
unless renewed. In addition, approval is pending for the
registration of the trademark "Morrison's Fresh Cooking" by MFCI.
The Company, MHCI and RTI have entered into Intellectual Property
License Agreements (collectively, "IP Agreements") which provide
for licensing to or among these companies of rights under
trademarks, service marks, trade secrets and certain other
intellectual property (collectively "Intellectual Property")
owned by RTI, MHCI or the Company following the Distribution. The
purpose of these IP Agreements is to provide RTI, MHCI and the
Company with those continuing rights and licenses under such
Intellectual Property following the Distribution necessary for
the continued conduct of their respective businesses in
accordance with practice prior to the Distribution.
___________________________________________________________________
Marketing
The Company's marketing strategy is to increase customer and
potential customers' awareness of MFCI's strengths including
variety, fresh cooking, bundled meals, speed of service, and
value-based pricing. MFCI's marketing efforts focus on active
advertising in television, radio and print media and local store
promotions. In addition, the Company is committing resources to
develop marketing manuals for each of its restaurants and
increase its community involvement to become more of a part of
the neighborhoods in which its restaurants are located.
___________________________________________________________________
Working Capital Practices
Cash provided by operations, along with borrowings under the
Company's revolving line of credit, are invested in new unit
expansion, the renovation of existing units and dividends.
Additional information concerning the working capital of the
Company is incorporated herein by reference to information
presented within the "Liquidity and Capital Resources" section of
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" of the Company's 1997 Annual Report to
Shareholders.
___________________________________________________________________
Customer Dependence
No material part of the business of the Company is dependent upon
a single customer, or a very few customers, the loss of any one
of which would have a material adverse effect on MFCI.
___________________________________________________________________
Competition
The Company's activities in the restaurant industry are subject
to vigorous competition relating to restaurant location and
service, as well as quality, variety and value perception of the
food products offered. The Company is in competition with other
food service operations, with locally-owned operations as well as
national and regional chains that offer the same type of services
and products as MFCI. Management believes that competition in the
"home-meal replacement" or "comfort food" market segment is based
on price, food quality, variety and convenience. The Company
believes it compares favorably with its competition in these
areas.
___________________________________________________________________
Impact of Inflation
In the past, the Company has been able to recover inflationary
cost increases through increased menu prices. There have been,
and there may be in the future, delays in implementing such menu
price increases, and competitive pressures may limit MFCI's
ability to recover such cost increases in their entirety.
Historically, the effects of inflation on the Company's net
income have not been materially adverse.
___________________________________________________________________
Government Compliance
The Company is subject to various regulations at
both the state and local levels for items such as zoning, land
use, sanitation, health and fire safety, all of which could delay
the opening of a new restaurant or the operation of an existing
unit. MFCI's business is subject to various other regulations at
the federal level such as health care, minimum wage and fair
labor standards. Compliance with these regulations has not had,
and is not expected to have, a material adverse effect on the
Company's operations.
There is no material portion of the Company's business that is
subject to renegotiation of profits or termination of contracts
or sub-contracts at the election of the Federal Government.
___________________________________________________________________
Environmental Compliance
Compliance with federal, state and local laws and regulations
which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the
protection of the environment, is not expected to have a material
effect upon the capital expenditures, earnings or competitive
position of the Company.
__________________________________________________________________
Personnel
The Company employs approximately 7,800 full-time and part-time
employees. MFCI believes that its relationship with its employees
is good, that working conditions are favorable and employee
compensation is comparable with its competition. None of the
Company's employees are subject to a collective bargaining
agreement.
___________________________________________________________________
Seasonality
The Company's business is moderately seasonal. Average restaurant
sales of MFCI are slightly higher during the winter months than
during the summer months. As MFCI has many restaurants located in
shopping malls and other retail locations, sales for these units
increase over the holiday season. Overall, the variation is not
material.
___________________________________________________________________
Item 2. Properties.
Information regarding the Company's location by state and the
number of operations is shown below.
Of the 154 Company-operated restaurants, MFCI owns the building
and holds long-term land leases for 10 restaurants, owns the land
and building for 13 restaurants, holds leases covering land and
building for 130 restaurants and owns the land and leases the
building for one unit. These leases have terms that expire on
various dates over the next 20 years, and generally provide for
options to renew, in some cases at adjusted rentals. The leases
may provide for escalation of rent during the lease term and
generally provide for additional contingent lease payments based
upon sales volume. The Company has a policy to remodel units as
needed. Facilities and equipment are repaired and maintained to
assure their adequacy, productive capacity and utilization.
The Company's corporate headquarters for its executive and
administrative personnel is located in Atlanta, Georgia in
approximately 17,000 square feet of a leased building. The lease
has a term ending in 1997, and annual lease payments are
approximately $180,000. Additional administrative support is
located in Mobile, Alabama; the lease term expires in 2001.
Additional information concerning the properties of the Company
and the lease obligations of MFCI is incorporated herein by
reference to Note 3 of the Notes to Financial Statements included
in the Annual Report to Shareholders for the fiscal year ended
May 31, 1997.
As of May 31, 1997, MFCI operated 154 locations in the following
states:
Alabama 18 North Carolina 5
Florida 51 South Carolina 8
Georgia 26 Tennessee 7
Indiana 1 Virginia 16
Kentucky 5 West Virginia 1
Louisiana 2
Maryland 4
Mississippi 10
________________________________________________________________________
Item 3. Legal Proceedings.
The Company is presently, and from time to time, subject to pending
claims and suits arising in the ordinary course of its business. In
the opinion of Management, the ultimate resolution of these pending
legal proceedings will not have a material adverse effect on MFCI's
operations or financial position.
________________________________________________________________________
Item 4. Submission of Matters to a Vote of Security Holders.
None.
__________________________________________________________________________
Executive Officers of the Company.
Executive officers of the Company are appointed by and serve at the
discretion of the Company's Board of Directors. Information regarding
the Company's executive officers as of August 8, 1997 is provided
below.
Executive
Officer
Name Age Position with the Company Since
Ronnie L. Tatum 57 Chief Executive Officer 1996
Craig D. Nelson 43 Senior Vice President, 1996
Finance and Assistant
Secretary
William M. Byrd 40 Senior Vice President, 1996
Operations
Mitchell S. Block 44 Vice President, 1996
General Counsel and
Secretary
Ronnie L. Tatum is Chief Executive Officer of the Company. He was
President of the Family Dining Division of MRI's Morrison Group from
March 1994 until the Distribution in March 1996. Mr. Tatum served as
President of MRI's Family Dining Group from March 1993 to March 1994,
and Senior Vice President of MRI's Family Dining Group from 1990 to
March 1993.
Craig D. Nelson is Senior Vice President of Finance and Assistant
Secretary of the Company. He was Vice President, Controller of MRI's
Morrison Group from July 1994 to March 1996. Mr. Nelson served as Vice
President/Controller - Family Dining Division from November 1990 to
July 1994. He joined MRI in 1976.
William M. Byrd is Senior Vice President of Operations of the Company.
He was Vice President, Operations of MRI's Family Dining Division from
October 1995 to March 1996, then of the Company until September 1996.
Previously, Mr. Byrd was Regional Vice President for Daka
International from July 1995 to October 1995. Prior to that he was
Operations Director at the Pizza Hut Division of Pepsico.
Mitchell S. Block is Vice President, General Counsel and Secretary of
the Company. Previously, he was Real Estate Attorney of MRI's Ruby
Tuesday Group from April 1993 to March 1996. Prior to joining the
Company, Mr. Block was Vice President, General Counsel and Secretary
for Wyatt Cafeterias, Inc. in Dallas, Texas, where he worked from
March 1986 to April 1993.
PART II
________________________________________________________________________
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Certain information required by this item is incorporated herein by
reference to Note 13 of the Notes to Financial Statements of the
Registrant's Annual Report to Shareholders for the fiscal year ended
May 31, 1997.
________________________________________________________________________
Item 6. Selected Financial Data.
The information contained under the caption "Summary of Operations" of
the Registrant's Annual Report to Shareholders for the fiscal year
ended May 31, 1997 is incorporated herein by reference.
________________________________________________________________________
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information contained under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the
Registrant's Annual Report to Shareholders for the fiscal year ended
May 31, 1997 is incorporated herein by reference.
________________________________________________________________________
Item 8. Financial Statements and Supplementary Data.
The following financial statements and the related report of the
Company's independent auditors contained in the Registrant's Annual
Report to Shareholders for the fiscal year ended May 31, 1997, are
incorporated herein by reference:
Statements of Operations - fiscal years ended May 31, 1997
June 1, 1996 and June 3, 1995.
Balance Sheets - As of May 31, 1997 and June 1, 1996
Statements of Stockholders' Equity - fiscal years ended
May 31, 1997, June 1, 1996 and June 3, 1995.
Statements of Cash Flows - fiscal years ended May 31, 1997,
June 1, 1996 and June 3, 1995.
Notes to Financial Statements.
________________________________________________________________________
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
________________________________________________________________________
Item 10. Directors and Executive Officers of the Company.
The information regarding directors of the Company is incorporated
herein by reference to the information set forth in the table
captioned "Director and Director Nominee Information" under "Election
of Directors" in the definitive proxy statement of the Registrant
dated August 20, 1997, relating to the Registrant's annual meeting of
shareholders to be held on September 24, 1997.
Pursuant to Form 10-K General Instruction G(3), the information
regarding executive officers of the Company has been included in Part
I of this Report under the caption "Executive Officers of the
Company".
MFCI has established Audit, Compensation and Stock Option, and
Nominating Committees of the Board. Members of the Audit and
Compensation and Stock Option Committees are not to be employees of
the Company.
________________________________________________________________________
Item 11. Executive Compensation.
The information required by this Item 11 is incorporated herein by
reference to the information set forth under the captions "Executive
Compensation" and "Election of Directors - Directors' Fees and
Attendance" in the definitive proxy statement of the Registrant dated
August 20, 1997 relating to the Registrant's annual meeting of
shareholders to be held on September 24, 1997.
________________________________________________________________________
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this Item 12 is incorporated herein by
reference to the information set forth in the table captioned
"Beneficial Ownership of Common Stock" under "Election of Directors"
in the definitive proxy statement of the Registrant dated August 20,
1997 relating to the Registrant's annual meeting of shareholders to be
held on September 24, 1997.
________________________________________________________________________
Item 13. Certain Relationships and Related Transactions.
The information required by this Item 13 is incorporated herein by
reference to the information set forth under the caption "Certain
Transactions" in the definitive proxy statement of the Registrant
dated August 20, 1997 relating to the Registrant's annual meeting of
shareholders to be held on September 24, 1997.
PART IV
___________________________________________________________________________
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are incorporated by reference into or are
filed as a part of this report:
1. Financial Statements:
The following financial statements and the independent
auditors' report thereon, included in the Registrant's Annual
Report to Shareholders for the fiscal year ended May 31, 1997,
a copy of which is contained in the exhibits to this report,
are incorporated herein by reference:
Page Reference
in paper version
of Annual Report
to Shareholders
Statements of Operations for the fiscal
years ended May 31, 1997, June 1, 1996
and June 3, 1995 18
Balance Sheets as of May 31, 1997 and
June 1, 1996 19
Statements of Stockholders' Equity for
the fiscal years ended May 31, 1997,
June 1, 1996 and June 3, 1995 20
Statements of Cash Flows for the fiscal
years ended May 31, 1997, June 1, 1996
and June 3, 1995 21
Notes to Financial Statements 22 - 31
Report of Independent Auditors 32
2. Financial statement schedules:
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
3. Exhibits
The following exhibits are filed as part of this report:
MORRISON FRESH COOKING, INC.
LIST OF EXHIBITS
Exhibit
Number Description
3(a) Amended and Restated Articles of Incorporation of
Morrison Fresh Cooking, Inc.(1)
3(b) Bylaws of Morrison Fresh Cooking, Inc.(1)
4(a) Specimen Common Stock Certificate.(2)
4(b) Amended and Restated Articles of Incorporation of
Morrison Fresh Cooking, Inc. (see Exhibit 3(a) hereto).
4(c) Bylaws of Morrison Fresh Cooking, Inc. (see Exhibit
3(b) hereto).
4(d) Form of Rights Agreement between Morrison Fresh
Cooking, Inc. and AmSouth Bank of Alabama, as Rights
Agent.(2)
4(e) Form of Rights Certificate (see Exhibit 4(d)
hereto).(2)
10(a) Form of Distribution Agreement among Morrison Restaurants
Inc., Morrison Fresh Cooking, Inc. and Morrison Health Care,
Inc.(1)
10(b) Form of Amended and Restated Tax Allocation and
Indemnification Agreement among Morrison Restaurants Inc.,
Custom Management Corporation of Pennsylvania, Custom
Management Corporation, John C. Metz & Associates, Inc.,
Morrison International, Inc., Morrison Custom Management
Corporation of Pennsylvania, Morrison Fresh Cooking, Inc.,
Ruby Tuesday, Inc., a Delaware corporation, Ruby Tuesday
(Georgia), Inc., a Georgia corporation, Galaxy Management,
Inc., Manask Food Service, Inc., Morrison of New Jersey,
Inc., Tias, Inc. and Morrison Health Care, Inc.(1)
10(c) Form of Agreement Respecting Employee Benefit Matters among
Morrison Restaurants Inc., Morrison Fresh Cooking, Inc. and
Morrison Health Care, Inc.(2)
10(d) Form of License Agreement between Morrison Fresh Cooking,
Inc. and Morrison Health Care, Inc.(1)
10(e) Form of Amended and Restated Operating Agreement of MRT
Purchasing, LLC among Morrison Restaurants Inc., Ruby
Tuesday, Inc., Morrison Fresh Cooking, Inc. and Morrison
Health Care, Inc.(1)
Exhibit
Number Description
10(f)* Form of Morrison Fresh Cooking, Inc. 1996 Stock Incentive
Plan.(2)
10(g)* Form of Morrison Fresh Cooking, Inc. Stock Incentive and
Deferred Compensation Plan for Directors.(2)
10(h)* Form of 1996 Non-Executive Stock Incentive Plan.(2)
10(i)* Form of Morrison Fresh Cooking, Inc. Executive Supplemental
Pension Plan together with related form of Trust
Agreement.(2)
10(j)* Form of Morrison Fresh Cooking, Inc. Management Retirement
Plan together with related form of Trust Agreement.(2)
10(k)* Form of Morrison Fresh Cooking, Inc. Salary Deferral Plan
together with related form of Trust Agreement.(2)
10(l)* Form of Morrison Fresh Cooking, Inc. Deferred Compensation
Plan together with related form of Trust Agreement.(2)
10(m)* Form of Morrison Fresh Cooking, Inc. Executive Group Life
and Executive Accidental Death and Dismemberment Plan.(2)
10(n)* Form of Morrison Fresh Cooking, Inc. Executive Life
Insurance Plan.(2)
10(o) Form of Indemnification Agreement to be entered into with
executive officers and directors.(1)
10(p)* Form of Change of Control Agreement to be entered into with
executive officers.(2)
10(q) Non-Qualified Stock Option Agreement between Morrison
Restaurants Inc. and Eugene E. Bishop.(2)
10(r) Non-Qualified Stock Option Agreement between Morrison
Restaurants Inc. and Samuel E. Beall, III.(2)
10(s) Credit agreement dated as of June 19, 1997 between Registrant and
AmSouth Bank of Alabama.
10(t) Severance agreements dated April 4, 1997 between Registrant and
Christopher P. Elliott and Scears Lee, III.
10(u) Form of Amendment Number 1 to Rights Agreement between Morrison
Fresh Cooking, Inc. and SunTrust Bank, Atlanta, as successor
Rights Agent to AmSouth Bank, Alabama.
10(v)* Form of First Amendment to the Morrison Fresh Cooking, Inc.
Executive Supplemental Pension Plan.
Exhibit
Number Description
10(w)* Form of First Amendment to the Morrison Fresh Cooking, Inc.
Management Retirement Plan.
10(x)* Form of Second Amendment to the Morrison Fresh Cooking, Inc.
Management Retirement Plan.
10(y)* Form of First Amendment to the Morrison Fresh Cooking, Inc.
Deferred Compensation Plan.
10(z)* Form of Second Amendment to the Morrison Fresh Cooking, Inc.
Deferred Compensation Plan.
10(aa)* Form of First Amendment to the Morrison Fresh Cooking, Inc.
Salary Deferral Plan.
10(bb)* Form of Second Amendment to the Morrison Fresh Cooking, Inc.
Salary Deferral Plan.
11 Statement regarding computation of per share earnings.
13 Annual Report to Shareholders for the fiscal year ended
May 31, 1997 (only portions specifically incorporated by
reference in the Form 10-K are being filed herewith).
23 Consent of Independent Auditors.
27 Financial Data Schedule.
MORRISON FRESH COOKING, INC.
EXHIBIT FOOTNOTES
Exhibit
Footnote Description
(1) Incorporated by reference to Exhibit of the same number
in the Registrant's Registration Statement on Form 10 filed
with the Commission on February 8, 1996.
(2) Incorporated by reference to Exhibit of the same number
in the Registrant's amendment to Registration Statement on
Form 10/A filed with the Commission on February 29, 1996.
* This is a management contract or compensatory plan or arrangement.
4. Reports on Form 8-K:
The Company did not file any Current Reports on Form 8-K during
the quarter ended May 31, 1997.
(b) Exhibits filed with this report are attached hereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MORRISON FRESH COOKING, INC.
Date 08/22/97 By:/s/ Craig D. Nelson
Craig D. Nelson
Senior Vice President, Finance
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated:
Date 08/22/97 By:/s/ Dolph W. von Arx
Dolph W. von Arx
Chairman of the Board
Date 08/22/97 By:/s/ Ronnie L. Tatum
Ronnie L. Tatum
Chief Executive Officer
and Director
Date 08/22/97 By:/s/ E. Eugene Bishop
E. Eugene Bishop
Director
Date 08/22/97 By:/s/ Donald Ratajczak
Dr. Donald Ratajczak
Director
Date 08/22/97 By:/s/ J. Veronica Biggins
J. Veronica Biggins
Director
Date 08/22/97 By:/s/ Arthur R. Outlaw
Arthur R. Outlaw
Vice Chairman of the Board
MORRISON FRESH COOKING, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER-SHARE DATA)
Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Average common shares outstanding......... 9,067 8,954 (1)
Average additional common shares
issuable on exercise of dilutive
stock options (computed by use of
the "treasury stock method", at the 33 *
average market price)...................
Number of shares used in computation of
primary earnings per share.............. 9,100 * 8,954 8,981
Net Income (Loss)......................... $2,732 ($9,894) $11,374
Primary earnings per common and
common equivalent share................. $0.30 ($1.10) $1.27
FULLY DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Average common shares outstanding......... 9,067 8,954 (1)
Average additional common shares issuable
on exercise of dilutive stock options
(computed by use of the "treasury stock
method", at the higher of period-end 33 *
or average market price)................
Number of shares used in computation of
fully diluted earnings per share........ 9,100 * 8,954 8,981
Net Income (Loss)......................... $2,732 ($9,894) $11,374
Fully diluted earnings per common and
common equivalent share................. $0.30 ($1.10) $1.27
* Per APB 15, due to a net loss dilutive stock options are not reported
because its effect is antidilutive.
(1) Prior to the Distribution earnings per share was calculated based on
the average number of MRI common shares outstanding adjusted for the
1-for-4 distribution ratio.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Morrison Fresh Cooking, Inc. of our
report dated June 20, 1997, included in the 1997 Annual
Report to Shareholders of Morrison Fresh Cooking, Inc.
We also consent to the incorporation by reference in the
Registration Statements of Morrison Fresh Cooking, Inc.
listed below of our report dated June 20, 1997, with respect
to the financial statements incorporated herein by
reference, in this Annual Report (Form 10-K) of Morrison
Fresh Cooking, Inc.
Registration Statement No. 333-2086 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-2088 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-2094 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-2090 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-2092 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-2096 on Form S-8 dated March
8, 1996 and related Prospectus.
Registration Statement No. 333-4498 on Form S-8 dated May 3,
1996 and related Prospectus.
Registration Statement No. 333-4500 on Form S-8 dated May 3,
1996 and related Prospectus.
/s/ Ernst & Young LLP
Atlanta, Georgia
August 19, 1997
MORRISON FRESH COOKING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For an understanding of the significant factors that influenced
the Company's performance during the past three fiscal years, the
following discussion should be read in conjunction with the
Financial Statements and related Notes found on pages 18 to 31.
RESULTS OF OPERATIONS
On March 9, 1996, Morrison Restaurants Inc., a Delaware
corporation (MRI), distributed to its shareholders all of the
issued and outstanding shares of common stock of the Company,
which held the family dining assets and business of MRI (the
"Distribution"). As a result of the Distribution, MRI
shareholders received one share of Company common stock for every
four shares of MRI common stock held. The effective date of the
Distribution for accounting purposes was March 3, 1996, the first
day of the fiscal 1996 fourth quarter of the Company.
Effects of Distribution on Results of Operations
The effect of the Distribution on the results of operations
of the Company for the fiscal years ended June 1, 1996 and June
3, 1995, are presented in the Unaudited Pro Forma Financial
Information in Note 12 of the Financial Statements. Such pro
forma financial information is presented as if the Distribution
had been effected as of the dates indicated.
The following table sets forth selected restaurant operating
data as a percentage of sales for the periods indicated. All
information is derived from the historical financial statements
of the Company included elsewhere in this Annual Report.
Fiscal Year Ended 1997 1996 1995
Net Sales 100.0% 100.0% 100.0%
Operating Costs and Expenses:
Cost of merchandise 28.3% 28.2% 26.8%
Payroll and related costs 36.3% 38.0% 35.8%
Other operating costs 22.5% 20.9% 20.6%
Selling, general and administrative 7.1% 6.6% 6.9%
Depreciation 4.0% 3.8% 3.5%
Interest expense (income), net 0.1% 0.0% (0.1)%
Loss on impairment of assets 5.2%
Restructure costs 3.1%
Total Operating Costs and Expenses 98.3% 105.8% 93.5%
Income (Loss) before Income Taxes 1.7% (5.8)% 6.5%
Provision for (Benefit from) Income 0.6% (2.1)% 2.6%
Taxes
Net Income (Loss) 1.1% (3.7)% 3.9%
1997 Compared to 1996
Net sales decreased $18.0 million, or 6.7%. This decrease in
sales was primarily attributable to two fewer cafeteria units
compared to the prior year and a 2.7% decrease in same-store
sales. The same-store sales decrease was partially mitigated by
an increase in check average due to a price increase implemented
in October 1996.
Cost of merchandise decreased $4.8 million, or 6.3% and was
relatively stable as a percentage of sales. The Company
maintained a flat cost of sales despite heavy to moderate
inflationary food cost pressures during the year, primarily in
the first and second quarters of fiscal 1997. The Company
experienced some food price increases as the result of product
offering changes during the latter part of fiscal 1997.
Payroll and related costs decreased $11.0 million, or 10.8%,
and as a percentage of sales, decreased 1.7 percentage points.
This decrease was the result of a reduction in store-level
management labor and a decrease in average wage rates associated
with the increased use of part-time labor. The labor reduction
was offset by the federal minimum wage increase in October 1996.
Fringe benefit costs decreased from the prior year due to a
decrease in the Company's self-insurance costs for workers'
compensation and medical insurance programs as a result of
improvements in claims experience.
Other operating costs decreased slightly from the prior
year. Rent and leasing expense, the largest components of this
category, remained relatively unchanged as a percentage of sales
from the prior year. The increase as a percentage of sales was
primarily due to an increase in accruals associated with the
expected settlement costs of closed units, as well as increases
in repairs and utilities costs.
Selling, general and administrative expenses increased
slightly over the prior year as a percentage of sales. General
and administrative costs increased as a percentage of sales over
the prior year due to increased management labor associated with
additional supervisory operations positions added to reduce the
number of restaurants supervised by each regional manager.
General and administrative costs were also negatively impacted by
a $0.3 million accrual of severance costs for two executives who
resigned during the fourth quarter of fiscal 1997. Advertising
costs remained relatively flat as a percentage of sales compared
to the prior fiscal year.
Depreciation increased slightly as a percentage of sales due
to equipment upgrades and remodeling programs conducted during
the fiscal year.
Net interest expense increased over the prior year due to
increased borrowing levels maintained during fiscal 1997 over
fiscal 1996.
The effective income tax rate (benefit) increased to 37.2%
in 1997 from (36.5%) in 1996.
1996 Compared to 1995
Net sales decreased $26.9 million, or 9.1%. This decrease
was principally the result of 26 store closings and same-store
customer count declines. Partially offsetting these decreases was
the addition of seven new stores and higher average tray prices
over the prior year.
Cost of merchandise decreased $3.5 million, or 4.5%,
principally due to the reduction in stores and lower sales
volume. However, early in fiscal year 1996, the menu was modified
to offer additional higher-end products, resulting in a higher
cost per meal.
Payroll and related costs decreased $3.8 million, or 3.6%.
The primary factors in this decrease were the reduction in
stores, the implementation of a self-serve beverage counter, a
kitchen labor reduction program and the use of an enhanced labor
scheduling tool. Management and hourly wage rate increases
partially offset this decrease.
Other operating costs decreased $4.4 million, or 7.3%. The
principal contributors to this decrease were reduction in stores,
offset partially by the settlement of a four-year-old claim.
Selling, general and administrative expenses decreased $2.8
million, or 13.6%. The majority of this decrease was associated
with the reduction in advertising promotions conducted by the
Company during the year.
Depreciation decreased $0.2 million, or 1.9%, and was
related to the reduction in stores, offset by the addition of
$14.7 million in capital expenditures.
Net interest income decreased $0.4 million as a result of
the reduction in available funds to invest stemming from lower
sales volume.
In the third quarter of fiscal 1996, the Company adopted
Statement of Financial Accounting Standards No. 121 (FAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-
lived Assets to be Disposed Of". In the third quarter of fiscal
1996, the Company recorded a $13.8 million charge for loss on
impairment of assets, $1.5 million of which was due to the
adoption of FAS 121. Of this charge, $8.7 million related to
assets to be disposed of, largely due to 15 quick service
restaurants and seven traditional cafeterias that were closed in
fiscal 1996, and the remaining $5.1 million related to a write-
down of impaired assets that will continue to be carried in
operations. See Note 10 of the Financial Statements for more
information on this charge.
The Company also recorded an $8.3 million restructure
charge in the third quarter of fiscal 1996. This restructure
charge was largely composed of $6.1 million for costs to be
incurred to settle lease obligations for the 15 quick service
restaurants and seven cafeterias that were closed. The remaining
$2.2 million of the charge related to various asset write-offs
and professional fees associated with the Distribution. See Note
11 of the Financial Statements for more information on this
charge.
The effective income tax rate (benefit) decreased to
(36.5%) in 1996 from 40.5% in 1995. This decrease was due to the
nondeductibility of a portion of the professional fees associated
with the restructuring, which resulted in a lower tax benefit
from the pre-tax loss.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
During 1997, cash generated from operations of $8.3 million
combined with cash available from lines of credit was used to
fund $14.1 million of net capital expenditures and $3.3 million
of dividends. There were $7.5 million in short-term borrowings
under the Company's line of credit as of May 31, 1997, an
increase of $7.5 million over the prior year. See the Statements
of Cash Flows on page 21 for more information.
Capital Expenditures
Property and equipment expenditures for fiscal 1997 were
$14.1 million, 4.6% lower than the prior year. During 1997, three
cafeteria-style restaurants (two small cafeterias and one mall
food court) were opened and four traditional cafeterias were
closed. The Company spent approximately $4.5 million on
technology upgrade programs during the fiscal year. Capital
expenditures for fiscal 1998 are expected to be $14.8 million.
Expected openings for fiscal year 1998 include six small
cafeterias. The Company anticipates that capital expansion will
be funded primarily by operations supplemented by incremental
borrowings from its line of credit when necessary. See "Special
Note Regarding Forward-Looking Information".
Borrowings and Credit Facilities
The Company had a committed line of credit totaling $10.0
million at May 31, 1997, which had a balance outstanding of $7.5
million as of the fiscal year end. There was also an additional
$5.0 million uncommitted portion of this same facility which was
unused during the fiscal year. Subsequent to fiscal 1997, the
Company replaced this line of credit with a $30.0 million
committed line of credit with another bank. This new line of
credit is considered adequate by the Company to provide for its
financing needs over the next three fiscal years. See "Special
Note Regarding Forward-Looking Information".
Dividends
Cash dividends paid to stockholders during 1997 equaled $3.3
million ($0.36 per share).
Deferred Tax Assets
The recognition of deferred tax assets depends on the
anticipated existence of taxable income in future periods in
amounts sufficient to realize the assets. Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes", specifies that deferred tax assets are to be reduced if
it is believed more likely than not that some or all of the
deferred tax assets will not be realized. Management believes
that future taxable income should be sufficient to realize all of
the Company's deferred tax assets based on the historical
earnings of the Company; therefore, a valuation allowance has not
been established. See "Special Note Regarding Forward-Looking
Information".
KNOWN EVENTS, UNCERTAINTIES AND TRENDS
New Accounting Standards
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 (FAS
128), "Earnings Per Share", which is required to be adopted for
financial statements issued after December 15, 1997. At that
time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be
excluded. The change is not expected to have a material impact on
the Company's primary or fully diluted earnings per share.
Impact of Inflation
In the past, the Company has been able to recover
inflationary cost increases through increased menu prices. There
have been, and there may be in the future, delays in implementing
such menu price increases, and competitive pressures may limit
the Company's ability to recover such cost increases in their
entirety. At present, the minimum wage is scheduled to increase
again on September 1, 1997 which may negatively impact the
Company's payroll costs in the short-term, but which Management
feels can be negated in the long-term through increased
efficiencies in its operations. Historically, the effects of
inflation on the Company's net income have not been materially
adverse.
Management's Outlook
The Company intends to grow primarily through same-store
customer and sales increases, as well as to achieve profitability
growth through cost management. To help accomplish this, the
Company will make its restaurants more convenient for the
customer by locating to freestanding sites when appropriate.
Incremental new restaurant growth will be managed to a level
which can be funded from operating cash flows, supplemented by
borrowings when appropriate. Management's focus in the short term
will be on improving operating margins at the restaurant level,
as well as leveraging overhead and general and administrative
expenses. Management consistently evaluates its advertising
expenditures and anticipates marketing its restaurants at a rate
consistent with prior years based on the effectiveness of its
efforts. See "Special Note Regarding Forward-Looking
Information".
Special Note Regarding Forward-Looking Information
The foregoing section contains various "forward-looking
statements" which represent the Company's expectations or beliefs
concerning future events, including the following: statements
regarding unit growth, future capital expenditures and future
borrowings. The Company cautions that a number of important
factors could, individually or in the aggregate, cause actual
results to differ materially from those included in the forward-
looking statements including, without limitation, the following:
consumer spending trends and habits; mall-traffic trends;
increased competition in the restaurant market; weather
conditions in the regions in which the Company operates
restaurants; consumers' acceptance of the Company's development
concepts; and laws and regulations affecting labor and employee
benefit costs.
MORRISON FRESH COOKING, INC.
SUMMARY OF OPERATIONS
(In thousands except per-share data)
For the Fiscal Year Ended
May 31, June 1, June 3, June 4, June 5,
1997 1996 1995 1994 1993
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Sales $ 249,637 $ 267,638 $ 294,587 $ 292,493 $ 291,032
Income Before Loss on
Impairment of Assets,
Restructure Costs, Income
Taxes and Cumulative Effect
of Accounting Changes $ 4,349 $ 6,491 $ 19,108 $ 16,724 $ 13,110
Loss on Impairment of Assets 13,789
Restructure Costs 8,290
Income (Loss) Before Income Taxes
and Cumulative Effect of
Accounting Changes 4,349 (15,588) 19,108 16,724 13,110
Provision for (Benefit from)
Income Taxes 1,617 (5,694) 7,734 6,646 4,898
Income (Loss) Before Cumulative
Effect of Accounting
Changes 2,732 (9,894) 11,374 10,078 8,212
Cumulative Effect of Accounting
Changes, net:
Postretirement Benefits (1,921)
Income Taxes 1,409
Net Income (Loss) $ 2,732 $ (9,894) $ 11,374 $ 10,078 $ 7,700
Earnings (Loss) Per Common and
Common Equivalent Share $ 0.30 $ (1.10) $ 1.27 $ 1.08 $ 0.81
Weighted Average Common and
Common Equivalent Shares 9,100 8,954 8,981 9,342 9,520
All fiscal years are composed of 52 weeks.
Other Financial Data:
Total Assets $ 84,028 $ 83,539 $ 90,122 $ 77,461 $ 82,077
Short Term Borrowings $ 7,461 $ 0 $ 0 $ 0 $ 0
Long-Term Capital Leases$ 662 $ 775 $ 848 $ 931 $ 1,008
Stockholders' Equity $ 39,944 $ 39,844 $ 47,465 $ 29,303 $ 32,623
Current Ratio 0.4:1 0.5:1 0.4:1 0.4:1 0.5:1
Cash Dividends Per
Common Share $ 0.36 $ 0.09 $ 0.00 $ 0.00 $ 0.00
</TABLE>
MORRISON FRESH COOKING, INC.
STATEMENTS OF OPERATIONS
(In thousands except per-share data)
For the Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
<TABLE>
<S> <C> <C> <C>
Net Sales $ 249,637 $ 267,638 $ 294,587
Operating Costs and Expenses:
Cost of merchandise 70,684 75,458 78,987
Payroll and related costs 90,712 101,718 105,472
Other operating costs 56,163 56,184 60,618
Selling, general and administrative 17,639 17,658 20,426
Depreciation 9,950 10,078 10,277
Interest expense (income), net 140 51 (301)
Loss on impairment of assets 13,789
Restructure costs 8,290
245,288 283,226 275,479
Income (Loss) Before Income Taxes 4,349 (15,588) 19,108
Provision for (Benefit from) Income Taxes 1,617 (5,694) 7,734
Net Income (Loss) $ 2,732 $ (9,894) $ 11,374
Earnings (Loss) Per Common and
Common Equivalent Share $ 0.30 $ (1.10) $ 1.27
Weighted Average Common and Common
Equivalent Shares 9,100 8,954 8,981
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
BALANCE SHEETS
(In thousands)
For the Fiscal Year Ended
May 31, June 1,
1997 1996
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 2,939 $ 1,561
Receivables:
Trade 321 412
Other 1,226 1,495
Inventories:
Merchandise 1,488 1,335
China, silver and supplies 924 1,081
Prepaid expenses 1,545 1,791
Deferred income tax benefits - current 5,027 5,605
Total Current Assets 13,470 13,280
PROPERTY AND EQUIPMENT - at cost:
Land 6,666 6,436
Buildings 19,882 18,762
Improvements 58,017 57,186
Restaurant equipment 56,265 53,143
Other equipment 14,277 13,232
Construction in progress 6,627 6,183
161,734 154,942
Less accumulated depreciation and amortization (100,834) (95,828)
60,900 59,114
Deferred income tax benefits 2,615 3,325
Other assets 7,043 7,820
TOTAL ASSETS $ 84,028 $ 83,539
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,212 $ 9,579
Accrued liabilities:
Taxes, excluding income taxes 2,621 2,983
Payroll and related costs 4,889 4,082
Insurance 4,257 5,829
Rent and other 2,910 4,484
Short term borrowings 7,461
Current portion of capital lease obligations 103 77
Total Current Liabilities 30,453 27,034
Capital lease obligations 662 775
Employee benefit obligations 8,285 8,620
Other deferred liabilities 4,684 7,266
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value (100,000 shares
authorized; 9,214 shares issued - 1997,
9,049 shares issued - 1996) 90 90
Capital in excess of par value 41,428 40,279
Accumulated deficit 593) (70)
Treasury stock (266) (455)
Unearned ESOP shares (715)
Total Stockholders' Equity 39,944 39,844
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 84,028 $ 83,539
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except per-share data)
Total
Capital in Unearned Stock-
Common Stock Excess of Accumulated Treasury Stock* ESOP holders'
Shares Amount Par Value Deficit Shares Amount Shares Amount Equity
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 4, 1994 29,303 29,303
Net Income 11,374 11,374
Net transfers from MRI 6,788 6,788
Balance, June 3, 1995 47,465 47,465
Net Income (Loss) as of
March 2, 1996 (10,615) (10,615)
Post-distribution Net Income 721 721
Net transfers from MRI 1,747 1,747
Shares issued pursuant to the
Distribution
8,839 88 367 48 (455) 0
Shares issued under stock bonus and
stock option plans
210 2 1,315 1,317
Cash Dividends of
$.09 per common share (791) (791)
Balance, June 1, 1996
9,049 90 40,279 (70) 48 (455) 39,844
Net Income 2,732 2,732
ESOP funding 734 151 (734) 0
Shares allocated under
ESOP 4 1 (4) 19 20
Deferred Compensation Plan (4) 189 189
Shares issued under
stock bonus and stock option
plans 14 414 414
Cash Dividends of
$.36 per common share (3,255) (3,255)
Balance, May 31, 1997
9,067 $ 90 $ 41,428 $ (593) 44 $(266) 147 $(715) $39,944
</TABLE>
The accompanying notes are an integral part of the financial
statements.
* Treasury shares are held exclusively in an irrevocable rabbi
trust for the Morrison Fresh Cooking, Inc. Deferred
Compensation Plan.
MORRISON FRESH COOKING, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
For the Fiscal Year Ended
May 31, June 1, June 3,
1997 1996 1995
<TABLE>
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss) $ 2,732 $ (9,894) $ 11,374
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 9,950 10,078 10,277
Deferred income taxes 1,617 (5,694) 1,624
(Gain)/Loss on disposition and write-down
of assets (1,122) 13,789 605
Changes in operating assets and liabilities:
(Increase)/decrease in receivables 360 (354) (450)
(Increase)/decrease in inventories 4 819 (456)
(Increase)/decrease in prepaid and
other assets 1,023 1,456 (311)
Increase/(decrease) in accounts payable,
accrued and other liabilities (6,264) 1,117 (5,764)
Net Cash Provided by Operating Activities 8,300 11,317 16,899
Investing Activities:
Purchases of property and equipment (14,068) (14,742) (19,422)
Proceeds from disposal of assets 2,404 1,160 154
Other, net (4,110)
Net Cash Used by Investing Activities (11,664) (13,582) (23,378)
Financing Activities:
Principal payments on capital leases (87) (79) (75)
Short-term borrowings 7,461
Proceeds from issuance of stock 414 1,317
Dividends paid (3,255) (791)
ESOP shares released 20
Decrease in treasury stock held by Deferred
Compensation Plan 189
Net transfers from Morrison Restaurants
Inc. 1,747 6,788
Net Cash Provided by Financing Activities 4,742 2,194 6,713
Increase/(decrease) in cash and short-term
Investment 1,378 (71) 234
Cash and short-term investments at the beginning
of the year 1,561 1,632 1,398
Cash and short-term investments at the end of
the year $ 2,939 $ 1,561 $ 1,632
Supplemental Disclosure of Cash Flow Information
Cash Paid for:
Interest (net of amount capitalized) $ 153 $ 45 $ 82
Income taxes, net $ 0 $ 0 $ 8,901
</TABLE>
The accompanying notes are an integral part of the financial statements.
MORRISON FRESH COOKING, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The operations of Morrison Fresh Cooking, Inc., a Georgia
corporation (the Company), consist of 154 family style
restaurants in the southeastern and mid-Atlantic regions of the
United States, with the largest number in Florida, Georgia,
Virginia, Alabama and Mississippi. The Company's restaurants
provide cafeteria-style service and are located in shopping and
business developments as well as residential areas. The
restaurants are generally open for lunch and dinner service,
seven days a week. All restaurants are Company-owned.
Basis of Presentation
On March 9, 1996, Morrison Restaurants Inc. (MRI)
distributed to its shareholders all of the issued and outstanding
shares of common stock of the Company, which held the family
dining assets and business of MRI. For financial reporting
purposes, the Distribution is assumed to have become effective on
March 3, 1996, the first day of the fourth quarter of fiscal year
1996. The accompanying comparative financial statements were
prepared as if MRI's family dining business had operated as a
stand-alone entity for all periods presented. Such statements
include the assets, liabilities, revenues and expenses that are
directly related to the Company's operations. For periods prior
to the Distribution, they also include an allocation of certain
assets, liabilities and general corporate expenses of MRI, such
as executive payroll, legal, data processing and interest, which
are related to the Company. Amounts were allocated using a
specific identification method where appropriate and on a pro
rata basis otherwise. Management believes the allocation methods
used are reasonable.
Certain 1996 balances have been reclassified between other
deferred liabilities and deferred tax assets to reflect
refinements in the allocation of liabilities at the time of
Distribution.
Use of Estimates in Financial Statements
Judgement and estimation are exercised by Management in
certain areas of the preparation of financial statements. Some of
the more significant areas include reserves for self insurance of
workers' compensation, general liability and medical benefits, as
well as the estimates of impairment losses, restructuring
expenses and the reates have been based on reasonable
assumptions and that provisions and reserves based on such
estimates are adequate. Actual results could differ from those
estimates.
Fiscal Year
The Company's fiscal year ends on the first Saturday after
May 30. The fiscal years ended May 31, 1997, June 1, 1996 and
June 3, 1995, were composed of 52 weeks.
Fair Value of Financial Instruments
The Company's financial instruments at May 31, 1997 and June
1, 1996 consisted of cash and short-term investments, receivables
and short-term borrowings. The fair value of these financial
instruments approximated the carrying amounts reported in the
balance sheets. The Company considers short-term marketable
securities with a maturity of three months or less when purchased
to be short-term investments.
Advertising
The Company expenses the costs of all advertising in the
period incurred.
Inventories
Inventories consist of food supplies and china and silver,
and are stated at the lower of cost (first in, first out) or
market.
Property and Equipment and Depreciation
Depreciation for financial reporting purposes is computed
using the straight-line method over the estimated useful lives of
the assets or, for capital lease property, over the term of the
lease, if shorter. Annual rates of depreciation range from 3% to
5% for buildings and from 8% to 34% for restaurant and other
equipment.
As discussed in Note 10, during fiscal year 1996, the
Company adopted Statement of Financial Accounting Standards No.
121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". FAS 121
requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Long-
lived assets and certain identifiable intangibles to be disposed
of are generally to be reported at the lower of carrying amount
or fair value, less cost to sell. In association with the
Company's adoption of FAS 121 in fiscal year 1996, a charge of
$13.8 million was recorded for the impairment of assets. Prior to
fiscal year 1996, the Company recognized asset impairment upon
the decision to close a unit.
Income Taxes
Deferred income taxes are determined utilizing a liability
approach. This method gives consideration to the future tax
consequences associated with differences between financial
accounting and tax bases of assets and liabilities. For periods
prior to the Distribution reflected in the accompanying
statements of operations, the income tax expense reflected
includes the Company's allocated share of MRI's tax expense. The
allocated income tax expense approximates the tax expense of the
Company on a stand-alone basis.
Pre-Opening Expenses
Salaries, personnel training costs and other expenses of
opening new facilities are charged to expense as incurred.
Earnings Per Share
Earnings per share are based on the weighted average number
of shares outstanding during the year and are adjusted for the
assumed exercise of options, after the assumed repurchase of
shares with the related proceeds and after the adjustment for any
stock splits and stock dividends through May 31, 1997.
For fiscal year 1996, shares issued in the Distribution were
assumed to have been issued for the entire year. For prior years,
the number of shares used in computing earnings per share was
based on the average number of MRI common shares outstanding
during the applicable fiscal year, adjusted for the 1-for-4
distribution ratio.
Stockholders' Equity
The Company's Certificate of Incorporation provides that
authorized capital stock will consist of 100,000,000 shares of
common stock at $0.01 par value and 250,000 shares of preferred
stock at $0.01 par value. As a result of the Distribution, one
share of Company common stock was issued for every four shares of
MRI common stock outstanding. No shares of preferred stock are
issued or outstanding.
Stock-Based Employee Compensation Plans
The Company has elected to follow Accounting Principles
Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees" and related Interpretations, in accounting for its
employee stock options and adopted the disclosure-only provisions
of Statement of Financial Accounting Standards No. 123 (FAS 123),
"Accounting for Stock-Based Compensation". The Company grants
stock options for a fixed number of shares to employees with an
exercise price equal to the market value of the shares at the
date of grant, and accordingly recognizes no compensation expense
for the stock option grants.
Insurance Programs
The Company is generally self-insured for costs related to
workers' compensation, health and welfare claims, business
interruption resulting from certain events, and comprehensive
general, product and vehicle liability. Losses are accrued using
actuarial assumptions followed in the insurance industry,
adjusted for company-specific history and expectations. The
Company uses commercial insurance as a risk reduction strategy to
minimize catastrophic losses.
2. Short-Term Borrowings
At May 31, 1997, the Company had $7.5 million in borrowings
under a $15 million line of credit. The interest rate on this
line of credit at May 31, 1997 was 8.5%. There were no borrowings
under this line of credit at June 1, 1996.
In June 1997, the Company replaced this line of credit with
a three-year $30 million credit facility with another financial
institution. This credit facility consists of a $25 million
revolving line of credit which allows the Company to borrow under
various interest rate options and a $5 million credit line toward
letters of credit issued with respect to the Company's self-
insurance programs. Commitment fees of 0.35% per annum are
payable on the unused portion of the $25 million revolving line
of credit. This credit facility contains certain restrictions,
including, but not limited to, incurring additional indebtedness
and certain funded debt, net worth and fixed charge coverage
requirements.
3. LEASES
Various operations of the Company are conducted in leased
premises. Initial lease terms expire at various dates over the
next 20 years and may provide for escalation of rent during the
lease term. Most of these leases provide for additional
contingent rents based upon sales volume and contain options to
renew (at adjusted rentals for some leases).
Assets recorded under capital leases are included in
Property and Equipment in the accompanying balance sheets.
At May 31, 1997, the future minimum lease payments under
capital leases and operating leases for the next five years and
in the aggregate are as follows:
(In thousands)
Capital Operating
Leases Leases
1998 265 $ 10,730
1999 140 9,517
2000 140 8,522
2001 140 7,156
2002 140 6,204
Subsequent years 188 16,816
Total minimum lease payments 1,013 $ 58,945
Less amount representing interest (248)
Present value of minimum lease payments
under capital leases (including current
maturities of $103) $ 765
Rental expense pursuant to operating leases is summarized as
follows:
(In thousands)
May 31, June 1, June 3,
1997 1996 1995
Minimum rent $ 11,706 $ 11,896 $ 12,173
Contingent rent 3,745 5,133 3,913
$ 15,451 $ 17,029 $ 16,086
On May 30, 1997, the Company entered into a sale-leaseback
transaction resulting in a gain of $1.6 million to be deferred
over the ten-year life of the lease. The Company classifies the
lease as an operating lease. Terms of the lease require minimum
lease payments plus a percentage of gross sales. The Company is
responsible for real estate taxes and flood insurance on the
property.
At May 31, 1997, the future minimum rent payments to be
received on subleases for the next five years and in the
aggregate are as follows:
(In thousands)
Sub
Leases
1998 $ 237
1999 304
2000 238
2001 232
2002 232
Subsequent years 183
Total minimum lease payments $ 1,426
4. INCOME TAXES
The components of income tax expense (benefit) are as follows:
(In thousands)
May 31, June 1, June 3,
1997 1996 1995
Current:
Federal $ 0 $ 0 $ 5,047
State 0 0 1,063
0 0 6,110
Deferred:
Federal 1,396 (4,689) 1,445
State 221 (1,005) 179
1,617 (5,694) 1,624
$ 1,617 $ (5,694) $ 7,734
Deferred tax assets and liabilities are comprised of the
following:
(In thousands)
May 31, June 1,
1997 1996
Deferred Tax Assets
Employee benefits $ 3,438 $ 4,102
Insurance reserves 2,234 3,052
Restaurant closing reserve 444 2,155
Net operating loss 4,196 2,234
Deferred income 583 0
Other 967 2,075
Total deferred tax assets 11,862 13,618
Deferred Tax Liabilities
Depreciation 1,039 1,423
Retirement plans 801 827
Prepaid deductions 84 226
Restructuring 0 765
Intangibles and other 2,296 1,447
Total deferred tax liabilities 4,220 4,688
Net deferred tax asset $ 7,642 $ 8,930
FAS 109 specifies that deferred tax assets are to be reduced
by a valuation allowance if it is more likely than not that some
portion of the deferred tax assets will not be realized.
Management believes that future taxable income should be
sufficient to realize all of the Company's deferred tax assets
based on historical earnings of the Company; therefore, a
valuation allowance has not been established.
A reconciliation from the statutory federal income tax
expense (benefit) to the reported income tax expense (benefit) is
as follows:
(In thousands)
May 31, June 1, June 3,
1997 1996 1995
Statutory Federal income tax
(benefit) $ 1,479 $ (5,456) $ 6,688
State income taxes, net of
federal income tax benefit 146 (653) 807
Tax credits (33) (20) (346)
Other, net 25 435 585
$ 1,617 $ (5,694) $ 7,734
The effective income tax (benefit) rate was 37.2%, (36.5%),
and 40.5% in 1997, 1996, and 1995, respectively.
For federal income tax purposes, the Company has a net
operating loss carryforward of $1.9 million which expires in
fiscal 2011. This loss was generated by the income tax returns
filed by the Company for the short tax year beginning March 3,
1996 and ending June 1, 1996. The net operating loss carryforward
generated by fiscal 1997 operations is estimated at $8.5 million
and will expire in fiscal 2012.
In connection with the Distribution, the Company entered
into a tax allocation agreement with Morrison Health Care, Inc.,
which was also spun-off to the shareholders of MRI, and Ruby
Tuesday, Inc., successor to MRI. This agreement provides that the
Company pay its share of Ruby Tuesday, Inc.'s (as successor to
MRI) consolidated tax liability for the tax years that the
Company was included in MRI's consolidated federal income tax
return. The agreement also provides for sharing, where
appropriate, of state, local and foreign taxes attributable to
periods prior to the Distribution date.
5. EMPLOYEE BENEFIT PLANS
The Company maintains the following employee benefit plans.
Salary Deferral Plan - Under the Morrison Fresh Cooking,
Inc. Salary Deferral Plan each eligible employee may elect to
make pre-tax contributions to a trust fund in amounts ranging
from 2% to 10% of their annual earnings. Employees contributing a
pre-tax contribution of at least 2% may elect to make after-tax
contributions not in excess of 10% of annual earnings. The
Company contribution to the Plan is based on the employee's pre-
tax contribution and years of service. After three years of
service (including service with MRI prior to the Distribution),
the Company contributes 20% of the employee's pre-tax
contribution, 30% after ten years of service and 40% after 20
years of service. The Company's contributions and allocated
contributions to the trust fund approximated $284,000, $308,000
and $303,000 for 1997, 1996 and 1995, respectively.
On February 28, 1997, the Company began sponsorship of an
employee stock ownership feature (ESOP) covering participants in
the Salary Deferral Plan. Under this feature, the Company issued
150,907 shares of its common stock with a fair market value of
$4.88 per share to the Salary Deferral Plan in exchange for a ten-
year note of $736,000 executed by the Plan's trustee. Repayment
of the loan is being funded by matching employer contributions to
the Plan. Shares purchased with the loan are allocated to
participants' accounts over time as loan repayments are made.
There were 3,890 shares allocated to the Plan in 1997. The market
value of unallocated shares was $735,000 at May 31, 1997.
The Company adopted the provisions of AICPA Statement of
Position No. 93-6 (SOP) which requires that compensation expense
be measured based on the fair value of the shares over the period
the shares are earned. Compensation expense was approximately
$20,000 in 1997. Dividends paid on unallocated shares held by the
ESOP are used to make additional principal and interest payments
and are not charged to retained earnings. Shares not yet
committed to be released are not considered outstanding in the
calculation of earnings per share.
Deferred Compensation Plan - The Company maintains the
Morrison Fresh Cooking, Inc. Deferred Compensation Plan for
certain selected employees. The provisions of this Plan are
similar to those of the Salary Deferral Plan. The Company's
contributions under the Plan approximated $62,000, $119,000, and
$102,000 for 1997, 1996, and 1995, respectively. Company assets
earmarked to pay benefits under the Plan are held by an
irrevocable rabbi trust. Assets of the irrevocable rabbi trust
are accounted for as if they are assets of the Company and all
earnings and expenses are recorded in the Company's financial
statements. The net of the rabbi trust's earnings and losses is
recorded as additional liability to the participants and is
considered to be interest expense to the Company. Assets in the
irrevocable rabbi trust approximated $3,148,000 and include
$266,000 of Company common stock which is accounted for as
treasury stock at May 31, 1997.
Retirement Plan - The Company is a co-sponsor of the
Morrison Restaurants Inc. Retirement Plan along with Ruby
Tuesday, Inc. and Morrison Health Care, Inc. The MRI Retirement
Plan was frozen on December 31, 1987. Participants receive
benefits based upon salary and length of service. No contribution
was made by the Company in 1997. Pension expense or income
related to the Plan was insignificant in 1997, 1996 and 1995. The
Plan's assets include common stock, fixed income securities,
short-term investments and cash. The Company will continue to
share in future expenses of the Plan, and will make contributions
to the Plan as necessary, on behalf of its employees.
Executive Supplemental Pension Plan - Under the Morrison
Fresh Cooking, Inc. Executive Supplemental Pension Plan,
employees with an average compensation of at least $120,000 for
the immediately preceding two calendar years and who have
completed five years (including service with MRI prior to the
Distribution) in a qualifying position become eligible to earn
supplemental retirement income based upon salary and length of
service (including service with MRI prior to the Distribution)
reduced by social security benefits and amounts otherwise
receivable under the Retirement Plan.
Management Retirement Plan - Under the Morrison Fresh
Cooking, Inc. Management Retirement Plan, individuals who have 15
years of credited service (including service with MRI prior to
the Distribution) and whose average annual compensation equaled
or exceeds $40,000, become participants. Participants receive
benefits based upon salary and length of service (including
service with MRI prior to the Distribution) reduced by social
security benefits and benefits payable under the Retirement Plan
and Executive Supplemental Pension Plan.
To provide a source for the payment of benefits under the
Executive Supplemental Pension Plan and the Management Retirement
Plan, the Company owns whole-life insurance contracts on some of
the participants. The cash value of these policies net of policy
loans was $678,000 at May 31, 1997. The Company has established
an irrevocable rabbi trust to hold the policies and death
benefits as they are received. Expenses recorded for the
Executive Supplemental Pension Plan and the Management Retirement
Plan were $534,000, $512,000 and $508,000 for 1997, 1996 and
1995, respectively.
The following table details the allocation of the components
of pension expense, as well as a comparison of assets to
obligations and amounts recognized in the Company's financial
statements for the Management Retirement Plan, the Executive
Supplemental Pension Plan, and the Retirement Plan.
(In thousands)
Assets Exceed Accumulated Benefits Exceed Assets-
Accumulated Benefits- Executive Supplemental Pension Plan
Retirement Plan and Management Retirement Plan
May 31, June 1, June 3, May 31, June 1, June 3,
1997 1996 1995 1997 1996 1995
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Components of pension expense (income):
Service cost $ $ $ $ 69 $ 56 $ 66
Interest cost 647 660 820 295 312 250
Actual return on
plan assets (1,307) (1,556) (263)
Amortization and
deferral 623 983 (622) 170 144 111
Other 81
$ (37) $ 87 $ (65) $ 534 $ 512 $ 508
Plan assets at fair
value $ 9,161 $ 8,903 $ 10,066 $ 0 $ 0 $ 0
Actuarial present value of
projected benefit obligations:
Accumulated benefit obligations:
Vested 8,527 8,764 9,846 3,148 2,040 3,108
Nonvested 0 0 7
Provision for future salary
increases 837 852 799
Total projected benefit
obligations 8,527 8,764 9,846 3,985 2,892 3,914
Excess (deficit) of plan assets over
projected benefit
obligations 634 139 220 (3,985) (2,892) (3,914)
Unrecognized net loss
(gain) 871 1,200 1,960 (101) 81 (239)
Unrecognized prior
service cost 381 450 602
Unrecognized net transition
obligation 641 769 1,077 981 710 899
Additional minimum
liability (923) (445) (524)
Prepaid (accrued)
pension cost $ 2,146 $ 2,108 $ 3,257 $(3,647) $(2,096) $(3,176)
</TABLE>
The weighted-average discount rate for all three plans is
8.25%, 7.75% and 8.5% for 1997, 1996, and 1995, respectively. The
rate of increase in compensation levels for the Executive
Supplemental Pension Plan and Management Retirement Plan is 4%
for 1997, 1996 and 1995. The expected long-term rate of return on
Plan assets for the Retirement Plan is 10% for all three years.
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care benefits and life
insurance benefits to eligible retirees. Effective June 7, 1992,
the Company amended the plan to fix the Company's current and
future contribution levels to the Benefit Plan at the rates in
place at that time. Increases in health care benefits above such
rates are borne by the participants. Measurement of the
accumulated postretirement benefit obligation was based on an
assumed 8.25% discount rate for fiscal 1997, 7.75% for fiscal
1996 and 8.5% for fiscal 1995. Benefits are funded as medical
claims and life insurance premiums are incurred. Retirees become
eligible for retirement benefits if they have met certain service
and minimum age requirements at date of retirement. The Company
accrues expenses related to postretirement health care and life
insurance benefits during the years an employee provides
services.
The actuarial present value of accumulated postretirement
benefit obligations and the amounts recognized in the Company's
balance sheets are as follows:
(In thousands)
May 31, June 1,
1997 1996
Retirees $ 1,867 $ 2,035
Fully eligible active plan participants 458 444
Other active plan participants 260 261
Accumulated postretirement benefit obligation 2,585 2,740
Unrecognized net loss (660) (848)
Unrecognized prior service cost 251 284
Accrued postretirement benefit cost $ 2,176 $ 2,176
The postretirement benefit cost is as follows:
(In thousands)
May 31, June 1, June 3,
1997 1996 1995
Service cost $ 8 $ 9 $ 22
Interest cost 203 223 307
Amortization of unrecognized net loss 60 40 95
Postretirement benefit cost $ 271 $ 272 $ 424
7. EMPLOYEE STOCK INCENTIVE PLANS
The Company's 1996 Stock Incentive Plan provides for a
committee appointed by the Board and authorizes the committee the
discretion to grant a variety of equity-based awards to eligible
persons. The plan has 595,000 shares of common stock authorized
for issuance. Options granted have a five-year term and become
fully vested and exercisable either two or three years from the
grant date. The 1996 Non-Executive Stock Incentive Plan has
1,985,000 shares authorized for the issuance of stock to non-
executive management personnel. Criteria for granting options and
vesting schedules are identical to those of the 1996 Stock
Incentive Plan.
The Stock Incentive and Deferred Compensation Plan for
Directors has 85,000 shares authorized for issue. The Plan
requires that directors use 60% of their retainer to purchase
shares of Company stock if they have not attained a specified
level of ownership. Participants receive 15% of the purchased
amount as bonus shares and a non-qualified stock option equal to
three times the total shares received. All options are fully
vested and exercisable after six months and have a term of five
years from the grant date.
Under the terms of the Distribution, employees of the
Company who were holders of MRI stock options received adjusted,
substitute options which, in the aggregate, preserved the
economic value as well as the material terms, such as option
period, vesting provisions and payment terms, the optionee had in
the original MRI options prior to the Distribution. Vested and
non-vested MRI options were adjusted by granting new option
rights to acquire Ruby Tuesday, Inc. and Morrison Health Care,
Inc. stock in addition to Company stock.
The Company applies APB 25 and related interpretations in
accounting for its employee stock options. In contrast to the
intrinsic value based method employed by APB 25, Statement of
Financial Accounting Standards No. 123 (FAS 123) "Accounting for
Stock-Based Compensation," utilizes a fair value based method.
FAS 123 requires the use of option valuation models developed for
estimating the fair value of traded options which are fully
transferable and have no vesting restrictions. Option valuation
models also utilize highly subjective assumptions such as
expected stock price volatility. Changes in the assumptions can
materially impact the fair value estimate and, in Management's
opinion, do not necessarily provide a reliable single measure of
the fair value of its employee stock options. Adoption of the
cost recognition requirements of FAS 123 is optional; however,
the required pro forma disclosures as if the Standard was adopted
in 1996 are presented on the following page.
All stock options are awarded at the prevailing market value
on the date of grant; therefore, under the intrinsic value method
employed by APB 25, no compensation expense is recognized. For
purposes of FAS 123 disclosure, the estimated fair value of the
options is expensed over the vesting period of the options. Fair
value was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted average
assumptions for 1997 and 1996, respectively: (i) risk-free
interest rates of 6.24% and 5.64%, (ii) dividend yield of 7.3%
and 4.6%, (iii) stock price volatility factor of .27 and .23, and
(iv) expected option life of 4.3 years. Options replacing those
originally granted prior to the Distribution were valued as of
the original date of grant. If the Company had adopted FAS 123 in
accounting for stock options granted in fiscal years 1997 and
1996, its net income and earnings per share would approximate the
pro forma amounts below (in thousands except for per share data):
1997 1996
As Reported Pro Forma As Reported ProForma
Net Income (Loss)......... $ 2,732 $ 2,567 $ (9,894) $ (9,951)
Earnings per Share........ $ 0.30 $ 0.28 $ (1.10) $ (1.11)
The effects of applying FAS 123 in this pro forma disclosure
may not be indicative of future results. FAS 123 does not apply
to awards made prior to 1996 and additional awards in future
years are anticipated.
The following table summarizes the activity in options under
all plans as of May 31, 1997 and June 1, 1996 (in thousands):
1997 1996
Wtd. Avg. Wtd.Avg.
Exercise Exercise
Shares Price Shares Price
Outstanding at beginning of year 1,875 $ 6.69 0
Replacement options granted 0 1,114 5.78
Granted 44 5.15 846 7.75
Exercised (111) 3.26 (65) 4.29
Forfeited (330) 7.73 (20) 9.18
Balance at end of year 1,478 6.68 1,875 6.69
Exercisable at end of year 796 5.92 778 5.46
Shares available for future grant 1,187 751
Weighted average fair value of options
granted during the year $0.74 $1.27
Information regarding stock options outstanding at the end
of the current fiscal year are summarized in the following table
(in thousands):
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Range of Options Remaining Average Options Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 5/31/97 Life in Yrs. Price at 5/31/97 Price
$3.34 to $5.41 566 2.3 $4.86 538 $4.87
$5.41 to $7.38 146 4.4 $6.07 60 $5.79
$7.75 to $7.75 523 3.9 $7.75 3 $7.75
$8.10 to $11.75 243 1.8 $8.96 195 $8.85
$3.34 to $11.75 1,478 2.9 $6.68 796 $5.92
The Company's Stock Incentive and Deferred Compensation Plan
for directors also provides for a restricted stock award of 5,000
shares to newly elected directors. Unvested shares are restricted
as to disposition and are subject to forfeiture if the
participant ceases to be a member of the Board of Directors. The
participant is entitled to full dividends and voting rights with
respect to the entire award. Shares vest incrementally over a
three year period, but become fully vested on account of death,
disability, or retirement. Upon issuance, unearned compensation
is recorded and then expensed ratably over the vesting period.
One such award was made during fiscal 1996. The Company
recognized compensation expense of $13,000 in fiscal 1997 and
$3,000 in fiscal 1996 related to the restricted shares.
In June 1997, the Compensation Committee approved a resolution
to replace 282,000 outstanding options granted to non-executive
employees immediately after the Distribution at a price of $7.75
per share with new options priced at $4.75 per share which was
the market value of the Company's stock on the date of re-grant.
The Company believes that the new options provide employees with
a greater incentive to increase their ownership in the Company.
8. Preferred Stock
Under its Certificate of Incorporation, the Company is
authorized to issue preferred stock with a par value of $0.01 in
an amount not to exceed 250,000 shares which may be divided into
and issued in designated series, with dividend rates, rights of
conversion, redemption, liquidation prices and other terms or
conditions as determined by the Board of Directors. No preferred
shares have been issued as of May 31, 1997. The Board of
Directors has designated 50,000 of such shares as Series A Junior
Participating Preferred Stock and has issued rights to acquire
such shares, upon certain events, with an exercise price of
$50.00 per one one-thousandth of a share, subject to adjustment.
The rights expire on March 1, 2006, and may be redeemed prior to
ten days after the acquisition of 20% or more of the Company's
common stock.
9. COMMITMENTS AND CONTINGENCIES
At May 31, 1997, the Company was contingently liable for
approximately $4.9 million in letters of credit and $4.1 million
for an indemnity agreement bond, issued primarily in connection
with its workers' compensation and casualty insurance programs.
The Company is presently, and from time to time, subject to
pending claims and lawsuits arising in the ordinary course of its
business. In the opinion of Management, the ultimate resolution
of these pending legal proceedings will not have a material
adverse effect on the Company's operations or financial position.
10. Loss on Impairment of Assets
In conjunction with the adoption of FAS 121 in the third
quarter of fiscal 1996, the Company recorded a loss on the
impairment of assets of $13.8 million. This charge was composed
of the following: a $6.8 million asset write-off of 15 quick
service restaurants and seven traditional cafeterias which were
approved for closure within one year by the Board of Directors; a
$5.1 million asset write-down of impaired units which will
continue to be operated, $1.5 million of which was due solely to
the adoption of FAS 121; and a $1.9 million asset write-down of
previously closed locations.
The $6.8 million charge was composed of the expected loss on
the disposal of long-lived assets of units selected for closure,
net of an assumed salvage value of $0.8 million. As of May 31,
1997, the Company had closed all seven of the traditional
cafeterias and 14 of the quick service restaurants which were
selected for closure, at a net loss on disposal of $6.6 million.
The remaining quick service restaurant is expected to be closed
in fiscal 1999 when the Company exercises its right to early
termination under the terms of the lease. Management anticipates
that the remaining allowance will be adequate to record the
ultimate loss expected on the disposal of the unit's assets.
All operating units not recommended for closure were
reviewed for impairment. Such review consisted of an analysis of
each unit's cash flows and profit trends over the past year. If
such review indicated impairment, Management estimated the
undiscounted future net cash flows to be generated by these units
and determined that certain of them would be unlikely to generate
net cash flows in excess of carrying value. Management then
estimated the fair value of those units using discounted net cash
flow as a measure of fair value, which resulted in a write-down
in fiscal 1996 of $5.1 million, $1.5 million of which was due to
the effect of the discounting of cash flows as prescribed by FAS
121.
In addition to those units selected for closure and impaired
operating units, the Company recorded a charge of $1.9 million in
fiscal 1996 for the write-down of long-lived assets of previously
closed units. This charge was based on Management's estimate of
the eventual loss that would be incurred on the ultimate disposal
of these properties. As of May 31, 1997, the Company had disposed
of two of these properties at a net loss on disposal of $0.9
million. Management anticipates that the allowance provided is
adequate for the remaining properties. The Company continues to
systematically analyze its units for signs of impairment, and
will record a loss on impairment when impairment is indicated. No
impairment was recorded in fiscal 1997 based on Management's
analysis.
11. Restructure Costs
In fiscal 1996, the Company recorded restructure costs of
$8.3 million relating to the settlement of lease obligations of
units selected for closure and costs associated with the
Distribution. In addition to the write-off of the 22 units
selected for closure by the Board of Directors as described in
Note 10, the Company accrued charges of $6.1 million in fiscal
1996 for settlement of the related lease obligations. As of May
31, 1997, the Company had negotiated lease settlements on 15 of
its closed units at a net cost of $2.3 million, subleased two
properties, and paid $3.3 million in rent and related payments on
closed properties. In addition to the lease obligations of its
closed units, the Company recorded charges of $0.3 million in
fiscal 1996 for severance payments of personnel employed at the
closed units. Management anticipates that the remaining accrual
of $0.8 million is adequate to settle the remaining five leases.
The Company recorded $2.0 million in 1996 in other charges
incurred as a result of the Distribution. These charges consisted
of $1.8 million in estimated professional and other fees such as
stock exchange listing fees, and $0.2 million of miscellaneous
other asset write-offs. As of May 31, 1997, the Company had
incurred $1.7 million in professional fees associated with the
Distribution, and had written off $0.3 million of miscellaneous
assets. The Company does not anticipate any additional costs
related to the Distribution.
12. PRO FORMA FINANCIAL INFORMATION (unaudited)
The following Unaudited Pro Forma Statements of Operations were
prepared to illustrate certain estimated effects of the
Distribution and related transactions. These statements include
adjustments for the effects of additional payroll and related
costs; other operating expenses; selling, general and
administrative expenses; and depreciation which might have
occurred had the Distribution been effected as of the dates
indicated, as well as the estimated tax benefit associated with
these adjustments. The Pro Forma Statements of Operations for the
years ended June 1, 1996 and June 3, 1995, are prepared assuming
the distribution had occurred as of June 1, 1996 and June 3,
1995, respectively. Such pro forma information may not
necessarily be indicative of the results that would actually have
occurred had the transactions occurred on the dates indicated or
of the results that may occur in the future. The Unaudited Pro
Forma Statements of Operations should be read in conjunction with
the historical financial statements, including the notes thereto,
and other financial data of the Company included elsewhere
herein.
MORRISON FRESH COOKING, INC.
PRO FORMA - STATEMENTS OF OPERATIONS (unaudited)
(In thousands except per-share data
For the Fiscal Year Ended
June 1, June 3,
1996 1995
<TABLE>
<S> <C> <C>
Net Sales $ 267,638 $ 294,587
Operating Costs and Expenses:
Cost of merchandise 75,458 78,987
Payroll and related costs 101,967 105,947
Other operating costs 56,364 60,960
Selling, general and administrative 18,416 20,642
Depreciation and 10,091 10,299
262,296 276,835
Operating Income Before Loss on Impairment of Assets
and Restructure Costs 5,342 17,752
Loss on impairment of assets 13,789
Restructure costs 8,290
Operating Income (Loss) (16,737) 17,752
Interest expense (income), net 51 (301)
Income (Loss) Before Income Taxes (16,788) 18,053
Provision for (Benefit from) Income Taxes (6,165) 7,307
Net Income (Loss) $ (10,623) $ 10,746
Earnings (Loss) Per Common and
Common Equivalent Share $ (1.19) $ 1.20
Weighted Average Common and
Common Equivalent Shares 8,954 8,981
</TABLE>
13. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (unaudited)
Quarterly financial results for the years ended May 31, 1997
and June 1, 1996 are summarized below. All quarters are composed
of 13 weeks.
In thousands (excpet per-share data)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(1) TOTAL
For The Year Ended May 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Sales $ 63,246 $ 62,889 $ 61,921 $ 61,581 $249,637
Gross Profit* $ 8,372 $ 7,844 $ 7,554 $ 8,308 $ 32,078
Income Before Income Taxes $ 1,262 $ 1,103 $ 1,109 $ 875 $ 4,349
Provision for Income Taxes 467 413 408 329 1,617
Net Income $ 795 $ 690 $ 701 $ 546 $ 2,732
Earnings Per Common and
Common Equivalent Share $ 0.09 $ 0.08 $ 0.08 $ 0.06 $ 0.30
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
For The Year Ended June 1, 1996:
Net Sales $ 70,129 $ 67,889 $ 65,260 $ 64,360 $267,638
Gross Profit* $ 9,726 $ 8,503 $ 8,774 $ 7,275 $ 34,278
Income (Loss) Before Income
Taxes $ 2,881 $ 1,387 $(21,057) $ 1,201 $(15,588)
Provision for (Benefit from)
Income Taxes 1,216 545 (7,935) 480 (5,694)
Net Income (Loss) $ 1,665 $ 842 $(13,122) $ 721 $ (9,894)
Earnings (Loss) Per Common and
Common Equivalent Share $ 0.19 $ 0.10 $ (1.49) $ 0.08 $ (1.10)
</TABLE>
(1) Fourth quarter 1997 results include $0.3 million expense for
severance costs ($0.02 per share, net of taxes), offset by
favorable adjustments of $0.6 million for medical insurance
expense ($0.04 per share, net of taxes) and $0.7 million for
workers' compensation and general liability insurance expense
($0.05 per share, net of taxes) due to favorable claims
experience during 1997.
* The Company defines gross profit as revenues less cost of
merchandise, payroll and related costs, and other operating
costs.
Due to weighted average share calculations, quarterly earnings
per share amounts may not sum to the fiscal year amount.
Morrison Fresh Cooking, Inc. common stock is publicly traded on
the New York Stock Exchange under the ticker symbol MFC. The
following table sets forth the reported high and low prices for
the fiscal year ended May 31, 1997, and the fiscal year ended
June 1, 1996, commencing with the first trading date following
the Distribution.
For the 52 weeks ended May 31, 1997
Per Share
Cash
Quarter High Low Dividend
First $ 7.38 $ 4.25 $ 0.09
Second $ 5.88 $ 4.63 $ 0.09
Third $ 5.38 $ 4.50 $ 0.09
Fourth $ 5.38 $ 4.50 $ 0.09
For the 12 weeks ended June 1, 1996
Per Share
Cash
Quarter High Low Dividend
Fourth $ 9.00 $ 5.50 $ 0.09
In June 1997 the Company's Board of Directors declared a
quarterly dividend of $0.09 per share payable July 31, 1997 to
5,884 shareholders of record on July 11, 1997.
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Morrison Fresh Cooking, Inc.
We have audited the accompanying balance sheets of Morrison
Fresh Cooking, Inc. as of May 31, 1997 and June 1, 1996, and the
related statements of operations, stockholders' equity and cash
flows for each of the three fiscal years in the period ended May
31, 1997. These financial statements are the responsibility of
the Company's Management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by Management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Morrison Fresh Cooking, Inc. at May 31, 1997 and June 1, 1996,
and the results of its operations and its cash flows for each of
the three fiscal years in the period ended May 31, 1997, in
conformity with generally accepted accounting principles.
As discussed in Note 10 to the financial statements, in
fiscal year 1996, Morrison Fresh Cooking, Inc. changed its method
of accounting relative to impairment of long-lived assets.
/s/ Ernst &Young LLP
Atlanta, Georgia
June 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MORRISON FRESH COOKING, INC. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD
ENDED MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 2,939
<SECURITIES> 0
<RECEIVABLES> 321
<ALLOWANCES> 0
<INVENTORY> 2,412
<CURRENT-ASSETS> 13,470
<PP&E> 161,734
<DEPRECIATION> 100,834
<TOTAL-ASSETS> 84,028
<CURRENT-LIABILITIES> 30,453
<BONDS> 662
0
0
<COMMON> 90
<OTHER-SE> 39,854
<TOTAL-LIABILITY-AND-EQUITY> 84,028
<SALES> 249,637
<TOTAL-REVENUES> 249,637
<CGS> 70,684
<TOTAL-COSTS> 227,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 4,349
<INCOME-TAX> 1,617
<INCOME-CONTINUING> 2,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,732
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
April 3, 1997
PERSONAL AND CONFIDENTIAL
Via Hand Delivery
Mr. Christopher P. Elliott
Dear Chris:
This letter confirms the terms of the agreement which
you and I have reached concerning your employment status
following discussions that you and I just completed, and
covers the change in your employment status with Morrison
Fresh Cooking, Inc. (the "Company").
The Company's offer that is described in this letter
will be open and effective for twenty-one (21) days from the
date shown as the "Effective Date" of the agreement. You
may elect to accept or reject this offer within the twenty-
one (21) day period. Obviously, it is important that you
understand the terms of our offer so that if you sign, you
do so knowingly and voluntarily. To enable you to do that,
we suggest that you consult with an attorney about the
Company's offer and your rights before signing it. You will
not, however, waive or give up any rights or claims you may
have against the Company that may arise after the date that
you accept the Company's offer. If you accept this offer,
both of us will acknowledge our agreement with the terms and
conditions outlined in the offer and Waiver of Rights (the
"Waiver") set forth in this letter (the offer and Waiver
collectively referred to herein as the "Agreement").
If you decide to sign the Agreement and waive your
rights against the Company, you will have seven (7) days
following the signing of the Agreement and the return of the
signed Agreement to change your mind and revoke the
Agreement. In other words, the Agreement will not be in
effect until seven (7) days have passed following your
signing.
The key elements of the Company's offer to you are as
follows:
1. Effective as of April 4, 1997, which we will refer to
as the "Termination Date," you no longer will be required to
perform services for the Company, your employment with the
Company will be officially terminated, you shall relinquish
all titles and offices held with the Company and resign from
the Company's Board of Directors, and the Change of Control
Agreement between you and the Company dated as of March 2,
1996 shall be terminated.
2. You will receive what we will refer to as additional
compensation (the "Additional Compensation") which will be
paid to you as follows:
(a) You will receive biweekly payments at your current
base compensation rate through the close of business on
April 4, 1997.
(b) You will be entitled to receive on a prorated
basis any bonus earned under the formula for which
you are accountable for the Company's Fiscal Year
1997, prorated through April 4, 1997. You will not
be eligible for any future bonuses other than the
bonus referenced in this Section 2(b).
(c) You have the option of purchasing your Company
automobile at its present net book value of
$7,507.67. If you elect to buy the automobile at
present net book value, the difference between such
value and the actual value of the automobile will be
considered income and you will receive a Form 1099
or W-2 reflecting such income.
(d) The Company currently has no severance pay
policy. However, you will receive six (6) monthly
payments each in the gross amount of $14,466.67. In
the event that you have obtained new employment
prior to the end of such six (6) month period, you
will have the option of receiving the balance of
such monthly payments in a single lump sum.
3. The Company will, subject to the approval of the
Compensation and Stock Option Committee of the Board of
Directors of the Company at its next regularly scheduled
meeting, waive any restrictions on your sale of the 37,419
shares of common stock of the Company which you purchased
pursuant to the Company's one-time 1996 Management Stock
Option Program. The timing of such sale by you will be so
as to be in compliance with all laws and regulations
affecting the trading of Company stock. Thereafter, the
Company shall pay to you based on your sale of such shares
between July 1, 1997 and December 31, 1997, for each of such
shares the difference between the actual per share market
price on the date of sale of such shares and $7.75 per
share.
4. The Company will arrange to provide at the Company's
expense the outplacement services of a reputable corporate
outplacement firm selected by the Company to assist you in
locating other suitable employment.
5. If you elect COBRA, the Company will reimburse you for
that portion of your COBRA cost equal to what the Company
contributes for the same type of employee coverage for a
period equal to the lesser of six (6) months or the duration
of your COBRA continuation period. We agree to provide you
with information covering your health insurance entitlements
under COBRA and other employee benefits at termination. You
will hear directly from the Company's Benefits Department
explaining these matters. If this written information does
not adequately answer your questions, please let us know
right away.
6. You will not be eligible to participate in the
Executive Stock Option Program or Management Stock Option
Program after April 4, 1997.
7. All compensation payments to you will be subject to
applicable deductions.
8. As of the Termination Date, under the terms of the
Company's Management Retirement Plan and Executive
Supplemental Pension Plan, you are not eligible to
participate in those plans. Therefore, you have no benefits
that are due you under those plans.
9. Exhibit "A " to this letter contains a complete list of
your Company-granted stock options. You are not eligible
for any future grants of options to acquire Company stock.
Except as modified by the terms of this paragraph, your
rights under the Company-granted stock options (the "Stock
Options") that you currently hold are controlled by the
terms of the applicable written stock option award or
agreement.
(a) Each Stock Option which by its terms would otherwise
expire upon the termination or change of your employment
status with the Company will, subject to the approval of
the Compensation and Stock Option Committee of the Board
of Directors of the Company, remain exercisable for a
period equal to the lesser of two (2) years from the date
of termination of your employment with the Company or the
expiration of the original option period and may be
exercised by you when such Stock Option becomes
exercisable under its terms. Stock Options not exercised
within such two (2) year period will automatically
terminate. You will be subject to exercising the Stock
Options as if you had remained an employee with the
Company and were still fully subject to all of the terms
and conditions of such plans which are not in conflict
with this two (2) year exercise period. The Company will
request the respective Chief Executive Officers of Ruby
Tuesday, Inc. and Morrison Health Care, Inc. to extend
the period during which stock options of those companies
which you may possess will remain exercisable for a
period equal to the lesser of two (2) years from the date
of termination of your employment with the Company or
until the stock options would expire other than due to
your termination of employment with the Company and may
be exercised by you if and when such stock options become
exercisable by their terms within such period.
10. If you are currently a member of the Morrison
Employees' Federal Credit Union, you may continue to
participate in that program, subject only to observing the
rules and qualifications governing participation.
11. If you participated in the Morrison Fresh Cooking, Inc.
Salary Deferral 401(k) Plan or the Deferred Compensation
Plan, as amended, you, of course, may receive monies in
accordance with the terms of those plans, but you will not
be allowed to make any contributions or receive Company
matching contributions under these plans following the
Termination Date.
12. Aside from the amounts to which you are entitled under
the terms of this Agreement, you acknowledge that you have
received any and all compensation and remuneration of any
kind and character, including, but not limited to, salary,
bonuses, commissions, vacation, stock options, and severance
pay, which you may be entitled to receive from the Company
at any time now or in the future. It is understood that the
Company's Agreement with you is in lieu of any other
severance pay.
13. You agree to keep confidential information disclosed to
you or known by you as a consequence of or through your
employment by the Company, concerning the business,
financial affairs, products, suppliers, processes, services,
customers, employees, or employees' compensation of the
Company, including information related to menus, recipes,
purchasing, bargaining, customer lists, manuals (all types),
sales and marketing techniques, territorial sales plans,
account records, personnel records, pricing information,
advertising, promotion, accounting, recordkeeping, and any
other information treated by the Company as being
confidential or which is labeled "Confidential" by the
Company or which is otherwise designated as confidential or
proprietary by the Company. Confidential information does
not include: (a) information already known to you prior to
your employment by the Company in any capacity, (b)
information lawfully disclosed to you from a third party
outside the Company who had a right to so disclose it, and
(c) information which has become a matter of public
knowledge through no fault or omission of yourself.
14. There are no other promises, agreements, or
understandings between you and the Company, and it is the
intent of this Agreement that it embody any and all
promises, agreements, and understandings between yourself
and the Company. No changes or modifications may be made in
the terms stated in this Agreement unless made in writing
and signed by yourself or your authorized representative and
an authorized representative of the Company. This Agreement
will inure to the benefit of, and will be binding on both
parties, and their personal representatives, heirs,
successors, and assigns.
15. It is understood and agreed that if any provision or
part of this Agreement is found to be unenforceable,
illegal, or inoperable, such provision or part shall be
severed, and all remaining provisions and parts of this
Agreement shall remain fully valid and enforceable.
16. Furthermore, you agree to perform the following:
(a) Return all Company-owned property and equipment
including, but not limited to, laptop, discs, software
and credit cards, to the corporate office within seven
(7) days of your execution of this letter.
(b) Return all records, manuals and materials which
came into your possession because of your employment
with the Company and which represent or relate to
the Company's business records, including, but not
limited to, those materials referenced in Section 13
above, and copies thereof made while the materials
were in your possession and/or under your control,
to the corporate office within seven (7) days of
your execution of this letter. You agree that you
will not retain any records, manuals and materials,
or copies of records, manuals and materials as set
forth herein.
The Company's offer under this Agreement will be left
open until April 24, 1997. If you have not executed this
Agreement on or before the close of business on April 24,
1997, then the Company's offer is withdrawn. Note that your
execution or non-execution of this Agreement does not change
the Company's decision regarding your employment and that
you are hereby terminated from the Company's payroll as an
employee effective April 4, 1997, and we will provide you
with the required information covering your health insurance
entitlement under COBRA.
By signing this Agreement on behalf of the Company, I
am indicating the Company's intent, and my authority in
behalf of the Company, to make you this offer. If there are
any questions which need clarification, please let me know
immediately in order that we can discuss and resolve them.
If you are in agreement and accept the Company's offer,
please return to me a fully executed copy of this Agreement
and Waiver.
Sincerely,
/s/ Ronnie L. Tatum
Ronnie L. Tatum
Chief Executive Officer
AGREEMENT ACKNOWLEDGED AND ACCEPTED.
I HEREBY TENDER MY RESIGNATION FROM THE BOARD OF DIRECTORS
OF
MORRISON FRESH COOKING, INC. EFFECTIVE AS OF APRIL 4, 1997.
/s/ Christopher P. Elliott
Christopher P. Elliott
Date: April 24, 1997
The "Effective Date" of this Agreement
is April 3, 1997.
PER SHARE TOTAL
NUMBER OF OPTION OPTION EXERCISABLE EXPIRATION
PLAN OPTIONS PRICE PRICE DATE DATE
<TABLE>
<S> <C> <C> <C> <C> <C>
STOCK INCENTIVE PLAN, 1995 2,500 $10.0095 $25,023.75 1/3/98 1/3/00
ESOP GRANT
STOCK INCENTIVE PLAN, 1996 120,000 $ 7.7500 $930,000.00 3/26/99 3/26/01
ESOP GRANT
1996 MSOP, 3RD QUARTER GRANT 112,257 $ 7.7500 $869,991.75 3/26/98 3/26/01
</TABLE>
WAIVER OF RIGHTS
I, Christopher P. Elliott, knowingly and voluntarily,
agree to waive, settle, release and discharge Morrison Fresh
Cooking, Inc. (the "Company") from any and all claims,
demands, damages, actions or causes of action, including any
claims for attorneys' fees which I have against the Company,
its predecessors, subsidiaries, and affiliates, and the
officers, directors, employees and agents of each of them
arising out of or relating to my employment with the
Company, my service on the Board of Directors of the
Company, my resignation from the Board of Directors of the
Company, the termination of the Change of Control Agreement
between the Company and me dated as of March 2, 1996, or the
termination or other change of status of my employment with
the Company under the terms of the Agreement executed by
myself and containing an Effective Date of April 3, 1997. I
understand this Waiver of Rights includes any claims I may
have arising under any Federal, state or local laws,
ordinances or regulations pertaining to wrongful discharge
or discrimination on the basis of sex, race, color,
religion, creed, national origin, age or handicap status and
particularly any rights I may have pursuant to the Age
Discrimination in Employment Act, the Older Workers Benefit
Protection Act, the Americans with Disabilities Act, Title
VII of the Civil Rights Act of 1964, as amended, or relating
to my employment with the Company, my service on the Board
of Directors of the Company, my resignation from the Board
of Directors of the Company, the termination of the Change
of Control Agreement between the Company and me dated as of
March 2, 1996, or termination of my employment with the
Company under terms of the Agreement executed by myself and
containing an Effective Date of April 3, 1997.
I acknowledge and understand that I waive my right to
file suit for any claim I may have under the laws and the
statutes named in the paragraph above. I further waive my
right to claim or receive damages as a result of any charge
of discrimination which may be filed by me or anyone acting
on my behalf.
I UNDERSTAND, ACKNOWLEDGE AND AGREE TO THE TERMS OF
THIS AGREEMENT, THIS 24 DAY OF April, 1997.
/s/Christopher P. Elliott
Christopher P. Elliott
PERSONAL AND CONFIDENTIAL
Via Hand Delivery
April 24,1997
Mr. Christopher P. Elliott
3687 Westbrooke Circle
Atlanta, GA 30319
Dear Chris:
In my letter to you dated April 3, 1997 ( the "Agreement"),
the Company offered you a severance package. You have
raised a number of questions regarding changes and/or
clarifications to the Agreement.
We have reviewed each of these matters and will respond as
follows:
1. Section 2(d) of the Agreement is amended by adding the
following at the end thereof: "In the event that you have
not obtained new employment prior to the end of such six (6)
month period, the Company will, provided that you have
exercised all due diligence in seeking new employment as
determined by the Company in its sole discretion, pay to you
up to three (3) additional monthly payments each in the
gross amount of $14,466.67. The Company's obligation to pay
such additional monthly payments shall cease during the
first month in which you commence such new employment. All
payments to be made pursuant to this Section 2(d) shall be
made upon the 1st day of the month, beginning May 1, 1997."
2. Section 3 of the Agreement is amended by deleting the
last sentence thereof and replacing it with the following:
"Thereafter, the Company shall pay to you within seven (7)
days of the Company's receipt of acceptable proof of such
sale, but in no event prior to July 1, 1997, based on your
sale of such shares between April 24, 1997 and December 31,
1997, for each of such shares the difference between the
actual per share closing price on the date of sale of such
shares and $7.75 per share."
3. Section 9 of the Agreement is amended to provide that
there shall be no extension of the period during which such
Stock Options shall remain exercisable shall apply to any
Stock Options issued to you during the fourth quarter of the
Company's fiscal 1996 under the Executive Stock Option
Program and the Management Stock Option Program.
4. Please note that the Compensation and Stock Option
Committee of the Board of Directors of the Company is
scheduled to meet on April 23, 1997, to consider those
matters addressed in Sections 3 and 9 of the Agreement which
require the approval of such Committee.
All of the terms and conditions stated in the April 3, 1997,
Agreement which are not in conflict with the changes in this
letter will remain in full force and effect. This means
that the twenty-one (21) day acceptance period during which
the Company's offer remains open and effective in the
Agreement is still in effect, and you are to accept or
reject the Company's offer within that time period.
Please let me know if you have any questions.
Sincerely,
/s/ Ronnie L. Tatum
Ronnie L. Tatum
Chief Executive Officer
THE AGREEMENT, AS MODIFIED HEREBY,
IS ACKNOWLEDGED AND ACCEPTED.
/s/ Christopher P. Elliott
Christopher P. Elliott
Date: April 24, 1997
April 3, 1997
PERSONAL AND CONFIDENTIAL
Via Hand Delivery
Mr. Scears Lee, III
Dear Scears:
This letter confirms the terms of the agreement which
you and I have reached concerning your employment status
following discussions that you and I just completed, and
covers the change in your employment status with Morrison
Fresh Cooking, Inc. (the "Company").
The Company's offer that is described in this letter
will be open and effective for twenty-one (21) days from the
date shown as the "Effective Date" of the agreement. You
may elect to accept or reject this offer within the twenty-
one (21) day period. Obviously, it is important that you
understand the terms of our offer so that if you sign, you
do so knowingly and voluntarily. To enable you to do that,
we suggest that you consult with an attorney about the
Company's offer and your rights before signing it. You will
not, however, waive or give up any rights or claims you may
have against the Company that may arise after the date that
you accept the Company's offer. If you accept this offer,
both of us will acknowledge our agreement with the terms and
conditions outlined in the offer and Waiver of Rights (the
"Waiver") set forth in this letter (the offer and Waiver
collectively referred to herein as the "Agreement").
If you decide to sign the Agreement and waive your
rights against the Company, you will have seven (7) days
following the signing of the Agreement and the return of the
signed Agreement to change your mind and revoke the
Agreement. In other words, the Agreement will not be in
effect until seven (7) days have passed following your
signing.
The key elements of the Company's offer to you are as
follows:
1. Effective as of April 4, 1997, which we will refer to
as the "Termination Date," you no longer will be required to
perform services for the Company and your employment with
the Company will be officially terminated, you shall
relinquish all titles and offices held with the Company, and
the Change of Control Agreement between you and the Company
dated as of March 2, 1996, shall be terminated.
2. You will receive what we will refer to as additional
compensation (the "Additional Compensation") which will be
paid to you as follows:
(a) You will receive biweekly payments at your current
base compensation rate through the close of business on
April 4, 1997.
(b) You will be entitled to receive on a prorated
basis any bonus earned under the formula for which
you are accountable for the Company's Fiscal Year
1997, prorated through April 4, 1997. You will not
be eligible for any future bonuses other than the
bonus referenced in this Section 2(b).
(c) The Company currently has no severance pay
policy. However, you will receive twelve (12)
monthly payments each in the gross amount of
$9,091.67. In the event that you have obtained new
employment prior to the end of such twelve (12)
month period, you will have the option of receiving
the balance of such monthly payments in a single
lump sum.
3. The Company will, subject to the approval of the
Compensation and Stock Option Committee of the Board of
Directors of the Company at its next regularly scheduled
meeting, waive any restrictions on your sale of the 3,116
shares of common stock of the Company which you purchased
pursuant to the Company's one-time 1996 Management Stock
Option Program. The timing of such sale by you will be so
as to be in compliance with all laws and regulations
affecting the trading of Company stock. Thereafter, the
Company shall pay to you based on your sale of such shares
between July 1, 1997 and December 31, 1997, for each of such
shares the difference between the actual per share market
price on the date of sale of such shares and $7.75 per
share.
4. The Company will arrange to provide at the Company's
expense the outplacement services of a reputable corporate
outplacement firm selected by the Company to assist you in
locating other suitable employment.
5. You will not be eligible to participate in the
Executive Stock Option Program or Management Stock Option
Program after April 4, 1997.
6. You agree to cooperate with and assist the Company in
any and all matters relating to claims or charges of
discrimination of any kind or sexual harassment which claims
or charges relate to a time when your worked in the Human
Resources Department of the Company or its predecessors.
Such cooperation and assistance shall include, but not be
limited to, your appearing as a witness during depositions,
hearings, trials, mediations, and arbitrations. The
provisions of this paragraph shall survive the termination
of this Agreement.
7. All compensation payments to you will be subject to
applicable deductions.
8. If you elect COBRA, the Company will reimburse you for
that portion of your COBRA cost equal to what the Company
contributes for the same type of employee coverage for a
period equal to the lesser of six (6) months or the duration
of your COBRA continuation period. We agree to provide you
with information covering your health insurance entitlements
under COBRA and other employee benefits at termination. You
will hear directly from the Company's Benefits Department
explaining these matters. If this written information does
not adequately answer your questions, please let us know
right away.
9. Exhibit "A " to this letter contains a complete list of
your Company-granted stock options. You are not eligible
for any future grants of options to acquire Company stock.
Except as modified by the terms of this paragraph, your
rights under the Company-granted stock options (the "Stock
Options") that you currently hold are controlled by the
terms of the applicable written stock option award or
agreement.
(a) Each Stock Option which by its terms would otherwise
expire upon the termination or change of your employment
status with the Company will, subject to the approval of
the Compensation and Stock Option Committee of the Board
of Directors of the Company, remain exercisable for a
period equal to the lesser of three (3) years from the
date of termination of your employment with the Company
or the expiration of the original option period and may
be exercised by you when such Stock Option becomes
exercisable under its terms. Stock Options not exercised
within such three (3) year period will automatically
terminate. You will be subject to exercising the Stock
Options as if you had remained an employee with the
Company and were still fully subject to all of the terms
and conditions of such plans which are not in conflict
with this three (3) year exercise period. The Company
will request the respective Chief Executive Officers of
Ruby Tuesday, Inc. and Morrison Health Care, Inc. to
extend the period during which stock options of those
companies which you may possess will remain exercisable
for a period equal to the lesser of three (3) years from
the date of termination of your employment with the
Company or until the stock options would expire other
than due to your termination of employment with the
Company and may be exercised by you if and when such
stock options become exercisable by their terms within
such period.
10. If you are currently a member of the Morrison
Employees' Federal Credit Union, you may continue to
participate in that program, subject only to observing the
rules and qualifications governing participation.
11. If you participated in the Morrison Fresh Cooking, Inc.
Salary Deferral 401(k) Plan or the Deferred Compensation
Plan, as amended, you, of course, may receive monies in
accordance with the terms of those plans, but you will not
be allowed to make any contributions or receive Company
matching contributions under these plans following the
Termination Date.
12. Aside from the amounts to which you are entitled under
the terms of this Agreement, you acknowledge that you have
received any and all compensation and remuneration of any
kind and character, including, but not limited to, salary,
bonuses, commissions, vacation, stock options, and severance
pay, which you may be entitled to receive from the Company
at any time now or in the future. It is understood that the
Company's Agreement with you is in lieu of any other
severance pay.
13. You agree to keep confidential information disclosed to
you or known by you as a consequence of or through your
employment by the Company, concerning the business,
financial affairs, products, suppliers, processes, services,
customers, employees, or employees' compensation of the
Company, including information related to menus, recipes,
purchasing, bargaining, customer lists, manuals (all types),
sales and marketing techniques, territorial sales plans,
account records, personnel records, pricing information,
advertising, promotion, accounting, recordkeeping, and any
other information treated by the Company as being
confidential or which is labeled "Confidential" by the
Company or which is otherwise designated as confidential or
proprietary by the Company. Confidential information does
not include: (a) information already known to you prior to
your employment by the Company in any capacity, (b)
information lawfully disclosed to you from a third party
outside the Company who had a right to so disclose it, and
(c) information which has become a matter of public
knowledge through no fault or omission of yourself.
14. There are no other promises, agreements, or
understandings between you and the Company, and it is the
intent of this Agreement that it embody any and all
promises, agreements, and understandings between yourself
and the Company. No changes or modifications may be made in
the terms stated in this Agreement unless made in writing
and signed by yourself or your authorized representative and
an authorized representative of the Company. This Agreement
will inure to the benefit of, and will be binding on both
parties, and their personal representatives, heirs,
successors, and assigns.
15. It is understood and agreed that if any provision or
part of this Agreement is found to be unenforceable,
illegal, or inoperable, such provision or part shall be
severed, and all remaining provisions and parts of this
Agreement shall remain fully valid and enforceable.
16. Furthermore, you agree to perform the following:
(a) Return all Company-owned property and equipment
including, but not limited to, laptop, discs, software
and credit cards, to the corporate office within seven
(7) days of your execution of this letter.
(b) Return all records, manuals and materials which
came into your possession because of your employment
with the Company and which represent or relate to
the Company's business records, including, but not
limited to, those materials referenced in Section 13
above, and copies thereof made while the materials
were in your possession and/or under your control,
to the corporate office within seven (7) days of
your execution of this letter. You agree that you
will not retain any records, manuals and materials,
or copies of records, manuals and materials as set
forth herein.
The Company's offer under this Agreement will be left
open until April 24, 1997. If you have not executed this
Agreement on or before the close of business on April 24,
1997, then the Company's offer is withdrawn. Note that your
execution or non-execution of this Agreement does not change
the Company's decision regarding your employment and that
you are hereby terminated from the Company's payroll as an
employee effective April 4, 1997, and we will provide you
with the required information covering your health insurance
entitlement under COBRA.
By signing this Agreement on behalf of the Company, I
am indicating the Company's intent, and my authority in
behalf of the Company, to make you this offer. If there are
any questions which need clarification, please let me know
immediately in order that we can discuss and resolve them.
If you are in agreement and accept the Company's offer,
please return to me a fully executed copy of this Agreement
and Waiver.
Sincerely,
/s/Ronnie L. Tatum
Ronnie L. Tatum
Chief Executive Officer
AGREEMENT ACKNOWLEDGED
AND ACCEPTED.
/s/ Scears Lee, III
Scears Lee, III
Date: 4/23, 1997
The "Effective Date" of this Agreement
is April 3, 1997.
PER
NUMBER SHARE TOTAL
OF OPTION OPTION EXERCISABLE EXPIRATION
PLAN OPTIONS PRICE PRICE DATE DATE
STOCK INCENTIVE PLAN, 1993 1,200 $8.1029 $9,723.48 7/1/96 7/1/98
ESOP GRANT
1994 MSOP, 1ST QUARTER GRANT 218 $8.9200 $1,944.56 9/4/95 9/4/98
1994 MSOP, 2ND QUARTER GRANT 227 $9.2946 $2,109.87 12/4/95 12/4/98
1994 MSOP, 4TH QUARTER GRANT 17 $9.6520 $ 164.08 6/4/96 6/4/99
1995 MSOP, 1ST QUARTER GRANT 200 $10.5202 $2,104.04 9/3/96 9/3/99
STOCK INCENTIVE PLAN, 1996 200 $5.4133 $1,082.66 1/15/99 1/15/01
ESOP GRANT
STOCK INCENTIVE PLAN, 1996 15,000 $7.7500 $116,250.00 3/26/99 3/26/01
ESOP GRANT
1996 MSOP, 3RD QUARTER GRANT 9,348 $7.7500 $72,447.00 3/26/98 3/26/01
WAIVER OF RIGHTS
I, Scears Lee, III, knowingly and voluntarily, agree to
waive, settle, release and discharge Morrison Fresh Cooking,
Inc. (the "Company") from any and all claims, demands,
damages, actions or causes of action, including any claims
for attorneys' fees which I have against the Company, its
predecessors, subsidiaries, and affiliates, and the
officers, directors, employees and agents of each of them
arising out of or relating to my employment with the
Company, the termination of the Change of Control Agreement
between the Company and me dated as of March 2, 1996, or the
termination or other change of status of my employment with
the Company under the terms of the Agreement executed by
myself and containing an Effective Date of April 3, 1997. I
understand this Waiver of Rights includes any claims I may
have arising under any Federal, state or local laws,
ordinances or regulations pertaining to wrongful discharge
or discrimination on the basis of sex, race, color,
religion, creed, national origin, age or handicap status and
particularly any rights I may have pursuant to the Age
Discrimination in Employment Act, the Older Workers Benefit
Protection Act, the Americans with Disabilities Act, Title
VII of the Civil Rights Act of 1964, as amended, or relating
to my employment with the Company, the termination of the
Change of Control Agreement between the Company and me dated
as of March 2, 1996, or termination of my employment with
the Company under terms of the Agreement executed by myself
and containing an Effective Date of April 3, 1997.
I acknowledge and understand that I waive my right to
file suit for any claim I may have under the laws and the
statutes named in the paragraph above. I further waive my
right to claim or receive damages as a result of any charge
of discrimination which may be filed by me or anyone acting
on my behalf.
I UNDERSTAND, ACKNOWLEDGE AND AGREE TO THE TERMS OF
THIS AGREEMENT, THIS 23 DAY OF April, 1997.
/s/Scears Lee, III
Scears Lee, III
PERSONAL AND CONFIDENTIAL
Via Hand Delivery
April 23, 1997
Mr. Scears Lee, III
Dear Scears:
In my letter to you dated April 3, 1997 ( the "Agreement"),
the Company offered you a severance package. You have
raised a number of questions regarding changes and/or
clarifications to the Agreement.
We have reviewed each of these matters and will respond as
follows:
1. Section 2(c) of the Agreement is amended by adding the
following at the end thereof: "In the event that you have
not obtained new employment prior to the end of such twelve
(12) month period, the Company will pay to you up to three
(3) additional monthly payments each in the gross amount of
$9,091.67. The Company's obligation to pay such additional
monthly payments shall cease during the first month in which
you commence such new employment. All payments to be made
pursuant to this Section 2(c) shall be made upon the 1st day
of the month, beginning May 1, 1997."
2. Section 3 of the Agreement is amended by deleting the
last sentence thereof and replacing it with the following:
"Thereafter, the Company shall pay to you within seven (7)
days of the Company's receipt of acceptable proof of such
sale, but in no event prior to July 1, 1997, based on your
sale of such shares between April 24, 1997 and December 31,
1997, for each of such shares the difference between the
actual per share closing price on the date of sale of such
shares and $7.75 per share."
3. Section 9 of the Agreement is amended to provide that
there shall be no extension of the period during which such
Stock Options shall remain exercisable shall apply to any
Stock Options issued to you during the fourth quarter of the
Company's fiscal 1996 under the Executive Stock Option
Program and the Management Stock Option Program.
4. Please note that the Compensation and Stock Option
Committee of the Board of Directors of the Company is
scheduled to meet on April 23, 1997, to consider those
matters addressed in Sections 3 and 9 of the Agreement which
require the approval of such Committee.
5. Section 6 of the Agreement is amended to provide that
the Company will cause you to be served with a subpoena in
conjunction with your appearing as a witness during any
proceeding.
6. Section 8 of the Agreement is amended by deleting the
first sentence thereof and replacing it with the following:
"If you elect COBRA, the Company will reimburse you for that
portion of your COBRA cost equal to what the Company
contributes for the same type of employee coverage for a
period equal to the lesser of twelve (12) months or the
duration of your COBRA continuation period."
All of the terms and conditions stated in the April 3, 1997,
Agreement which are not in conflict with the changes in this
letter will remain in full force and effect. This means
that the twenty-one (21) day acceptance period during which
the Company's offer remains open and effective in the
Agreement is still in effect, and you are to accept or
reject the Company's offer within that time period.
Please let me know if you have any questions.
Sincerely,
/s/ Ronnie L. Tatum
Ronnie L. Tatum
Chief Executive Officer
THE AGREEMENT, AS MODIFIED HEREBY,
IS ACKNOWLEDGED AND ACCEPTED.
/s/ Scears Lee, III
Scears Lee, III
Date: April 23, 1997
AMENDMENT NUMBER 1 TO
RIGHTS AGREEMENT
This Amendment, made this 28th day of February, 1997
between Morrison Fresh Cooking, Inc., a Georgia corporation (the
"Company"), and SunTrust Bank, Atlanta, ("SunTrust"), amends that
certain Rights Agreement between the Company and AmSouth Bank of
Alabama, ("AmSouth") dated as of March 2, 1996 (the "Rights
Agreement").
W I T N E S S E T H
WHEREAS, pursuant to Section 21 of the Rights Agreement, the
Company has removed AmSouth as Rights Agent under the Rights
Agreement, effective as of March 17, 1997 (the "Effective Date");
and;
WHEREAS, the Company desires to appoint SunTrust, and
SunTrust desires to serve as, Successor Rights Agent under the
Rights Agreement, effective as of the Effective Date:
NOW, THEREFORE, in consideration of the premises contained
herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Appointment of Successor Rights Agent. The Company
hereby appoints SunTrust to serve as the Successor Rights Agent
under the Rights Agreement, to be effective as of the Effective
Date, and SunTrust hereby accepts such appointment.
2. Amendment of Rights Agreement. The Rights Agreement is
hereby amended effective as of the Effective Date such that all
references to the "Rights Agent" under the Rights Agreement shall
refer to SunTrust rather than AmSouth.
3. Undertakings. Each of the parties hereto agrees to
take any and all actions necessary to cause SunTrust to serve as
Rights Agent under the Rights Agreement, including, without
limitation, the Company sending notice, prior to the Effective
Date, to AmSouth and each transfer agent of the Company's stock
that SunTrust has been appointed Successor Rights Agent under the
Rights Agreement.
4. Continuation of Rights Agreement. Except as explicitly
amended above, the Rights Agreement shall continue in full force
and effect.
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Amendment as of the date first above written.
MORRISON FRESH COOKING, INC.
By:/s/ Mitchell S. Block
Title: Vice President
and General Counsel
SUNTRUST BANK, ATLANTA
By:/s/ Sue Hampton
Title: Trust Officer
FIRST AMENDMENT TO THE MORRISON FRESH COOKING, INC.
EXECUTIVE SUPPLEMENTAL PENSION PLAN
THIS FIRST AMENDMENT is made on this 31st day of December,
1996, by MORRISON FRESH COOKING, INC. (the "Primary Sponsor"), a
corporation organized and existing under the laws of the State of
Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Executive Supplemental Pension Plan (the "Plan"),
which was established by indenture dated March 7, 1996;
WHEREAS, Ruby Tuesday, Inc. is the successor to Morrison
Restaurants, Inc. which effected that certain plan of
distribution involving the distribution to its stockholders of
all of the outstanding shares of common stock, respectively, of
Morrison Fresh Cooking, Inc. and Morrison Health Care, Inc. (the
"Distributions"); and
WHEREAS, the Primary Sponsor desires to amend the Plan
primarily to clarify how the distributions will affect Plan
participation by certain former employees of Morrison Restaurants
Inc. who did not continue in the employment of Morrison Fresh
Cooking, Inc. immediately following the Distributions;
NOW, THEREFORE, the Plan is hereby amended, effective
immediately, as follows:
1. By adding a new final clause to the final paragraph of
Section 1.6, as follows:
"; provided, however, Continuous Service shall not include
any period of employment by a Former Morrison Employee with
MRI or any of its affiliates completed on or prior to the
effective date of the Distributions."
2. By adding a new final clause to the final sentence of
Section 1.9, as follows:
"; provided, however, with respect to any Former Morrison
Employee, Annual Base Salary shall not include any amounts
paid by MRI or any of its affiliates during a calendar year
commencing prior to the effective date of the
Distributions."
3. By adding a new Section 1.6A, as follows:
"1.6A `Distributions' means the distributions by MRI
to its stockholders of all of the outstanding shares of
common stock, respectively, of Morrison Fresh Cooking, Inc.
and Morrison Health Care, Inc."
4. By adding a new Section 1.9A, as follows:
"1.9A `Former Morrison Employee' means an employee of
MRI at any time prior to the effective date of the
Distributions who did not continue in the employ of Morrison
Fresh Cooking, Inc. immediately after the Distributions, but
who subsequently has been hired by Morrison Fresh Cooking,
Inc."
5. By adding a new final clause to the final sentence of
Section 2.1, as follows:
"; provided, however, the salary and years of service of a
Former Morrison Employee completed with MRI or any of its
affiliates prior to the Spinoff Date shall be disregarded."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
First Amendment to be executed as of the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/ Ronnie L. Tatum
Ronnie L. Tatum
Title: Chief Executive Officer
ATTEST:
/s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
FIRST AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
MANAGEMENT RETIREMENT PLAN
THIS FIRST AMENDMENT is made on this 31st day of December,
1996, by MORRISON FRESH COOKING, INC. (the "Primary Sponsor"), a
corporation organized and existing under the laws of the State of
Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Management Retirement Plan (the "Plan"), which was
established by indenture dated March 7, 1996;
WHEREAS, Ruby Tuesday, Inc. is the successor to Morrison
Restaurants Inc. which effected that certain plan of distribution
involving the distribution to its stockholders of all of the
outstanding shares of common stock, respectively, of Morrison
Fresh Cooking, Inc. and Morrison Health Care, Inc. (the
"Distributions"); and
WHEREAS, the Primary Sponsor desires to amend the Plan
primarily to clarify how the Distributions will affect Plan
participation by certain former employees of Morrison Restaurants
Inc. who did not continue in the employment of Morrison Fresh
Cooking, Inc. immediately following the Distributions;
NOW, THEREFORE, the Plan is hereby amended, effective
immediately, as follows:
1. By adding a new Section 1.8A, as follows:
"1.8A `Distributions' means the distributions by MRI
to its stockholders of all of the outstanding shares of
common stock, respectively, of Morrison Fresh Cooking, Inc.
and Morrison Health Care, Inc."
2. By adding a new final clause to the final sentence of
Section 1.12, as follows:
"With respect to any Former Morrison Employee, Compensation
shall not include any compensation paid by MRI or any of its
affiliates during any Plan Year commencing prior to the
effective date of the Distributions."
3. By adding a new Section 1.12A, as follows:
"1.12A `Former Morrison Employee' means an employee of
MRI at any time prior to the effective date of the
Distributions who did not continue in the employ of Morrison
Fresh Cooking, Inc. immediately after the Distributions, but
who subsequently has been hired by Morrison Fresh Cooking,
Inc."
4. By adding a new final clause to Section 1.15(e), as follows:
"; provided, however, for purposes of determining Hours of
Service, a Former Morrison Employee shall not be credited
with any period of employment with MRI or any of its
affiliates completed on or prior to the Spinoff Date."
5. By adding a new final clause to the final sentence of
Section 2.1, as follows:
"; provided, however, a Participant who is a Former Morrison
Employee shall not have included as Compensation any items
of compensation earned with MRI or any of its affiliates
prior to the Spinoff Date."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
First Amendment to be executed as of the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/ Ronnie L. Tatum
Ronnie L. Tatum
Title: Chief Executive Officer
ATTEST:
/s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
SECOND AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
MANAGEMENT RETIREMENT PLAN
THIS SECOND AMENDMENT is made on this 28th day of March,
1997, by Morrison Fresh Cooking, Inc. (the "Primary Sponsor"), a
corporation organized and existing under the laws of the state of
Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Management Retirement Plan (the "Plan"), which was
established by indenture dated March 7, 1996;
WHEREAS, the Primary Sponsor now desires to amend the Plan
to alter the definition of compensation in order to broaden the
Plan's eligibility criteria and to otherwise conform the Plan
document with certain historical administrative practices;
NOW, THEREFORE, the Primary Sponsor does hereby amend the
Plan, by deleting Section 1.07 in its entirety and by
substituting the following:
"1.07 'Compensation' means the total compensation
that would be subject to tax under Code Section 3101(a) (but
without dollar limitation of Code Section 3121(a)(1) and
excluding any amounts paid as Long-Term Disability Benefits)
paid to a Participant by the Company, or any Affiliate,
during the Plan Year, increased by (a) amounts that would
have been paid during the Plan Year but which are
contributed by the Plan Sponsor pursuant to a salary
reduction agreement and which are not includable in the
gross income of the Participant under Code Section 125 and
(b) amounts paid or credited to a Participant as
nonqualified deferred compensation by the Company or any
Affiliate, notwithstanding the provisions of Code Section
3121(v)(2). In no event shall Compensation in excess of
$100,000 (as adjusted from time to time at the sole
discretion of the Company) be counted for purposes of
determining a Participant's Accrued Benefit."
This amendment will be effective as of March 7, 1996, for all
purposes except for determining eligibility pursuant to Article
II of the Plan. This amendment will be effective as of January
1, 1997, for purposes of determining eligibility pursuant to
Article II of this Plan.
Except as specifically provided herein, the Plan will remain
in full force and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Amendment to be executed as of the day and year first
above written.
MORRISON FRESH COOKING, INC.
By: /s/ Ronnie L. Tatum
Ronnie L. Tatum
Title: Chief Executive Officer
ATTEST:
By: /s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
FIRST AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
DEFERRED COMPENSATION PLAN
THIS FIRST AMENDMENT is made on this 31st day of December,
1996, by MORRISON FRESH COOKING, INC. (the "Primary Sponsor"), a
corporation organized and existing under the laws of the State of
Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Deferred Compensation Plan (the "Plan"), which was
established by indenture dated March 7, 1996;
WHEREAS, Ruby Tuesday, Inc. is the successor to Morrison
Restaurants Inc. which effected that certain plan of distribution
involving the distribution to its stockholders of all of the
outstanding shares of common stock, respectively, of Morrison
Fresh Cooking, Inc. and Morrison Health Care, Inc. (the
"Distributions"); and
WHEREAS, the Primary Sponsor desires to amend the Plan
primarily to clarify how the Distributions will affect Plan
participation by certain former employees of Morrison Restaurants
Inc. who did not continue in the employment of Morrison Fresh
Cooking, Inc. immediately following the Distributions;
NOW, THEREFORE, the Plan is hereby amended, effective
immediately, as follows:
1. By adding a new Section 1.11A, as follows:
"1.11A `Distributions' means the distributions by MRI
to its stockholders of all of the outstanding shares of
common stock, respectively, of Morrison Fresh Cooking, Inc.
and Morrison Health Care, Inc."
2. By adding a new Section 1.15A, as follows:
"1.15A `Former Morrison Employee' means an employee of
MRI at any time prior to the effective date of the
Distributions who did not continue in the employ of Morrison
Fresh Cooking, Inc. immediately after the Distributions, but
who subsequently has been hired by Morrison Fresh Cooking,
Inc."
3. By adding a new final clause to the final sentence of
Section 3.3(c), as follows:
"; provided, however, with respect to any Former Morrison
Employee, periods of employment with MRI or any of its
affiliates completed on or prior to the effective date of
the Distributions shall be disregarded."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
First Amendment to be executed as of the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/ Ronnie L. Tatum
Ronnie L. Tatum
Title: Chief Executive Officer
ATTEST:
/s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
SECOND AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
DEFERRED COMPENSATION PLAN
THIS SECOND AMENDMENT is made as of this 28th day of
February, 1997, by MORRISON FRESH COOKING, INC. (the "Primary
Sponsor"), a corporation organized and existing under the laws of
the State of Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Deferred Compensation Plan (the "Plan"), which was
established by indenture dated March 7, 1996; and
WHEREAS, the Primary Sponsor desires to amend the Plan to
clarify the scope of potential rates of return available
thereunder;
NOW, THEREFORE, the Plan is hereby amended, effective as of
March 7, 1996, by deleting Section 1.9 in its entirety and by
substituting therefor the following:
"1.9 `Company Stock Rate of Return' means a designated
rate of return that corresponds, in whole or in part, to
changes in the value of securities of the Primary Sponsor,
any Affiliate, Ruby Tuesday, Inc. or Morrison Health Care,
Inc."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
Second Amendment to be executed as of the day and year first
above written.
MORRISON FRESH COOKING, INC.
By: /s/ Craig Nelson
Craig Nelson
Title: Senior Vice President - Finance
ATTEST:
/s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
FIRST AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
SALARY DEFERRAL PLAN
THIS FIRST AMENDMENT is made on this 31st day of December,
1996, by MORRISON FRESH COOKING, INC. (the "Primary Sponsor"), a
corporation organized and existing under the laws of the State of
Georgia.
W I T N E S S E T H:
WHEREAS, the Primary Sponsor maintains the Morrison Fresh
Cooking, Inc. Salary Deferral Plan (the "Plan"), which was
established by indenture dated March 7, 1996;
WHEREAS, Ruby Tuesday, Inc. is the successor to Morrison
Restaurants Inc. which effected that certain plan of distribution
involving the distribution to its stockholders of all of the
outstanding shares of common stock, respectively, of Morrison
Fresh Cooking, Inc. and Morrison Health Care, Inc. (the
"Distributions"); and
WHEREAS, the Primary Sponsor desires to amend the Plan
primarily to clarify how the Distributions will affect Plan
participation by certain former employees of Morrison Restaurants
Inc. who did not continue in the employment of Morrison Fresh
Cooking, Inc. immediately following the Distributions;
NOW, THEREFORE, the Plan is hereby amended, effective
immediately, as follows:
1. By adding a new Section 1.16A, as follows:
"1.16A `Distributions' means the distributions by
Morrison Restaurants Inc. to its stockholders of all of the
outstanding shares of common stock, respectively, of
Morrison Fresh Cooking, Inc. and Morrison Health Care, Inc."
2. By adding a new Section 1.28A, as follows:
"1.28A `Former Morrison Employee' means an employee of
Morrison Restaurants Inc. at any time prior to the effective
date of the Distributions who did not continue in the employ
of Morrison Fresh Cooking, Inc. immediately after the
Distributions, but who subsequently has been hired by
Morrison Fresh Cooking, Inc."
3. By adding a new final clause to the final sentence of
Section 1.54, as follows:
"; provided, however, with respect to any Former Morrison
Employee, any Year of Service with Morrison Restaurants Inc.
or any of its affiliates completed on or prior to the
effective date of the Distributions shall be disregarded."
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
First Amendment to be executed as of the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/ Ronnie L. Tatum
Ronnie L. Tatum
Title: Chief Executive Officer
ATTEST:
/s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
SECOND AMENDMENT TO THE
MORRISON FRESH COOKING, INC.
SALARY DEFERRAL PLAN
THIS SECOND AMENDMENT is made on this 28th day of February,
1997, by MORRISON FRESH COOKING, INC., a corporation duly
organized and existing under the laws of the State of Georgia
(the "Primary Sponsor").
W I T N E S S E T H:
WHEREAS, the Primary Sponsor established by indenture dated
March 7, 1996 the Morrison Fresh Cooking, Inc. Salary Deferral
Plan (the "Plan"); and
WHEREAS, the Primary Sponsor desires to amend the Plan
primarily to clarify certain employee stock ownership provisions
of the Plan and to reflect the changes required by the Small
Business Job Protection Act of 1996;
NOW, THEREFORE, the Primary Sponsor does hereby amend the
Plan, effective as of January 1, 1997, except as otherwise
provided herein, as follows:
1. By substituting the phrase "Supplemental Contribution
Account" for the phrase "Supplemental Matching Account" each time
the latter phrase appears in the Plan and by deleting the
existing Subsections (e) and (g) of Section 1.1 and substituting
therefor the following:
"(e) `Pre-Spinoff Matching Account' which shall reflect
a Member's interest in matching contributions made under the
Plan through the date of the first Acquisition Loan.
(g) `Supplemental Contributions Account' which shall
reflect a Member's interest in supplemental allocations
under Plan Section 4.2(b)."
2. By adding a new Subsection (j) to Section 1.1 and
deleting the last sentence of Section 1.1 and substituting
therefor the following:
"(k) `Unallocated Contributions and Dividends Account'
which shall consist of any Company Stock and cash a Plan
Sponsor contributes during a Plan Year and cash dividends
paid on shares of Company Stock held in the Loan Suspense
Account during a Plan Year until allocated for that Plan
Year pursuant to Plan Section 4.
Each Account under the Plan may consist of a Company
Stock Subaccount and an Other Investment Subaccount."
3. By deleting Subsection (b) of Section 1.5 in its
entirety and substituting therefor the following:
"(b) [Reserved];"
4. By deleting the last sentence of Section 1.25 and
substituting therefor the following:
"The ESOP shall consist of the Supplemental Contributions
Accounts, Company Matching Accounts, the Loan Suspense
Account, the Suspense Account and the Unallocated
Contributions and Dividends Account."
5. By replacing the existing Section 1.31 with new Section
1.31, as follows:
"1.31 `Highly Compensated Employee' shall mean,
with respect to a Plan Year, each Employee who:
(a) was at any time during the Plan Year or
the immediately preceding Plan Year an owner of more
than five percent (5%) of the outstanding stock of a
Plan Sponsor or Affiliate or more than five percent
(5%) of the total combined voting power of all stock of
a Plan Sponsor or Affiliate; or
(b) received Annual Compensation in excess
of $80,000 (as adjusted for changes in the cost of
living from time to time by the Secretary of the
Treasury) during the immediately preceding Plan Year.
For purposes of this Section, (1) Annual Compensation
shall include amounts paid by Affiliates and shall be
determined without regard to Annual Compensation Limit; (2)
a former Employee shall be treated as a Highly Compensated
Employee if the former Employee was a Highly Compensated
Employee at the time the former Employee separated from
service with the Plan Sponsor or Affiliate or the former
Employee was a Highly Compensated Employee at any time after
the former Employee attained age 55; and (3) Employees who
are nonresident aliens and who receive no earned income from
a Plan Sponsor or Affiliate from sources within the United
States shall not be treated as Employees.
Notwithstanding the foregoing, the Primary Sponsor may
elect to determine each Highly Compensated Employee using
the snapshot day of December 31, in a manner consistent with
Section 4 of Revenue Procedure 93-42."
6. By deleting the second to last sentence of Section 3.3
and by adding a new second paragraph thereto, as follows:
"A cash contribution by a Plan Sponsor pursuant to this
Section shall be used first to make any scheduled or
accelerated amortization payments, or prepayments, on an
Acquisition Loan and then, to the extent of any excess,
shall be used to acquire additional shares of Company Stock,
to the extent practicable."
7. By adding the phrase "and, if applicable, Plan Section
4.4(d)" immediately after the cross-reference to Section 4.4(b)
and by substituting, effective as of the Effective Date, Section
4.2(a)(2) as the cross-reference in place of Section 4.2(b) in
Section 3.4.
8. By adding new Sections 3.4A and 3.4B, as follows:
"3.4A Qualified Contributions. At the sole
discretion of the Primary Sponsor, each Plan Sponsor shall
make `Qualified Nonelective Contributions' and/or `Qualified
Matching Contributions', as those terms are defined in
Section 1 of Appendix A, in an amount determined by the
Primary Sponsor as necessary to satisfy, as applicable, the
testing requirements of Code Section 401(k)(3)(A)(ii) and
Code Section 401(m)(2)(A).
3.4B Contributions Respecting Qualified Military
Service. Notwithstanding any other provision of the Plan to
the contrary, effective December 12, 1994, contributions,
benefits and service credit with respect to qualified
military service will be provided in accordance with Code
Section 414(u)."
9. By adding the following head language to Section 4.2:
"Plan Sponsor contributions and dividends paid on shares of
Company Stock allocated to the Loan Suspense Account during
a Plan Year shall be credited initially to the Unallocated
Contributions and Dividends Account until such amounts are
further allocated pursuant to this Section 4."
10. By deleting Subsection (b) of Section 4.2 in its
entirety and substituting therefor the following:
"(b) Supplemental Allocations. As of each Valuation
Date, if the Fair Market Value of Company Stock released
from the Loan Suspense Account in accordance with Plan
Section 4.4(b) exceeds the value of matching allocations
provided for in Plan Section 4.2(a), the excess shares of
Company Stock so released and any contributions described in
Plan Section 3.4A shall be allocated to the Supplemental
Account of each Member who is employed by a Plan Sponsor on
the last day of the Plan Year in the proportion that the
Member's Annual Compensation bears to the Annual
Compensation of all Members entitled to an allocation
pursuant to this Section 4.2(b)."
11. By deleting the existing head language of Section
4.3(b) and substituting therefor the following:
"As of each Valuation Date, the Trustee shall allocate to
each Account under the ESOP (other than the Unallocated
Contributions and Dividends Account) its share of the net
income or net loss of the ESOP Fund as hereinafter set
forth:".
12. By deleting clause (1) from Section 5.1(b) and
substituting therefor the following:
"(1) the Acquisition Loan provides for payments of principal
and interest no less frequently than annually at a
cumulative rate that is not less rapid at any time than
level annual payments of those amounts for ten years,".
13. By deleting the first sentence of Section 5.1(c) in its
entirety and substituting therefor the following:
"No person entitled to payment under an Acquisition Loan
shall have any right to Fund assets other than (1)
collateral given for the Acquisition Loan; (2) contributions
(other than contributions of Company Stock) that are made to
the ESOP under Plan Section 3.3; and (3) earnings
attributable to such collateral and such contributions."
14. By replacing the term "Plan" with the term "ESOP" the
first time the former appears in Section 7.1.
15. By deleting the second sentence of Sections 8.3 and 9.2
in their entireties and substituting therefor the following:
"If the Member's interest in Company Stock under the Plan
equals or exceeds the value of one hundred (100) shares of
Company Stock, that interest may be distributed in the form
of whole shares of Company Stock if the Member so elects in
such form as the Plan Administrator may prescribe."
16. By deleting Subsection (c) of Section 11.3 in its
entirety and by substituting therefor the following:
"(c) For purposes of this Plan Section, the term
`required beginning date' means April 1 of the calendar year
following the later of the calendar year in which the Member
attains age 70.5 or the calendar year in which the Member
retires, except that, in the case of a person described in
Section 1(b)(3) of Appendix C, the `required beginning date'
shall be April 1 of the calendar following the calendar year
in which the Member attains age 70.5."
17. By redesignating Section 22 as Section 23 and by adding
new Section 22 as follows:
"SECTION 22
PLAN LOANS
22.1 Subject to the provisions of the Plan and the
Trust, on and after the date the provisions of this Section
are activated by express written action of the Plan
Administrator, each Member who is an Employee shall have the
right, subject to prior approval by the Plan Administrator,
to borrow from the Fund an amount equal to the lesser of the
value of the Member's accounts under the Profit Sharing Plan
or fifty percent (50%) of the value of the Member's vested
Account. In addition, each "party in interest," as defined
in ERISA Section 3(14), who is (a) a Member but no longer an
Employee, (b) the Beneficiary of a deceased Member, or
(c) an alternate payee of a Member pursuant to the
provisions of a "qualified domestic relations order," as
defined in Code Section 414(p), shall also have the right,
subject to prior approval by the Plan Administrator, to
borrow from the Fund; provided, however, that loans to such
parties in interest may not discriminate in favor of Highly
Compensated Employees.
22.2 In order to apply for a loan, a borrower must
complete and submit to the Plan Administrator documents
provided by the Plan Administrator for this purpose.
22.3 Loans shall be available to all eligible borrowers
on a reasonably equivalent basis which may take into account
the borrower's creditworthiness, ability to repay, and
ability to provide adequate security. Loans shall not be
made available to Highly Compensated Employees, officers or
shareholders of a Plan Sponsor in an amount greater than the
amount made available to other borrowers. This provision
shall be deemed to be satisfied if all borrowers have the
right to borrow the same percentage of their interest in the
Member's vested Account, notwithstanding that the dollar
amount of such loans may differ as a result of differing
values of Members' vested Accounts.
22.4 Each loan shall bear a "reasonable rate of
interest" and provide that the loan be amortized in
substantially level payments, made no less frequently than
quarterly, over a specified period of time. A "reasonable
rate of interest" shall be that rate that provides the Plan
with a return commensurate with the interest rates charged
by persons in the business of lending money for loans which
would be made under similar circumstances.
22.5 Each loan shall be adequately secured, with the
security for the outstanding balance of all loans to the
borrower to consist of one-half (1/2) of the borrower's
interest in the Member's vested Account, or such other
security as the Plan Administrator deems acceptable. No
portion of the Member's Employee Deferral Account shall be
used as security for any loan hereunder unless and until
such time as the loan amount exceeds the value of the
borrower's interest in the Member's vested Account in all
other Accounts.
22.6 Each loan, when added to the outstanding balance
of all other loans to the borrower from all retirement plans
of the Plan Sponsor and its Affiliates which are qualified
under Section 401 of the Code, shall not exceed the lesser
of:
(a) $50,000, reduced by the excess, if any, of
(1) the highest outstanding balance of loans
made to the borrower from all retirement plans
qualified under Code Section 401 of the Plan Sponsor
and its Affiliates during the one (1) year period
immediately preceding the day prior to the date on
which such loan was made, over
(2) the outstanding balance of loans made to
the borrower from all retirement plans qualified under
Code Section 401 of the Plan Sponsor and its Affiliates
on the date on which such loan was made, or
(b) one-half (1/2) of the value of the borrower's
interest in the vested Account attributable to the Member's
Account.
For purposes of this Section, the value of the vested
Account attributable to a Member's Account shall be
established as of the latest preceding Valuation Date, or
any later date on which an available valuation was made, and
shall be adjusted for any distributions or contributions
made through the date of the origination of the loan.
22.7 Each loan, by its terms, shall be repaid within
five (5) years, except that any loan which is used to
acquire any dwelling unit which within a reasonable time is
to be used (determined at the time the loan is made) as the
principal residence of the borrower may, by its terms, be
repaid within a longer period of time.
22.8 The Plan Administrator may establish limits on the
number of loans outstanding in favor of any single borrower
at any one time and, for any such loan, a minimum loan
amount, which limitations shall be applied in a uniform and
nondiscriminatory manner.
22.9 The entire unpaid principal sum and accrued
interest shall, at the option of the Plan Administrator,
become due and payable if (a) a borrower fails to make any
loan payment when due, (b) a borrower ceases to be a "party
in interest", as defined in ERISA Section 3(14), (c) the
vested Account held as security under the Plan for the
borrower will, as a result of an impending distribution or
withdrawal, be reduced to an amount less than the amount of
all unpaid principal and accrued interest then outstanding
under the loan, or (d) a borrower makes any untrue
representations or warranties in connection with the
obtaining of the loan. In that event, the Plan
Administrator may take such steps as it deems necessary to
preserve the assets of the Plan, including, but not limited
to, the following: (1) direct the Trustee to deduct the
unpaid principal sum, accrued interest, and any other
applicable charge under the note evidencing the loan from
any benefits that may become payable out of the Plan to the
borrower, (2) direct the Plan Sponsor to deduct and transfer
to the Trustee the unpaid principal balance, accrued
interest, and any other applicable charge under the note
evidencing the loan from any amounts owed by the Plan
Sponsor to the borrower, or (3) liquidate the security given
by the borrower, other than amounts attributable to a
Member's Employee Deferral Account, and deduct from the
proceeds the unpaid principal balance, accrued interest, and
any other applicable charge under the note evidencing the
loan. If any part of the indebtedness under the note
evidencing the loan is collected by law or through an
attorney, the borrower shall be liable for attorneys' fees
in an amount equal to ten percent of the amount then due and
all costs of collection.
22.10 Each loan shall be treated as an investment
of that borrower's Account and shall be made only in
accordance with regulations and rulings of the Internal
Revenue Service and the Department of Labor. The Plan
Administrator shall be authorized to administer the loan
program of this Section and shall act in his sole discretion
to ascertain whether the requirements of such regulations
and rulings and this Section have been met."
18. By deleting the first sentence of Section 2 of Appendix
A and substituting therefor the following:
"In addition to any other limitations set forth in the
Plan, for each Plan Year one of the following tests must be
satisfied:
(a) the actual deferral percentage for the
Highly Compensated Eligible Members for the Plan Year
must not be more than the actual deferral percentage of
all other Eligible Members for the preceding Plan Year
multiplied by 1.25; or
(b) the excess of the actual deferral
percentage for the Highly Compensated Eligible Members
for the Plan Year over that of all other Eligible
Members for the preceding Plan Year must not be more
than two (2) percentage points, and the actual deferral
percentage for the Highly Compensated Eligible Members
for the Plan Year must not be more than the actual
deferral percentage of all other Eligible Members for
the preceding Plan Year multiplied by two (2).
Notwithstanding the foregoing, the Plan
Administrator may utilize any transition rule permitted
by Internal Revenue Service 97-2 or otherwise regarding
the use of current year data for calculating actual
deferral percentages."
19. By deleting Subsection (b) of Section 3 of Appendix A
in its entirety and substituting therefor the following:
"(b) the maximum amount of Deferral Amounts permitted
under Section 2 of this Appendix A for the Plan Year, which
shall be determined by reducing the Deferral Amounts
contributed on behalf of Highly Compensated Eligible Members
in order of the amount of Deferral Amounts contributed by
such Eligible Members beginning with the greatest of such
amounts."
20. By deleting the first sentence of Section 5 of Appendix
A and substituting therefor the following:
"In addition to any other limitations set forth in the
Plan, Matching Contributions under the Plan and the amount
of nondeductible employee contributions under the Plan, for
each Plan Year must satisfy one of the following tests:
(a) The contribution percentage for the
Highly Compensated Eligible Members for the Plan Year
must not exceed 125% of the contribution percentage for
all other Eligible Members for the preceding Plan Year;
or
(b) The contribution percentage for Highly
Compensated Eligible Members for the Plan Year must not
exceed the lesser of (1) 200% of the contribution
percentage for all other Eligible Members for the
preceding Plan Year, and (2) the contribution
percentage for all other Eligible Members for the
preceding Plan Year plus two (2) percentage points.
Notwithstanding the foregoing, the Plan
Administrator may utilize any transition rule permitted
by Internal Revenue Service 97-2 or otherwise regarding
the use of current year data for calculating actual
contribution percentages."
21. By deleting Subsection (b) of Section 6 of Appendix A
in its entirety and substituting therefor the following:
"(b) the maximum amount of the contributions permitted
under the limitations of Section 5 of this Appendix A,
determined by reducing contributions made on behalf of
Highly Compensated Eligible Members beginning with the
greatest of such amounts."
22. By deleting the last sentence of the second paragraph
of Section 6 of Appendix A.
23. By deleting the reference in Section 6(c) of Appendix B
to Plan Section 4.2(b)(3) and substituting therefor a reference
to Plan Section 4.2(b).
24. By substituting Section 4.2(b)(3) as the cross-
reference in place of Section 4.2(b) in Section 6(c) of Appendix
B.
25. By deleting Section 1(b)(1) of Appendix C in its
entirety and substituting therefor the following:
"(1) An officer of the Plan Sponsor or any Affiliate
whose Annual Compensation was greater than fifty percent
(50%) of the amount in effect under Code Section
415(b)(1)(A) for the calendar year in which the Plan Year
ends, where the term `officer' means an administrative
executive in regular and continual service to the Plan
Sponsor or Affiliate; provided, however, that in no event
shall the number of officers exceed the lesser of Clause (A)
or (B) of this Subparagraph (1), where:
(A) equals fifty (50) Employees; and
(B) equals the greater of (i) three (3)
Employees or (ii) ten percent (10%) of the number of
Employees during the Plan Year, with any non-integer
being increased to the next higher integer.
If for any Plan Year no officer of the Plan Sponsor meets
the requirements of this Subparagraph (1), the highest paid
officer of the Plan Sponsor for the Plan Year shall be
considered an officer for purposes of this Subparagraph."
Except as specifically amended hereby, the Plan shall remain
in full force and effect prior to this Second Amendment.
IN WITNESS WHEREOF, the Primary Sponsor has caused this
Second Amendment to be executed on the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/ Craig Nelson
Craig Nelson
Title: SVP - Finance
ATTEST:
By: /s/ Mitchell S. Block
Mitchell S. Block
Title: Secretary
[CORPORATE SEAL]
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of June 19, 1997 ("this
Agreement") is entered into by MORRISON FRESH COOKING, INC., a
Georgia corporation (the "Borrower") and AMSOUTH BANK OF ALABAMA,
an Alabama banking corporation (the "Lender").
Recitals
A. The Borrower has applied to the Lender for a revolving
credit facility in an aggregate principal amount outstanding not
to exceed $30,000,000 (the "Revolving Facility") the proceeds of
which are to be used by the Borrower for working capital, general
corporate purposes and letters of credit issued in the ordinary
course of business.
B. The Lender is willing to make the Revolving Facility
available to the Borrower only if, among other things, the
Borrower enters into this Agreement and the other Loan Documents
(as hereinafter defined).
Agreement
NOW, THEREFORE, in consideration of the foregoing Recitals,
and to induce the Lender to make the Revolving Facility
available, the Borrower and the Lender agree as follows:
ARTICLE 1
RULES OF CONSTRUCTION AND
DEFINITIONS
SECTION 1.1 For the purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise
requires:
All accounting terms not otherwise defined herein have
the meanings assigned to them, and all computations herein
provided or shall be made, in accordance with generally
accepted accounting principles applied on a consistent
basis. All references herein to "generally accepted
accounting principles" refer to such principles as they
exist at the date of application thereof; provided, however,
that if any change in generally accepted accounting
principles after the Closing Date could, in the reasonable
judgment of the Lender, affect adversely the interests of
the Lender in the interpretation or calculation of the
financial covenants or other provisions of this Agreement or
the other Loan Documents, such change shall not be effective
for purposes of this Agreement or the other Loan Documents
unless and until the provisions of this Agreement and the
other Loan Documents that could be adversely affected by
such change have been amended by the mutual agreement of the
Borrower and the Lender so as to insure that the interests
of the Lender will not be adversely affected by such change.
All references in this Agreement to designated
"Articles", "Sections" and other subdivisions or to lettered
Exhibits or numbered Schedules are to the designated
Articles, Sections and other subdivisions hereof and the
lettered Exhibits and numbered Schedules annexed hereto
unless the context otherwise clearly indicates. All
Article, Section, other subdivision and Exhibit captions
herein are used for reference only and in no way limit or
describe the scope or intent of, or in any way affect, this
Agreement.
The terms "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other
subdivision.
The terms "include," "including" and similar terms
shall be construed as if followed by the phrase "without
being limited to."
The terms defined in this article have the meanings
attributed to them in this article. Singular terms shall
include the plural as well as the singular, and vice versa.
Words of masculine, feminine or neuter gender shall mean and
include the correlative words of other genders.
All recitals set forth in this Agreement are hereby
incorporated in the operative provisions of this Agreement.
No inference in favor of or against any party shall be
drawn from the fact that such party or its counsel has
drafted any portion hereof.
All references herein to a separate instrument are to
such separate instrument as the same may be amended or
supplemented from time to time pursuant to the applicable
provisions thereof.
If the Borrower now or hereafter has any Subsidiaries,
all computations required in connection with the covenants
contained in Article 7 and all references to events or
conditions having a "material adverse effect" on the
Borrower shall be made for the Borrower and its Subsidiaries
on a combined or consolidated basis, after elimination of
intercompany items, and all financial statements, reports
and certificates required hereunder shall be prepared on the
same basis.
Actual/360 Basis shall mean a method of computing
interest or other charges hereunder on the basis of an
assumed year of 360 days for actual number of days elapsed,
meaning that interest or other charges accrued for each day
will be computed by multiplying the rate applicable on that
day by the unpaid principal balance (or other relevant sum)
on that day and dividing the result by 360.
Advance shall mean a borrowing under the Revolving
Facility pursuant to Section 0.
Affiliate of any specified person shall mean any person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified
person. For purposes of this definition "control" when used
with respect to any specified person means the power to
direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
Agreement shall mean, on any date, this Credit
Agreement, as originally in effect on the Closing Date and
as thereafter from time to time amended, supplemented,
restated or otherwise modified and in effect on such date.
Application shall have the meaning attributed to that
term in Section 0.
Authorized Representative shall mean the officer or
officers of the Borrower that are duly authorized to act for
the Borrower in the specified capacity under the Governing
Documents of the Borrower or applicable law.
Borrower shall mean Morrison Fresh Cooking, Inc., a
Georgia corporation.
Business Day shall mean (a) any day on which commercial
banks are not authorized or required to close in Birmingham,
Alabama and (b) if such day relates to the giving of notices
or quotes in connection with a LIBOR Quote or to a borrowing
of, a payment or prepayment of principal of or interest on,
or an Interest Period for, a LIBOR-Based Rate Segment or a
notice by the Borrower with respect to any such borrowing,
payment, prepayment or Interest Period, any day on which
dealings in Dollar deposits are carried out in the London
interbank market.
Capital Expenditures shall mean any expenditure for
fixed assets or that is properly chargeable to capital
account in accordance with generally accepted accounting
principles.
Closing Date shall mean the date of this Agreement.
Credit Obligations shall mean the Revolving Facility
Obligations, the Letter of Credit Obligations and all other
obligations and debts owing to the Lender, and arising under
the terms of this Agreement, the Note, the Applications and
the other Loan Documents, whether now or hereafter incurred,
existing or arising, including the principal amount of all
Advances, all Letter of Credit Borrowings and all
Reimbursement Obligations, any sums expended by the Lender
in exercising the rights and remedies described in Section
0, all accrued interest on Advances and Reimbursement
Obligations, and all costs, fees, charges and expenses
incurred and payable in connection therewith, including fees
payable under the terms of, or in connection with, this
Agreement, all other obligations and debts owing to the
Lender arising in connection with, ancillary to, or in
support of Advances and Letter of Credit Borrowings, and all
renewals, extensions, modifications and amendments of any of
the foregoing, whether or not any renewal, extension,
modification or amendment agreement is executed in
connection therewith.
Debt shall mean (i) the Credit Obligations and all
other indebtedness, whether or not represented by bonds,
debentures, notes or other securities, for the repayment of
borrowed money or for reimbursement of drafts drawn or
available to be drawn under letters of credit and banker's
acceptances issued for the account of such person, (ii) all
indebtedness deferred for the payment of the purchase price
of property or assets purchased, (iii) all capitalized lease
obligations, (iv) all indebtedness secured by any mortgage
or pledge of, or Lien on, property of such person, whether
or not the indebtedness secured thereby shall have been
assumed, (v) Guaranteed Obligations, (vi) all obligations
with respect to any conditional sale contract or title
retention agreement, and (vii) all obligations with respect
to interest rate swap agreements.
Default shall mean an Event of Default or an event that
with notice or lapse of time or both would become an Event
of Default.
Dollars and the symbol $ shall mean dollars
constituting legal tender for the payment of public and
private debts in the United States of America.
EBITDA for any period shall mean Net Income (or the net
deficit, if expenses and charges exceed revenues and other
proper income credits) after taxes for such period, plus
amounts that have been deducted for (i) depreciation, (ii)
amortization, (iii) Interest Expense and (iv) income and
profit taxes in determining Net Income for such period.
EBITDAR for any period shall mean Net Income (or the
net deficit, if expenses and charges exceed revenues and
other proper income credits) after taxes for such period,
plus amounts that have been deducted for (i) Interest
Expense, (ii) Operating Lease Payments, (iii) depreciation,
(iv) amortization and (v) income and profit taxes in
determining Net Income for such period.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
ERISA Affiliate shall mean, as of any date, any
corporation, partnership or other trade or business (whether
or not incorporated) under common control with the Borrower
within the meaning of Sections 414(b), (c) or (m) of the
Internal Revenue Code, as amended.
Event of Default shall have the meaning assigned to
such term in Article 0 hereof.
Fixed Charge Coverage Ratio shall mean as of the last
day of any fiscal quarter, beginning with the fiscal quarter
ending August 31, 1997, the ratio of:
(i) the sum of (y) EBITDAR for the
applicable period then ending minus (z) dividends
actually paid during such period; to
(ii) the aggregate (without duplication) of
the following, all determined in accordance with
generally accepted accounting principles for the
applicable period then ending: (a) Interest Expense for
such period, (b) Operating Lease Payments for such
period, (c) Principal Maturities (not including the
Loans) for the next succeeding four fiscal quarters
following the date of determination, and (d) 20% of the
outstanding Loans during such period.
Funded Debt shall mean all Debt maturing by its terms
more than one year after, or which is renewable or
extendible at the option of the obligor to a date more than
one year after, the date as of which Funded Debt is being
determined.
Governing Documents of the Borrower shall mean all
organizational and governing documents applicable thereto
including its articles of incorporation and bylaws, and all
applicable resolutions or other directions of the directors,
shareholders, officers, or other relevant persons
comprising, owning, managing or operating the Borrower.
Governmental Authority shall mean any national,
federal, state, county, municipal or other agency,
authority, department, commission, bureau, board, court or
instrumentality thereof.
Governmental Requirements shall mean all laws, rules,
regulations, requirements, ordinances, judgments, decrees,
codes and orders of any Governmental Authority applicable to
the Borrower.
Guaranteed Obligations of any person shall mean all
guaranties (including guaranties of guaranties and
guaranties of dividends and other monetary obligations),
endorsement, assumptions and other contingent obligations
with respect to, or to purchase or otherwise pay or acquire,
Debt of others.
Hazardous Material shall mean (a) any asbestos or
insulation or other material composed of or containing
asbestos and (b) any hazardous, toxic or dangerous waste,
substance or material defined as such in (or for purposes
of) the Comprehensive Environmental Response, Compensation
and Liability Act, any so-called "Superfund" or "Superlien"
law, or any other Governmental Requirement regulating,
relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste,
substance or material as at the Closing Date or at any time
thereafter in effect. This definition refers to the amounts
of such waste, substance or material present at a particular
facility in excess of the reportable quantity or threshold
planning quantity, if applicable, for such waste, substance
or material as may be listed in such act, law or other
Governmental Requirement described in the foregoing
sentence, as at the Closing Date or at any time thereafter
in effect.
Interest Expense shall mean all interest incurred on
Debt (including obligations payable under capitalized leases
attributable to interest) during the period in question.
Interest Period shall mean each period commencing on
the date a LIBOR Loan is made or the last day of the next
preceding Interest Period for such LIBOR Loan and ending on
the numerically corresponding day in the first, second,
third, or sixth calendar month thereafter, as the Borrower
may select as provided in Section 0 hereof, except that each
Interest Period that commences on the last Business Day of a
calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period
for any LIBOR Loan would otherwise end after the Termination
Date, such Interest Period shall end on the Termination
Date; (ii) each Interest Period that would otherwise end on
a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on
the next preceding Business Day); and (iii) notwithstanding
clauses (i) and (ii) above, no Interest Period for any LIBOR
Loan shall have a duration of less than one month and, if
the Interest Period for any LIBOR Loan would otherwise be a
shorter period, such LIBOR Loan shall not be available
hereunder for such period.
Letter of Credit Borrowings shall mean as of any date
the maximum aggregate amount that the Lender could be
required to pay under drafts that could be, or have been,
properly drawn in compliance with the terms of all Letters
of Credit outstanding on such date, other than drafts that
have been drawn and paid.
Letter of Credit Obligations shall mean (a) the Letter
of Credit Borrowings and (b) the Reimbursement Obligations
and the Borrower's other obligations under this Agreement
and the Applications with respect to Letters of Credit or
drawings made thereunder, including obligations with respect
to all principal, interest, fees and other charges related
thereto.
Letters of Credit shall mean all letters of credit
issued on or after the Closing Date by the Lender for the
account of the Borrower under this Agreement.
Liabilities shall mean all Debt and all other items
(including taxes accrued as estimated) that, in accordance
with generally accepted accounting principles, would be
included in determining total liabilities as shown on the
liabilities side of a balance sheet.
LIBOR-Based Rate shall mean a rate per annum equal to
the LIBOR Quote plus the applicable Margin.
LIBOR-Based Rate Segment shall mean a Segment to which
the LIBOR-Based Rate is (or is proposed to be) applicable.
LIBOR Loans shall mean Loans on which interest rates
are determined on the basis of LIBOR-Based Rates.
LIBOR Quote shall mean, with respect to any time at
which the LIBOR-Based Rate is to be determined, the rate of
interest determined by the Lender by reference to the Knight-
Ridder Money Center reporting service or other comparable
financial information reporting service at the time employed
by the Lender as of 10:00 a.m. (Birmingham, Alabama time)
two (2) Business Days prior to the commencement of the
Interest Period, of the cost of funds available to the
Lender from the purchase on the London interbank market of
funds in the form of time deposits in Dollars in the
approximate amount of the Segment that is to bear interest
at the LIBOR-Based Rate, having a maturity comparable to the
Interest Period during which the LIBOR-Based Rate is to be
in effect, it being expressly understood that (1) the Lender
may not actually purchase any such time deposits and obtain
such funds and (2) the LIBOR Quote will be an estimate, and
for a variety of reasons, including changing market
conditions, the actual cost of funds to the Lender (if the
Lender elects to purchase funds in the form of time deposits
on such date) might vary from the LIBOR Quote.
LIBOR Reserve Requirement shall mean the percentage
(expressed as a decimal) prescribed by the Board of
Governors of the Federal Reserve System (or any successor),
on the date on which the LIBOR-Based Rate is determined, for
determining the reserve requirements of the Lender
(including any marginal, emergency, supplemental, special or
other reserves) with respect to liabilities relating to time
deposits purchased in the London interbank market having a
maturity equal to the period during which the LIBOR-Based
Rate will be in effect and in an amount equal to the Segment
involved, without any benefit or credit for any proration,
exemptions or offsets under any now or hereafter applicable
regulations.
Lien shall mean any mortgage, pledge, assignment,
charge, encumbrance, lien, security interest or financing
lease.
Loan Documents shall mean this Agreement, the Note, the
Applications and all other agreements, instruments and
documents executed or delivered at any time in connection
with the Credit Obligations, or to evidence or secure any of
the Credit Obligations.
Loans shall mean the aggregate outstanding amount of
all Advances, Letter of Credit Borrowings and Reimbursement
Obligations, and all extensions and renewals thereof.
Margin shall mean that percent per annum set forth
below, which shall be the Margin set forth opposite the
Fixed Charge Coverage Ratio at the time of each such Advance
as determined based on the most recent financial statements
furnished to the Lender pursuant to Section 5.3 or Section
7.3 hereof:
Fixed Applicable
Charge Coverage Ratio Margin *
>2.0:1 1.00%
<2.0:1 31.55:1 1.25%
<1.55:1 31.35:1 1.625%
<1.35:1 31.15:1 2.00%
* An additional 25 basis points will be added to the
applicable Margin if the ratio calculated with respect to
the financial covenant set forth in Section 7.8(2) exceeds
3.75 to 1.0 at any time; provided, however, if the ratio
calculated with respect to such financial covenant exceeds
3.75 to 1.0 at any time after the fiscal quarter ending
August 31, 1998, the default interest rate described in
Section 3.5 shall apply in lieu of the 25 basis point
increase provided hereunder.
Margin Stock shall have the meaning attributed to that
term in Regulation U of the Federal Reserve Board, as
amended.
Maximum Credit Amount shall mean the lesser of (a) 2.25
times Operating Cash Flow of the Borrower for the
immediately preceding four fiscal quarters and
(b) $30,000,000 or such lesser amount to which the Revolving
Facility may have been reduced under Section 2.6 hereof.
Multiemployer Plan shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
Net Income shall mean, for any period, net income (or
loss) for the Borrower for such period, determined in
accordance with generally accepted accounting principles.
Net Worth shall mean, at any time, the net worth of the
Borrower at such time, determined in accordance with
generally accepted accounting principles.
Note shall have the meaning assigned to such term in
Section 0 hereof.
Operating Cash Flow shall mean, for any period, the
aggregate of (a) Net Income, after taxes, for such period,
plus (b) the sum of Interest Expense, federal, state, local
and other income taxes, depreciation, amortization of
intangible assets, and extraordinary losses and other
noncash expenses or charges reducing income for such period,
all to the extent taken into account in the calculation of
Net Income for such period, minus the sum of dividends
actually paid during such period and extraordinary gains and
other noncash credits increasing income for such period, all
to the extent taken into account in the calculation of Net
Income for such period.
Operating Lease Payments shall mean all amounts payable
under any lease or rental agreement (other than obligations
under capital leases) during the period in question (but
excluding, in any event, amounts paid in respect of taxes,
utilities, insurance, common area maintenance and other like
charges associated with the lease and rental of real and
personal property).
PBGC shall mean the Pension Benefit Guaranty
Corporation and any successor thereto.
Permitted Encumbrances shall mean:
(1) taxes, assessments and other governmental charges
that are not delinquent or that are being contested in good
faith by appropriate proceedings duly pursued, and for which
adequate reserves have been established and are being
maintained;
(2) mechanics', materialmen's, contractors',
landlords' or other similar liens arising in the ordinary
course of business, securing obligations that are not
delinquent or that are being contested in good faith by
appropriate action or proceedings duly pursued, and for
which adequate reserves have been established and are being
maintained to the extent required by generally accepted
accounting principles;
(3) restrictions, exceptions, reservations, easements,
conditions, limitations and other matters of record other
than Liens that do not materially adversely affect the value
or utility of the property affected thereby or the use to
which such property is being put;
(4) Liens and other matters approved in writing by the
Lender;
(5) Purchase money Liens, not exceeding the purchase
price of the property securing the Lien and any refinancings
of such amounts; and
(6) the existing Liens described in Exhibit A hereto.
Permitted Investments shall mean:
(1) direct obligations of, or obligations the payment
of which is guaranteed by, the United States of America or
an interest in any trust or fund that invests solely in such
obligations or repurchase agreements, properly secured, with
respect to such obligations;
(2) direct obligations of agencies or
instrumentalities of the United States of America having a
rating of A or higher by Standard & Poor's Ratings Group or
A2 or higher by Moody's Investors Service, Inc.;
(3) a certificate of deposit issued by, or other
interest-bearing deposits with, a financial institution
having its principal place of business in the United States
of America and having equity capital of not less than
$250,000,000;
(4) certificates of deposit issued by, or other
interest-bearing deposits with, any other financial
institution organized under the laws of the United States of
America or any state thereof, provided that such deposit is
either (i) insured by the Federal Deposit Insurance
Corporation or (ii) properly secured by such financial
institution by pledging direct obligations of the United
States of America having a market value not less than the
face amount of such deposits;
(5) prime commercial paper maturing within 270 days of
the acquisition thereof and, at the time of acquisition,
having a rating of A-1 or higher by Standard & Poor's
Ratings Group, or P-1 or higher by Moody's Investors
Service, Inc.;
(6) eligible banker's acceptances, repurchase
agreements and tax-exempt municipal bonds having a maturity
of less than one year, in each case having a rating of, or
that is the full recourse obligation of a person whose
senior debt is rated, A or higher by Standard & Poor's
Ratings Group or A2 or higher by Moody's Investors Service,
Inc.;
(7) any other investment having a rating of A or
higher or A-1 or higher by Standard & Poor's Ratings Group
or A2 or higher or P-1 or higher by Moody's Investors
Service, Inc;
(8) other investments made with the express prior
written approval of the Lender;
(9) investments in Subsidiaries or resulting from
acquisitions permitted by Section 7.8(15) below;
(10) investments received in satisfaction of disputed
trade accounts; and
(11) other investments not to exceed $250,000 in the
aggregate.
person (whether or not capitalized) shall include
natural persons, sole proprietorships, corporations, trusts,
unincorporated organizations, associations, companies,
institutions, entities, joint ventures, partnerships,
limited liability companies and Governmental Authorities.
Plan shall mean any "employee benefit plan" maintained
by or on behalf of the Borrower or any ERISA Affiliate as
defined in Section 3(3) of ERISA, including any defined
benefit pension plan, profit sharing plan, money purchase
pension plan, savings or thrift plan, stock bonus plan,
employee stock ownership plan, Multiemployer Plan or any
plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical),
hospitalization, accident, sickness, disability or life
insurance benefits.
Principal Maturities means principal maturing or coming
due on Debt during the period in question.
Principal Office shall mean the principal office of the
Lender located at AmSouth-Sonat Tower, 1900 Fifth Avenue
North, Birmingham, Alabama 35203, or such other location in
Jefferson County, Alabama designated by the Lender by notice
to the Borrower.
Quarterly Payment Date shall have the meaning
attributed to that term in Section 0.
Quoted Cost of Funds Rate shall mean the per annum rate
of interest (rounded upwards, if necessary, to the nearest
1/100 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published for such day (or, if such day is not
a Business Day, for the immediately preceding Business Day)
by the Federal Reserve Bank of Atlanta, or, if such rate is
not so published for any day that is a Business Day, the
average of the quotations at approximately 10:00 a.m.
(Birmingham, Alabama time) on such day on such transactions
received by the Lender from three Federal funds brokers of
recognized standing selected by the Lender in its sole
discretion, plus the applicable Margin.
Reimbursement Obligation shall mean at any time the
obligation of the Borrower with respect to any Letter of
Credit to reimburse the Lender for amounts theretofore paid
by the Lender pursuant to a drawing under such Letter of
Credit.
Request for LIBOR Loan or Interest Rate Election shall
have the meaning attributed to that term in Section 0.
Revolving Facility shall mean the credit facility made
available to the Borrower by the Lender under the terms of
Article 0 in an aggregate amount of up to $30,000,000 as
reduced by the Borrower pursuant to Section 0 hereof.
Revolving Facility Obligations shall mean the
outstanding principal amount of all Advances, all interest
accrued thereon, all costs, charges, fees and expenses
payable in connection therewith and all extensions and
renewals thereof.
Segment shall mean a portion of the Advances (or all
thereof) with respect to which a particular interest rate is
(or is proposed to be) applicable. The aggregate amount of
all Advances that bear interest at the Quoted Cost of Funds
Rate shall be deemed to constitute a single Segment. The
aggregate amount of all Advances that bear interest at the
same LIBOR-Based Rate and for the same Interest Period shall
be deemed to constitute a single Segment.
Solvent shall mean, as to any person, on a particular
date, that such person has capital sufficient to carry on
its business and transactions and all business and
transactions in which it is about to engage, is able to pay
its debts as they mature, owns property having a value, both
at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable
liability on existing debts as they become mature (including
known reasonable contingencies and contingencies that should
be included in notes of such person's financial statements
pursuant to generally accepted accounting principles), and
does not intend to, and does not believe that it will, incur
debts or probable liabilities beyond its ability to pay such
debts or liabilities as they mature.
Subsidiary shall mean (1) any corporation more than 50%
of whose shares of stock having general voting power under
ordinary circumstances to elect a majority of the board of
directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any
other class or classes has or might have voting power by
reason of the happening of any contingency), are owned or
controlled directly or indirectly by the Borrower, or
(2) any partnership or limited liability company, 50% or
more of the partnership or membership interests in which are
owned or controlled, directly or indirectly, by the
Borrower, and includes entities currently or hereafter
falling within the categories described above.
Technology Leases shall mean leases relating to
hardware, software and related programming and information
services.
Termination Date shall mean the maturity date of the
Credit Obligations (which is initially June 19, 2000), as
such date may be extended from time to time pursuant to
Section 2.8 or accelerated pursuant to Section 8.1.
ARTICLE 2
REVOLVING FACILITY TERMS
SECTION 2.1 Loans.
(a) From and after the Closing Date to (but not including)
the Termination Date, on the terms and subject to the conditions
set forth in this Agreement, the Lender agrees to lend to the
Borrower, and the Borrower may borrow, repay and reborrow, an
amount not exceeding the difference between (i) the Maximum
Credit Amount in effect from time to time, and (ii) the sum of
the then outstanding (x) Letter of Credit Borrowings, (y)
Reimbursement Obligations and (z) overdrafts that the Borrower
may have with respect to any operating account established by the
Borrower with the Lender; provided, however, in no event shall
the amount available under the Revolving Facility for Advances
exceed $25,000,000 minus the aggregate outstanding amount of
Letter of Credit Borrowings and Reimbursement Obligations in
excess of $5,000,000. All Advances made by the Lender to the
Borrower under this Agreement with respect to the Revolving
Facility shall be evidenced by a promissory note for the Lender
dated the Closing Date payable to the order of the Lender, duly
executed by the Borrower, and in the aggregate maximum principal
amount of $30,000,000 (the "Note"). The date, amount, interest
rate and duration of Interest Period (if applicable) of each
Advance made by the Lender to the Borrower, and each payment made
on account of the principal thereof, shall be recorded by the
Lender on its books; provided that the failure of the Lender to
make, or any error by the Lender in making, any such recordation
shall not affect the obligations of the Borrower to make a
payment when due of any amount owing hereunder or under the Note
with respect to the Advances to be evidenced by the Note. The
Advances shall bear interest as provided in Article 0 below.
(b) If a draft drawn under any Letter of Credit is paid by
the Lender, and the Borrower fails or refuses to reimburse the
Lender for such payment, as required by Section 0, on or before
the close of business on the next Business Day after demand is
made by the Lender on the Borrower for such reimbursement, the
Borrower hereby authorizes the Lender, without the requirement of
notice to the Borrower, to satisfy the Reimbursement Obligation
created by the payment of such draft by requesting Advances by
the Lender under the Revolving Facility with interest at the
Quoted Cost of Funds Rate. Such Advances shall not be subject to
the provisions of Section 0.
SECTION 2.2 Advances. Each Advance that is not designated
by the Borrower as a LIBOR Loan shall bear interest at the Quoted
Cost of Funds Rate. All such Advances shall be made not more
frequently than once each Business Day and shall be made either
on telephone request by the Borrower to the Bank not later than
noon (Birmingham, Alabama time) on the day on which the Advance
is to be made or in accordance with the provisions of the
automated Control Account-Credit Line Service Agreement executed
by the Borrower in favor of the Lender (the "Disbursement
Agreement"). Each LIBOR Loan shall be in an amount not less than
$1,000,000 and shall be in a multiple of $500,000. Each request
for a LIBOR Loan must be in writing (which may be by facsimile)
and must be received by the Lender not later than 10:00 a.m.,
Birmingham, Alabama time, at least three Business Days prior to
the date of any LIBOR Loan. Each request for a LIBOR Loan shall
be in the form attached hereto as Exhibit B ("Request for LIBOR
Loan or Interest Rate Election") and shall specify the amount of
the LIBOR Loan requested, the date as of which the LIBOR Loan is
to be made and shall provide the interest rate information called
for in Section 0. All LIBOR Loans requested in a single Request
for LIBOR Loan or Interest Rate Election shall be subject to the
same interest rate terms. Not later than 2:00 P.M. Birmingham,
Alabama time, on the date specified for each LIBOR Loan
hereunder, the Lender shall make available the amount of the
LIBOR Loan to be made by it on such date to the Borrower by
depositing the proceeds thereof into an account with the Lender
in the name of the Borrower. The Lender's obligation to make
Advances shall terminate, if not sooner terminated pursuant to
other provisions of this Agreement, on the Termination Date. The
Lender shall have no obligation to make Advances if a Default or
Event of Default has occurred and is continuing. Each Request
for LIBOR Loan or Interest Rate Election, whether submitted under
this Section 0 in connection with a requested LIBOR Loan or under
Section 0 in connection with an interest rate election, shall be
signed by an Authorized Representative of the Borrower designated
as authorized to sign and submit Request for LIBOR Loan or
Interest Rate Election forms in the documents submitted to the
Lender pursuant to Section 6.4. The Borrower may, from time to
time, by written notice to the Lender, terminate the authority of
any Authorized Representative to submit Request for LIBOR Loan or
Interest Rate Election forms, such termination of authority to
become effective upon actual receipt by the Lender of such notice
of termination. The Borrower may from time to time authorize
other Authorized Representatives to sign and submit Request for
LIBOR Loan or Interest Rate Election forms by delivering to the
Lender a certificate of the Secretary or Assistant Secretary of
the Borrower certifying the incumbency and specimen signature of
each such Authorized Representative. The Lender shall be
entitled to rely conclusively upon the authority of any
Authorized Representative so designated by the Borrower. The
Lender may, at its option, without any request by the Borrower,
make Advances (with interest calculated at the Quoted Cost of
Funds Rate) to itself for the purpose of paying overdrafts that
the Borrower may have from time to time with respect to any
operating account established by the Borrower with the Lender and
promptly shall notify Borrower in each such event.
SECTION 2.3 Letter of Credit Borrowings.
(a) From and after the Closing Date to and including thirty
(30) Business Days prior to the Termination Date, the Lender
shall, upon the terms and subject to the conditions of this
Agreement, issue Letters of Credit from time to time for the
account of the Borrower in such amounts as may be requested by
the Borrower, up to a maximum aggregate amount of Letter of
Credit Borrowings at any one time outstanding that, when added to
(i) the then outstanding Reimbursement Obligations plus (ii) the
then outstanding Advances, would not exceed the Maximum Credit
Amount then in effect; provided, however, that no Letter of
Credit shall be issued if the issuance thereof would cause the
aggregate outstanding amount of Letter of Credit Borrowings and
Reimbursement Obligations to exceed the lesser of (y) $6,000,000
and (z) the difference between $30,000,000 and the outstanding
amount of Advances under the Revolving Facility.
(b) Each request by the Borrower for the issuance of a
Letter of Credit (an "Application") shall be submitted to the
Lender by the Borrower at least three (3) Business Days prior to
the date the Letter of Credit is to be issued, shall be on the
Lender's then standard application form for letters of credit,
shall obligate the Borrower to reimburse the Lender on demand for
any amounts drawn under a Letter of Credit and such other sums as
may be provided for therein, and shall be executed by an
Authorized Representative of the Borrower. In the event of any
conflict between the provisions of any Application and the
provisions of this Agreement, the provisions of this Agreement
shall govern.
(c) Each Letter of Credit shall (i) be a letter of credit
issued in the ordinary course of the business of the Borrower;
(ii) expire by its terms on a date not later than thirty (30)
Business Days prior to the Termination Date; (iii) be in an
amount that complies with paragraph (a) of this Section 0; and
(iv) contain such further provisions and conditions as are
standard and reasonable for ordinary irrevocable letters of
credit and as may be requested by the Borrower, and reasonably
satisfactory to the Lender.
(d) The Borrower shall pay to the Lender a letter of credit
fee on the aggregate amount of Letter of Credit Obligations
outstanding on the date of determination at the rate equal to the
applicable Margin on LIBOR Loans on a per annum basis as follows:
(1) On the Closing Date a fee shall be payable for the
period beginning on such Closing Date and ending on August
31, 1997.
(2) On each Quarterly Payment Date in each year a fee
shall be payable for the period beginning on such date and
ending three months later.
Such fees shall be calculated on the assumption that the Letter
of Credit Obligations on the date of determination will be
available for the entire period for which such fee is payable.
At the end of such period the fee shall be recalculated based on
the actual daily average of the Letter of Credit Obligations for
such period, and the difference, if any, shall be added to or
subtracted from, as the case may be, the commission payable for
the next ensuing period or paid or credited as appropriate if
there is no ensuing period.
The Borrower acknowledges that the Lender will be required
by applicable rules and regulations of the Federal Reserve Board
to maintain reserves for its liability to honor draws made
pursuant to a Letter of Credit. The Borrower agrees to reimburse
the Lender promptly for all additional costs that it may
hereafter incur solely by reason of its acting as issuer of the
Letters of Credit and its being required to reserve for such
liability, it being understood by the Borrower that other
interest and fees payable under this Agreement do not include
compensation of the Lender for such reserves. The Lender shall
furnish to the Borrower, at the time of its demand for payment of
such additional costs, the computation of such additional cost,
which shall be conclusive absent manifest error, provided that
such computations are made on a reasonable basis.
The Borrower shall pay to the Lender administrative and
other fees, if any, in connection with the Letters of Credit in
such amounts and at such times as the Lender and the Borrower
shall agree from time to time.
(e) This Agreement shall not terminate so long as any
Letter of Credit is in effect; provided, however, no Letters of
Credit shall be issued under this Agreement after the Termination
Date.
SECTION 2.4 Payments. All interest accrued on Advances
subject to the Quoted Cost of Funds Rate shall be payable on the
first day of each successive March, June, September and December
(each, a "Quarterly Payment Date"), commencing on September 1,
1997. All interest accrued on each LIBOR Loan having an Interest
Period of three months or less, shall be payable at the end of
the applicable Interest Period then in effect. All interest
accrued on each LIBOR Loan having an Interest Period of greater
than three months, shall be payable (a) the date that is three
months after the initial date of the Interest Period applicable
to such LIBOR Loan and (b) the last day of the Interest Period
applicable to such LIBOR Loan. The principal amount of Loans,
together with accrued interest thereon, shall be due on the
Termination Date.
SECTION 2.5 Prepayment.
(a) The Borrower may at any time prepay all or any part of
the Advances, without premium or penalty; provided, however, that
(1) unless the Borrower pays the amounts, if any, due under
Section 4.2, no LIBOR-Based Rate Segment may be prepaid during an
Interest Period, and (2) any partial prepayment shall be in the
amount of $100,000 or more unless prepayments are made pursuant
to the terms of the Disbursement Agreement. The Borrower shall
pay, on the date of prepayment, all interest accrued to the date
of prepayment on any amount prepaid in connection with the
prepayment in full of the Credit Obligations and the concurrent
termination of this Agreement. The Borrower shall pay all
interest accrued to the date of prepayment on the amount prepaid.
(b) If at any time the principal amount of the Advances,
together with the sum of the then outstanding Letter of Credit
Borrowings and Reimbursement Obligations, is greater than the
Maximum Credit Amount then in effect, the Borrower shall
immediately make a prepayment (notwithstanding the provisions of
clause (a) of this section, but subject to the provisions of
Section 4.2) on the Advances equal to the difference between said
aggregate principal amount of the Advances plus the sum of the
then outstanding Letter of Credit Borrowings and Reimbursement
Obligations and the Maximum Credit Amount.
SECTION 2.6 Reduction in Revolving Facility. The Borrower
shall have the right from time to time on each Quarterly Payment
Date, upon not less than five (5) Business Days' written notice
to the Lender, to reduce the amount of the Revolving Facility.
Each such reduction shall be in the aggregate principal amount of
$5,000,000 or a larger integral multiple of $1,000,000, and shall
permanently reduce the Maximum Credit Amount. No such reduction
shall result in payment of a LIBOR-Based Rate Segment other than
on the last day of the respective Interest Period. Each
reduction of the Revolving Facility shall be accompanied by
payment of the Loans to the extent that the Credit Obligations
exceed the Revolving Facility after giving effect to such
reductions together with accrued and unpaid interest on the
amounts prepaid.
SECTION 2.7 Fees.
(a) The Borrower shall pay to the Lender on the Closing
Date a closing fee equal to $60,000. This fee shall be fully
earned and nonrefundable as of the Closing Date.
(b) The Borrower shall pay to the Lender an availability
fee (the "Availability Fee") that begins to accrue on the Closing
Date and shall be computed at the rate of thirty-five hundredths
of one percent (.35%) per annum times the daily average
difference between (1) $25,000,000 and (2) the aggregate
outstanding principal amount of the Advances made by the Lender.
The Availability Fee shall be payable in arrears on each
Quarterly Payment Date and on the Termination Date, commencing on
September 1, 1997. The Availability Fee shall not be refundable
under any circumstances and shall be calculated on an Actual/360
Basis.
SECTION 2.8 Extension of Termination Date. The Borrower
and the Lender may from time to time extend the then-current
Termination Date to any subsequent termination date upon which
the Borrower and the Lender may agree by executing a written
extension agreement. Upon the execution of such an extension
agreement by the Borrower and the Lender, the maturity date of
the Credit Obligations shall be extended to the agreed-upon
termination date, and the agreed-upon termination date shall
become the new "Termination Date" for purposes of this Agreement.
SECTION 2.9 Place and Time of Payments.
(a) All payments by the Borrower to the Lender under this
Agreement and the other Loan Documents shall be made in lawful
currency of the United States and in immediately available funds
to the Lender at its Principal Office or at such other address
within the continental United States as shall be specified by the
Lender by notice to the Borrower. Any payment received by the
Lender after 2:00 p.m. (Birmingham, Alabama time) on a Business
Day (or at any time on a day that is not a Business Day) shall be
deemed made by the Borrower and received by the Lender prior to
2:00 p.m. on the following Business Day.
(b) All amounts payable by the Borrower to the Lender under
this Agreement or any of the other Loan Documents for which a
payment date is expressly set forth herein or therein shall be
payable on the specified due date without notice or demand by the
Lender except as otherwise expressly provided herein. All
amounts payable by the Borrower to the Lender under this
Agreement or the other Loan Documents for which no payment date
is expressly set forth herein or therein shall be payable ten
days after written demand by the Lender to the Borrower. The
Lender may, at its option, send written notice or demand to the
Borrower of amounts payable on a specified due date pursuant to
this Agreement or the other Loan Documents, but the failure to
send such notice shall not affect or excuse the Borrower's
obligation to make payment of the amounts due on the specified
due date except as otherwise expressly provided herein.
(c) Payments that are due on a day that is not a Business
Day shall be payable on the next succeeding Business Day, and any
interest payable thereon shall be payable for such extended time
at the specified rate.
(d) Except as otherwise required by law, payments received
by the Lender shall be applied first to expenses, fees and
charges, then to interest and finally to principal.
(e) The Borrower agrees to pay to the Lender, on demand, a
late charge computed as follows to cover the extra expense
involved in handling late payments: The late charge will be
equal to five percent (5.0%) of any payment that is not paid
within twelve (12) days after it is due. The late charge shall
never be less than $10.00 on each payment. This provision shall
not be deemed to excuse a late payment or be deemed a waiver of
any other right the Lender may have, including the right to
declare the entire unpaid principal and interest immediately due
and payable.
ARTICLE 3
INTEREST
SECTION 3.1 Applicable Interest Rates. The Borrower shall
have the option to elect to have any Segment bear interest at the
LIBOR-Based Rate. For any period of time and for any Segment
with respect to which the Borrower does not elect the LIBOR-Based
Rate, such Segment shall bear interest at the Quoted Cost of
Funds Rate. The Borrower's right to elect a LIBOR-Based Rate for
a Segment shall be subject to the following requirements:
(a) each Segment shall be in the amount of $1,000,000 or more and
in an integral multiple of $500,000, (b) each such Segment shall
have a maturity selected by the Borrower of one, two, three or
six months and (c) no more than five Segments may be outstanding
at any time; provided, however, that no such Segment shall have a
maturity date later than the Termination Date.
SECTION 3.2 Procedure for Exercising the LIBOR-Based Rate.
The Borrower may elect to have the LIBOR-Based Rate apply to a
Segment by notifying the Lender in writing (which may be by
facsimile transmission) not later than 10:00 a.m., Birmingham,
Alabama time, three (3) Business Days prior to the effective date
on which any LIBOR-Based Rate is to become applicable. Any
notice of interest rate election hereunder shall be irrevocable
and shall be in the form attached hereto as Exhibit B and shall
set forth the following: (a) the amount of the LIBOR-Based Rate
Segment to which the requested interest rate will apply, (b) the
date on which the selected interest rate will become applicable,
and (c) the maturity selected for the Interest Period. On the
day that the Lender receives a notice hereunder requesting that
the requested LIBOR-Based Rate be applicable, the Lender shall
use its best efforts to notify the Borrower by telephone or by
facsimile transmission of the applicable LIBOR-Based Rate as
early on that day or the next Business Day as may be practical in
the circumstances. The Lender shall not be required to provide a
LIBOR-Based Rate on any day on which dealings in deposits in
Dollars are not transacted in the London interbank market. If
the Borrower does not immediately accept the LIBOR-Based Rate
quoted by the Lender, the Lender may, in view of changing market
conditions, revise the quoted LIBOR-Based Rate at any time.
SECTION 3.3 Quoted Cost of Funds Rate. Each Segment
subject to the Quoted Cost of Funds Rate shall bear interest from
the date the Quoted Cost of Funds Rate becomes applicable thereto
until payment in full, or until a LIBOR-Based Rate is selected by
the Borrower and becomes applicable thereto, on the unpaid
principal balance of such Segment on an Actual/360 Basis. Any
change in the Quoted Cost of Funds Rate shall take effect on the
effective date of such change in the Quoted Cost of Funds Rate
designated by the Lender, without notice to the Borrower and
without any further action by the Lender. Notwithstanding the
foregoing, for the purpose of enabling the Lender to send
periodic billing statements in advance of each interest payment
date reflecting the amount of interest payable on such interest
payment date, at the option of the Lender, the Quoted Cost of
Funds Rate, in effect 15 days prior to each interest payment date
shall be deemed to be the Quoted Cost of Funds Rate, as
continuing in effect until the date prior to such interest
payment date for purposes of computing the amount of interest
payable on such interest payment date. If the Lender elects to
use the Quoted Cost of Funds Rate 15 days prior to the interest
payment date for billing purposes, and if the Quoted Cost of
Funds Rate changes during such 15-day period, the difference
between the amount of interest that in fact accrues during such
period and the amount of interest actually paid will be added to
or subtracted from, as the case may be, the interest otherwise
payable in preparing the periodic billing statement for the next
succeeding interest payment date. In determining the amount of
interest payable at the Termination Date or upon full prepayment
of the Credit Obligations, all changes in the Quoted Cost of
Funds Rate, occurring on or prior to the day before the
Termination Date or the date of such full prepayment shall be
taken into account.
SECTION 3.4 LIBOR-Based Rate. Each LIBOR-Based Rate
Segment shall bear interest from the date the LIBOR-Based Rate
becomes applicable thereto until the end of the applicable
Interest Period on the unpaid principal balance of such LIBOR-
Based Rate Segment at the LIBOR-Based Rate on an Actual/360 Day
Basis.
SECTION 3.5 Post Maturity Interest. Upon and after the
occurrence of any Event of Default, the outstanding principal
amount of all Loans and, to the extent permitted by applicable
law, any interest payments thereon not paid when due and any fees
and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any
proceeding under applicable bankruptcy laws) payable upon demand
at a rate that is 2.00% per annum (calculated on an Actual/360
Basis) in excess of the interest rate otherwise payable under
this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate that is 2.00%
per annum in excess of the interest rate otherwise payable under
this Agreement for Advances bearing interest at the Quoted Cost
of Funds Rate); provided that, in the case of LIBOR Loans, upon
the expiration of the Interest Period in effect at the time any
such increase in interest rate is effective, such LIBOR Loans
shall thereupon bear interest at the Quoted Cost of Funds Rate
and thereafter bear interest payable upon demand at a rate that
is 2.00% per annum (calculated on an Actual/360 Basis) in excess
of the interest rate otherwise payable under this Agreement for
Segments bearing interest at the Quoted Cost of Funds Rate. The
payment or acceptance of the increased rate provided by this
Section 0 shall not constitute a waiver of any Event of Default
or an amendment to this Agreement or otherwise prejudice or limit
any rights or remedies of the Lender. Interest on all Loans
shall be calculated on an Actual/360 Basis.
SECTION 3.6 Changes in Margin. Any change in the LIBOR-
Based Rate or Quoted Cost of Funds Rate because of a change in
the applicable Margin shall become effective as of the first day
of the fiscal quarter next following the receipt by the Lender of
the Compliance Certificate furnished by the Borrower to the
Lender pursuant to Section 7.3(4) hereof, stating that as a
result of a change in the Fixed Charges Coverage Ratio there has
been a change in the Margin. Any such change in the Margin shall
be effective without notice to the Borrower and without any
further action by the Lender. From the Closing Date until the
first day of the first fiscal quarter after receipt by the Lender
of the financial statements for the fiscal quarter ending August
31, 1997 pursuant to Section 7.3 below, the applicable Margin
shall be 1.625%.
ARTICLE 4
TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION
SECTION 4.1 Termination of LIBOR-Based Rate; Increase in
LIBOR-Based Rate; Reduction of Return.
(a) If at any time the Lender shall reasonably determine
(which determination, if reasonable, shall be final, conclusive
and binding upon all parties) that:
(1) by reason of any changes arising after Closing
Date affecting the London interbank market or affecting the
position of the Lender in such market, adequate and fair
means do not exist for ascertaining the LIBOR-Based Rate by
reference to the LIBOR Quote with respect to a LIBOR-Based
Rate Segment; or
(2) the continuation by the Lender of LIBOR-Based Rate
Segments at the LIBOR-Based Rate or the funding thereof in
the London interbank market would be unlawful by reason of
any law, governmental rule, regulation, guidelines or order;
or
(3) the continuation by the Lender of LIBOR-Based Rate
Segments at the LIBOR-Based Rate or the funding thereof in
the London interbank market would be impracticable as a
result of a contingency occurring after the Closing Date
that materially and adversely affects the London interbank
market;
then, and in any such event, the Lender shall on such date give
notice (by telephone and confirmed in writing) to the Borrower of
such determination. The obligation of the Lender to make or
maintain LIBOR-Based Rate Segments so affected or to permit
interest to be computed thereon at the LIBOR-Based Rate, as the
case may be, shall be terminated, and interest shall thereafter
be computed on the affected LIBOR-Based Rate Segment at the
Quoted Cost of Funds Rate.
(b) It is the intention of the parties hereto that the
LIBOR-Based Rate shall accurately reflect the cost to the Lender
of maintaining any LIBOR-Based Rate Segment during the applicable
Interest Period assuming the Lender purchases any such time
deposits and obtains such funds comprising any LIBOR-Based Rate
Segment. Accordingly, if by reason of any change after the
Closing Date in any applicable Governmental Requirement (or any
interpretation thereof and including the introduction of any new
Governmental Requirement), including any change in the LIBOR
Reserve Requirement, the cost to the Lender of maintaining any
LIBOR-Based Rate Segment or funding the same by means of a London
interbank market time deposit, as the case may be, shall
increase, the LIBOR-Based Rate applicable to such LIBOR-Based
Rate Segment shall be adjusted as necessary to reflect such
change in cost to the Lender, effective as of the date on which
such change in any applicable Governmental Requirement becomes
effective. Any amounts due under this Section 0 as a result of a
change in the LIBOR Reserve Requirement shall only be payable by
the Borrower to the extent the Lender incurs actual costs
associated with any such change.
(c) If the Lender shall have determined that the adoption
after the Closing Date of any Governmental Requirement regarding
capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by the Lender (or any lending office of the Lender) or the
Lender's holding company with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such Governmental Authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on
the Lender's capital or on the capital of the Lender's holding
company, as a consequence of the Lender's obligations under this
Agreement or the Advances made by the Lender pursuant hereto to a
level below that which the Lender or the Lender's holding company
could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's guidelines with respect
to capital adequacy) by an amount deemed by the Lender to be
material, then from time to time the Borrower shall pay to the
Lender such additional amount or amounts as will compensate the
Lender or the Lender's holding company for any such reduction
suffered.
SECTION 4.2 Compensation. The Borrower shall compensate
the Lender for all reasonable losses, expenses and liabilities
(including any interest paid by the Lender to lenders on funds
borrowed by the Lender to make or carry any LIBOR-Based Rate
Segment and any loss sustained by the Lender in connection with
the re-employment of such funds), that the Lender may sustain:
(a) if for any reason (other than a default by the Lender)
following agreement between the Borrower and the Lender as to the
LIBOR-Based Rate applicable to the LIBOR-Based Rate Segment the
Borrower fails to accept such LIBOR-Based Rate Segment, (b) as a
consequence of any unauthorized action taken or default by the
Borrower in the repayment of any LIBOR-Based Rate Segment when
required by the terms of this Agreement or (c) as a consequence
of the prepayment of any LIBOR-Based Rate Segment pursuant to
Section 2.5. A certificate as to the amount of any additional
amounts payable pursuant to this section or Section 4.1(b) or (c)
(setting forth in reasonable detail the basis for requesting such
amounts) submitted by the Lender to the Borrower shall be
conclusive, in the absence of manifest error. The Borrower shall
pay to the Lender the amount shown as due on any such certificate
delivered by the Lender within 30 days after the Borrower's
receipt of the same.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as
follows:
SECTION 5.1 Organization Powers, Existence, etc. (a) The
Borrower is duly organized, validly existing and in good standing
under the laws of the state in which it is incorporated, (b) the
Borrower has the power and authority to own its properties and
assets and to carry on its business as now being conducted, (c)
the Borrower has the power to execute, deliver and perform the
Loan Documents to which it is a party, (d) the Borrower is duly
qualified to do business in each state with respect to which the
failure to be so qualified would have a material adverse effect
on its properties or business and (e) except as set forth in
Schedule 5.1(e) hereto, has not done business under any other
name, trade name or otherwise within the five years immediately
preceding the Closing Date.
SECTION 5.2 Authorization of Borrowing, etc. The
execution, delivery and performance of the Loan Documents (a)
have been duly authorized by all requisite action and (b) will
not violate any Governmental Requirement, the articles of
incorporation or bylaws of the Borrower, or any indenture,
agreement or other instrument to which the Borrower is a party,
or by which the Borrower or any of its properties are bound, or
be in conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument, or result in a material
adverse change, when taken as a whole.
SECTION 5.3 Liabilities. The Borrower has furnished to the
Lender a copy of the audited balance sheet of the Borrower dated
as of June 1, 1996 and a statement of changes in shareholders'
equity and the related statements of income and cash flow as of
the end of fiscal year 1996 and the unaudited balance sheet of
the Borrower dated as of March 1, 1997, and the related
statements of income and cash flow for the fiscal period then
ended. Such financial statements were prepared in conformity
with generally accepted accounting principles consistently
applied throughout the period involved, are in accordance with
the books and records of the Borrower, are correct and complete
and present fairly the financial condition of the Borrower as of
the date of such financial statements, and, since the date of
such financial statements, no material adverse change in the
financial condition, business or operations of the Borrower has
occurred. The Borrower has no Liabilities, Guaranteed
Obligations or other obligations or liabilities, direct or
contingent, that are material in amount other than the
Liabilities reflected in such balance sheet and the notes
thereto.
SECTION 5.4 Taxes. Except as set forth in Schedule 5.4
hereto, the Borrower has filed or caused to be filed all federal,
state and local tax returns that are required to be filed, and
has paid all taxes as shown on said returns or on any assessment
received by the Borrower to the extent that such taxes have
become due giving effect to all extensions then obtained. The
Borrower has reserves which are believed by the officers of the
Borrower to be adequate for the payment of additional taxes for
years which have not been audited by the respective tax
authorities.
SECTION 5.5 Litigation. Except as disclosed is Schedule
5.5 attached hereto, there are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower, by or before any Governmental
Authority that involve any of the transactions contemplated in
this Agreement or the possibility of any judgment or liability
that may reasonably be likely to result in a material adverse
change in the operations or financial condition of the Borrower
taken as a whole; and the Borrower is not in default with respect
to any material Governmental Requirement which default could
reasonably be likely to have a material adverse effect upon the
operations or financial condition of the Borrower taken as a
whole.
SECTION 5.6 Agreements. The Borrower is not a party to any
agreement or instrument, or subject to any charter or other
corporate or restriction, that materially and adversely affects
its business, properties or assets, operations or condition,
financial or otherwise, or is in default in the performance,
observance or fulfillment of any of the obligations contained in
any agreement or instrument to which it is a party, which default
could reasonably be likely to have a material adverse effect upon
the operations or financial condition of the Borrower.
SECTION 5.7 Use of Proceeds. The Borrower does not intend
to use any part of the proceeds of Advances for the purpose of
purchasing or carrying any Margin Stock or retiring any debt
incurred to purchase or carry any Margin Stock or for any other
purpose that is not expressly authorized by this Agreement.
SECTION 5.8 ERISA.
(a) Identification of Plans. Except as disclosed in
Schedule 5.8(a) attached hereto, neither the Borrower nor
any ERISA Affiliate maintains or contributes to, or has
maintained or contributed to, any Plan that is a Plan
subject to Title IV of ERISA.
(b) Liabilities. Except as disclosed in Schedule
5.8(b) attached hereto, the Borrower is not currently or
will not become subject to any liability (other than routine
Plan expenses or contributions, if timely paid), tax or
penalty whatsoever to any person whomsoever, which
liability, tax or penalty is directly or indirectly related
to any Plan including, but not limited to, any penalty or
liability arising under Title I or Title IV of ERISA, any
tax or penalty resulting from a loss of deduction under
Sections 404 or 419 of the Code, or any tax or penalty under
Chapter 43 of the Code, except such liabilities, taxes, or
penalties (when taken as a whole) as will not have a
material adverse effect on the Borrower, or upon its
financial condition, assets, business, operations,
liabilities or prospects; and
(c) Funding. Except as disclosed in Schedule 5.8(c)
attached hereto, the Borrower and each ERISA Affiliate has
made full and timely payment of all amounts (i) required to
be contributed under the terms of each Plan and applicable
law and (ii) required to be paid as expenses of each Plan.
No Plan would have an "amount of unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA) if
such Plan were terminated as of the date on which this
representation and warranty is made.
SECTION 5.9 Subsidiaries. The Borrower has no
Subsidiaries.
SECTION 5.10 Principal Place of Business. The principal
place of business and chief executive office of the Borrower is
at its address shown in Section 0 and will not be changed from
such address unless, prior to such change, the Borrower shall
have notified the Lender of the proposed change.
SECTION 5.11 Environmental Laws.
(a) To the best knowledge of the Borrower, all properties
owned or used by the Borrower, while under the custody, care and
control of the Borrower, have been maintained in compliance in
all material respects with all federal, state and local
environmental protection, occupational, health and safety or
similar laws, including the Federal Water Pollution Control Act
(33 U.S.C. 1251 et seq.), Resource Conservation & Recovery Act
(42 U.S.C. 6901 et seq.), Safe Water Drinking Act (42 U.S.C.
3000(f) et seq.), Toxic Substances Control Act (15 U.S.C. 261
et seq.), Clean Air Act (42 U.S.C. 7401 et seq.) and
Comprehensive Environmental Response of Compensation and
Liability Act (42 U.S.C. 6901 et seq.) ("CERCLA").
(b) The Borrower has not received any written notification
from any Governmental Authority with respect to current, existing
violations of any of the laws enumerated in clause (a) above, or
pursuant to any of their respective implementing regulations or
state analogues to such laws or regulations.
(c) There has not been, at any location owned or used by
the Borrower, any "Release" by the Borrower, or anyone within the
Borrower's control, or to the best of the Borrower's knowledge,
any other person, of any Hazardous Materials.
(d) To the best knowledge of the Borrower, the Borrower has
not sent or arranged for the transportation or disposal of
Hazardous Materials or wastes to a site which, pursuant to CERCLA
or any similar state law (i) has been placed, or is proposed (by
the Environmental Protection Agency or relevant state authority)
to be placed, on the "National Priorities List" of hazardous
waste sites or its state equivalent, or (ii) is subject to a
claim, an administrative order or other request to take "removal"
or "remedial" action (in each case as defined in CERCLA) by any
person.
(e) The Borrower has not used and does not use storage
tanks located on any property owned or presently leased by the
Borrower.
SECTION 5.12 Disclosure. No financial statement, document,
certificate or other written communication furnished to the
Lender by or on behalf of the Borrower in connection with any
Loan Document contains any untrue statement of a material fact
after giving effect to all other statements so delivered to the
Lender.
SECTION 5.13 Licenses. All material licenses, permits,
accreditations and approvals required by all Governmental
Authorities necessary in order for each restaurant to be operated
for its intended purpose have been obtained and are in full force
and effect.
SECTION 5.14 Title to Properties. The Borrower has good
and marketable title to all its properties and assets reflected
on the balance sheet referred to in Section 0 except for those
matters shown on such balance sheet and except for such
properties and assets as have been disposed of since the date of
said balance sheet as no longer used or useful in the conduct of
its business or as have been disposed of in the ordinary course
of the business. All such properties and assets are free and
clear of all Liens, except as otherwise permitted or required by
the provisions of the Loan Documents.
SECTION 5.15 Enforceability. This Agreement and each of
the other Loan Documents, when duly executed and delivered by the
Borrower in accordance with the provisions of this Agreement,
will constitute the legal, valid and binding, joint and several,
obligations of the Borrower, enforceable in accordance with their
respective terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and similar
laws affecting the rights and remedies of creditors generally.
SECTION 5.16 Consents, Registrations, Approvals, etc. No
registration with or consent or approval of, or other action by,
any Governmental Authority is required for the execution,
delivery and performance of this Agreement or the other Loan
Documents, or the borrowings under this Agreement, by the
Borrower.
SECTION 5.17 Solvency. The Borrower is Solvent, and the
Borrower will not, as a result of the transactions provided for
herein (i) become not Solvent, (ii) be left with unreasonably
small capital, (iii) incur debts beyond its ability to pay them
as they mature or (iv) have Liabilities (including reasonable
contingencies) in excess of the fair saleable value of its
assets.
SECTION 5.18 Patents, Trademarks. The Borrower owns, or
possesses the right to use, all the patents, trademarks, service
marks, trade names, copyrights, franchises, consents,
authorizations and licenses and rights with respect to the
foregoing, necessary for the conduct of its business as now
conducted and proposed to be conducted, without any known
conflict with the rights of others.
ARTICLE 6
GENERAL CONDITIONS OF LENDING
The Lender's obligation to make each Advance and to issue
each Letter of Credit hereunder is subject to the following
conditions precedent:
SECTION 6.1 Representations and Warranties. On the Closing
Date and the date of each Advance or issuance of a Letter of
Credit hereunder and on the date the Borrower presents to the
Lender a Request for LIBOR Loan or Interest Rate Election form or
Application, the representations and warranties set forth in this
Agreement and in all other Loan Documents shall be true and
correct on and as of such date in all material respects with the
same effect as though such representations and warranties had
been made on the date of the Advance or issuance of the Letter of
Credit or on the date the Borrower presents to the Lender a
Request for LIBOR Loan or Interest Rate Election form or
Application, as the case may be (or in the case of any such
representation and warranty made as of a particular date, as of
such particular date). Each such warranty and representation
shall be deemed to be continuing in effect so long as this
Agreement remains in effect unless updated by the Borrower in a
written notice to the Lender given prior to the presentation of a
Request for LIBOR Loan or Interest Rate Election or Application.
The presentation by the Borrower of each Request for LIBOR Loan
or Interest Rate Election or Application shall constitute a
representation and warranty by the Borrower to the Lender that no
material adverse change in the financial condition of the
Borrower, as reflected in the financial statements delivered to
the Lender pursuant to Section 0 has occurred since the date of
such financial statements.
SECTION 6.2 No Default. On the Closing Date and the date
of each Advance hereunder and on the date of the issuance of each
Letter of Credit, the Borrower shall be in compliance in all
material respects with all the terms and conditions set forth in
this Agreement on its part to be observed or performed, and no
Default or Event of Default shall have occurred and be
continuing. The presentation by the Borrower of each Request for
LIBOR Loan or Interest Rate Election and Application shall
constitute a representation and warranty by the Borrower to the
Lender that no Default or Event of Default has occurred and is
continuing.
SECTION 6.3 Required Items. On and as of the Closing Date
and on and as of the date of each Advance and on the date the
Borrower presents to the Lender each Request for LIBOR Loan and
Interest Rate Election form, the Lender must have received all
financial statements (if any), reports and other items required
as of that date under Article 2 and Article 7 of this Agreement.
SECTION 6.4 Authorized Representative Certificates. On and
as of the Closing Date, the Borrower must have delivered to the
Lender the following certificates executed by the appropriate
Authorized Representatives of the Borrower, each of which
certificates must be of a current date and must be satisfactory
in form and substance to the Lender: (a) a certificate confirming
compliance by the Borrower with the conditions precedent set
forth in Sections 6.1 and 6.2; (b) a certificate certifying as in
full force and effect resolutions of its directors authorizing
the transactions contemplated by the Loan Documents and
authorizing certain Authorized Representatives of the Borrower to
execute the Loan Documents on behalf of the Borrower and to act
on behalf of the Borrower with respect to the Loan Documents,
including the authority to request disbursements of the proceeds
of the Advances and to direct the disposition of such proceeds
(including Request for LIBOR Loan and Interest Rate Election
forms); and (c) a certificate certifying as true and correct, as
amended, attached copies of the organizational documents of the
Borrower and the incumbency and signature of each Authorized
Representative of the Borrower specified in said resolutions.
The Lender may conclusively rely on the certified resolutions
described in Section 6.4(b) as to all actions on behalf of the
Borrower by the Authorized Representatives specified therein
until the Lender receives further duly adopted resolutions
cancelling or amending the prior resolutions.
SECTION 6.5 Other Supporting Documents. The Lender must
receive on or before the Closing Date the following, each of
which must be satisfactory to the Lender in form and content,
(a) such opinions of counsel, certificates, proceedings,
instruments and other documents as the Lender or its counsel may
reasonably request to evidence (1) compliance by the Borrower and
all other parties to the Loan Documents with legal requirements,
(2) the truth and accuracy as of the Closing Date of the
respective representations thereof contained in the Loan
Documents, and (3) the due performance or satisfaction by such
parties at or prior to the Closing Date of all agreements then
required to be performed and all conditions then required to be
satisfied by them pursuant to the Loan Documents, and (b) such
additional supporting documents as the Lender or its counsel may
reasonably request.
ARTICLE 7
GENERAL COVENANTS OF THE BORROWER
From the Closing Date until payment in full of the Credit
Obligations, the Borrower covenants and agrees that:
SECTION 7.1 Existence, Properties, etc. The Borrower shall
(a) do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, all material rights
and franchises and comply in all material respects with all
Governmental Requirements applicable to it and (b) at all times
maintain, preserve and protect all necessary franchises and trade
names and preserve such of its property as the Borrower
reasonably determines at any date of determination to be useful
in the conduct of its business and keep the same in good repair,
working order and condition, and from time to time make, or cause
to be made, all needful and proper repairs, renewals and
replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times, and the failure to do
which would have a material adverse effect on the Borrower; and
at all times keep its insurable properties adequately insured and
maintain, and pay all premiums and costs of, (i) insurance on its
properties to such extent and against such risks, including fire,
as is customary with companies in the same or a similar business,
(ii) necessary workmen's compensation insurance and (iii) such
other insurance (including liability insurance) as may be
required by law or as may otherwise be customarily maintained by
companies in the same or a similar business.
SECTION 7.2 Payment of Indebtedness, Taxes, etc. The
Borrower shall (a) pay its indebtedness and obligations in
accordance with normal terms and (b) pay and discharge or cause
to be paid and discharged promptly all taxes, assessments and
other charges or levies of Governmental Authorities imposed upon
it or upon its income and profits or upon any of its properties
before the same shall become in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if
unpaid, might reasonably be likely to become a Lien upon such
properties or any part thereof; provided, however, that the
Borrower shall not be required to pay and discharge or cause to
be paid and discharged any such indebtedness, obligation, tax,
assessment, charge, levy or claim so long as the validity thereof
shall be duly pursued and contested in good faith by appropriate
action or proceedings and the Borrower shall maintain to the
extent required under generally accepted accounting principles,
adequate reserves for such taxes, indebtedness, obligations,
assessments, charges, levies or claims during such proceedings.
SECTION 7.3 Financial Statements, Reports, etc. The
Borrower shall deliver or cause to be delivered to the Lender:
(1) Not later than 60 days after the end of each
first, second and third fiscal quarter, a copy of the
Borrower's 10-Q as filed with the Securities and Exchange
Commission or if such filing is no longer required, a
balance sheet and a statement of revenues and expenses of
the Borrower and a statement of cash flow of the Borrower
for such fiscal quarter and for the period beginning on the
first day of the fiscal year and ending on the last day of
such fiscal quarter (in sufficient detail to indicate the
Borrower's compliance with the financial covenants set forth
in this Article 0), together with statements in comparative
form for the corresponding periods in the preceding fiscal
year, and certified by the chief executive officer,
president or chief financial officer of the Borrower; each
certificate provided pursuant to this clause (1) shall state
that, except as disclosed in such certificate (a) on the
date of such certificate the representations and warranties
set forth in this Agreement and all the other Loan Documents
are true and correct in all material respects on and as of
such date with the same effect as though such
representations and warranties had been made on such date,
and (b) no Default or Event of Default has occurred and is
continuing as of such date or, if such certificate discloses
that a Default or Event of Default has occurred and is
continuing as of such date, such certificate shall describe
such Default or Event of Default in reasonable detail and
state what action, if any, the Borrower are taking or
propose to take with respect thereto.
(2) Not later than 105 days after the end of each
fiscal year, a copy of the Borrower's 10-K as filed with the
Securities and Exchange Commission or if such filing is no
longer required, financial statements (including a balance
sheet, a statement of revenues and expenses, a statement of
changes in shareholders' equity and a statement of cash
flow) of the Borrower for such fiscal year (in sufficient
detail to indicate the Borrower's compliance with the
financial covenants set forth in this Article 0), together
with statements in comparative form for the preceding fiscal
year, and accompanied by an opinion of certified public
accountants acceptable to the Lender, which opinion shall
state in effect that such financial statements (A) were
audited using generally accepted auditing standards, (B)
were prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and (C)
present fairly the financial condition and results of
operations of the Borrower for the periods covered.
(3) With the financial statements submitted under
Section 7.3(1) and 7.3(2), a certificate signed by the party
certifying said statement to the effect that no Event of
Default, nor any event that, upon notice or lapse of time or
both, would constitute an Event of Default, exists or, if
any such Event of Default or event exists, specifying the
nature and extent thereof.
(4) Together with the financial statements required by
paragraphs (1) and (2) above, a compliance certificate duly
executed by an Authorized Representative of the Borrower
substantially in the form of Exhibit C attached hereto
evidencing compliance with the covenants set forth in
Section 7.8 (a "Compliance Certificate").
(5) Contemporaneously with the distributions thereof
to the Borrower's stockholders or the filing thereof with
the Securities and Exchange Commission, as the case may be,
copies of all statements, reports, notices and filings
distributed by the Borrower to its stockholders or filed
with the Securities and Exchange Commission.
(6) Promptly upon receipt thereof, copies of all other
reports, management letters and other documents submitted to
it by independent accountants in connection with any annual
or interim audit of its books made by such accountants.
(7) Promptly after the Borrower knows or has reason to
know of the occurrence of any "reportable event" under
Section 4043 of ERISA applicable to the Borrower or other
ERISA Affiliate, a certificate of the chief executive
officer, president or chief financial officer of the
Borrower setting forth the details as to such "reportable
event" and the action that the Borrower or other ERISA
Affiliate has taken or will take with respect thereto, and
promptly after the filing or receiving thereof, copies of
all reports and notices that any Borrower or other ERISA
Affiliate files under ERISA with the Internal Revenue
Service or the PBGC or the United States Department of
Labor.
(8) As soon as practicable, such other information
regarding the business affairs, financial condition or
operations of the Borrower as the Lender shall reasonably
request from time to time or at any time.
SECTION 7.4 Litigation Notice. The Borrower shall,
promptly after the same shall have become known to any officer of
the Borrower, notify the Lender in writing of any action, suit or
proceeding at law or in equity or by or before any Governmental
Authority that, if adversely determined, might reasonably be
likely to impair the ability of the Borrower to perform its
obligations under this Agreement or any other Loan Document or
might materially and adversely affect the business or condition,
financial or other, of the Borrower.
SECTION 7.5 Default Notice. The Borrower shall promptly
give notice in writing to the Lender of the occurrence of (a) any
Default or Event of Default, and (b) any event of default or any
event which upon notice or lapse of time or both would constitute
such an event of default under any other document or agreement to
which the Borrower is a party with entities other than the
Lender, which default would have a material and adverse effect on
the continued business operations of the Borrower, taken as a
whole.
SECTION 7.6 Further Assurances. The Borrower shall at its
cost and expense, upon the request of the Lender, duly execute
and deliver, or cause to be duly executed and delivered, to the
Lender such further instruments and do and cause to be done such
further acts as may be reasonably necessary or proper in the
opinion of the Lender or its counsel to carry out more
effectively the provisions and purposes of the Loan Documents.
SECTION 7.7 Insurance. [Intentionally omitted].
SECTION 7.8 Covenants Regarding Financial Condition. The
Borrower covenants and agrees that:
(1) Fixed Charges Coverage Ratio. The Fixed Charge
Coverage Ratio for any four consecutive fiscal quarters
immediately preceding the date of determination shall not be
less than (x) 1.15 to 1.0 at any time during fiscal year
1998, (y) 1.25 to 1.0 at any time during fiscal year 1999
and (z) 1.35 to 1.0 at any time during fiscal year 2000.
(2) Debt to EBITDAR Ratio. The ratio of Debt plus six
times Operating Lease Payments for any four consecutive
fiscal quarters to EBITDAR for such period shall not be
greater than (x) 4.0 to 1.0 at the end of any fiscal quarter
during fiscal year 1998, (y) 3.75 to 1.0 at the end of any
fiscal quarter during fiscal year 1999 and (z) 3.5 to 1.0 at
the end of any fiscal quarter during fiscal year 2000.
(3) Capital Expenditures. The Borrower will not make
in the aggregate in any consecutive four fiscal quarters
Capital Expenditures that exceed $20,000,000.
(4) Net Worth. The Borrower will not permit its Net
Worth to be at any time less than the sum of (i) $37,250,000
plus (ii) 100% of cumulative Net Income, if positive, after
taxes for the period from June 1, 1996 through the date of
determination, less dividends actually paid during such
period, determined on a quarterly basis; provided, however,
the amount of dividends paid cannot exceed 125% of Net
Income for fiscal year ending 1998, 110% of Net Income for
fiscal year ending 1999 and 100% of Net Income thereafter.
(5) Investment and Loans. The Borrower will not,
directly or indirectly, purchase or otherwise acquire any
stock, security, obligation or evidence of indebtedness of,
make any capital contribution to, own any equity interest
in, or make any loan or advance to, any other person;
provided, however, that it may acquire and continue to hold
Permitted Investments.
(6) Disposition of Assets. The Borrower will not
without the consent of the Lender, sell, lease, transfer or
otherwise dispose of any substantial part of its properties
and assets.
(7) Consolidation or Merger. The Borrower will not
consolidate with or merge with or into another person or
permit any other person to merge into it other than (x) a
merger or consolidation in which the Borrower is the
surviving entity and no Default or Event of Default shall
occur as a result thereof and (y) any merger of Subsidiaries
with the Borrower or each other.
(8) Liens. The Borrower will not, nor (except to the
extent required in connection with the terms of purchase
money Debt or performance or surety bond obligations or as
required by law or any Governmental Authority having
jurisdiction over the Borrower) covenant with any other
person not to, incur, create, assume or permit to exist any
Lien upon any of its accounts receivable, contract rights,
chattel paper, inventory, equipment, instruments, general
intangibles or other personal or real property of any
character, whether now owned or hereafter acquired, other
than Liens that constitute Permitted Encumbrances.
(9) Sale of Receivables. The Borrower will not sell,
assign or discount, or grant or permit any Lien on, any of
its accounts receivable or any promissory note held by it,
with or without recourse, other than the discount of such
notes in the ordinary course of business for collection.
(10) Lease Obligations. The Borrower will not incur,
create, permit to exist or assume any commitment to make any
direct or indirect payment, as rent, under any lease, rental
or other arrangement for the use of property of any other
person, if immediately thereafter the aggregate of such
payments to be made by it would exceed $15,000,000
(exclusive of Technology Leases) plus up to $3,000,000 of
payments with respect to Technology Leases in any
consecutive four fiscal quarters.
(11) Indebtedness. The Borrower will not incur,
create, assume or permit to exist any Debt, except the
indebtedness evidenced by the Note, other Debt to the
Lender, purchase money obligations in respect of Liens
allowed under Section 7.8(8), Debt set forth in Schedule
7.8(11) attached hereto existing on the date hereof, Debt
not exceeding $500,000 in the aggregate and capitalized
lease obligations.
(12) Guaranties. The Borrower will not guarantee,
endorse, become surety for or otherwise in any way become or
be responsible for the indebtedness, liabilities or
obligations of any other person, whether by agreement to
purchase the indebtedness or obligations of any other
person, or agreement for the furnishing of funds to any
other person (directly or indirectly, through the purchase
of goods, supplies or services or by way of stock purchase,
capital contribution, working capital maintenance agreement,
advance or loan) or for the purpose of paying or discharging
the indebtedness or obligations of any other person, or
otherwise, except for the endorsement of negotiable
instruments in the ordinary course of business for
collection.
(13) Take or Pay Contracts. The Borrower will not
enter into or be a party to any contract for the purchase of
merchandise, materials, supplies or other property if such
contract provides that payment for such merchandise,
materials, supplies or other property shall be made
regardless of whether delivery of such merchandise,
materials, supplies or other property is ever made or
tendered.
(14) Sale-Leaseback. The Borrower will not enter into
any arrangement, directly or indirectly, with any person
whereby it sells or transfers any property, real, personal
or mixed, and used or useful in its business, whether now
owned or hereafter acquired, and thereafter rents or leases
such property or other property that it intends to use for
substantially the same purpose or purposes as the property
sold or transferred, unless (A) such transaction is entered
into on commercially reasonable terms on an arms'-length
basis; (B) the Borrower notifies the Lender of any proposed
lease transaction subject to the provisions of this
clause and advises the Lender as to the terms thereof,
within 30 days prior to the effective date of such lease;
and (C) the net cash proceeds (if any) to the Borrower, from
such transaction are immediately applied to reduce the
Credit Obligations.
(15) Permitted Acquisitions. The Borrower shall not
make in any given fiscal year any acquisition having a cost
in excess of $5,000,000, if, on the date of the acquisition
a Default or Event of Default would occur or would result
from such acquisition without the express prior written
consent of the Lender.
(16) Solvency. The Borrower will continue to be
Solvent.
SECTION 7.9 Continuation of Current Business. The Borrower
will not engage in any business other than the restaurant
business and substantially related businesses.
SECTION 7.10 Cooperation; Inspection of Properties. The
Borrower shall permit the Lender and its representatives to
inspect the Borrower's properties and assets (including all
Stores), and to inspect, review and audit the Borrower's books
and records from time to time and at any time, after reasonable
notice and at reasonable times all with minimal disruption.
SECTION 7.11 Use of Proceeds. The Borrower shall use the
proceeds exclusively for general corporate purposes and other
capital needs including expenditures involving the construction
of new Borrower-owned restaurants and/or renovations of existing
cafeterias.
SECTION 7.12 Transactions with Affiliates. The Borrower
will not, directly or indirectly, enter into any lease or other
transaction with any Affiliate on terms that are less favorable
to the Borrower entering into such lease or other transaction
than those that are typical of those obtained at the time from
persons who are not Affiliates of the Borrower.
SECTION 7.13 Change in Management. The Borrower will
promptly notify the Lender of any change with respect to the
members of the Board of Directors of the Borrower or any change
in the senior executive officers of the Borrower.
SECTION 7.14 Continuation of Current Business, Offices,
Name, etc. The Borrower will not (a) remove its principal place
of business or business records from Clayton County, Georgia,
unless the removal is pursuant to a merger, consolidation or
transfer of assets approved by the Lender; or (b) without
providing the Lender with prior written notice, change its name
or conduct its business in any name other than its current names;
or (c) enter into (1) any agreement whereby the management,
supervision or control of its business is delegated to or placed
in any person other than its governing body and officers or
(2) any contract or agreement whereby any of its principal
functions are delegated to or placed in any agent or independent
contractor.
SECTION 7.15 Creation or Acquisition of Subsidiaries. The
Borrower may from time to time create or acquire new Subsidiaries
in connection with permitted acquisitions allowed under Section
7.8(15) or otherwise in accordance with this Agreement, provided
that promptly (and in any event within fifteen (15) Business
Days) after the creation or direct or indirect acquisition by the
Borrower of any such new Subsidiary, such new Subsidiary will
execute and deliver to the Lender a Guaranty Agreement in the
form customarily used by the Lender in similar transactions and
all such other documents necessary to cause it to guaranty all
the Credit Obligations.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1 Events of Default. The following shall
constitute Events of Default under this Agreement:
(a) default in the due payment of any principal or
interest payable under the terms of any Note or any other
amount payable under this Agreement or any other of the
Credit Obligations or any other amount owed to the Lender
under or in connection with any of the Loan Documents and,
if such default is with respect to a payment other than a
principal payment, such nonpayment continues for five (5)
days after such due date; or
(b) the Borrower shall default in the observance or
performance of any provision in Sections 7.3, 7.8, 7.11,
7.12, 7.14 and 7.15; or
(c) the Borrower shall default in the performance or
observance of any provision of this Agreement, except those
covered by clauses (a) and (b) above, and shall not cure
such default within 30 days after the first to occur of (i)
the date the Lender gives written or telephonic notice of
the default to the Borrower or (ii) the date an Authorized
Representative of the Borrower otherwise has actual notice
thereof; or
(d) the Lender shall determine that any statement,
certification, representation or warranty contained herein,
or in any of the other Loan Documents or in any report,
financial statement, certificate or other instrument
delivered to the Lender by or on behalf of the Borrower, was
misleading or untrue in any material respect at the time it
was made; or
(e) default shall be made with respect to any Debt
(other than the Credit Obligations) of the Borrower when due
or the performance of any other obligation incurred in
connection with any Debt of the Borrower, if the effect of
such default is to accelerate the maturity of such Debt or
to permit the holder thereof to cause such Debt to become
due prior to its stated maturity, or any such Debt shall not
be paid when due, if the aggregate amount of all such Debt
involved exceeds $1,000,000; or
(f) the Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or other
custodian of it or any of its properties or assets,
(ii) fail or admit in writing its inability to pay its debts
generally as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) suffer or
permit an order for relief to be entered against it in any
proceeding under the federal Bankruptcy Code, or (v) file a
voluntary petition in bankruptcy, or a petition or an answer
seeking an arrangement with creditors or seeking to take
advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or
statute, or an answer admitting the material allegations of
a petition filed against it in any proceeding under any such
law or statute, or if corporate or partnership action shall
be taken by the Borrower for the purpose of effecting any of
the foregoing; or
(g) a petition shall be filed, without the
application, approval or consent of any of the Borrower, in
any court of competent jurisdiction, seeking bankruptcy,
reorganization, rearrangement, dissolution or liquidation of
the Borrower or of all or a substantial part of the
properties or assets of the Borrower, or seeking any other
relief under any law or statute of the type referred to in
clause (v) of paragraph (f) above against the Borrower, or
the appointment of a receiver, trustee, liquidator or other
custodian of the Borrower or of all or a substantial part of
the properties or assets of the Borrower, and such petition
shall not have been dismissed within 60 days after the
filing thereof; or
(h) there shall occur the insolvency, dissolution,
liquidation or suspension of business of the Borrower or the
issuance of a writ of execution, attachment or garnishment
against the assets of the Borrower, and such writ of
execution, attachment or garnishment shall not be dismissed,
discharged or quashed within 30 days of issuance; or
(i) the Borrower shall default under any agreement
material to the operation of its business as conducted on
the Closing Date or proposed to be conducted which default
shall have a material adverse effect on the Borrower; or
(j) final judgment or judgments for the payment of
money in excess of an aggregate of $500,000 (in excess of
insurance coverages) shall be rendered against any of the
Borrower and the same shall remain undischarged for a period
of 30 days during which execution shall not be effectively
stayed; or
(k) any event with respect to a Plan shall have
occurred that would result in termination of such Plan (a
"Termination Event") and, 30 days after the Borrower has
notice thereof, (i) such "Termination Event" shall still
exist and (ii) the sum (determined as of the date of
occurrence of such "Termination Event") of the
"Insufficiency" of such Plan attributable to the Borrower
and the "Insufficiency" of any and all other Plans
attributable to the Borrower with respect to which a
"Termination Event" shall have occurred and then exist is
equal to or greater than $1,000,000; or
(l) the Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that it
has incurred "Withdrawal Liability" to such Multiemployer
Plan in an amount attributable to Borrower which, when
aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with "Withdrawal
Liability" (determined as of the date of such notification),
exceeds $1,000,000 or requires payments exceeding $250,000
per annum; or
(m) the Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that
such Multiemployer Plan is in reorganization or is being
terminated, within the meaning of Title IV of ERISA, if
solely as a result of such reorganization or termination the
aggregate annual contributions attributable to Borrower and
its ERISA Affiliates to all Multiemployer Plans which are
then in reorganization or being terminated have been or will
be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years which
include the date hereof by an amount exceeding $250,000; or
(n) this Agreement shall cease to be in full force and
effect or the Borrower shall take any action to claim that
this Agreement is not in full force and effect;
then, and in any such event and at any time thereafter, if such
Event of Default shall then be continuing,
(A) either or both of the following actions may be
taken: (i) the Lender may declare any obligation of the
Lender to make further Advances or issue Letters of Credit
terminated, whereupon the obligation of the Lender to make
further Advances or issue Letters of Credit, hereunder shall
terminate immediately, and (ii) the Lender shall declare by
notice to the Borrower any or all of the Credit Obligations
to be immediately due and payable, and the same, including
all interest accrued thereon and all other obligations of
the Borrower to the Lender, shall forthwith become
immediately due and payable without presentment, demand,
protest, notice or other formality of any kind, all of which
are hereby expressly waived, anything contained herein or in
any instrument evidencing the Credit Obligations to the
contrary notwithstanding; provided, however, that
notwithstanding the above, if there shall occur an Event of
Default under clauses (f) or (g) above, then the obligation
of the Lender to lend hereunder shall automatically
terminate and any and all of the Credit Obligations shall be
immediately due and payable without the necessity of any
action by the Lender or notice to the Borrower;
(B) the Lender may treat all then outstanding Letters
of Credit as if drafts in the full amount available to be
drawn thereunder had been properly drawn thereunder and paid
by the Lender and the Borrower had failed or refused to
reimburse the Lender for the amount so paid within the time
permitted under Section 0;
(C) the Borrower shall, promptly upon demand of the
Lender, deposit in cash with the Lender an amount equal to
the amount of all Letter of Credit Obligations then
outstanding, as collateral security for the repayment
thereof, which deposit shall be held by the Lender under the
provisions of Section 0; and
(D) the Lender shall exercise any and all rights and
remedies available to the Lender under the Loan Documents
and applicable law.
SECTION 8.2 Cumulative Rights. No right or remedy herein
conferred upon the Lender is intended to be exclusive of any
other rights or remedies contained herein or in any other Loan
Document, and every such right or remedy shall be cumulative and
shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law
or in equity or by statute, or otherwise.
SECTION 8.3 No Waiver. No course of dealing between the
Borrower and the Lender or any failure or delay on the part of
the Lender in exercising any rights or remedies hereunder shall
operate as a waiver of any rights or remedies hereunder and no
single or partial exercise of any rights or remedies hereunder
shall operate as a waiver or preclude the exercise of any other
rights or remedies hereunder or of the same right or remedy on a
future occasion.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Participations. The Borrower and the Lender
understand that the Lender may grant a participation in the Note,
Loans and interest in the Credit Obligations and the Loan
Documents to any Affiliate of the Lender, and all communications
with the Lender and the Borrower shall be solely with the Lender
and not with any participant. The Borrower agrees that any
participant or subparticipant may exercise any and all rights of
banker's lien or set-off with respect to the Borrower, as fully
as if such participant or subparticipant had made a loan directly
to the Borrower in the amount of the participation or
subparticipation given to such participant or subparticipant in
the Credit Obligations and the Loan Documents. For purposes of
this Section 0 only, the Borrower shall be deemed to be directly
obligated to each participant or subparticipant in the amount of
its participating interest in the amount of the principal of, and
interest on, the Credit Obligations. Nothing contained in this
section shall affect the Lender's right of set-off (under
Section 0 or applicable law) with respect to the entire amount of
the Credit Obligations, notwithstanding any such participation or
subparticipation. The Lender may divulge to any participant or
subparticipant all information, reports, financial statements,
certificates and documents obtained by the Lender from the
Borrower or any other person under any provisions of this
Agreement or the other Loan Documents or otherwise.
SECTION 9.2 Notices.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other document provided or permitted by this
Agreement or the other Loan Documents to be made upon, given or
furnished to, or filed with, the Borrower or the Lender must
(except as otherwise provided in this Agreement or the other Loan
Documents) be in writing and be delivered by one of the following
means: (1) by personal delivery at the hand delivery address
specified below, (2) by first-class, registered or certified
mail, postage prepaid and addressed as specified below, or (3) if
facsimile transmission facilities for such party are identified
below or pursuant to a separate notice from such party, sent by
facsimile transmission to the number specified below or in such
notice.
(b) The hand delivery address, mailing address and (if
applicable) facsimile transmission number for receipt of notice
or other documents by such parties are as set forth below the
signatures of the Borrower and the Lender on the attached
signature pages. Any of such parties may change its address or
facsimile transmission number for receiving any such notice or
other document by giving notice of the change to the other
parties referred to in this Section 0.
(c) Any such notice or other document shall be deemed
delivered when actually received by an officer, director, partner
or other legal representative of the party) at the address or
number specified pursuant to this Section 0, or, if sent by mail
and not earlier received, three Business Days after such notice
or document is deposited in the United States mail, addressed as
provided above.
(d) Five (5) Business Days' notice to the Borrower as
provided above shall constitute reasonable notification to the
Borrower when notification is required by law; provided, however,
that nothing contained in the foregoing shall be construed as
requiring five (5) Business Days' notice if, under applicable law
and the circumstances then existing, a shorter period of time
would constitute reasonable notice.
SECTION 9.3 No Waiver. No failure or delay on the part of
the Lender or the Borrower in the exercise of any right, power or
privilege hereunder shall operate as a waiver of any such right,
power or privilege nor shall any such failure or delay preclude
any other or further exercise thereof. The rights and remedies
herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.4 Setoff. Upon the occurrence and during the
continuance of any Event of Default the Lender is hereby
authorized at any time and from time to time, without notice to
the Borrower (any such notice being expressly waived by the
Borrower), to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by the Lender (including
any branches, agencies or Affiliates of the Lender, wherever
located) to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or
hereafter existing under any of the Loan Documents, irrespective
of whether or not any demand shall have been made under the Loan
Documents and although such obligations may be unmatured. The
Lender agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and
application or impose any liability on the Lender. The rights of
the Lender under this Section 0 are in addition to all other
rights and remedies (including other rights of set-off or
pursuant to any banker's lien) that the Lender may have.
SECTION 9.5 Survival. All representations and warranties
made under this Agreement shall be deemed to be made, and shall
be true and correct, at and as of the Closing Date and, as
updated by the Borrower from time to time, the date of each
Advance or of issuance of a Letter of Credit. All covenants,
agreements, representations and warranties made in this Agreement
or in any of the other Loan Documents and in the certificates
delivered pursuant to any of the Loan Documents shall survive the
making by the Lender of the Loans and the execution and delivery
to the Lender of this Agreement, the Note and the other Loan
Documents and shall continue in full force and effect so long as
any of the Credit Obligations remain outstanding.
SECTION 9.6 Expenses. The Borrower shall promptly pay all
reasonable legal fees and expenses actually incurred by Lender
(including reasonable documented fees and expenses of counsel for
the Lender), insurance premiums, recording, filing and transfer
fees and taxes, and other costs and expenses related to the
Credit Obligations or required by any of the Loan Documents. If
the Borrower fails to pay any such cost or expense, the Lender
may, but shall have no obligation to, pay the same from the
Lender's funds or by making an Advance for such purpose, without
notice to the Borrower. The Borrower shall reimburse the Lender
on demand for, and shall indemnify and hold the Lender harmless
from and against, all such costs and expenses paid by the Lender
and all other reasonable costs and expenses (including the
reasonable fees and disbursements of the Lender's counsel) of
every kind incurred by the Lender in connection with (i) the
making or collection of the Credit Obligations, (ii) the
preparation and review of the Loan Documents (whether or not the
transactions provided for in this Agreement shall be consummated)
and any other documents related thereto, (iii) the enforcement of
any of the Loan Documents and the defense of any claim, cross-
claim or counterclaim asserted against the Lender by the Borrower
or any other person that relates to the Credit Obligations or the
Loan Documents and (iv) the transactions provided for in the Loan
Documents. Any amount paid or advanced by the Lender under this
section or the other Loan Documents shall bear interest until
paid at a rate equal to two percent (2%) in excess of the Quoted
Cost of Funds Rate in effect from time to time, or the highest
rate permitted by law, whichever is less. The Borrower shall pay
all costs and expenses of performing and satisfying their
obligations under this Agreement. The Borrower's obligations
under this Section 0 shall survive the payment in full of the
Credit Obligations and the termination of this Agreement.
SECTION 9.7 Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account
for more than one such fully-executed counterpart.
SECTION 9.8 Submission to Jurisdiction. The Borrower
irrevocably (a) acknowledges that this Agreement will be accepted
by the Lender and performed by the Borrower in the State of
Alabama; (b) submits to the jurisdiction of each state or federal
court sitting in Jefferson County, Alabama (collectively, the
"Courts") over any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Loan Documents
(individually, an "Agreement Action"); (c) waives, to the fullest
extent permitted by law, any objection or defense that the
Borrower may now or hereafter have based on improper venue, lack
of personal jurisdiction, inconvenience of forum or any similar
matter in any Agreement Action brought in any of the Courts; (d)
agrees that non-applicable final judgment in any Agreement Action
brought in any of the Courts shall be conclusive and binding upon
the Borrower and may be enforced in any other court to the
jurisdiction of which the Borrower is subject, by a suit upon
such judgment; (e) consents to the service of process on the
Borrower in any Agreement Action by the mailing of a copy thereof
by registered or certified mail, postage prepaid, to the Borrower
at its address designated in or pursuant to Section 0; (f) agrees
that service in accordance with this Section 0 shall in every
respect be effective and binding on the Borrower to the same
extent as though served on the Borrower in person by a person
duly authorized to serve such process; and (g) AGREES THAT THE
PROVISIONS OF THIS SECTION, EVEN IF FOUND NOT TO BE STRICTLY
ENFORCEABLE BY ANY COURT, SHALL CONSTITUTE "FAIR WARNING" TO THE
BORROWER THAT THE EXECUTION OF THIS AGREEMENT MAY SUBJECT THE
BORROWER TO THE JURISDICTION OF EACH STATE OR FEDERAL COURT
SITTING IN JEFFERSON COUNTY, ALABAMA WITH RESPECT TO ANY
AGREEMENT ACTIONS, AND THAT IT IS FORESEEABLE BY THE BORROWER
THAT IT MAY BE SUBJECTED TO THE JURISDICTION OF SUCH COURTS AND
MAY BE SUED IN THE STATE OF ALABAMA IN ANY AGREEMENT ACTIONS.
Nothing in this Section 0 shall limit or restrict the Lender's
right to serve process or bring Agreement Actions in manners and
in courts otherwise than as herein provided.
SECTION 9.9 Termination. The termination of this Agreement
shall not affect any rights of the Borrower, the Lender or any
obligation of the Borrower, the Lender, arising prior to the
effective date of such termination, and the provisions hereof
shall continue to be fully operative until all transactions
entered into or rights created or obligations incurred prior to
such termination have been fully disposed of, concluded or
liquidated and the Credit Obligations arising prior to or after
such termination have been irrevocably paid in full. The rights
granted to the Lender for the benefit of the Lender hereunder and
under the other Loan Documents shall continue in full force and
effect, notwithstanding the termination of this Agreement, until
all of the Credit Obligations have been paid in full after the
termination hereof or the Borrower have furnished the Lender with
an indemnification satisfactory to the Lender with respect
thereto. All representation, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof
until payment in full of the Credit Obligations unless otherwise
provided herein. Notwithstanding the foregoing, if after receipt
of any payment of all or any part of the Credit Obligations, the
Lender is for any reason compelled to surrender such payment to
any Person because such payment is determined to be void or
voidable as a preference, impermissible setoff, a diversion of
trust funds or for any other reason, this Agreement shall
continue in full force and the Borrower shall be liable to, and
shall indemnify and hold the Lender harmless for, the amount of
such payment surrendered until the Lender shall have been finally
and irrevocably paid in full. The provisions of the foregoing
sentence shall be and remain effective notwithstanding any
contrary action which may have been taken by the Lender in
reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Lender's rights under this
Agreement and shall be deemed to have been conditioned upon such
payment having become final and irrevocable. If on any date on
which the Borrower wishes to pay the Credit Obligations in full
and terminate this Agreement, there are any outstanding Letter of
Credit Borrowings, the Borrower shall, unless otherwise agreed by
the Lender in its sole discretion, make a cash prepayment to the
Lender on such date in an amount equal to the then-outstanding
Letter of Credit Borrowings, and the Lender shall hold such
prepayment in an interest-bearing cash collateral account in the
name and under the sole control of the Lender (which account
shall bear interest at the Lender's then-current rate for such
accounts) as security for the Reimbursement Obligations and other
Letter of Credit Obligations. Such account shall not constitute
an asset of the Borrower, subject to its rights therein under
this Section 0. The Lender shall from time to time debit such
account for the payment of the Letter of Credit Obligations as
the same become due and payable and shall promptly refund any
excess funds (including interest) held in said account to the
Borrower if and when no Letter of Credit Borrowings remain
outstanding hereunder and all of the Credit Obligations have been
paid in full. The Borrower shall remain liable for any Credit
Obligations in excess of the amounts paid from such account.
SECTION 9.10 Governing Law. All documents executed
pursuant to the transactions contemplated herein, including this
Agreement and each of the Loan Documents shall be deemed to be
contracts made under, and for all purposes shall be construed in
accordance with, the internal laws and judicial decisions of the
State of Alabama.
SECTION 9.11 Indemnification. In consideration of the
execution and delivery of this Agreement by the Lender, and so
long as the Lender has fulfilled its obligations hereunder, the
Borrower hereby indemnifies, exonerates and holds the Lender and
its respective officers, directors, employees and agents
(collectively, the "Indemnified Parties") free and harmless from
and against any and all actions, causes of action, claims, suits,
losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable
documented attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), actually incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or
relating to any of the following:
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds
of any Loan;
(b) the entering into and performance of this
Agreement and any other Loan Document by any of the
Indemnified Parties;
(c) any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or
other matter relating to the protection of the environment
with respect to property owned or operated by the Borrower
or to any action or inaction of the Borrower or the release
by the Borrower of any Hazardous Materials; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the
Borrower thereof of any Hazardous Materials (including any
losses, liabilities, damages, injuries, costs, expenses or
claims asserted or arising under any environmental laws),
regardless of whether caused by, or within the control of,
the Borrower,
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or willful
misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 9.12 Agreement Controls. In the event that any
term of any of the Loan Documents other than this Agreement
conflicts with any term of this Agreement, the terms and
provisions of this Agreement shall control.
SECTION 9.13 Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided,
however, that the Borrower may not assign or transfer their
rights or obligations hereunder without the prior written consent
of the Lender. The Lender may not assign or transfer its
interest hereunder except as otherwise provided in this
Agreement.
SECTION 9.14 Severability. Any provision of any of the
Loan Documents that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 9.15 Arbitration; Preservation and Limitation of
Remedies.
(a) If any dispute or controversy shall arise among the
parties hereto as to any matter arising out of or in connection
with the Loan Documents, the parties shall attempt in good faith
to resolve such controversy by mutual agreement. If such dispute
or controversy cannot be so resolved, it shall be resolved solely
in accordance with the provisions of this Section 0. Institution
of a judicial proceeding by a party does not waive the right of
that party to demand arbitration hereunder.
(b) Any dispute, controversy or claim between or among the
parties hereto (the "Disputing Parties"), including disputes,
controversies and claims arising out of or related to the Loan
Documents, or the breach thereof, and the subject matter hereof,
shall, except as provided in this Section 0, be settled by a
single arbitrator by arbitration in Birmingham, Alabama in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association as amended from time to time and as
modified by this Agreement.
(c) The arbitrator shall be selected by the Disputing
Parties within 15 days after demand for arbitration is made by a
Disputing Party. If the Disputing Parties are unable to agree on
an arbitrator within such period, then each Disputing Party shall
select one arbitrator, and each such arbitrator shall select a
third arbitrator and the dispute shall be settled by the panel
consisting of such three arbitrators (such panel, or the single
arbitrator agreed to by both parties, as the case may be, being
hereinafter referred to as the "Arbiter"). Each arbitrator shall
be a licensed attorney in the State of Alabama and shall possess
substantive legal experience with respect to the principal issues
in dispute.
(d) Except as may otherwise be agreed in writing by the
Disputing Parties or as ordered by the Arbiter upon substantial
justification, the hearing of the dispute shall be held and
concluded within 90 days of submission of the dispute to
arbitration. The Arbiter shall render its final award within 30
days following conclusion of the hearing. The Arbiter shall
state the factual and legal basis for the award. The decision of
the Arbiter shall be final and binding except as provided in the
Federal Arbitration Act, 9 U.S.C. Section 1 et. seq., and except
for errors of law based on findings of fact. Final judgment may
be entered upon such an award in any court of competent
jurisdiction, but entry of such judgment shall not be required to
make such award effective.
(e) Nothing in this Section 0 shall limit any right that
any party may otherwise have to seek to obtain preliminary
injunctive relief in order to preserve the status quo pending the
disposition of any such arbitration proceeding.
SECTION 9.16 Usury Laws. Any provision of this Agreement
or any of the other Loan Documents to the contrary
notwithstanding, the Borrower and the Lender agree that they do
not intend for the interest or other consideration provided for
in this Agreement and the other Loan Documents to be greater than
the maximum amount permitted by applicable law. Regardless of
any provision in this Agreement or any of the other Loan
Documents, the Lender shall not be entitled to receive, collect
or apply, as interest on the Credit Obligations, any amount in
excess of the maximum rate of interest permitted to be charged
under applicable law until such time, if any, as that interest,
together with all other interest then payable, falls within the
then applicable maximum lawful rate of interest. If the Lender
shall receive, collect or apply any amount in excess of the then
maximum rate of interest, the amount that would be excessive
interest shall be applied first to the reduction of the principal
amount of the Credit Obligations then outstanding in the inverse
order of maturity, and second, if such principal amount is paid
in full, any excess shall forthwith be returned to the Borrower.
In determining whether the interest paid or payable under any
specific contingency exceeds the highest lawful rate, the
Borrower and the Lender shall, to the maximum extent permitted
under applicable law, (a) characterize any nonprincipal payment
as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effects thereof,
(c) consider all the Credit Obligations as one general obligation
of the Borrower, and (d) "spread" the total amount of the
interest throughout the entire term of the Note so that the
interest rate is uniform throughout the entire term of the Note.
SECTION 9.17 Confidentiality of Information. The Borrower
may from time to time furnish to the Lender written information
which is identified when delivered as being confidential (the
"Confidential Information"). The Lender shall use reasonable
efforts to apply to any Confidential Information such procedures
regarding confidentiality as it provides generally to information
of that nature; provided, however, that the Lender may disclose
any Confidential Information delivered by the Borrower in
connection with or pursuant to this Agreement to (i) the Lender's
directors, officers, employees, agents and professional
consultants; (ii) any person to which the Lender sells or offers
to sell a participation as provided in Section 9.1 so long as
such person agrees in writing prior to receipt of the
Confidential Information to comply with this Section 9.17; (iii)
any federal or state regulatory authority having jurisdiction
over the Lender; and (iv) any other person to which such delivery
or disclosure may be necessary or appropriate (a) in compliance
with any law, rule or regulation applicable to such person, (b)
in response to any subpoena or other legal process, (c) in
connection with any litigation to which the Lender is a party or
(d) in order to protect the Lender's rights under this Agreement.
In connection with disclosures by the Lender pursuant to clause
(b) or (c) above, the Lender shall use its best efforts to notify
the Borrower prior to any such disclosure unless such
notification to Borrower is prohibited by court order or law.
IN WITNESS WHEREOF, the Borrower and the Lender has caused
this Credit Agreement to be executed and delivered by its duly
authorized corporate officer as of the day and year first above
written.
MORRISON FRESH COOKING, INC.
By: /s/Ronnie L. Tatum
Ronnie L. Tatum
Its Chief Executive Officer
Hand Delivery and Mailing Address:
4893 Riverdale Road, Suite 260
Atlanta, Georgia 30337
FAX: (205) 991-9125
Attention: Chief Financial Officer
AMSOUTH BANK OF ALABAMA
By: /s/ Alan D. Lott
Alan D. Lott
Its Vice President
Hand Delivery Address:
7th Floor, AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
FAX: (205) 583-4436
Attention: Regional Banking
Department
Mailing Address:
Post Office Box 11007
Birmingham, Alabama 35288
FAX: (205) 583-4436
Attention: Regional Banking Department
EXHIBIT A
EXISTING LIENS
Debtor Secured Party Place of Filing File
Number
1. Morrison Fresh Orix Credit State of Florida
970000012651
Cooking, Inc. Alliance, Inc.
2. Morrison Fresh AT&T Credit Clayton County, 96-5203
Cooking, Inc. Corporation Georgia
3. Morrison Fresh Pitney Bowes Credit DeKalb County, 96-
9722
Cooking, Inc. Corporation Georgia
4. Morrison Fresh Orix Credit State of North
1406028
Cooking, Inc. Alliance, Inc. Carolina
5. Morrison Fresh Orix Credit State of North
1441827
Cooking, Inc. Alliance, Inc. Carolina
6. Morrison Fresh Orix Credit State of South
123326B
Cooking, Inc. Alliance, Inc. Carolina
7. Morrison Fresh Orix Credit State of Tennessee 972-020879
Cooking, Inc. Alliance, Inc.
EXHIBIT B
MORRISON FRESH COOKING, INC.
REQUEST FOR LIBOR LOAN OR INTEREST RATE ELECTION
Under the Credit Agreement dated as of June 19, 1997 (the
"Credit Agreement") entered into by MORRISON FRESH COOKING, INC.,
a Georgia corporation (the "Borrower") and AMSOUTH BANK OF
ALABAMA, an Alabama banking corporation (the "Lender"):
Request for LIBOR Loan
Pursuant to Section 2.2 of the Credit Agreement, the
Borrower hereby requests an LIBOR Loan at the LIBOR-Based Rate as
follows:
(a) Amount of LIBOR Loan -
$_______________.
(b) Date as of which the
LIBOR Loan is to be made -
_________________.
(c) The maturity selected for
the Interest Period is [one month]
[two months] [three months] [six
months] (circle one, if
applicable).
Interest Rate Election
Pursuant to Section 3.2 of the Credit Agreement, the
Borrower makes the following interest rate election with respect
to the Segment in the principal amount of $______________ that
matures on ____________________.
(a) The amount of the Segment
to which the requested interest
rate will apply - $__________.
(b) The date on which the
selected interest rate will become
applicable - _______________.
(c) The maturity selected for
the Interest Period is [one month]
[two months] [three months] [six
months] (circle one, if
applicable).
In accordance with Section 6.1 of the Credit Agreement, the
presentation by the Borrower of this Request for LIBOR Loan or
Interest Rate Election constitutes a representation and warranty
by the Borrower to the Lender that no material adverse change in
the financial condition of the Borrower, as reflected in the
financial statements referred to in Section 5.3 of the Credit
Agreement, has occurred since the date of such financial
statements and that the representations and warranties of
Borrower contained in the Credit Agreement continue to be true
and correct (except the financial statements referred to in
Section 5.3 shall be deemed those most recently delivered to the
Lender pursuant to Section 7.3).
Dated ________________.
MORRISON FRESH COOKING, INC.
By:
Its
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
Reference is made to that certain Credit Agreement between
MORRISON FRESH COOKING, INC., a Georgia corporation (the
"Borrower") and AMSOUTH BANK OF ALABAMA, an Alabama banking
corporation (the "Lender"), dated as of June 19, 1997 (the
"Credit Agreement"). Capitalized terms used in this certificate
and the Schedule attached hereto, unless otherwise defined
herein, have the meanings assigned to them in the Credit
Agreement.
The undersigned does hereby certify to the Lender as
follows:
1. He is the duly elected and serving [Senior Vice
President - Finance or chief executive officer or president] of
the Borrower and is authorized to execute and deliver this
Certificate on behalf of the Borrower acting in that capacity.
2. He has reviewed the terms of the Credit Agreement and
the other Loan Documents and has made, or has caused to be made
under his supervision, a review of the transactions and
conditions of the Borrower through the date on which this
certificate is delivered to the Lender. To the best of his
knowledge, no Default or Event of Default under the Credit
Agreement has occurred and is continuing as of the date this
certificate is delivered to the Lender, except as follows:
[Give detailed description or insert "none" if appropriate].
3. The computations relating to the Borrower's financial
condition set forth on Schedule D-1 attached hereto were true and
correct as of , 199 (such date being the last
day of the most recently ended fiscal calendar quarter) and there
has been no material adverse change in such amounts upon which
such computations are based through the date on which this
certificate is delivered to the Lender.
___________________ of
MORRISON FRESH COOKING, INC.
Dated: , 199
SCHEDULE C-1
Financial Covenant Compliance
The following financial covenants calculations are made as
of ______________, 199__ (the "Determination Date"):
1. The Fixed Charge Coverage Ratio at the
Determination Date for the most recent four quarter period
was _______ to 1.00, calculated as follows:
(a) Net Income after taxes for the most recent-ended
four fiscal quarters $___________
(b) Depreciation and amortization for the most
recent-ended four fiscal quarters ___________
(c) Interest Expense for the most recent-ended
four fiscal quarters ___________
(d) Income and Profit Taxes for the most recent-ended
four fiscal quarters ___________
(e) Operating Lease Payments for the most recent-ended
four fiscal quarters ___________
(f) Sum of (a) through (e) ___________
(g) Dividends actually paid for the most recent-ended
four fiscal quarters ___________
(h) (f) - (g) ___________
(i) Interest Expense for the most
recent-ended four fiscal quarters ___________
(j) Principal Maturities (not including
the Loans) for the next succeeding four
fiscal quarters following the Determination Date___________
(k) Operating Lease Payments for the most
recent-ended four fiscal quarters ___________
(l) Outstanding Loans on the Determination
Date times 20% ___________
(m) Sum of (i) through (l) ___________
(n) (h) , (m) ___________
Required: Not less than 1.15 to 1.0 at any time during
fiscal year 1998, 1.25 to 1.0 at any time during fiscal year
1999 and 1.35 to 1.0 at any time during fiscal year 2000.
2. The ratio at the Determination Date of Debt plus
six times Operating Lease Payments to EBITDAR for the most
recent-ended four fiscal quarters was ______ to 1.00,
calculated as follows:
(a) Outstanding Debt on the Determination Date___________
(b) Operating Lease Payments for the most recent-ended
four fiscal quarters ___________
(c) Line (b) multiplied by six ___________
(d) Sum of (a) and (c) ___________
(e) Net Income after taxes for the most recent-ended
four fiscal quarters ___________
(f) Income and Profit Taxes for the most recent-ended
four fiscal quarters ___________
(g) Interest Expense for the most recent-ended
four fiscal quarters ___________
(h) Depreciation and amortization for the most
recent-ended four fiscal quarters ___________
(i) Operating Lease Payments for the most
recent-ended four fiscal quarters ___________
(j) Sum of (e) through (i) (EBITDAR) ___________
(k) (d) , (j) ___________
Required: Not greater than 4.0 to 1.0 at the end of
any fiscal quarter during fiscal year 1998, 3.75 to 1.0 at
the end of any fiscal quarter during fiscal year 1999 and
3.5 to 1.0 at the end of any fiscal quarter during fiscal
year 2000.
3. During the four fiscal quarter period ended on the
Determination Date the Borrower incurred in the aggregate:
Capital Expenditures of $_________.
Required: Not in excess of $20,000,000.
4. (a) The amount of obligations for Operating Lease
Payments (exclusive of Technology Leases) for the four
fiscal quarter period ended on the Determination Date was
$__________.
Required: Not in excess of $15,000,000.
(b) The amount of obligations for Technology
Leases for the four fiscal quarter period ended on the
Determination Date was $___________
Required: Not in excess of $3,000,000.
5. Net Worth at the Determination Date was
$_________.
Required: Not less than the sum of (i) $37,250,000
plus (ii) 100% of cumulative Net Income, if positive, after
taxes for the period from June 1, 1996 through the date of
determination, less dividends actually paid during such
period, determined on a quarterly basis; provided, however,
the amount of dividends paid cannot exceed 125% of Net
Income for fiscal year ending 1998, 110% of Net Income for
fiscal year ending 1999 and 100% of Net Income thereafter.
6. The Maximum Credit Amount was $______________ at
the Determination Date, calculated as follows:
(a) Net Income after taxes for the most recent-
ended
four fiscal quarters ___________
(b) Interest Expense for the most recent-ended
four fiscal quarters ___________
(c) Income and Profit Taxes for the most recent-ended
four fiscal quarters ___________
(d) Depreciation and Amortization for the most recent-
ended
four fiscal quarters ___________
(e) Extraordinary Losses/Noncash Charges for the most
recent-ended four fiscal quarters ___________
(f) Sum of (a) through (e) ___________
(g) Dividends actually paid for the most recent-ended
four fiscal quarters ___________
(h) Extraordinary gains/Noncash Credits for the most
recent-ended four fiscal quarters ___________
(i) Sum of (g) and (h) ___________
(j) (f) minus (i) ___________
(k) Lesser of (j) and $30,000,000 (Maximum Credit
Amount) ___________
___________________ of
MORRISON FRESH COOKING, INC.
Dated: , 199
TABLE OF CONTENTS
Page
ARTICLE 1
RULES OF CONSTRUCTION AND
DEFINITIONS
SECTION 1.1 1
ARTICLE 2
REVOLVING FACILITY TERMS
SECTION 2.1 Loans 13
SECTION 2.2 Advances 13
SECTION 2.3 Letter of Credit Borrowings 14
SECTION 2.4 Payments 16
SECTION 2.5 Prepayment 16
SECTION 2.6 Reduction in Revolving Facility 16
SECTION 2.7 Fees 17
SECTION 2.8 Extension of Termination Date 17
SECTION 2.9 Place and Time of Payments 17
ARTICLE 3
INTEREST
SECTION 3.1 Applicable Interest Rates 18
SECTION 3.2 Procedure for Exercising the LIBOR-
Based Rate 18
SECTION 3.3 Quoted Cost of Funds Rate 18
SECTION 3.4 LIBOR-Based Rate 19
SECTION 3.5 Post Maturity Interest 19
SECTION 3.6 Changes in Margin 19
ARTICLE 4
TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION
SECTION 4.1 Termination of LIBOR-Based Rate;
Increase in
LIBOR-Based Rate; Reduction of Return 20
SECTION 4.2 Compensation 21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Organization Powers, Existence, etc 22
SECTION 5.2 Authorization of Borrowing, etc 22
SECTION 5.3 Liabilities 22
SECTION 5.4 Taxes 22
SECTION 5.5 Litigation 22
SECTION 5.6 Agreements 23
SECTION 5.7 Use of Proceeds 23
SECTION 5.8 ERISA 23
SECTION 5.9 Subsidiaries 23
SECTION 5.10 Principal Place of Business 23
SECTION 5.11 Environmental Laws 24
SECTION 5.12 Disclosure 24
SECTION 5.13 Licenses 24
SECTION 5.14 Title to Properties 24
SECTION 5.15 Enforceability 25
SECTION 5.16 Consents, Registrations, Approvals,
etc. 25
SECTION 5.17 Solvency 25
SECTION 5.18 Patents, Trademarks 25
ARTICLE 6
GENERAL CONDITIONS OF LENDING
SECTION 6.1 Representations and Warranties 25
SECTION 6.2 No Default 26
SECTION 6.3 Required Items 26
SECTION 6.4 Authorized Representative
Certificates 26
SECTION 6.5 Other Supporting Documents 26
ARTICLE 7
GENERAL COVENANTS OF THE BORROWER
SECTION 7.1 Existence, Properties, etc 27
SECTION 7.2 Payment of Indebtedness, Taxes, etc 27
SECTION 7.3 Financial Statements, Reports, etc 28
SECTION 7.4 Litigation Notice 29
SECTION 7.5 Default Notice 29
SECTION 7.6 Further Assurances 29
SECTION 7.7 Insurance 29
SECTION 7.8 Covenants Regarding Financial
Condition 30
SECTION 7.9 Continuation of Current Business 32
SECTION 7.10 Cooperation; Inspection of
Properties 32
SECTION 7.11 Use of Proceeds 32
SECTION 7.12 Transactions with Affiliates 32
SECTION 7.13 Change in Management 32
SECTION 7.14 Continuation of Current Business,
Offices,
Name, etc. 32
SECTION 7.15 Creation or Acquisition of
Subsidiaries 32
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1 Events of Default 33
SECTION 8.2 Cumulative Rights 36
SECTION 8.3 No Waiver 36
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Participations 36
SECTION 9.2 Notices 36
SECTION 9.3 No Waiver 37
SECTION 9.4 Setoff 37
SECTION 9.5 Survival 37
SECTION 9.6 Expenses 38
SECTION 9.7 Counterparts 38
SECTION 9.8 Submission to Jurisdiction 38
SECTION 9.9 Termination 39
SECTION 9.10 Governing Law 40
SECTION 9.11 Indemnification 40
SECTION 9.12 Agreement Controls 41
SECTION 9.13 Successors and Assigns 41
SECTION 9.14 Severability 41
SECTION 9.15 Arbitration; Preservation and
Limitation
of Remedies 41
SECTION 9.16 Usury Laws 42
SECTION 9.17 Confidentiality of Information 42
EXHIBITS
A Existing Liens
B Request for LIBOR Loan or Interest Rate Election
C Form of Compliance Certificate
Schedule C-1 - Financial Covenant Compliance
SCHEDULES
5.1(e) Tradenames
5.4 Taxes
5.5 Material Litigation
5.8(a) ERISA Plans
5.8(b) Plan Liabilities
5.8(c) Funding
7.8(11) Existing Indebtedness
[EXECUTION COPY]
CREDIT AGREEMENT
Dated as of June 19, 1997
Between
MORRISON FRESH COOKING, INC.
and
AMSOUTH BANK OF ALABAMA
Relating to a
$30,000,000 Revolving Loan
