<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GORGES/QUIK-TO-FIX FOODS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2013 58-2263508
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
9441 LBJ FREEWAY, SUITE 214
DALLAS, TEXAS 75243
PHONE: (972) 690-7675
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES)
---------------
A. SCOTT LETIER
CHIEF FINANCIAL OFFICER
GORGES/QUIK-TO-FIX FOODS, INC.
9441 LBJ FREEWAY, SUITE 214
DALLAS, TEXAS 75243
PHONE: (972) 690-7675
FACSIMILE: (972) 907-9658
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
BRYAN E. DAVIS
W. THOMAS CARTER, III
SCOTT D. DICKINSON
ALSTON & BIRD
ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
PHONE: (404) 881-7000
FACSIMILE: (404) 881-7777
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: Upon
commencement of the Exchange Offer referred to herein.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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If this form is filed to register additional Securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1993, please check the
following box. [_]
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If this form is a post-effective amendment filed pursuant to Rule 462(a)
under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [_]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
11 1/2% Senior
Subordinated Notes due
2006, Series B....... $100,000,000 100% $100,000,000 $30,303.03
</TABLE>
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(1) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457(f), based upon the book value (aggregate outstanding principal
amount) of such securities.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
[LOGO OF
GORGES/
QUICK-TO-
GORGES/QUIK-TO-FIX FOODS, INC. FIX LOGO
OFFER TO EXCHANGE ITS APPEARS
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B HERE]
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
-----------
EACH EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON , 1997,
UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION DATE").
Gorges/Quik-To-Fix Foods, Inc., a Delaware corporation (the "Company") and a
wholly owned subsidiary of Gorges Holding Corporation, a Delaware corporation
("GHC"), hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
up to $100,000,000 aggregate principal amount of its 11 1/2% Senior
Subordinated Notes Due 2006, Series B (the "Exchange Notes") for equal
principal amounts of its outstanding 11 1/2% Senior Subordinated Notes Due 2006
(the "Senior Notes"). The Exchange Notes are substantially identical (including
principal amount, interest rate, maturity and redemption rights) to the Senior
Notes for which they may be exchanged pursuant to this offer, except that (i)
the offering and sale of the Exchange Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) holders of
Exchange Notes will not be entitled to certain rights of holders of Senior
Notes under a Registration Rights Agreement of the Company dated as of November
25, 1996 (as defined herein). The Senior Notes have been, and the Exchange
Notes will be, issued under an Indenture dated as of November 25, 1996 (the
"Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"). The Company will not receive any proceeds from this
Exchange Offer; however, pursuant to the Registration Rights Agreement, the
Company will bear certain offering expenses. See "Description of Notes" and
"Senior Notes Registration Rights." The Senior Notes together with the Exchange
Notes are referred to herein as the "Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Senior Notes. Consequently, interest on the Exchange Notes will be
payable semi-annually in arrears on June 1 and December 1 of each year,
commencing June 1, 1997. The Exchange Notes will mature on December 1, 2006,
and may be redeemed at the option of the Company, in whole or in part, on or
after December 1, 2001, at the redemption prices set forth herein, plus accrued
and unpaid interest thereon and Liquidated Damages (as defined herein), if any,
to the applicable redemption date. Notwithstanding the foregoing, any time on
or before December 1, 1999, the Company may redeem up to 35% of the original
aggregate principal amount of the Notes with the net proceeds of a Public
Equity Offering (as defined herein) at the redemption prices set forth herein,
plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the
applicable redemption date. Upon a Change of Control (as defined herein), each
holder of Notes will have the right to require the Company to repurchase all or
any part of such holder's Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest thereon and Liquidated Damages, if any, to the date
of repurchase. See "Description of Notes."
The Exchange Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company, which will include borrowings under the
Credit Facilities (as defined herein). At September 28, 1996, on a pro forma
basis after giving effect to the Transactions (as defined herein), the Company
had $48.0 million of outstanding Senior Indebtedness. The terms of the
Indenture will permit the Company to incur additional indebtedness, including
additional Senior Indebtedness, subject to certain limitations. See "Risk
Factors--Subordination of Exchange Notes" and "Description of Notes--Certain
Covenants."
The Company will accept for exchange any and all Senior Notes validly
tendered by eligible holders and not withdrawn prior to 5:00 P.M. Eastern time
on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Senior Notes may be withdrawn at any time prior
to the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Senior Notes may be tendered only in integral multiples of
$1,000. See "The Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
(as defined herein) provides that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time-to-time, may be used by a broker-
dealer in connection with resales of the Exchange Notes received in exchange
for Senior Notes where such Senior Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. The Company
has agreed that, beginning on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Explanatory Note," "The Exchange Offer--Terms of the Exchange" and "Plan of
Distribution."
The Senior Notes are not listed on any securities exchange and are not traded
on the National Association of Securities Dealers Automated Quotation System,
Inc. ("Nasdaq"). The Senior Notes are traded through the National Association
of Securities Dealers, Inc.'s ("NASD") PORTAL trading system under the symbol
"GQTFNP06." The Company does not intend to list the Exchange Notes on any
national securities exchange or to seek admission thereof to trading on Nasdaq.
NationsBanc Capital Markets, Inc. has advised the Company that it has made a
market in the Senior Notes, and that it may make a market in the Senior Notes
and in the Exchange Notes; however, it is not obligated to do so and any
market-making activity may be discontinued at any time. As a result, there is
no assurance that an active public market will develop or continue for the
Exchange Notes, and that the market, if any, that develops for its Exchange
Notes will be similar to the limited market that currently exists for the
Senior Notes. See "Risk Factors--Absence of Public Market for the Exchange
Notes."
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY INVESTORS WITH RESPECT TO THE NOTES AND THE
EXCHANGE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers $100,000,000 aggregate principal amount
of 11 1/2% Senior Subordinated Notes Due 2006, Series B of the Company to be
offered in exchange for equal principal amounts of the Company's outstanding
11 1/2% Senior Subordinated Notes Due 2006. This Registration Statement is
being filed to satisfy certain requirements of a Registration Rights Agreement
dated as of November 25, 1996 between the Company and NationsBanc Capital
Markets, Inc., as the initial purchaser (the "Initial Purchaser") of the
Senior Notes (the "Registration Rights Agreement").
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") set forth in no-action letters
issued to unrelated third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Senior Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder which is (i) a broker-dealer that holds Notes
acquired for its own account as a result of market-making or other trading
activities, (ii) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or (iii) a broker-dealer that acquired Senior Notes
directly from the Company) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
The Company hereby notifies each holder of Senior Notes that any broker-
dealer that holds Senior Notes acquired for its own account as a result of
market-making activities or other trading activities and who receives Exchange
Notes pursuant to the Exchange Offer may be a statutory underwriter, and must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the Exchange Notes. Any broker-dealer that holds
Senior Notes acquired for its own account as a result of market-making or
other trading activities, acknowledges and agrees as a term of the Exchange
Offer, that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Exchange Notes received
pursuant to the Exchange Offer. However, by so doing, the broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Such broker-dealer will also be deemed to represent and
warrant to the Company that it is not participating in, and has no intent to
participate in, any distribution of Exchange Notes, and has not entered into
any arrangement or understanding with any person to distribute the Exchange
Notes.
In the event that any holder of Senior Notes is prohibited by law or any
policy of the Commission from participating in the Exchange Offer or any
holder may not resell the Exchange Notes without delivering a prospectus and
the Prospectus contained in this Registration Statement is inappropriate or
unavailable for such resales by such holder or if such holder is a broker-
dealer and holds Senior Notes acquired directly from the Company or one of its
affiliates, and such holder satisfies certain other requirements, the Company
has agreed, pursuant to the Registration Rights Agreement, to file a
registration statement in respect of such Exchange Notes and Senior Notes
pursuant to Rule 415 under the Securities Act. See "Prospectus Summary--The
Exchange Offer;" "The Exchange Offer;" and "Plan of Distribution."
Any Senior Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent any Senior Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered and unregistered Senior
Notes could be adversely affected. Following consummation of the Exchange
Offer, the holders of Senior Notes will continue to be subject to the existing
restrictions upon transfer thereof and the Company will have fulfilled certain
of its obligations under the Registration Rights Agreement. Holders of Senior
Notes who do not tender their Notes generally will not have any further
registration rights under the Registration Rights Agreement or otherwise. See
"Risk Factors--Consequences of Exchange and Failure to Exchange" and "The
Exchange Offer."
The Company expects that similar to the Senior Notes, and except as
specifically requested by a holder on the Letter of Transmittal, the Exchange
Notes will be issued only in the form of a Global Note (as defined herein),
which will be deposited with, or on behalf of, The Depository Trust Company
(the "Depository") and
2
<PAGE>
registered in its name or in the name of the Depository's nominee, Cede & Co.
Beneficial interests in the Global Note representing the Exchange Notes will
be shown on, and transfers thereof will be effected through, records
maintained by the Depository and its participants. After the initial issuance
of the Global Note, Exchange Notes in certificated form may be issued in
exchange for the Global Note on the terms and conditions set forth in the
Indenture (as defined herein). See "Description of Notes--Book Entry, Delivery
and Form."
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Exchange Notes, the Company will become subject
to the informational requirements of the Exchange Act. So long as the Company
is subject to the periodic reporting requirements of the Exchange Act, it is
required to furnish the information required to be filed with the Commission
to the Trustee and the holders of the Senior Notes and the Exchange Notes. The
Company has agreed that, even if it is not required under the Exchange Act to
furnish such information to the Commission, it will nonetheless continue to
furnish information that would be required to be furnished by the Company by
Section 13 of the Exchange Act to the Trustee and the holders of the Senior
Notes or Exchange Notes as if it were subject to such periodic reporting
requirements. See "Available Information."
In addition, the Company has agreed that, for so long as any of the Senior
Notes are "restricted securities" within the meaning of Rule 144(a)(3) under
the Securities Act, it will make available to any prospective purchaser of the
Senior Notes or holder of the Senior Notes upon the request of such
prospective purchaser or holder the information required by Rule 144A(d)(4)
under the Securities Act.
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company, the Senior Notes and the Exchange
Notes reference is hereby made to the Registration Statement, including the
exhibits and schedules filed or incorporated as a part thereof. Statements
contained herein concerning the provisions of any document are not necessarily
complete and in each instance reference is made to the copy of the document
filed as an exhibit or schedule to the Registration Statement. Each such
statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the Commission. In addition, after
effectiveness of the Registration Statement, the Company will file periodic
reports and other information with the Commission under the Exchange Act. The
Registration Statement, including the exhibits and schedules thereto, and the
periodic reports and other information filed in connection therewith, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Seven World Trade Center, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. Such reports, proxy and information statements and other
information may be found on the Commission's site address, http://www.sec.gov.
Copies of such material also can be obtained from the Company upon request by
writing to Gorges/Quik-to-Fix Foods, Inc., 9441 LBJ Freeway, Suite 214,
Dallas, Texas 75243, Attention: President.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Prospectus Summary;"
"Risk Factors;" "Unaudited Pro Forma Financial Information;" "Management's
Discussion and Analysis of Financial Condition and Results of Operations;"
"Business" and elsewhere in this Prospectus may constitute forward-looking
statements and as such may involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements.
Important factors that could cause the actual results, performance or
achievements of the Company to differ materially from the Company's
expectations are disclosed in this Prospectus ("Cautionary Statements"),
including, without limitation, those statements made in conjunction with the
forward-looking statements included under "Risk Factors" and otherwise herein.
All written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by the Cautionary Statements.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
EXPLANATORY NOTE......................................................... 2
AVAILABLE INFORMATION.................................................... 4
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS........... 4
PROSPECTUS SUMMARY....................................................... 6
RISK FACTORS............................................................. 16
USE OF PROCEEDS.......................................................... 23
THE ACQUISITION, FINANCING AND RELATED TRANSACTIONS...................... 24
PRO FORMA CAPITALIZATION................................................. 26
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................ 26
SELECTED FINANCIAL DATA.................................................. 32
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................. 34
BUSINESS................................................................. 40
MANAGEMENT............................................................... 49
CERTAIN TRANSACTIONS..................................................... 51
PRINCIPAL STOCKHOLDER.................................................... 52
THE EXCHANGE OFFER....................................................... 53
DESCRIPTION OF NOTES..................................................... 60
DESCRIPTION OF CREDIT FACILITIES......................................... 86
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................ 88
SENIOR NOTES REGISTRATION RIGHTS......................................... 90
PLAN OF DISTRIBUTION..................................................... 91
LEGAL MATTERS............................................................ 92
EXPERTS.................................................................. 92
INDEX TO FINANCIAL STATEMENTS............................................ F-1
</TABLE>
5
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and should
be read in conjunction with the more detailed information and financial data,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context requires otherwise, as used herein, the "Company" refers to
Gorges/Quik-to-Fix Foods, Inc. following the completion of the Transactions (as
defined herein) and the processed beef operations of Tyson Foods, Inc. prior to
the completion of the Transactions. Historically, the Company's fiscal year has
ended on the Saturday closest to September 30, and references to particular
fiscal years of the Company refer to the 12 months ended on the Saturday
closest to September 30 of the year indicated. See the Financial Statements and
the Notes thereto.
THE COMPANY
The Company is a leading producer of value added processed beef products for
the foodservice industry and is one of the few companies in this segment of the
industry that markets and distributes nationally. The Company's products are
marketed under the nationally recognized Quik-to-Fix and Gorges brand names, as
well as the private labels of leading national foodservice distributors. The
Company believes that its products are well positioned to take advantage of
what it believes is a trend within the foodservice industry towards greater
outsourcing of the food preparation process. For the fiscal year ended
September 28, 1996, the Company had sales and Adjusted Pro Forma EBITDA (as
defined herein) of $232.8 million and $37.0 million, respectively.
The Company purchases fresh and frozen beef and, to a lesser extent, pork and
poultry, which it processes into a broad range of fully cooked and ready to
cook products. The Company's two product categories are value added processed
products ("value added products") and ground beef. Value added product
offerings include (i) breaded beef items, such as country fried steak and beef
fingers, (ii) charbroiled beef, such as fully cooked hamburger patties, fajita
strips, meatballs, meatloaf and taco meat and (iii) other specialty products,
such as fully cooked and ready to cook pork sausage, breaded pork and turkey,
cubed steaks and Philly steak slices. Ground beef product offerings consist
primarily of uncooked individually quick frozen ("IQF") hamburger patties. The
Company's products are sold primarily to the foodservice industry, which
encompasses all aspects of away-from-home food preparation, including
commercial establishments such as fast food restaurants and family dining
restaurants and non-commercial establishments such as healthcare providers,
schools and corporations. The Company sells its products principally through
broadline and specialty foodservice distributors.
The Company acquired the Gorges/Quik-to-Fix Foods operations (the "Business")
of Tyson Foods, Inc. ("Tyson") on November 25, 1996 (the "Acquisition"). The
Company's principal business objective is to build its higher margin value
added business. Value added products address many of the concerns within the
foodservice industry, including cost reduction, food safety and product quality
and consistency. The Company also intends to utilize its ground beef
manufacturing capabilities to target higher volume multi-unit accounts,
especially where opportunities exist to cross-sell its higher margin value
added products. Management believes that by operating as an integrated, stand
alone enterprise, the Company will be better able to capitalize on its
strengths and favorable industry trends, including the following.
. Favorable Trends in the Foodservice Industry. Purchases of food prepared
away from home have grown consistently for over forty years and currently
represent approximately 45% of total food purchases. Demand has risen due
to various demographic changes, including increases in personal
disposable income, the increasing number of single-parent households and
the rising number of dual income families. Driven by the continuing
consumer trend toward purchasing food prepared away from home, the
foodservice industry is projected to grow at a nominal rate of 5.0% in
1996, superior to the growth prospects of the food industry in general,
according to Technomic Inc.
6
<PAGE>
The Company believes that there is also an increasing trend within the
foodservice industry toward outsourcing more of the food preparation
process to reduce preparation costs and to ensure product safety, quality
and consistency. The Company addresses these outsourcing needs by
producing products that are precooked or ready to cook (e.g., breaded,
portioned and seasoned) and require little "back-of-the-house"
preparation.
. Strong Brand Names. The Gorges and Quik-to-Fix brands have been
established for over 50 and 30 years, respectively. The Company believes
its charbroiled beef and country fried steak customers associate the
Gorges and Quik-to-Fix brand names with products that are high quality,
safe and reasonably priced. The Company intends to capitalize on this
brand recognition to increase the market penetration of its breaded beef
and charbroiled beef products and to promote additional products under
the Gorges and Quik-to-Fix brand names.
. Focused Sales and Marketing Team. The Company's sales and marketing team
consists of 16 experienced professionals, most of whom worked with Gorges
Foodservice, Inc. ("Gorges, Inc.") or Quik-to-Fix Foods, Inc. ("Quik-to-
Fix, Inc.") prior to their acquisition by Tyson. Until May 1996, these
sales professionals marketed substantially all of the Tyson product line.
With volume based incentives, sales were dominated by high volume chicken
products. Going forward, the Company will maintain a dedicated sales
force that will be responsible solely for the Company's products.
. Extensive Foodservice Broker Network. Management believes that the
Company's extensive independent foodservice broker network, consisting of
51 brokers covering 49 states, is one of its most valuable assets. The
brokers act as extensions of the Company's in-house sales force,
providing sales and marketing support and an intensive sales effort
focused on the major foodservice distributors in each of their respective
regions. Management anticipates that the existing strong broker
relationships will continue because of the revenue stream created by the
Company's products, the continuity of the Company's sales and marketing
team and the increased responsiveness to broker and customer needs
resulting from the Company's exclusive focus on its own products.
. Strong and Diverse Customer Base. The Company has a strong and diverse
customer base, anchored by 48 of the 50 largest broadline foodservice
distributors. The Company's products are purchased by 28 of the 50
largest multi-unit restaurant chains in the United States, including
Shoney's, Chili's, Ponderosa and Cracker Barrel, as well as by
institutional customers such as Marriott Corporation and school districts
through the USDA Commodity Reprocessing Program. The Company's products
are also purchased by wholesale club stores.
. Modern Facilities With Excess Capacity. The Company operates four modern
facilities using state-of-the-art equipment with capacity that will allow
significant volume increases without major additional capital
expenditures. Until recently, several plants had duplicative
capabilities, creating production inefficiencies. During late fiscal 1995
and the first half of fiscal 1996, Tyson reconfigured the facilities (the
"Reconfiguration"), significantly enhancing the operating efficiency of
the facilities, increasing capacity and reducing the Company's overall
labor expenditures. The Company believes the full benefits of the
Reconfiguration will first be realized in fiscal 1997.
. Experienced and Focused Management Team. Prior to the Acquisition, the
Company's four plants operated primarily as independent facilities rather
than as an integrated unit. Furthermore, strategic decisions were made by
corporate level managers whose principal focus was on Tyson's core
poultry business. The Company is now operated by a team of managers
almost all of whom have spent the majority of their careers in the beef
processing industry. Most members of the management team were employed by
Gorges, Inc., Quik-to-Fix, Inc. or Harker's, Inc. ("Harker's") prior to
their acquisition by Tyson. The management team has developed valuable
industry relationships and has extensive experience in key aspects of the
Company's operations, including procurement, production, sales and
marketing, research and development and distribution.
7
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Beef is the most consumed protein in the United States on the basis of
boneless, per capita consumption. Although per capita beef consumption in the
United States declined through the late 1980s as consumers became more
concerned about the level of fat in their diet, the beef industry has taken
steps to maintain beef as the nation's number one protein. Beef is now leaner
than ever, with the average cut of beef 27% leaner than in 1985, due to closer
trimming of fat, new leaner cuts of beef and the use of leaner cattle.
According to the National Livestock and Meat Board, U.S. beef consumption is
projected to be 65.2 boneless pounds per capita in 1996, up slightly from 64.1
pounds in 1990 and representing 32.5% of projected total meat consumption.
Furthermore, according to the Beef Industry Council, within the foodservice
industry, beef consumption increased from 6.22 billion beef servings in
commercial restaurants in 1991 to 6.68 billion servings in 1994, a 7.4%
increase.
In fiscal 1996, the Company's sales decreased to $232.8 million from $304.5
million in fiscal 1995, primarily reflecting (i) the Company's decision to
discontinue production of frozen portion-controlled steak products resulting in
a decrease in sales of $24.7 million, (ii) the completion of a temporary
contract to supply IQF hamburger patties to a national fast food chain (the
"IQF Contract") related to a product promotion by the chain resulting in a
decrease in sales of $21.2 million and (iii) decreases in selling prices for
certain of the Company's products as a result of lower raw materials prices.
See "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE ACQUISITION, FINANCING AND RELATED TRANSACTIONS
On November 25, 1996, the Company acquired the Business (the "Acquisition
Closing"). The purchase price for the Acquisition was $183.5 million (the "Cash
Consideration"). The Company assumed no liabilities or obligations of Tyson
associated with the Business, other than future obligations under executory
contracts of the Business, such as agreements to purchase inventory or to
supply products, accrued vacation pay and certain property tax obligations.
Tyson agreed to indemnify the Company for any and all liabilities and
obligations relating to the Business prior to the Acquisition Closing, other
than the aforementioned liabilities assumed by the Company. In addition, the
Company and Tyson agreed, subject to certain exceptions and limitations, not to
compete with each other in the production and/or sale of beef and pork
products, in the case of Tyson, or certain poultry products, in the case of the
Company, for a period of two years from the Acquisition Closing. Pursuant to a
Transition Services Agreement (the "Transition Services Agreement"), Tyson
currently is providing certain services to the Company with respect to the
operation of the Business, such as computer processing services, and will
continue to provide such services for up to twelve months after the Acquisition
Closing. Such services will be provided at no cost to the Company for the first
six months. Thereafter, the Company will pay Tyson an agreed upon rate. See
"The Acquisition, Financing and Related Transactions."
The $183.5 purchase price for the Acquisition, together with approximately
$9.5 million of related fees and expenses (of which $900,000 has been allocated
to the Equity Private Placement (as defined herein)), was financed (the
"Financing") with the proceeds of: (i) the offering of the Senior Notes; (ii)
the borrowing of $40.0 million pursuant to a term loan (the "Term Loan
Facility") and the borrowing of $8.0 million under a $30.0 million revolving
credit facility (the "Revolving Credit Facility" and, together with the Term
Loan Facility, the "Credit Facilities"); and (iii) an equity contribution by
GHC of $45.0 million. The Acquisition, Financing and related transactions are
referred to herein as the "Transactions."
8
<PAGE>
THE EXCHANGE OFFER
Securities Offered.......... $100 million aggregate principal amount of 11
1/2% Senior Subordinated Notes Due December 1,
2006, Series B.
The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of
Senior Notes. As of the date hereof, all of the
aggregate principal amount of Senior Notes are
outstanding. The Company will issue the Exchange
Notes to eligible holders on or promptly after
the Expiration Date of the Exchange Offer.
Based on interpretations by the staff of the
Commission set forth in no-action letters issued
to unrelated third parties, the Company believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Senior Notes may
be offered for resale, resold and otherwise
transferred by any holder thereof (other than any
holder which is (i) a broker-dealer that holds
Notes acquired for its own account as a result of
market-making or other trading activities,
(ii) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act or
(iii) a broker-dealer that acquired Senior Notes
directly from the Company) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
such Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in a distribution of such Exchange
Notes.
Each broker-dealer that receives Exchange Notes
for its own account pursuant to the Exchange
Offer may be a statutory underwriter and must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from to time, may be used
for 180 days after the Expiration Date by a
broker-dealer in connection with resales of
Exchange Notes received in exchange for Senior
Notes where such Senior Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities. The
Company has agreed that for a period of 180 days
after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of
Distribution."
Any holder who is an affiliate of the Company and
any person who intends to, or is participating in
a distribution of the Exchange Notes, will not be
able to rely on the position of the staff of the
9
<PAGE>
Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan
Stanley & Co., Inc. (available June 5, 1991), and
Shearman & Sterling (available July 2, 1993) or
similar no-action letters and, in the absence of
an exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with the
resale of the Exchange Notes. Failure to comply
with such requirements in such instance may
result in such holder incurring liability under
the Securities Act for which the holder will not
be indemnified by the Company.
Expiration Date............. 5:00 p.m., Eastern Time, on , 1997, unless
the Exchange Offer is extended by the Company in
its sole discretion, in which case the term
"Expiration Date" means the latest date and time
to which the Exchange Offer is extended.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer...................... customary conditions, which may be waived, to the
extent permitted by law, by the Company. See "The
Exchange Offer--Terms of the Exchange" and "--How
to Tender."
Procedures for Tendering Each eligible holder of Senior Notes wishing to
Notes...................... accept the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Senior Notes and any other required documentation
to the Exchange Agent (as defined herein) at the
address set forth in the Letter of Transmittal.
By executing the Letter of Transmittal, each
holder will represent to the Company that, among
other things, the holder or the person receiving
such Exchange Notes, whether or not such person
is the holder, is acquiring the Exchange Notes in
the ordinary course of business and that neither
the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes, that neither the holder nor any such
person is an "affiliate" (as defined under Rule
405 of the Securities Act) of the Company, and if
such holder is a broker-dealer that holds the
Senior Notes as a result of market-making or
other trading activities, it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resales of
the Exchange Notes. In lieu of physical delivery
of the certificates representing Senior Notes,
tendering holders may transfer Senior Notes
pursuant to the procedure for book-entry transfer
as set forth under "The Exchange Offer--How to
Tender."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Senior Notes are held
in book-entry form or are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to
exchange
such Senior Notes for the Exchange Notes should
contact such
10
<PAGE>
registered holder promptly and instruct such
registered holder to tender the Senior Notes for
exchange on such beneficial owner's behalf. See
"The Exchange Offer--How to Tender."
Guaranteed Delivery
Procedures................. Holders of Senior Notes who wish to tender their
Senior Notes and whose Senior Notes are not
immediately available or who cannot deliver their
Senior Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Senior
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--How
to Tender--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., Eastern Time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer--Withdrawal Rights."
Acceptance of Notes and
Delivery of Exchange
Notes...................... The Company will accept for exchange any and all
Senior Notes that are properly tendered in the
Exchange Offer, and not withdrawn, prior to 5:00
p.m., Eastern Time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered on the earliest
practicable date following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange."
Federal Income Tax
Consequences............... The issuance of the Exchange Notes to holders of
the Senior Notes pursuant to the terms set forth
in this Prospectus will not constitute an
exchange for federal income tax purposes.
Consequently, no gain or loss will be recognized
by holders of the Senior Notes upon receipt of
the Exchange Notes. See "Certain Federal Income
Tax Considerations."
Effect on holders of the
Senior Notes............... As a result of the making of this Exchange Offer,
the Company will have fulfilled certain of its
obligations under the Registration Rights
Agreement, and holders of Senior Notes who do not
tender their Senior Notes will generally not have
any further registration rights under the
Registration Rights Agreement or otherwise. Such
holders will continue to hold the untendered
Senior Notes and will be entitled to all the
rights and subject to all the limitations,
including,
without limitation, transfer restrictions,
applicable thereto under the Indenture dated as
of November 25, 1996 (the "Indenture"), between
the Company and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee"), except to
the extent such rights or limitations, by their
terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
Accordingly, if any Senior Notes are tendered and
accepted in the Exchange Offer, the trading
market, if any, for the untendered Senior Notes
could be adversely affected.
Exchange Agent.............. IBJ Schroder Bank & Trust Company is serving as
exchange agent (the "Exchange Agent") with
respect to the Senior Notes.
11
<PAGE>
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Senior Notes which they replace except that (i) the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof and (ii) the holders of
Exchange Notes generally will not be entitled to further registration rights
under the Registration Rights Agreement, which rights generally will have been
satisfied when the Exchange Offer is consummated. The Exchange Notes will
evidence the same indebtedness as the Senior Notes which they replace and will
be issued under, and be entitled to the benefits of the Indenture. See
"Description of Notes."
Maturity Date............... December 1, 2006
Interest Payment Dates...... June 1 and December 1, commencing June 1, 1997.
Subordination............... The Exchange Notes will be general unsecured
obligations of the Company, subordinated in right
of payment to all existing and future Senior
Indebtedness of the Company, which will include
borrowings under the Credit Facilities. At
December 28, 1996, as a result of the
Transactions and additional borrowings under the
Credit Facilities to finance working capital
needs, the Company had $49.0 million of
outstanding Senior Indebtedness, which would rank
senior in right of payment to the Notes. See
"Description of Notes--Subordination."
Optional Redemption......... On or after December 1, 2001, the Company may
redeem the Exchange Notes, in whole or in part,
at the redemption prices set forth herein, plus
accrued and unpaid interest thereon and
Liquidated Damages, if any, to the applicable
redemption date. Notwithstanding the foregoing,
any time on or before December 1, 1999, the
Company may redeem up to 35% of the original
aggregate principal amount of the Notes with the
net proceeds of a Public Equity Offering (as
defined herein) at the redemption prices set
forth herein, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the
applicable redemption date, provided that at
least 65% of the original aggregate principal
amount of the Notes remains outstanding
immediately after such redemption.
Mandatory Redemption........ None, except at maturity on December 1, 2006.
Change in Control........... Upon a Change in Control (as defined herein),
each holder will have the right to require the
Company to repurchase all or any part of such
holder's Exchange Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the
date of repurchase.
Covenants................... The Indenture pursuant to which the Exchange
Notes will be issued restricts, among other
things, the Company's ability to incur additional
indebtedness, pay dividends or make certain other
restricted payments, incur liens to secure pari
passu or subordinated indebtedness, engage in any
sale and leaseback transaction, sell
12
<PAGE>
stock of subsidiaries, apply net proceeds from
certain asset sales, merge or lease, convey or
otherwise dispose of substantially all of the
assets of the Company, enter into certain
transactions with affiliates or incur
indebtedness that is subordinate in right of
payment to any Senior Indebtedness and senior in
right of payment to the Exchange Notes. See
"Description of Notes--Certain Covenants."
Exchange Offer;
Registration Rights........ If (i) the Exchange Offer is not permitted by
applicable law or (ii) any holder of Notes
notifies the Company that (A) it is prohibited by
law or Commission policy from participating in
the Exchange Offer, (B) it may not resell the
Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a
prospectus and this Prospectus is not appropriate
or available for such resales or (C) it is a
broker-dealer and holds Senior Notes acquired
directly from the Company or an affiliate of the
Company, and such holders timely notify the
Company of such facts, the Company will be
required to provide a shelf registration
statement (the "Shelf Registration Statement") to
cover resales of the Notes by the holders
thereof. If the Company fails to satisfy these
registration obligations, it will be required to
pay liquidated damages ("Liquidated Damages") to
such holders of Notes under certain
circumstances. See "Senior Notes Registration
Rights"
RISK FACTORS
See "Risk Factors" as well as other information and data included in this
Prospectus for a discussion of certain factors that should be considered in
evaluating the Exchange Offer and an investment in the Notes.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents (i) summary selected historical financial
information of the Business, as of the dates and for the periods indicated, and
(ii) summary pro forma financial information of the Company, as of the date and
for the period indicated, adjusted for the completion of the Acquisition, the
application of the net proceeds of the Financing and the events described in
"Unaudited Pro Forma Financial Information." The historical financial
information for each of the three years in the period ended September 28, 1996
has been derived from the Business' financial statements, which have been
audited by Ernst & Young LLP. The historical financial information for each of
the two years in the period ended October 2, 1993 has been derived from
unaudited financial statements and, in the opinion of management, includes all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of results of operations for these periods. The summary pro forma
financial information does not purport to represent what the Company's results
of operations would have been if such events had occurred at the dates
indicated, nor does such information purport to project the results of the
Company for any future period. The summary financial information should be read
in conjunction with "Unaudited Pro Forma Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THE COMPANY
PRO FORMA
THE BUSINESS HISTORICAL FISCAL YEAR
FISCAL YEAR ENDED ENDED
------------------------------------------------------------ -------------
OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 28,
1992 1993 1994 1995 1996 1996
---------- ---------- ---------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $295,835 $294,468 $331,969 $304,474 $232,761 $226,394
Cost of goods sold...... 252,544 246,630 278,600 250,787 189,559 178,693
-------- -------- -------- -------- -------- --------
Gross profit.......... 43,291 47,838 53,369 53,687 43,202 47,701
Selling................. 18,581 24,661 27,513 25,128 22,452 18,670
General and administra-
tive................... 6,485 6,107 6,367 6,386 3,962 3,775
Amortization............ 1,239 1,239 1,528 1,624 1,624 2,782
Plant relocation........ -- -- -- 1,036 -- --
-------- -------- -------- -------- -------- --------
Total operating ex-
penses............... 26,305 32,007 35,408 34,174 28,038 25,227
-------- -------- -------- -------- -------- --------
Operating income........ 16,986 15,831 17,961 19,513 15,164 22,474
Interest expense........ -- -- -- -- -- 17,428
Other expenses.......... -- -- 4 678 796 796
-------- -------- -------- -------- -------- --------
Earnings before taxes on
income................. 16,986 15,831 17,957 18,835 14,368 4,250
Provision for income
taxes.................. 7,134 6,649 7,508 7,931 6,205 1,658
-------- -------- -------- -------- -------- --------
Net income............ $ 9,852 $ 9,182 $ 10,449 $ 10,904 $ 8,163 $ 2,592
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1)............... $ 26,118 $ 24,909 $ 28,579 $ 29,877 $ 24,080 $ 32,653
Capital expenditures.... 4,600 3,300 6,580 2,792 735 735
Cost of goods sold as a
% of sales............. 85.4% 83.8% 83.9% 82.4% 81.4% 78.9%
Selling and general and
administrative expenses
as a % of sales........ 8.5% 10.4% 10.2% 10.4% 11.3% 9.9%
EBITDA as a % of sales.. 8.8% 8.5% 8.6% 9.8% 10.3% 14.4%
Ratio of Pro Forma
EBITDA to pro forma
fixed charges(2)(3).... 1.9x
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AT SEPTEMBER 28, 1996
------------------------
THE BUSINESS THE COMPANY
HISTORICAL PRO FORMA
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET AND OTHER DATA:
Working capital........................................ $31,334 $23,974
Total assets........................................... 137,298 194,057
Total liabilities...................................... 137,298 149,057
Total liabilities and stockholders' equity............. 137,298 194,057
</TABLE>
- --------
(1) EBITDA represents the sum of income before interest expense and provision
for income taxes, plus depreciation, amortization and other expenses, which
consist of losses on dispositions of property, plant and equipment. EBITDA
should not be construed as a substitute for operating income, net income or
cash flow from operating activities for purposes of analyzing the Company's
operating performance, financial position and cash flows. The Company has
presented EBITDA because it is commonly used by investors to analyze and
compare companies on the basis of operating performance and to determine a
company's ability to service debt.
(2) The historical financial statements of the Business do not reflect any
interest expense as Tyson did not allocate any such expense to the
Business. The only fixed charge that the Business incurred in fiscal 1996
was $15,000, which represents the estimated interest component of rent
expense, resulting in a ratio of earnings to fixed charges of 958.9x.
Therefore, the ratio of Pro Forma EBITDA to pro forma fixed charges is
shown.
(3) The historical financial statements of the Business for the fiscal year
ended September 28, 1996 include various non-recurring costs incurred in
connection with problems with the Reconfiguration, which have since been
resolved. These costs consisted of increased production costs resulting
from inefficient yields, increased labor and overhead conversion costs,
including the costs of operating a temporary production facility, as well
as certain customer discounts and other non-recurring expenses. The effect
of these costs has not been eliminated in the Pro Forma Income Statement
and Pro Forma EBITDA, but has been eliminated in determining Adjusted Pro
Forma EBITDA as set forth below.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 28, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro Forma EBITDA....................................... $32,653
Adjustments described above............................ 4,315
-------
Adjusted Pro Forma EBITDA.............................. $36,968
=======
Ratio of Adjusted Pro Forma EBITDA to pro forma fixed
charges............................................... 2.1x
Ratio of total debt to Adjusted Pro Forma EBITDA....... 4.0x
Ratio of Adjusted Pro Forma EBITDA to pro forma cash
interest expense...................................... 2.3x
</TABLE>
15
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Senior Notes for the Exchange Notes offered hereby, holders of
Senior Notes should consider carefully the following factors, which (other
than "Consequences of Exchange and Failure to Exchange" and "Absence of Public
Market") are generally applicable to the Senior Notes as well as the Exchange
Notes. Certain statements in this Prospectus that are not historical fact may
constitute "forward-looking statements." Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results of the Company to be materially different from
results expressed or implied by such forward-looking statements.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Senior Notes who do not exchange their Senior Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Senior Notes as set forth in the legend
thereon as a consequence of the issuance of the Senior Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Senior Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Company
does not intend to register the Senior Notes under the Securities Act. In
addition, any holder of Senior Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. To the extent Senior Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
the Senior Notes could be adversely affected. See "The Exchange Offer" and
"Senior Notes Registration Rights."
SIGNIFICANT LEVERAGE AND DEBT SERVICE
Upon consummation of the Transactions, the Company became highly leveraged.
At September 28, 1996, on a pro forma basis, after giving effect to the
Transactions, the Company would have had total outstanding debt of $148.0
million. In addition, subject to the restrictions in the Indenture, the
Company may incur additional indebtedness (including additional Senior
Indebtedness) from time to time to finance acquisitions or capital
expenditures or for other purposes. At the Acquisition Closing, the Company
had unused capacity of $22.0 million under the Revolving Credit Facility and
as of December 28, 1996 the Company had drawn down approximately an additional
$1.0 million under the Revolving Credit Facility to finance working capital
needs. In addition, the Company expects to draw down an additional $11.0
million under the Revolving Credit Facility during the first quarter of
calendar 1997 to finance working capital needs.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures,
research and development, acquisitions or other corporate purposes may be
limited; (iii) the borrowings of the Company under the Credit Facilities
accrue interest at variable rates, which could cause the Company to be
vulnerable to increased interest expense in the event of higher interest
rates; and (iv) the Company's level of indebtedness could limit its
flexibility in reacting to changes in its industry or economic conditions
generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and
other factors, certain of which are beyond its control, as well as the
availability of borrowings under the Revolving Credit Facility or successor
facilities. The Company anticipates that its operating cash flow and
borrowings under the Revolving Credit Facility or successor facilities will be
sufficient to meet its operating expenses and to service its debt requirements
as they become due. However, if the Company is unable to service
16
<PAGE>
its indebtedness, it will be forced to take actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing
its indebtedness or seeking additional equity capital. There can be no
assurance that any of these remedies can be effected on satisfactory terms, if
at all. In addition, the Company's ability to repay the principal amount of
the Notes at maturity may depend on its ability to refinance the Notes. There
can be no assurance that the Company will be able to refinance the Notes at
maturity, if necessary, on satisfactory terms, if at all.
SUBORDINATION OF NOTES
The Senior Notes are, and the Exchange Notes will be, general unsecured
obligations of the Company subordinated in right of payment to all existing
and future Senior Indebtedness of the Company, including borrowings under the
Credit Facilities. In the event of bankruptcy, liquidation or reorganization
of the Company, the assets of the Company will be available to pay obligations
on the Notes only after all Senior Indebtedness has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on any or all
of the Notes then outstanding. In addition, under certain circumstances the
Company will not be able to make payment of its obligations under the Notes in
the event of a default under certain Senior Indebtedness. The aggregate
principal amount of Senior Indebtedness of the Company, as of September 28,
1996, would have been $48.0 million on a pro forma basis after giving effect
to the Transactions. As of December 28, 1996, the Company had borrowed
approximately an additional $1.0 million of Senior Indebtedness under the
Revolving Credit Facility to finance working capital needs. In addition, the
Company expects to draw down an additional $11.0 million under the Revolving
Credit Facility during the first quarter of calendar 1997 to finance working
capital needs. Additional Senior Indebtedness may be incurred by the Company
from time to time, subject to certain restrictions. See "Description of
Notes--Subordination."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the ability of the Company to
incur additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness,
engage in any sale and leaseback transactions, sell stock of subsidiaries,
apply net proceeds from certain asset sales, merge or consolidate with any
other person, sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company, enter into certain
transactions with affiliates, or incur indebtedness that is subordinate in
right of payment to any Senior Indebtedness and senior in right of payment to
the Notes. In addition, the Credit Facilities contain other and more
restrictive covenants and prohibit the Company from prepaying other
indebtedness (including the Notes). As a result of these covenants, the
ability of the Company to respond to changing business and economic conditions
and to secure additional financing, if needed, may be significantly
restricted, and the Company may be prevented from engaging in transactions
that might otherwise be considered beneficial to the Company. See "Description
of Credit Facilities" and "Description of Notes--Certain Covenants."
The Credit Facilities also require the Company to maintain specified
financial ratios and satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. A breach of any of these covenants could result in a default
under the Credit Facilities. Upon the occurrence of an event of default under
the Credit Facilities, the lenders could elect to declare all amounts
outstanding under the Credit Facilities, together with any accrued interest,
to be immediately due and payable. If the Company were unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure that indebtedness. If the Credit Facilities were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient
to repay in full that indebtedness and the other indebtedness of the Company,
including the Notes. Substantially all the assets of the Company are pledged
as security under the Credit Facilities. Such assets may also be pledged in
the future to secure other Indebtedness. See "Description of Credit
Facilities."
17
<PAGE>
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if among other things, the
Company, at the time it incurred its indebtedness in connection with the
offering of the Senior Notes, (i) (a) was or is insolvent or rendered
insolvent by reason of such incurrence or (b) was or is engaged in a business
or transaction for which the assets remaining with the Company constituted
unreasonably small capital or (c) intended or intends to incur, or believed or
believes that it would incur, debts beyond its ability to pay such debts as
they mature, and (ii) the Company received or receives less than reasonably
equivalent value or fair consideration for the incurrence of such
indebtedness, the Notes, and any pledge or other security interest securing
such indebtedness, could be voided, or claims in respect of the Notes could be
subordinated to all other debts of the Company. The voiding or subordination
of any of such pledges or other security interests or of any such indebtedness
could result in an Event of Default (as defined in the Indenture) with respect
to such indebtedness, which could result in acceleration thereof. In addition,
the payment of interest and principal by the Company pursuant to the Notes
could be voided and be required to be returned to the person making such
payment or to a fund for the benefit of the creditors of the Company.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if
(i) the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets at a fair valuation or if the
present fair saleable value of its assets were less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could
not pay its debts as they become due.
GENERAL RISKS OF FOOD INDUSTRY
The industry in which the Company competes is subject to various risks,
including: adverse changes in general economic conditions; adverse changes in
local markets; evolving consumer preferences; nutritional and health-related
concerns; federal, state and local food processing controls; consumer product
liability claims; risks of product tampering; limited shelf life of food
products; and the availability and expense of liability insurance.
RAW MATERIALS
The Company uses large quantities of meat proteins, including beef, pork and
poultry. Historically, market prices for meat proteins have fluctuated in
response to a number of factors, including changes in United States government
farm support programs, changes in international agricultural and trading
policies, weather and other conditions during the growing and harvesting
seasons. While the Business historically has been able to pass through changes
in the price of meat proteins to end users, there can be no assurance that the
Company will be able to pass the effects of future changes to end users.
Furthermore, large, abrupt changes in the price of meat proteins could
adversely affect the Company's operating margins, although such adverse
effects historically have been only temporary. There is no assurance that
significant changes in meat protein prices would not have a material adverse
effect on the Company's business, results of operations and debt service
capabilities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Suppliers."
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent, to a significant extent, on the
continued efforts of J. David Culwell, Richard E. Mitchell, and Randall H.
Collins with whom it has entered into employment agreements containing non-
compete provisions. If any of these people becomes unable to continue in his
present role, or if the Company is unable to attract and retain other skilled
employees, the Company's business could be adversely affected. See
"Management."
18
<PAGE>
COMPETITION
The value added beef processing industry is highly competitive with a large
number of competitors offering similar products. Certain of the Company's
suppliers, such as Cargill, IBP and ConAgra, produce ground beef products that
compete directly with certain of the Company's products and there can be no
assurance that such suppliers will not further expand their presence in the
value added beef processing industry in the future or that any such expansion
will not have a material adverse effect on the Company's business, results of
operations and debt service capabilities. These suppliers and one of the
Company's significant competitors are larger and have greater resources than
the Company. The Company also faces significant price competition from its
competitors and may encounter competition from new market entrants. See
"Business--Competition."
POTENTIAL INABILITY TO FUND CHANGE OF CONTROL OFFER
Upon a Change of Control (as defined herein), each holder will have the
right to require the Company to repurchase all or any part of such holder's
Notes at 101% of the principal amount thereof, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the date of repurchase.
The source of funds for any such repurchase will be the Company's available
cash or cash generated from operating or other sources, including borrowings,
sales of equity or funds provided by a new controlling person. However, there
can be no assurance that sufficient funds will be available at the time of any
Change of Control to make any required repurchases of Notes tendered, or that
restrictions in the Credit Facilities will allow the Company to make such
required repurchases. Notwithstanding these provisions, the Company could
enter into certain transactions, including certain recapitalizations, that
would not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of Notes."
GOVERNMENTAL REGULATION
The Company's production facilities and products are subject to numerous
federal, state and local laws and regulations concerning, among other things,
health and safety matters, food manufacture, product labeling, advertising and
the environment. Compliance with existing federal, state and local laws and
regulations is not expected to have a material adverse effect on the Company's
business, results of operations or debt service capabilities. However, the
Company cannot predict the effect, if any, of laws and regulations that may be
enacted in the future, or of changes in the enforcement of existing laws and
regulations that are subject to extensive regulatory discretion. There can be
no assurance that the Company will not incur expenses or liabilities for
compliance with such laws and regulations in the future, including those
resulting from changes in health laws and regulations, that may have a
material adverse effect on the Company's business, results of operations and
debt service capabilities. See "Business--Governmental Regulation."
As a participant in the USDA Commodity Reprocessing Program for schools, the
Company must adhere to certain rules, regulations and guidelines. Such rules,
regulations and guidelines include financial surety bonding in the state of
operation, product inspection and grading and certain reporting requirements.
Should the Company fail to remain in compliance with such rules, regulations
and guidelines, it could be excluded from the USDA Commodity Reprocessing
Program which could have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See "Business--
Governmental Regulation."
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The operations of the Company and the ownership and operation of real
property by the Company are subject to extensive and changing federal, state
and local environmental laws and regulations. As a result, the Company may be
involved from time to time in administrative and judicial proceedings and
inquiries relating to environmental matters. The Company cannot predict what
environmental legislation or regulations will be enacted in the future, how
existing or future laws or regulations will be administered or interpreted or
what environmental conditions may be found to exist. Compliance with more
stringent laws or regulations, stricter interpretation of existing laws or
discovery of unknown conditions may require additional expenditures by the
19
<PAGE>
Company, some of which may be material. The Company believes it is currently
in material compliance with all known material and applicable environmental
regulations.
Prior to the Acquisition, Tyson incurred monthly surcharges of approximately
$40,000 to the city of Garland, Texas as a result of effluent wastewater
discharges from the Garland, Texas facility. Tyson elected to pay the monthly
surcharges rather than modify the facility to allow its operation without
incurring such surcharges. Since the Acquisition, the Company has continued to
incur the monthly surcharges and the Company currently does not intend to
modify the facility to allow its operation without incurring such surcharges.
Management does not believe that the incurrence of the aforementioned
surcharges will have a material adverse effect on the Company's business,
results of operation and debt service capabilities. There can be no assurance,
however, that such surcharges will not be increased or that the Company will
not be required to modify its operations, which may result in significant
expenses or material capital expenditures. See "Business--Environmental
Matters."
SEASONALITY
Certain of the end uses for some of the Company's products are seasonal.
Demand in many markets is generally higher in the period from July to
September due to higher demand for beef products during the summer months and
increased purchasing by schools in anticipation of the commencement of the
school year. As a result, Company sales and profits are generally higher in
the Company's fourth quarter than in any other quarter during its fiscal year.
In addition, demand in many markets is generally lowest in the period from
January to March, resulting in lower sales and profits in the Company's second
quarter.
IMPORTANCE OF KEY CUSTOMERS
Historically, one of the Company's largest customers has been Sam's Club
("Sam's"), a subsidiary of Wal-Mart Stores, Inc. The Company supplies Sam's
with ground beef patties pursuant to two contracts (the "Sam's Contracts")
which became effective in November 1995. Pursuant to the Sam's Contracts, the
Company agreed to sell and Sam's agreed to purchase an aggregate of 28.0
million pounds of ground beef. As of September 28, 1996, the Company had
delivered approximately 21.7 million pounds of ground beef under the Sam's
Contracts. The Company anticipates it will fulfill its obligations under the
Sam's Contracts by April 1997. During fiscal 1995 and fiscal 1996, the Sam's
Contracts accounted for 14.4% and 13.2% of the Company's sales, respectively.
The Sam's Contracts are fixed price contracts, do not allow the Company to
adjust its prices in response to changing raw material prices or market
conditions and do not contain renewal provisions. Although Sam's has not
informed the Company whether it will enter into a new contract with the
Company, total sales to this customer are likely to be significantly lower in
fiscal 1997 than in fiscal 1996 due to Sam's decision to increase its
purchases from one of the Company's competitors. The Company will attempt to
secure replacement contracts with other customers, but there can be no
assurance that such efforts will be successful or that any contracts secured
will provide the Company with revenues or gross profits comparable to the
Sam's Contracts. See "--Reliance on Sales of Ground Beef."
The Company's second largest customer is Harker's. The Company supplies
Harker's with ground beef and value added products pursuant to a supply
agreement that will remain in effect until 1999 (the "Harker's Contract"). The
Harker's Contract requires Harker's to purchase minimum amounts of the
Company's products. The Harker's Contract provides that amounts charged by the
Company thereunder may be adjusted in response to fluctuations in the
Company's costs. During fiscal 1995 and fiscal 1996, the Harker's Contract
accounted for 12.5% and 12.6% of sales, respectively. At the Acquisition
Closing, Tyson assigned to the Company its rights and obligations related to
the supply of ground beef and value added products pursuant to the Harker's
Contract. Tyson will continue to supply poultry products to Harker's pursuant
to the Harker's Contract. The Company is currently negotiating a replacement
agreement with Harker's to supply ground beef and value added products. There
can be no assurance, however, that any such replacement agreement will be
secured on terms that will provide the Company with revenues or gross profits
comparable to the Harker's Contract.
20
<PAGE>
In addition to Sam's and Harker's, the Company sells a significant amount of
its products to affiliates of Sysco Corp. ("Sysco"). Each local Sysco
affiliate is responsible for its own purchasing decisions. Management believes
that the loss of an individual Sysco affiliate as a customer would not have a
material adverse effect on the Company's business, results of operations or
debt service capabilities. However, there can be no assurance that Sysco will
not elect to employ a system whereby purchasing decisions are centralized.
Should Sysco elect to employ a centralized system, there can be no assurance
that Sysco will continue to purchase the Company's products at historical
volumes, if at all. The loss of all or a significant portion of the Company's
sales to Sysco, regardless of the cause of such loss, would have a material
adverse effect on the Company's business, results of operations and debt
service capabilities. During fiscal 1995 and fiscal 1996, total sales to Sysco
affiliates accounted for 15.2% and 17.8% of sales, respectively.
Sam's, Harker's and affiliates of Sysco collectively accounted for
approximately 42.1% and 43.6% of sales during fiscal 1995 and fiscal 1996,
respectively. The loss of the Sam's Contracts or the Harker's Contract or
reduced sales to affiliates of Sysco without offsetting sales to other
customers could have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See Note 8 of the Notes
to Financial Statements.
RELIANCE ON SALES OF GROUND BEEF
Although the Company's strategy is to maximize sales of higher margin value
added products, the Company has historically relied on sales of lower margin
ground beef products to generate a significant portion of its revenues. The
Company anticipates that such reliance will continue in the future. In recent
years, however, the Company's sales of ground beef have been declining, and it
is expected that one customer that purchased approximately 21.7 million pounds
of ground beef in fiscal 1996 will purchase a significantly lower amount in
fiscal 1997. Any substantial decline in ground beef sales below the fiscal
1996 level, unless replaced by sales of other products, could have a material
adverse effect on the Company's business, results of operations and debt
service capabilities. See "--Importance of Key Customers."
RISKS RELATED TO UNIONIZED EMPLOYEES
The Company's business is labor intensive. The Company's ability to operate
profitably is dependent on its ability to recruit and retain employees while
controlling labor costs. Currently, certain of the Company's employees at the
Garland, Texas facility are represented by the United Food & Commercial
Workers International Union, AFL-CIO, CLC, Local 540 (the "Union"). The
Company and the Union have not entered into a collective bargaining agreement.
The Garland, Texas facility is being operated pursuant to the terms and
conditions specified by the Company at the time of the Acquisition Closing.
The Company is not obligated to enter into the collective bargaining agreement
agreed upon by Tyson and the Union or to continue to operate the Garland,
Texas facility pursuant to the terms of such agreement. Management is
currently negotiating a replacement collective bargaining agreement with the
Union, although there can be no assurance that it will be successful in doing
so. Except for employees at the Garland, Texas facility, none of the Company's
employees are represented by a union. If unionized employees were to engage in
a strike or other work stoppage or if additional employees were to become
unionized, the Company could experience a significant disruption of operations
and higher labor costs, either of which could have a material adverse effect
on the Company's business, results of operations and debt service
capabilities. See "Business--Employees."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Senior Notes are currently owned by a relatively small number of
beneficial owners. The Senior Notes have not been registered under the
Securities Act and will continue to be subject to restrictions on
transferability to the extent that they are not exchanged for the Exchange
Notes. The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Exchange Notes will generally be
permitted to be resold or otherwise transferred by holders who are not
affiliates of the Company without compliance with
21
<PAGE>
the registration requirements under the Securities Act, the Company does not
intend to list the Exchange Notes on any national securities exchange or for
trading on Nasdaq. The Senior Notes are traded through NASD's PORTAL trading
system under the Symbol "GQTFNP06." NationsBanc Capital Markets, Inc. has
advised the Company that it has made a market in the Senior Notes; however, it
is not obligated to do so and any market-making activity with respect to the
Senior Notes and the Exchange Notes may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act. Accordingly, there is no
assurance that an active public or other market will develop or continue for
the Exchange Notes, and it is expected that the market, if any, that develops
for the Exchange Notes will be similar to the limited market that currently
exists for the Senior Notes.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Senior Notes pursuant to
the Exchange Offer will be made only after timely receipt by the Exchange
Agent of properly completed and duly executed Letters of Transmittal and all
other required documents from holders eligible to participate in the Exchange
Offer. Therefore, holders of the Senior Notes desiring to tender such Senior
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects
or irregularities with respect to the tenders of Senior Notes for exchange.
Senior Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof and, upon consummation of the
Exchange Offer, certain of the registration rights under the Registration
Rights Agreement will terminate. In addition, any holder of Senior Notes who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale which will not be satisfied by delivery of this Prospectus. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Senior Notes, where such Senior Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a copy of this Prospectus in connection with
any resale of such Exchange Notes. To the extent that Senior Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Senior Notes could be adversely affected. See
"Explanatory Note;" "Prospectus Summary--The Exchange Offer;" and "The
Exchange Offer."
RESTRICTIONS ON TRANSFER OF SENIOR NOTES
Except for persons that are ineligible to participate in the Exchange Offer
under positions taken by the Commission Staff, holders of Senior Notes who do
not tender their Senior Notes in the Exchange Offer generally will not have
any further registration rights under the Registration Rights Agreement or
otherwise. Accordingly, any holder of Senior Notes that does not exchange that
holder's Senior Notes for Exchange Notes will continue to hold unregistered
Senior Notes and will be entitled to all the rights and limitations applicable
thereto under the Indenture and the Securities Act, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer. The failure to participate in
the Exchange Offer may adversely affect the ability of eligible holders to
resell unregistered Senior Notes in the future.
LACK OF OPERATING HISTORY
Prior to the Acquisition, the Business was operated as a division of Tyson
and relied upon Tyson for many administrative and logistical functions,
including computer, accounting, treasury and human resources support,
warehouse space and distribution services. There can be no assurance that the
Company can successfully develop and implement infrastructure necessary to
address these and other matters related to the operation of the Business as a
stand-alone entity. In addition, the development and implementation of such
infrastructure could divert management's attention from other concerns, which
could have a material adverse effect on the Company's business, results of
operations and debt service capabilities. Upon the consummation of the
Transactions, the Company entered into the Transition Services Agreement,
pursuant to which Tyson has agreed to provide certain
22
<PAGE>
services with respect to the operation of the Business for up to twelve months
following the Acquisition. Such services will be provided at no cost to the
Company for the first six months. Thereafter, the Company will pay Tyson an
agreed upon rate. Subsequent to the Acquisition Closing, the Company entered
into new broker agreements. The Company expects to enter into new warehouse
agreements in the first six months of fiscal 1997. Although the Company
believes it will be able to enter into such agreements on substantially the
same terms as those currently provided to Tyson, there can be no assurance
that it will be able to do so. See "The Acquisition, Financing and Related
Transactions" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
CONTROL BY INVESTORS
All of the outstanding shares of the Company's $.01 par value common stock
("Common Stock") are beneficially owned by GHC. GHC has no business other than
holding the stock of the Company, which is the sole source of GHC's financial
resources. GHC is controlled by CGW Southeast Partners, III, L.P. ("CGW"),
which beneficially owns shares representing 52.9% of the voting interest in
GHC on a fully diluted basis and which has the right to designate all of the
directors of GHC. Accordingly, CGW, through its control of GHC, controls the
Company and has the power to elect all of its directors, appoint new
management and approve any action requiring the approval of the holders of the
Company's Common Stock, including adopting amendments to the Company's
Certificate of Incorporation and approving mergers or sales of substantially
all of the Company's assets. The directors elected by GHC have the authority
to make decisions affecting the capital structure of the Company, including
the issuance of additional capital stock, the implementation of stock
repurchase programs and the declaration of dividends. See "Management;"
"Certain Transactions" and "Principal Stockholder."
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. The net proceeds to the Company from the
sale of the Senior Notes on November 25, 1996 were approximately $94.5 million
(after deducting estimated expenses and commissions), all of which was applied
to the purchase price for the Acquisition and to pay additional related fees
and expenses. See "Prospectus Summary--The Acquisition, Financing and Related
Transactions;" "Capitalization;" Management's Discussion and Analysis of
Financial Condition and Results of Operations."
23
<PAGE>
THE ACQUISITION, FINANCING AND RELATED TRANSACTIONS
THE ACQUISITION
General
On November 25, 1996, pursuant to the Asset Purchase Agreement (the "Asset
Purchase Agreement") with Tyson and certain Tyson affiliated entities, the
Company purchased substantially all of the assets of the Business. The Company
did not assume any liabilities or obligations of Tyson relating to the
Business, other than future obligations under executory contracts of the
Business, such as agreements to purchase inventory or to supply products,
accrued vacation pay and certain property tax obligations.
Purchase Price
The aggregate purchase price paid by the Company for the assets was $183.5
million.
Indemnification
Tyson is required to indemnify, defend and hold harmless the Company and
certain affiliated persons, against and for any and all Losses (as defined in
the Asset Purchase Agreement) resulting from, based upon or arising out of,
among other things: (i) breaches of representations, warranties or covenants
of Tyson contained in or made pursuant to the Asset Purchase Agreement; (ii)
any liability or obligation of Tyson arising out of or relating to the
operation of the Business at any time prior to the Acquisition Closing, other
than the liabilities assumed by the Company. Tyson's obligation to provide
such indemnification with respect to the liabilities and obligations relating
to the Business prior to the Acquisition Closing is not limited by any time
period or by any minimum or maximum dollar amount. With respect to
indemnification for a breach of any of the representations or warranties made
by Tyson pursuant to the Asset Purchase Agreement, Tyson is obligated to
provide such indemnity generally for a period of two years following the
Acquisition Closing. Tyson is not obligated to provide such indemnity until
the total of all Losses with respect thereto exceeds $1,000,000, and Tyson
will only be liable for the amount by which such Losses exceed $500,000.
Transition Services
Pursuant to the Transition Services Agreement, which was executed and
delivered by the parties at the Acquisition Closing, Tyson agreed to provide
certain services to the Company with respect to the operation of the Business,
and to assist the Company in transferring the Business from Tyson to the
Company. Such services include, among other things, computer processing and
related services, order entry, transportation and storage scheduling services,
the Company's use of Tyson's product development and research test facilities,
the Company's limited use of the "Tyson" name, and certain payroll and
accounting administrative functions. Tyson will provide the transition
services to the Company for a period of up to twelve months following the
Acquisition Closing. For the first six months, Tyson will provide the services
at no additional cost to the Company as part of its consideration for the
purchase price paid by the Company. Thereafter, the Company will pay Tyson an
agreed upon rate for each service. It is the Company's current intention to
begin providing such services for itself within six months following the
Acquisition Closing or as soon thereafter as practicable.
Non-Competition Agreement
The Company and Tyson have agreed, subject to certain exceptions and
limitations, not to compete with each other in the production and/or sale of
beef and pork products, in the case of Tyson, or certain poultry products, in
the case of the Company, for a period of two years from the Acquisition
Closing.
24
<PAGE>
FINANCING OF THE ACQUISITION
The purchase price for the Acquisition, approximately $183.5 million,
together with an estimated $9.5 million of related fees and expenses (of which
$900,000 has been allocated to the Equity Private Placement (as defined
herein)), was funded through (i) a $45.0 million equity contribution from GHC
funded by a private equity placement (the "Equity Contribution" and the
"Equity Private Placement," respectively) (ii) the net proceeds of the
offering of the Senior Notes (the "Initial Offering") and (iii) borrowings
under the Credit Facilities. Of the $45.0 million of GHC capital stock sold
through the Equity Private Placement, CGW purchased $25.0 million of Class A
common stock (voting), NationsBanc Investment Corp. ("NBIC"), an affiliate of
the Initial Purchaser, purchased $9.0 million of Class B common stock (non-
voting) and Mellon Bank, N.A., as trustee of First Plaza Group Trust, a
General Motors pension plan ("FPGT") purchased $11.0 million of Class A common
stock (voting). GHC made the Equity Contribution by contributing such funds to
the Company at the Acquisition Closing.
The following table sets forth the estimated amounts of sources and uses of
the funds for the Acquisition in connection with the Financings.
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
SOURCES OF FUNDS
The Credit Facilities(1).............................. $ 48,031
The Initial Offering.................................. 100,000
Equity Contribution(2)................................ 45,000
--------
Total Sources of Funds.............................. $193,031
========
USES OF FUNDS
The Acquisition....................................... $183,531
Fees and Transaction Expenses......................... 9,500
--------
Total Uses of Funds................................. $193,031
========
</TABLE>
- --------
(1) Consists of the $40.0 million Term Loan Facility and an $8.0 million
drawdown under the $30.0 million Revolving Credit Facility. Immediately
after consummation of the Acquisition and the Financing, approximately
$22.0 million was available to the Company for borrowing under the
Revolving Credit Facility. As of December 28, 1996, the Company had
borrowed approximately an additional $1.0 million of Senior Indebtedness
under the Revolving Credit Facility to finance working capital needs. In
addition, the Company expects to draw down an additional $11.0 million
under the Revolving Credit Facility during the first quarter of calendar
1997 to finance working capital needs. See "Unaudited Pro Forma Financial
Information;" "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources;" and
"Description of Credit Facilities."
(2) Consists of a cash equity contribution by GHC to the Company.
25
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 28, 1996 as adjusted on a pro forma basis to reflect the Acquisition
and the Financing, including the Initial Offering, and the application of the
net proceeds therefrom. This table should be read in conjunction with
"Unaudited Pro Forma Financial Information" and the Financial Statements and
the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 28, 1996
----------------------
THE COMPANY
PRO FORMA
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Long-term debt (including current portion):
Revolving Credit Facility(1)........................ $ 8,031
Term Loan Facility.................................. 40,000
Notes............................................... 100,000
--------
Total long-term debt.................................. 148,031
Stockholder's equity.................................. 45,000
--------
Total capitalization.................................. $193,031
========
</TABLE>
- --------
(1) As of December 28, 1996, the Company had borrowed approximately an
additional $1.0 million of Senior Indebtedness under the Revolving Credit
Facility to finance working capital needs. In addition, the Company
expects to draw down an additional $11.0 million under the Revolving
Credit Facility during the first quarter of calendar 1997 to finance
working capital needs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Credit Facilities."
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Acquisition has been accounted for by the purchase method of accounting
and, accordingly, the purchase price of $183.5 million plus approximately $9.5
million of related fees and expenses (of which $900,000 has been allocated to
the Equity Private Placement), has been allocated on a preliminary basis to
the assets acquired and liabilities assumed based upon their estimated fair
value at the Acquisition Closing. The excess of such purchase price over the
estimated fair values at the Acquisition Closing has been preliminarily
recognized as goodwill, which will be amortized over 30 years.
The unaudited pro forma balance sheet is based on the historical financial
statements for the Business, as the Company's predecessor, and the assumptions
and adjustments described in the accompanying notes. The unaudited pro forma
income statement does not purport to represent what the Company's results of
operations actually would have been if the events described above had occurred
as of the date indicated or what results will be for any future periods. The
unaudited pro forma financial information is based upon assumptions that the
Company believes are reasonable and should be read in conjunction with the
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
The following unaudited pro forma income statement for the year ended
September 28, 1996 gives effect to the completion of the Acquisition, the
application of the net proceeds of the Financing and the events described in
the notes below, as though they had occurred on October 1, 1995. The unaudited
pro forma balance sheet of the Company at September 28, 1996 was prepared as
if such transactions had occurred on such date.
26
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
UNAUDITED PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 28, 1996
-----------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Sales....................................... $232,761 $ (8,527)(a) $226,394
2,160 (b)
Cost of goods sold.......................... 189,559 (9,611)(a) 178,693
1,800 (b)
605 (c)
(3,660)(d)
-------- -------- --------
Gross profit.............................. 43,202 4,499 47,701
Operating expenses:
Selling..................................... 22,452 (3,782)(e) 18,670
General and administrative.................. 3,962 (430)(a) 3,775
(3,532)(f)
3,415 (g)
360 (h)
Amortization................................ 1,624 500 (i) 2,782
658 (j)
-------- -------- --------
Total operating expenses.................. 28,038 (2,811) 25,227
-------- -------- --------
Operating income............................ 15,164 7,310 22,474
Interest expense............................ -- 17,428 (k) 17,428
Other expenses.............................. 796 -- 796
-------- -------- --------
Earnings before taxes on income............. 14,368 (10,118) 4,250
Provision for income taxes.................. 6,205 (4,547)(l) 1,658
-------- -------- --------
Net income................................ $ 8,163 $ (5,571) $ 2,592
======== ======== ========
OPERATING AND OTHER DATA:
EBITDA(m)................................... $ 24,080 $ 8,573 $ 32,653
Depreciation and amortization............... 8,916 1,263 10,179
Capital expenditures........................ 735 -- 735
Cash interest expense....................... -- 16,257 16,257
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
(a) Represents the elimination of operating results for the discontinuation of
the Company's frozen portion controlled steak business.
(b) Represents the increase in sales and cost of sales resulting from beef
sales to Tyson which will be executed at a markup of approximately 20% on
the cost of the products commencing upon the consummation of the
Acquisition and which are not reflected in the historical financial
statements of the Business.
(c) To record the increase in annual depreciation expense relating to the
increase in fair market value of property, plant and equipment acquired.
(d) The Company has prepared an analysis of redundant positions and has
estimated the plant personnel that will not be employed by the Company
following the Acquisition Closing. The adjustment represents the
elimination of approximately 106 plant personnel.
(e) Certain indirect selling and administrative expenses incurred at Tyson
which are not actually incurred for programs specific to the Business have
been allocated in the historical financial statements of the Business
primarily based on net sales. The pro forma adjustments described herein
and in note (f) reflect the removal of the allocated costs from the
historical financial statements. This adjustment represents the
elimination of certain indirect selling expenses allocated from Tyson and
included in the historical financial statements.
(f) Represents the elimination of the corporate overhead expenses allocated
from Tyson and included in the historical financial statements.
(g) Represents the addition of the estimated actual costs expected to be
incurred, which are based on estimated personnel head counts and estimated
expenses necessary to maintain administration, sales and marketing.
(h) Represents amounts to be paid by the Company to the General Partner (as
defined herein) for annual consulting services to be rendered to the
Company. The General Partner may also receive additional compensation not
reflected in the pro forma income statement (not to exceed $500,000
annually) at the end of the Company's fiscal year, based on the overall
performance of the Company if approved by the Board of Directors of the
Company.
(i) To reflect the amortization of the estimated value assigned to the
Transition Services Agreement between Tyson and the Business.
(j) To reflect the increase in amortization expense and the excess of the
investment over estimated fair market value of the net assets acquired
under the terms of the Asset Purchase Agreement as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Total purchase price................................ $183,531
Less: Inventory..................................... 30,000
Property, plant and equipment..................... 86,488
Other............................................. 500
Plus: Liabilities assumed........................... 1,026
Estimated fees and expenses related to the Equity
Private Placement................................ 900
--------
Excess of investment over estimated fair market
value of the net assets acquired................... $ 68,469
========
</TABLE>
Pro forma amortization expense has been calculated based on the excess of
the investment over estimated fair market value of the net assets acquired
being amortized over a 30 year period.
(k) Pro forma adjustment to record interest expense for additional interest
costs and amortization of debt issuance cost related to the Revolving
Credit Facility, the Term Loan Facility and the Notes.
28
<PAGE>
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Interest expense on the Revolving Credit Facility... $ 1,702
Interest expense on Term Loan Facility.............. 3,055
Interest expense on the Notes....................... 11,500
Amortization of Debt Issuance Cost.................. 1,171
-------
Total Interest Expense.............................. $17,428
=======
</TABLE>
Interest on the Revolving Credit Facility and the Term Loan Facility is
based on LIBOR plus 2.5% (an average of 8% for the year ended September 28,
1996). Interest on the Notes is based on the rate of 11.5% per annum. An
increase of .125% in the interest rate on the Revolving Credit Facility and
the Term Loan Facility would have caused interest expense to increase by
approximately $73,000. Pro forma interest expense on the Revolving Credit
Facility has been calculated based on the $8.0 million that was drawn down
at the Acquisition Closing plus approximately an additional $12.0 million
that the Company expects to borrow after the Acquisition Closing through
the first quarter of calendar 1997 to finance working capital needs.
(l) Reflects adjustment necessary to state estimated income tax expense on pro
forma earnings before taxes on income at an effective rate of 39%.
(m) EBITDA represents the sum of income before interest expense and income
taxes, plus depreciation, amortization and other expenses which consist of
losses on dispositions of property, plant and equipment. EBITDA should not
be construed as a substitute for operating income, net income or cash flow
from operating activities for the purpose of analyzing the Company's
operating performance, financial position and cash flows. The Company has
presented EBITDA because it is commonly used by investors to analyze and
compare companies on the basis of operating performance and to determine a
company's ability to service debt.
29
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 28, 1996
-----------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS:
Current Assets
Cash...................................... $ 9 $ (9)(a) $ --
Inventories............................... 31,325 (1,325) 30,000
-------- -------- --------
Total current assets.................... 31,334 (1,334) 30,000
Net property, plant and equipment........... 46,456 (3,497)(a) 86,488
43,529 (b)
Intangible and other assets
Debt issuance costs....................... -- 8,600 (c) 8,600
Excess of investment over net assets
acquired................................. 59,508 8,961 (d) 68,469
Other..................................... -- 500 (e) 500
-------- -------- --------
Total intangibles and other assets...... 59,508 18,061 77,569
-------- -------- --------
Total assets.............................. $137,298 $ 56,759 $194,057
======== ======== ========
LIABILITIES
Accrued liabilities......................... $ -- $ 1,026 (f) $ 1,026
Current portion of long-term-debt........... -- 5,000 (g) 5,000
-------- -------- --------
Total current liabilities............... -- 6,026 6,026
Long term debt.............................. -- 143,031 (g) 143,031
Noncurrent deferred income taxes............ 6,375 (6,375)(a) --
Investment and advances by parent........... 130,923 (130,923)(a) --
-------- -------- --------
Total liabilities....................... 137,298 11,759 149,057
STOCKHOLDER'S EQUITY
Common stock, par value $0.01 per share;
2,000 shares authorized; 1,000 shares
issued and outstanding..................... -- 1 (h) 1
Additional paid in capital.................. -- 44,999 (h) 44,999
-------- -------- --------
Total stockholder's equity.............. -- 45,000 45,000
-------- -------- --------
Total liabilities and stockholder's
equity................................... $137,298 $ 56,759 $194,057
======== ======== ========
</TABLE>
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) To eliminate certain assets and liabilities that were not purchased or
assumed, respectively, under the terms of the Asset Purchase Agreement.
(b) To reflect net property, plant and equipment acquired in the Acquisition
at estimated fair market value.
(c) To reflect the payment and capitalization of debt issuance costs related
to the Revolving Credit Facility, Term Loan Facility and the Notes.
(d) To record the increase in the excess of the investment over estimated fair
market value of the net assets acquired.
(e) To reflect the estimated value of the Transition Services Agreement
between Tyson and the Business. This amount will be amortized as expense
by the Business as services are used pursuant to the Transition Services
Agreement during the first six months following the Acquisition.
(f) To record liabilities assumed in connection with the Acquisition (accrued
vacation earned of $208,000 and accrued property tax of $818,000.
(g) To reflect new current and long-term debt as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Notes............................................................ $100,000
Term Loan Facility............................................... 40,000
Revolving Credit Facility........................................ 8,031
--------
148,031
Less current portion............................................. 5,000
--------
$143,031
========
</TABLE>
Subsequent to the Acquisition Closing, through the first quarter of calendar
1997 the Company expects to borrow approximately an additional $12.0
million under the Revolving Credit Facility to finance working capital
needs.
(h) To reflect proceeds from the Equity Contribution.
31
<PAGE>
SELECTED FINANCIAL DATA
The following table presents (i) selected historical financial information
of the Business, as of the dates and for the periods indicated, and (ii)
summary pro forma financial information of the Company, as of the date and for
the period indicated, adjusted for the completion of the Acquisition, the
application of the net proceeds of the Financing and the events described in
"Unaudited Pro Forma Financial Information." The historical financial
information for each of the three years in the period ended September 28, 1996
has been derived from the Business' financial statements, which have been
audited by Ernst & Young LLP. The historical financial information for each of
the two years in the period ended October 2, 1993 has been derived from
unaudited financial statements and, in the opinion of management, includes all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of results of operations for these periods. The summary pro forma
information does not purport to represent what the Company's results of
operations would have been if such events had occurred at the dates indicated,
nor does such information purport to project the results of the Company for
any future period. The summary financial information should be read in
conjunction with "Unaudited Pro Forma Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THE COMPANY
PRO FORMA
THE BUSINESS HISTORICAL FISCAL YEAR
FISCAL YEAR ENDED ENDED
------------------------------------------------------------ -------------
OCTOBER 3, OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 28,
1992 1993 1994 1995 1996 1996
---------- ---------- ---------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $295,835 $294,468 $331,969 $304,474 $232,761 $226,394
Cost of goods sold...... 252,544 246,630 278,600 250,787 189,559 178,693
-------- -------- -------- -------- -------- --------
Gross profit.......... 43,291 47,838 53,369 53,687 43,202 47,701
Selling................. 18,581 24,661 27,513 25,128 22,452 18,670
General and administra-
tive................... 6,485 6,107 6,367 6,386 3,962 3,775
Amortization............ 1,239 1,239 1,528 1,624 1,624 2,782
Plant relocation........ -- -- -- 1,036 -- --
-------- -------- -------- -------- -------- --------
Total operating ex-
penses............... 26,305 32,007 35,408 34,174 28,038 25,227
-------- -------- -------- -------- -------- --------
Operating income........ 16,986 15,831 17,961 19,513 15,164 22,474
Interest expense........ -- -- -- -- -- 17,428
Other expenses.......... -- -- 4 678 796 796
-------- -------- -------- -------- -------- --------
Earnings before taxes on
income................. 16,986 15,831 17,957 18,835 14,368 4,250
Provision for income
taxes.................. 7,134 6,649 7,508 7,931 6,205 1,658
-------- -------- -------- -------- -------- --------
Net income............ $ 9,852 $ 9,182 $ 10,449 $ 10,904 $ 8,163 $ 2,592
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1)............... $ 26,118 $ 24,909 $ 28,579 $ 29,877 $ 24,080 $ 32,653
Capital expenditures.... 4,600 3,300 6,580 2,792 735 735
Cost of goods sold as a
% of sales............. 85.4% 83.8% 83.9% 82.4% 81.4% 78.9%
Selling and general and
administrative expenses
as a % of sales........ 8.5% 10.4% 10.2% 10.4% 11.3% 9.9%
EBITDA as a % of total
sales.................. 8.8% 8.5% 8.6% 9.8% 10.3% 14.4%
Ratio of Pro Forma
EBITDA to pro forma
fixed charges(2)(3).... 1.9x
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
AT SEPTEMBER 28, 1996
----------------------
THE THE
BUSINESS COMPANY
HISTORICAL PRO FORMA
----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET AND OTHER DATA:
Working capital......................................... $ 31,334 $ 23,974
Total assets............................................ 137,298 194,057
Total liabilities....................................... 137,298 149,057
Total liabilities and stockholders' equity.............. 137,298 194,057
</TABLE>
- --------
(1) EBITDA represents the sum of income before interest expense and provision
for income taxes, plus depreciation, amortization and other expenses,
which consist of losses on dispositions of property, plant and equipment.
EBITDA should not be construed as a substitute for operating income, net
income, or cash flow from operating activities for purposes of analyzing
the Company's operating performance, financial position and cash flows.
The Company has presented EBITDA because it is commonly used by investors
to analyze and compare companies on the basis of operating performance and
to determine a company's ability to service debt.
(2) The historical financial statements of the Business do not reflect any
interest expense as Tyson did not allocate any such expense to the
Business. The only fixed charge that the Business incurred in fiscal 1996
was $15,000, which represents the estimated interest component of rent
expense, resulting in a ratio of earnings to fixed charges of 958.9x.
Therefore, the ratio of Pro Forma EBITDA to pro forma fixed charges is
shown.
(3) The historical financial statements of the Business for the fiscal year
ended September 28, 1996 include various non-recurring costs incurred in
connection with problems with the Reconfiguration, which have since been
resolved. These costs consisted of increased production costs resulting
from inefficient yields, increased labor and overhead conversion costs,
including the costs of operating a temporary production facility, as well
as certain customer discounts and other non-recurring expenses. The effect
of these costs has not been eliminated in the Pro Forma Income Statement
and Pro Forma EBITDA, but has been eliminated in determining Adjusted Pro
Forma EBITDA as set forth below.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 28, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro Forma EBITDA.................................... $32,653
Adjustments described above......................... 4,315
-------
Adjusted Pro Forma EBITDA........................... $36,968
=======
Ratio of Adjusted Pro Forma EBITDA to pro forma
fixed charges...................................... 2.1x
Ratio of total debt to Adjusted Pro Forma EBITDA.... 4.0x
Ratio of Adjusted Pro Forma EBITDA to pro forma cash
interest expense................................... 2.3x
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In the Acquisition, the Company acquired the Business from Tyson. Prior to
the Acquisition, (i) Gorges/Quik-to-Fix Foods, Inc. had no significant assets
or liabilities and had not conducted any business, other than in connection
with the Transactions, and (ii) the Business was not operated by Tyson as a
distinct legal entity.
The following discussion should be read in conjunction with the Financial
Statements and the Notes thereto, and the Unaudited Pro Forma Financial
Statements and the Notes thereto of the Company, included elsewhere in this
Prospectus.
RESULTS OF OPERATIONS
The following tables set forth, for the fiscal periods indicated, (i) sales
and categories of expenses in dollars and as a percentage of sales and (ii)
production volumes.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
-------------- -------------- --------------
(DOLLARS AND POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales......................... $331,969 100.0% $304,474 100.0% $232,761 100.0%
Cost of goods sold............ 278,600 83.9 250,787 82.4 189,559 81.4
-------- ----- -------- ----- -------- -----
Gross profit.................. 53,369 16.1 53,687 17.6 43,202 18.6
Operating expenses............ 35,408 10.7 34,174 11.2 28,038 12.0
-------- ----- -------- ----- -------- -----
Operating income.............. 17,961 5.4 19,513 6.4 15,164 6.5
Other expenses................ 4 0.0 678 0.2 796 0.3
-------- ----- -------- ----- -------- -----
Earnings before taxes on
income....................... 17,957 5.4 18,835 6.2 14,368 6.2
Provision for income taxes.... 7,508 2.3 7,931 2.6 6,205 2.7
-------- ----- -------- ----- -------- -----
Net income.................... $ 10,449 3.1% $ 10,904 3.6% $ 8,163 3.5%
======== ===== ======== ===== ======== =====
Volumes (in pounds)........... 224,809 215,289 173,821
</TABLE>
Overview
The Company has experienced an overall decrease in net sales during the past
two years primarily due to reduced sales volumes, and to a lesser extent,
decreases in average selling prices. The decreases in average selling prices
are primarily due to lower prices for two key raw materials, 90% lean beef
trimmings and rib lifter meat, which the Company has passed on, in part, to
customers. The lower sales volumes are principally attributable to reduced
sales of ground beef, primarily related to the completion of a temporary
contract with a national fast food chain, and lower volumes for frozen portion
steaks, a business which the Company discontinued in fiscal 1996. Sales
volumes for the Company's value added products have generally increased during
the two year period due to overall market growth for these products and the
introduction of new products. These increases in sales volumes for value added
products were partially offset by the loss of some business with several
national accounts.
Gross profit declined in fiscal 1996 relative to fiscal 1995 and was
unchanged in fiscal 1995 relative to fiscal 1994. The decline in gross profit
in fiscal 1996 is attributable primarily to the lower sales volumes described
above. However, as a percentage of sales, gross profits improved from 16.1% in
fiscal 1994 to 17.6% in fiscal 1995 and to 18.6% in fiscal 1996. The
improvement in gross profit as a percentage of sales is attributable to the
declines in the raw materials costs and changes in product mix, with the
Company's sales of lower margin ground beef and portion steaks decreasing. The
increase in gross profit as a percentage of sales was partially offset by
34
<PAGE>
several factors, including inefficiencies and costs related to the
Reconfiguration and losses incurred in disposing of portion steak inventory in
connection with the discontinuation of that product.
In late fiscal 1995 and the first half of fiscal 1996, the Company relocated
the production lines for several products in order to take advantage of lower
labor costs and to segregate production between cooked and uncooked products
to assure high standards for food safety preparation. The Company had
significant problems related to the Reconfiguration, including product quality
and order fulfillment issues. The Company estimates that non-recurring costs
totaling approximately $4.3 million were incurred in connection with the
Reconfiguration, which adversely affected gross profit and operating income in
fiscal 1996.
The Company decided to exit the frozen portion steak business in March 1996
due to increased consumer preference for fresh cut steaks resulting in a
decrease in sales of $24.7 million. This change in the marketplace had
resulted in a steady deterioration in the Company's sales volumes for frozen
portion steaks. Subsequent to the decision to exit this business, the Company
was forced to sell inventory at significant discounts, with this product
generating negative gross profit of approximately $1.1 million and an
operating loss of approximately $1.5 million in fiscal 1996. The portion steak
business had operating income of approximately $1.0 million in fiscal 1995 and
approximately $3.7 million in fiscal 1994.
The Company's operating income increased in fiscal 1995 due primarily to the
positive impact of the lower raw material prices. In fiscal 1996, operating
income decreased approximately 22% from fiscal 1995 due primarily to lower
gross profit partially offset by a reduction in indirect selling expenses and
general and administrative expenses allocated by Tyson.
Sales
The following table outlines sales by product category for fiscal 1994,
fiscal 1995 and fiscal 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
(DOLLARS AND POUNDS IN THOUSANDS,
EXCEPT PER POUND AMOUNTS)
<S> <C> <C> <C>
DOLLARS
Value added products..................... $138,745 $154,124 $149,564
Ground beef.............................. 150,740 117,118 74,670
Frozen portion steaks.................... 42,484 33,232 8,527
-------- -------- --------
$331,969 $304,474 $232,761
======== ======== ========
VOLUMES (IN POUNDS)
Value added products..................... 80,493 95,113 93,631
Ground beef.............................. 132,545 111,429 77,604
Frozen portion steaks.................... 11,771 8,747 2,586
-------- -------- --------
224,809 215,289 173,821
======== ======== ========
SALES PER POUND
Value added products..................... $ 1.72 $ 1.62 $ 1.60
Ground beef.............................. 1.14 1.05 0.96
Frozen portion steaks.................... 3.61 3.80 3.30
-------- -------- --------
Overall average.......................... $ 1.48 $ 1.41 $ 1.34
======== ======== ========
</TABLE>
Value Added Products. Sales of value added products decreased approximately
3% in fiscal 1996 after increasing approximately 11% in fiscal 1995. The
decrease in fiscal 1996 was due to a slight decrease in both sales volumes and
selling prices. Sales volumes decreased due to the loss of some business with
national account
35
<PAGE>
customers and the elimination of certain less profitable products, partially
offset by sales of newly introduced products. Additionally, fiscal 1996 sales
were adversely affected by order fulfillment and quality problems resulting
from the Reconfiguration. Sales volumes in fiscal 1995 increased due to growth
in the market for certain of the Company's products, such as country fried
steak and fully cooked charbroiled patties, and due to the inclusion of
Gorges, Inc.'s products for a full year in fiscal 1995 as compared to only
nine months in fiscal 1994. Selling prices for value added products were
slightly lower in both fiscal 1996 and fiscal 1995 primarily due to lower
prices for two key raw materials, 90% lean beef trimmings and rib lifter meat.
Additionally, with the acquisition of Gorges, Inc. the Company entered the
commodity reprocessing market whereby the Company receives meat from the
federal government which is then processed and sold to school districts. The
Company does not purchase the meat used in commodity reprocessing and only
charges the school system customers for the conversion costs, plus related
margin, incurred during the reprocessing.
Ground Beef. Ground beef sales decreased 36% in fiscal 1996 versus fiscal
1995 and 22% in fiscal 1995 versus fiscal 1994 due to decreases in sales
volumes and average selling prices. A major reason for the decrease in sales
volumes in fiscal 1996 was the completion in late fiscal 1995 of a temporary
contract with a national fast food chain related to a product promotion by the
chain resulting in a decrease in sales of $21.2 million. The Company's sales
volumes with this customer were approximately 34.4 million pounds in fiscal
1994, 21.2 million pounds in fiscal 1995 and 0.5 million pounds in fiscal
1996. This loss was partially offset in fiscal 1996 by increases in ground
beef sales to a national club store, with sales volumes to this customer
increasing to approximately 21.0 million pounds from approximately 16.2 pounds
in fiscal 1995. Sales volumes with this customer were approximately 23.0
million pounds in fiscal 1994. Although the Company will continue to fulfill
its present commitments to this customer in fiscal 1997, total sales to this
customer are likely to be significantly lower in fiscal 1997 than in fiscal
1996 due to the customer's decision to increase its purchases from one of the
Company's competitors. Average selling prices per pound decreased in fiscal
1996 and fiscal 1995 primarily due to the decreases in raw material costs. The
Company's ground beef contracts with its national account customers are
generally based on the market price of the raw materials used in manufacturing
the product and, therefore, changes in the costs of raw materials are
generally passed along to customers.
Gross Profit
The following table outlines gross profit by product category for fiscal
1994, fiscal 1995 and fiscal 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER POUND AMOUNTS)
<S> <C> <C> <C>
DOLLARS
Value added products.... $ 34,853 $ 38,971 $ 37,543
Ground beef............. 11,783 11,153 6,743
Frozen portion steaks... 6,733 3,563 (1,084)
---------------- ---------------- ----------------
$ 53,369 $ 53,687 $ 43,202
================ ================ ================
PERCENTAGE OF SALES
Value added products.... 25.1% 25.3% 25.1%
Ground beef............. 7.8 9.5 9.0
Frozen portion steaks... 15.8 10.7 (12.7)
---------------- ---------------- ----------------
Overall gross profit
percentage............. 16.1% 17.6% 18.6%
================ ================ ================
PER POUND
Value added products.... $ 0.43 $ 0.41 $ 0.40
Ground beef............. 0.09 0.10 0.09
Frozen portion steaks... 0.57 0.41 (0.42)
---------------- ---------------- ----------------
Overall gross profit per
pound.................. $ 0.24 $ 0.25 $ 0.25
================ ================ ================
</TABLE>
36
<PAGE>
Value Added Products. Gross profit from value added products decreased 4% in
fiscal 1996 from fiscal 1995, after increasing approximately 12% from fiscal
1994. As a percentage of sales, gross profit remained relatively constant for
all three years at approximately 25%, but decreased slightly on a per pound
basis in each of the years. The decrease in gross profit in fiscal 1996 was
due primarily to the decrease in sales volumes and non-recurring costs
incurred in connection with the order fulfillment and quality problems related
to the Reconfiguration. These decreases were partially offset by the decreases
in raw material costs and the favorable effects of a higher margin sales mix.
The non-recurring costs related to the Reconfiguration were approximately $4.3
million, the absence of which would have increased gross profit as a
percentage of sales to approximately 27.5%.
Gross profit increased in fiscal 1995 due primarily to higher sales volumes.
Lower selling prices were effectively offset by the lower costs of raw
materials in fiscal 1995.
Ground Beef. Gross profit from ground beef sales fell approximately 40% in
fiscal 1996 compared to fiscal 1995, after being flat relative to fiscal 1994.
The decrease in fiscal 1996 was primarily due to the reduction in sales
volumes discussed above. Additionally, gross profit as a percentage of sales
and gross profit per pound fell to 9.0% and $0.09 per pound, respectively, in
fiscal 1996 from 9.5% and $0.10, respectively, in fiscal 1995. The decrease in
volumes resulted in reduced plant utilization and increased the conversion
costs per pound for ground beef in fiscal 1996. Meat costs continued to
decrease in fiscal 1996; however, the Company passed along the majority of the
benefit resulting from the lower meat prices due to the formula based pricing
contained in many of the sales contracts with the Company's national account
customers. In fiscal 1995, the Company's gross profit as a percentage of sales
and gross profit per pound from the ground beef business increased to 9.5% and
$0.10 per pound, respectively, from 7.8% and $0.09 per pound, respectively, in
fiscal 1994. These improvements were generally attributable to a reduction in
the average cost of ground beef sold of approximately $0.10 per pound. This
decrease was due primarily to lower costs for 90% lean beef trimmings.
Operating Expenses
The following table shows the components of the Company's operating expenses
for fiscal 1994, fiscal 1995 and fiscal 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Direct selling........................ $17,083 $18,546 $18,670
Indirect selling...................... 10,430 6,582 3,782
------- ------- -------
Total selling......................... 27,513 25,128 22,452
General and administrative............ 6,367 6,386 3,962
Amortization.......................... 1,528 1,624 1,624
Plant relocation...................... -- 1,036 --
------- ------- -------
$35,408 $34,174 $28,038
======= ======= =======
</TABLE>
Total direct selling expenses, principally consisting of freight and
freezer, market development and brokerage expenses, increased approximately 1%
in fiscal 1996 and approximately 9% in fiscal 1995 even though sales volumes
and dollars decreased in both periods. As a result, direct selling expenses as
a percentage of sales and on a per pound basis increased in both years. The
increase in these costs as a percentage of sales and on a per pound basis in
both years is due, in part, to decreases in sales of ground beef which has
lower selling expenses. Additionally, in fiscal 1996 the Company experienced
increases in freight and freezer expenses due to increased usage of more
expensive third party outside freezer storage space as a result of the
Reconfiguration of the Garland plant; higher inventory levels as a result of
reduced sales volumes and opportunistic purchases of raw materials; and the
added costs of servicing a national account customer. Additionally, brokerage
costs were
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higher due to increases in the brokerage rates on certain products. Total
market development expenses, which include direct payments and discounts to
customers made to promote products, were down approximately 13% in fiscal
1996. Market development expenses are relatively discretionary in nature and
do not directly correlate with sales volumes or dollars. The decrease in
market development expenses in fiscal 1996 is due to conscious decisions by
management to reduce these items, partially offset by increased discounts
offered to customers in connection with the sales of certain products
manufactured during the period of the product line Reconfiguration.
The increase in direct selling expenses in fiscal 1995 is due to increased
brokerage rates effected for certain products in mid-fiscal 1995 and increased
market development expenses. As noted above, market development expenses are
relatively discretionary and management elected to maintain these at levels
consistent with fiscal 1994.
Indirect selling expenses for all years represent Tyson sales and marketing
department expenses allocated to the Company, principally based on the
Company's sales relative to Tyson's consolidated sales. This allocation
decreased in both fiscal 1995 and fiscal 1996.
General and administrative expenses are allocations of Tyson's corporate
expenses. For all periods, the allocation of Tyson's general and
administrative expenses has been made based on the Company's sales relative to
Tyson's consolidated sales. The allocation decreased in fiscal 1996 due to the
decrease in the Company's relative sales and decreases in Tyson's total
general and administrative costs.
Amortization expense represents the amortization of the excess of the
purchase price over the fair value of the assets related to the acquisitions
of Holly Farms and Gorges, Inc. The increase in fiscal 1995 is due to the
inclusion of a full year of amortization expense related to the Gorges, Inc.
acquisition which occurred at the beginning of the second quarter of fiscal
1994.
Plant relocation expenses relate to the closure of the LeMars, Iowa facility
and relocation of the production line to other Company facilities.
Other Expenses
Other expenses are non-recurring items consisting of losses on the disposal
of fixed assets.
Provision for Income Taxes
The Company's results of operations have historically been included in
Tyson's consolidated federal income tax return. However, the provision for
income taxes for fiscal years 1994 through 1996 has been computed as though
the Company had operated on a stand-alone basis. The Company's effective
income tax rate was approximately 42%, 42% and 43% for fiscal 1994, fiscal
1995 and fiscal 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Interest payments on the Senior Notes and interest and principal payments
under the Credit Facilities represent, and interest payments on the Exchange
Notes will represent, significant obligations of the Company. The Notes
require semi-annual interest payments commencing in June 1997. Borrowings
under the Credit Facilities bear interest at floating rates and require
quarterly interest payments. The Credit Facilities include a $40.0 million
Term Loan Facility which requires principal repayment beginning in March 1997
and matures in 2001. The Revolving Credit Facility is a $30.0 million facility
with approximately $9.0 million drawn down as of December 28, 1996. All
amounts under the Revolving Credit Facility then outstanding will mature in
2001. See "Description of Credit Facilities."
In addition to its debt service obligations, the Company will need liquidity
for working capital and capital expenditures. For the fiscal year ended
September 28, 1996, the Company spent $0.7 million on capital projects. The
Company is in the process of establishing an administrative structure to
provide certain services that had
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previously been provided by Tyson. The Company has entered into the Transition
Services Agreement to obtain these services for up to one year after the
Acquisition Closing. In connection with the establishment of its
administrative structure, the Company is in the process of hiring employees
for its headquarters, making certain capital expenditures and leasing
additional facilities. Management estimates that the Company's fiscal 1997
stand-alone general and administrative expenses will be approximately $3.4
million. Capital expenditures of approximately $1.0 million, principally for
computer equipment and software, will be required in fiscal 1997 to establish
the Company's administrative structure. Additionally, the Company expects to
lease office space for its headquarters. The Company expects fiscal 1997
capital expenditures to be approximately $4.0 million, primarily related to
capital maintenance of current facilities and equipment and the purchase of
the computer equipment and software. See "Risk Factors--Lack of Operating
History" and "The Acquisition, Financing and Related Transactions."
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the Revolving Credit Facility. Immediately after
consummation of the Acquisition and the Financing, approximately $22.0 million
was available to the Company for borrowing under the Revolving Credit
Facility. As of December 28, 1996, the Company had borrowed approximately an
additional $1.0 million of Senior Indebtedness under the Revolving Credit
Facility to finance working capital needs. In addition, the Company expects to
draw down an additional $11.0 million under the Revolving Credit Facility
during the first quarter of calendar 1997 to finance working capital needs.
The Company anticipates that its working capital requirements, capital
expenditures and scheduled repayments for fiscal 1997 will be satisfied
through a combination of cash flow generated from operations together with
funds available under the Revolving Credit Facility.
EFFECTS OF INFLATION
Inflation has not had a significant effect on the operations of the
Business. However, in the event of increases in inflation or commodity prices
from recent levels, the Company could experience sudden and significant
increases in beef costs. Over periods of 90 days or less, the Company may be
unable to completely pass these price increases on to its customers.
Management currently believes that over longer periods of time, it generally
will be able to pass on price increases to its customers. See "Risk Factors--
Raw Materials" and "Business--Suppliers."
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BUSINESS
GENERAL
The Company is a leading producer of value added processed beef products for
the foodservice industry and is one of the few companies in this segment of
the industry that markets and distributes nationally. The Company's products
are marketed under the nationally recognized Quik-to-Fix and Gorges brand
names, as well as the private labels of leading national foodservice
distributors. The Company believes that its products are well positioned to
take advantage of what it believes is a trend within the foodservice industry
towards greater outsourcing of the food preparation process. Outsourcing
provides many benefits to foodservice operators including consistent product
quality, reduced preparation costs and increased food safety. For the fiscal
year ended September 28, 1996, the Company had sales and Adjusted Pro Forma
EBITDA of $232.8 million and $37.0 million, respectively.
The Company purchases fresh and frozen beef and, to a lesser extent, pork
and poultry, which it processes into a broad range of fully cooked and ready
to cook products. The Company's two product categories are value added
products and ground beef. Value added product offerings include (i) breaded
beef items, such as country fried steak and beef fingers, (ii) charbroiled
beef, such as fully cooked hamburger patties, fajita strips, meatballs,
meatloaf and taco meat and (iii) other specialty products, such as fully
cooked and ready to cook pork sausage, breaded pork and turkey, cubed steaks
and Philly steak slices. Ground beef product offerings consist primarily of
uncooked IQF hamburger patties. The Company operates four manufacturing
facilities, three of which are dedicated to value added products and one of
which produces ground beef products. The Company's products are sold primarily
to the foodservice industry, which encompasses all aspects of away-from-home
food preparation, including commercial establishments such as fast food
restaurants and family dining restaurants and non-commercial establishments
such as healthcare providers, schools and corporations. The Company sells its
products principally through broadline and specialty foodservice distributors.
The Company was formed in 1996 in connection with the Acquisition. Prior to
the Acquisition, the Business operated as part of Tyson, the world's largest
vertically integrated poultry processor. Tyson acquired a portion of the
Business in 1989 through its acquisition of Holly Farms. In doing so, Tyson
acquired two separate beef processing companies, Harker's and Quik-to-Fix,
Inc., each of which had been acquired by Holly Farms in 1986. In 1990, Tyson
sold the Harker's brand name and route sales division to Harker's
Distribution, Inc., a company formed by former members of Harker's management.
In January 1994, Tyson expanded its beef further processing operations by
acquiring Gorges, Inc. a leading producer of charbroiled beef products. In
April 1996, Tyson announced its intention to sell the Business in order to
concentrate on its core poultry business. The Acquisition was consummated on
November 25, 1996.
INDUSTRY
The Foodservice Industry
Purchases of food prepared away from home have grown consistently for over
forty years and currently represent approximately 45% of total food purchases.
Demand has risen due to various demographic changes, including increases in
personal disposable income, the increasing number of single-parent households
and the rising number of dual income families. Driven by the continuing
consumer trend toward purchasing food prepared away from home, the foodservice
industry is projected to grow at a nominal rate of 5.0% in 1996, superior to
the growth prospects of the food industry in general, according to Technomic
Inc. The Company believes it has strengthened its relationships with broadline
and specialty foodservice distributors over the last decade, a period of
industry consolidation. Furthermore, management believes that the Company is
well positioned to continue to identify and capitalize on certain segments of
the foodservice industry that are growing at a faster rate than the
foodservice industry overall.
The Company believes that restaurants and other foodservice providers are
seeking to outsource more of the "back-of-the-house" food preparation process
in order to reduce preparation costs and to ensure product
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safety, quality and consistency. Management believes the growth in the
foodservice industry, combined with the trend of outsourcing food preparation,
will enhance the growth of value added food processors.
The Beef Industry
Beef is the most consumed protein in the United States on the basis of
boneless, per capita consumption. Although per capita beef consumption in the
United States declined through the late 1980s as consumers became more
concerned about the level of fat in their diet, the beef industry has taken
steps to maintain beef as the nation's number one protein. Beef is now leaner
than ever, with the average cut of beef 27% leaner than in 1985, due to closer
trimming of fat, new leaner cuts of beef and the use of leaner cattle.
According to the National Livestock and Meat Board, U.S. beef consumption is
projected to be 65.2 boneless pounds per capita in 1996, up slightly from 64.1
pounds in 1990 and representing 32.5% of projected total meat consumption.
According to the Beef Industry Council, within the foodservice industry,
beef consumption increased from 6.22 billion beef servings in commercial
restaurants in 1991 to 6.68 billion servings in 1994, a 7.4% increase.
Furthermore, according to NPD/CREST, ground beef represents 79% of all beef
served away from home. Fueled by high value "combo" meals in the fast food
segment, ground beef sales in the restaurant industry grew by 3% in 1995.
A number of national associations conduct research on consumer preferences
for beef, run programs to promote the consumption of beef and conduct research
on improvement of the beef product. These associations, which provide valuable
category promotion, include The National Cattlemen's Association, The Beef
Industry Council and the National Livestock and Meat Board.
Value Added Beef Processors
Value added beef processors such as the Company purchase fresh and frozen
beef and process it into a broad range of fully cooked and ready to cook
products sold primarily to the foodservice industry, including fast food and
family dining restaurants, wholesale clubs, healthcare providers, schools and
corporations. The Company believes that foodservice operators' priorities are
quality, product consistency, food safety, ease of preparation and price and
that its products satisfy these priorities.
GROWTH STRATEGY
The Company's business was acquired from Tyson on November 25, 1996. Prior
to the Acquisition, Tyson's management modified its strategy of providing a
full range of center of the plate meat proteins in addition to chicken.
Accordingly Tyson returned its focus to its core poultry business, as
evidenced by its adoption of the "We're Chicken" campaign in early 1996.
The Company's principal business objective is to build its higher margin
value added business. Value added products address many of the concerns within
the foodservice industry, including cost reduction, food safety and product
quality and consistency. The Company also intends to utilize its ground beef
manufacturing capabilities to target higher volume multi-unit accounts,
especially where opportunities exist to cross-sell its higher margin value
added products. Management believes that by operating as an integrated, stand
alone enterprise, the Company will be better able to capitalize on its
strengths and industry trends, including the following.
. Favorable Trends in the Foodservice Industry. Purchases of food prepared
away from home have grown consistently for over forty years and
currently represent approximately 45% of total food purchases. Demand
has risen due to various demographic changes, including increases in
personal disposable income, the increasing number of single-parent
households and the rising number of dual income families.
The Company believes that there is also an increasing trend within the
foodservice industry toward outsourcing more of the food preparation
process to reduce preparation costs and to ensure product safety,
quality and consistency. The Company addresses these outsourcing needs
by producing
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products that are precooked or ready to cook (e.g. breaded, portioned
and seasoned) and require little "back-of-the-house" preparation.
. Strong Brand Names. The Gorges and Quik-to-Fix brands have been
established for over 50 and 30 years, respectively. The Company believes
its charbroiled beef and country fried steak customers associate the
Gorges and Quik-to-Fix brand names with products that are high quality,
safe and reasonably priced. The Company intends to capitalize on this
brand recognition to increase the market penetration of its breaded beef
and charbroiled beef products and to promote additional products under
the Gorges and Quik-to-Fix brand names.
. Focused Sales and Marketing Team. The Company's sales and marketing team
consists of 16 experienced professionals, most of whom worked with
Gorges, Inc. or Quik-to-Fix, Inc. prior to their acquisition by Tyson.
Until May 1996, these sales professionals marketed substantially all of
the Tyson product line. With volume based incentives, sales were
dominated by high volume chicken products. Going forward, the Company
will maintain a dedicated sales force that will be responsible solely
for the Company's products.
. Extensive Foodservice Broker Network. Management believes that the
Company's extensive independent foodservice broker network, consisting
of 51 brokers covering 49 states, is one of its most valuable assets.
The brokers act as extensions of the Company's in-house sales force,
providing sales and marketing support and an intensive sales effort
focused on the major foodservice distributors in each of their
respective regions. Management anticipates that the existing strong
broker relationships will continue because of the revenue stream created
by the Company's products, the continuity of the Company's sales and
marketing team and the increased responsiveness to broker and customer
needs resulting from the Company's exclusive focus on its own products.
. Strong and Diverse Customer Base. The Company has a strong and diverse
customer base, anchored by 48 of the 50 largest broadline foodservice
distributors. The Company's products are purchased by 28 of the 50
largest multi-unit restaurant chains in the United States, including
Shoney's, Chili's, Ponderosa and Cracker Barrel, as well as by
institutional customers such as Marriott Corporation and school
districts through the USDA Commodity Reprocessing Program. The Company's
products are also purchased by wholesale club stores.
. Modern Facilities With Excess Capacity. The Company operates four modern
facilities using state-of-the-art equipment with capacity that will
allow significant volume increases without major additional capital
expenditures. Until recently, several plants had duplicative
capabilities, creating production inefficiencies. During late fiscal
1995 and the first half of fiscal 1996, Tyson reconfigured the
facilities, significantly enhancing the operating efficiency of the
facilities, increasing capacity and reducing the Company's overall labor
expenditures. The Company believes the full benefits of the
Reconfiguration will first be realized in fiscal 1997.
. Experienced and Focused Management Team. Prior to the Acquisition, the
Company's four plants operated primarily as independent facilities
rather than as an integrated unit. Furthermore, strategic decisions were
made by corporate level managers whose principal focus was on Tyson's
core poultry business. The Company is now operated by a team of managers
almost all of whom have spent the majority of their careers in the beef
processing industry. Most members of the management team were employed
by Gorges, Inc., Quik-to-Fix, Inc. or Harker's prior to their
acquisition by Tyson. The management team has developed valuable
industry relationships and has extensive experience in key aspects of
the Company's operations, including procurement, production, sales and
marketing, research and development and distribution.
PRODUCT CATEGORIES
The Company manufactures and markets an extensive variety of IQF, fully
cooked and ready to cook beef, pork and poultry products. The Company's
products are marketed under the nationally recognized Quik-to-Fix and Gorges
brand names as well as the private labels of leading national foodservice
distributors.
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Value Added Products
The Company's breaded beef products are sold primarily under the Quik-to-Fix
brand. The flagship product of the Quik-to-Fix brand is country fried steak.
The primary customers for breaded beef products are commercial foodservice
operators, including Shoney's, Cracker Barrel, Chili's, Steak and Ale and
Marriott Corporation.
Charbroiled beef products are the flagship items of the Gorges brand. Under
the Gorges brand, the Company offers an extensive variety of fully cooked
charbroiled beef products, including charbroiled steak burgers, meatballs,
meatloaf, taco meat and chili. Customers for charbroiled beef products include
a wide variety of commercial users such as Ponderosa, Ryan's, Subway, Golden
Corral and Marriott Corporation, along with non-commercial users such as
hospitals, schools and corporations. Growth in charbroiled beef products has
been driven by customers' desire to minimize preparation time and concerns
about the food safety issues surrounding the handling of raw beef products.
The USDA Commodity Reprocessing Program for schools has also played an
important role in the growth of these products, as it allows the Company to
couple the processing of federally donated commodity products with the sale of
other value added products, thereby increasing penetration in the important
school foodservice program segment.
Other value added products include a wide variety of fully cooked and ready
to cook items such as pork sausage, beef luncheon steaks, cubed steaks, pre-
cooked rib patties, meatloaf, stew beef and breaded turkey products. In March
1996, Quik-to-Fix Beef Steak Slices were introduced for use in Philly steak
sandwiches, stir-fry and other sliced steak dishes. Customers for these
specialty items include Stouffer's, Steak and Ale, Sam's Club and Subway.
Value added products accounted for $149.6 million (66.7%), $154.1 million
(56.8%) and $138.7 million (47.9%) of sales (excluding frozen portion steak
sales) in fiscal 1996, fiscal 1995 and fiscal 1994, respectively. Value added
products accounted for $37.5 million (84.8%), $39.0 million (77.7%) and $34.9
million (74.7%) of total gross profits (excluding frozen portion steak sales)
in fiscal 1996, fiscal 1995 and fiscal 1994, respectively.
Ground Beef
The Company serves the ground beef market principally through the sale of
IQF patties. The ground beef market is very competitive and is served by a
large number of national and regional suppliers. The Company's quality
standards allow the Company to position its ground beef products as safer,
healthier and more consistent. Ground beef customers include Sonic, Harker's,
Sam's Club and Sysco.
Ground beef accounted for $74.7 million (33.3%), $117.1 million (43.2%) and
$150.7 million (52.1%) of sales (excluding frozen portion steak sales) and in
fiscal 1996, fiscal 1995 and fiscal 1994, respectively. Ground beef products
accounted for $6.7 million (15.2%), $11.2 million (22.3%) and $11.8 million
(25.3%) of gross profits (excluding frozen portion steak sales) in fiscal
1996, fiscal 1995 and fiscal 1994, respectively.
SALES AND MARKETING
Sales and Marketing Team
The Company's sales and marketing team consists of 16 experienced
professionals, most of whom worked with Gorges, Inc. or Quik-to-Fix, Inc.
prior to their respective acquisitions by Tyson. Until May 1996, these sales
professionals marketed substantially all of the Tyson product line. With
volume based incentives, sales were dominated by high volume chicken products.
The Company now maintains a dedicated sales force that is responsible solely
for the Company's products.
Foodservice Broker Network
Management believes that the Company's extensive independent foodservice
broker network consisting of 51 brokers covering 49 states, is one of its most
valuable assets. The brokers act as extensions of the Company's
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in-house sales force, providing sales and marketing support and an intensive
sales effort focused on the major foodservice distributors in each of their
respective regions. The brokers are compensated on a commission basis and do
not take title to the Company's products. Management anticipates that the
existing strong broker relationships will continue because of the revenue
stream created by the Company's products, the continuity of the Company's
sales and marketing team and the increased responsiveness to broker and
customer needs resulting from the Company's exclusive focus on its own
products.
The brokers perform the following functions: (i) sell the Company's products
to foodservice distributors; (ii) provide administrative support for the
Company and its foodservice distributors; and (iii) sell the Company's
products to foodservice operators through product presentations, participation
in broadline foodservice distributor food shows, training seminars for key
foodservice operators, training seminars for distributor sales representatives
and introduction and execution of new product rollout and promotional
activities.
CUSTOMERS AND END USERS
Overview
Commercial and non-commercial foodservice operators are the primary end
users of the Company's products. Commercial foodservice operators include fast
food and family dining restaurants, multi-unit national chain accounts,
regional chain accounts and wholesale clubs. Non-commercial foodservice
operators include hospitals, corporations and schools (including through the
USDA Commodity Reprocessing Program). The Company's sales force, in
conjunction with the Company's independent foodservice brokers, markets the
Company's products to broadline and specialty distributors, multi-unit chains
and wholesale clubs. The majority of sales to foodservice distributors are
effected through the Company's independent broker network. Foodservice
distributors are the principal suppliers of the Company's products to the end
users.
During fiscal 1996, Sysco, Sam's Club and Harker's accounted for 17.8%,
13.2% and 12.6% of gross sales, respectively. See "Risk Factors--Importance of
Key Customers."
Foodservice Distributors
Broadline foodservice distributors distribute a full line of dry,
refrigerated and frozen food products to commercial and non-commercial
foodservice operators. A majority of the Company's sales are made to broadline
and specialty foodservice distributors which resell the Company's products to
end users under the Gorges and Quik-to-Fix brand names or under the
distributor's private label using items produced and packaged for the
distributor. The Company has established strong relationships with 48 of the
top 50 broadline foodservice distributors in the United States, including
Sysco, Alliant Foodservice, Inc. and PYA/Monarch, Inc.
End Users
The four primary end users of the Company's products are: (i) independent
commercial foodservice operators, including fast food, family dining and fine
dining restaurants, snack bars and caterers, most of which purchase their
products through broadline foodservice distributors; (ii) national accounts,
concentrated in the rapidly growing fast food and family dining category,
which generally have centralized buying organizations served by either
broadline or specialty foodservice distributors; (iii) wholesale clubs such as
Sam's Club and Price/Cost Co.; and (iv) non-commercial foodservice operators,
including corporate cafeterias and health care and educational institutions,
most of which purchase their products primarily through broadline foodservice
distributors.
USDA Commodity Reprocessing
The Company participates in the USDA Commodity Reprocessing Program. Under
this federal program, the Company takes USDA-donated commodity beef and
further processes it for schools. The Company charges a fee for processing the
beef into value-added further processed products such as charbroiled beef
patties and
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fully cooked breaded beef patties. The program has complex administrative
requirements with which the Company has significant experience. These complex
administrative requirements make it difficult for competitors to enter the
business on a casual basis. The majority of demand for products under the
program arises each spring and fall; however, the frozen nature of the product
allows production to be scheduled throughout the year to keep plant
utilization high.
DISTRIBUTION
The Company is one of the few value added beef processors that distributes
its products nationally. Prior to the Acquisition, all of the Company's
products were shipped frozen to customers, to public warehouses for
distribution or to a Tyson warehouse for distribution with other Tyson
products. Historically, two thirds of the Company's shipping requirements have
been met by independent shippers and trucking lines with the remainder being
shipped in Tyson-owned trucks with charges to the Company at market rates.
Between 1994 and the Acquisition Closing, Tyson required the Business to stock
inventory at four separate warehouses to accommodate Tyson's poultry shipping
needs, thereby resulting in higher inventory levels. The Company is now in the
process of establishing its own distribution network using one or more public
warehouses and common carriers. Management believes that this network will
allow the Company to maintain its national distribution capability while
reducing inventory levels.
SUPPLIERS
The three major components of the Company's products are: (i) meat proteins;
(ii) batter, breading, spices and other ingredients; and (iii) packaging
material.
The Company has long standing relationships with numerous major beef
suppliers and operates a centralized procurement group which is responsible
for sourcing beef for all of its facilities. Approximately 70% of the
Company's beef needs are sourced from three major suppliers: IBP; Montfort
(ConAgra); and Excel (Cargill). The Company's pork and poultry needs also are
sourced primarily from these major suppliers. Although the supply of meat
proteins is concentrated, it is a commodity market and supplies at USDA
standards are readily available from a variety of sources. The Company does
not speculate in the markets for its raw materials. See "Risk Factors--Raw
Materials." As a matter of policy, the Company performs its own quality
assurance testing of its raw materials.
Batters, breading, spices and other ingredients, once specified, are
purchased at the plant level, typically from regional suppliers.
Virtually all packaging material requirements for the Company's products,
which consist of corrugated boxes, plastic bags and labels, are sourced on a
local basis for each of the plants.
RESEARCH AND DEVELOPMENT
Over the past three years, the Company has introduced a variety of new
products or product extensions, including Beef TastyRib, charbroiled
meatballs, cooked taco meat, breakfast country fried steaks, beef steak
slices, Quik-to-Fix homestyle country fried steaks, breaded turkey and cooked
babyback ribs. Research and development activities for the Business have
historically been carried out at centralized Tyson facilities in Arkansas, and
these facilities will be available for use by the Company for up to twelve
months after the Acquisition Closing. The Company's Garland, Texas facility
has space which was specifically designed and used for conducting food related
research and development prior to its acquisition by Tyson. Such space will
eventually be utilized by the Company for research and development of new and
existing products. The Company currently employs four research and development
professionals dedicated to product development, headed by a team leader with a
Ph.D. in animal science. The Company's research and development team works
closely with the sales force to respond to changing customer needs.
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ENVIRONMENTAL MATTERS
The operations of the Company and the ownership of real property by the
Company are subject to extensive and changing federal, state and local
environmental laws and regulations. The Company believes it is currently in
material compliance with all known material and applicable environmental
regulations and currently does not expect to make material capital
expenditures with respect to environmental control facilities during fiscal
1997. The Company did not assume any liabilities for environmental matters
relating to the operation of the Business prior to the Acquisition Closing. In
the future, the Company may be involved from time to time in administrative
and judicial proceedings and inquiries relating to environmental matters and
may be required to make capital expenditures to comply with environmental
laws.
Prior to the Acquisition, Tyson incurred monthly surcharges of approximately
$40,000 to the city of Garland, Texas as a result of effluent wastewater
discharges from the Garland, Texas facility. Tyson elected to pay the monthly
surcharges rather than modify the facility to allow its operation without
incurring such surcharges. Since the Acquisition, the Company has continued to
incur the monthly surcharges and the Company currently does not intend to
modify the facility to allow its operation without incurring such surcharges.
Management does not believe that the incurrence of the aforementioned
surcharges will have a material adverse effect on the Company's business,
results of operations and debt service capabilities. There can be no
assurance, however, that such surcharges will not be increased or that the
Company will not be required to modify its operations, which may result in
significant expenses or material capital expenditures. See "Risk Factors--
Compliance with Environmental Regulations."
PROPERTIES
The Company's properties consist of the following manufacturing facilities:
<TABLE>
<CAPTION>
LOCATION PRODUCT CATEGORY SQUARE FOOTAGE
-------- ---------------- --------------
<S> <C> <C>
Garland, Texas.............................. Value added products 122,166
Harlingen, Texas............................ Value added products 111,412
Orange City, Iowa........................... Ground beef 135,600
Sioux Center, Iowa.......................... Value added products 72,211
</TABLE>
All of the manufacturing facilities are owned by the Company. The Company's
principal executive offices are located at 9441 LBJ Freeway, Suite 214,
Dallas, Texas 75243.
EMPLOYEES
The Company employs approximately 1,100 people. Currently, approximately 200
employees of a total of 253 union-eligible employees at the Garland, Texas
facility are represented by the 'Union. The Company and the Union have not
entered into a collective bargaining agreement. The Garland, Texas Facility is
being operated pursuant to the terms and conditions specified by the Company
at the time of the Acquisition Closing. The Company is not obligated to enter
into the collective bargaining agreement agreed upon by Tyson and the Union or
to continue to operate the Garland, Texas Facility pursuant to the terms of
such agreement. Management is currently negotiating a replacement collective
bargaining agreement with the Union, although there can be no assurance that
it will be successful in doing so. Except for employees at the Garland, Texas
facility, none of the Company's employees are represented by a union. The
Company believes that its employee relationships are generally good.
PATENTS AND TRADEMARKS
The Company utilizes a number of U.S. trademarks, the most important of
which are Gorges(R) and Quik-to-Fix(R). Certain of the Company's products are
marketed under additional trademarks, such as Crispntender(R), Tenderbroil(R)
and TastyRib(R).
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In addition, pursuant to a license agreement entered into in connection with
the Acquisition, the Company has a limited right to use the name "Tyson" to
the extent it appears on packaging materials obtained in the Acquisition. The
Company may use such materials until its supply of such materials is
exhausted, but in no event for more than six months after the date of the
Acquisition Closing. The Company considers protecting its intellectual
property rights to be important to its business.
Various trademarks, service marks and trade names to which reference is made
in this Prospectus are the property of owners other than the Company. Such
owners have all applicable rights with respect to their respective trademarks,
service marks and trade names.
SEASONALITY
Certain of the end uses for some of the Company's products are seasonal.
Demand in many markets is generally higher in the period from July to
September due to higher demand for beef products during the summer months and
increased purchasing by schools in anticipation of the commencement of the
school year. As a result, Company sales and profits are generally higher in
the Company's fourth quarter than in any other quarter during its fiscal year.
In addition, demand in many markets is generally lowest in the period from
January to March, resulting in lower sales and profits in the Company's second
quarter.
COMPETITION
The value added beef processing industry is highly competitive, with a large
number of competitors offering similar products. The Company's most
significant competitors in its primary markets are Advance Meats, King's
Command, Penthouse Meats, Hudson Specialty Foods, Travis Meats and Zartic. In
addition, certain of the Company's suppliers, such as Cargill, IBP and
ConAgra, produce ground beef products that compete directly with certain of
the Company's products and there can be no assurance that such suppliers will
not expand their presence in the value added beef processing industry in the
future. These suppliers and Hudson Specialty Foods are larger and have greater
resources than the Company. The Company also faces significant price
competition from its competitors and may encounter competition from new market
entrants. See "Risk Factors--Competition."
GOVERNMENTAL REGULATION
The Company is subject to federal, state and local health laws and
regulations that establish standards for the manufacture, storage, labeling
and transport of foodstuffs. The USDA is the regulatory body which is
primarily responsible for oversight of the Company's operations. Beef, pork
and poultry inspection is mandatory, under the jurisdiction of the Food Safety
and Inspection Service (a division of the USDA), for meat that is transported
across state lines or is otherwise placed in interstate commerce. Tyson has
made, and the Company may be required to make, capital expenditures in
response to changing compliance standards and production, storage, and
transportation technology.
The Company operates a USDA-approved Total Quality Control program at each
facility. The Company's programs assure that the Company's products are
manufactured under conditions that meet or exceed all applicable government
standards. Such programs are monitored by federal inspectors and include: (i)
inspection of meat at various stages of processing; (ii) temperature
monitoring for both fresh and cooked meat; (iii) review of packaging and
labels used for fresh and processed meat; and (iv) controlling and monitoring
the use of additives.
As a participant in the USDA Commodity Reprocessing Program for schools, the
Company must adhere to certain rules, regulations and guidelines. Such rules,
regulations and guidelines include financial surety bonding in the state of
operation, product inspection and grading and certain reporting requirements.
Should the Company fail to remain in compliance with such rules, regulations
and guidelines, it could be excluded from the USDA Commodity Reprocessing
Program which could have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See "Risk Factors--
Governmental Regulation."
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The operations and the products of the Company are also subject to state and
local regulation through such measures as licensing of plants, enforcement of
health standards and inspection of the facilities. Enforcement actions for
violations of federal, state and local regulations may include seizure and
condemnation of violative products, cease and desist orders, injunctions
and/or monetary penalties. Management believes that the Company's facilities
and practices are sufficient to maintain compliance with applicable government
regulations, although there can be no assurances in this regard.
LEGAL PROCEEDINGS
The Company did not assume any litigation relating to the Business that was
pending as of the Acquisition Closing. Tyson agreed to indemnify the Company
with respect to any litigation that may arise in the future to the extent such
litigation relates to the conduct of the Business prior to the Acquisition
Closing. The Company is not a party to nor are any of its properties subject
to any lawsuit or proceeding which, in the opinion of management of the
Company, is likely, individually or in the aggregate,to have a material
adverse effect on the Company.
The Company is likely to be subject to claims arising from time to time in
the ordinary course of its business. In certain of such actions, plaintiffs
may request punitive or other damages that may not be covered by insurance
and, accordingly, no assurance can be given with respect to the ultimate
outcome of any such possible future claims or litigation or their effect on
the Company.
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MANAGEMENT
DIRECTORS AND OFFICERS OF THE COMPANY
Set forth below are the names and positions of the directors, officers and
significant employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
J. David Culwell.................... 45 Chief Executive Officer and Director
Richard E. Mitchell................. 55 President and Director
Randall H. Collins.................. 49 Vice President--Sales and Marketing
A. Scott Letier..................... 35 Chief Financial Officer
Robert M. Powers.................... 55 Vice President--Operations
Hernando Aviles..................... 40 Vice President--Human Resources
Stuart Alan Ensor................... 39 Director of Research and Development
Richard L. Cravey................... 51 Director
William A. Davies................... 50 Director
James A. O'Donnell.................. 43 Director
</TABLE>
J. DAVID CULWELL became Chief Executive Officer and a Director of the
Company at the time of the Acquisition Closing. Mr. Culwell has been an
independent food industry consultant since January 1991.
RICHARD E. MITCHELL joined Tyson in January 1994 as a Non-Commercial
Division Manager and in April 1996, was promoted to Vice President/General
Manager for the Business, where he was responsible for the Sales and
Marketing, Operations, Research and Development and Quality Assurance, and
Human Resources departments. Mr. Mitchell formerly was Vice President of Sales
of Gorges, Inc. and served on the Board of Directors of Gorges, Inc. from July
1991 until Tyson's acquisition of Gorges, Inc. in 1994. He became a director
of the Company at the time of the Acquisition Closing.
RANDALL H. COLLINS was employed by Tyson as Vice President of Sales and
Marketing for the Business since April 1996, where he is responsible for a 16
member sales and marketing staff. Prior to holding this position, Mr. Collins
held a number of positions at Tyson, including Division Manager for Tyson
Foodservice, Division Sales Manager for Tyson Beef and Pork, and Division
Manager for Beef Sales. Prior to joining Tyson in 1989 as a result of Tyson's
acquisition of Holly Farms, he held a number of general management and sales
positions at Harker's/Holly Farms and Kraft/General Foods.
A. SCOTT LETIER has been Vice President and Chief Financial Officer since
joining the Company on December 10, 1996. Prior to joining the Company Mr.
Letier served as the Senior Vice President and Chief Financial Officer of CS
Wireless Systems, Inc. from July 1996 until December 1996. Mr. Letier also
served as the Vice President of Finance and Chief Financial Officer of
AmeriServ Food Company from July 1993 until June 1996. Mr. Letier served as
the Vice President and Corporate Controller of AmeriServ Food Company from
February 1992 until July 1993. Mr. Letier is a certified public accountant.
ROBERT M. POWERS was employed by Tyson as Vice President of Operations for
the Business since April 1996. Prior to that time, Mr. Powers was Director of
Commodity Procurement for Tyson, a position to which he was promoted in 1991.
HERNANDO AVILES was employed by Tyson as Vice President--Human Resources,
Beef and Pork Division since February 1994, where he was responsible for
overseeing six personnel location directors, with responsibility over all
human resources practices and policies. Mr. Aviles joined Tyson in 1989 as the
Complex Personnel Manager for the New Holland, Pennsylvania complex of Tyson.
Prior to 1989, Mr. Aviles held various positions at Holly Farms.
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STUART ALAN ENSOR was named Director of Research and Development and Quality
Assurance for the Business in April 1996. Previously, Mr. Ensor served as
Senior Food Scientist since December 1993. Prior to that time, Mr. Ensor held
the position of Senior Food Scientist at Cargill, Inc. from April 1992 until
November 1993 and a similar position at Pilgrim's Pride Corporation from July
1990 until March 1992.
RICHARD L. CRAVEY has been a director of the Company since October 1996. Mr.
Cravey is a member of CGW Southeast III, L.L.C., the general partner of CGW
(the "General Partner"), and is jointly responsible for all major decisions of
the General Partner. Mr. Cravey is also a member of CGW Southeast Management
III, L.L.C., (the "Management Company"), an affiliate of CGW. Mr. Cravey has
been a member of the General Partner, the Management Company or affiliated
entities for more than five years. He is a director of AMRESCO, Inc. and
Cameron Ashley Building Products, Inc.
WILLIAM A. DAVIES has been a director of the Company since October 1996. Mr.
Davies is a member of the General Partner, and is responsible for sourcing,
structuring and negotiating transactions, participating in strategic planning
with portfolio company managements to maximize value and managing exit
strategies. In addition, Mr. Davies is involved in managing the administrative
functions of the General Partner. Mr. Davies has been a member of the General
Partner or an employee of affiliates of the General Partner for more than five
years.
JAMES A. O'DONNELL has been a director of the Company since October 1996.
Mr. O'Donnell has been a member of the General Partner since 1995, and is
responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with portfolio company managements to
maximize value and managing exit strategies. Mr. O'Donnell has been a general
partner of Sherry Lane Partners, a private equity investment firm based in
Dallas, Texas, since 1992. Also, Mr. O'Donnell has been a general partner of
O'Donnell & Masur, a private equity investment firm based in Dallas, Texas,
since 1989. He is a director of Bestway Rental, Inc.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements (the "Employment Agreements")
with Messrs. Culwell, Mitchell, Collins, Powers, Letier, Aviles and Ensor
(each a "Senior Manager" and collectively the "Senior Management") for terms
expiring on the fifth anniversary of the Acquisition Closing, subject to
automatic one-year renewals unless either party gives 60 days notice not to
renew. The Company has the right to terminate the Employment Agreements at any
time prior to expiration. However, if a Senior Manager is terminated other
than for cause, death or disability, such Senior Manager will receive, in
addition to earned salary and bonus, a severance payment equal to 12 months
base salary. If a Senior Manager is terminated for cause, death or disability,
such Senior Manager will receive only earned salary and bonus due as of the
date of termination. The Employment Agreements will also contain non-
competition, non-solicitation and confidentiality provisions.
Mr. Culwell's Employment Agreement provides for a base salary of $175,000,
and Mr. Culwell is eligible to receive a bonus of up to 50% of his base salary
at the discretion of the Company's Board of Directors. Mr. Mitchell's
Employment Agreement provides for a base salary of $159,000, and Mr. Mitchell
eligible to receive a bonus of up to 50% of his base salary at the discretion
of the Company's Board of Directors. Mr. Collins' Employment Agreement
provides for a base salary of $142,500, and Mr. Collins is eligible to receive
a bonus of up to 50% of his base salary at the discretion of the Company's
Board of Directors. Mr. Powers' Employment Agreement provides for a base
salary of $115,000, and Mr. Powers will be eligible to receive a bonus of up
to 40% of his base salary at the discretion of the Company's Board of
Directors. Mr. Letier's Employment Agreement provides for a base salary of
$130,000, and Mr. Letier is eligible to receive a bonus of up to 40% of his
base salary at the discretion of the Company's Board of Directors. Mr. Aviles'
and Mr. Ensor's Employment Agreements are substantially similar in form to
those of the other Senior Managers.
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STOCK INCENTIVE PLAN
At the Acquisition Closing, GHC adopted a Stock Incentive Plan (the "Plan")
pursuant to which options to purchase up to 112,500 shares of restricted GHC
common stock (the "Options") may be granted to the Senior Management or other
employees selected for participation in the Plan by the Company's Board of
Directors (each an "Optionee"). The Options are subject to a five year vesting
period and will be exerciseable at the same price per share as the GHC stock
sold through the Equity Private Placement ("Cost"). The Options will
immediately and fully vest in the event of a change in control of GHC or the
Company or the sale of substantially all of the Company's assets. The Options
will provide that Optionees may not transfer shares acquired pursuant thereto
except to the extent that any transferee agrees to be bound by the same
restrictions as the Optionee. The Plan also provides for other equity-based
forms of incentive compensation in addition to the Options. See "Certain
Transactions--Securities Purchase and Stockholders Agreement."
CERTAIN TRANSACTIONS
SECURITIES PURCHASE AND STOCKHOLDERS AGREEMENT
At the Acquisition Closing, CGW, NBIC, FPGT and the Senior Managers (except
for Mr. Letier) (the "Stockholders") entered into a Securities Purchase and
Stockholders Agreement (the "Securities Purchase and Stockholders Agreement")
with regard to GHC. All future purchasers of GHC common stock will be required
to enter into the Securities Purchase and Stockholders Agreement. The
Securities Purchase and Stockholders Agreement contains provisions concerning
the governance of GHC and the Company, restrictions on the transferability of
the securities of GHC and the Company and registration rights for the
securities of GHC held by the Stockholders.
The governance provisions of the Securities Purchase and Stockholders
Agreement provide that the Board of Directors of GHC will consist of up to
five members all of whom shall be designated by CGW, and that the Board of
Directors of the Company shall be comprised of the directors of GHC. The
Securities Purchase and Stockholders Agreement requires holders of voting
securities of GHC to vote their shares in favor of such designees of CGW for
election as directors of GHC. The Securities Purchase and Stockholders
Agreement also grants to each of NBIC and FPGT the right, except in certain
circumstances, to have a representative in attendance at all meetings of the
Board of Directors of GHC or the Company.
The Securities Purchase and Stockholders Agreement grants to the stockholder
parties thereto pre-emptive rights, exercisable pro rata in accordance with
their respective ownership of common stock of GHC, to purchase shares of
common stock or other equity securities of GHC (other than shares of common
stock issued upon exercise of options, rights, awards or grants pursuant to
the Plan and common stock issued in exchange for common stock of another
class), and further provides for certain co-sale rights and obligations in the
event CGW elects to sell all or a portion of its shares of GHC's common stock.
Additionally, GHC has a right of first refusal in connection with any proposed
sale by NBIC, FPGT or any Senior Manager of its or his investment in GHC.
The Securities Purchase and Stockholders Agreement provides that if a Senior
Manager's employment is terminated for any reason other than for cause, GHC
will have the right to repurchase any shares owned by such Senior Manager at
the greater of cost or fair value. If a Senior Manager's employment is
terminated for cause, GHC will have the right to repurchase any shares owned
by such Senior Manager at the lesser of fair value or cost. Such right is
exercisable within 180 days following such termination of employment of the
Senior Manager. Fair value of the repurchased shares shall be determined by
agreement between GHC and the Senior Manager whose shares are being
repurchased or, failing such agreement, by an independent investment banking
firm.
If GHC is unable to exercise either its right of first refusal or right to
repurchase shares of common stock from a Senior Manager whose employment is
terminated, it may assign such right to the other Stockholders who are parties
to the Securities Purchase and Stockholders Agreement (other than the
Stockholder whose shares are subject to such rights), who may exercise such
rights in accordance with their respective ownership of common stock.
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TRANSACTIONS WITH CGW AND ITS AFFILIATES
At the Acquisition Closing, the General Partner entered into a consulting
agreement (the "Consulting Agreement") with the Company whereby the Company
will pay the General Partner a monthly retainer fee of $30,000 for financial
and management consulting services. The General Partner may also receive
additional compensation (not to exceed an aggregate of $500,000 annually) if
approved by the Board of Directors of the Company at the end of the Company's
fiscal year, based upon the overall performance of the Company. The Consulting
Agreement expires five years from the Acquisition Closing. At the Acquisition
Closing, the General Partner will delegate its rights and obligations under
the Consulting Agreement to the Management Company, an affiliate of CGW.
At the Acquisition Closing, the Company paid to the Management Company, an
affiliate of CGW, a fee of $2.65 million for its services in assisting the
Company in structuring and negotiating the Transactions.
TRANSACTIONS WITH NBIC AND ITS AFFILIATES
NationsBank of Texas, N.A. (the "Bank"), an affiliate of NBIC and the
Initial Purchaser, was paid usual and customary fees for underwriting,
structuring, syndicating and administering the Credit Facilities. The Initial
Purchaser received a portion of the fees related to underwriting, structuring
and syndicating the Credit Facilities. The Initial Purchaser received $3.0
million in discounts and commissions in connection with the Initial Offering.
See "Description of Credit Facilities."
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificates of Incorporation of the Company and GHC contain provisions
eliminating the liability of directors for monetary damages for breaches of
their duty of care to the Company or GHC, as applicable, except in certain
prescribed circumstances. The Certificates of Incorporation and Bylaws of the
Company and GHC also provide that directors and officers of the Company and
GHC will be indemnified by the Company and GHC, respectively, to the fullest
extent authorized by Delaware law, as it now exists or may in the future be
amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of the Company or GHC, as
appropriate. The Certificate of Incorporation and Bylaws of the Company and
GHC provide that the right of directors and officers to indemnification is not
exclusive of any other right now possessed or hereinafter acquired under any
statute, agreement or otherwise.
PRINCIPAL STOCKHOLDER
GHC owns 100% of the issued and outstanding capital stock of the Company.
GHC is owned 55.6% by CGW, 20.0% by NBIC and 24.4% by FPGT, without taking
into consideration any shares that may be owned by the Optionees pursuant to
the Plan. Pursuant to the Securities Purchase and Stockholders Agreement, the
Senior Managers entered into subscription agreements to purchase an aggregate
of 1.2% of the capital stock of the Company (the "Management Stock") without
taking into consideration any shares that may be owned by the Optionees
pursuant to the Plan. The closings for the purchase of the Management Stock
will be held approximately 100 days after the Acquisition Closing, at which
time GHC will be owned 54.9% by CGW, 19.8% by NBIC, 24.1% by FPGT and 1.2% by
the Senior Managers without taking into consideration any shares that may be
owned by the Optionees pursuant to the Plan. Additionally, the Options will
permit the Optionees to purchase up to an aggregate of 20% of the capital
stock of the Company on a fully diluted basis. Affiliated entities of each of
(i) Richard L. Cravey, William A. Davies and James A. O'Donnell, (ii) NBIC and
(iii) FPGT are limited partners of CGW. See "The Acquisition, Financing and
Related Transactions;" "Management;" "Certain Transactions;" and "Description
of Credit Facilities--Security."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the Registration Rights Agreement.
The Senior Notes were originally issued and sold on November 25, 1996 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
Rule 144A of the Securities Act. In connection with the sale of the Senior
Notes, the Company agreed to file with the Commission a registration statement
relating to an exchange offer (the "Exchange Offer Registration Statement")
pursuant to which another series of notes of the Company covered by such
registration statement and containing the same terms as the Senior Notes,
except as set forth in this Prospectus, would be offered in exchange for
Senior Notes tendered at the option of the holders thereof. If (i) any changes
in law or applicable interpretations of the Commission Staff do not permit the
Company to effect the Exchange Offer, or (ii) for any reason the Exchange
Offer is not consummated by April 30, 1997, or (iii) in certain other
circumstances, the Company will, at its expense, (a) as promptly as
practicable, and in any event no more than 60 days after such filing
obligation arises or requested by eligible holders of Notes, file with the
Commission a Shelf Registration Statement covering resales of the Notes, (b)
use its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act on or prior to 45 days after such filing
occurs and (c) keep the Shelf Registration Statement continuously effective
until three years after its effective date (or such shorter period that will
terminate when all the Notes covered thereby have been sold pursuant thereto
or in certain other circumstances). The Company will, in the event of the
filing of a Shelf Registration Statement, provide to each holder of the Notes
covered by the Shelf Registration Statement copies of the prospectus that is a
part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement for the Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Notes. In the event that either (w) the Exchange Offer Registration Statement
is not filed with the Commission on or prior to January 31, 1997 or the Shelf
Regiatration Statement is not filed within 60 days after the such filing
obligation arises or requested by holders of such Notes, (x) either the
Exchange Offer Registration Statement is not declared effective prior to March
31, 1997, or the Shelf Registration Statement is not declared effective on or
prior to 45 days after the filing of the Shelf Registration Statement, (y) the
Exchange Offer is not consummated on or prior to April 30, 1997, or (z) either
the Exchange Offer Registration Statement or the Shelf Registration Statement
is filed and declared effective but thereafter ceases to be effective during
the 180-day period following the consummation of the Exchange Offer or the
three-year period following the effective date of the Shelf Registration
Statement, as appropriate, the Company will be required to pay liquidated
damages as described in the Registration Rights Agreement. See "Senior Notes
Registration Rights."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the "Letter of Transmittal"), $1,000 in principal amount of
Exchange Notes for each $1,000 in principal amount of Senior Notes. The terms
of the Exchange Notes are identical in all respects to the terms of the Senior
Notes for which they may be exchanged pursuant to this Exchange Offer, except
that (i) the Exchange Notes will generally be freely transferable by holders
thereof and (ii) the holders of the Exchange Notes will generally not be
entitled to registration rights under the Registration Rights Agreement. The
Exchange Notes will evidence the same debt as the Senior Notes and will be
entitled to the benefits of the Indenture. See "Description of the Notes" and
"Senior Notes Registration Rights."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange.
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Based on its view of interpretations set forth in no-action letters issued
by the Commission Staff to unrelated third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Senior Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder which is (i) a broker-dealer that
holds Notes acquired for its own account as a result of market-making or other
trading activities, (ii) any holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act or (iii) a broker-
dealer that acquired Senior Notes directly from the Company) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. Each broker-dealer that holds Senior Notes acquired for its
own account as a result of market-making activities or other trading
activities and who receives Exchange Notes pursuant to the Exchange Offer may
be a statutory underwriter, and must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging, and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Broker-dealers who acquired Senior Notes as
a result of market making or other trading activities may use this Prospectus,
as supplemented or amended, in connection with resales of the Exchange Notes.
The Company has agreed that it will make this Prospectus available to any
broker-dealer for use in connection with any such resale for a period of no
more than 180 days after the Expiration Date. Any holder that cannot rely upon
such interpretations will be ineligible, under Commission policy, to
participate in the Exchange Offer, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction involving the Notes.
Tendering holders of Senior Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Senior Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Senior Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance
of the Exchange Notes, such interest to be payable with the first interest
payment on the Exchange Notes, but will not receive any payment in respect of
interest on the Senior Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1997 unless the Company
in its sole discretion extends the period during which the Exchange Offer is
open, in which event the term "Expiration Date" means the latest time and date
on which the Exchange Offer, as so extended by the Company, expires. The
Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to IBJ
Schroder Bank & Trust Company (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Senior Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Company expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Senior Notes for any reason,
including if any of the events set forth below under "--Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Senior Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and
will either issue a press release or give
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written notice to the holders of the Senior Notes as promptly as practicable.
Unless the Company terminates the Exchange Offer prior to 5:00 p.m., Eastern
time, on the Expiration Date, the Company will exchange the Exchange Notes for
the Senior Notes on the Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time
that notice of such waiver or amendment is first published, sent or given to
holders of Senior Notes in the manner specified above, the Exchange Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the fifth business day from, and including, the date that such notice is
first so published, sent or given, then the Exchange Offer will be extended
until the expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Senior Notes and
will be finished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Notes.
HOW TO TENDER
The tender to the Company of Senior Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of a Senior Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Senior Notes being
tendered and any required signature guarantees (or a timely confirmation of a
book-entry transfer (a "Book Entry Confirmation") pursuant to the procedure
described below), to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Senior Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Senior Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other
institution (each an "Eligible Institution") that is a member of a recognized
signature guarantee medallion program within the meaning of Rule 17Ad-15 under
the Exchange Act. If the Exchange Notes and/or Senior Notes not exchanged are
to be delivered to an address other than that of the registered holder
appearing on the note register for the Senior Notes, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Senior Notes should contact such holder promptly and instruct such
holder to tender Senior Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Senior Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Notes at The Depository Trust Company (the "Book-
Entry Transfer Facility") for purpose of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial institution
that is a participant
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in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Senior Notes by causing the Book Entry Transfer Facility to transfer such
Senior Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Senior Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the back cover page of this Prospectus on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
THE METHOD OF DELIVERY OF SENIOR NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION
DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION
DATE.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Senior Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected
if the Exchange Agent has received at its office listed on the back cover
hereof on or prior to the Expiration Date a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address
of the tendering holder, the principal amount of the Senior Notes being
tendered, the names in which the Notes are registered and, if possible, the
certificate numbers of the Senior Notes to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of such letter, telegram or
facsimile transmission by the Eligible Institution, the Senior Notes, in
proper form for transfer, will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal
(and any other required documents). Unless Senior Notes being tendered by the
above-described method (or a timely, Book-Entry Confirmation) are deposited
with the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange
Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Senior Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Senior Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Senior Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel
to the Company, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or
irregularities in tenders of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders. Neither the
Company, the Exchange Agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or shall incur
any liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
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The party tendering Senior Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Senior Notes to be assigned, transferred and exchanged. The
Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Senior Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Senior Notes, and that, when
the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Senior Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The Transferor also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Senior Notes. The
Transferor further agrees that acceptance of any tendered Senior Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the
death or incapacity of the Transferor and every obligation of the Transferor
shall be binding upon the heirs, legal representatives, successors, assigns,
executors and administrators of such Transferor.
By tendering Senior Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an affiliate of the Company within the
meaning of Rule 405 under the Securities Act, it is not a broker-dealer that
owns Senior Notes acquired directly from the Company or an affiliate of the
Company, it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no
arrangement with any person to participate in the distribution of such
Exchange Notes or (b) it is an affiliate of the Company or of the Initial
Purchaser of the Senior Notes in the Initial Offering and that it will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Senior Notes to be withdrawn, the certificate
numbers of Senior Notes to be withdrawn, the principal amount of Senior Notes
to be withdrawn, a statement that such holder is withdrawing his election to
have such Senior Notes exchanged and the name of the registered holder of such
Senior Notes, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the beneficial
ownership of the Senior Notes being withdrawn. The Exchange Agent will return
the properly withdrawn Senior Notes promptly following receipt of notice of
withdrawal. All questions as to the validity of notices of withdrawal,
including time of receipt, will be determined by the Company, and such
determination will be final and binding on all parties.
ACCEPTANCE OF SENIOR NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Notes validly tendered and not withdrawn and the
issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted
for exchange validly tendered Senior Notes when, as and if the Company has
given written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Senior
Notes for the purposes of receiving Exchange Notes from the Company and
causing the Senior Notes to be assigned, transferred and exchanged. Upon the
terms and subject to the conditions of the Exchange Offer, delivery of
Exchange Notes to be issued in
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exchange for accepted Senior Notes will be made by the Exchange Agent promptly
after acceptance of the tendered Senior Notes. Senior Notes not accepted for
exchange by the Company will be returned without expense to the tendering
holders (or in the case of Senior Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to
the procedures described above, such non-exchanged Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) promptly
following the Expiration Date or, if the Company terminates the Exchange Offer
prior to the Expiration Date, promptly after the Exchange Offer is so
terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange
Notes in respect of any properly tendered Senior Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the
Exchange Agent and by timely public announcement, unless otherwise required by
applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if
(a) there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any
court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, (ii) assessing or seeking any damages as a
result thereof, or (iii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Senior Notes
pursuant to the Exchange Offer; (b) any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or
deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any government or governmental
authority, domestic or foreign, or any action shall have been taken, proposed
or threatened, by any government, governmental authority, agency or court,
domestic or foreign, that in the sole judgment of the Company might directly
or indirectly result in any of the consequences referred to in clauses (a)(i)
or (ii) above or, in the sole judgment of the Company, might result in the
holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Commission referred to on the cover page of this
Prospectus and under the heading "Explanatory Note" or would otherwise make it
inadvisable to proceed with the Exchange Offer, or (c) a material adverse
change shall have occurred in the business, condition (financial or
otherwise), operations, or prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in
whole or in part at any time or from time to time in its sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and each right will be deemed
an ongoing right which may be asserted at any time or from time to time. In
addition, the Company has reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or non-
fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Senior Notes
tendered and no Exchange Notes will be issued in exchange for any such Senior
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover page of this
Prospectus.
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Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The
Company will, however, pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and printing, accounting and legal fees, will
be paid by the Company and are estimated at approximately $500,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Senior Notes in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
However, the Company may at its discretion, take such action as it may deem
necessary to make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Senior Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the
Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer
is being made on behalf of the Company by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their
Senior Notes. Holders of the Senior Notes are urged to consult their financial
and tax advisors in making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled certain covenants contained in the terms of
the Senior Notes and the Registration Rights Agreement. Holders of the Senior
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and subject
to all the limitations applicable thereto, under the Indenture, except for any
such rights under the Registration Rights Agreement, which by their terms
terminate or cease to have further effect as a result of the making of this
Exchange Offer. See "Description of Notes." All untendered Senior Notes will
continue to be subject to the restriction on transfer set forth in the
Indenture. To the extent that Senior Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Senior Notes could be
adversely affected. See "Risk Factors--Consequences of Exchange and Failure to
Exchange."
The Company may in the future seek to acquire untendered Senior Notes in the
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Senior
Notes which are not tendered in the Exchange Offer.
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DESCRIPTION OF NOTES
GENERAL
The Exchange Notes will be issued, and the Senior Notes were issued,
pursuant to an Indenture (the "Indenture") between the Company, as issuer, and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), in a private
transaction that is not subject to the registration requirements of the
Securities Act. The terms of the Exchange Notes will, and the Senior Notes
currently, include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Exchange Notes will be,
and the Senior Notes are, subject to all such terms, and holders of Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of certain provisions of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
Indenture and the Registration Rights Agreement are available as set forth
under "Additional Information." The definitions of certain terms used in the
following summary are set forth below under the caption "Certain Definitions."
The Exchange Notes will be, and the Senior Notes are, unsecured senior
subordinated general obligations of the Company. The Company, subject to
certain exceptions, will cause each future Subsidiary of the Company that
guarantees the Company's obligations under the Credit Agreement or any other
Senior Indebtedness to enter into a supplemental indenture providing for the
unconditional guarantee of the Notes on a senior subordinated and unsecured
basis (a "Note Guarantee") by such Subsidiary (a "Guarantor") as required in
the Indenture; provided that any Guarantor that is released from its guarantee
of the Company's obligations under the Credit Agreement and any other Senior
Indebtedness shall also be released from its Note Guarantee.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $100 million and
will mature on December 1, 2006. Interest on the Notes will accrue at the rate
of 11 1/2% per annum and will be payable semiannually in arrears on June 1 and
December 1, commencing on June 1, 1997, to holders of record on the
immediately preceding May 15, and November 15. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date on which the Notes were originally
issued. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium, if any, interest and Liquidated
Damages on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest and Liquidated Damages may be made
by check mailed to the holders of the Notes at their respective addresses set
forth in the register of holders of Notes; provided that all payments with
respect to Global Notes and Certificated Notes (as such terms are defined
below under the caption "Book Entry, Delivery and Form") the holders of which
have given wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be in the office of the Trustee
maintained for such purpose. The Notes will be issued only in fully registered
form, without coupons and in denominations of $1,000 and integral multiples
thereof; provided that Certificated Notes originally purchased by or
transferred to institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) who are not "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) will
be subject to a minimum denomination of $250,000.
POTENTIAL NOTE GUARANTEES
The Company currently has no Subsidiaries, and there are no Note Guarantees.
Under any Note Guarantee that may exist in the future, the Guarantor will
irrevocably and unconditionally, jointly and severally, guarantee the
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of the Company under the
Indenture and the Notes. The Guarantor will agree to pay, in addition to any
amount stated above, any and all expenses (including reasonable counsel fees
and expenses) incurred by the Trustee in enforcing any rights under the Note
Guarantee. Each Note Guarantee will be limited in amount to an
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amount not to exceed the maximum amount that can be guaranteed by the relevant
Guarantor without rendering such Note Guarantee as it relates to such
Guarantor voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors
generally. See "Risk Factors--Fraudulent Conveyance Statutes."
Each Note Guarantee that may exist in the future will be a continuing
guarantee and shall (a) remain in full force and effect until payment in full
of all of the Company's Obligations under the Indenture and the Notes or until
such Guarantor is released from its guarantee of Indebtedness of the Company
under the Credit Agreement and any other Senior Indebtedness and (b) inure to
the benefit of and be enforceable by the Trustee, the holders and their
successors, transferees and assigns. Each Note Guarantee shall be a guarantee
of payment and not of collection.
SUBORDINATION
The payment of principal of, and premium, if any, interest and Liquidated
Damages, if any, on the Senior Notes are, and the Exchange Notes will be,
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash of all Obligations in respect of Senior Indebtedness,
which will include borrowings under the Credit Agreement, whether outstanding
on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash of all Obligations due with respect to Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness regardless of
whether such interest is an allowed claim in such proceeding) before the
holders of Notes will be entitled to receive any payment with respect to the
Notes, and until all Obligations with respect to Senior Indebtedness are paid
in full in cash, any distribution to which the holders of Notes would be
entitled shall be made to the holders of Senior Indebtedness (except that
holders of Notes may receive securities that are subordinated at least to the
same extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness and holders of Notes may recover payments
made from the trust described under the caption "Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or with respect to the Notes
(except in such subordinated securities or from the trust described under the
caption "Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, the premium, if any, or the interest on, or of
any regularly accruing fees constituting, Obligations in respect of Designated
Senior Indebtedness occurs and is continuing beyond any applicable period of
grace or (ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness which permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Agent Bank or the holders or the representative of the holders of any
Designated Senior Indebtedness. Payments on the Notes may and shall be resumed
(a) in the case of a payment default, upon the date on which such default is
cured or waived and (b) in case of a nonpayment default, the earlier of the
date on which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Indebtedness has been accelerated. No new
period of payment blockage may be commenced by a Payment Blockage Notice
unless and until 360 days have elapsed since the first day of the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice, unless such default has been cured or
waived for a period of not less than 90 days.
The Indenture requires that the Company promptly notify holders of Senior
Indebtedness if payment of the Notes is accelerated because of any Event of
Default.
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As a result of the subordination provisions described above, in the event of
an insolvency, bankruptcy, reorganization or liquidation of the Company, or
upon the occurrence of a Change of Control or an Asset Sale requiring
repurchase by the Company of any Notes, there may not be sufficient assets
remaining to satisfy the claims of the holders after satisfying the claims of
creditors of the Company who are holders of Senior Indebtedness and claims of
creditors of the Company's Subsidiaries. See "Risk Factors--Subordination of
Notes." On a pro forma basis, after giving effect to the Acquisition and the
Financing, including the application of the net proceeds from the issuance of
the Notes, the principal amount of Senior Indebtedness outstanding at
September 28, 1996 would have been approximately $48.0 million. As of December
28, 1996, the Company had borrowed approximately an additional $1.0 million of
Senior Indebtedness under the Revolving Credit Facility to finance working
capital needs. In addition, the Company expects to draw down an additional
$11.0 million under the Revolving Credit Facility during the first quarter of
calendar 1997 to finance working capital needs. Additional Senior Indebtedness
may be incurred by the Company from time to time, subject to certain
restrictions. The terms of the Indenture permit the Company and its
Subsidiaries to incur additional Indebtedness, subject to certain limitations,
including additional Senior Indebtedness and Indebtedness that may be secured
by Liens on property of the Company and its Subsidiaries. See the discussion
below under the captions "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock" and "Certain Covenants--Liens."
SUBORDINATION OF ANY FUTURE NOTE GUARANTEES; RELEASE OF ANY FUTURE NOTE
GUARANTEES
Any Note Guarantees that may exist in the future will be subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full
in cash of all Obligations in respect of Senior Indebtedness of the Company
and of the relevant Guarantor, which will include guarantees of each Guarantor
of Indebtedness of the Company under the Credit Agreement, whether outstanding
on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of a Guarantor in a liquidation or
dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor or its property,
an assignment for the benefit of creditors or any marshaling of such
Guarantor's assets and liabilities, the holders of Senior Indebtedness of such
Guarantor or Senior Indebtedness of the Company will be entitled to receive
payment in full in cash of all Obligations due in respect of Senior
Indebtedness of such Guarantor or Senior Indebtedness of the Company
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Indebtedness of such Guarantor or Senior
Indebtedness of the Company regardless of whether such interest is an allowed
claim in such proceeding) before the holders of Notes will be entitled to
receive any payment with respect to the relevant Note Guarantee, and until all
Obligations with respect to Senior Indebtedness of such Guarantor or Senior
Indebtedness of the Company are paid in full in cash, any payment that would
have been made under such Note Guarantee shall be made to the holders of
Senior Indebtedness of such Guarantor or Senior Indebtedness of the Company
(except that holders of Notes may receive securities that are subordinated at
least to the same extent as such Note Guarantee to Senior Indebtedness of such
Guarantor and to any securities issued in exchange for Senior Indebtedness of
such Guarantor).
Such Guarantor also may not make any payment upon or in respect of its Note
Guarantee (except in such subordinated securities of such Guarantor) if (i) a
default in the payment of the principal of, the premium, if any, or interest
on, or of any regularly accruing fees constituting, Obligations in respect of
Designated Senior Indebtedness of the relevant Guarantor or of the Company
occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to Designated Senior
Indebtedness of such Guarantor or of the Company which permits holders of the
Designated Senior Indebtedness of such Guarantor or of the Company as to which
such default relates to accelerate its maturity and the Trustee receives a
Payment Blockage Notice from the holders or the representative of the holders
of any Designated Senior Indebtedness of such Guarantor or of the Company.
Payments under any Note Guarantee may and shall be resumed (a) in the case of
a payment default, upon the date on which such default is cured or waived and
(b) in the case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness of the relevant Guarantor or of the Company has
been accelerated. No new period of payment blockage may be commenced by a
Payment Blockage Notice unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that
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existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice, unless such default has been cured or waived for a period of
not less than 90 days.
As a result of the subordination provisions described above, in the event
that any Guarantor is required to make a payment under a Note Guarantee, there
may not be sufficient assets remaining to satisfy the claims of the holders
with respect to such Note Guarantee after satisfying the claims of creditors
of such Guarantor who are holders of Senior Indebtedness of such Guarantor.
The terms of the Indenture permit Subsidiaries of the Company to incur
Indebtedness, subject to certain limitations, including additional Senior
Indebtedness and Indebtedness that may be secured by Liens on property of the
Subsidiaries. See the discussion below under the captions "Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock" and "Certain
Covenants--Liens."
The Indenture provides that any Guarantor that is released from its
guarantee of the Company's obligations under the Credit Agreement and any
other Senior Indebtedness shall also be released from its Note Guarantee. One
of the circumstances in which this could occur is in the event of a sale or
other disposition of all or substantially all of the assets of any Guarantor
or a sale or other disposition of all of the Capital Stock of any Guarantor;
provided, in each case, that such transaction is carried out in accordance
with the covenants described below under the captions "Repurchase at the
Option of Holders--Asset Sales" and "Certain Covenants--Merger, Consolidation
or Sale of Assets."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to December
1, 2001. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the applicable redemption date, if redeemed
during the twelve-month period beginning on December 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................................................. 105.750%
2002.............................................................. 103.833%
2003.............................................................. 101.917%
2004 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 1999, the
Company, at its option, may redeem the Notes, in part, with the net proceeds
of a Public Equity Offering made by the Company or of a capital contribution
made by GHC to the common equity capital of the Company with the net proceeds
of a Public Equity Offering made by GHC, at the redemption prices (expressed
as percentages of the principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of
the years indicated below; provided, however, that after any such redemption
the aggregate principal amount of the Notes outstanding must equal at least
65% of the aggregate principal amount of the Notes originally issued in this
Offering.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996.............................................................. 111.50%
1997.............................................................. 110.75%
1998.............................................................. 110.00%
</TABLE>
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the Nasdaq National Market or the principal national
securities exchange, if any, on which the Notes are listed, or, if the Notes
are not so listed, on a pro rata basis; provided that no Notes of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is
to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon
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cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon (the "Change of Control Purchase
Price") to the date of purchase (the "Change of Control Payment Date"). Within
30 days after the date of any Change of Control, the Company will mail a
notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Change of Control Payment Date shall be a business day not less than 30 days
nor more than 60 days after such notice is mailed.
On the Change of Control Payment Date, the Company will (1) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent an amount equal to the
Change of Control Purchase Price in respect of all Notes or portions thereof
so tendered and (3) deliver or cause to be delivered to the Trustee the Notes
so tendered together with an officers' certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture will
provide that, prior to complying with the provisions of this covenant, but in
any event within 30 days following a Change of Control, the Company will
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this covenant. The
Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Notes to require
that the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring. Although the existence of a
holder's right to require the Company to repurchase the Notes in respect of a
Change of Control may deter a third party from acquiring the Company in a
transaction that constitutes a Change of Control, the provisions of the
Indenture relating to a Change of Control in and of themselves may not afford
holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, recapitalization, restructuring, merger or
similar transaction involving the Company that may adversely affect holders,
if such transaction is not the type of transaction included within the
definition of a Change of Control.
The Credit Agreement provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent
or repay such borrowings, the Company will remain
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<PAGE>
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the holders of Notes.
The meaning of the phrase "all or substantially all," as used in the
definition of "Change of Control" with respect to a sale of assets, varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve
a disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether a Change of Control has occurred and
whether the Notes are subject to a Change of Control Offer.
Restrictions in the Indenture described herein on the ability of the Company
and its Subsidiaries to incur additional Indebtedness, to grant Liens on its
or their property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. In certain circumstances, such restrictions and the restrictions
on transactions with Affiliates may make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries. While such
restrictions cover a variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford the
holders of Notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, engage in an Asset Sale except an
Exempt Asset Sale, as defined below, unless (i) the Company (or such
Subsidiary) receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of,
and in the case of a lease of assets, a lease providing for rent and other
conditions which are no less favorable to the Company (or such Subsidiary) in
any material respect than the then prevailing market conditions (evidenced in
each case by a resolution of the Board of Directors of the Company set forth
in an officers' certificate delivered to the Trustee), and (ii) at least 75%
(100% in the case of lease payments) of the consideration therefor received by
the Company or such Subsidiary is in the form of cash, Cash Equivalents or
Eligible Assets. An "Exempt Asset Sale" means an Asset Sale on or after the
date of the Indenture, the Net Proceeds of which, plus the Net Proceeds of all
other Asset Sales concurrently or previously made in the same fiscal year do
not exceed $1.0 million. "Eligible Assets" means another business or any
substantial part of another business or other long-term assets, in each case,
in, or used or useful in, the same or a similar line of business as the
Company or any of its Subsidiaries was engaged in on the date of the Indenture
or any reasonable extensions or expansions thereof (including the Capital
Stock of another Person engaged in such business, provided such other Person
is, or immediately after giving effect to any such acquisition shall become, a
Wholly Owned Subsidiary of the Company).
The Company may apply, and may permit its Subsidiaries to apply, Net
Proceeds of an Asset Sale (other than an Exempt Asset Sale), at its option,
within 365 days after the consummation of such an Asset Sale (a) to
permanently reduce Senior Indebtedness other than Senior Revolving Debt, (b)
to permanently reduce Senior Revolving Debt (and to correspondingly reduce the
commitments, if any, with respect thereto), (c) to acquire Eligible Assets or
to reimburse the Company or its Subsidiaries for expenditures previously made
to acquire Eligible Assets, provided that any such expenditures were made not
more than 180 days prior to the consummation of such Asset Sale and were made
in contemplation of such Asset Sale and for the purpose of replacing the
assets to be disposed of in such Asset Sale, or (d) to reimburse the Company
or its Subsidiaries for expenditures made, and costs incurred, to repair,
rebuild, replace or restore property subject to loss, damage or taking to the
extent that the Net Proceeds consist of insurance proceeds received on account
of such loss, damage
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or taking. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Senior Revolving Debt or otherwise invest such Net
Proceeds temporarily in Cash Equivalents. Any Net Proceeds from Asset Sales
(other than Exempt Asset Sales) that are not applied within 365 days after the
consummation of an Asset Sale as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5.0 million, the Company will be required
to make an offer to all holders of Notes (an "Asset Sale Offer") to purchase,
on a pro rata basis, the principal amount of Notes equal in amount to the
Excess Proceeds (and not just the amount thereof that exceeds $5.0 million),
at a purchase price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon to the
date of purchase, in accordance with the procedures set forth in the
Indenture. If the aggregate principal amount of Notes surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero, subject to any
subsequent Asset Sale.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under the caption "Certain Covenants--
Merger, Consolidation or Sale of Assets" below, the successor corporation
shall be deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this covenant, and shall
comply with the provisions of this covenant with respect to such deemed sale
as if it were an Asset Sale. In addition, the fair market value of such
properties and assets of the Company or its Subsidiaries deemed to be sold
shall be deemed to be Net Proceeds for purposes of this covenant.
If at any time any non-cash consideration received by the Company or any
Subsidiary in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Proceeds thereof
shall be applied in accordance with this covenant.
The Company will comply with the requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control
or an Asset Sale.
The Company may use Net Proceeds from Exempt Asset Sales for general
corporate purposes (subject to the other provisions of the Indenture).
CERTAIN COVENANTS
Ownership of and Liens on Capital Stock
The Indenture provides that the Company (i) will not permit any Person
(other than the Company or any Wholly Owned Subsidiary of the Company) to own
any Capital Stock of any Subsidiary of the Company, and (ii) will not permit
any Subsidiary of the Company to issue Capital Stock (except to the Company or
to a Wholly Owned Subsidiary) or create, incur, assume or suffer to exist any
Lien thereon, in each case except (a) directors' qualifying shares, (b)
Capital Stock issued prior to the time such Person became a Subsidiary of the
Company, provided that such Capital Stock was not issued in anticipation of
such transaction, (c) if such Subsidiary merges with another Subsidiary of the
Company, (d) if such Subsidiary ceases to be a Subsidiary of the Company (as a
result of the sale of 100% of the shares of such Subsidiary, the Net Proceeds
from which are applied in accordance with "Repurchase at the Option of
Holders--Asset Sales"), (e) Liens on Capital Stock of any Subsidiary of the
Company to secure Indebtedness incurred under the Credit Agreement or other
Senior Indebtedness incurred in compliance with the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" or
(f) Liens on Capital Stock of any Subsidiary of the Company granted in
accordance with the provisions of the Indenture described below under the
caption "Liens."
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Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any distribution of any kind or character (whether in cash, securities
or other property) on account of any class of the Company's or any of its
Subsidiaries' Equity Interests or to holders thereof (including, without
limitation, any payment to stockholders of the Company in connection with a
merger or consolidation involving the Company), other than (a) dividends or
distributions payable solely in Equity Interests (other than Disqualified
Stock) of the Company or (b) dividends or distributions payable solely to the
Company or any Wholly Owned Subsidiary of the Company; (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company,
any Subsidiary of the Company, or any other Affiliate of the Company (other
than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness of
the Company or any Guarantor that is pari passu with or subordinated to the
Notes or the Note Guarantees prior to any scheduled repayment date, mandatory
sinking fund payment date or final maturity date (other than the Notes), other
than through the purchase, redemption or acquisition by the Company of
Indebtedness of the Company or any of its Subsidiaries through the issuance in
exchange therefor of Equity Interests (other than Disqualified Stock) of the
Company or (iv) make any Investment (other than Permitted Investments) (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning
of the applicable four-quarter period, the Company would have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its
Subsidiaries on or after the date of the Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii) and (iv) of the second sentence
of the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale after the date of the Indenture of Equity Interests of
the Company or of debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or convertible
debt securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock).
The foregoing clauses (b) and (c) will not prohibit (i) the payment of any
dividend on any class of Capital Stock of the Company or any Subsidiary of the
Company within 60 days after the date of declaration thereof, if on the date
on which such dividend was declared such payment would have complied with the
provisions of the Indenture; (ii) the making of any Investment in exchange
for, or out of the proceeds of, the substantially concurrent sale (other than
to a Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided, that any net cash proceeds that are utilized
for any such Investment, and any Net Income resulting therefrom, shall be
excluded from clause (c) of the preceding paragraph; (iii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); provided that
any net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition, and any Net Income resulting
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therefrom, shall be excluded from clause (c) of the preceding paragraph; (iv)
the defeasance, redemption or repurchase of pari passu or subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided, that any net cash proceeds that are utilized
for any such defeasance, redemption or repurchase, and any Net Income
resulting therefrom, shall be excluded from clause (c) of the preceding
paragraph; (v) any payment by the Company or any of its Subsidiaries directly
or through any direct or indirect parent company (A) in connection with the
repurchase of outstanding shares of Capital Stock of the Company or GHC
following the death, disability or termination of employment of Management
Stockholders and (B) of amounts required to be paid to participants or former
participants in employee benefit plans upon any termination of employment by
such participants as provided in the documents related thereto, in an
aggregate amount (for both clauses (A) and (B)) not to exceed $1.0 million in
any fiscal year (provided that any unused amount may be carried over to any
subsequent fiscal year subject to a maximum amount of $1.5 million in any
fiscal year); (vi) payments to GHC pursuant to a tax sharing agreement under
which the Company is allocated its proportionate share of the tax liability of
the affiliated group of corporations that file consolidated federal income tax
returns (or that file state or local income tax returns on a consolidated
basis); (vii) loans, advances, dividends or distributions by the Company or
any of its Subsidiaries to GHC to pay for corporate, administrative and
operating expenses in the ordinary course of business, including payment of
directors' and officers' liability insurance premiums, directors' fees, and
fees, expenses and indemnities in connection with the Acquisition and
Financing Transactions and related transactions, in an aggregate amount not to
exceed $1.0 million in any fiscal year; and (viii) (A) loans, advances,
dividends or distributions by the Company or any of its Subsidiaries to GHC
not to exceed an amount necessary to permit GHC to pay (1) its costs
(including all professional fees and expenses) incurred to comply with its
reporting obligations under federal or state laws or in connection with
reporting or other obligations under the Credit Agreement or any related
collateral documents or guarantees, (2) its expenses incurred in connection
with any public offering of equity securities which has been terminated by the
board of directors of GHC, the net proceeds of which were specifically
intended to be received by or contributed or loaned to the Company and (B)
loans or advances by the Company or any of its Subsidiaries to GHC not to
exceed an amount necessary to permit GHC to pay its interim expenses incurred
in connection with any public offering of equity securities the net proceeds
of which are specifically intended to be received by or contributed or loaned
to the Company, which, unless such offering shall have been terminated by the
board of directors of GHC, shall be repaid to the Company promptly out of the
proceeds of such offering.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an officers' certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described under this caption were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) and that the Company will not issue any Disqualified
Stock and will not permit any of its Subsidiaries to issue any shares of
preferred stock; provided, however, that the Company may incur Indebtedness
(including Acquired Indebtedness) and the Company may issue shares of
Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0 with respect to any incurrence on or before
December 31, 1997, or 2.25 to 1.0 with respect to any incurrence thereafter,
determined on a pro forma basis (including a pro
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<PAGE>
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period; and (ii) no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof.
The foregoing limitations on the incurrence of Indebtedness will not apply
to:
(i) the incurrence by the Company of Indebtedness under the Credit
Agreement (and the incurrence by Subsidiaries of the Company of guarantees
thereof) in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
not to exceed $80.0 million, less the aggregate amount of all Net Proceeds
of Asset Sales applied to permanently reduce the outstanding amount or the
commitments with respect to such Indebtedness pursuant to the covenant
described above under the caption "--Asset Sales" and less any amount
incurred pursuant to clause (vii) below;
(ii) the incurrence by the Company and any Guarantors of Indebtedness
represented by the Notes and the Note Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations (whether or not
incurred pursuant to Sale and Leaseback Transactions), mortgage financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of the Company or such
Subsidiary or any Permitted Refinancing Indebtedness thereof (provided that
the requirements of clause (ii) of the definition of Permitted Refinancing
Indebtedness need not be met for the purposes of this clause (iii)), in an
aggregate principal amount not to exceed $5.0 million at any time
outstanding;
(iv) the incurrence by the Company of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, any Indebtedness permitted
under the Fixed Charge Coverage Ratio test described in the first paragraph
of this caption;
(v) the incurrence by the Company or any of its Wholly Owned Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries or between or among any Wholly Owned
Subsidiaries; provided, however, that (a) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned Subsidiary of the
Company and (b) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary of the
Company shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations; and
(vii) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph other than
Indebtedness incurred pursuant to clause (i) above in excess of $70.0
million) in an aggregate principal amount at any time outstanding not to
exceed $10.0 million.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any of its assets, now owned or hereafter acquired,
securing any Indebtedness other than Senior Indebtedness or Indebtedness
specified in clauses (w) or (y) of the second sentence of the definition of
"Senior Indebtedness," unless the Notes, in the case of the Company, or the
Note Guarantees, in the case of any Guarantors, are secured equally and
ratably with such other Indebtedness; provided that, if such Indebtedness is
by its terms expressly subordinate to the Notes or the Note Guarantees, the
Lien securing such subordinate or junior Indebtedness shall be subordinate and
junior to the Lien securing the Notes or the Note Guarantees with the same
relative priority as such subordinated or junior Indebtedness shall have with
respect to the Notes or the Note Guarantees.
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Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to
(i) pay dividends or make any other distributions to the Company or any
of its Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits;
(ii) pay any Indebtedness or other obligation owed to the Company or any
of its Subsidiaries;
(iii) make loans or advances to the Company or any of its Subsidiaries;
(iv) sell, lease or transfer any of its properties or assets to the
Company or any of its Subsidiaries; or
(v) guarantee the obligations of the Company evidenced by the Notes or
any renewals, refinancings, exchanges, refundings or extensions thereof,
except for such encumbrances or restrictions existing under or by reason of
(A) the Indenture and the Notes, (B) applicable law, (C) any instrument
governing Acquired Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Acquired Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, provided that the Consolidated EBITDA of such Person is not taken
into account in determining whether such acquisition was permitted by the
terms of the Indenture, (D) any document or instrument governing Indebtedness
incurred pursuant to clause (iii) of the second paragraph under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," provided that
any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith, (E) Permitted Refinancing
Indebtedness of Indebtedness described in clause (C) hereof, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, or (F) any provision of the
Credit Agreement as such provision is in effect on the date of initial
issuance of the Notes.
Limitation on Layering Debt
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Indebtedness and
senior in any respect in right of payment to the Notes.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company will not, and the Company will not
permit any Subsidiary of the Company to, in a single transaction or series of
related transactions, consolidate or merge with or into (other than the
consolidation or merger of a Wholly Owned Subsidiary of the Company with
another Wholly Owned Subsidiary of the Company or into the Company) (whether
or not the Company or such Subsidiary is the surviving corporation), or
directly and/or indirectly through its Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company and its Subsidiaries (determined on a
consolidated basis for the Company and its Subsidiaries taken as a whole) in
one or more related transactions to, another corporation, Person or entity
unless
(i) either (a) the Company, in the case of a transaction involving the
Company, or such Subsidiary, in the case of a transaction involving a
Subsidiary of the Company, is the surviving corporation or (b) in the case
of a transaction involving the Company or a Guarantor, the entity or the
Person formed by or surviving any such consolidation or merger (if other
than the Company or such Guarantor) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States of
America, any state thereof or the District of Columbia
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and expressly assumes all the obligations of the Company under the Notes
and the Indenture or such Guarantor under the relevant Note Guarantee and
the Indenture, as the case may be, pursuant to a supplemental indenture in
a form reasonably satisfactory to the Trustee;
(ii) immediately after such transaction no Default or Event of Default
exists;
(iii) in the case of a transaction involving the Company, the Company or,
if other than the Company, the corporation formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company immediately
preceding the transaction; provided, however that in the case of a
transaction involving a merger or consolidation between GHC and the Company
in contemplation of an underwritten primary public offering of the common
stock of the corporation formed by or surviving any such merger or
consolidation, the Consolidated Net Worth of such corporation immediately
after the transaction may be up to $1.0 million less than the Consolidated
Net Worth of the Company immediately preceding the transaction, and (B)
will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock";
(iv) if, as a result of any such transaction, property or assets of the
Company or a Guarantor would become subject to a Lien securing Indebtedness
not excepted from the provisions of the Indenture described above under the
caption "--Liens," the Company, any such Guarantor or the surviving entity,
as the case may be, shall have secured the Notes and the relevant Note
Guarantee, as required by such provisions; and
(v) the Company shall have delivered to the Trustee an officers'
certificate and, except in the case of a merger of a Subsidiary of the
Company into the Company or into a Wholly Owned Subsidiary of the Company,
an opinion of counsel, each stating that such consolidation, merger,
conveyance, lease or disposition and any supplemental indenture with
respect thereto, comply with all of the terms of this covenant and that all
conditions precedent provided for in this provision relating to such
transaction or series of transactions have been complied with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Company.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not cause or
permit any of its Subsidiaries to, enter into any Sale and Leaseback
Transaction. Notwithstanding the foregoing, the Company or any Subsidiary may
enter into a Sale and Leaseback Transaction if: (i) after giving pro forma
effect to any such Sale and Leaseback Transaction, the Company shall be in
compliance with the covenants described under the captions "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and "--Liens" above; (ii) the
gross cash proceeds of such Sale and Leaseback Transaction are at least equal
to the fair market value of such property (as determined by the Board, whose
determination shall be conclusive if made in good faith and evidenced by a
Board Resolution); (iii) the aggregate rent payable by the Company in respect
of such Sale and Leaseback Transaction is not in excess of the fair market
rental value of the property leased pursuant to such Sale and Leaseback
Transaction; and (iv) the Company shall apply the net cash proceeds of the
sale as provided under "Repurchase at the Option of Holders--Asset Sales"
above, to the extent required therein.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, in any one transaction or a
series of related transactions, sell, lease, transfer or otherwise dispose of
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any of its properties, assets or services to, or make any payment to, or
purchase any property, assets or services from, or enter into or make any
agreement, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), other than
Exempt Affiliate Transactions, unless (i) such Affiliate Transaction is on
terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable arm's length
transaction by the Company or such Subsidiary with a Person that is not an
Affiliate and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction entered into after the date of the Indenture involving
aggregate consideration in excess of $1.0 million, a resolution of the Board
of Directors of the Company set forth in an officers' certificate certifying
that such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company and (b) with respect to any
Affiliate Transaction involving aggregate consideration equal to or in excess
of $5.0 million, a written opinion issued by an investment banking firm of
recognized national standing that such Affiliate Transaction is fair to the
Company or such Subsidiary, as the case may be, from a financial point of
view.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the holders of Notes, and file with the Trustee,
within 15 days after it is or would have been required to file such with the
Commission all information, documents and reports specified in Section 13 and
Section 15(d) of the Exchange Act; provided, however, that the Company will
not be required to furnish to the holders of Notes or file with the Commission
a report on Form 10-K for fiscal 1996. In addition, whether or not required by
the rules and regulations of the Commission, at any time after the Company
files an Exchange Offer Registration Statement or a Shelf Registration
Statement, the Company will file a copy of all such information, documents and
reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the holders and to securities analysts and prospective investors,
upon their request, the information specified in Rule 144A(d)(4) under the
Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company to comply with the provisions described under the captions
"Repurchase at Option of Holders--Change of Control," "Repurchase at Option of
Holders--Asset Sales," "--Ownership of and Liens on Capital Stock," "--
Restricted Payments," "--Incurrence of Indebtedness and Issuance of Preferred
Stock" or "--Merger, Consolidation or Sale of Assets"; (iv) failure by the
Company to comply with any of its other agreements or covenants in the
Indenture or the Notes for 60 days after written notice by the Trustee or
holders of at least 25% of the aggregate principal amount of the Notes
outstanding; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the
date of the Indenture, which default (a) is caused by a failure to pay
principal of such Indebtedness at final maturity thereof (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness as to which
there has been a Payment Default or the maturity of which has been so
accelerated, exceeds in the aggregate $10.0 million; (vi) failure by the
Company or any of its Subsidiaries to pay final judgments (not fully covered
by insurance) which exceed in the aggregate $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; (vii) certain events
of bankruptcy, insolvency or reorganization with respect to the Company or any
of its Subsidiaries; and
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(viii) the Note Guarantee of any Guarantor is held in any judicial proceeding
to be unenforceable or invalid or ceases for any reason to be in full force
and effect (other than in accordance with the terms of the Indenture) or any
Guarantor or any Person acting on behalf of any Guarantor denies or disaffirms
such Guarantor's obligations under its Note Guarantee (other than by reason of
a release of such Guarantor from its Note Guarantee in accordance with the
terms of the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in aggregate principal amount of all of the then outstanding
Notes may declare all the Notes to be due and payable immediately. After such
acceleration, but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of principal, interest, premium or
Liquidated Damages that have become due solely because of such acceleration,
have been cured or waived as provided in the Indenture. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any Subsidiary of the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Indenture
provides that if a Default occurs and is continuing, generally the Trustee
must give notice of such Default to the holders within 90 days after the
occurrence of such Default. The Trustee may withhold from holders of the Notes
notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or premium, if any, or
interest or Liquidated Damages) if it determines that withholding notice is in
their interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest or premium or Liquidated Damages on, or the principal of,
any Note (except a payment default resulting from an acceleration that has
been rescinded) or in respect of a provision that cannot be amended or waived
without the consent of the holder affected. See "Amendment, Supplement and
Waiver."
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon becoming aware of any
Default or Event of Default, the Company is required to deliver to the Trustee
a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. No director, officer, employee,
incorporator or stockholder of any Guarantor, as such, shall have any
liability for any obligations of such Guarantor under its Note Guarantee or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Note Guarantees. Such waiver
may not be effective to waive liabilities under the federal securities laws
and it is the view of the Commission that such waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
At its option and at any time, the Company may elect to have all of the
obligations of the Company and the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments
are due from the trust referred to below, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of
Notes,
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mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
Company's obligations under the Registration Rights Agreement, (iv) the
rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (v) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including nonpayment,
bankruptcy and insolvency events) described under "Events of Default" will no
longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds (or the granting of a Lien as security therefor) to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 123rd day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under the Credit
Agreement or any other material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company must
deliver to the Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the holders of Notes
over other creditors of the Company or the Guarantors or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company, the
Guarantors or others; (vii) such Legal Defeasance or Covenant Defeasance shall
not result in the trust arising from such deposit constituting an investment
company within the meaning of the Investment Company Act of 1940, as amended,
unless such trust shall be registered under such Act or exempt from
registration thereunder; and (viii) the Company must deliver to the Trustee an
officers' certificate and a opinion of counsel, each stating that all
conditions precedent relating to Legal Defeasance or Covenant Defeasance, as
the case may be, have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The Trustee will act as paying agent and registrar for the Notes. The Company,
the registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents as well as
certifications, legal opinions and other information and the Company may
require a holder to pay any taxes and fees required by law or permitted
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by the Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Notes), and any existing default or failure to comply with any provision of
the Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Without the consent of each holder, an amendment or waiver may not (i)
reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or premium on or
change the fixed maturity of any Note or alter the provisions with respect to
the redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages on the Notes (except a
rescission of acceleration of the Notes by the holders of at least a majority
in aggregate principal amount of the then outstanding Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of or premium, if
any, or interest or Liquidated Damages on the Notes, (vii) waive a redemption
payment with respect to any Note (other than a payment required by one of the
covenants described above under the caption "Repurchase at the Option of
Holders"), (viii) modify the ranking or priority of the Notes or the Note
Guarantee of any Guarantor, (ix) release any Guarantor from any of its
obligations under its Note Guarantee or the Indenture other than in accordance
with the terms of the Indenture or (x) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of Certificated Notes, to provide for the
assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of Notes or that does not adversely affect
the interests of the holders of the Notes in any material respect, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
Without the consent of the holders of Senior Indebtedness (or any group or
representative thereof authorized to give a consent), no amendment or
supplement to the subordination or defeasance provisions of the Indenture
shall be effective if such amendment or supplement adversely affects the
rights of any holder of Senior Indebtedness.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any terms or provisions of the Notes,
unless such consideration is offered to be paid or agreed to be paid to all
holders of the Notes which so consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
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CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture. The
Trustee's current address is One State Street, New York, New York 10004.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not have been cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in
the conduct of his own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Gorges/Quik-to-Fix
Foods, Inc., 9441 LBJ Freeway, Suite 214, Dallas, Texas 75243, Attn:
President.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form and may, if agreed by the Company and the holder, be issued in
the form of a permanent global certificate in fully registered form (the
"Global Note") and will be deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of a nominee of
DTC.
Global Note. The Company expects that upon the issuance of the Global Note,
DTC or its custodian will credit, on its book entry registration and transfer
system, the respective principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Note to the accounts of
Persons who have accounts with such depositary. Ownership of beneficial
interests in the Global Notes will be limited to Persons who have accounts
with DTC ("participants") or Persons who hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interest of participants) and the
records of participants (with respect to interests of Persons other than
participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner
of an interest in the Global Note will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Indenture.
Payments of the principal, of premium (if any), and interest and Liquidated
Damages (if any) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. Neither the Company, the
Trustee nor any Paying Agent will have any responsibility or liability for any
aspect of the record relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any record relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium (if any) or interest or Liquidated Damages (if any) in
respect of the Global Note, will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Note held through such participants will
be governed by standing instructions and customary practice, as is now the
case with securities held for the accounts of customers registered in the
names of nominees for such customers. Such payments will be the responsibility
of such participants.
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The Company expects that transfers between participants in DTC will be
effected in the ordinary way in accordance with DTC rules and will be settled
in clearinghouse funds. If a holder requires physical delivery of a
Certificated Note for any reason, including to sell Exchange Notes to Persons
in states which require physical delivery of such Exchange Notes or to pledge
such Exchange Notes, such holder must transfer its interest in the Global Note
in accordance with the normal procedures of DTC and the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Note is credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Exchange
Notes or the Indenture, DTC will exchange the Global Note for Exchange Notes
in definitive form, which it will distribute to its participants.
To the Company's knowledge, DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Initial Purchaser), banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC customarily agrees to the foregoing procedures in order to
facilitate transfers of interests in global notes among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may
be discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. Subject to certain conditions, any person having a
beneficial interest in a Global Note may, upon request to the Trustee,
exchange such beneficial interest for the Exchange Notes in the form of
Certificated Notes. Upon any such issuance, such Trustee is required to
register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). All such
Certificated Notes, other than the registered Exchange Notes, will continue to
be subject to the restrictive legend requirements presently in effect. If DTC
is at any time unwilling or unable to continue as a depositary for the Global
Note and a successor depositary is not appointed by the Company within 90
days, Exchange Notes in definitive form will be issued in exchange for the
Global Note.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means with respect to any specified Person, (i) any
Indebtedness or Disqualified Stock of any other Person existing at the time
such other Person is merged with or into or becomes a Subsidiary of such
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person, and
in either case for purposes of the Indenture shall be deemed to be incurred by
such specified Person at the time such other Person is merged with or into or
becomes a Subsidiary of such specified Person or at the time such asset is
acquired by such specified Person, as the case may be.
"Affiliate" of any specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director
or executive officer of (a) such specified Person or (b) any Person described
in the preceding clause (i).
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For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise, provided that beneficial ownership of
10% or more of any class, or any series of any class, of equity securities of
a Person, whether or not voting, shall be deemed to be control; and provided,
however, that NBIC or any affiliate (as determined without giving effect to
this proviso) of NBIC shall not be deemed to be an Affiliate of any Person
solely by reason of its ownership of non-voting equity securities of such
Person.
"Agent Bank" means NationsBank of Texas, N.A. and its successors under the
Credit Agreement.
"Asset Sale" means with respect to any Person, the sale, lease, conveyance
or other disposition, that does not constitute a Restricted Payment or an
Investment, by such Person of any of its assets (including, without
limitation, by way of a Sale and Leaseback Transaction and including the
issuance, sale or transfer of any Equity Interests in any Subsidiary of the
Company) other than to the Company (including the receipt of proceeds of
insurance paid on account of the loss of or damage to any asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceeding, and including the receipt of proceeds of business interruption
insurance), in each case, in one or a series of related transactions;
provided, that notwithstanding the foregoing the term "Asset Sale" shall not
include: (a) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company, in accordance with the
terms of the covenant described under the caption "Certain Covenants--Merger,
Consolidation or Sale of Assets," (b) the sale or lease of equipment,
inventory, accounts receivable or other assets in the ordinary course of
business consistent with past practice, (c) a transfer of assets by the
Company to a Wholly Owned Subsidiary of the Company or by a Wholly Owned
Subsidiary of the Company to the Company or to another Wholly Owned Subsidiary
of the Company, (d) an issuance of Equity Interests by a Wholly Owned
Subsidiary of the Company to the Company or to another Wholly Owned Subsidiary
of the Company, provided that the consideration paid by the Company or such
Wholly Owned Subsidiary of the Company for such Equity Interests shall be
deemed to be an Investment, or (e) the sale or other disposition of cash or
Cash Equivalents.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, capital stock, (ii)
in the case of an association or business entity, any and all shares,
interests, participations, rights, or other equivalents (however designated)
of capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $500
million or (ii) any bank whose short-term commercial paper rating from S&P is
at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case
with maturities of not more than twelve months from the date of acquisition,
and (c) commercial paper issued by any Approved Lender (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-2 (or the equivalent thereof) or better by S&P or
P-2 (or the equivalent thereof) or better by Moody's and maturing within
twelve months of the date of acquisition.
For
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"Change of Control" means such time as either:
(i) prior to the initial Public Equity Offering by the Company or GHC of
its common stock, the Initial Shareholders cease to be, directly or
indirectly, the beneficial owners, in the aggregate, of more than 50% of
the voting power of the Voting Stock of the Company and of GHC, in each
case on a fully-diluted basis, after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Company or GHC, as the case may be, convertible into or exercisable for
Voting Stock of the Company or GHC, as the case may be (whether or not such
securities are then currently convertible or exercisable); or
(ii) after the initial Public Equity Offering by the Company or GHC of
its common stock, (a) any "person" or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) (other than one or more of the
Initial Shareholders) has become, directly or indirectly, the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), by way of
merger, consolidation or otherwise, of 35% or more of the voting power of
the Voting Stock of the Company or GHC on a fully-diluted basis, after
giving effect to the conversion and exercise of all outstanding warrants,
options and other securities of the Company or GHC, as the case may be,
convertible into or exercisable for Voting Stock of the Company or GHC, as
the case may be (whether or not such securities are then currently
convertible or exercisable) and (b) such person or group is or becomes,
directly or indirectly, the beneficial owner of a greater percentage of the
voting power of the Voting Stock of the Company or of GHC, as the case may
be, calculated on such fully-diluted basis, than the percentage then
beneficially owned by the Initial Shareholders; or
(iii) the Company merges with or into another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially
all of its assets to any Person, or any Person merges with or into the
Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where
(x) the outstanding Voting Stock of the Company is converted into or
exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation and/or (2) cash, securities and other
property in an amount which could be paid by the Company as a Restricted
Payment under the Indenture and (y) immediately after such transaction no
"person" or "group" (within the meaning of Section 13(d) and 14(d) of the
Exchange Act) (other than one or more of the Initial Shareholders) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of
all shares that any such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of (1) 35% or more of the voting power of the
Voting Stock of the surviving or transferee corporation on a fully diluted
basis, after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities of such surviving or
transferee corporation, convertible into or exercisable for Voting Stock of
such surviving or transferee corporation (whether or not such securities
are then currently convertible or exercisable) and (2) a greater percentage
of the voting power of the Voting Stock of such surviving or transferee
corporation calculated on such fully diluted basis, than the percentage
then beneficially owned by the Initial Shareholders; or
(iv) during any period of two consecutive calendar years, individuals who
at the beginning of such period constituted either the board of directors
of the Company or of GHC, as the case may be, together with any new members
of such board of directors (a) whose election by such board of directors or
whose nomination for election by the stockholders of the Company or the
stockholders of GHC, as the case may be, was approved by a vote of a
majority of the members of such board of directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved or (b) elected by the
Initial Shareholders, cease for any reason to constitute a majority of the
directors of the Company or of GHC, as the case may be, then in office.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum of, without duplication, (i) the Consolidated Net Income of such Person
and its Subsidiaries for such period, plus (ii) the Fixed Charges
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for such period, plus (iii) amortization of deferred financing charges for
such period, plus (iv) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in computing
Consolidated Net Income for such period), plus (v) consolidated depreciation,
amortization and other noncash charges of such Person and its Subsidiaries
required to be reflected as expenses on the books and records of such Person,
minus (vi) cash payments with respect to any nonrecurring, noncash charges
previously added back pursuant to clause (v), and excluding (vii) the impact
of foreign currency translations. Notwithstanding the foregoing, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and other noncash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated EBITDA only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if
a corresponding amount would be permitted at the date of determination to be
dividended to such Person by such Subsidiary without any prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary
or that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income
of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained), or, directly or
indirectly, by operation of the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups subsequent to the date of the Indenture in the book value of any
asset owned by such Person or a consolidated Subsidiary of such Person (other
than purchase accounting adjustments made, in connection with any acquisition
of any entity that becomes a consolidated Subsidiary of such Person after the
date of the Indenture, to the book value of the assets of such entity), (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and
(z) all unamortized debt discount and expense and unamortized deferred charges
as of such date, all of the foregoing determined on a consolidated basis in
accordance with GAAP.
"Credit Agreement" means that certain Credit Agreement, dated as of the date
of the Indenture, by and among the Company and NationsBank of Texas, N.A., as
agent, and the lenders parties thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, increased,
renewed, refunded, replaced, restated or refinanced in whole or in part from
time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
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"Designated Senior Indebtedness" means in respect of the Company, (i) so
long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) any
other Senior Indebtedness permitted under the Indenture the principal amount
of which is $15.0 million or more and that has been designated by the Company
as "Designated Senior Indebtedness" and, in respect of any Guarantor, any
guarantee by such Guarantor of Designated Senior Indebtedness of the Company.
"Disqualified Stock" means (a) with respect to any Person, Capital Stock of
such Person that, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date which is one year after the date
on which the Notes mature and (b) with respect to any Subsidiary of such
Person (including with respect to any Subsidiary of the Company), any Capital
Stock other than any common stock with no preference, privileges, or
redemption or repayment provisions.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock), whether outstanding
prior to, on or after the date of the Indenture.
"Exempt Affiliate Transactions" means (a) transactions between or among the
Company and/or its Wholly Owned Subsidiaries, (b) advances to officers of the
Company or any Subsidiary of the Company in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Company or such Subsidiary or in
connection with any relocation, (c) fees and compensation paid to and
indemnity provided on behalf of directors, officers or employees of the
Company or any Subsidiary of the Company in the ordinary course of business,
(d) any employment agreement that is in effect on the date of the Indenture
and any such agreement entered into by the Company or a Subsidiary of the
Company after the date of the Indenture in the ordinary course of business of
the Company or such Subsidiary, (e) any Restricted Payment that is not
prohibited by the covenant set forth under the caption "Certain Covenants--
Restricted Payments" above, (f) payments to the General Partner of (i)
retainer fees pursuant to the Consulting Agreement not to exceed $30,000 per
month and (ii) annual performance bonuses as provided for under the Consulting
Agreement not to exceed $500,000 in any fiscal year, (g) the delegation by the
General Partner of its rights and obligations under the Consulting Agreement
to the Management Company and (h) payment to the Management Company of an
investment banking fee in an amount not to exceed $2.65 million.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, guarantees or repays or redeems any Indebtedness
(other than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the four-quarter reference period for which
the Fixed Charge Coverage Ratio is being calculated but on or prior to the
date on which the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence, assumption,
guarantee, repayment or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first
day of the four-quarter reference period and Consolidated EBITDA for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or
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businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date and (iv) in the event that any one or more of the fiscal
quarters included in the four-quarter reference period for which the Fixed
Charge Coverage Ratio of the Company is being calculated is a fiscal quarter
ending on or before September 28, 1996, Consolidated EBITDA for each such
quarter shall be deemed to be $9.25 million, subject to adjustment with
respect to events occurring after September 28, 1996 as required above. $9.25
million is one quarter of Adjusted Pro Forma EBITDA as shown in Note 3 to
"Selected Financial Data."
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Subsidiaries for such period (net of any interest income) including,
without limitation, amortization of original issue discount, noncash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations, but excluding amortization of deferred
financing charges for such period and (ii) the consolidated interest expense
of such Person and its Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Subsidiaries or secured by a Lien on
assets of such Person or one of its Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments (and noncash dividend payments in the case of a Person that
is a Subsidiary) on any series of preferred stock of such Person payable to a
party other than the Company or a Wholly Owned Subsidiary, multiplied by (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
for taxes based on the income or profits of such Person, expressed as a
decimal, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession of the United States, that are applicable to the circumstances as
of the date of determination; provided that, except as specifically provided
in the Indenture, all calculations made for purposes of determining compliance
with the covenants set forth in Article IV and Section 5.01 of the Indenture
(which include the covenants described above under "--Certain Covenants")
shall use GAAP as in effect on the date of the Indenture for financial
statements for fiscal years ending on or after September 28, 1996.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary of the Company formed or acquired (and
each other Person that becomes a Subsidiary of the Company) after the date of
the Indenture that guarantees the Company's obligations under the Credit
Agreement or any other Senior Indebtedness; provided that any Guarantor that
is released from its guarantee of the Company's obligations under the Credit
Agreement and any other Senior Indebtedness shall also be released from its
Note Guarantee.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person entered into in the ordinary course of business under interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and other similar financial agreements or arrangements designed to
protect such Person against, or manage the exposure of such Person to,
fluctuations in interest rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital
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Lease Obligations, or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable incurred in the ordinary
course of business, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such indebtedness is assumed by such Person) and,
to the extent not otherwise included, the guarantee by such Person of any
indebtedness of any other Person.
"Initial Stockholders" means CGW, Management Stockholders, NBIC, FPGT and
any Affiliates of NBIC or FPGT.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding advances to officers of the type
specified in clause (b) of the definition of Exempt Affiliate Transactions),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition by the Company for consideration consisting of
common equity securities of the Company shall not be deemed to be an
Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Stockholder" means an officer, director or employee of the
Company or any Subsidiary of the Company who is the beneficial owner of any
Capital Stock of the Company or GHC.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding, however, (i)
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to Sale and Leaseback
Transactions) or (b) the disposition of any securities by such Person or any
of its Subsidiaries or the extinguishment of any Indebtedness of such Person
or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any
noncash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), taxes paid or payable as
a result thereof, and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, premiums, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investments in the Company; (b) any
Investments in Cash Equivalents; (c) Investments made as a result of the
receipt of noncash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales"; (d) Investments
outstanding as of the date of the Indenture; and (e) Investments in Wholly
Owned Subsidiaries of the Company and any entity that (i) is engaged in the
same or
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a similar line of business as the Company or any of its Subsidiaries was
engaged in on the date of the Indenture or any reasonable extensions or
expansions thereof and (ii) as a result of such Investment, becomes a Wholly
Owned Subsidiary of the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount of such Permitted Refinancing Indebtedness does not exceed
the principal amount of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary of the Company that is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Public Equity Offering" means an underwritten primary public offering of
the common stock of the Company or of the common stock of GHC pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act (whether alone or in conjunction with a secondary public
offering).
"Purchase Money Obligations" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
construction and/or acquisition of real or personal property to be used in the
business of such Person or any of its Subsidiaries in an amount that is not
more than 100% of the cost of such property, and incurred within 180 days
after the date of such construction or acquisition (excluding accounts payable
to trade creditors incurred in the ordinary course of business).
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of any property, whether owned by the
Company or any Subsidiary as of the date of the Indenture or later acquired,
which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property.
"Senior Bank Debt" means the Obligations outstanding under the Credit
Agreement.
"Senior Indebtedness" means, with respect to the Company, (i) the Senior
Bank Debt and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to any Indebtedness for money borrowed. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not
include (w) any liability for federal, state, local or other taxes owed or
owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness to the extent that it is incurred in violation of the Indenture
(other than Senior Bank Debt incurred in accordance with the terms of the
Credit Agreement as in effect on the date of the initial issuance of the
Notes). "Senior Indebtedness" means, with respect to any Guarantor, any
guarantee by such Guarantor of Senior Indebtedness of the Company.
"Senior Revolving Debt" means revolving credit borrowings and letters of
credit under the Credit Agreement and/or any successor facility or facilities.
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"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"U.S. Government Obligations" means (i) securities that are (a) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at
the option of the issuer thereof; and (ii) depositary receipts issued by a
bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation which is specified in clause (i)
above and held by such bank for the account of the holder of such depositary
receipt, or with respect to any specific payment of principal or interest on
any U.S. Government Obligation which is so specified and held, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest of the U.S.
Government Obligation evidenced by such depositary receipt.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF CREDIT FACILITIES
GENERAL
The Company has entered into a credit agreement (the "Credit Agreement")
with NationsBank of Texas, N.A., as administrative agent (the "Agent") and a
syndicate of banks and other financial institutions (the "Lenders") which
provides the Company with a $30.0 million Revolving Credit Facility and a
$40.0 million Term Loan Facility. The Revolving Credit Facility includes a
subfacility for commercial and standby letters of credit of up to $7.0
million. The Credit Agreement is guaranteed by GHC and is required to be
guaranteed by each subsidiary of the Company and GHC acquired or created after
the Acquisition Closing (collectively, the "Guarantors"). This information
relating to the Credit Agreement is qualified in its entirety by reference to
the complete text of the documents entered into or to be entered into in
connection therewith, copies of which will be available from the Company upon
request.
The borrowings under the Credit Agreement were used, to finance the
Acquisition, to pay various costs associated with the Transactions and, in the
case of the Revolving Credit Facility, were, and currently are being used, for
general working capital purposes. The entire amount of the Term Loan Facility
and approximately $8.0 million of the Revolving Credit Facility were funded
simultaneously at the Acquisition Closing. As of December 28, 1996, the
outstanding principal amount of Loans (as defined in the Credit Agreement) was
approximately $49.0.
MATURITY
The maturity of the Term Loan Facility is five years from the Acquisition
Closing and all amounts outstanding thereunder will be due on such date. The
Term Loan is subject to quarterly amortization of principal commencing on
March 31, 1997, in an aggregate amount of $3.75 million in fiscal 1997, $6.5
million in fiscal 1998, $8.5 million in fiscal 1999, $9.0 million in fiscal
2000, $9.75 million in fiscal 2001 and $2.5 million in fiscal 2002.
The Revolving Credit Facility will terminate, and all amounts outstanding
thereunder will become due and payable in full five years from the Acquisition
Closing.
MANDATORY PREPAYMENT
The Credit Agreement requires mandatory prepayment of Loans (as defined in
the Credit Agreement) in an amount equal to 100% of the net cash proceeds
received by the Company or any Guarantor in connection with any sales of
assets the proceeds of which are not used to acquire replacement assets. The
Credit Agreement also requires mandatory prepayment of loans in an amount
equal to 50% of the net cash proceeds received by the Company or any Guarantor
from the issuance of equity securities. Further, the Company is required to
prepay loans in an amount equal to 50% of the Excess Cash Flow (as defined in
the Credit Agreement) earned by the Company for each fiscal year. Until paid
in full, all such mandatory prepayments will be applied to the Term Loan
Facility pro rata to the reduction of the remaining scheduled amortization
payments. After the prepayment in full of the Term Loan, all such mandatory
prepayments will be applied as permanent reductions to the Revolving Credit
Facility.
INTEREST
Outstanding borrowings under the Credit Agreement bear interest at a
floating rate per annum equal to, at the Company's option: (i) the Base Rate
plus 1.50% (as defined in the Credit Agreement) or (ii) the Eurodollar Rate
(as defined in the Credit Agreement) plus 2.50%; provided, however, the
interest rate margins are subject to reductions in the event the Company meets
certain performance targets based on a funded debt to EBITDA ratio. The
Company is required at all times to cause the lesser of (i) 50% of the sum of
(A) all Funded Debt (as defined in the Credit Agreement) and (B) the Unused
Commitment (as defined in the Credit Agreement) and (ii) all Funded Debt (as
defined in the Credit Agreement) to bear interest at a fixed rate of interest.
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FEES
The Company is required to pay to the Lenders a commitment fee equal to 0.5%
per annum, payable in arrears on a quarterly basis, on the committed undrawn
amount of the Revolving Credit Facility during the preceding quarter;
provided, however, that such fee is subject to reduction to 0.375% in the
event the Company meets certain performance tests based on a funded debt to
EBITDA ratio. The Company is also required to pay to the Lenders participating
in the Revolving Credit Facility certain letter of credit fees, plus a
fronting fee to be paid to the issuing bank for its own account. The Agent and
the Lenders shall receive such other fees as have been separately agreed upon
with the Agent. See "Certain Transactions."
SECURITY
Indebtedness outstanding under the Credit Agreement is secured by a first-
priority security interest in, and lien upon, substantially all of the
Company's present and future tangible and intangible assets, including all
accounts receivable, inventory, machinery, equipment, real property, capital
stock of Subsidiaries, contract rights, trademarks, copyrights, patents,
license agreements and general intangibles. GHC and each Guarantor are
required to grant a security interest and lien in all of its present and
future assets to secure its guarantee. Further, GHC and each Guarantor are
required to pledge all of the capital stock of each of its Subsidiaries
(including the capital stock of the Company) as collateral.
COVENANTS
The Credit Agreement includes customary financial and other covenants
including, among other things: (i) maximum leverage ratio; (ii) minimum fixed
charge coverage ratio; (iii) interest coverage ratio; (iv) minimum net worth;
(v) limitations on indebtedness and guaranties; (vi) limitations on liens;
(viii) limitations on dividends and stock redemptions; (viii) limitations on
prepayments and redemptions of indebtedness (including optional or mandatory
redemptions of the Notes); (ix) limitations on mergers, consolidations and
asset sales; (x) limitations on acquisitions and other investments; and (xi)
limitations on transactions with affiliates. See "Risk Factors--Restrictions
Imposed by Terms of Company's Indebtedness."
EVENTS OF DEFAULT
The events of default under the Credit Agreement include, among others: (i)
failure of the Company to make any payment of principal of, interest on, or
any other amount owing in respect of any obligation under the Credit Agreement
when due and payable; (ii) breach of representations or warranties; (iii)
breach of other covenants or agreements contained in the Credit Agreement;
(iv) cross-default with respect to other indebtedness of GHC, the Company or
any Guarantor; (v) the filing by or against GHC, the Company or of any
Guarantor of a petition for bankruptcy or the appointment of a receiver for
the business or assets of GHC, the Company or any Guarantor or other similar
bankruptcy events; (vi) certain ERISA defaults; (vii) material judgments;
(viii) invalidity of loan documents or security interests; (ix) failure under
certain circumstances of GHC to own 100% of the issued and outstanding capital
stock of the Company; (x) a change in control of GHC; and (xi) engagement by
GHC in any business other than holding 100% of the common stock of the Company
and other subsidiaries.
INDEMNIFICATION
Under the Credit Agreement, the Company has agreed to indemnify the Lenders
and related persons from and against any and all losses, liabilities, claims,
damages or expenses (including, without limitation, fees and disbursements of
counsel) that may be incurred by or asserted against any such indemnified
party in connection with any investigation, litigation or other proceeding
relating to the Credit Agreement or related documents, provided that the
Company is not liable for any such losses, liabilities, claims, damages or
expenses resulting from such indemnified party's own gross negligence or
willful misconduct.
The Credit Agreement also contains customary provisions protecting the
Lenders in the event of unavailability of funding, illegality, capital
adequacy requirements, increased costs, withholding taxes and funding losses.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the ownership of the Exchange Notes but does not
purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on the Internal Revenue Code of 1986,
as amended (the "Code"), existing, temporary, and proposed Treasury
Regulations, laws, rulings and decisions now in effect, all of which are
subject to change. This summary deals only with holders that will hold
Exchange Notes as "capital assets" (within the meaning of Section 1221 of the
Code) and that are (i) citizens or residents of the United States, (ii)
domestic corporations, or (iii) otherwise subject to United States federal
income taxation on a net income basis in respect of an Exchange Note. This
summary does not address tax considerations applicable to investors that may
be subject to special tax rules, such as banks, tax-exempt organizations,
insurance companies, dealers in securities or currencies, or persons that will
hold Notes as a position in a hedging transaction, "straddle" or "conversion
transaction" for tax purposes. This summary discusses the principal tax
considerations applicable to the initial owners of the Exchange Notes who
acquire the Exchange Notes in exchange for Senior Notes that were issued at
par and those applicable to subsequent owners of the Exchange Notes.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE OWNERSHIP OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME
AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
EXCHANGE OF SENIOR NOTES FOR EXCHANGE NOTES
The exchange of Senior Notes for Exchange Notes pursuant to the Exchange
Offer should not be considered a taxable exchange for federal income tax
purposes because the Exchange Notes should not constitute a material
modification of the terms of the Senior Notes. Accordingly, such exchange
should have no federal income tax consequences to holders of Senior Notes who
receive Exchange Notes in exchange therefor, and a holder's basis in an
Exchange Note will be the same as such holder's adjusted tax basis in the
Senior Note exchanged therefor. An Exchange Note acquired in exchange for a
Senior Note will have the same amount of market discount or premium, if any,
as the Senior Note exchanged therefor.
PAYMENT OF INTEREST
Interest on an Exchange Note generally will be includable in the income of a
holder as ordinary income at the time such interest is received or accrued, in
accordance with such holder's method of accounting for United States federal
income tax purposes.
OPTIONAL REDEMPTION OR REPAYMENT
The Senior Notes were issued with no original issue discount ("OID") because
they were issued at par. Similarly, the Exchange Notes will have no OID. For
purposes of determining OID, Treasury Regulations provide that (i) the
holder's right to require redemption of the Exchange Notes upon the occurrence
of a Change of Control will not be taken into account unless, based on all the
facts and circumstances as of the issue date, it is more likely than not that
a Change of Control giving rise to the redemption will occur and (ii) the
Company will be deemed to exercise its option to redeem the Exchange Notes in
a manner that minimizes the yield on the Exchange Notes. In the event of a
Change of Control, each holder of Exchange Notes will have the right to
require the Company to repurchase all or a part of such holder's Exchange
Notes as described in "Description of Notes--Repurchase at the Option of
Holders--Change of Control." The Company may also redeem the
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Exchange Notes in certain circumstances, pursuant to the terms of the Exchange
Notes. Under the Treasury Regulations discussed above, neither the repurchase
nor the redemption provisions of the Exchange Notes will cause the Exchange
Notes to be issued with OID. See "Description of Notes--Optional Redemption."
MARKET DISCOUNT ON RESALE OF EXCHANGE NOTES
A holder of an Exchange Note should be aware that the acquisition or resale
of an Exchange Note may be affected by the "market discount" provisions of the
Code. The market discount rules generally provide that if a holder of an
Exchange Note acquires the Exchange Note at a market discount (i.e., a
discount other than at original issue), any gain recognized upon the
disposition of the Exchange Note by the holder will be taxable as ordinary
interest income, rather than as capital gain, to the extent such gain does not
exceed the accrued market discount on such Exchange Note at the time of such
disposition. "Market discount" generally means the excess, if any, of an
Exchange Note's stated redemption price at maturity over the price paid by the
holder therefor, subject to a de minimis exception. A holder who acquires an
Exchange Note at a market discount also may be required to defer the deduction
of a portion of the amount of interest that the holder paid or accrued during
the taxable year on indebtedness incurred or maintained to purchase or carry
such Exchange Note, if any.
Any principal payment on an Exchange Note acquired by a holder at a market
discount will be included in gross income as ordinary income (generally, as
interest income) to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of the accrued market
discount for purposes of determining the tax treatment of subsequent payments
on, or dispositions of, an Exchange Note is to be reduced by the amounts so
treated as ordinary income.
A holder of an Exchange Note acquired at a market discount may elect to
include market discount in gross income, for federal income tax purposes, as
such market discount accrues, either on a straight-line basis or on a constant
interest rate basis. This current inclusion election, once made, applies to
all market discount obligations acquired on or after the first day of the
first taxable year to which the election applies, and may not be revoked
without the consent of the IRS. If a holder of an Exchange Note makes such an
election, the foregoing rules regarding the recognition of ordinary interest
income on sales and other dispositions and the receipt of principal payments
with respect to such Exchange Note, and regarding the deferral of interest
deductions on indebtedness incurred or maintained to purchase or carry such
Exchange Note, will not apply.
EXCHANGE NOTES PURCHASED AT A PREMIUM
In general, if a holder acquires an Exchange Note for an amount in excess of
its stated redemption price at maturity, the holder may elect to treat such
excess as "amortizable bond premium," in which case the amount required to be
included in the holder's income each year with respect to interest on the
Exchange Note will be reduced by the amount of amortizable bond premium
allocable (based on the Exchange Note's yield to maturity) to such year. Any
such election would apply to all bonds (other than bonds the interest on which
is excludable from gross income) held by the holder at the beginning of the
first taxable year to which the election applies or which thereafter are
acquired by the holder, and such election is irrevocable without the consent
of the IRS.
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES
Upon the sale, exchange or redemption of an Exchange Note, a holder
generally will recognize capital gain or loss equal to the difference between
(i) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income not previously included in income
which is taxable as ordinary income) and (ii) such holder's adjusted tax basis
in the Exchange Note. A holder's adjusted tax basis in an Exchange Note
generally will equal the cost of the Exchange Note to such holder. Such
capital gain or loss will be long-term capital gain or loss if the holder's
holding period in the Exchange Note is more than one year at the time of sale,
exchange or redemption.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note and payments of the
proceeds of the sale of a Note to certain noncorporate holders, and a 31%
backup withholding tax may apply to such payments if the holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that
he is subject to backup withholding for failure to report interest and
dividend payments. Any amounts withheld under the backup withholding rules
from a payment to a holder will be allowed as a credit against such holder's
United States federal income tax and may entitle the holder to a refund,
provided that the required minimum information is furnished to the IRS.
SENIOR NOTES REGISTRATION RIGHTS
The Company and the Initial Purchaser of the Senior Notes entered into the
Registration Rights Agreement dated November 25, 1996 pursuant to which the
Company agreed, for the benefit of the holders of the Senior Notes, at the
Company's cost, (i) on or prior to January 31, 1997, to file the Exchange
Offer Registration Statement of which this Prospectus is a part pursuant to
which the Senior Notes will be exchanged for the Exchange Notes, which will
have the same terms as the Senior Notes (except that the Exchange Notes will
not contain terms with respect to certain Liquidated Damages provisions and
transfer restrictions), (ii) to use its best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
prior to March 31, 1997, and (iii) use its best efforts to consummate the
Exchange Offer on or prior to April 30, 1997. Upon this Exchange Offer
Registration Statement being declared effective, the Company will offer the
Exchange Notes in exchange for surrender of the Senior Notes. The Company will
keep the Exchange Offer open for not less than 30 days and not more than 45
days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Senior Notes. For each Senior
Note tendered to the Company pursuant to the Exchange Offer and not validly
withdrawn by the holder thereof, the holder of such Senior Note will receive
an Exchange Note having a principal amount equal to that of the surrendered
Senior Note. Holders whose Senior Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the
Exchange Notes, such interest to be payable with the first interest payment on
the Exchange Notes, but will not receive any payment in respect of interest on
Senior Notes accrued after the issuance of the Exchange Notes. See "The
Exchange Offer."
In the event that any changes in law or applicable interpretations of the
Commission Staff do not permit the Company to effect the Exchange Offer, or if
for any reason the Exchange Offer is not consummated by April 30, 1997, or in
certain other circumstances, the Company will, at its expense, (i) as promptly
as practicable, and in any event on or prior to 60 days after such filing
obligation arises or requested by eligible holders of Notes, file with the
Commission a Shelf Registration Statement covering resales of Notes, (ii) use
its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act on or prior to 45 days after such filing
occurs and (iii) keep effective the Shelf Registration Statement continuously
until three years after its effective date (or such shorter period that will
terminate when all the Notes covered thereby have been sold pursuant thereto
or in certain other circumstances). The Company will, in the event of the
filing of a Shelf Registration Statement, provide to each holder of the Notes
covered by the Shelf Registration Statement copies of the prospectus that is a
part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement for the Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Notes. A holder of Notes that sells such Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification obligations). In addition, each
holder of the Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have its Notes
included in the Shelf Registration Statement.
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If (a) the Company fails to file the Exchange Offer Registration Statement
by January 31, 1997 or the Shelf Registration Statement within 60 days after
such filing obligation arises or requested by eligible holders of Notes, (b)
either the Exchange Offer Registration Statement is not declared effective by
the Commission on or prior March 31, 1997 or the Shelf Registration Statement
is not declared effective on or prior to 45 days after the filing of the Shelf
Registration Statement, (c) the Company fails to consummate the Exchange Offer
on or before April 30, 1997 or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective during the 180-day period following the consummation of
the Exchange Offer or the three-year period following the effective date of
the Shelf Registration Statement, as appropriate (each such event referred to
in clauses (a) through (d) above, a "Registration Default"), then the Company
will pay liquidated damages ("Liquidated Damages") to each holder of Notes,
with respect to the first 90-day period immediately following the occurrence
of such Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Notes held by such holder for each week or portion thereof
during which such Registration Default continues. The amount of the Liquidated
Damages for such Registration Default will increase by an additional $.05 per
week per $1,000 principal amount of Notes with respect to each subsequent 90-
day period until such Registration Default has been cured, up to an aggregate
maximum amount of Liquidated Damages of $.30 per week per $1,000 principal
amount of Notes for all Registration Defaults. All accrued Liquidated Damages
will be paid by the Company on each interest payment date with respect to the
Notes. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease and all accrued and unpaid Liquidated Damages
shall be paid promptly thereafter, as described in the Registration Rights
Agreement.
PLAN OF DISTRIBUTION
Based on interpretations by the Commission Staff set forth in no-action
letters issued to unrelated third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Senior Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is (i) a broker-dealer that holds Notes
acquired for its own account as a result of market-making or other trading
activities, (ii) any holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act or (iii) a broker-dealer that
acquired Senior Notes directly from the Company) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. Each broker-
dealer that holds Senior Notes acquired for its own account as a result of
market-making activities or other trading activities and who receives Exchange
Notes pursuant to the Exchange Offer may be a statutory underwriter, and must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so
acknowledging, and by delivering a prospectus, such a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. To date, the Commission Staff has taken the position that
broker-dealers that hold Notes acquired for its own account as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Senior Notes
to the Initial Purchaser) with the prospectus contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit such broker-dealers referred to in the prior
sentence and other persons, if any, subject to similar prospectus delivery
requirements to use this Prospectus in connection with the resale of such
Exchange Notes. Any holder that cannot rely upon such interpretations will be
ineligible, under Commission policy, to participate in the Exchange Offer, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction involving
the Notes.
Each holder of the Senior Notes who wishes to exchange its Senior Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer--Terms of
the Exchange."
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This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Senior Notes where such Senior Notes were acquired as
a result of market making activities or other trading activities. The Company
has agreed that it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer for use in connection with any such
resale; provided, however, that the Company shall not be required to maintain
the effectiveness of the Exchange Offer Registration Statement for more than
180 days following the consummation of the Exchange Offer (i.e., the
Expiration Date), exclusive of any period during which any stop order shall be
in effect suspending the effectiveness of the Exchange Offer Registration
Statement; provided, however, that in the event that all resales of Exchange
Notes (including, subject to the time periods set forth herein, any resales by
a broker-dealer exchanging Senior Notes acquired for its own account as a
result of market-making activities or other trading activities for Exchange
Notes) covered by the Exchange Offer Registration Statement have been made,
the Exchange Offer Registration Statement need not remain continuously
effective for the full 180-day period discussed above. In addition, until
, 1997, all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Exchange Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
During the 180-day period following the Expiration Date discussed above, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incidental to the Exchange Offer other than commissions and
concessions of any brokers or dealers and will indemnify holders of the Senior
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act, as set forth in the Registration Rights
Agreement.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Exchange Notes
have been passed upon for the Company by Alston & Bird, Atlanta, Georgia.
EXPERTS
The financial statements of the Business at September 30, 1995 and at
September 28, 1996, and for each of the three years in the period ended
September 28, 1996 appearing in this Prospectus and Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GORGES/QUIK-TO-FIX FOODS
Report of Independent Auditors............................................. F-2
Balance Sheets............................................................. F-3
Statements of Income....................................................... F-4
Statements of Cash Flows................................................... F-5
Notes to Financial Statements.............................................. F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors Tyson Foods, Inc.
We have audited the accompanying balance sheets of the Gorges/Quik-to-Fix
Foods operations (the "Business") of Tyson Foods, Inc. as of September 28,
1996 and September 30, 1995, and the related statements of income and cash
flows for each of the three years in the period ended September 28, 1996.
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 the Business as of
September 28, 1996 and September 30, 1995, and the results of its operations
and its cash flows for each of the three years in the period ended September
28, 1996 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Little Rock, Arkansas
November 1, 1996
F-2
<PAGE>
GORGES/QUIK-TO-FIX FOODS
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 28,
1995 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS:
Current assets:
Cash............................................. $ 9 $ 9
Inventories...................................... 30,634 31,325
-------- --------
Total current assets........................... 30,643 31,334
Property, plant and equipment:
Land............................................. 1,088 1,088
Buildings and leasehold improvements............. 34,905 35,768
Machinery and equipment.......................... 57,149 52,853
Land improvements and other...................... 1,160 1,155
Buildings and equipment under construction....... 3,139 31
-------- --------
97,441 90,895
Accumulated depreciation......................... 43,510 44,439
-------- --------
Net property, plant and equipment.............. 53,931 46,456
Excess of investment over net assets acquired.. 61,132 59,508
-------- --------
Total assets..................................... $145,706 $137,298
======== ========
LIABILITIES AND INVESTMENT AND ADVANCES BY PARENT:
Noncurrent deferred income taxes................... $ 7,660 $ 6,375
Investment and advances by Parent.................. 138,046 130,923
-------- --------
Total liabilities and investment and advances by
Parent.......................................... $145,706 $137,298
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
GORGES/QUIK-TO-FIX FOODS
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales.................................... $331,969 $304,474 $232,761
Cost of goods sold....................... 278,600 250,787 189,559
-------- -------- --------
Gross profit......................... 53,369 53,687 43,202
Operating expenses:
Selling................................ 27,513 25,128 22,452
General and administrative............. 6,367 6,386 3,962
Amortization........................... 1,528 1,624 1,624
Plant relocation....................... -- 1,036 --
-------- -------- --------
Total operating expenses............. 35,408 34,174 28,038
-------- -------- --------
Operating income......................... 17,961 19,513 15,164
Other expenses........................... 4 678 796
-------- -------- --------
Earnings before taxes on income.......... 17,957 18,835 14,368
Provision for income taxes............... 7,508 7,931 6,205
-------- -------- --------
Net income........................... $ 10,449 $ 10,904 $ 8,163
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
GORGES/QUIK-TO-FIX FOODS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 10,449 $ 10,904 $ 8,163
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation......................... 9,090 8,740 7,292
Amortization......................... 1,528 1,624 1,624
Deferred income taxes................ 778 (3,720) (1,285)
Loss on dispositions of property,
plant and equipment................. 4 678 792
(Increase) decrease in inventories... (5,125) 2,881 (691)
-------- -------- --------
Cash provided by operating activi-
ties.............................. 16,724 21,107 15,895
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisitions......... (33,476) -- --
Additions to property, plant and equip-
ment.................................. (6,580) (2,792) (735)
Proceeds from sale of property, plant
and equipment......................... 283 5,302 126
-------- -------- --------
Cash provided by (used for) invest-
ing activities.................... (39,773) 2,510 (609)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in investment and
advances by Parent.................... 23,075 (23,637) (15,286)
-------- -------- --------
Cash provided by (used for) financ-
ing activities.................... 23,075 (23,637) (15,286)
-------- -------- --------
Increase (decrease) in cash............ 26 (20) --
Cash at beginning of period............ 3 29 9
-------- -------- --------
Cash at end of period.................. $ 29 $ 9 $ 9
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
GORGES/QUIK-TO-FIX FOODS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Gorges/Quik-to-Fix Foods (the "Business") represents the beef processing
assets and operations of Tyson Foods, Inc. ("Parent"). The Business is a U.S.
processor of beef and produces a wide variety of individually quick-frozen,
fully-cooked, and ready-to-cook foodservice beef products and specialty items.
Products are sold throughout the U.S. to foodservice operators and
distributors and wholesale clubs.
The Business has been operated and accounted for as a consolidated operating
division of Parent. Parent's accounting system produces separate income
statements for the Business while certain balance sheet accounts, including
cash, receivables, prepaids, payables and accruals are maintained only on a
consolidated basis at the corporate level, which are in effect reflected in
Investment and Advances by Parent.
The Business participates in Parent's overall corporate cash management
program whereby operating funds for the Business are provided by Parent with
the corresponding charge or credit reflected in the Investment and Advances by
Parent account. As a result, the Business maintains only nominal cash
accounts.
The Business's products are sold through Parent's common marketing and
distribution operations with the related receivables being recorded at the
corporate level. A customer invoice frequently includes sales of products of
more than one Parent division. Accounts receivable are not maintained at the
Business level; accounting and collection efforts of receivables are performed
by Parent personnel. The Business's receivables are credited to the Business
through the Investment and Advances by Parent account. Additionally, the
purchase of raw materials and services is performed at the Parent corporate
level and related payables are maintained only on a consolidated group basis.
The Business's share of such payables and other liabilities is included in the
Investment and Advances by Parent account. A portion of Parent's accounting
and administrative costs related to these functions is allocated to the
Business as discussed in Note 2.
Personnel involved in the operations of the Business are employed by Parent
and obligations related to these employees are recorded at the corporate level
with the Business's allocable portion of the related expense reflected in the
Business's operating results. Vacation earned by the Business's salaried and
hourly employees is determined on a calendar year basis. The amount of earned
and unused vacation is accrued and reflected in the Investment and Advances by
Parent account.
Additionally, the allocable portion of the expenses associated with certain
other assets and other liabilities recorded at the corporate level for which
the Business receives benefit is reported in the Business's operations.
On October 17, 1996, Parent signed an agreement with an entity formed by CGW
Southeast Partners III, L.P. to sell the assets of the Business. The sale is
expected to close in November 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Business utilizes a 52 or 53 week accounting period which ends on the
Saturday closest to September 30.
F-6
<PAGE>
GORGES/QUIK-TO-FIX FOODS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market
(replacement or net realizable value), consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 28,
1995 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Finished products................................ $24,948 $27,569
Work in process.................................. 1,622 688
Supplies......................................... 4,064 3,068
------- -------
Total.......................................... $30,634 $31,325
======= =======
</TABLE>
Property, Plant and Equipment and Depreciation
Property, plant and equipment is stated at cost. Depreciation is calculated
primarily by the straight-line method over the estimated useful lives of the
assets, which range from 3 to 33 years.
Capital expenditures for equipment and capital improvements are generally
capitalized while maintenance is expensed. Approximately $488,000 will be
required to complete construction in progress at September 28, 1996.
Excess of Investments Over New Assets Acquired
Costs in excess of the fair value of net assets of businesses purchased are
amortized on a straight line basis over 40 years. The carrying value of excess
of investments over net assets acquired is reviewed at each balance sheet date
to determine if facts and circumstances suggest that it may be impaired. If
this review indicates that the excess of investments over net assets acquired
may not be recoverable, an estimate of the discounted cash flows of the entity
acquired is prepared and the Business's carrying value of excess of
investments over net assets acquired will be reduced by the estimated
shortfall of cash flows. At September 30, 1995 and September 28, 1996, the
accumulated amortization of excess of investments over net assets acquired was
$9.0 million and $10.6 million, respectively.
Income Taxes
The Business follows the liability method in accounting for deferred income
taxes. The liability method provides that deferred tax liabilities are
recorded at currently enacted tax rates based on the difference between the
tax basis of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences.
Selling Expenses
Selling expenses consist of direct selling expenses incurred by the
Business, and include direct product line expenses such as shipping and
storage, external handling, consignment freight, external freezer charges,
product and package design, brokerage expense, and other direct selling
expenses such as certain salaries, travel and research and development.
Selling expenses also include an allocable share of other common Parent
selling expenses as discussed below.
F-7
<PAGE>
GORGES/QUIK-TO-FIX FOODS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Allocation of Corporate Expenses
Certain indirect administrative and selling expenses incurred at the
corporate level which are not actually incurred for programs specific to the
Business have been allocated to the Business based on net sales. Allocated
administrative expenses include costs incurred for all corporate support
functions. Allocated selling expenses consisted of costs incurred by Parent's
corporate sales and marketing department. Because these charges were incurred
by Parent, actual charges, if the Business were a separate entity, might have
differed. Certain expenses incurred at the corporate level directly related to
the Business such as production scheduling, research and development and the
corporate aviation department are allocated based on usage.
Selling, administrative and corporate expenses allocated to the Business and
charged to operations for fiscal 1994, fiscal 1995 and fiscal 1996 were $17.1
million, $13.9 million and $7.7 million, respectively.
Advertising and Promotion Expenses
Advertising and promotion expenses are charged to operations in the period
incurred. Advertising and promotion expenses for fiscal 1994, fiscal 1995 and
fiscal 1996 were $11.2 million, $7.3 million and $5.7 million, respectively.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. PLANT RELOCATION AND DISPOSITION OF ASSETS
In May 1995, Parent sold the LeMars, Iowa beef processing facility for total
proceeds of $5.3 million, resulting in a loss of $582,000, which is included
in the Business's other expenses for the year ended September 30, 1995.
Additionally, the Business incurred $1.0 million in costs to close this plant
and relocate the production lines to its other facilities. Plant relocation
costs represent charges that can be specifically attributed to this production
line move. Plant closing costs consist primarily of employee compensation and
expenses related to shutting the plant down and disassembling the machinery
and equipment.
As a result of the LeMars plant closing discussed above and the movement of
production lines between other facilities, the Business incurred certain
expenses during the year ended September 28, 1996, associated with
Reconfiguration of production between its facilities in an effort to gain
production efficiencies. It is estimated that approximately $4.3 million in
expenses related to this Reconfiguration were incurred during the year ended
September 28, 1996, which may not reoccur. These expenses included costs to
train employees, production inefficiencies incurred during start-up of the
transferred production lines, and transportation costs. Additionally, as part
of the Reconfiguration of product lines between facilities, certain equipment
was written off or sold at a loss which has been included in other expenses
for the year ended September 28, 1996.
4. INVESTMENT AND ADVANCES BY PARENT
Investment and advances by Parent represents Parent's ownership interest in
the recorded net assets of the Business. As discussed in Note 1, all cash and
intercompany transactions flow through this account. The Business is not
charged interest on advances from Parent.
F-8
<PAGE>
GORGES/QUIK-TO-FIX FOODS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. BENEFIT PLANS
Parent has a defined contribution retirement and incentive benefit program
for various groups of personnel. Discretionary Parent contributions for the
Business totaled $649,000, $785,000 and $873,000 for fiscal 1994, fiscal 1995
and fiscal 1996, respectively.
6. COMMITMENTS
Parent leases certain properties and equipment for the Business for which
the total rentals thereon approximated $10,000, $17,000 and $44,000 for fiscal
1994, fiscal 1995 and fiscal 1996, respectively.
Future minimum lease payments for all noncancelable operating leases for the
Business at September 28, 1996 total $61,000, composed of $31,000 for fiscal
1997 and $10,000 annually for fiscal 1998 through 2000.
7. INCOME TAXES
The Business is included in the consolidated federal income tax return of
Parent and computes its federal tax provision as if it filed a separate
return. The state tax provision is computed using an effective state tax rate
as if the Business filed separate state tax returns.
Detail of the provision for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal............................... $6,449 $ 6,746 $ 5,270
State................................. 1,059 1,185 935
------ ------- -------
$7,508 $ 7,931 $ 6,205
====== ======= =======
Current............................... $6,730 $11,651 $ 7,490
Deferred.............................. 778 (3,720) (1,285)
------ ------- -------
$7,508 $ 7,931 $ 6,205
====== ======= =======
</TABLE>
The reasons for the difference between the effective income tax rate and the
statutory U.S. federal income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28,
1994 1995 1996
---------- ------------- -------------
<S> <C> <C> <C>
U.S. federal income tax rate........ 35.0% 35.0% 35.0%
State income taxes.................. 3.8 4.1 4.2
Amortization of excess of
investments over net assets
acquired........................... 3.1 3.0 4.0
---- ---- ----
41.9% 42.1% 43.2%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
component of the Business's deferred tax liabilities as of September 30, 1995
and September 28, 1996, $7.7 million and $6.4 million, respectively, consisted
primarily of the basis difference in property, plant and equipment.
F-9
<PAGE>
GORGES/QUIK-TO-FIX FOODS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. SIGNIFICANT CUSTOMERS
Certain of the Business's products are sold to major foodservice
distributors for distribution to foodservice chains. As a result, the
Business's top three customers accounted for approximately 42% of sales for
fiscal 1994 and 1995 and 44% of sales for fiscal 1996. Sales to one of these
customers are likely to be significantly lower in fiscal 1997 than in fiscal
1996 due to the customer's decision to increase its purchases with one of the
Business's competitors.
F-10
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
All tendered Senior Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Confirm By Telephone
(212) 858-2103
Attention: Reorganization Operations Department
By Hand Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window Subcellar One, (SC-1)
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
P. O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention: Reorganization Operations Department
UNTIL , 1997 (90 DAYS
AFTER THE DATE OF THIS
PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS
UNDERWRITERS OR AS REQUIRED
BY THE TERMS OF THE EXCHANGE
OFFER.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All amounts are estimates except the SEC registration fee.*
<TABLE>
<S> <C>
SEC Registration Fee............................................... $30,303
Accounting fees and expenses....................................... **
Legal fees and expenses............................................ **
Printing and engraving expenses.................................... **
Blue Sky fees and expenses......................................... **
Trustee, Exchange Agent, Transfer Agent and Registrar fees and ex-
penses............................................................ **
Miscellaneous...................................................... **
-------
Total.......................................................... $ **
=======
</TABLE>
- --------
* Includes amounts incurred in connection with the original issuance of the
Notes.
**To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of the Company's Restated Certificate of Incorporation provide
that no person shall be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director; provided,
however, except liability of a director (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended hereafter
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Company shall
be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. No amendment, repeal or modification
of Article VII of the Company's Restated Certificate of Incorporation shall
adversely affect any right or protection of a director of the Company existing
thereunder with respect to any act or omission occurring prior to such
amendment, repeal or modification. For purposes of Article VII of the
Company's Restated Certificate of Incorporation, "fiduciary duty as a
director" also includes any fiduciary duty arising out of serving at the
Company's request as a director of another corporation, partnership, limited
liability company, joint venture or other enterprise, and "personal liability
to the Company or its stockholders" also shall include any liability to such
other corporation, partnership, limited liability company, joint venture,
trust or other enterprise, and any liability to the Company in its capacity as
a security holder, joint venturer, partner, member, beneficiary, creditor or
investor of or in any such other corporation, partnership, limited liability
company, joint venture, trust or other enterprise.
Section 6.1 of the Company's Restated Certificate of Incorporation provides
that each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she, or a person of whom he or she is the legal
representative, is or was a director or Board-elected officer of the
Company, or
(b) that he or she, being at the time a director or Board-elected officer
of the Company, is or was serving at the request of the Company as a
director, trustee, officer, employee or agent of another corporation or of
a partnership, limited liability company, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"), whether either
in case (a) or in case (b) the basis of such proceeding is alleged action
or inaction (x) in an official capacity as a director or officer of the
Company, or as a director, trustee, officer, employee or agent
II-1
<PAGE>
of such other enterprise, or (y) in any other capacity related to the
Company or such other enterprise while so serving as a director, trustee,
officer, employee or agent, shall be indemnified and held harmless by the
Company to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law (or any successor provision or provisions) as the
same exists or may hereafter be amended (but, in the case of any such
amendment, with respect to alleged action or inaction occurring prior to
such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than permitted prior thereto),
against all expense, liability and loss (including without limitation
attorneys' fees and expenses, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) actually and reasonably incurred
by such person in connection therewith. The persons indemnified by Article
VI of the Company's Restated Certificate of Incorporation are hereinafter
referred to as "indemnitees." Such indemnification as to such alleged
action or inaction shall continue as to an indemnitee who has after such
alleged action or inaction ceased to be a director or officer of the
Company, or director, trustee, officer, employee or agent of such other
enterprise; and shall inure to the benefit of the indemnitee's heirs,
executors and administrators. Notwithstanding the foregoing, except as may
be provided in the Company's Bylaws or by the Company's Board of Directors,
the Company shall not indemnify any such indemnitee in connection with a
proceeding (or portion thereof) initiated by such indemnitee (but this
prohibition shall not apply to a counterclaim, cross-claim or third-party
claim brought by the indemnitee in any proceeding) unless such proceeding
(or portion thereof) was authorized by the Company's Board of Directors.
The right to indemnification conferred in Article VI of the Company's
Restated Certificate of Incorporation: (i) shall be a contract right; (ii)
shall not be affected adversely as to any indemnitee by any amendment of
the Company's Restated Certificate of Incorporation with respect to any
alleged action or inaction occurring prior to such amendment; and (iii)
shall, subject to any requirements imposed by law and the Company's Bylaws,
include the right to be paid by the Company the expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of
its final disposition.
Section 6.2 of the Company's Restated Certificate of Incorporation provides
that the rights to indemnification and to the advancement of expenses
conferred in Article VI of the Company's Restated Certificate of Incorporation
shall not be exclusive of any other right which any person may have or
hereafter acquire under the Company's Restated Certificate of Incorporation,
any statute, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 6.2 of the Company's Bylaws further provides that if and to the
extent the Delaware General Corporation Law requires, an advancement by the
Company of expenses incurred by an indemnitee pursuant to clause (iii) of the
last sentence of Section 6.1 of the Company's Restated Certificate of
Incorporation (hereinafter an "advancement of expenses") shall be made only
upon delivery to the Company of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
no further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under Article
VI of the Company's Restated Certificate of Incorporation or otherwise.
Section 6.3 of the Company's Bylaws provides that if a claim for
indemnification under Section 6.1 of the Company's Restated Certificate of
Incorporation is not paid in full by the Company within 60 days after it has
been received in writing by the Company, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Company to recover an advancement
of expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to
an advancement of expenses) it shall be a defense that, and in any suit by the
Company to recover an advancement of expenses pursuant to the terms of an
undertaking the Company shall be entitled to recover such expenses only upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in Section 145 of the Delaware General Corporation Law (or
any successor
II-2
<PAGE>
provision or provisions). Neither the failure of the Company (including the
Company's Board of Directors, independent legal counsel, or its stockholders)
to have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth in Section 145
of the Delaware General Corporation Law (or any successor provision or
provisions), nor an actual determination by the Company (including the
Company's Board of Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable standard
of conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a right
to indemnification or to an advancement of expenses hereunder, or by the
Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to have or retain such advancement of expenses, under Article
VI of the Company's Restated Certificate of Incorporation or Section VI of the
Company's Bylaws or otherwise, shall be on the Company.
Section 6.5 of the Company's Bylaws the Company may maintain insurance, at
its expense, to protect itself and any director, trustee, officer, employee or
agent of the Company or another enterprise against any expense, liability or
loss, whether or not the Company would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law.
Section 6.6 of the Company's Bylaws further states that in the event that
any of the provisions of Section VI of the Company's Bylaws (including any
provision within a single section, paragraph or sentence) is held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions are severable and shall remain enforceable to the full
extent permitted by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On October 17, 1996, the Company issued and sold to CGW Southeast Partners
III, L.P. one hundred (100) shares of its Common Stock, $.01 par value per
share, for aggregate cash consideration of $100.00. On November 18, 1996, the
Company issued and sold to CGW Southeast Partners III, L.P. nine hundred (900)
shares of its Common Stock, $.01 par value per share, for aggregate cash
consideration of $900.00. These sales were exempt from registration under
Section 4(2) of the Securities Act.
On November 20, 1996, the Company issued and sold to the Initial Purchaser
$100.0 million aggregate principal amount of 11 1/2% Senior Subordinated Notes
due 2006. These sales were exempt from registration under Section 4(2) of the
Securities Act. The Initial Purchaser offered those securities for resale in
transactions not requiring registration under the Securities Act to persons
they reasonably believed to be "Qualified Institutional Buyers" as defined in
Rule 144A under the Securities Act or institutional "Accredited Investors" as
defined in subparagraph (a)(1), (2), (3) or (7) of Commission Rule 501 under
the Securities Act. The aggregate price to investors for those securities was
$100.0 million and the Initial Purchaser received $3.0 million in discounts
and commissions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<C> <C> <S>
1 -- Purchase Agreement of $100,000,000 11 1/2% Senior Subordinated Notes
due 2006, dated November 20, 1996, between Gorges/Quik-To-Fix Foods,
Inc. and NationsBanc Capital Markets, Inc.
2 -- Asset Purchase Agreement, dated October 17, 1996, by and among
Gorges/Quik-To-Fix Foods, Inc. and Tyson Foods, Inc., Tyson Holding
Company and Gorges Foodservice, Inc.
3.1 -- Restated Certificate of Incorporation of Gorges/Quik-To-Fix Foods,
Inc.
3.2 -- Bylaws of Gorges/Quik-To-Fix Foods, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <C> <S>
4 -- Indenture, dated November 25, 1996, between Gorges/Quik-To-Fix
Foods, Inc. and IBJ Schroder Bank & Trust Company, as Trustee,
relating to the 11 1/2% Senior Subordinated Notes due 2006.
5 -- Opinion of Alston & Bird re legality*
10.1 -- Agreement For Investment Banking Services, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and CGW Southeast Management
III, L.L.C.
10.2 -- Transition Services Agreement, dated November 25, 1996, between
Tyson Foods, Inc. and Gorges/Quik-To-Fix Foods, Inc.
10.3 -- Collection Agreement, dated November 25, 1996, between Tyson Foods,
Inc. and Gorges/Quik-To-Fix Foods, Inc.
10.4 -- Trademark License Agreement, dated November 25, 1996, between Tyson
Holding Company and Gorges/Quik-To-Fix Foods, Inc.
10.5 -- Assumption Agreement, dated November 25, 1996, among Gorges/Quik-To-
Fix Foods, Inc., Tyson Foods, Inc., Gorges Foodservice, Inc. and
Tyson Holding Corporation.
10.6 -- Credit Agreement, dated November 25, 1996, among Gorges/Quik-To-Fix
Foods, Inc., as Borrower, and Gorges Holding Corporation, as
Guarantor, the lenders identified therein and NationsBank of Texas,
N.A., as Agent.
10.7 -- Registration Rights Agreement, dated November 25, 1996, between
Gorges/Quik-To-Fix Foods, Inc. and NationsBanc Capital Markets, Inc.
10.8 -- Co-Pack Pricing Agreement, dated November 25, 1996, between Tyson
Foods, Inc. and Gorges/Quik-To-Fix Foods, Inc.**
10.9 -- Agreement of Lease dated December 15, 1995 by and between Stover
Steel Structures, Inc. and Tyson Foods, Inc. as assigned to
Gorges/Quik-To-Fix Foods, Inc. pursuant to that certain Bill of Sale
dated as of November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.
10.10 -- Lease Agreement dated May 1992 by and between Cope Properties and
Tyson Foods, Inc., as amended by letter agreement dated August 25,
1992, from Terry W. Cozby and as amended by letter agreement dated
May 23, 1995 from Terry W. Cozby as assigned to Gorges/Quik-To-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.
10.11 -- Supply Agreement dated November 9, 1990 by and between Harker's
Distribution, Inc. and Tyson Foods, Inc., as amended by Modification
to Supply Agreement dated September 14, 1993 and Second Modification
to Supply Agreement dated May 1, 1995 as assigned to Gorges/Quik-To-
Fix Foods, Inc. pursuant to that certain Assignment Assumption and
Consent Agreement dated as of November 25, 1996 by and among Tyson
Foods, Inc., Harker's Distribution, Inc. and Gorges/Quik-To-Fix
Foods, Inc.**
10.12 -- Letter Agreement dated September 12, 1996 by and between Sonic
Corporation and Tyson Foods, Inc. as assigned to Gorges/Quik-To-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.**
10.13 -- Beef Pattie Contract dated November 1, 1995, by and between Sam's
Clubs and Tyson Foods, Inc. as assigned to Gorges/Quik-To-Fix Foods,
Inc. pursuant to that certain Bill of Sale dated as of November 25,
1996 by and among Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson
Holding Company and Gorges/Quik-To-Fix Foods, Inc.**
10.14 -- Gas Sales Agreement dated December 1, 1995 by and between Tyson
Foods, Inc. and US Gas Services LLC as assigned to Gorges/Quik-To-
Fix Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <C> <S>
10.15 -- Contract for Industrial Gas Service dated February 14, 1996 by and
between Lone Star Gas Company and Tyson Foods, Inc., as amended by
(i) Amendment of Contract for Industrial Gas Service dated February
14, 1996, (ii) Addendum to Amendment of Contract for Industrial Gas
Service (a/k/a Interruptible Gas Service Agreement) dated February
14, 1996, and (iii) letter of March 21, 1996 as assigned to
Gorges/Quik-To-Fix Foods, Inc. pursuant to that certain Bill of Sale
dated as of November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.
10.16 -- Gas Sales Agreement dated June 1, 1995 by and between Tyson Foods,
Inc. and Mercado Gas Services, Inc. as assigned to Gorges/Quik-To-
Fix Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-To-Fix
Foods, Inc.
10.17 -- Waste Water Treatment Agreement dated October 25, 1995 by and
between the City of Orange City, Iowa and Tyson Foods, Inc. as
assigned to Gorges/Quik-To-Fix Foods, Inc. pursuant to that certain
Bill of Sale dated as of November 25, 1996 by and among Tyson Foods,
Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-To-Fix Foods, Inc.
10.18 -- Securities Purchase and Stockholders Agreement dated November 25,
1996 by and among CGW Southeast Partners III, L.P., NationsBanc
Investment Corporation, Mellon Bank, N.A., as Trustee for First
Plaza Group Trust, J. David Culwell, Richard E. Mitchell, Randall H.
Collins, Robert M. Powers, Hernando Aviles, Stuart Alan Ensor, and
Gorges Holding Corporation.
10.19 -- Consulting Agreement, dated November 25, 1996, between Gorges/Quik-
To-Fix Foods, Inc. and CGW Southeast Partners III, L.L.C.
10.20 -- Bill of Sale dated as of November 25, 1996 between Tyson Foods, Inc.
and Gorges/Quik-To-Fix Foods, Inc.
10.21 -- Bill of Sale dated as of November 25, 1996 between Gorges
Foodservice, Inc. and Gorges/Quik-To-Fix Foods, Inc.
10.22 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and J. David Culwell.
10.23 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Hernando Aviles.
10.24 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Stuart A. Ensor.
10.25 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Robert M. Powers.
10.26 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Randall H. Collins.
10.27 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Richard E. Mitchell
23.1 -- Consents of Ernst & Young LLP
23.2 -- Consent of Alston & Bird (included in opinion filed as Exhibit 5)
24 -- Power of Attorney (included in Part II of the Registration Statement)
25 -- Statement of eligibility of trustee
27 -- Financial Data Schedule
99.1 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and J. David Culwell.
99.2 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Richard E. Mitchell.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <C> <S>
99.3 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Randall H. Collins.
99.4 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Robert M. Powers.
99.5 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Hernando Aviles.
99.6 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Stuart Alan Ensor.
99.7 -- Gorges Holding Corporation 1996 Stock Incentive Plan
99.8 -- Form of Letter of Transmittal
99.9 -- Form of Notice of Guaranteed Delivery
99.10 -- Form of Letter to Clients
99.11 -- Form of Letter to Nominees
</TABLE>
- --------
* To be filed by amendment.
** Certain portions of this Exhibit have been deleted and confidentially filed
with the Commission pursuant to a confidential treatment request under Rule
406 under the Securities Act.
(b) Financial Statement Schedules. All schedules have been omitted because
they are not applicable or not required or the information required is
included in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
4. If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any
delayed offering or throughout a continuous offering. Financial statements
and information otherwise required by
II-6
<PAGE>
Section 10(a)(3) of the Act need not be furnished, provided, that the
registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4)
and further information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to registration
statements on Form F-3, a post-effective amendment need not be filed to
include financial statements and information required by Section 10(a)(3)
of the Act or Rule 3-19 of this chapter if such financial statements and
information are contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the Form F-3.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of the
registrant in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF GARLAND, STATE OF TEXAS, ON JANUARY 21, 1997.
Gorges/Quick-To-Fix Foods, Inc.
By: /s/ J. David Culwell
----------------------------------
J. DAVID CULWELL
CHIEF EXECUTIVE OFFICER AND
DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. David Culwell and Richard E. Mitchell, or
either of them, his true and lawful attorney-in-fact and agent, with full
power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposed as he might or could
do in person, hereby ratifying and confirming that said attorney-in-fact,
agent or their substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON JANUARY 21, 1997.
SIGNATURE TITLE
/s/ J. David Culwell Chief Executive Officer and Director
- ------------------------------------- (Principal Executive Officer)
J. DAVID CULWELL
/s/ Richard E. Mitchell President and Director
- -------------------------------------
RICHARD E. MITCHELL
/s/ A. Scott Letier Chief Financial Officer (Principal
- ------------------------------------- Financial and Accounting Officer)
A. SCOTT LETIER
/s/ Richard L. Cravey Director
- -------------------------------------
RICHARD L. CRAVEY
/s/ William A. Davies Director
- -------------------------------------
WILLIAM A. DAVIES
/s/ James A. O'Donnell Director
- -------------------------------------
JAMES A. O'DONNELL
II-8
<PAGE>
EXHIBIT INDEX
1 -- Purchase Agreement of $100,000,000 11-1/2% Senior Subordinated
Notes due 2006, dated November 20, 1996, between Gorges/Quik-To-Fix
Foods, Inc. and NationsBanc Capital Markets, Inc.
2 -- Asset Purchase Agreement, dated October 17, 1996, by and among
Gorges/Quik-To-Fix Foods, Inc. and Tyson Foods, Inc., Tyson Holding
Company and Gorges Foodservice, Inc.
3.1 -- Restated Certificate of Incorporation of Gorges/Quik-To-Fix Foods,
Inc.
3.2 -- Gorges/Quik-To-Fix Foods, Inc. Bylaws.
4 -- Indenture, dated November 25, 1996, between Gorges/Quik-To-Fix
Foods, Inc. and IBJ Schroder Bank & Trust Company, as Trustee,
relating to the 11-1/2% Senior Subordinated Notes due 2006.
5 -- Opinion of Alston & Bird Re Legality*
10.1 -- Agreement For Investment Banking Services, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and CGW Southeast Management
III, L.L.C.
10.2 -- Transition Services Agreement, dated November 25, 1996, between
Tyson Foods, Inc. and Gorges/Quik-To-Fix Foods, Inc.
10.3 -- Collection Agreement, dated November 25, 1996, between Tyson Foods,
Inc. and Gorges/Quik-To-Fix Foods, Inc.
10.4 -- Trademark License Agreement, dated November 25, 1996, between Tyson
Holding Company and Gorges/Quik-To-Fix Foods, Inc.
10.5 -- Assumption Agreement, dated November 25, 1996, among
Gorges/Quik-To-Fix Foods, Inc., Tyson Foods, Inc., Gorges
Foodservice, Inc. and Tyson Holding Corporation.
10.6 -- Credit Agreement, dated November 25, 1996, among Gorges/Quik-To-Fix
Foods, Inc., as Borrower, and Gorges Holding Corporation, as
Guarantor, the lenders identified therein and NationsBank of Texas,
N.A., as Agent.
10.7 -- Registration Rights Agreement, dated November 25, 1996, between
Gorges/Quik-To-Fix Foods, Inc. and NationsBanc Capital Markets,
Inc.
10.8 -- Co-Pack Pricing Agreement, dated November 25, 1996, between Tyson
Foods, Inc. and Gorges/Quik-To-Fix Foods, Inc.**
10.9 -- Agreement of Lease dated December 15, 1995 by and between Stover
Steel Structures, Inc. and Tyson Foods, Inc. as assigned to
Gorges/Quik-to-Fix Foods, Inc. pursuant to that certain Bill of
Sale dated as of November 25, 1996 by and among Tyson Foods, Inc.,
Gorges Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-
Fix Foods, Inc.
10.10 -- Lease Agreement dated May 1992 by and between Cope Properties and
Tyson Foods, Inc., as amended by letter agreement dated August 25,
1992, from Terry W. Cozby and as amended by letter agreement dated
May 23, 1995 from Terry W. Cozby as assigned to Gorges/Quik-to-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-Fix
Foods, Inc.
<PAGE>
10.11 -- Supply Agreement dated November 9, 1990 by and between Harker's
Distribution, Inc. and Tyson Foods, Inc., as amended by
Modification to Supply Agreement dated September 14, 1993 and
Second Modification to Supply Agreement dated May 1, 1995 as
assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant to that certain
Assignment Assumption and Consent Agreement dated as of November
25, 1996 by and among Tyson Foods, Inc., Harker's Distribution,
Inc. and Gorges/Quik-to-Fix Foods, Inc.**
10.12 -- Letter Agreement dated September 12, 1996 by and between Sonic
Corporation and Tyson Foods, Inc. as assigned to Gorges/Quik-to-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-Fix
Foods, Inc.**
10.13 -- Beef Pattie Contract dated November 1, 1995, by and between Sam's
Clubs and Tyson Foods, Inc. as assigned to Gorges/Quik-to-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-Fix
Foods, Inc.**
10.14 -- Gas Sales Agreement dated December 1, 1995 by and between Tyson
Foods, Inc. and US Gas Services LLC as assigned to Gorges/Quik-to-
Fix Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-Fix
Foods, Inc.
10.15 -- Contract for Industrial Gas Service dated February 14, 1996 by and
between Lone Star Gas Company and Tyson Foods, Inc., as amended by
(i) Amendment of Contract for Industrial Gas Service dated February
14, 1996, (ii) Addendum to Amendment of Contract for Industrial Gas
Service (a/k/a Interruptible Gas Service Agreement) dated February
14, 1996, and (iii) letter of March 21, 1996 as assigned to
Gorges/Quik-to-Fix Foods, Inc. pursuant to that certain Bill of
Sale dated as of November 25, 1996 by and among Tyson Foods, Inc.,
Gorges Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-
Fix Foods, Inc.
10.16 -- Gas Sales Agreement dated June 1, 1995 by and between Tyson Foods,
Inc. and Mercado Gas Services, Inc. as assigned to Gorges/Quik-to-
Fix Foods, Inc. pursuant to that certain Bill of Sale dated as of
November 25, 1996 by and among Tyson Foods, Inc., Gorges
Foodservice, Inc., Tyson Holding Company and Gorges/Quik-to-Fix
Foods, Inc.
10.17 -- Waste Water Treatment Agreement dated October 25, 1995 by and
between the City of Orange City, Iowa and Tyson Foods, Inc. as
assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant to that certain
Bill of Sale dated as of November 25, 1996 by and among Tyson
Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
10.18 -- Securities Purchase and Stockholders Agreement dated November 25,
1996 by and among CGW Southeast Partners III, L.P., NationsBanc
Investment Corporation, Mellon Bank, N.A., as Trustee for First
Plaza Group Trust, J. David Culwell, Richard E. Mitchell, Randall
H. Collins, Robert M. Powers, Hernando Aviles, Stuart Alan Ensor,
and Gorges Holding Corporation.
10.19 -- Consulting Agreement, dated November 25, 1996, between Gorges/Quik-
to-Fix Foods, Inc. and CGW Southeast Partners III, L.L.C.
10.20 -- Bill of Sale dated as of November 25, 1996 between Tyson Foods,
Inc. and Gorges/Quik-to-Fix Foods, Inc.
10.21 -- Bill of Sale dated as of November 25, 1996 between Gorges
Foodservice, Inc. and Gorges/Quik-to-Fix Foods, Inc.
-2-
<PAGE>
10.22 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and J. David Culwell.
10.23 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Hernando Aviles.
10.24 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Stuart A. Ensor.
10.25 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Robert M. Powers.
10.26 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Randall H. Collins.
10.27 -- Employment and Confidentiality Agreement, dated November 25, 1996,
between Gorges/Quik-To-Fix Foods, Inc. and Richard E. Mitchell
23.1 -- Consents of Ernst & Young LLP
23.2 -- Consent of Alston & Bird (included in opinion filed as Exhibit 5)
24 -- Power of Attorney (included in Part II of the Registration
Statement)
25 -- Statement of Eligibility of Trustee
27 -- Financial Data Schedule
99.1 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and J. David Culwell.
99.2 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Richard E. Mitchell.
99.3 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Randall H. Collins.
99.4 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Robert M. Powers.
99.5 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Hernando Aviles.
99.6 -- Non-Qualified Stock Option Agreement, dated November 25, 1996,
between Gorges Holding Corporation and Stuart Alan Ensor.
99.7 -- Gorges Holding Corporation 1996 Stock Incentive Plan
99.8 -- Form of Letter of Transmittal
99.9 -- Form of Notice of Guaranteed Delivery
99.10 -- Form of Letter to Clients
99.11 -- Form of Letter to Nominees
- ---------------
* To be filed by amendment.
** Certain portions of this Exhibit have been deleted and confidentially filed
with the Commission pursuant to a confidential treatment request under Rule
406 under the Securities Act.
-3-
<PAGE>
EXHIBIT 1
GORGES/QUIK-TO-FIX FOODS, INC.
$100,000,000
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
PURCHASE AGREEMENT
November 20, 1996
NationsBanc Capital Markets, Inc.
NatiousBank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell (the "Initial Placement") to NationsBanc Capital
Markets, Inc. (the "Initial Purchaser") $100,000,000 principal amount of its 11
1/2% Senior Subordinated Notes Due 2006 (the "Notes"). The Notes are to be
issued under an indenture (the "Indenture") to be dated as of the Closing Date
(as defined below) between the Company and IBI Schroder Bank & Trust Company, as
trustee (the "Trustee"). The Initial Placement is to occur concurrently with,
and is conditioned upon, (i) the consummation of the acquisition (the
"Acquisition") by the Company of the Gorges/Quik-to-Fix Foods operations (the
"Business") of Tyson Foods, Inc., a Delaware corporation ("Tyson"), pursuant to
an asset purchase agreement dated as of October 17, 1996 (the "Asset Purchase
Agreement") among Tyson, Gorges Foodservice, Inc., a Texas Corporation and Tyson
Holding Company, a Delaware corporation, and the Company, (ii) the execution of,
and initial borrowings under the Credit Agreement, to be executed and delivered
on or prior to the date on which the Notes are issued (the "Credit Agreement")
among the Company, Gorges Holding Corporation ("GHC"), as guarantor, NationsBank
of Texas, N.A. as agent and lender and the other lenders named therein
(collectively, the "Banks") and (iii) the receipt by the Company of a $45
million equity contribution (the "Equity Contribution") from GHC. This
Agreement, the registration rights agreement, to be dated the Closing Date,
between the Initial Purchaser and the Company (the "Registration Rights
Agreement"), the Indenture, the Asset Purchase Agreement, the Transition
Services Agreement to be dated November 25, 1996 (the "Transition Services
Agreement") between Tyson and tile Company and the Credit Agreement are
hereinafter collectively referred to as the "Transaction Documents."
The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon certain exemptions from the registration
requirements of the Securities Act. You
<PAGE>
have advised the Company that you will offer and sell the Notes purchased by you
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated November 4, 1996 (the "Preliminary
Memorandum"), and a final offering memorandum, dated November 20, 1996 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company and the Notes. The Company
hereby confirms that it has authorized the use of the Preliminary Memorandum and
the Final Memorandum, and any amendment or supplement thereto, in connection
with the offer and sale of the Notes by the Initial Purchaser. Unless stated to
the contrary, all references herein to the Final Memorandum are to the Final
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement, or any information incorporated by reference
therein, subsequent to the Execution Time.
1. Representations and Warranties. The Company represents and warrants
------------------------------
to the Initial Purchaser as set forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not and at the Closing Date will not (and any amendment
or supplement thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Company makes no representation or warranty as to the
-------
information contained in or omitted from the Preliminary Memorandum or the
Final Memorandum, or any amendment or supplement thereto, in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Initial Purchaser specifically for inclusion therein.
(b) Neither the Company nor any of its Affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")), nor any
person acting on its or their behalf (other than the Initial Purchaser or
any of its Affiliates, as to whom each of the Company makes no
representation or warranty) has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of the Notes under the
Securities Act.
(c) Neither the Company nor any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser or any of
its Affiliates, as to whom the Company makes no representation or warranty)
has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with any offer or sale
of the Notes.
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(d) Neither the Company nor any of its Affiliates has (i) taken,
directly or indirectly, any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Notes; or (ii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any
securities of the Company (except as contemplated by this Agreement).
(e) The Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(f) It is not necessary in connection with the offer, sale and
delivery of the Notes in the manner contemplated by this Agreement and the
Final Memorandum to register the Notes under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
(g) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(h) The Company is validly existing as a corporation in good standing
under the laws of the State of Delaware, with full power (corporate and
other) to own or lease its properties, conduct its business as described in
the Final Memorandum and enter into each Transaction Document and to carry
out all the terms and provisions of each Transaction Document to be carried
out by it, and is, or will be on or before the Closing Date, duly qualified
to do business as a foreign corporation and in good standing under the laws
of each jurisdiction that requires such qualification wherein it owns or
leases properties or conducts business, in each case giving effect to the
Acquisition, except in such jurisdictions in which the failure to so
qualify would not have a material adverse effect on (i) the business,
operations, properties, assets, liabilities, net worth, condition
(financial or otherwise) or prospects of the Company or (ii) the ability of
the Company to perform any of its material obligations under the
Transaction Documents or the Notes, in each case giving effect to the
Acquisition ("Material Adverse Effect"). The Company has no subsidiaries.
(i) The capital stock of the Company consists of 2,000 shares of
authorized common stock, $.01 par value, of which 1,000 shares were
outstanding on November 20, 1996, and all of which will be issued and
outstanding upon completion of the Equity Contribution. All of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
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(j) This Agreement has been duly authorized by all necessary
corporate action of the Company, has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, (i)
subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect ("Bankruptcy Law") and the
application of equitable principles in any action, legal or equitable
("Equity") and (ii) except to the extent that rights to indemnity and
contribution thereunder may be limited by federal or state securities laws
or the public policy underlying such laws. Each of the other Transaction
Documents has been, or will be on or before the Closing Date, duly
authorized by all necessary corporate action of the Company, has been, or
will be on or before the Closing Date, duly executed and delivered by the
Company, and constitutes, or will constitute on or before the Closing Date,
a legal, valid and binding obligation of the Company, enforceable against
the Company, in accordance with its terms, (i) subject, as to enforcement
of remedies, to applicable Bankruptcy Law and Equity and (ii) except to the
extent that rights to indemnity and contribution thereunder may be limited
by federal or state securities laws or the public policy underlying such
laws. The descriptions of the Indenture, the Registration Rights Agreement,
the Credit Agreement and the Notes contained in the Final Memorandum fairly
and accurately summarize the Indenture, the Registration Rights Agreement,
the Credit Agreement and the Notes in all material respects.
(k) The Notes have been duly and validly authorized by all necessary
corporate action of the Company for issuance and sale pursuant to this
Agreement and, when executed, authenticated (assuming due authentication by
the Trustee), issued and delivered in accordance with the provisions of the
Indenture and paid for by the Initial Purchaser as provided in this
Agreement, will constitute the legal, valid and binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, subject, as to enforcement of
remedies, to applicable Bankruptcy Law and Equity.
(l) (A) The issuance, offering and sale of the Notes to the Initial
Purchaser by the Company pursuant to this Agreement and the compliance by
the Company with the other provisions of this Agreement, (B) the compliance
by the Company with the other Transaction Documents, and (C) the
consummation of the other transactions herein and therein contemplated (i)
do not require the consent, approval, authorization, registration,
qualification or order of or with any court or governmental agency or body,
except such as have been obtained (including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act")) and such as may be required under state
securities or blue sky laws or under the Securities Act or the Trust
Indenture Act of 1939 (the "Trust Indenture Act") in connection with a
registration under the Securities Act pursuant to the Registration Rights
Agreement or (ii) do not conflict with, result in a breach or violation of,
or
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<PAGE>
constitute a default under the charter documents or by-laws of the Company
or any of the terms and provisions of any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company is a
party or by which the Company or any of its properties is bound or any
statute, judgment, decree, order, rule or regulation of any court,
regulatory body, administrative agency, governmental body or arbitrator
applicable to the Company, in each case giving effect to the Acquisition
and except, in the case of clauses (B) and (C) above, as would not have a
Material Adverse Effect.
(m) The historical financial statements (including the notes thereto)
of the Business included in the Final Memorandum comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act and fairly present in all
material respects the financial position of the Business and the results of
operations and cash flows as of the dates and periods therein specified.
Such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein). Since the date of the most
recent financial statements included in the Final Memorandum, there has
been no change or development or event involving a prospective change
constituting a Material Adverse Effect, except as set forth in or
contemplated by the Final Memorandum (exclusive of any amendment or
supplement thereto). The unaudited pro forma financial statements of the
Company included in the Final Memorandum comply as to form in all material
respects with the requirements of the Securities Act; the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of such pro forma statements; the assumptions described in the
notes to such pro forma statements provide a reasonable basis for
presenting the significant direct effects of the transactions contemplated
therein; and such pro forma adjustments give appropriate effect to those
adjustments, in each case, in accordance with Regulation S-X under the
Securities Act ("Regulation S-X").
(n) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(o) The Company is not now, or, after giving effect to the issuance
of the Notes, and the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby, will not be (i) insolvent, (ii) left with unreasonably small
capital with which to engage
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<PAGE>
in its anticipated businesses or (iii) incurring debts beyond its ability
to pay such debts as they become due. The Company is not in liquidation,
administration or receivership nor has any petition been presented for the
winding-up of the Company.
(p) (i) No ERISA Event (as defined below) has occurred, is planned
or is reasonably expected to occur and no condition or event currently
exists or currently is expected to occur that could result in any such
ERISA Event. The aggregate Underfunding (as defined below) with respect to
all Plans (as defined below) which have any Underfunding does not exceed
$500,000.
(ii) The Company has not incurred unsatisfied liabilities
in connection with withdrawals from Multiemployer Plans and Multiple
Employer Plans (each as defined below), if any, in excess of an aggregate
amount of $1,000,000. If the Company were to completely withdraw on the
date hereof from all Multiemployer Plans and Multiple Employer Plans to
which it is contributing or has an obligation to contribute, the Company
would not incur, directly or indirectly, liability in excess of an
aggregate amount of $1,000,000.
(iii) No labor dispute with the employees of the Company or
any of the subsidiaries of the Company exists or, to the best knowledge of
the Company, is threatened or imminent which is likely to result in a
Material Adverse Effect.
(iv) No event has occurred or failed to occur with respect
to a Plan sponsored, maintained or contributed to by an ERISA Affiliate
that is reasonably likely to have a Material Adverse Effect.
As used herein, the following terms shall have the respective meaning
ascribed to each below.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and the regulations promulgated and the rulings issued thereunder.
"ERISA" means the United States Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that would be treated together with the Company as a single
employer under Tide IV of ERISA or Section 302 of ERISA or Section 412 of
the Code.
"ERISA Event" means (i) the occurrence of a "reportable event"
described in Section 4043 of ERISA (other than a "reportable event" not
subject to the
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<PAGE>
provision for 30-day notice or for which penalties have been waived under
PBGC Technical Update 95-3), or (ii) the provision or filing of a notice of
intent to terminate a Plan subject to Title IV of ERISA (other than in a
standard termination within the meaning of Section 4041 of ERISA) or the
treatment of a Plan amendment as a distress termination under Section 4041
of ERISA, or (iii) the institution of proceedings to terminate a Plan by
the Pension Benefit Guaranty Corporation, or (iv) the existence of any
"accumulated funding deficiency" or "liquidity shortfall" (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived, or the filing of an application pursuant to Section 412(e) of the
Code or Section 304 of ERISA for any extension of an amortization period,
or (v) the receipt of notice by the Company that any Multiemployer Plan may
be terminated, partitioned or reorganized or that any Multiple Employer
Plan may be terminated, or (vi) the occurrence of any transaction which
might reasonably be expected to constitute grounds for the imposition of
liability under Section 4069 of ERISA.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" means an employee benefit plan described in
Section 4063 of ERISA.
"Plan" means an employee benefit plan, other than a Multiemployer
Plan, with respect to which the Company could be subject to any liability
under Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.
"Underfunding" means, with respect to any Plan, the excess, if any, of
the "projected benefit obligations" (within the meaning of Statement of
Financial Accounting Standards 87) under such Plan over the fair market
value of the assets held under the Plan.
(q) (i) Except as otherwise disclosed in the Final Memorandum, the Company
is, or on or before the Closing Date will be, in compliance with all applicable
laws, statutes, ordinances, rules, regulations, orders, judgments, decisions,
decrees, standards, and requirements ("Legal Requirements") relating to: human
health and safety; pollution, management, disposal or release of any chemical
substance, product or waste; and protection, cleanup, remediation or corrective
action relating to the environment or natural resources ("Environmental Law");
(ii) Except as otherwise disclosed in the Final Memorandum, the
Company has obtained and is in compliance with the conditions of all
permits, authorizations, licenses, approvals, authorizations, and variances
necessary under any Environmental Law for the continued conduct of the
business of the Company in the manner now conducted ("Environmental
Permits");
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<PAGE>
(iii) Except as otherwise disclosed in the Final Memorandum,
there are no conditions or circumstances, including but not limited to
pending changes in any Environmental Law (of which the Company has
knowledge after due inquiry and investigation) or Environmental Permit,
that are likely to interfere with the conduct of the business of the
Company in the manner now conducted or which would interfere with
compliance with any Environmental Law or Environmental Permit; and
(iv) Except as otherwise disclosed in the Final Memorandum,
there are no conditions or circumstances at, or arising out of, the
business, assets and properties of the Company or any formerly leased,
operated or owned businesses, assets or properties of the Company,
including but not limited to on-site or off-site disposal or release of any
chemical substance, product or waste, which may give rise to: (A)
liabilities or obligations for any cleanup, remediation or corrective
action under any Environmental Law, (B) claims arising under any
Environmental Law for personal injury, property damage, or damage to
natural resources, (C) liabilities or obligations incurred to enable the
Company or any subsidiary of the Company to comply with any Environmental
Law, or (D) fines or penalties arising under any Environmental Law;
except in each case for any noncompliance or conditions or circumstances that,
singly or in the aggregate, would not result in a Material Adverse Effect.
(r) No legal or governmental proceedings or investigations are
pending to which the Company is a party or to which the property of the
Company is subject that are not described in the Final Memorandum, and no
such proceedings or investigations, to the best knowledge of the Company,
have been threatened against the Company or with respect to any of their
respective properties, except in each case for such proceedings or
investigations that, if the subject of an unfavorable decision, ruling or
finding, would not, singly or in the aggregate, result in a Material
Adverse Effect.
(s) To the best of the Company's knowledge, and giving effect to the
Acquisition, the Company owns or otherwise possesses the right to use all
patents, trademarks, service marks, trade names and copyrights, all
applications and registrations for each of the foregoing, and all other
proprietary rights and confidential information used in the conduct of its
business as currently conducted; and the Company has not received any
notice, and is not otherwise aware, of any infringement of or conflict with
the rights of any third party with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(t) The Company possesses or will on or before the Closing Date
possess all certificates, authorizations and permits issued by the
appropriate
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<PAGE>
federal, state or foreign regulatory authorities necessary to conduct its
business, except where the failure to possess such certificates,
authorizations or permits, singly or in the aggregate, would not have a
Material Adverse Effect, and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would result in
a Material Adverse Effect.
Each certificate signed by any officer of the Company and delivered to
the Initial Purchaser or its counsel shall be deemed to be a representation and
warranty by the Company to the Initial Purchaser as to the matters covered
thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, at a purchase price of 97 % of the principal amount
thereof, plus accrued interest, if any, from the Issue Date (as defined in the
Indenture) to the Closing Date, $100,000,000 in principal amount of Notes
3. Delivery and Payment. Delivery of and payment for the Notes
--------------------
shall be made at 10:00 AM, New York City time, on November 25, 1996, which date
and time may be postponed by agreement between the Initial Purchaser and the
Company (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"), Delivery of the Notes shall be made to the Initial
Purchaser against payment by the Initial Purchaser of the purchase price thereof
to or upon the order of the Company by intrabank transfer payable in same day
funds or such other manner of payment as may be agreed by the Company and the
Initial Purchaser. Delivery of the Notes shall be made at such location as the
Initial Purchaser shall reasonably designate at least one business day in
advance of the Closing Date and payment for the Notes shall be made at the
office of Alston & Bird ("Counsel for the Company"), One Atlantic Center, 1201
West Peachtree Street, Atlanta, Georgia. Certificates for the Notes shall be
registered in such names and in such denominations as the Initial Purchaser may
request not less than two full business days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchaser in Atlanta, Georgia, not later
than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Notes. The Initial Purchaser represents and warrants to
-----------------
and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell, any Notes
except (i) to those it reasonably believes to be qualified institutional
buyers (as defined in Rule 144A under the Securities Act) ("QIBs") or (ii)
to other institutional "accredited investors" (as defined in Rule
501(a)(1). (2), (3) or (7) of
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<PAGE>
Regulation D) who provide to it and to the Company a letter in the form of
Exhibit A hereto. In connection with each sale pursuant to clause (i)
above, the Initial Purchaser has taken or will take reasonable steps to
ensure that the purchaser of such Notes is aware that such sale is being
made in reliance on Rule 144A.
(b) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes by means of any form of general
solicitation or general advertising (within the meaning of Regulation D).
5. Agreements. The Company agrees with the Initial Purchaser that:
----------
(a) The Company will furnish to the Initial Purchaser and to Cleary,
Gottlieb, Steen & Hamilton ("Counsel for the Initial Purchaser"), without
charge, during the period referred to in paragraph (c) below, as many
copies of the Final Memorandum and any amendments and supplements thereto
as they may reasonably request. The Company will pay the expenses of
printing or other production of all documents relating to the offering of
the Notes and will reimburse the Initial Purchaser for payment of the
required PORTAL filing fee.
(b) The Company will not amend or supplement the Final Memorandum
prior to the completion of the distribution of the Notes by the Initial
Purchaser, without the prior written consent of the Initial Purchaser.
(c) If at any time prior to the completion of the sale of the Notes
acquired by the Initial Purchaser pursuant to this Agreement (as determined
by the Initial Purchaser), any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, or if it should be necessary to amend or
supplement the Final Memorandum to comply with applicable law, the Company
will promptly notify the Initial Purchaser of the same and, subject to the
requirements of paragraph (b) of this Section 5, will prepare and provide
to the Initial Purchaser pursuant to paragraph (a) of this Section 5 an
amendment or supplement that will correct such statement or omission or
effect such compliance.
(d) The Company will arrange for the qualification of the Notes for
sale by the Initial Purchaser under the laws of such jurisdictions as the
Initial Purchaser may designate and will maintain such qualifications in
effect so long as required for the sale of the Notes by the Initial
Purchaser. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
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<PAGE>
(e) The Company, whenever it publishes or makes available to the
public (by filing with any regulatory authority or securities exchange or
by publishing a press release or otherwise) any information that could
reasonably be expected to be material in the context of the issue of Notes
under this Agreement, shall promptly notify the Initial Purchaser as to the
nature of such information or event. The Company will likewise notify the
Initial Purchaser of (i) any decrease in the rating of the Notes or any
other debt securities of the Company by any nationally recognized
statistical rating organization (as defined in Rule 436(g)(2) under the
Securities Act) or (ii) any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change, as soon as the
Company becomes aware of any such decrease or notice. The Company will
also deliver to the Initial Purchaser, as soon as available and without
request, copies of its latest annual report and quarterly statement and any
report of its auditors thereon.
(f) The Company will not, and will not permit any of its Affiliates
to, resell any Notes that have been acquired by any of them, other than
pursuant to an effective registration statement under the Securities Act.
(g) Except as contemplated in the Registration Rights Agreement,
neither the Company nor any of its Affiliates, nor any person acting on its
or their behalf (other than the Initial Purchaser or any of its Affiliates,
as to whom the Company expresses no opinion) will, directly or indirectly,
make offers or sales of any security, or solicit offers to buy any
security, under circumstances that would require the registration of the
Notes under the Securities Act.
(h) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser or any of
its Affiliates, as to whom the Company expresses no opinion) will engage in
any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Company will
provide to each holder of such restricted securities and to each
prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Securities
Act. This covenant is intended to be for the benefit of the holders, and
the prospective purchasers designated by such holders, from time to time of
such restricted securities.
(j) The Company will cooperate with the Initial Purchaser and use its
best efforts to permit the Notes that are sold to QIBs to be eligible for
clearance and settlement through The Depository Trust Company.
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<PAGE>
(k) The Company will conduct its operations in a manner that will not
subject the Company to registration as an investment company under the
Investment Company Act.
6. Conditions to the Obligations of the Initial Purchaser. The
------------------------------------------------------
obligations of the Initial, Purchaser to purchase the Notes shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Company contained herein at the date and time that this
Agreement is executed and delivered by the parties hereto (the "Execution Time")
and the Closing Date, to the accuracy of the statements of the Company made in
any certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Company shall have furnished to the Initial Purchaser the
opinion of Counsel for the Company, dated the Closing Date, in form and
substance satisfactory to the Initial Purchaser.
(b) The Initial Purchaser shall have received from Counsel for the
Initial Purchaser such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes, the Final Memorandum (as
amended or supplemented at the Closing Date) and other related matters as
the Initial Purchaser may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(c) The Company shall have furnished to the Initial Purchaser a
certificate of the Company, signed by James A. O'Donnell and Richard E.
Mitchell, dated the Closing Date, to the effect that the signers of such
certificates have carefully examined the Final Memorandum, any amendment or
supplement to the Final Memorandum, this Agreement and the Credit Agreement
and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date,
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no change or
development or event involving a prospective change constituting a
Material Adverse Effect, except as set forth in or contemplated by the
Final Memorandum (exclusive of any amendment or supplement thereto);
and
(iii) all conditions to borrowings under the Credit Agreement
have been satisfied or waived.
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<PAGE>
(d) At the Execution Time and at the Closing Date, Ernst & Young LLP
shall have furnished to the Initial Purchaser a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Initial Purchaser, confirming that they
are independent public accountants within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and stating in effect that:
(i) on the basis of a reading of the latest unaudited financial
information made available by Tyson for the 13 minor lines which
represent the Business; carrying out certain specified procedures (but
not an examination in accordance with generally accepted auditing
standards) that would not necessarily reveal matters of significance
with respect to the comments set forth in such letter; a reading of
the minutes of the meetings of the stockholders, directors and
committees of the board of directors of Tyson; and inquiries of
certain officials of Tyson who have responsibility for financial and
accounting matters of the Business, as to transactions and events
subsequent to September 28, 1996, nothing came to their attention that
caused them to believe that with respect to the period subsequent to
September 28, 1996, there were any changes, at a specified date not
more than five business days prior to the date of the letter, in the
long-term debt or net current assets of the Business as compared with
the amounts shown on the September 28, 1996 balance sheet of the
Business included in the Final Memorandum, or for the period from
September 29, 1996 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year, in
sales, gross profit, operating income and earnings before taxes on
income, except in all instances for changes or decreases set forth in
such letter, in which case the letter shall be accompanied by an
explanation by Tyson as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchaser;
(ii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Business) set forth in the Final
Memorandum, including without limitation the information set forth
under the captions "Offering Memorandum Summary," "Summary Historical
and Pro Forma Condensed Financial Data," "Risk Factors," "Unaudited
Pro Forma Condensed Combined Financial Statements," "Selected
Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and
"Management," in the Final Memorandum agrees with the accounting
records of the Business, excluding any questions of legal
interpretation; and
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(iii) as to pro forma financial information,
(A) they have read the unaudited pro forma financial
information included in the Final Memorandum;
(B) they have inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to the basis
for their determination of the pro forma adjustments and whether the
unaudited pro forma financial statements included in the Final Memorandum
comply as to form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X;
(C) they have compared the historical financial information
included in the unaudited pro forma balance sheet and the unaudited pro
forma income statement in the Final Memorandum with the historical
information for the Business and found them to be in agreement;
(D) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the financial amounts in the
unaudited pro forma financial statements; and
(E) they have performed certain other specified procedures as
a result of which they determined that certain pro forma information of an
accounting, financial, or statistical nature set forth in the Final
Memorandum, including without limitation the information set forth under
the captions "Offering Memorandum Summary," "Summary Historical and Pro
Forma Condensed Financial Data," "Risk Factors," "Pro Forma
Capitalization," "Unaudited Pro Forma Financial Information," "Selected
Historical Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Notes"
in the Offering Memorandum agrees to or can be derived from the pro forma
financial statements of the Company or the analysis completed in the
preparation of such pro forma financial statements, excluding any questions
of legal interpretation.
All references in this Section 6(d) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the letter
or letters.
(e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letter or letters referred
to in paragraph (d) of this Section 6, or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Company, giving effect to the Acquisition, the effect of
which, in any case referred to in clause (i) or (ii) above, is, in the
judgment of the Initial Purchaser, so material and
-14-
<PAGE>
adverse as to make it impractical or inadvisable to market the Notes as
contemplated by the Final Memorandum.
(f) Subsequent to the respective dates as of which information is
given in the Final Memorandum and giving effect to the Acquisition, (i) the
Company shall not have incurred any material liability or obligation,
direct or contingent, or entered into any material transaction not in the
ordinary course of business; (ii) the Company shall not have purchased any
of its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock; and (iii) there
shall not have been any material change in the capital stock of the Company
or in the short-term debt or long-term debt of the Company, except in each
case as described in or contemplated by the Final Memorandum.
(g) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of the Notes by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Securities Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(h) Each of the Transaction Documents (including any amendments
thereto) shall have been duly authorized, executed and delivered by each of
the parties thereto, and the Initial Purchaser shall have received copies
of each such Transaction Document (including any amendments thereto) as so
executed and delivered in the form provided to the Initial Purchaser on or
before the date hereof except for changes approved by the Initial Purchaser
or changes which do not materially affect the rights or obligations of the
Company.
(i) All conditions to borrowings under the Credit Agreement shall
have been satisfied, the initial borrowings under the Credit Agreement
shall have occurred concurrently with the closing of the sale of the Notes
hereunder as contemplated in the Final Memorandum and all representations
and warranties of the Company contained in the Credit Agreement shall be
true and correct in all material respects on the Closing Date as if made on
the Closing Date.
(j) On the Closing Date, there shall be no less than $21.5 million of
additional availability under the Credit Agreement (as defined in the
Indenture), after giving effect to the Acquisition and any borrowings under
the Credit Agreement.
(k) All applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act with respect to the consummation of the
Acquisition shall have expired or otherwise been terminated, and the
Acquisition shall have been consummated as contemplated in the Asset
Purchase Agreement on the Closing Date.
-15-
<PAGE>
(1) The Initial Stockholders (as defined in the Indenture) shall have
executed a Securities Purchase and Stockholders Agreement with regard to
GHC in substantially the same form as provided to the Initial Purchaser
prior to execution of this Agreement, and the Equity Contribution shall
have be made concurrently with the sale of the Notes in the same manner as
described in the Final Memorandum.
(m) The Company shall have executed employment contracts with each of
Richard E. Mitchell, Randall H. Collins, Robert M. Powers, Stuart Alan
Ensor, Hernando Aviles and J. David Culwell in a form reasonably
satisfactory to the Initial Purchaser.
(n) The Company shall have been advised by the National Association
of Securities Dealers, Inc. (the "NASD") PORTAL Market ("PORTAL") that the
Notes have been designated PORTAL-eligible securities in accordance with
the rules and regulations of the NASD.
(o) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchaser such further information, certificates and documents
as the Initial Purchaser may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and Counsel for the Initial Purchaser,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at the Closing Date by the Initial Purchaser. Notice of such
cancellation shall be given to the Company in writing or by telephone or by
telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be delivered
at the office of Counsel for the Company on the Closing Date.
7. Reimbursement of Expenses; Fees. The Company will (i) whether or not
-------------------------------
the sale of the Notes provided for herein is consummated, pay all expenses
incident to the performance of its obligations under the offering documents,
including the fees and disbursements of its accountants and counsel, the cost of
printing or other production and delivery of the Preliminary Memorandum, the
Final Memorandum, all amendments thereof and supplements thereto, this
Agreement, the Registration Rights Agreement and all other documents relating to
the offering of the Notes, the cost of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including fees of counsel
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, the fees and expenses,
if any, incurred in connection with the admission of the Notes for trading in
the PORTAL system and (ii) only in the event the
-16-
<PAGE>
sale of the Notes provided for herein is not consummated, reimburse the Initial
Purchaser as requested for all reasonable out-of-pocket expenses incurred by the
Initial Purchaser in connection with the proposed purchase and resale of the
Notes.
8. Indemnification and Contribution. (a) The Company agrees to indemnify
--------------------------------
and hold harmless, to the fullest extent lawful, the Initial Purchaser, the
directors, officers, employees and agents of the Initial Purchaser and each
person who controls the Initial Purchaser within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 (the "Exchange Act")
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Preliminary
Memorandum, the Final Memorandum or any information provided by the Company to
any holder or prospective purchaser of Notes pursuant to Section 5(i), or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchaser
specifically for inclusion therein; and, provided, further, that the Company
-------- -------
will not be liable in any such case if a copy of the Preliminary Memorandum or
the Final Memorandum (including any amendment or supplement thereto delivered to
the Initial Purchaser prior to the date such Preliminary Memorandum or Final
Memorandum was sent or given to such purchaser) was not sent or given by or on
behalf of the Initial Purchaser to such person at or prior to the written
confirmation of the sale of Notes to such person, and if the Preliminary
Memorandum or Final Memorandum (including any amendment or supplement thereto
delivered to the Initial Purchaser prior to the date such Preliminary Memorandum
or Final Memorandum was sent or given to such purchaser) cured the defect giving
rise to such losses, claims, damages, liabilities or expenses. This indemnity
agreement will be in addition to any liability that the Company may otherwise
have.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, officers, employees, agents and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company to the Initial
-17-
<PAGE>
Purchaser, but only with reference to written information furnished to the
Company by or on behalf of the Initial Purchaser specifically for inclusion in
the Preliminary Memorandum or the Final Memorandum (or in any amendment or
supplement thereto). This indemnity agreement will be in addition to any
liability that the Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and under the headings "Notice to Investors" and "Plan of Distribution" in
the Preliminary Memorandum and the Final Memorandum constitute the only
information furnished in writing by or on behalf of the Initial Purchaser for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party except as set
forth below); provided, however, that such counsel shall be satisfactory to the
-------- -------
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party (it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for such indemnified persons), (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party or an indemnified party will
not, without the prior written consent (which shall not be unreasonably
withheld) of the indemnified parties or the indemnifying parties, as the case
may be, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of
-18-
<PAGE>
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties or the indemnifying parties, as the case may be, are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party or indemnifying party, as the case may be, from all liability arising out
of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company, on the one hand, and the Initial Purchaser,
on the other, agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, on the one hand, and the Initial Purchaser, on the other, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and by the Initial Purchaser, on the
other, from the offering of the Notes; provided, however, that in no case shall
-------- -------
the Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by the Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, on the one hand, and the
Initial Purchaser, on the other, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, on the one hand, and of the Initial Purchaser, on the
other, in connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Initial Purchaser shall be deemed to be equal to the total purchase discounts
and commissions received by the Initial Purchaser from the Company in connection
with the purchase of the Notes hereunder. Relative fault shall be determined by
reference to, among other things, whether any alleged untrue statement or
omission relates to information provided by the Company or the Initial Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities, expenses or judgments referred to in the
immediately preceding paragraph shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11l(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls the Initial Purchaser within the meaning of either the Securities Act
or the Exchange Act and each director, officer, employee and agent of the
Initial Purchaser shall have the same rights to contribution as the Initial
Purchaser, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act and
-19-
<PAGE>
each officer, director, employee and agent of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination by notice
-----------
given to the Company prior to delivery of and payment for the Notes, if prior to
such time there shall have occurred (i) any change in the market for
subordinated debt similar in nature to the Notes or (ii) any disruption of or
change in financial, banking or capital market conditions generally, the effect
of which, in any case referred to in clause (i) or (ii) above, is, in the
judgment of the Initial Purchaser, so material or adverse as to make it
impracticable or inadvisable to proceed with the offering or delivery of the
Notes as contemplated by the Final Memorandum.
10. Presentations and Indemnities to Survive. The respective agreements,
----------------------------------------
representations, warranties, indemnities and other statements of the Company or
its officers and of the Initial Purchaser set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Initial Purchaser or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Notes. The provisions of Sections
7 and 8 hereof shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied and confirmed to it at NationsBank Corporate
Tower, 100 North Tryon Street, NC1-007-07-01, Charlotte, North Carolina 28255-
0001, Telecopy No.: (704) 388-9941; or, if sent to the Company, will be mailed,
delivered or telecopied and confirmed to them at c/o CGW Southeast Partners,
III, L.P., Suite 210, Twelve Piedmont Center, Atlanta, Georgia 30305, Attention:
William A. Davies and James A. O'Donnell.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns and
the officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm, corporation or other entity any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provisions
herein contained. No purchaser of Notes from the Initial Purchaser shall be
deemed to be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
-20-
<PAGE>
14. Business Day. For purposes of this Agreement, "business day" means
------------
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
-21-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement between the
Company and the Initial Purchaser.
Very truly yours,
GORGES/QUICK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
--------------------------------
Name: William A. Davies
Title: Vice President and Secretary
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ William Caperson
-------------------------------
Name: William Caperson
Title: Vice President
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
Agreement and your acceptance shall represent a binding agreement between the
Company and the Initial Purchaser.
Very truly yours,
GORGES/QUICK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
--------------------------------
Name: William A. Davies
Title: Secretary
The foregoing Agreement is hereby
confirmed and accepted as of the
data first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ William Caperson
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT 2
ASSET PURCHASE AGREEMENT
by and among
GORGES/QUIK-TO-FIX FOODS, INC.,
as Buyer,
and
TYSON FOODS, INC.,
TYSON HOLDING COMPANY
and
GORGES FOODSERVICE, INC.,
as Sellers
DATED OCTOBER 17,1996
Volume 1 of 2
(Asset Purchase Agreement and Exhibits)
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of October 17, 1996
by and among
Tyson Foods, Inc., a Delaware corporation,
Gorges Foodservice, Inc., a Texas corporation,
Tyson Holding Company, a Delaware corporation,
and Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
ARTICLE 1 - DEFINITIONS AND TERMS....................................... -2-
1.1 Certain Defined Terms........................................ -2-
---------------------
1.2 Knowledge Convention......................................... -12-
--------------------
ARTICLE 2 - PURCHASE AND SALE OF ASSETS................................. -13-
2.1 Basic Transaction............................................ -13-
-----------------
2.2 Consideration for Purchased Assets........................... -17-
----------------------------------
2.3 Determination of Inventories................................. -22-
----------------------------
2.4 The Closing and Post Closing Adjustments..................... -24-
----------------------------------------
2.5 Like Kind Exchange........................................... -25-
------------------
ARTICLE 3 - CONDITIONS TO CLOSING....................................... -26-
3.1 Conditions to Buyer's Obligations............................ -26-
---------------------------------
3.2 Conditions to Sellers' Obligations........................... -30-
----------------------------------
ARTICLE 4 - COVENANTS PRIOR TO CLOSING.................................. -32-
4.1 Affirmative Covenants of Sellers............................. -32-
--------------------------------
4.2 Negative Covenants of Seller................................. -35-
----------------------------
4.3 Covenants of Buyer........................................... -36-
------------------
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SELLERS................... -36-
5.1 Corporate Organization and Power............................. -36-
--------------------------------
5.2 Authorization................................................ -37-
-------------
5.3 No Violation................................................. -37-
------------
5.4 Financial Statements......................................... -38-
--------------------
5.5 No Adverse Changes........................................... -38-
------------------
5.6 Absence of Certain Changes................................... -39-
--------------------------
5.7 Condition of Purchased Assets................................ -40-
-----------------------------
5.8 Title to Assets.............................................. -41-
---------------
5.9 Leases....................................................... -42-
------
5.10 Rolling Stock................................................ -43-
-------------
5.11 Intellectual Property........................................ -44-
---------------------
5.12 Written Assumed Contracts.................................... -44-
-------------------------
5.13 Employees.................................................... -45-
---------
5.14 Taxes........................................................ -48-
-----
5.15 Litigation................................................... -49-
----------
5.16 Compliance with Law; Licenses and Permits.................... -50-
-----------------------------------------
5.17 Environmental Matters........................................ -50-
---------------------
5.18 Employee Benefits............................................ -51-
-----------------
5.19 Brokers and Finders.......................................... -53-
-------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
5.20 Insurance.................................................... -53-
---------
5.21 Transactions with Affiliates................................. -54-
----------------------------
5.22 Statements True and Correct.................................. -54-
---------------------------
5.23 No Other Representations or Warranties....................... -54-
--------------------------------------
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF BUYER..................... -55-
6.1 Corporate Organization and Power............................. -55-
--------------------------------
6.2 Authorization................................................ -55-
-------------
6.3 No Violation................................................. -55-
------------
6.4 Litigation................................................... -56-
----------
6.5 Brokers and Finders.......................................... -56-
-------------------
6.6 Statements True and Correct.................................. -56-
---------------------------
ARTICLE 7 - TERMINATION
7.1 Termination.................................................. -57-
-----------
7.2 Effect of Termination........................................ -58-
---------------------
7.3 Confidentiality.............................................. -58-
---------------
7.4 Risk of Loss................................................. -58-
------------
ARTICLE 8 - ADDITIONAL AGREEMENTS....................................... -59-
8.1 Indemnification.............................................. -59-
---------------
8.2 Employees of the Business.................................... -69-
-------------------------
8.3 Continuing Assistance........................................ -71-
---------------------
8.4 Expenses..................................................... -72-
--------
8.5 Press Releases and Announcements............................. -72-
--------------------------------
8.6 Continuing Access to Records................................. -72-
----------------------------
8.7 Bulk Transfer Laws........................................... -73-
------------------
8.8 Allocation of Purchase Price................................. -74-
----------------------------
8.9 Third Party Beneficiaries.................................... -74-
-------------------------
8.10 Supplemental Schedules....................................... -74-
----------------------
8.11 Arbitration.................................................. -75-
-----------
8.12 Covenants Not to Compete..................................... -76-
------------------------
8.13 Disclaimer Regarding Projections............................. -80-
--------------------------------
8.14 Communications and Investigations............................ -80-
---------------------------------
8.15 Ancillary Agreements......................................... -81-
--------------------
8.16 Sale of L-Street Facility.................................... -82-
-------------------------
ARTICLE 9 - MISCELLANEOUS............................................... -83-
9.1 Amendment and Waiver......................................... -83-
--------------------
9.2 Notices...................................................... -83-
-------
9.3 Assignment................................................... -84-
----------
9.4 Severability................................................. -85-
------------
9.5 No Strict Construction....................................... -85-
----------------------
9.6 Section Headings............................................. -85-
----------------
9.7 Complete Agreement........................................... -86-
------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
9.8 Governing Law................................................ -86-
-------------
9.9 Counterparts................................................. -86-
------------
</TABLE>
-5-
<PAGE>
ASSET PURCHASE AGREEMENT SCHEDULES
----------------------------------
Schedule 2.1(a)(ix) Included Poultry Products
Schedule 3.1(1) Permitted Exceptions
Schedule 5.4 Financial Statements
Schedule 5.5 No Adverse Changes
Schedule 5.6 Absence of Certain Changes
Schedule 5.8 Title to Assets
Schedule 5.9 Personal Property Leases
Schedule 5.10 Rolling Stock
Schedule 5.11 Intellectual Property
Schedule 5.12 Written Assumed Contracts
Schedule 5.13 Employee Matters
Schedule 5.15 Litigation
Schedule 5.16 Compliance with Law; Licenses and
Permits
Schedule 5.17 Environmental Matters
Schedule 5.18 Employee Benefits
Schedule 8.12 Certain Beef and Pork Products
Schedule 8.16 L-Street Facility
ASSET PURCHASE AGREEMENT EXHIBITS
---------------------------------
Exhibit "A" Highly Confident Letter
Exhibit "B" Bank Commitment Letter
Exhibit "C" Form of Transition Services Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this
17th day of October, 1996 by and among Tyson Foods, Inc., a Delaware corporation
("Tyson"), Gorges Foodservice, Inc., a Texas corporation ("Gorges"), Tyson
Holding Company, a Delaware corporation ("Tyson Holding") (Tyson, Gorges and
Tyson Holding are each a "Seller" and are collectively the "Sellers"), and
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation ("Buyer").
WHEREAS, Tyson, directly and through Gorges and Tyson Holding, owns and
operates as a division its beef further processing operations which is known as
Gorges/Quik-to-Fix Foods; and
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Sellers and Sellers desire to sell to Buyer all of the
assets used in the operations of the beef further processing business of Sellers
(other than Excluded Assets) (collectively, the "Business"); and
WHEREAS, Buyer has agreed to assume certain executory obligations under
existing contracts entered into by Sellers in the ordinary course of business of
the Business, but will not assume or become liable for any other obligations and
liabilities of Sellers arising out of the operation of the Business prior to the
Closing Date (as hereinafter defined) or the ownership prior to that date of the
Purchased Assets (as hereinafter defined); and
WHEREAS, certain of the assets which comprise the Business are owned by
Gorges and Tyson Holding and Tyson desires to cause Gorges and Tyson Holding to
sell and convey such assets to Buyer;
NOW, THEREFORE, in consideration of the premises recited, of the covenants,
agreements and provisions of this Agreement, and of other good and valuable
<PAGE>
consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the parties hereby agree as follows:
ARTICLE 1 - DEFINITIONS AND TERMS
1.1 Certain Defined Terms. As used in this Agreement and in any
---------------------
Schedules and exhibits hereto, the following terms have the following meanings:
(a) "1996 Audit" shall mean the audited combined balance sheets
----------
of the Business as of September 28, 1996 and audited combined statements of
income and statements of cash flow of the Business for the fiscal year
ended September 28, 1996.
(b) "Adjusted Closing Statement" shall have the meaning set forth
--------------------------
for such term in Section 2.3(b) hereof.
(c) "Area" shall have the meaning set forth for such term in
----
Section 8.12(a) hereof.
(d) "Assumed Contracts" shall have the meaning set forth for such
-----------------
term in Section 2.1(a)(ii) hereof.
(e) "Audited Financial Statements" shall have the meaning set forth
----------------------------
for such term in Section 5.4(a) hereof.
(f) "Assumed Liabilities" shall have the meaning set forth for such
-------------------
term in Section 2.2(c)(i) hereof.
-8-
<PAGE>
(g) "Base Purchase Price" shall have the meaning set forth for such
-------------------
term in Section 2.2(a) hereof.
(h) "Business" shall have the meaning set forth for such term in
--------
the second recital hereof.
(i) "Buyer" means Gorges/Quik-to-Fix Foods, Inc., a Delaware
-----
corporation.
(j) "Buyer Indemnitees" shall have the meaning set forth for such
-----------------
term in Section 8.1(a) hereof.
(k) "CERCLA" shall have the meaning set forth for such term in this
------
Section 1.1 within the definition of "Environmental Laws."
(l) "Closing" and "Closing Date" shall have the meaning set forth
------- ------------
for such terms in Section 2.4 hereof.
(m) "Closing Statement" shall have the meaning set forth for such
-----------------
term in Section 2.3(a) hereof.
(n) "Code" means the Internal Revenue Code of 1986 (or any
----
successor(s) thereto), as amended from time to time, and all rules and
regulations promulgated thereunder.
(o) "Collection Agreement" shall have the meaning set forth for
--------------------
such term in Section 8.15(a)(ii) hereof.
-9-
<PAGE>
(p) "Encumbrances" shall mean any liens, pledges, charges,
------------
encumbrances, security interests, options, or restriction of any kind,
including any restriction on use, transfer, receipt of income, or exercise
of any other attribute of ownership.
(q) "Employment Liability" means any obligation or liability of the
--------------------
Sellers, or any of them, based upon or arising out of (i) any contract,
agreement, understanding or commitment (whether written or oral) between
any Seller and any employee, agent or representatives of such Seller, or
any former employee, agent or representatives of such Seller, relating to
the terms or conditions of employment, compensation, deferred compensation,
severance, vacation pay, sick leave, profit sharing, pension, retirement,
or any other type of benefit or emolument of employment, (ii) any
collective bargaining or other labor or union agreement, (iii) the breach,
violation or failure to comply with any law, rule, regulation, statute,
ordinance or other authority governing the employment relationship,
including, without limitation, those relating to the health, welfare or
safety of employees, or (iv) Sellers' Plans, or any "multi-employer plan"
to which any Seller has or does contribute.
(r) "Environmental Laws" shall mean all codes, laws (including
------------------
common laws), ordinances, regulations, reporting or licensing requirements,
rules or statutes relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over, and including common law in respect
of, pollution or protection of the
-10-
<PAGE>
environment, including the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
-- ----
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other laws relating to emissions,
------
discharges, releases, or threatened releases of any Hazardous Substance, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous
Substance.
(s) "Environmental Liability" means any obligation imposed by or
-----------------------
any liability based upon or arising out of the breach, violation or failure
to comply with any Environmental Law.
(t) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time and all regulations promulgated
thereunder.
(u) "Estimated Inventory Amount" shall have the meaning set forth
--------------------------
for such term in Section 2.3(a) hereof.
(v) "Excluded Assets" shall have the meaning set forth for such
---------------
term in Section 2.1(b) hereof.
(w) "Excluded Contracts" shall mean all contracts, agreements,
------------------
instruments, plans and leases (other than those described on Schedule 5.12)
to which any Seller is a party, or by which any of the Purchased Assets are
subject or bound, meeting any of the descriptions set forth below:
-11-
<PAGE>
(i) Any purchase order, agreement or commitment obligating any
Seller to purchase or sell any products or services and which either
(A) was not entered into in the normal course of the Business, (B) is
not terminable by such Seller without payment of a penalty upon 30
days' (or less) notice, or (C) which is presently expected to result
in a loss upon-completion or performance thereof in an amount in
excess of $50,000;
(ii) any indebtedness, obligation or liability for borrowed
money, or liability for the deferred purchase price of property, or
any instrument guaranteeing any material indebtedness, obligation or
liability for borrowed money, or any obligation to incur any
indebtedness, obligation or liability for borrowed money;
(iii) any joint venture, partnership or other arrangement
involving a sharing of profits or costs involving the Business;
(iv) any agreement pursuant to which a rebate, discount, bonus,
commission or other payment with respect to the sale of any product of
the Business will be payable or required after the Closing;
(v) any consulting, employment or collective bargaining
agreement or arrangement; and
(vi) any lease, contract, license, permit, distribution
arrangement, sales and purchase agreement, or other agreement or
arrangement that is described in Section 5.13, 5.18 or 5.21 hereof, or
that is otherwise defined herein as an Excluded Liability.
-12-
<PAGE>
(x) "Excluded Liabilities" shall have the meaning set forth for
--------------------
such term in Section 2.2(c)(ii) hereof.
(y) "Facilities" means Sellers' processing facilities which
----------
constitute a part of the Purchased Assets.
(z) "Fajita Purchase Order" shall have the meaning set forth for
---------------------
such term in Section 8.15(b) hereof.
(aa) "Final Inventory Amount" shall have the meaning set forth for
----------------------
such term in Section 2.3(b) hereof.
(bb) "GAAP" means United States generally accepted accounting
----
principles consistently applied with prior periods.
(cc) "Gorges" means Gorges Foodservice, Inc., a Texas corporation
------
and wholly-owned subsidiary of Tyson.
(dd) "Hazardous Substance(s)" means substances that are defined or
----------------------
listed in, or otherwise classified pursuant to, any Environmental Laws as
"hazardous substances," "hazardous materials," "hazardous wastes" or "toxic
substances" or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive
toxicity or "EP toxicity" and includes, but is not limited to, asbestos or
asbestos containing materials, petroleum and
-13-
<PAGE>
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or
geothermal energy.
(ee) "Hired Employees" shall have the meaning set forth for such
---------------
term in Section 8.2(b) hereof.
(ff) "Immigration Laws" shall have the meaning set forth for such
----------------
term in Section 5.13(c) hereof.
(gg) "Indemnification Claim" shall have the meaning set forth for
---------------------
such term in Section 8.1(c) hereof.
(hh) "Indemnitee" shall have the meaning set forth for such term in
----------
Section 8.1(c) hereof.
(ii) "Indemnitor" shall have the meaning set forth for such term in
----------
Section 8.1(c) hereof.
(jj) "Intellectual Property" shall mean (i) the trademarks, service
---------------------
marks and trade names listed on Schedule 5.11 hereto, the other trade
rights, copyrights and applications for issuance or registration of any of
the foregoing, and (ii) the trade secrets, products codes and other
confidential, nonpublic, or similar information necessary to the running of
the Business as the same is presently conducted (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable
or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
proposals,
-14-
<PAGE>
technical data, copyrightable works, financial and marketing plans and
customer and supplier lists and information).
(kk) "Inventory" shall mean all inventory held for resale and all
---------
raw materials, work-in-process, finished products, shipments in transit,
wrapping, supply and packaging items related to the Business.
(ll) "L-Street Facility" means the real property and improvements
-----------------
described on Schedule 8.16 hereto.
(mm) "Leased Real Estate" shall mean all real property leased by any
------------------
Seller which is used in the operation of the Business and which is listed
as Leased Real Estate on Schedule 5.8 hereto.
(nn) "Leases" shall have the meaning set forth for such term in
------
Section 5.9 hereof.
(oo) "License Agreement" shall have the meaning set forth for such
-----------------
term in Section 8.15(a)(iii) hereof.
(pp) "Loss" means any action, suit, proceeding, claim, cost, damage,
----
expense, liability, loss or obligation, including but not limited to,
interest or carrying costs, penalties, legal, accounting, and other
professional fees and expenses incurred in the collection, prosecution and
defense of actions or claims and amounts paid in settlement pursuant to the
terms of this Agreement, that may be imposed or otherwise incurred or
suffered by the specified person (but a "Loss"
-15-
<PAGE>
shall not include consequential, speculative or punitive damages unless
asserted by a third party).
(qq) "Market Price" shall mean the USDA Market Value (plus
------------
applicable inbound freight cost) that is reflected on the USDA Market News
Report (a/k/a Blue Sheet) as reported for the Closing Date.
(rr) "Material Adverse Effect" means a material adverse change in,
-----------------------
or material adverse effect upon, any of (i) the financial condition,
assets, liabilities, cash flows, properties or results of operations of the
Business; or (ii) the ability of Sellers to perform their respective
obligations under the Agreement or any document ancillary thereto.
(ss) "Neutral Auditors" shall have the meaning set forth for such
----------------
term in Section 2.3(c) hereof.
(tt) "Owned Real Estate" shall mean all real property (other than
-----------------
the L-Street Facility) owned by a Seller which is used in the operation of
the Business, including any buildings, structures and improvements thereon
or appurtenances thereto, and which is listed as Owned Real Estate on
Schedule 5.8 hereto.
(uu) "Permits" shall mean Sellers' licenses, permits, certificates
-------
and other public, governmental and private third party authorizations
necessary to carry on the Business as presently conducted.
(vv) "Permitted Encumbrances" shall have the meaning set forth for
----------------------
such term in Section 5.8(a) hereof.
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<PAGE>
(ww) "Permitted Exceptions" shall have the meaning set forth for
--------------------
such term in Section 3.1(i) hereof.
(xx) "Prime Rate" shall have the meaning set forth for such term in
----------
Section 2.4(c) hereof.
(yy) "Purchased Assets" shall have the meaning set forth for such
----------------
term in Section 2.1(a) hereof.
(zz) "Resolution Period" shall have the meaning set forth for such
-----------------
term in Section 2.3(c) hereof.
(aaa) "Restricted Business" shall have the meaning set forth for such
-------------------
term in Section 8.12(a) hereof.
(bbb) "Schedules" means those Schedules attached hereto and made a
-----------
part hereof which are specifically delineated to be Schedules.
(ccc) "Seller" means each of Tyson, Gorges and Tyson Holding and
------
"Sellers" means all of them taken together.
--------
(ddd) "Seller Affiliate" shall have the meaning set forth for such
----------------
term in Section 5.18(a) hereof.
(eee) "Seller's Cost" as it relates to Inventory shall be defined as
-------------
the actual historical cost as reflected on such Seller's books as of the
Closing Date, as
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<PAGE>
such books are regularly maintained by such Seller in the ordinary course
of business consistent with past practices.
(fff) "Seller Indemnitees" shall have the meaning set forth for
------------------
such term in Section 8.1(b) hereof.
(ggg) "Sellers' Knowing Persons" shall mean any of Dick Mitchell,
------------------------
Randy Collins, Bob Powers, Hernando Aviles, Stuart Ensor, Rick Loehr, Troie
Burch, Bob Thiesen, Greg Westhoff, John Tyson, Dennis Leatherby and William
Whitfield.
(hhh) "Sellers' Plans" shall have the meaning set forth for such term
--------------
in Section 5.18(a) hereof.
(iii) "Tax" or "Taxes" shall mean any federal, state, local or
--- -----
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code (S)59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
(jjj) "Third Party Claim" shall have the meaning set forth for such
-----------------
term in Section 8.1(d) hereof.
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<PAGE>
(kkk) "Transition Services Agreement" shall have the meaning set
-----------------------------
forth for such term in Section 8.15(a)(i) hereof.
(111) "Tyson" means Tyson Foods, Inc., a Delaware corporation.
-----
(mmm) "Tyson Holding" means Tyson Holding Company, a Delaware
-------------
corporation and wholly-owned subsidiary of Tyson.
(nnn) "WARN Act" shall have the meaning set forth for such term in
--------
Section 8.2(f) hereof.
1.2 Knowledge Convention. Whenever any statement herein or in any
--------------------
Schedule, exhibit, certificate or other document delivered to any party
pursuant to this Agreement is made, "[to] its knowledge" or "[to] its best
knowledge", (or in the case of any "Seller," the "knowledge of such Seller," in
the case of "Sellers," the "knowledge of Sellers," or in the case of the Buyer,
the "knowledge of Buyer,"), or words of similar intent or effect of any party or
its representative, such statement shall be deemed to include a representation
that a reasonable investigation of the subject matter thereof has been
conducted. A reasonable investigation shall mean that senior representatives of
the party (which in the case of any Seller, shall mean the "Sellers' Knowing
Persons" only), have reviewed the relevant statement and have consulted with the
appropriate individuals as to whether they have knowledge of any fact or
circumstance that would make such statement untrue and have reviewed documents
in the possession of such representative, such appropriate individuals and the
party. Knowledge of any entity or person shall be limited to the actual
knowledge of such entity or person after giving effect to the investigations
described above, and shall not include any matter, fact or circumstance
-19-
<PAGE>
which such person otherwise should have known. Further, "knowledge" of any
Seller or Sellers collectively shall mean only knowledge of the Sellers' Knowing
Persons.
-20-
<PAGE>
ARTICLE 2 - PURCHASE AND SALE OF ASSETS
2.1 Basic Transaction.
-----------------
(a) Purchased Assets. Except as otherwise provided below, on and
----------------
subject to the terms established in this Agreement, Buyer hereby agrees to
purchase from Sellers, and each Seller hereby agrees to sell, convey,
assign, transfer and deliver on the Closing Date to Buyer, free and clear
of all Encumbrances of any kind, except for Permitted Exceptions and as
otherwise specified herein, all of the right, title and interest of such
Seller in and to all of the properties, assets and rights of such Seller of
any kind, tangible and intangible, and wherever located, exclusively used
in or relating exclusively to the Business as a going concern, except the
Excluded Assets (collectively, the "Purchased Assets"). The Purchased
Assets shall include but shall not be limited to the following as the same
shall exist on the Closing Date:
(i) All Owned Real Estate set forth in Schedule 5.8 hereto;
(ii) All leases (of real and personal property), contracts,
licenses, Permits, distribution arrangements, sales and purchase
agreements, other agreements and business arrangements (including
deposits made by a Seller pursuant thereto), to the extent
assignable pursuant to which any Seller enjoys a right or benefit
solely in connection with the Business, whether oral or written,
other than an Excluded Contract (the "Assumed Contracts");
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<PAGE>
(iii) All machinery, equipment, furniture, tools,
computers, office equipment, business machines, telephones and
telephone systems owned by a Seller located at the Owned Real
Estate and Leased Real Estate described in Schedule 5.8 hereto;
(iv) All vehicles and rolling stock owned by a Seller
and described in Schedule 5.10 hereto;
(v) All of Sellers' office supplies, production
supplies, spare parts, other miscellaneous supplies, and other
tangible property of any kind located at the Facilities on the
Closing Date;
(vi) All Inventories of the Business (other than
inventories related to or a part of Seller's discontinued steak
business and any poultry or poultry based products to the extent
not included or related to those items listed in Schedule
2.1(a)(ix) hereto);
(vii) As used exclusively in the Business and as
disclosed on Schedule 5.11 hereto, all of any Seller's
ownerships, where applicable, and/or right, title and interest in
and to Intellectual Property, together with all of such Seller's
rights to use all of the foregoing and all other rights in, to
and under the foregoing in the United States and in all countries
anywhere outside the United States; and all goodwill and going
concern value and all
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<PAGE>
other intangible properties of the Business, all of the foregoing
to the extent assignable;
(viii) As used exclusively in the Business, copies of
all records pertaining to customers and accounts, personnel
records, all lists and records pertaining to suppliers, and all
books, ledgers, files and business records except as relating to
Excluded Assets or Excluded Liabilities, and subject to Sellers'
and Buyer's respective rights and obligations under Section 8.6
hereof;
(ix) In furtherance of but not in any way limiting
the foregoing, those poultry based products listed on Schedule
2.1(a)(ix) hereto;
(x) All of the pork chop co-pack business of
Sellers, whether or not currently produced or conducted at any of
the Facilities or considered a part of the Business;
(xi) All of the business which is part of Tyson
product codes 15030, 15006 and 15008 (i.e. St. Louis and Baby
Back Ribs) whether or not currently produced or conducted at any
of the Facilities or considered a part of the Business ;
(xii) All assignable rights against third parties
under any warranty with respect to any of the foregoing; and
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<PAGE>
(xiii) All other similar property not referred to above
which is used exclusively in Sellers' operation of the Business,
wherever located, but specifically excluding the Excluded Assets
and such property which has been sold or otherwise disposed of by
a Seller in the ordinary course of business.
(b) Excluded Assets. Notwithstanding the foregoing, the
---------------
parties agree that the following rights, properties and assets of
Sellers are expressly excluded from this purchase and sale and
are not included in the Purchased Assets (the "Excluded
Assets"):
(i) Sellers' rights under or pursuant to this Agreement
and the other agreements with Buyer contemplated hereby;
(ii) Cash, including bank balances and bank accounts,
monies in possession of any banks, savings and loans or trust
companies and similar cash items on hand on the Closing Date;
(iii) Investment securities and other short- and
medium-term investments of the Business;
(iv) Accounts receivable;
(v) Any intercompany accounts receivable of any Seller;
(vi) All prepaid items and deposits (other than deposits
described in Section 2.1(a)(ii) hereof), rebates, refunds,
claims,
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<PAGE>
causes of action, choses in action, rights of recovery and rights
of set-off of any kind (including any tax credits, tax refunds or
tax benefits);
(vii) All right, title and/or interest of a Seller in and
to or existing under such Seller's tax records and tax returns
(including any right to tax refunds), corporate charter, minute
and stock record books, corporate seal, check books and cancelled
checks all subject to the respective rights of Sellers and Buyer
under Section 8.6 hereof;
(viii) Any ownership interest, direct or indirect, actual or
beneficial, of Tyson in Gorges or Tyson Holding;
(ix) Other than those items listed on Schedule 2.1(a)(ix)
hereto and subject to the provisions of Section 8.12 hereof, any
business of the Business which pertains to poultry or poultry
based products;
(x) The L-Street Facility (subject to the provisions of
Section 8.16 hereof); and
(xi) Any other asset of a Seller or any affiliates of
Sellers other than those set forth in Section 2.1(a) hereof.
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<PAGE>
2.2 Consideration for Purchased Assets. The total consideration to be
----------------------------------
paid by Buyer for the Purchased Assets shall be the cash consideration described
in subparagraphs 2.2(a) and 2.2(b) hereinbelow and the assumption by Buyer of
the Assumed Liabilities.
(a) Basic Cash Consideration. At Closing, Buyer will pay to Sellers
------------------------
One Hundred Fifty-Four Million Dollars ($154,000,000) (the "Base Purchase
Price").
(b) Cash Consideration for Sellers' Inventories. Buyer will pay cash
-------------------------------------------
to Sellers for Sellers' inventories as follows:
(i) All of Sellers' Inventories of the Business (other than
raw materials) shall be valued and purchased at the lower of (A)
Seller's Cost thereof or (B) market value thereof, with such market
value being determined, to the extent practical, on an item by item
basis; provided, however, if an item of inventory is sold or offered
for sale at a price lower than Seller's Cost, such price shall not be
deemed market value for purposes of the valuation of such item of
inventory as herein provided unless such lower price is the prevailing
price at which such item is offered or sold to Sellers' customers
generally;
(ii) All of Sellers, raw materials shall be valued and
purchased at the Market Price of such raw materials; and
(iii) All of the ingredients, packing materials and supplies not
meeting the historical quality standards of the Business due to
shrinkage, spoilage, obsolescence or deviation from purchasing
specifications shall be valued at zero.
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<PAGE>
(c) Assumption of Liabilities.
-------------------------
(i) Liabilities Assumed. Subject to the conditions specified
-------------------
in this Agreement, Buyer will assume on the Closing Date and pay,
discharge or perform when due, all obligations and liabilities of
Sellers, or any of them, arising on or after the Closing Date under
all Assumed Contracts, excluding however (A) any liability or
obligation for any breach by a Seller of any of the foregoing
occurring prior to the Closing Date, and (B) any liability for the
payment of monies under any of the foregoing for the purchase of goods
or services occurring prior to the Closing Date (and whether such
monies are payable before or after the Closing Date). The obligations
and liabilities to be assumed by Buyer as described in this Section
2.2(c)(i) are herein referred to as the "Assumed Liabilities."
(ii) Excluded Liabilities. Buyer will not assume or be liable
--------------------
for any liability or obligation of any Seller, known or unknown,
liquidated or contingent, other than the Assumed Liabilities (the
"Excluded Liabilities"). Without limiting the generality of the
foregoing, Buyer expressly will not assume (and Excluded Liabilities
shall include) all of the following liabilities and obligations:
a. Any of Sellers' liabilities or obligations under this
Agreement and the other agreements with Buyer contemplated
hereby;
b. The trade or other accounts payable of any Seller;
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<PAGE>
c. Any liabilities or obligations of a Seller for expenses
or fees incident to or arising out of the negotiation,
preparation, approval, or authorization of this Agreement or the
consummation (or preparation for the consummation) of the
transactions contemplated hereby, including without limitation,
attorneys', accountants' and brokers' fees;
d. Any liability or obligation of any Seller with respect
to Taxes for any period or partial period occurring prior to the
Closing Date and any liabilities for interest, penalties or
additions to any Taxes, it being understood that Buyer shall not
be deemed to be any Seller's transferee with respect to any Tax
liability;
e. Any liabilities or obligations of a Seller for product
liability and warranty claims with respect to products sold prior
to the Closing Date;
f. Any Environmental Liability arising out of or related to
any period prior to the Closing Date;
g. Any liability or obligation of any Seller which relates
to the Excluded Assets;
h. Any liability or obligation arising out of or relating
to the operations of the Business prior to the Closing Date which
is not an Assumed Liability, including without limitation any
such
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<PAGE>
liability or obligation for bodily or personal injury, death,
property damage or workers' compensation claims;
i. Any Employment Liability, and any liability or
obligation due or to become due to any officer, director,
shareholder, employee or agent of any Seller as a result of the
consummation of the transactions contemplated hereby;
j. Any liability or obligation, including, without
limitation, any fees or expenses to defend any claim, relating to
or arising out of any of the claims or other matters listed on
Schedule 5.15 hereto;
k. Any liability or obligation under any Excluded Contract;
1. Any liability arising out of a breach by any Seller of
any Assumed Contract; and
m. Any other liability or obligation of any Seller not
expressly assumed by Buyer under Section 2.2(c) hereof.
(d) Other Adjustments to Purchase Price.
-----------------------------------
(i) All real and personal property taxes and special assessments
(but not including any transfer or sales taxes), if any, which are
applicable to the Purchased Assets for the year 1996 shall be prorated
as of the
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<PAGE>
Closing Date and treated as adjustments to the Without limitation, all
real and personal property taxes which are for the year 1996,
regardless of when same are due and payable, shall be prorated
respectively between Sellers on the one hand and Buyer on the other
hand as of the Closing Date on the basis of the most recent available
tax bill.
(ii) Buyer and Sellers shall mutually determine and calculate
the earned but unused vacation of the Hired Employees as of the
Closing Date. Such amount shall be deducted from the cash
consideration paid to Sellers pursuant to this Section 2.2. The
settlement for this amount shall be done at such time settlement
occurs for the Final Inventory Amount pursuant to Section 2.4(c)
hereof.
(iii) Buyer and Sellers shall review the status of any advance
payments under any Assumed Contracts which have been made by any
Seller on behalf of the Business. Buyer and Sellers shall thereafter
mutually calculate and determine the amount due Sellers, if any, by
virtue of benefits or items to be received by Buyer after the Closing
pursuant to such prepayments. The settlement for this amount shall be
done at such time settlement occurs for the Final Inventory Amount
pursuant to Section 2.4(c) hereof.
2.3 Determination of Inventories.
----------------------------
(a) Not less than five (5) days prior to the Closing, Sellers, in
consultation with Buyer, shall prepare a statement (the "Closing
Statement")
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<PAGE>
setting forth Sellers' estimated value of the Inventory (the "Estimated
Inventory Amount") as of the close of business on the Closing Date. For
purposes of determining the Estimated Inventory Amount, it is acknowledged
that Sellers will be unable to conduct a complete physical inventory prior
to Closing. Sellers shall thus, in consultation with Buyer, prepare, based
on their books and records which have been maintained in the ordinary
course of business, an estimate of the quantity of Inventory which will be
in place as of the close of business on the Closing Date. The value of the
Inventory shown on the Closing Statement shall be determined in accordance
with GAAP and as provided in Section 2.2(b) hereof. In the event of any
conflict between GAAP and the valuation methodology set forth in Section
2.2(b) hereof, GAAP shall control. The amount so calculated shall be used
on the Closing Statement.
(b) Within three (3) business days after the Closing Date, Buyer and
Sellers shall conduct a physical inventory count as of the close of
business on the Closing Date of the Inventories purchased as part of the
Purchased Assets. Such physical inventory count shall be conducted in
accordance with GAAP, and at Sellers' election may be observed by Ernst &
Young, LLP and at Buyer's election may be observed by Price Waterhouse &
Co. Within three (3) days after completion of the physical inventory count,
Buyer and Sellers shall prepare a written reconciliation thereof (the
"Adjusted Closing Statement"), stating the quantities and values of the
Inventories, determined in accordance with GAAP and the principles set
forth in Section 2.2(b), the amount of Inventory not meeting the historical
quality standards of the Business due to shrinkage, spoilage, obsolescence
or deviation from purchasing specification, the total amount of the
Inventory determined in such manner (the "Final Inventory Amount"), and
stating the difference, if any, between the Estimated Inventory Amount and
the Final
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Inventory Amount. In the event of any conflict between GAAP and the
valuation methodology set forth in Section 2.2(b) hereof, GAAP shall
control.
(c) If Buyer and Sellers cannot agree as to a Final Inventory Amount
and Adjusted Closing Statement within seven (7) days of the Closing Date
(the "Resolution Period"), a11 disputed items shall then be submitted to a
firm of nationally recognized independent public accountants (the "Neutral
Auditors") selected by Sellers and Buyer within five (5) days after the
expiration of the Resolution Period (which Neutral Auditors shall not have
been engaged directly by any party hereto within the preceding two (2)
years). If Sellers and Buyer are unable to agree on the Neutral Auditors,
then Sellers shall appoint an accounting firm and Buyer shall appoint an
accounting firm. Such appointed accounting firms shall thereafter mutually
appoint another nationally recognized accounting firm to be the Neutral
Auditors. All fees and expenses relating to the work, if any, to be
performed by the Neutral Auditors shall be borne equally by Sellers on the
one hand, and Buyer on the other hand. The Neutral Auditors shall act as
an arbitrator to determine, based solely on presentations by Sellers and
Buyer, and not by independent review, only those issues still in dispute.
The Neutral Auditors' determination shall be made within 30 days of their
selection, shall be set forth in a written statement delivered to Sellers
and Buyer and shall be final, binding and conclusive. The term "Adjusted
Closing Statement," as hereinafter used, shall mean the definitive Adjusted
Closing Statement agreed to by Buyer and Sellers in accordance with Section
2.3(b) or the definitive Adjusted Closing Statement resulting from the
determinations made by the Neutral Auditors in accordance with this Section
2.3(c) (in addition to those items theretofore agreed to by Sellers and
Buyer).
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(d) Any item of inventory that is valued as provided in Section
2.2(b) hereof at less than Seller's Cost due to "pinking" shall, at
Buyer's option, be retained by Sellers, and if so retained, shall be an
Excluded Asset hereunder.
2.4 The Closing and Post Closing Adjustments.
----------------------------------------
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Alston & Bird in Atlanta,
Georgia on November 22, 1996 at 10:00 a.m. local time or at such other
place or on such other date as is mutually agreeable to the parties;
provided, however that if any of the conditions to Closing set forth in
this Agreement have not been satisfied or waived by the party entitled to
the benefit of such condition, the Closing will take place on the third
business day after such condition has been satisfied or waived but not
later than November 30, 1996; and provided further, that (i) if the 1996
Audit shall be delivered to Buyer after November 1, 1996 but on or before
November 8, 1996, each of the dates set out above in this Section 2.4(a)
shall be extended by two (2) weeks and (ii) if the 1996 Audit shall be
delivered to Buyer after November 8, 1996 but on or before November 15,
1996, each of the dates set out above in this Section 2.4(a) shall be
extended by three (3) weeks. The date and time of the Closing are herein
referred to as the "Closing Date."
(b) At the Closing, Buyer shall deliver to Sellers, in addition to
the deliveries required by Section 3.2 hereof, by wire transfer or
equivalent means, in immediately available federal funds in Springdale,
Arkansas, (i) the Base Purchase Price, plus (ii) the Estimated Inventory
Amount, subject to the adjustments required by Section 2.2(d)(i) hereof.
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(c) Within five (5) business days after delivery of the Adjusted
Closing Statement, any adjustments to the cash consideration paid pursuant
to Section 2.4(b) hereinabove necessitated by (i) the calculation of the
Final Inventory Amount, (ii) the determinations required by Section
2.2(d)(ii) hereof, and (iii) the determinations required by Section
2.2(d)(iii) hereof, shall be made by wire transfer to the party entitled to
receive same. Such payment shall be accompanied by interest thereon at the
Prime Rate as reported for the Closing Date, from the Closing Date through
and including the date of payment. For purposes of this Agreement, "Prime
Rate" shall be the prime rate as published in the "Money Rates" column of
the Closing Date edition of The Wall Street Journal, Eastern Edition; in
-----------------------
the event that more than one such rate is reported, the Prime Rate shall
equal the average of such rates. Use of the term "Prime Rate" in this
Agreement shall mean a per annum rate, simple interest.
2.5 Like Kind Exchange. Buyer acknowledges that the Sellers may desire to
------------------
complete one or more like kind exchanges through the use of a qualified
intermediary (as defined in the Code Section 1031 regulations) or a similar
arrangement. If requested by Sellers, Buyer shall cooperate with Sellers to the
extent reasonably necessary in order to accomplish such like kind exchanges and
shall execute all documents and provide all consents reasonably necessary to
complete such like kind exchange including, but not limited to, an amendment to,
or an assignment of, this Agreement; provided, however, that (i) Buyer's
obligations hereunder shall not be increased, (ii) Sellers' representations,
warranties, covenants and obligations hereunder shall not be reduced, relieved
or modified, and (iii) the purchase price shall not be different than that which
Buyer would have otherwise paid hereunder.
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ARTICLE 3 - CONDITIONS TO CLOSING
3.1 Conditions to Buyer's Obligations. The obligation of Buyer to
---------------------------------
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver by Buyer of the following conditions on or before the
Closing Date (subject to the provisions of Section 8.10 hereof):
(a) The representations and warranties of Sellers set forth in
Article 5 hereof shall have been true and correct as of the date hereof and
such representations and warranties shall be true and correct at and as of
the Closing Date;
(b) Sellers will have performed in all material respects all of the
covenants and agreements required to be performed by Sellers under this
Agreement;
(c) No Material Adverse Effect shall have occurred and there will
have been no material casualty loss or damage to the Purchased Assets taken
as a whole (whether or not covered by insurance);
(d) The consents or approvals by third parties and governmental
entities or authorities that are required for the consummation of the
transactions contemplated hereby, and where the failure to so obtain would
have a Material Adverse Effect, will have been obtained;
(e) All filings required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (as amended), will have been made, and any
approvals
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required thereunder will have been obtained, or the waiting period required
thereby will have expired or have been terminated, as the case may be;
(f) No action, proceeding or investigation by or before any
government body will have been initiated, be pending, or threatened wherein
a judgment, decree or order might be issued that would prevent any of the
transactions contemplated hereby or cause such transactions to be declared
unlawful or rescinded;
(g) Buyer will have received from Sellers' corporate counsel a legal
opinion, addressed to Buyer and dated the Closing Date, and in form and
substance reasonably satisfactory to Buyer and its counsel;
(h) Buyer shall have received and accepted a final Phase I
environmental audit report on each of the parcels of Owned Real Estate;
(i) Buyer shall have received commitments for title insurance from a
nationally recognized title insurance company acceptable to Buyer in a form
and substance reasonably acceptable to Buyer committing to insure, subject
only to items identified in Schedule 3.1(i) hereto, but specifically
excluding any and all monetary liens and encumbrances required to be
removed or satisfied by Sellers pursuant to this Agreement (which together
with Permitted Encumbrances are hereinafter referred to as "Permitted
Exceptions"), Buyer's interest in the Owned Real Estate and Buyer's
leasehold interest in the Leased Real Estate;
(j) On the Closing Date, each Seller, as applicable, will have
delivered to Buyer the following:
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(i) A certificate dated the Closing Date executed by an
authorized officer of such Seller stating that the preconditions
specified in subsections (a) and (b) hereof have been satisfied;
(ii) Certified copies of the resolutions duly adopted by
such Seller's Executive Committee of its board of directors or its
board of directors, as applicable, approving and authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby;
(iii) Copies of third party and governmental consents (or other
evidence reasonably satisfactory to Buyer) that are required in order
to effect the transactions contemplated by this Agreement;
(iv) Such instruments of sale, transfer, assignment, conveyance
and delivery (including, as to any Owned Real Estate, a special
warranty deed), in form and substance reasonably satisfactory to
counsel for Buyer, as are required in order to transfer to Buyer, such
Seller's right, title and interest to the Purchased Assets, including
without limitation such Seller's rights under contracts and leases
included in the Purchased Assets, and such Seller shall have delivered
any other instrument or taken any other action required hereunder of
such Seller or reasonably required by Buyer, to enable such Seller to
fulfill its obligations hereunder; and
(v) A certificate from each Seller, under penalties of perjury,
stating that such Seller is not a foreign corporation, foreign
partnership,
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foreign trust or foreign estate and listing such Seller's
U.S. Employer Identification Number and address of its principal
business office;
(k) Buyer shall have consummated the borrowing arrangements described
in the letters attached hereto as Exhibit "A" and Exhibit "B,"
substantially on the terms described therein, which borrowing arrangements
shall include the ability to borrow such amounts as may be required, when
aggregated with other funds on hand or available to Buyer, to pay in full
the Base Purchase Price and the cash consideration necessary to pay for the
Inventories after taking into account the adjustments provided for in
Section 2.2(d) hereof;
(1) Tyson shall have executed and delivered to Buyer:
(i) the Transition Services Agreement;
(ii) the Collection Agreement;
(iii) the License Agreement; and
(iv) the Fajita Purchase Order;
(m) The purchase price allocation described in Section 8.8 hereof
shall have been finalized in accordance with the provisions thereof; and
(n) All proceedings to be taken by Sellers in connection with the
consummation of the Closing on the Closing Date and the other transactions
contemplated hereby and all documents required to be delivered by Sellers,
or any of them, in connection with the transactions contemplated hereby
will be reasonably satisfactory in form and substance to Buyer.
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3.2 Conditions to Sellers' Obligations. The obligation of each Seller to
----------------------------------
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver by such Seller of the following conditions on or before
the Closing Date:
(a) The representations and warranties of Buyer set forth in Article
6 hereof shall have been true and correct as of the date hereof and such
representations and warranties shall be true and correct at and as of the
Closing Date;
(b) Buyer will have performed in all material respects all the
covenants and agreements required to be performed by it under this
Agreement;
(c) The consents or approvals by third parties and governmental
entities or authorities that are required for the consummation of the
transactions contemplated hereby, and where the failure to so obtain would
have a Material Adverse Effect, will have been obtained;
(d) All filings required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (as amended), will have been made, and any
approvals required thereunder will have been obtained, or the waiting
period required thereby will have expired or have been terminated, as the
case may be;
(e) No action, proceeding or investigation by or before any
government body will have been initiated, be pending, or threatened wherein
a judgment, decree or order might be issued that would prevent any of the
transactions contemplated hereby or cause such transactions to be declared
unlawful or rescinded;
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(f) Sellers will have received from Buyer's counsel, Alston & Bird, a
legal opinion, addressed to Sellers and dated the Closing Date, in form and
substance reasonably satisfactory to Sellers and their counsel;
(g) On the Closing Date, Buyer will have delivered to Sellers the
following:
(i) An officer's certificate executed by an authorized officer
of Buyer dated the Closing Date, stating that the preconditions
specified in subsections (a) and (b) hereof have been satisfied; and
(ii) Certified copies of the resolutions adopted by Buyer's Board
of Directors approving and authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby;
(h) Buyer will have executed such agreements or instruments as are
reasonably necessary to evidence its adoption and assumption of all of the
Assumed Liabilities including, where applicable, the Assumed Contracts, in form
reasonably satisfactory to Sellers, and Buyer shall have delivered any other
instrument or taken any other action required hereunder of Buyer or reasonably
required by Sellers, to enable Buyer to fulfill its obligations hereunder;
(i) Buyer shall have executed and delivered to Tyson:
(i) the Transition Services Agreement;
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(ii) the Collection Agreement;
(iii) the License Agreement; and
(iv) the Fajita Purchase Order;
(j) The purchase price allocation described in Section 8.8 hereof
shall have been finalized in accordance with the provisions thereof; and
(k) All proceedings to be taken by Buyer in connection with the
consummation of the Closing on the Closing Date and the other transactions
contemplated hereby and all documents required to be delivered by Buyer and
all payments of funds required by Buyer hereunder in connection with the
transactions contemplated hereby will be made and/or be reasonably
satisfactory in form and substance to Sellers.
ARTICLE 4 - COVENANTS PRIOR TO CLOSING
4.1 Affirmative Covenants of Sellers.
--------------------------------
(a) From the date hereof and prior to the Closing, unless Buyer has
otherwise consented, each Seller will take the following actions with
respect to the Business:
(i) Continue to conduct the operations of the Business
respectively conducted by such Seller only in the ordinary and usual
course of business and not dispose of any of the Purchased Assets
respectively
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owned by such Seller except in the ordinary course of business, in
each case, consistent with past practices;
(ii) Use its reasonable efforts to retain its employees and
preserve its present business relationships with customers, suppliers
and others having dealings with Seller, and continue to compensate its
employees consistent with past custom and practice;
(iii) Maintain the Purchased Assets respectively owned by such
Seller in customary repair, order and condition and maintain all
insurance on such Purchased Assets in effect as of the date of this
Agreement;
(iv) Maintain the existence of and protect its Intellectual
Property;
(v) Comply with all legal requirements and contractual
obligations applicable to the Business and avoid incurring any
material liability, including, without limitation, those relating to
the public health and safety or the environment;
(vi) Permit Buyer and its employees, agents, environmental
consultants, appraisers, and accounting and legal representatives and
their representatives to have reasonable access to the books, records,
contracts, leases, key personnel, independent accountants, plants and
equipment of the Business;
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(vii) Use its best efforts to cause a copy of the 1996 Audit to
be delivered to Buyer prior to November 1, 1996; and
(viii) Use its best efforts to comply with all conditions to
Buyer's obligations to close and to make all necessary filings and
cooperate with Buyer to obtain all third party and governmental
approvals necessary or desirable to consummate the transactions
contemplated hereby.
(b) Each Seller shall use its best efforts to obtain, at its sole
cost and expense, prior to the Closing all consents and estoppels which, in
the reasonable judgment of Buyer, are necessary or appropriate for the
transfer or assignment of each of the material Purchased Assets and the
Business to Buyer and the consummation of the transactions contemplated
hereby. All such consents and estoppels shall be in writing and in form and
substance reasonably satisfactory to Buyer, and executed counterparts
thereof will be delivered to Buyer promptly after receipt thereof but in no
event later than the Closing.
(c) To the extent that Sellers' rights under any agreement, Lease,
contract or other Purchased Asset to be transferred and assigned to Buyer
hereunder may not be transferred or assigned without the consent of another
person which has not been obtained, and if the condition precedent set
forth in Section 3.1(d) is not satisfied as a result of such failure to
obtain such consent but Buyer elects to waive such condition, this
Agreement shall not constitute an agreement to transfer or assign the same
if an attempted transfer or assignment would constitute a breach thereof or
be unlawful, and Sellers, at their sole cost and expense, shall use their
best efforts to obtain any such required consent(s) as promptly as
possible. If any such consent shall not be obtained or if any attempted
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transfer or assignment would be ineffective or would materially impair
Buyer's rights under the asset in question so that Buyer would not in
effect acquire the benefit of all such rights, Sellers, to the maximum
extent permitted by law and the asset in question, and without any
obligation to pay any additional monies, shall act after the Closing as
Buyer's agent in order to obtain for Buyer the benefits thereunder, and
Sellers shall cooperate, to the maximum extent permitted by law and such
asset, with Buyer in any other reasonable arrangement designed to provide
such benefit to Buyer. Notwithstanding any other provision to the contrary
contained in this Agreement, if Seller shall comply with its obligations
under this Section 4.1(c), then Buyer shall bear the risk and expense of
any failure by Seller to obtain the consent to transfer or assign any such
Purchased Asset.
(d) Prior to the Closing, each Seller shall have discharged, removed
or satisfied any and all monetary liens and encumbrances against the Owned
Real Estate which now exist or which may arise prior to the Closing, except
for amounts owed for current year taxes, which amounts shall be prorated as
of the Closing Date in accordance with Section 2.2(d).
4.2 Negative Covenants of Seller. Prior to the Closing, without the prior
----------------------------
written consent of Buyer, no Seller will, with respect to the Business:
(a) Take any action that would require disclosure under Section 5.6
hereof except as provided or contemplated hereunder;
(b) Grant any bonus or any wage, salary or benefit increase to any
employee or group of employees of the Business, except in accordance with
past custom and practice;
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(c) Make or obligate itself to make capital expenditures on behalf of
the Business aggregating more than $50,000; or
(d) Accelerate the sale of any inventory of the Business or delay the
payment of any obligation of the Business except in the ordinary course of
business consistent with past practice.
4.3 Covenants of Buyer. Prior to the Closing, Buyer will use its best
------------------
efforts to comply with all conditions to Sellers' obligations to close and to
cooperate with Sellers in obtaining all third party and governmental consents or
approvals necessary or desirable to consummate the transactions contemplated
hereby. In addition to and in furtherance of the foregoing, Buyer will use its
commercially reasonable best efforts to comply with all conditions to closing
the borrowing arrangements described in the letters attached hereto as Exhibit
"A" and Exhibit "B."
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby represents and warrants to Buyer, now and at the time of
Closing, as follows:
5.1 Corporate Organization and Power. Each Seller is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as now being conducted and to own and operate the properties and
assets now owned and being operated by it. Each Seller is qualified as a
foreign corporation for the transaction of
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business and is in good standing under the laws of each jurisdiction in which it
owns or leases properties or conducts any business which to its knowledge
requires such qualification, except such jurisdictions where the failure to
qualify will not have a Material Adverse Effect. Each Seller has full corporate
power and authority to execute, deliver and perform this Agreement and the other
agreements contemplated hereby.
5.2 Authorization. The execution, delivery and performance by each Seller
-------------
of this Agreement and the other agreements contemplated hereby have been duly
authorized by such Seller. This Agreement and the other agreements contemplated
hereby, assuming the valid execution by Buyer of this Agreement and such other
agreements, constitute valid and binding obligations of each Seller, to the
extent it is a party to such agreements, enforceable in accordance with their
terms except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights and any equitable principles relating to or limiting
creditors' rights generally and the right to obtain specific enforcement of any
obligations of such Seller and by general principles of equity regardless of
whether they are considered in a proceeding at law or in equity.
5.3 No Violation. The execution, delivery and performance of this
------------
Agreement and the other agreements contemplated hereby by Sellers and the
consummation of the transactions contemplated hereby and thereby do not and will
not (a) conflict with or result in any breach of any of, (b) constitute a
default under, (c) result in a violation of, (d) result in the creation of any
Encumbrance upon the Purchased Assets under, (e) give any third party the right
to accelerate any material obligation under, or (f) require any authorization,
consent, approval, exemption or other action by any court, other governmental
body, or other third party under the provisions of the charter or bylaws of any
Seller or any indenture, mortgage, lease, loan agreement or other agreement or
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instrument by which any Seller is bound or to which any of the Purchased Assets
are subject, or any law, statute, rule, regulation, judgment or decree to which
any Seller is subject other than the approvals or consents to be obtained as
contemplated hereunder.
5.4 Financial Statements.
--------------------
(a) Attached hereto as Schedule 5.4 are the audited combined balance
sheets of the Business as of September 30, 1995 and June 29, 1996, and
audited combined statements of income and statements of cash flow of the
Business for the fiscal years ended October 1, 1994 and September 30, 1995
and the nine months ended June 29, 1996 (collectively, the "Audited
Financial Statements").
(b) The Audited Financial Statements (i) have been prepared in
conformity with GAAP applied on a consistent basis from period to period;
and (ii) are true and correct, reflect all assets and liabilities of the
Business in accordance with GAAP, and present fairly in accordance with
GAAP the financial condition of the Business and the results of operations
and changes in cash flow of the Business for the periods to which each
relates.
5.5 No Adverse Changes. Except as set forth in Schedule 5.5 hereto, since
------------------
the date of the Audited Financial Statements, Sellers have conducted the
Business only in the ordinary course and in conformity with past practice, and
there has been no change in the assets, or employee, customer or supplier
relations of the Business which would, individually or in the aggregate, have a
Material Adverse Effect.
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5.6 Absence of Certain Changes. Except as set forth in Schedule 5.6
--------------------------
hereto, since the date of the Audited Financial Statements, other than in the
ordinary and usual course of business, Sellers have not, with respect to the
Business:
(a) sold, assigned, pledged, hypothecated or otherwise transferred any
of the Purchased Assets, or imposed, suffered the imposition of, or
permitted to exist, any Encumbrance (other than Permitted Encumbrances) on
any of the Purchased Assets;
(b) terminated or materially amended any Assumed Contract;
(c) suffered any damage, destruction or other casualty loss (whether
or not covered by insurance) which would have a Material Adverse Effect;
(d) except as described in Section 5.13 hereof or on Schedule 5.13
hereto, increased the compensation payable or to become payable by any
Seller to any of employees of the Business, increased any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made by any
Seller, for or with any such employees, or entered into or amended any
employment or severance agreement with any employee of the Business; or
(e) entered into an agreement to do any of the foregoing.
5.7 Condition of Purchased Assets.
-----------------------------
(a) The Purchased Assets include substantially all of the properties
and assets used by Sellers in the conduct of the Business on the date
hereof, other than
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(i) the properties and assets to be used by Tyson in providing Services (as
defined in the Transition Services Agreement) and (ii) such properties and
assets, although not included in the Purchased Assets, the absence thereof
will not cause a Material Adverse Effect.
(b) All items of machinery, equipment, buildings and other tangible
assets of the Business which are Purchased Assets are adequate and fit to
be used for the purposes for which, and in the manner that, they are
currently used, other than items currently under or scheduled for repair or
construction.
(c) All Inventory is current and saleable or usable in the ordinary
course of business and is of consistent and merchantable quality, of the
grade specified, was produced in accordance with the Business' standards,
meets the usual standards of the trade and is suitable for use in the
Business.
(d) Excluded from the representations and warranties of Section 5.7(c)
are ingredients, packing materials and supplies not meeting the quality
standards of the Business due to shrinkage, spoilage or deviation from
purchasing specifications; provided, however, that the cost basis of the
-------- -------
amounts in such items is not greater than past experiences in the Business.
5.8 Title to Assets.
---------------
(a) Set forth in Schedule 5.8 hereto is a list of all of the Owned
Real Estate and the Leased Real Estate, showing as to each the Seller that
is the record owner of such Owned Real Estate or the lessee of the Leased
Real Estate. Except as set forth in Schedules 3.1(i) and 5.8, each Seller
has, with respect to the Owned
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Real Estate shown on Schedule 5.8 to be owned by it, good, marketable and
insurable title to, or with respect to the Leased Real Estate shown on
Schedule 5.8 to be leased by it, a valid and binding leasehold interest in,
such property included in the Purchased Assets, free and clear of all
Encumbrances, except: (i) any easement, quasi-easement, right of way, land
use ordinance, zoning plan or similar type of Encumbrance that may affect
use of the property subject thereto (but not title to such property)
provided that such Encumbrances do not restrict or impair the use by the
Business of the property subject thereto or affected thereby in such a way
as would have a Material Adverse Effect; (ii) any Encumbrances for taxes
(and assessments) not delinquent or which are being contested by a Seller
in good faith by appropriate proceedings; (iii) any workmen, repairman,
warehousemen and carriers liens and Encumbrances arising in the ordinary
course of business which are not due or which are being contested by a
Seller in good faith by appropriate proceedings; and (iv) any Encumbrances
which are matters of record, such as easements, quasi-easements, rights of
way, land use ordinances and zoning plans (all items included in (i)
through (iv) are referred to collectively herein as "Permitted
Encumbrances").
(b) To Sellers' knowledge, no facts or circumstances exist which do, or
potentially may, adversely affect any of the ordinary rights of access to and
from the Owned Real Estate, from and to the existing public highways and roads,
and there is no pending or threatened denial, revocation, modification or
restriction of such access.
(c) To Sellers' knowledge, all of the Owned Real Estate is in
compliance with all applicable zoning or similar land use restrictions of
all governmental authorities having jurisdiction thereof and with all
recorded restrictions, covenants and conditions affecting any of the Owned
Real Estate, and
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the Seller owner thereof has performed all affirmative covenants relating
to the Owned Real Property and required to be performed by such Seller.
(d) There is no pending or, to Sellers' knowledge, threatened
condemnation, expropriation, eminent domain, change in grade of public
street or similar proceeding affecting all or any portion of the Owned Real
Estate; Sellers have received no written or oral notice of same; and
Sellers have no knowledge that any such proceeding is contemplated.
(e) No Seller is a "foreign person" as that term is defined in the
Code. The sale of the Owned Real Estate by the Seller owner thereof is not
subject to any Federal, state or local withholding obligation of Buyer
under the tax laws applicable to such Seller or the Owned Real Estate.
5.9 Leases. Schedule 5.9 hereto contains a complete and accurate list of
------
all leases of Leased Real Estate and material leases of tangible personal
property used exclusively in the Business to which any Seller is a party (the
"Leases") except for such individual leases for which the monthly rental for
property thereunder is less than $500. Sellers have delivered to Buyer true and
complete copies of all such Leases. With respect to each such Lease:
(a) The Lease is in full force and effect and is valid, binding and
enforceable in accordance with its respective terms, except to the extent
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of
creditors' rights or by general equitable principles;
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(b) No amount payable thereunder by the Seller that is the lessee
thereunder is past due;
(c) The Seller that is the lessee thereunder, and to such Seller's
knowledge the other party thereto, has complied with all material
commitments and obligations on their part to be performed or observed under
such Lease; and
(d) The Seller that is the lessee thereunder has not received any
notice of a default (which has not been cured), offset or counterclaim
under any such Lease, or any other communication calling upon such Seller
to comply with any provision of such Lease or asserting noncompliance, and
to such Seller's knowledge no event or condition has happened or presently
exists which constitutes a default or, after notice or lapse of time or
both, would constitute a default under such Lease.
5.10 Rolling Stock. All rolling stock, except Excluded Assets, used
-------------
exclusively in the Business, whether owned or leased, are listed in Schedule
5.10 hereto. All licenses, permits, inspections and other authorizations
necessary for the use of such rolling stock by Sellers have been obtained and
are full force and effect.
5.11 Intellectual Property. Set forth in Schedule 5.11 hereto is a list of
---------------------
all registered trademarks, trade names, service marks, service names, copyrights
and all applications for the same included in the Intellectual Property owned by
the Sellers. No Seller has received any notice from any other person challenging
or questioning the right of such Seller to use any of the Intellectual Property
in the operation of the Business which, if resolved adversely to such Seller,
would have a Material Adverse Effect. Except as set forth on Schedule 5.11, the
Sellers own and have the sole and exclusive right to use
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all items set forth on Schedule 5.11, and such items are not subject to any
Encumbrances of any kind, including without limitation, any rights retained by
any Seller. No Seller has granted any license or has entered into any other
agreement relating in whole or in part to any of the Intellectual Property. To
Sellers' knowledge, there is no infringement or other adverse claim against the
rights of any Seller with respect to any of the Intellectual Property. No Seller
has been charged with, nor to Sellers' knowledge is it threatened to be charged
with or, to Sellers' knowledge is there any basis for any charge of,
infringement or other violation of, nor has any Seller infringed any unexpired
patent, trademark, trademark registration, trade name, service mark, copyright,
copyright registration or other proprietary right of any third party in
connection with the Business.
5.12 Written Assumed Contracts. Each Assumed Contract which has been
-------------------------
reduced to writing is listed and described on Schedule 5.12 hereto. Correct and
complete copies of all such Assumed Contracts have been delivered to Buyer.
Except as set forth in Schedule 5.12:
(x) All such Assumed Contracts are in full force and effect and are
valid, binding and enforceable in accordance with their terms, except to
the extent such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally or by general equitable
principles;
(y) No Seller is, and, to the knowledge of Sellers, no other party to
any such Assumed Contract is, in breach of any provision of, in violation
of, or in default under the terms of any such Assumed Contract; and
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(z) No event has occurred which, after the giving of notice or
passage of time or otherwise, would constitute a material default under or
result in the material breach of any such Assumed Contracts by the Seller
party thereto, or to the knowledge of Sellers, by any other party.
5.13 Employees.
---------
(a) Schedule 5.13 hereto contains a complete and accurate list and
description of all of the following to which any Seller is a party or by
which it is bound which relate to the Business:
(i) written employment contracts with officers and employees
of the Business;
(ii) collective bargaining agreements;
(iii) incentive and bonus arrangements;
(iv) pension and retirement plans;
(v) profit sharing plans;
(vi) deferred compensation plans;
(vii) multi-employer plans;
(viii) medical, life or health insurance plans;
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(ix) stock purchase, stock option or similar plans;
(x) severance plans or policies; and
(xi) other material employee compensation or benefit plans,
arrangements or understandings, including, but not limited to, any
"employee benefit plan" (as defined in ERISA Section 3(3)).
(b) Except as set forth in Schedule 5.13, each Seller has complied in all
material respects with its obligations related to, is not in default under, and
the transactions contemplated hereby will not affect, any of the foregoing.
Sellers have delivered to Buyer a true and complete list of the name, position
and present rate of compensation of each employee of the Business as of a recent
date. All payments to employees which would have been paid in the ordinary
course of business on or before the Closing Date shall have been paid or accrued
as of the Closing. Except as and to the extent set forth in Schedule 5.13, (i)
no Seller is a party to any union agreement or collective bargaining agreement
or work rules or practices agreed to with any labor organization or employee
association applicable to employees of the Business and no attempt to organize
any of the employees of the Business has been made, proposed or threatened, (ii)
since January 1, 1994, no Seller has had any Equal Employment Opportunity
Commission charges or other claims of employment discrimination made against it
by any of the employees of the Business, (iii) since January 1, 1994, no Wage
and Hour Department investigations have ever been made of any Seller with
respect to employees of the Business, (iv) no labor strike, dispute, slowdown,
stoppage or lockout is pending or, to Sellers' knowledge, threatened against or
affecting the Purchased Assets or the Business and since January 1, 1994 there
has not been any such action, (v) no unfair
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labor practice charge or complaint against any Seller is pending or, to Sellers'
knowledge, threatened before the National Labor Relations Board or any similar
governmental authority with respect to employees of the Business, and (vi) no
Seller has received any notice that any employees of the Business will terminate
or contemplates terminating his or her employment currently or at any time
within sixty (60) days after the Closing Date or will otherwise not be available
to Buyer, or not agree to employment by Buyer, on substantially the same terms
and conditions as his or her current employment by such Seller. Since the date
of the Audited Financial Statements, no Seller has effectuated (i) a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more Facilities or operating units within any site of employment or Facility of
Sellers related to the Business; or (ii) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or Facility of Sellers related to the
Business; nor has any Seller been affected by any transaction or engaged in
layoffs or employment terminations related to the Business sufficient in number
to trigger application of any similar state or local law. Except as set forth in
Schedule 5.13, none of the employees of the Business has suffered an "employment
loss" (as defined in the WARN Act) since August 22, 1996.
(c) With respect to the Business, each Seller is in material compliance
with and has not materially violated the terms and provisions of the Immigration
Reform and Control Act of 1986, and all related regulations promulgated
thereunder (the "Immigration Laws"). With respect to each employee (as defined
in Section 274a.l(f) of Title 8, Code of Federal Regulations) of the Business
for whom compliance with the Immigration Laws by an employer (as defined in
Section 274a.l(g) of Title 8, Code of Federal Regulations) is required, each
Seller has supplied, or shall supply prior to the Closing Date, to Buyer, with
regard to all applicable Hired Employees, Form I-9 (Employment Eligibility
Verification Form) and all other records, documents or other papers which are
retained with the Form I-9 by such Seller pursuant to the Immigration Laws. No
Seller has been warned, fined or
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otherwise penalized by reason of any failure to comply with the Immigration
Laws, nor is any such proceeding pending or, to the knowledge of Sellers,
threatened. To Sellers' knowledge, no Seller has ever been the subject of any
inspection or investigation relating to its compliance with or violation of the
Immigration Laws with respect to the Business.
5.14 Taxes.
-----
(a) With respect to the Facilities, the Purchased Assets, all
employees of the Business and otherwise regarding the operation of the
Business, all federal, state and other Tax returns, reports and
declarations of every nature required to be filed by or on behalf of any
Seller (either separately or as part of a consolidated group) prior to the
Closing have been timely filed and such returns, reports and declarations
as so filed are complete and accurate and disclose all Taxes required to be
paid for the periods covered thereby. All Taxes (whether or not shown on
any Tax return) for all periods ending on or before the Closing Date have
been fully paid or appropriate accruals have been made therefor. All Taxes
and other assessments and levies which any Seller is required by law to
withhold or to collect for payment have been duly withheld and collected.
No Seller is or has been a United States real property holding company (as
defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(b) None of the Purchased Assets is property which any Seller or Buyer
is or will be required to treat as owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code as in effect immediately before
the enactment of the Tax Reform Act of 1986.
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(c) None of the Purchased Assets is "tax-exempt use" property within
the meaning of Code Section 168(h). None of the Purchased Assets is
property used predominantly outside the United States within the meaning of
Prop. Treas. Reg. (S)1.168-2(g)(5), or "Tax-exempt bond financed property"
within the meaning of Section 168(g)(5) of the Code.
5.15 Litigation. Except as set forth in Schedule 5.15 hereto, there are no
----------
actions, suits, proceedings, orders or investigations pending or, to Sellers'
knowledge, threatened against or affecting any Seller (with respect to the
Business), the Business or the Purchased Assets, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
might materially adversely affect the Purchased Assets, the Business or any
Seller's performance under this Agreement or the consummation of the
transactions contemplated hereby. Except as set forth in Schedule 5.15, no
Seller is currently subject to any judgment, consent decree, binding arbitration
or regulatory order not generally applicable to similar businesses, which
affects the Business, its business or any of the Purchased Assets.
5.16 Compliance with Law; Licenses and Permits.
-----------------------------------------
(a) Except as set forth in Schedule 5.16 hereto, the Business is
being, and since September 30, 1994 has been, conducted in compliance with
all laws, ordinances and regulations of any governmental entity applicable
to the Business or the Purchased Assets (including, without limitation,
those relating to occupational safety and health practices), except where
non-compliance would not have a Material Adverse Effect.
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(b) Schedule 5.16 hereto sets forth all Permits necessary to conduct
the Business, the dates such Permits were obtained, the date of renewals
thereof and the status of each Permit. Except as set forth in Schedule
5.16, all Permits have been complied with except where non-compliance would
not have a Material Adverse Effect.
5.17 Environmental Matters.
---------------------
(a) To the knowledge of Sellers, except as disclosed on Schedule 5.17
hereto, the Purchased Assets, the Business and the Facilities (i) are and have
been operated in substantial compliance with all applicable Environmental Laws,
(ii) are not the subject of any pending written notice from any governmental
entity alleging the violation of any applicable Environmental Laws, (iii) are
not currently subject to any court order, administrative order, decree, notice,
citation or summons arising under any Environmental Law, (iv) have not been used
for the disposal of Hazardous Substances, and (v) have not had any emissions or
discharges of Hazardous Substances except as permitted under applicable
Environmental Laws. The Phase I Environmental Audits attached hereto as part of
Schedule 5.17 disclose all known environmental conditions on and with respect to
the Purchased Assets, the Business and the Facilities.
(b) No Seller has received any request for information, notice of
claim, demand or notification indicating that it is or may be potentially
responsible under CERCLA or any other federal, state or local law or
regulation with respect to any investigation or clean-up of any threatened
or actual release of any Hazardous Substance related to the Business or the
Purchased Assets.
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(c) No Hazardous Substance managed by any Seller in connection with
the Business or the Purchased Assets has come to be located at any site
which is listed or proposed for listing under CERCLA or which is the
subject of federal, state or local enforcement actions or other
investigations or third party claims which may reasonably be expected to
lead to claims against any Seller for clean-up costs, remedial work,
damages to natural resources or for personal injury or property damage
claims including, but not limited to, claims under CERCLA.
5.18 Employee Benefits. Except as set forth on Schedule 5.18 hereto:
-----------------
(a) Each "employee benefit plan" (as defined in Section 3(3) of ERISA) and
any related trust subject to ERISA, to which any Seller or any other trade or
business, whether or not incorporated, that would be aggregated with a Seller
under Code Section 414 (a "Seller Affiliate") is a part or subject (the
"Sellers' Plans"), complies in all material respects in form and operation with
the requirements of ERISA and all other applicable statutes, orders,
governmental rules and regulations, and there is no material liability with
respect to any failure to file any required report with respect to the Sellers'
Plans;
(b) There are no actions, suits or claims other than routine claims
for benefits in the ordinary course of the operation of the Sellers' Plans,
with respect to the Sellers' Plans pending or, to the knowledge of Sellers,
threatened, and to the knowledge of Sellers there is no fact, event or
circumstance which should reasonably be anticipated to give rise to any
such action, suit or claim;
(c) Since September 25, 1980, neither a Seller nor any Seller
Affiliate has had an "obligation to contribute" to (as defined in ERISA
Section 4212), or had any employees covered by or had any obligation to
make any material payment
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or contribution to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA and Section 3(37)(A) of ERISA), and neither a Seller
nor any Seller Affiliate has any accrued liability under ERISA for any
complete or partial withdrawal from any such "multiemployer plan;"
(d) Neither any Seller nor any Seller Affiliate, nor any of their
respective directors, officers, employees or fiduciaries, has committed any
breach of fiduciary responsibility imposed by Part 4 of Title I of ERISA or
any other applicable law with respect to the Sellers' Plans that would
subject any Seller or any Seller Affiliate or any of their respective
directors, officers or employees to material liability under ERISA or any
other applicable law;
(e) With respect to each of the Sellers' Plans that is a "defined
contribution plan," (i) if intended to be tax-qualified, such plan complies
in all material respects with the requirements of a "qualified plan" under
Section 401(a) of the Code; (ii) all required contributions have been made
or accrued and reflected on the applicable Seller's financial statements;
(iii) all reporting requirements under ERISA and the Code have been
satisfied in all material respects; and (iv) neither any Seller, nor any
administrator or fiduciary of any of the Sellers' Plans has engaged in any
transaction subject to, nor is any Seller or any Seller Affiliate subject
to, any potential material liability under ERISA;
(f) Neither any Seller nor any Seller Affiliate has, at any time,
maintained, sponsored, participated in, contributed to or been obligated to
contribute to any "defined benefit plan" (as defined in ERISA Section 3(35)
or Code Section 414(j)); and
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(g) Neither any Seller nor any Seller Affiliate has taken or claimed
any deduction or credit for any contribution with respect to any of the
Sellers' Plans, except for any contribution that has been fully paid or
funded within the time period required by law.
5.19 Brokers and Finders. Other than CS First Boston Corporation, no
-------------------
Seller or any Seller Affiliate has employed any broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
who would be entitled to a broker's, finder's or similar fee or commission in
connection therewith or upon the consummation thereof, if the Closing does not
occur. Each Seller agrees to bear all costs it incurs in connection with the
transactions contemplated by this Agreement unless otherwise expressly provided
herein.
5.20 Insurance. No Seller has been refused, or denied renewal of, any
---------
insurance coverage in connection with the ownership or use of the Purchased
Assets or the operation of the Business.
5.21 Transactions with Affiliates. Other than in the ordinary course of
----------------------------
business consistent with past practice, since the date of the Audited Financial
Statements, there have been, and prior to the Closing Date there will be, no
transactions, agreements or arrangements between the Business and (i) any
Seller, (ii) any affiliate of a Seller, (iii) any director or officer of a
Seller or any affiliate of a Seller, or (iv) any member of the immediate family
of any individual described in clause (ii) or (iii) of this Section 5.21.
5.22 Statements True and Correct. No representation or warranty of any
---------------------------
Seller in this Agreement and no exhibit, document, statement, certificate or
Schedule furnished or to be furnished to Buyer pursuant hereto, or in connection
with the transactions
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contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statement or facts contained herein or therein not misleading or necessary to
provide Buyer with adequate and complete information as to each Seller, the
Business and the Purchased Assets.
5.23 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article 5, no Seller or any
other person makes any other express or implied representation or warranty on
behalf of a Seller, and each Seller hereby disclaims any such representation or
warranty whether by a Seller or any of its or the Business' respective officers,
directors, employees, agents or representatives or any other person, with
respect to the execution and delivery of any of this Agreement or the
transactions contemplated hereby, notwithstanding the delivery or disclosure to
Buyer or any of its officers, directors, employees, agents or representatives or
any other person of any documentation or other information by a Seller or any of
its or the Business' respective officers, directors, employees, agents or
representatives or any other person with respect to any one or more of the
foregoing.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers, now and at the time of
Closing, as follows:
6.1 Corporate Organization and Power. Buyer is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has full corporate power and authority to execute, deliver and
perform this Agreement and the other agreements contemplated hereby.
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6.2 Authorization. The execution, delivery and performance by Buyer of
-------------
this Agreement and the other agreements contemplated hereby have been duly
authorized by Buyer. This Agreement and the other agreements contemplated
hereby, assuming the valid execution by Sellers of this Agreement and such other
agreements to which each is a party, constitute valid and binding obligations of
Buyer, to the extent it is a party to such agreements, enforceable in accordance
with its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights and any equitable principles relating to or
limiting creditors' rights generally and the right to obtain specific
enforcement of any obligations of Buyer and by general principles of equity
regardless of whether they are considered in a proceeding at law or in equity.
6.3 No Violation. The execution, delivery and performance of this
------------
Agreement and the other agreements contemplated hereby by Buyer and the
consummation of the transactions contemplated hereby or thereby do not and will
not (a) conflict with or result in any breach of, (b) constitute a default
under, (c) result in a violation of, or (d) give any third party the right to
accelerate any obligation under the provisions of Buyer's certificate of
incorporation or bylaws or any indenture, mortgage, lease, loan agreement or
other agreement or instrument to which Buyer is bound or affected, or any law,
statute, rule, regulation, judgment or decree to which Buyer is subject.
6.4 Litigation. There are no actions, suits, proceedings, orders or
----------
investigations pending or, to the knowledge of Buyer, threatened against or
affecting Buyer at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which is reasonably likely to materially
and adversely affect Buyer's
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performance under this Agreement or the consummation of the transactions
contemplated hereby.
6.5 Brokers and Finders. Buyer has not employed any broker, finder,
-------------------
consultant or intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or similar fee or
commission in connection therewith or upon the consummation thereof, if the
Closing does not occur. Buyer agrees to bear all costs it incurs in connection
with the transactions contemplated by this Agreement unless otherwise expressly
provided herein.
6.6 Statements True and Correct. No representation or warranty of Buyer
---------------------------
in this Agreement and no exhibit, document, statement, certificate or Schedule
furnished or to be furnished to Sellers pursuant hereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statement or facts contained herein or therein not
misleading or necessary to provide Sellers with adequate and complete
information as to Buyer.
ARTICLE 7 - TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by mutual consent of Sellers and Buyer;
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(b) by Sellers on the one hand or Buyer on the other hand (provided
that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement) if there has been a material breach by the other party or
parties of any representation, warranty, covenant or other agreement
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party
or parties of such breach; or if events have occurred which have made it
impossible to satisfy a condition precedent to the terminating party's
obligations to consummate the transactions contemplated hereby;
(c) By Buyer pursuant to Section 7.4 or 8.10 hereof; or
(d) by Sellers on the one hand or Buyer on the other hand if the
Closing hereunder has not been consummated by the termination date set
forth in Section 2.4(a) hereof, provided that if a party's willful breach
of this Agreement has prevented the consummation of the transactions
contemplated hereby, that party shall not be entitled to terminate pursuant
to this Section 7.1(d).
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by Sellers or Buyer as provided above, this Agreement, except this
Section 7.2, Section 7.3 and Article 9 hereof, will forthwith become void;
provided, however, that a termination pursuant to Section 7.1(b) shall not
relieve the breaching party from liability for an uncured willful breach of a
representation, warranty, covenant or agreement giving rise to such termination.
7.3 Confidentiality. In the event of any termination of this Agreement,
---------------
each Seller and Buyer shall treat as confidential and not disclose, or use
directly or indirectly for
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its benefit in any manner whatsoever, or permit others under its control to
disclose, or to use, any information concerning another person or entity
obtained pursuant to or in connection with the transaction which is the subject
of this Agreement which is not generally known to the trade or a matter of
public knowledge, and each Seller and Buyer shall each promptly return to the
other or destroy upon written request all written information and documents
received from the other or its representatives, including all copies thereof.
7.4 Risk of Loss. Sellers assume all risk of condemnation, destruction or
------------
Loss ue to fire or other casualty from the date of this Agreement until the
Closing. If the condemnation, destruction or Loss is such that the Business is
interrupted or curtailed or the Purchased Assets are materially affected, then
Buyer shall have the right to terminate this Agreement. If the condemnation,
destruction or Loss is such that the Business is neither interrupted nor
curtailed nor the Purchased Assets materially affected, no party shall be
entitled to terminate this Agreement as a result thereof, and the Base Purchase
Price shall be adjusted at the Closing to reflect such condemnation, destruction
or Loss, to the extent that insurance or condemnation proceeds paid or to be
paid to Buyer are not sufficient to cover such destruction or Loss. If the
parties are unable to agree on such Base Purchase Price adjustment prior to the
date upon which all conditions to Closing are satisfied and the Closing would
otherwise occur: (i) the Closing shall take place on schedule, (ii) Buyer shall
pay to Sellers the full Base Purchase Price plus the Estimated Inventory Amount
(subject to the adjustments required by Section 2.2(d)(i) hereof) in accordance
with this Agreement, (iii) the parties shall submit the dispute regarding the
Base Purchase Price adjustment to arbitration in accordance with Section 8.11
hereof, and (iv) within ten (10) days after a decision is rendered by the
arbitrator, Sellers shall pay to Buyer the amount of any Base Purchase Price
adjustment determined by the arbitrator, if
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any, plus interest thereon at the Prime Rate from the date of Closing through
the date of payment.
ARTICLE 8 - ADDITIONAL AGREEMENTS
8.1 Indemnification.
---------------
(a) Agreement of Sellers to Indemnify. Subject to the terms and
---------------------------------
conditions of this Section 8.1, Sellers, jointly and severally, agree to
indemnify, defend and hold harmless Buyer and its officers, directors,
shareholders, controlling persons, affiliates and representatives (the
"Buyer Indemnitees"), and each of them, from, against, for and in respect
of any and all Losses asserted against, or paid, suffered or incurred by, a
Buyer Indemnitee and resulting from, based upon, or arising out of:
(i) the breach of any representation or warranty of Sellers
contained in or made pursuant to this Agreement or in any certificate,
Schedule or exhibit furnished by Sellers in connection herewith;
(ii) a breach of or failure to perform any covenant or agreement
of any Seller made in this Agreement;
(iii) any Excluded Liability; and
(iv) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and
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other expenses, (including, without limitation, reasonable legal fees
and expenses) incident to subsections (i), (ii) or (iii) of this
Section 8.1(a) or the enforcement of this Section 8.1(a).
(b) Agreement of Buyer to Indemnify. Subject to the terms and
-------------------------------
conditions of this Article 8, Buyer agrees to indemnify, defend and hold
harmless Sellers and their officers, directors, shareholders, controlling
persons, affiliates and representatives (the "Seller Indemnitees"), and
each of them, from, against, for and in respect of any and all Losses
asserted against, or paid, suffered or incurred by, such Seller Indemnitee
and resulting from, based upon, or arising out of:
(i) the breach of any representation or warranty of Buyer
contained in or made pursuant to this Agreement or in any certificate,
Schedule or exhibit furnished by Buyer in connection herewith;
(ii) a breach of or failure to perform any covenant or agreement
of Buyer made in this Agreement;
(iii) any Assumed Liability;
(iv) any claim brought by any Hired Employee to the extent that
such Hired Employee alleges that he or she was damaged solely as a
result of Sellers having delivered to Buyer copies or originals of
such Hired Employee's personnel and medical records; provided,
however, this subsection (iv) is not intended to cover any liability
or obligation included within the definition of Excluded Liabilities,
nor is it intended to cover any claim or cause of action (A) for any
Seller's breach of contract or promise
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not to disclose any information contained in such records or (B)
relating to any information contained in such records; and
(v) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses, (including, without limitation, reasonable legal
fees and expenses) incident to subsections (i), (ii), (iii) or (iv) of
this Section 8.1(b) or the enforcement of this Section 8.1(b).
(c) Procedure for Indemnification.
-----------------------------
(i) Any claim for indemnification under this Section 8.1 (an
"Indemnification Claim") shall be made by the party claiming indemnification
(the "Indemnitee") by delivery of a written notice to the party against whom
indemnification is claimed (the "Indemnitor") requesting indemnification and
specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of a Third Party Claim (as defined below),
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim.
(ii) If the Indemnification Claim involves a Third Party Claim
the procedures set forth in Section 8.1(d) shall be observed by the
Indemnitee and the Indemnitor.
(iii) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor shall have thirty (30) days to
object to such Indemnification Claim by delivery of a written notice
of such objection to such Indemnitee specifying in reasonable detail
the basis for
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such objection. Failure to timely so object shall constitute a final
and binding acceptance of the Indemnification Claim by the Indemnitor,
and the Indemnification Claim shall be paid in accordance with
subsection (iv) hereof. If an objection is timely interposed by the
Indemnitor and the dispute is not resolved by such Indemnitee and the
Indemnitor within 15 days from the date the Indemnitee receives such
objection, such dispute shall be resolved by arbitration as provided
in Section 8.11.
(iv) Upon determination of the amount of an Indemnification
Claim, whether by agreement between the Indemnitor and the Indemnitee
or by an arbitration award or by any other final adjudication, the
Indemnitor shall pay the amount of such Indemnification Claim within
ten (10) days of the date such amount is determined.
(d) Third Party Claims.
------------------
(i) For purposes of this Agreement, "Third Party Claim" means
any action, arbitration, cause of action, claim, complaint, criminal
prosecution, governmental or other examination or investigation,
hearing, administrative or other proceeding (including, without
limitation, an audit by any taxing authority) that is instituted
against an Indemnitee by a person other than an Indemnitor and which,
if prosecuted successfully, would result in a Loss for which such
Indemnitee is entitled to indemnification hereunder.
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(ii) The obligations and liabilities of the parties hereunder
with respect to a Third Party Claim shall be subject to the following
terms and conditions:
a. The Indemnitee shall give the Indemnitor written notice
of a Third Party Claim promptly after receipt by the Indemnitee
of notice thereof, and the Indemnitor may undertake the defense,
compromise and settlement thereof by representatives of its own
choosing reasonably acceptable to the Indemnitee. The failure of
the Indemnitee to notify the Indemnitor of such claim shall not
relieve the Indemnitor of any liability that it may have with
respect to such claim except to the extent the Indemnitor
demonstrates that the defense of such claim is prejudiced by such
failure. The assumption of the defense, compromise and settlement
of any such Third Party Claim by the Indemnitor shall be an
acknowledgment of the obligation of the Indemnitor to indemnify
the Indemnitee with respect to such claim hereunder. If the
Indemnitee desires to participate in, but not control, any such
defense, compromise and settlement, it may do so at its sole cost
and expense. If, however, the Indemnitor fails or refuses to
undertake the defense of such Third Party Claim within ten (10)
days after written notice of such claim has been given to the
Indemnitor by the Indemnitee, the Indemnitee shall have the right
to undertake the defense, compromise and settlement of such claim
with counsel of its own choosing. In the circumstances described
in the preceding sentence, the Indemnitee shall, promptly upon
its assumption of the defense of such claim, make an
Indemnification
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Claim as specified in Section 8.1(c) which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein.
b. If, in the reasonable opinion of the Indemnitee, any
Third Party Claim or the litigation or resolution thereof
involves an issue or matter which could have a material adverse
effect on the business, operations, assets, properties or
prospects of the Indemnitee (including, without limitation, the
administration of the tax returns and responsibilities under the
tax laws of the Indemnitee), the Indemnitee shall have the right
to control the defense, compromise and settlement of such Third
Party Claim undertaken by the Indemnitor, and the costs and
expenses of the Indemnitee in connection therewith shall be
included as part of the indemnification obligations of the
Indemnitors hereunder. If the Indemnitee shall elect to exercise
such right, the Indemnitor shall have the right to participate
in, but not control, the defense, compromise and settlement of
such Third Party Claim at its sole cost and expense.
c. No settlement of a Third Party Claim involving the
asserted liability of the Indemnitors under this Section 8.1
shall be made without the prior written consent by or on behalf
of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. Consent shall be presumed in the case of
settlements of $25,000 or less where the Indemnitor has not
responded within five (5) business days of notice of a proposed
settlement. If the
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Indemnitor assumes the defense of such a Third Party Claim, (y)
no compromise or settlement thereof may be effected by the
Indemnitor without the Indemnitee's consent unless (1) there is
no finding or admission of any violation of law or any violation
of the rights of any person and no effect on any other claim that
may be made against the Indemnitee, (2) the sole relief provided
is monetary damages that are paid in full by the Indemnitors, and
(3) the compromise or settlement includes, as an unconditional
term thereof, the giving by the claimant or the plaintiff to the
Indemnitee of a release, in form and substance satisfactory to
the Indemnitee, from all liability in respect of such Third Party
Claim, and (z) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without
its consent.
d. In connection with the defense, compromise or
settlement of any Third Party Claim, the parties to this
Agreement shall execute such powers of attorney as may reasonably
be necessary or appropriate to permit participation of counsel
selected by any party hereto and, as may reasonably be related to
any such claim or action, shall provide access to the counsel,
accountants and other representatives of each party during normal
business hours to all properties, personnel, books, tax records,
contracts, commitments and all other business records of such
other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if
requested).
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(e) Exclusive Remedy. The indemnification rights provided
----------------
in this Section 8.1 shall be the sole and exclusive remedy
available to each of the parties to this Agreement as against the
other party for any breach of representation or warranty or
failure to fulfill any covenant or agreement contained herein.
(f) Survival. Subject to the provisions of subsection (g)
--------
hereinbelow, all representations, warranties and agreements
contained in this Agreement or in any certificate delivered
pursuant to this Agreement shall survive the Closing
notwithstanding any investigation conducted with respect thereto
or any knowledge acquired as to the accuracy or inaccuracy of any
such representation or warranty.
(g) Time Limitations. Sellers will have no liability to
----------------
the Buyer Indemnitees with respect to the matters described in
clause (i) of Section 8.1(a) and clause (iv) of Section 8.1(a)
insofar as it related to clause (i) thereof (other than the
representations and warranties set forth in Sections 5.2 and 5.8
hereof) unless written notice asserting an Indemnification Claim
based thereon is given to Sellers prior to the second anniversary
of the Closing Date. With respect to the representations and
warranties set forth in Section 5.8 hereof, Sellers will have no
liability to Buyer Indemnitees unless written notice asserting an
Indemnification Claim based thereon is given to Sellers prior to
the third anniversary of the Closing Date. With respect to the
representations and warranties set forth in Section 5.2 hereof,
Sellers will have no liability to Buyer
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Indemnitees unless written notice asserting an Indemnification
Claim based thereon is given to Sellers prior to the tenth
anniversary of the Closing Date.
(h) Limitations as to Amount.
------------------------
(i) Sellers shall have no liability with respect to
the matters described in clause (i) of Section 8.1(a), and
clause (iv) of Section 8.1(a) insofar as it relates to
clause (i) thereof, until the total of all Losses with
respect thereto exceeds One Million Dollars ($1,000,000),
and then Sellers shall only be liable for the amount by
which such Losses exceed Five Hundred Thousand Dollars
($500,000). Sellers shall be liable for the full amount of
any Losses described in clauses (ii) and (iii) of Section
8.1(a), and clause (iv) of Section 8.1(a) insofar as it
relates to clauses (ii) and (iii) thereof. The limitations
set forth in Section 8.1(g) hereof and this Section 8.1(h)
shall not apply to any fraud or any intentional
misrepresentation or breach of warranty of Sellers or any
intentional failure to perform or comply with any covenant
or agreement of any Seller, and Sellers shall be liable for
all Losses with respect thereto.
(ii) Buyer shall be liable for the full amount of any
Losses described in Section 8.1(b).
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(i) Tax Effect and Insurance. The liability of any
------------------------
Indemnitor with respect to any Indemnification Claim shall be reduced
by the tax benefit actually realized and any insurance proceeds
received by the Indemnitee as a result of any Losses upon which such
Indemnification Claim is based, and shall include any tax detriment
actually suffered by the Indemnitee as a result of such Losses. The
amount of any such tax benefit or detriment shall be determined by
taking into account the effect, if any and to the extent determinable,
of timing differences resulting from the acceleration or deferral of
items of gain or loss resulting from such Losses and shall otherwise
be determined so that payment by the Indemnitor of the Indemnification
Claim, as adjusted to give effect to any such tax benefit or
detriment, will make the Indemnitee as economically whole as is
reasonably practical with respect to the Losses upon which the
Indemnification Claim is based. Any dispute as to the amount of such
tax benefit or detriment shall be resolved by arbitration as provided
in Section 8.11 of this Agreement.
(j) Subrogation. Upon payment in full of any Indemnification
-----------
Claim, or the payment of any judgment or settlement with respect to a
Third Party Claim, the Indemnitor shall be subrogated to the extent of
such payment to the rights of the Indemnitee against any person or
entity with respect to the subject matter of such Indemnification
Claim or Third Party Claim.
8.2 Employees of the Business.
-------------------------
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(a) No Obligation to Hire. Subject to the provisions of Section
---------------------
8.2(f) hereof, nothing in this Agreement (i) requires Buyer to hire, or to
offer to hire, the current employees of the Business, (ii) constitutes an
offer to employ such employees, or (iii) requires Buyer to pay any such
persons severance pay in the event of termination except as expressly set
out below. The parties do not intend to confer any benefit under this
Agreement on anyone other than the parties, and nothing contained in this
Agreement shall be deemed to confer any such benefit on any such other
person, including any current or former employee or agent of any Seller or
any dependent or beneficiary of any of them.
(b) Vacation Pay. Buyer agrees to give each employee of the Business
------------
hired by Buyer (the "Hired Employees") credit for prior years of service
with Sellers for purposes of calculating vacation pay that may be received
pursuant to the vacation pay policy of Buyer as may be in effect from time
to time after the Closing, and will waive any eligibility requirements of
such policy with respect to the Hired Employees. Subject to normal business
requirements, Buyer will allow the Hired Employees to take any unused
vacation for the calendar year in which the Closing occurs but unused under
Sellers' vacation policy in effect at the Closing, provided that a
reduction in the cash consideration for the pay owed for such unused
vacation is made pursuant to Section 2.2(d)(ii) hereof, and Buyer may
require that such unused vacation be taken in 1996.
(c) Employee Files. To the extent permitted by law, on the Closing
--------------
Date or as soon as practicable thereafter, Sellers shall deliver to Buyer a
copy of all historical personnel and medical records of each of the Hired
Employees, including but not limited to, Forms I-9, employment agreements,
confidentiality agreements and non-compete agreements; provided, however,
that (i) Sellers shall provide
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Buyer access to the original of any document contained in any such employee
files if Buyer has a reasonable business need therefor, and (ii) Sellers
shall provide to Buyer the originals of all Forms I-9 for the Hired
Employees upon Buyer's request therefor.
(d) No Assumption of Employee Obligations. Except to the extent
-------------------------------------
expressly set out in this Section 8.2 or included in the Assumed
Liabilities, Buyer does not, and shall not, assume or be responsible for
any obligation or liability arising out of any employment relationship of
Sellers, or any of them, and without limiting the foregoing, Buyer shall
have no liability or obligation in connection with current or former
employees or agents of Sellers or any dependent or beneficiary of any of
them by reason of their relationship to Sellers, or any of them, for the
following: (i) unpaid wages, salaries or other compensation; (ii)
contributions to or payments under employee benefit plans, programs,
policies, arrangements or understandings; (iii) accrued, but unused
vacation, holiday, sick leave and severance pay, if any; (iv) liabilities
or obligations under any collective bargaining agreement or bargaining
relationship; or (v) claims, demands, administrative proceedings or suits
arising out of, or in connection with, alleged unlawful employment
practices of Sellers, or any of them.
(e) Insured Fringe Benefit Plans; COBRA Coverage. It is understood
--------------------------------------------
and agreed that Sellers will administer their insured fringe benefit plans,
at their-expense, for the benefit of current and former employees for
claims relating to matters arising before the Closing Date, even though
doing so may have an adverse effect on future costs or premiums with
respect to such plans and may result in retroactive premium adjustments.
Sellers shall be responsible for complying with the requirements of Code
Section 4980B and Part 6 of Title I of
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ERISA for their respective employees (including those employees who are
hired by Buyer on or after the Closing Date) and their "qualified
beneficiaries" whose "qualifying event" (as such terms are defined in Code
Section 4980B) occurs on or prior to the Closing Date.
(f) WARN Agreements. Buyer shall refrain from engaging in any plant
---------------
closing or mass layoff within the meaning of the Worker Adjustment
Retraining Notification Act, 29 U.S.C. Sec. 2101 et. seq. (the "WARN Act"),
-------
for a period of at least ninety (90) days after Closing; provided, however,
that Buyer shall have no obligation to Sellers for a breach of this Section
8.2(f) to the extent that any such plant closing or mass layoff by Buyer
results from any terminations or layoffs of employees by Tyson within the
90-day period prior to the Closing Date.
8.3 Continuing Assistance. At any time and from time to time after the
---------------------
Closing, at Buyer's request and without further consideration or compensation
whatsoever, each Seller will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such action as Buyer
may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to Buyer, and to confirm Buyer's title to, all of
the Purchased Assets, to put Buyer in actual possession and operating control
thereof and to assist Buyer in exercising all rights with respect thereto.
Subsequent to the Closing, each Seller will refer all customer, supplier, and
other inquires relating to the Business to Buyer. At any time and from time to
time after the Closing, at Sellers' request and without further consideration or
compensation whatsoever, Buyer will execute and deliver such other instruments
of assignment and assumption and take such action as Sellers may reasonably deem
necessary or desirable in order to more effectively evidence the assumption by
Buyer of the Assumed Liabilities.
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<PAGE>
8.4 Expenses. Except as otherwise expressly provided herein, each party
--------
will pay all of its expenses, including attorneys', accountants' and brokers'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations hereunder, and the consummation of the transactions contemplated
by this Agreement. All state, county or local sales, use or other transfer taxes
required to be paid on the transfer of any of the Purchased Assets will be
prorated through to the Closing Date and paid by such party as is customary
pursuant to state and local law, ordinance or custom.
8.5 Press Releases and Announcements. No press releases, announcements
--------------------------------
or other disclosure related to this Agreement, the transactions contemplated
herein or the consideration paid hereunder or pursuant to any agreement
ancillary hereto will be issued by any party hereto without the joint approval
of Buyer and Tyson, except for any public disclosure which any party hereto in
good faith believes is required by law (in which case the disclosing party will
consult with the other party prior to making such disclosure). Buyer and Tyson
shall be liable for any breaches of this provision by any of their respective
affiliates, employees or representatives.
8.6 Continuing Access to Records. For a period of not less than three
----------------------------
(3) years from the Closing Date (plus any additional time during which a party
has been advised that (a) there is an ongoing tax audit with respect to periods
prior to the Closing Date, or (b) such period is otherwise open to assessment)
Buyer agrees to give Sellers reasonable cooperation, access and staff
assistance, as needed, during normal business hours with respect to books and
records and other financial data delivered to Buyer hereunder, and Sellers agree
to give Buyer reasonable cooperation, access, and staff assistance, as needed,
during normal business hours with respect to books and records and other
financial data retained by Sellers, as may be necessary for general business
purposes, including, without limitation for (x) the preparation of tax return
and financial statements and (y) the management and handling of tax audits, to
an extent as will not unreasonably interfere with a party's conduct of its
business, and to keep such materials reasonably accessible. A party will not
destroy or otherwise dispose of such materials for such time
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without the written consent of the other party, which shall not be unreasonably
withheld. From and after the Closing Date, Tyson agrees to furnish to Buyer such
financial information as Buyer shall reasonably request in connection with, and
for inclusion in, any filings required to be made by Buyer with the Securities
Exchange Commission or any other governmental authorities, including, without
limitation, the 1996 Audit; provided, however, that the foregoing shall not
require Tyson to furnish any such financial information in a format different
than that format then used by Tyson for its own internal purposes or cause any
such financial information to be audited and reported upon by independent
certified public accountants. Buyer shall reimburse Tyson for its actual cost
and expense (including, without limitation, reasonable professional fees and
expenses) incurred in furnishing such financial information (other than the cost
of preparing the 1996 Audit) to Buyer.
8.7 Bulk Transfer Laws. Buyer hereby waives compliance by Sellers with
------------------
the provisions of any so-called bulk transfer laws of any jurisdiction in
connection with the sale of the Purchased Assets. Notwithstanding anything to
the contrary in Section 8.1 hereof, Sellers, jointly and severally, agree to
indemnify Buyer against all liability, damage or expense which Buyer suffers due
to the failure to so comply or to provide notice required by the bulk transfers
laws (excluding from such indemnity any Assumed Liabilities or a liability
indemnified by Buyer pursuant to Section 8.2(b) hereof).
8.8 Allocation of Purchase Price. The cash portion of The Purchase
----------------------------
Price shall be allocated among each item or class of the Purchased Assets as
agreed by the parties hereto. No less than ten (10) days prior to the Closing
Date, Tyson shall deliver to Buyer a written proposal of the allocation, and
such allocation shall be deemed accepted by Buyer unless objected to in writing
within five (5) after its receipt by Buyer. If the parties cannot resolve any
dispute as to the allocation, the matter will be submitted for resolution by the
Neutral Auditors. Buyer and Tyson shall each pay one-half of the cost of the
fees and expenses of the Neutral Auditors in resolving any dispute with respect
to such allocation. With respect to the Purchase Price allocation finally
determined or agreed
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upon by the parties (or as resolved by the Neutral Auditors), Buyer and Sellers
shall prepare Form 8594 in a manner consistent with such allocation and shall
timely file such Form 8594 with the Internal Revenue Service.
8.9 Third Party Beneficiaries. This Agreement does not create any
-------------------------
rights in parties who are not a party to this Agreement.
8.10 Supplemental Schedules. At any time and from time to time between the
----------------------
date hereof and the Closing Date, Sellers shall have the right and the
continuing obligation to supplement any of the Schedules contained in Article 5
hereof with respect to any matter arising after the date hereof that, if
existing or occurring at such date, would have been required to be set forth or
described in such Schedules; provided, however, that Buyer may unilaterally
extend the Closing Date if necessary to allow Buyer ten (10) business days to
review such supplements to the Schedules prior to the Closing Date. If, in
Buyer's reasonable determination, any such supplements to the Schedules reveal
any material adverse change with respect to the Business or the Purchased
Assets, or any condition or event which threatens to result in a material
adverse change with respect to the Business or the Purchased Assets, Buyer shall
have the option to (a) terminate this Agreement pursuant to Section 7.1, without
liability to any party hereto, or (b) elect not to terminate this Agreement, and
to close the transactions contemplated herein and then any failure, breach or
other such fact, matter or circumstance disclosed in such supplements to the
Schedules, shall be deemed disclosed for the purposes therein stated and Sellers
shall be relieved of any indemnification obligation with respect to such
disclosed failure, breach or other fact, matter or circumstance, unless there is
a specific mutual agreement entered into with respect to the fact, matter or
circumstance so disclosed. Further, each party agrees to inform the other on or
before the Closing Date, of such party's knowledge of any breach by the other of
any representation or warranty at any time made or reiterated at
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Closing, and no claim shall be made under the indemnification provisions hereof
by Buyer in respect of any such cited representation or warranty known to Buyer
as of the Closing Date unless Buyer, as a condition of such Closing, enters into
a mutually acceptable agreement with Sellers with respect to any such
representation or warranty hereunder.
8.11 Arbitration. If a dispute, controversy or claim arises out of or in
-----------
connection with the terms and conditions of this Agreement, except as set forth
in Sections 2.3, 8.8 and 8.12 hereof, it shall be submitted to binding
arbitration which shall be conducted as follows: (a) the arbitrator shall be an
independent third party knowledgeable of the beef further processing and
distribution industries and mutually satisfactory to Buyer and Sellers; (b) the
arbitrator, in conducting such arbitration, shall have access to all relevant
documents and records of the parties; (c) the arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect on the date such arbitration is commenced and shall be
final and binding on the parties hereto; and (d) all arbitration proceedings
shall be conducted in English in a location mutually agreed upon by the parties.
8.12 Covenants Not to Compete.
------------------------
(a) Sellers' Covenants. Each Seller acknowledges that the beef and
------------------
pork based products of the Business are currently distributed in and
throughout all states of the United States (the "Area"). Each Seller
acknowledges that an important part of the benefits that Buyer will receive
in connection with the transactions contemplated hereby is the ability to
carry on the Business free from competition by such Seller and its
affiliates. In order that Buyer may enjoy such benefits, each Seller
agrees that, for a period of two (2) years from the Closing Date, except as
set forth below, such Seller will not, and will cause its affiliates not
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to, engage at any place in the Area, directly or indirectly, alone or in
association with any other person, in the business of producing and/or
selling beef and pork based products of the type produced and/or sold by
the Business as conducted on the Closing Date (the "Restricted Business"),
or own, share in the earnings of, or invest in the equity securities of,
any person engaged at any place in the Area in the Restricted Business,
except that (i) such Seller and its affiliates may purchase equity
securities in a publicly-traded company that is engaged in the Restricted
Business in an amount not to exceed five percent (5%) of the total equity
interest in such company, (ii) such Seller and/or its affiliates may
continue to produce and/or sell those products described and identified on
Schedule 8.12 hereto, and (iii) such Seller and its affiliates may acquire
businesses that conduct operations that include businesses engaged in the
Restricted Business, provided such operations account for twenty-five 25%
or less of the total revenues of the acquired business as a whole in the
last complete fiscal year of such acquired business prior to the date of
such acquisition. Tyson represents that, except for the Business, neither
it nor any of its affiliates produces beef or other beef-based products.
For purposes of this Agreement, an affiliate of a Seller is any entity,
directly or indirectly, controlling, controlled by or under common control
with Tyson. The restrictions contained in this Section 8.12(a) are made
and given to protect and preserve unto Buyer the benefit of its acquisition
of the Purchased Assets, the Business and the goodwill associated
therewith. Each Seller further acknowledges and agrees that such
restrictions are fair and reasonable, that such restrictions are necessary
to protect and preserve unto Buyer and its affiliates the benefit of its
bargain in the acquisition of the Purchased Assets and the Business, and
that such restrictions are necessary for the protection of the legitimate
business interests of the Buyer and its affiliates.
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(b) Buyer Covenants. Buyer acknowledges that Sellers' poultry based
---------------
products are currently distributed in and throughout the Area. Buyer
acknowledges that, as a material inducement to Sellers agreeing to sell the
Business to Buyer, a benefit that Sellers expect to receive in connection
with the transactions contemplated hereby is the ability to carry on their
business of producing and selling poultry based products free from
competition by Buyer and its affiliates. In order that Sellers may enjoy
such benefits, Buyer agrees that, for a period of two (2) years from the
Closing Date, except as set forth below, Buyer will not, and will cause its
affiliates not to, engage at any place in the Area, directly or indirectly,
alone or in association with any other person, in any business of producing
and/or selling any poultry based products (other than those items listed on
Schedule 2.1(a)(ix) hereto) or any Excluded Products, or own, share in the
earnings of, or invest in the equity securities of, any person engaged in
such business in the Area, except that (i) Buyer and its affiliates may
purchase equity securities in a publicly traded company that is engaged in
such business in an amount not to exceed five percent (5%) of the total
equity interest in such company, (ii) Buyer and its affiliates may acquire
businesses that conduct operations that include such business, provided
such operations account for twenty-five 25% or less of the total revenues
of the acquired business as a whole in the last complete fiscal year of
such acquired business prior to the date of such acquisition, and (iii)
Buyer and its affiliates may produce poultry based products for non-
affiliates of Buyer that currently produce and market poultry based
products so long as such poultry based products are marketed and sold by
such non-affiliates and not by Buyer or its affiliates (i.e. co-pack
arrangements only). For purposes of this Agreement, an affiliate of Buyer
is a company, directly or indirectly, controlling, controlled by or under
common control with Buyer. The restrictions contained in this Section
8.12(b) are made and given to protect and
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preserve unto Sellers the benefit of the transactions described herein.
Buyer further acknowledges and agrees that such restrictions are fair and
reasonable, that such restrictions are necessary to protect and preserve
unto Sellers and their affiliates the benefit of their bargain in the
disposition of the Purchased Assets and the Business, and that such
restrictions are necessary for the protection of the-legitimate business
interests of the Sellers and their affiliates.
(c) Remedies. The restrictive covenants contained in this Section
--------
8.12 are independent of each other and of any other provision of this
Agreement, and the existence of a claim which one party may allege against
the other, whether based on this Agreement or otherwise, will not prevent
the enforcement of any of these covenants. Each party subject to the non-
competition restrictions agrees that the other party's remedies at law for
any breach or threat of breach by the restricted party of the provisions of
this Section 8.12 will be inadequate, and that the non-breaching party
shall be entitled to seek an injunction or injunctions to prevent breaches
of the provisions of this Section and to enforce specifically the terms and
provisions hereof, in addition to any other remedy to which the non-
breaching party may be entitled at law or equity. Should any provision of
these covenants be held invalid, illegal or unenforceable, in whole or in
part, the validity, legality or enforceability of the remaining part of
such provision, and the validity, legality and enforceability of the
other provisions hereof, shall not be affected hereby. If any invalidity
shall be caused by the length of any period of time, the size of any area,
or the scope of activities set forth in any provision hereof, such period
of time, such area, such scope or all of such factors, shall be considered
to be reduced to the maximum period, area or scope which would cure such
invalidity and still be enforceable. Any provision of this Section 8.12
which is held invalid,
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illegal or unenforceable in any jurisdiction shall not be deemed invalid,
illegal or unenforceable in any other jurisdiction.
8.13 Disclaimer Regarding Projections. In connection with Buyer's
--------------------------------
investigation of the Business, Buyer has received from Sellers certain
projections, including but not limited to projected statements of income,
balance sheets and statements of changes in financial position of Sellers and
the Business for the fiscal year ending September 27, 1996 and subsequent years
and certain business plan information for such and succeeding fiscal years. This
information includes but is not limited to the information contained in a book
entitled "Gorges/Quik-to-Fix Foods Offering Memorandum", dated April 30, 1996.
Buyer acknowledges that there are uncertainties inherent in attempting to make
such projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all projections and other forecasts
and plans so furnished to it, and that Buyer shall have no claim against Sellers
with respect thereto. Accordingly, no Seller makes any representation or
warranty with respect to such projections and other forecasts and plans except
that no Seller has any knowledge of any information that would render the
projections misleading.
8.14 Communications and Investigations. Between the date hereof and the
---------------------------------
Closing Date, each Seller shall give to Buyer and its authorized representatives
(including, without limitation, its counsel, accountants, and lenders or
prospective lenders, and their respective agents and employees), during normal
business hours, access to the Purchased Assets and the books and records of the
Business, and each Seller shall furnish to Buyer and its authorized
representatives such additional financial, legal and other information with
respect to the Business and the Purchased Assets that Buyer may reasonably
request. Between the date hereof and the Closing Date, Buyer shall furnish to
Sellers such
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information with respect to Buyer as any Seller may reasonably request. Prior to
the Closing Date, each party shall keep the other party advised of all material
developments relevant to the Business and to consummation of the transactions
contemplated hereby.
8.15 Ancillary Agreements.
--------------------
(a) Tyson and Buyer shall execute and deliver at Closing the
following:
(i) The Transition Services Agreement in the form of Exhibit
"C" hereto (the "Transition Services Agreement");
(ii) An Accounts Receivable Collection Agreement (the
"Collection Agreement") which provides for the orderly collection,
receipt and distribution by Sellers and Buyer of accounts receivable;
and
(iii) A Trademark License Agreement (the "License Agreement")
which provides for the licensing by Tyson and Tyson Holding to Buyer
of the right use certain Intellectual Property for a limited period of
time.
(b) The parties acknowledge that a material inducement to Buyer
entering into this Agreement is the promise by Tyson to purchase from
Buyer, subject to agreement between Tyson and Buyer on price and other
terms, a substantial portion of Tyson's beef fajita meat (Tyson product
codes 3514-001, 2275-001, 5333-001 and 5176-001). Tyson and Buyer hereby
agree to negotiate in good faith prior to the Closing towards an agreement
(the "Fajita Purchase Order") pursuant to which Tyson will agree to
purchase substantially all of its requirements for such product from Buyer,
at a price which shall be calculated to
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<PAGE>
yield to Buyer a gross margin on the quantity of such product reasonably
consistent with gross margins generally obtained in the industry for
similar products at similar quantities and levels of quality. The Fajita
Purchase Order shall be for an initial term of one (1) year. In addition to
other terms which may be negotiated, the terms of the Fajita Purchase Order
will include the Tyson product specifications for such product as well as
other standard terms of performance including but not limited to customary
quality standards.
8.16 Sale of L-Street Facility. The L-Street Facility (which contains more
-------------------------
than one parcel and is described on Schedule 8.16 hereto) shall be retained by
Gorges and put up for sale as soon as reasonably possible after the date of this
Agreement. Gorges and Buyer agree that the proceeds of such sale or sales, net
of any costs associated with the completion of thereof and the ownership and
maintenance of the L-Street Facility from the Closing Date to the date of such
sale or sales, will be delivered solely to Buyer within five (5) business days
following the closing of such sale or sales (unless such sale or sales occurs
more than five (5) days prior to the Closing Date in which event such proceeds
will be delivered to Buyer at the Closing). Buyer hereby agrees that Gorges
shall have the right in its discretion to agree to all of the terms, conditions
and provisions of the sale or sales of the L-Street Facility, subject to final
approval by Buyer which will not be unreasonably withheld. Buyer's right to
approve the terms of such sale or sales shall in no way subject Buyer to any
liability as an owner or operator of the L-Street Facility. Gorges agrees to use
its best efforts to seek the sale of, and to sell, the L-Street Facility as soon
as commercially practical after the date hereof.
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<PAGE>
ARTICLE 9 - MISCELLANEOUS
9.1 Amendment and Waiver.
--------------------
(a) This Agreement may be amended, or any provision of this Agreement
may be waived, provided that any such amendment or waiver will be binding
upon Sellers only if set forth in a writing executed by each Seller, and
any such amendment or waiver will be binding upon Buyer only if set forth
in a writing executed by Buyer.
(b) No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any
person under or by reason of this Agreement.
9.2 Notices. Except as otherwise expressly set forth in this Agreement,
-------
all notices, demands and other communications to be given or delivered under or
by reason of the provisions of this Agreement will be in writing and will be
deemed to have been given when delivered personally, or by documented overnight
delivery service, or sent by telecopy, telefax, or other electronic transmission
service, provided a confirmation copy is also sent no later than the next
business day by first class mail, return receipt requested. Notices, demands and
communications to Buyer or Sellers will, unless another address is specified in
writing, be sent to the address indicated below:
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<PAGE>
If to Sellers, to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
with a copy to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: David L. Van Bebber, Esq.
(501) 290-4000
(501) 290-7967 (FAX)
If to Buyer, to: Gorges/Quik-to-Fix Foods, Inc.
c/o Cravey, Green & Wahlen
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
(404) 816-3255
(404) 816-3258 (FAX)
with a copy to: Alston & Bird
One Atlantic Center
1201 West Peachtree St.
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin, Esq.
(404) 881-7000
(404) 881-7777 (FAX)
9.3 Assignment. This Agreement and all of the provisions hereof will be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors
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<PAGE>
and permitted assigns, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party without prior
written consent of the other party; provided, however, that Buyer may assign its
rights hereunder to any lender to Buyer upon the condition that such lender may
only exercise any of Buyer's rights hereunder if Buyer is then and continues to
be in default under any credit agreement with such lender.
9.4 Severabilily. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provisions will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
9.5 No Strict Construction. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
9.6 Section Headings. The headings of sections contained in this
----------------
Agreement are provided for convenience only. They form no part of this Agreement
and shall not affect its construction or interpretation. All references to
sections or subsections refer to the corresponding sections and subsections of
this Agreement. All words used herein shall be construed to be of such gender or
number as the circumstances require. This "Agreement" shall mean this Agreement
as a whole and as the same may, from time to time hereafter, be amended,
supplemented or modified. The words "herein," "hereby," "hereof," "hereinabove"
and "hereinbelow," and words of similar import, refer to this
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<PAGE>
Agreement as a whole and not to any particular section, subsection, paragraph,
clause or other subdivision hereof, unless otherwise specifically noted.
9.7 Complete Agreement. This document and the documents referred to
------------------
herein or attached hereto contain the complete Agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
9.8 Governing Law. The substantive law (and not the law of conflicts) of
-------------
the State of Delaware will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
9.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts (including by means of FAXed signature pages), any one of which
need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same instrument.
[Intentionally Left Blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal on the day and year first above written.
TYSON FOODS, INC.,
A DELAWARE CORPORATION
By: /s/ John Tyson
----------------------------------------
Name: John Tyson
--------------------------------------
(Corporate Seal) Title: President, Beef and Pork Division
-------------------------------------
GORGES FOODSERVICE, INC.,
A TEXAS CORPORATION
By: /s/ Leland E. Tollett
----------------------------------------
Name: Leland E. Tollett
--------------------------------------
(Corporate Seal) Title: Chairman
-------------------------------------
TYSON HOLDING COMPANY,
A DELAWARE CORPORATION
By: /s/ James G. Ennis
----------------------------------------
Name: James G. Ennis
--------------------------------------
(Corporate Seal) Title: Treasurer
-------------------------------------
GORGES/QUIK-TO-FIX FOODS, INC.,
A DELAWARE CORPORATION
By: /s/ James A. O'Donnell
----------------------------------------
Name: James A. O'Donnell
---------------------------------------
(Corporate Seal) Title: President
-------------------------------------
-95-
<PAGE>
EXHIBIT A
Form of Investment Letter
-------------------------
for Institutional Accredited Investors
--------------------------------------
, 1996
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street, NCl-007-07-01
Charlotte, NC 825-0001
Gorges/Quik-to-Fix Foods, Inc.
c/o CGW Southeast Partners, III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies and James A. O'Donnell
Ladies and Gentlemen:
In connection with our purchase of the Notes we confirm that:
1. We understand that the Notes are not being and will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), and are
being sold to us in a transaction that is exempt from the registration
requirements of the Securities Act.
2. We acknowledge that (a) neither the Company, nor the Initial Purchaser
(as defined in the Offering Memorandum dated November 20, 1996 relating to the
Notes (the "Final Memorandum")) nor any person acting on behalf of the Company
or the Initial Purchaser has made any representation to us with respect to the
Company or the offer or sale of any Notes and (b) any information we desire
concerning the Company and the Notes or any other matter relevant to our
decision to purchase the Notes (including a copy of the Final Memorandum) is or
has been made available to us.
3. We have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in the
Notes, and we are (or any account for which we are purchasing under paragraph 5
below is) an institutional "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) (an "IAI")
able to bear the economic risk of investment in the Notes.
<PAGE>
4. We understand that the minimum principal amount of Notes that may be
purchased by an IAI is $250,000.
5. We are acquiring the Notes for our own account (or for accounts as to
which we exercise sole investment discretion and have authority to make, and do
make, the statements contained in this letter) and not with a view to any
distribution of the Notes, subject, nevertheless, to the understanding that the
disposition of our property will at all times be and remain within our control.
6. We understand that (a) the Notes will be in registered form only and
that any certificates delivered to us in respect of the Notes will bear a legend
substantially to the following effect:
"This Note has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and this Note may not be offered, sold,
pledged or otherwise transferred except pursuant to an effective
registration statement or in accordance with an applicable exemption from
the registration requirements of the Securities Act (subject to the
delivery of such evidence, if any, required under the indenture pursuant to
which this Note is issued) and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction."
7. We agree that in the event that at some future time we wish to dispose
of any of the Notes, we will not do so unless such disposition is made in
accordance with any applicable securities laws of any state of the United States
and:
(a) the Notes are sold in compliance with Rule 144(k) under the
Securities Act; or
(b) the Notes are sold in compliance with Rule 144A under the
Securities Act; or
(c) the Notes are sold in compliance with Rule 904 of Regulation S
under the Securities Act; or
(d) the Notes are sold pursuant to an effective registration statement
under the Securities Act; or
(e) the Notes are sold to the Company or an affiliate (as defined in
Rule 501(b) of Regulation D) of the Company; or
(f) the Notes are disposed of in any other transaction that does not
require registration under the Securities Act, and we theretofore have furnished
to the Company or its designee an opinion of counsel experienced in securities
law matters to
-A-2-
<PAGE>
such effect or such other documentation as the Company or its designee may
reasonably request.
8. We understand that the Company and NationsBanc Capital Markets, Inc.,
as the Initial Purchaser, and other persons will rely upon the truth and
accuracy of the statements set forth herein, and we agree that if any of such
statements are no longer true or accurate, we will promptly so notify the
Company and NationsBanc Capital Markets, Inc.
Very truly yours,
By ______________________
(Authorized Officer)
-A-3-
<PAGE>
Exhibit "A"
-------
NationsBank
September 27, 1996
CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, GA 30305
Attention: Bill Davies
Jim O'Donnell
Gentlemen:
We understand that CGW Southeast Partners III, L.P. ("CGW") is proposing to
indirectly acquire Gorges/Quik-to-Fix Foods (the "Division") which represents
the beef and pork further processing assets and operations of Tyson Foods, Inc.
for an aggregate purchase price including fees and expenses not to exceed $195
million in cash (the "Acquisition Transaction"). We further understand that the
Division will be operated as a single operating company (the "Company"). In
connection with the Acquisition Transaction, and to finance the same, you have
informed us that the Company intends to (i) issue $100 million aggregate
principal amount of senior subordinated notes, (ii) obtain a senior secured term
loan/revolving credit facility in the amount of $70 million, and (iii) receive a
cash common equity contribution from CGW and others in an amount of at least $45
million (the transactions in (i), (ii) and (iii) collectively referred to as the
"Financings"). In issuing this letter, we have relied on the information
provided to us with respect to the Division, the Acquisition Transaction and the
Financings and have assumed, without independent verification, that such
information, financial and otherwise, is accurate and complete.
At your request, based on our understanding of the Financings and Acquisition
Transaction and subject to the conditions set forth below, we are pleased to
confirm that NationsBanc Capital Markets, Inc. ("NCMI") is highly confident of
its ability to underwrite the public sale or private placement under Rule 144A
under the Securities Act of 1933, of $100 million of senior subordinated notes
of the Company (the "Securities").
We acknowledge that, in arriving at the opinion contained herein, we conducted a
review of the business, operations and financial performance of the division,
the scope of which was sufficient to allow us to arrive at the opinion contained
herein. Our underwriting of the Securities would be subject to the Company's
acquisition of the Division on terms and conditions substantially consistent
with the draft of the proposed Asset Purchase
<PAGE>
Agreement furnished by Tyson on or about September 23, 1996, completion of the
remaining required Financings for such acquisition on terms and conditions as
outlined in the commitment letter of even date, execution of our customary
underwriting or placement agreement (and satisfaction of the conditions
contained therein), finalization of acceptable terms for the Securities and
documentation thereof receipt of audited and proforma financial statements for
each of the three fiscal years ending September 30, 1996 and other information
of the Company and/or the Division that are necessary to complete the offering,
no material adverse change in the business, assets, condition (financial or
otherwise) or prospects of the Division or the Company (the "Business") or in
market conditions, completion of any remaining due diligence to meet customary
standards in underwriting securities comparable to the Securities without the
discovery of new or additional information that is materially adverse to the
Business, the absence of any federal or state regulatory restrictions with
respect to the issuance of the Securities, satisfactory indemnification for all
matters arising out of this transaction, availability of Division and Company
personnel for road show meetings with prospective investors, in the case of a
public sale of the securities, if the Securities are to be sold to the public,
effectiveness of a Registration Statement satisfactory to us with respect to the
Securities and, in the case of the private placement of the Securities,
preparation of an offering document satisfactory to us with respect to the
Securities.
This letter is intended solely for the benefit of and use of CGW in connection
with the acquisition of the Division. This letter does not constitute a
commitment by NCMI to underwrite the sale of the Securities. This letter shall
not be used by or for the benefit of any other person without the express
written consent of NCMI.
Very truly yours,
NATIONSBANC CAPITAL MARKETS, INC.
By:____________________________
William B. Sacher
Managing Director
-2-
<PAGE>
Exhibit "B'
-----------
NationsBank
October 1, 1996
CGW Southeast Partners III, L.P.
Suite 210
12 Piedmont Center
Atlanta, Georgia 30305
RE: Gorges/Quick-to-Fix Foods Acquisition Financing
-----------------------------------------------
Ladies and Gentlemen:
You have advised us that a group of investors to be arranged by you which shall
include you as a majority investor (the "Investors") has formed or will form a
corporation (the "Borrower") wholly-owned by a newly formed holding company (the
"Parent") wholly-owned by the investors, and that the Investors intend to cause
the Borrower to make an offer (the "Offer") to acquire specified assets of and
to assume specified liabilities of the Gorges/Quick-to-Fix Foods division (the
"Acquired Company") of Tyson Foods, Inc. ("Tyson") for up to $195 million,
including fees and expenses (hereinafter the acquisition of Acquired company may
be referred to as the "Acquisition"). You have advised us that $70 million in
senior debt financing will be required in order to effect the Acquisition, to
pay the costs and expenses related to the Acquisition and to provide for ongoing
general corporate purposes after completion of the Acquisition and that no
external financing other than the financing described herein and the $100
million senior subordinated debt financing (the "Subordinated Debt") described
in the term sheet attached hereto will be required in connection with the
Acquisition. The Investors will directly or indirectly contribute $45 million
of common equity capital to the Borrower prior to the Acquisition.
In connection with the foregoing, NationsBank of Texas, N.A. ("NationsBank" or
-----------
the "Agent") is pleased to advise you of its commitment, which shall not be
-----
conditioned on the syndication hereinafter described, to provide the full
principal amount of the Credit Facilities described in the term sheet attached
hereto as Annex I (the "Term Sheet"). NationsBanc Capital Markets, Inc.
("NCMI") is pleased to advise you of its commitment, as Arranger and Syndication
Agent for the Credit Facilities, to form a syndicate of financial institutions
(the "Lenders") reasonably acceptable to you for the Credit Facilities. All
capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Term Sheet.
<PAGE>
The commitments of NationsBank and NCMI hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NCMI:
(a) completion of each of the terms and conditions set forth herein;
(b) satisfaction of the Conditions Precedent to Closing set forth in the
Term Sheet;
(c) consummation of the Acquisition on terms and conditions substantially
consistent with the draft of the proposed Asset Purchase Agreement
furnished by Tyson on or about September 23, 1996;
(d) execution of a fee letter by you, the Borrower, NationsBank and NCMI
prior to or concurrently with the acceptance of this letter by you;
(e) the negotiation, execution and delivery of definitive documentation
with respect to the Credit Facilities consistent with the Term Sheet and
otherwise satisfactory to NationsBank and NCMI;
(f) the absence of any material adverse change in, or disruption of,
financial banking or capital market conditions; and
(g) the continued cooperation of Tyson in obtaining historical financial
detail for fiscal years 1994 and 1995 necessary to implement the
syndication of the Credit Facilities described in the Term Sheet.
NationsBank will act as Agent for the Credit Facilities and NCMI will act as
Arranger and Syndication Agent for the Credit Facilities. No additional agents
will be appointed without the prior approval of NationsBank and NCMI.
NationsBank and NCMI have conducted certain due diligence, including meeting
with management of the Acquired Company, and reviewing certain information
provided to us by you regarding the Acquisition, the Acquired Company, the
Borrower and the Parent. NationsBank and NCMI acknowledge that, in issuing the
commitment contained herein, NationsBank and NCMI conducted a review of the
business, operations and financial performance of the Acquired company, the
scope of which was sufficient to allow NationsBank and NCMI to issue the
commitment contained herein. If the continuing review by NationsBank and NCMI of
the Borrower or the Acquired Company discloses information relating to
conditions or events not previously disclosed to NationsBank and NCMI or
relating to new information or additional developments concerning conditions or
events previously disclosed to NationsBank and NCMI which NationsBank and NCMI
in their sole discretion believe may have a material adverse effect on the
condition (financial or otherwise), assets, properties, business, operations or
prospects of the Borrower or the Acquired Company, NationsBank and NCMI may, in
their sole discretion, suggest
-2-
<PAGE>
alternative financing amounts or structures that ensure adequate protection for
the Lenders or decline to participate in the proposed financing.
In addition to the forgoing conditions, as you know, neither we nor you know at
this time the precise terms of the Subordinated Debt. Our commitment to provide
the Credit Facilities is subject to the requirement that the amount, interest
rates, maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other terms of the Subordinated Debt be
satisfactory to the Agent and the Lenders. We understand that all covenants and
defaults contained in the documentation pursuant to which the Subordinated Debt
is issued would be less restrictive than those contained in the definitive loan
documents for the Credit Facilities and cross defaults to other indebtedness
contained in the documentation for the Subordinated Debt will be limited to the
acceleration of such other indebtedness rather than a default (monetary or
otherwise) in respect of such indebtedness.
You agree to actively assist NationsBank and NCMI in achieving a syndication of
the Credit Facilities that is satisfactory to NationsBank, NCMI and you. In the
event that such syndication cannot be achieved in a manner satisfactory to
NationsBank and NCMI under the structure outlined in the Term Sheet you agree to
cooperate with NationsBank and NCMI in developing an alternative structure that
will permit a satisfactory syndication of the Senior Credit Facilities.
Syndication of the Credit Facilities will be accomplished by a variety of means,
including direct contact during the syndication between senior management and
advisors of the Borrower and the Acquired Company, and the proposed Lenders. To
assist NationsBank and NCMI in the syndication efforts, you hereby agree to (a)
provide and cause your advisors to provide NationsBank and NCMI and the other
Lenders upon request with all information reasonably deemed necessary by
NationsBank and NCMI to complete syndication, including but not limited to
information and evaluations prepared by the Borrower and the Acquired Company
and their advisors, or on their behalf, relating to the Acquisition, (b) assist
NationsBank and NCMI upon their reasonable request in the preparation of an
Information Memorandum to be used in connection with the syndication of the
Credit Facilities and (c) otherwise assist NationsBank and NCMI in their
syndication efforts, including by making available officers and advisors of the
Borrower and the Acquired Company and their subsidiaries from time to time to
attend and make presentations regarding the business and prospects of the
Borrower and the Acquired Company and their subsidiaries, as appropriate, at a
meeting or meetings of prospective Lenders. You further agree to refrain from
engaging in any additional financings for the Acquired Company (except as
described in this letter and except for the Subordinated Debt issue described in
the Term Sheet) during such syndication process unless otherwise agreed to by
NationsBank and NCMI.
It is understood and agreed that NationsBank and NCMI, after consultation with
you, will manage and control all aspects of the syndication, including decisions
as to the selection of proposed Lenders and any titles offered to proposed
Lenders, when commitments will be accepted and the final allocations of the
commitments among the Lenders. It is understood that no Lender participating in
the Credit Facilities will receive compensation
-3-
<PAGE>
from you outside the terms contained herein and in the Term Sheet in order to
obtain its commitment. It is also understood and agreed that the amount and
distribution of the fees among the Lenders will be at the sole discretion of
NationsBank and NCMI and that any syndication prior to execution of definitive
documentation will reduce the commitment of NationsBank.
You hereby represent, warrant and covenant that (i) all information, other than
Projections (as defined below), which has been or is hereafter made available to
NationsBank and NCMI or the Lenders by you or any of your representatives in
connection with the transactions contemplated hereby ("Information") is and will
-------------
be complete and correct in all material respects and does not and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not misleading and (ii) all
financial projections concerning the Borrower and the Acquired Company that have
been or are hereafter made available to NationsBank and NCMI or the Lenders by
you or any of your representatives (the "Projections") have been or will be
-------------
prepared in good faith based upon reasonable assumptions. You agree to furnish
us with such Information and Projections as we may reasonably request and to
supplement the Information and the Projections from time to time until the
closing date for the Credit Facilities so that the representation and warranty
in the preceding sentence is correct on the such date. In arranging and
syndicating the Credit Facilities, NationsBank and NCMI will be using and
relying on the Information and the Projections without independent- verification
thereof.
By consenting to this letter agreement, CGW Southeast III, L.L.C. (the "General
Partner") agrees to reimburse NationsBank and NCMI from time to time on demand
for all reasonable out-of-pocket fees and expenses (including, but not limited
to, the reasonable fees, disbursements and other charges of Moore & Van Allen,
PLLC, as counsel to NationsBank and the other Lenders) incurred in connection
with the Credit Facilities and the preparation of the definitive documentation
for the Credit Facilities and the other transactions contemplated hereby.
In the event that NationsBank or NCMI becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter contemplated
by this letter, the General Partner, by its execution of the consent set forth
below, agrees to reimburse NationsBank and NCMI for their legal and other
expenses (including the cost of any investigation and preparation) as they are
incurred by NationsBank or NCMI. The General Partner also agrees to indemnify
and hold harmless NationsBank, NCMI and their affiliates and their respective
directors, officers, employees and agents (the "Indemnified Parties") from and
against any and all losses, claims, damages and liabilities, joint or several,
related to or arising out of any matters contemplated by this letter, unless and
only to the extent that it shall be finally judicially determined that such
losses, claims, damages or liabilities resulted primarily from the gross
negligence or willful misconduct of NationsBank or NCMI.
-4-
<PAGE>
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NCMI hereunder, provided,
however, that the General Partner shall be deemed released of its obligations
under the immediately preceding two paragraphs upon the execution of definitive
financing documentation.
As described herein and in the Term Sheet, NCMI will act as Arranger and
Syndication Agent for the Credit Facilities. NationsBank reserves' the right to
allocate, in whole or in part, to NCMI certain fees payable to NationsBank in
such manner as NationsBank and NCMI agree in their sole discretion. You
acknowledge and agree that NationsBank may share with any of its affiliates
(including specifically NCMI) any information relating to the Credit Facilities,
the Borrower, the Acquired Company, the members of the Investor Group and their
subsidiaries and affiliates.
This letter agreement may not he assigned by you to any person or entity other
than the Borrower without the prior written consent of NationsBank and NCMI.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than the close of business on
October 1, 1996. This letter agreement will become effective upon your delivery
to us of executed counterparts of this letter agreement and the fee letter of
even date herewith (the "Fee Letter") and, without limiting the more specific
terms hereof and of the Term Sheet, you agree upon acceptance of this commitment
to pay the fees set forth in the Term Sheet and in the Fee Letter. This
commitment shall terminate if not so accepted by you prior to that time.
Following acceptance by you, this commitment will terminate on November 30,
1996, unless the Credit Facilities are closed by such time.
Except as required by applicable law, this letter and the Fee Letter and the
contents hereof and thereof shall not be disclosed by you to any third party
(including the Acquired Company) without the prior consent of NationsBank and
NCMI, other than to your attorneys, financial advisors and accountants, in each
case to the extent necessary in your reasonable judgment; provided, however, it
is understood and agreed that, after acceptance of this letter by you by
execution in the space provided below and execution by you of the Fee Letter,
you may disclose the terms of this letter to the Acquired Company in connection
with the offer. without limiting the foregoing, in the event that you disclose
the contents of this letter in contravention of the preceding sentence, you
shall be deemed to have accepted the terms of this letter and the Fee Letter.
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet and the Fee
Letter, embodies the entire agreement and understanding among NationsBank, NCMI,
the Investor Group and the Borrower with respect to the specific matters set
forth herein and supersedes all prior agreements and understandings relating to
the subject matter hereof. No party has been authorized by NationsBank or NCMI
to make any oral or written statements inconsistent
-5-
<PAGE>
with this letter. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO ITS PRINCIPLES
OF CONFLICTS OF LAW.
Very truly yours,
NATIONSBANK OF TEXAS, N.A.
By: /s/
--------------------------
Title: Vice President
-----------------------
NATIONSBANC CAPITAL MARKETS,
INC.
By: /s/
--------------------------
Title: Vice President
-----------------------
ACCEPTED AND AGREED TO:
CGW SOUTHEAST PARTNERS III, L.P.
By: CGW Southeast III, L.L.C.,
Its General Partner
By: /s/ William A. Davies
------------------------------
Title: Partner
---------------------------
Date: 10/3/96
-----------------------------
CONSENTED TO:
CGW SOUTHEAST III, L.L.C.
By: /s/ William A. Davies
------------------------------
Title: Partner
---------------------------
Date: 10/3/96
----------------------------
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<PAGE>
ANNEX I
GORGES/QUIK-TO-FIX FOODS, INC,
SUMMARY OF TERMS & CONDITIONS
SEPTEMBER 1996
BORROWER: A newly formed company which will acquire the
outstanding stock or assets of the beef division of
Tyson Foods ( the "Acquired Company" or the
"Borrower"). Borrower shall be a subsidiary of a
holding company (the "Parent"), also newly formed and
with no business other than holding the stock of the
Borrower and other subsidiaries. The acquisition of the
beef division shall be referred to as (the
"Acquisition").
GUARANTORS: The Credit Facilities shall be guaranteed by the Parent
and all existing and hereafter acquired subsidiaries of
the Borrower and the Parent (the "Guarantors") upon
consummation of the Acquisition. All guarantees shall
be guarantees of payments not of collection.
AGENT: NationsBank N.A. (the "Agent" or "NationsBank") win act
as sole and exclusive administrative and collateral
agent. As such, NationsBank will negotiate with the
Borrower, act as the primary contact for the Borrower
and perform all other duties associated with the role
of exclusive administrative agent. No other agents or
co-agents may be appointed without the prior written
consent of NationsBank and NCMI.
ARRANGER &
SYNDICATION AGENT: NationsBank Capital Markets, Inc. ("NCMI").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NCMI, which institutions shall
be acceptable to the Borrower and the Agent
(collectively, the "Lenders").
CREDIT FACILITIES: An aggregate principal amount of up to $70 million will
be available under the conditions hereinafter set
forth:
<PAGE>
Revolving Credit Facility: $30 million revolving credit
-------------------------
facility, which will include a sublimit for the
issuance of standby and commercial letters of credit
(each a "Letter of Credit") to be determined. Letters
of Credit will be issued by NationsBank (in such
capacity the "Fronting Bank"), and each Lender will
purchase an irrevocable and unconditional participation
in each Letter of Credit.
Tranche A Term Loan Facility: $40 million term loan
----------------------------
facility.
PURPOSE: The proceeds of the Credit Facilities shall be used:
(i) to pay the cash Portion of the purchase price for
the Acquired Company pursuant to the Purchase Agreement
(as defined below); (ii) to pay fees and expenses
incurred in connection with the Acquisition in an
amount not to exceed $9 million and (iii) to provide
for working capital and general corporate purposes of
the Borrower. No indebtedness or obligations of the
Acquired Company will be assumed by Borrower other than
certain executory obligations under existing contracts,
agreements and leases.
INTEREST RATES: The Revolving Credit Facility and the Tranche A Term
Loan Facility shall bear interest as set forth on
Addendum I hereto.
MATURITY: The Revolving Credit Facility shall terminate and all
amounts outstanding thereunder shall be due and payable
in full upon the earlier to occur of repayment in full
of the Tranche A Term Loans or five years from Closing.
The Term Loan Facility shall be subject to repayment
according to the Scheduled Amortization. with the final
payment of all amounts outstanding plus accrued
interest being due five years from Closing.
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<PAGE>
SCHEDULED
AMORTIZATION: Term Loan Facilities: The loans made under the Tranche
--------------------
A Term Loan Facility ("Tranche A Term Loans") will be
available in a single borrowing at Closing. The Term
Loan Facility will be subject to quarterly amortization
of principal based upon the annual amounts shown below
(the "Scheduled Amortization").
Tranche A
-----------
Loan year 1 $ 5.000,000
Loan year 2 $ 7,000.000
Loan year 3 $ 9,000,000
Loan year 4 $ 9,000,000
Loan year 5 $10,000.000
SECURITY: Concurrently with the Acquisition, the Agent (on behalf
of the Lenders) shall receive a first priority
perfected security interest in all of the capital stock
of the Borrower and each of the domestic subsidiaries
(direct or indirect) of the Borrower, which capital
stock shall not be subject to any other lien or
encumbrance. The Agent (on behalf of the Lenders) shall
also receive a first priority perfected security
interest in all other present and future assets and
properties of the Borrower and its subsidiaries
(including, without limitations accounts receivable,
inventory, real property, machinery, equipment,
contracts, trademarks, copyrights, patents, license
agreements, and general intangibles).
The foregoing security shall ratably secure the Credit
Facilities and any interest rate swap/foreign currency
swap or similar agreements with a Lender under the
Credit Facilities.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the amortization set forth above, the
Credit Facilities will be prepaid to an amount equal to
(a) 100% of the Facilities will be prepaid by an amount
net cash proceeds of all asset sales by the Parent, the
Borrower or any subsidiary of the Borrower (including
stock of subsidiaries), subject to de minimus baskets
and reinvestment provisions
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<PAGE>
to be agreed upon and net of selling expenses and taxes
to the extent such taxes are paid; (b) 50% of Excess
Cash Flow (to be defined) pursuant to an annual cash
sweep arrangement; (c) 100% of the net cash proceeds
from the issuance of any debt (excluding certain
permitted debt) by the Parent, the Borrower or any
subsidiary; and (d) 50% of the net cash proceeds from
the issuance of equity by the Parent, the Borrower or
any subsidiary.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Credit Facilities in whole
or in part at any time without penalty (except as
agreed to in Addendum 1), subject to reimbursement of
the lenders' breakage and redeployment costs in the
case of prepayment of LIBOR borrowings.
CONDITIONS PRECEDENT
TO CLOSING: The initial funding of the Credit Facilities will be
subject to satisfaction of the conditions precedent
deemed appropriate by the Agent and the Lenders for
leveraged financings generally and for this transaction
in particular, including but not limited to the
following:
(i) The negotiation, execution and delivery, of
definitive documentation with respect to the
Credit Facilities satisfactory to NCMI, the
Agent and the Lenders.
(ii) The Agent's satisfactory review of the purchase
agreement (including all schedules exhibits
thereto) regarding the Acquired Company (the
"Purchase Agreement") which shall provide for an
aggregate purchase price not in excess of $195
million. The purchase price shall be comprised
of a cash payment of $154 million plus an
additional cash payment in the amount of the
audited value of inventory of the Acquired
Company as of the Closing Date and shall include
all fees and expenses and the repayment in full
of any and all funded debt of the Acquired
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<PAGE>
Company immediately prior to closing. The
Purchase Agreement shall have been consummated
in accordance with the terms thereof and in
compliance with applicable law and regulatory
approvals. The Purchase Agreement shall not be
altered, amended or otherwise changed or
supplemented or any condition therein waived,
without the prior written consent of the Agent.
(iii) The corporate capital and ownership structure
(including articles of incorporation and by-
laws), shareholders agreements and management of
the Parent, the Borrower and its subsidiaries
(after giving effect to the Acquisition,
including without limitation), the execution of
employment contracts, equity interests and the
issuance key man life insurance with key
executives of the Acquired Company, shall be
reasonably satisfactory to the Agent. Without
limiting the generality of the above, the Agent
shall be satisfied that the Borrower shall have
received the proceeds from the issuance of $100
million of senior subordinated debt under terms
and conditions satisfactory to the Agent and a
net capital contribution of at least $45 million
in common equity from CGW Southeast Partner III,
L.P. ("CGW") and others under terms and
conditions reasonably satisfactory to the Agent.
(iv) The Agent shall have received a pro forma
balance sheet of the Borrower and its
subsidiaries as of the Closing Date giving
effect to the Acquisition and the transactions
contemplated hereby and reflecting estimated
Purchase price accounting adjustments, prepared
by independent public accountants of recognized
national standing, and such other information
relating to the Acquisition as the Agent may
require.
(v) There shall not have occurred a material adverse
change since September 30, 1995 in
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<PAGE>
the business, assets, operations, condition
(financial or otherwise) or prospects of the
Borrower and its subsidiaries or the Acquired
Company and its subsidiaries or in the facts
and information regarding such entities as
represented to date.
(vi) Certification as to the financial condition and
solvency of the Parent, the Borrower and its
subsidiaries (after giving effect to the
Acquisition and the incurrence of indebtedness
related thereto) from an independent firm
acceptable to the Agent.
(vii) The Agent shall have received (a) satisfactory
opinions of counsel to the Borrower (which
shall cover, among other things, authority,
legality, validity, binding effect and
enforceability of the documents for the Credit
Facilities) and such corporate resolutions,
certificates and other documents as the Agent
shall reasonably require and (b) satisfactory
evidence that the Agent (on behalf of the
Lenders) holds a perfected, first priority lien
in all collateral for the Credit Facilities,
subject to no other liens except for permitted
liens to be determined.
(viii) Receipt of all governmental shareholder and
third party consents (including Hart-Scott
Rodino clearance) and approval necessary or, in
the opinion of the Agent, desirable in
connection with the purchase of the Acquired
Company and the related financings and other
transactions contemplated hereby and expiration
of all applicable waiting periods without any
action being taken by any authority that could
restrain, prevent or impose any material
adverse conditions on the Acquired Company or
such other transactions or that could seek or
threaten any of the foregoing, and no law or
regulation shall be applicable which in the
judgment of the Agent could have such effect.
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<PAGE>
(ix) The absence of any action, suit, investigation
or proceeding pending or threatened in any
court or before any arbitrator or governmental
authority that purports to affect the Acquired
Company or its subsidiaries or any transaction
contemplated hereby, or that could have a
material adverse effect on the Acquired Company
or its subsidiaries or any transaction
contemplated hereby or on the ability of the
Borrower and its subsidiaries to perform its
obligations under the documents to be executed
in connection with the Credit Facilities.
(x) Receipt and review, with results reasonably
satisfactory to the Agent and its counsel, of
information regarding legal litigation,
accounting, labor, insurance, real estate
leases, material contracts, transition
agreements, and ownership properties of the
Acquired Company, the Borrower, the Parent, and
their respective subsidiaries.
(xi) The Agent shall be satisfied that the amount of
committed financing available to the Borrower
shall be sufficient to meet the ongoing
financing needs of the Borrower and its
subsidiaries after giving effect to the
Acquisition and there shall be no less than $20
million of availability under the Revolving
Credit Facility at Closing after giving effect
to the Acquisition and all borrowings under the
Revolving Credit Facility on such date.
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions of this type to
include without limitation: (i) corporate status; (ii)
corporate power and authority/enforceability; (iii) no
violation of law or contracts or organizational
documents; (iv) no material litigation; (v) correctness
of specified financial statements and no material
adverse change; (vi) no required governmental or third
Party approvals; (vii) use of
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<PAGE>
proceeds/compliance with margin regulations; (viii)
status under Investment Company Act; (ix) ERISA; (x)
environmental matters; (xi) perfected liens and
security interests; (xii) payment of taxes, and (xiv)
consummation of the Acquisition.
COVENANTS: Usual and customary for transactions of this type, to
include without limitation: (i) delivery of financial
statements and other reports; (ii) delivery of
compliance certificates: (iii) notices of default,
material litigation and material governmental and
environmental proceedings; (iv) compliance with laws;
(v) payment of taxes; (vi) maintenance of insurance;
(vii) limitation on liens; (viii) limitations on
mergers, consolidations and sales of assets;
(ix) limitations on incurrence of debt; (x)
limitations on dividends and stock redemptions and the
redemption and/or prepayment of other debt; (xi)
limitations on investments and acquisitions; (xii)
ERISA; (xiii) limitation on transactions with
affiliates; and (xiv) limitation on capital
expenditures.
Financial covenants to include (but not limited to):
. Maintenance on a rolling four quarter basis of a
Maximum Leverage Ratio (total funded debt/EBITDA)
. Maintenance on a rolling four quarter basis of a
Minimum Fixed Charge Coverage Ratio (EBITDA less
capital expenditures less cash taxes)/(interest
expense + scheduled principal repayments)
. Maintenance on a rolling four quarter basis of an
Interest Coverage Ratio (EBITDA/interest expense),
and
. Maintenance at all times of a Minimum Net Worth,
with step-up provisions to be agreed upon.
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<PAGE>
The Parent shall have agreed that it will not engage in
any business, activity or operations other than owning
and holding the capital stock of the Borrower and other
subsidiaries and activities directly related thereto.
The Parent shall not be permitted to merge with or into
any of its subsidiaries either now owned or hereafter
created.
EVENTS OF DEFAULT: Usual and customary in transactions of this nature, and
to include, without limitation, (i) nonpayment of
principal, interest, fees or other amounts, (ii)
violation of covenants, (iii) inaccuracy of
representations and warranties, (iii) cross-default to
other material agreements and indebtedness, (iv)
bankruptcy, (v) material judgments, (vi) ERISA, (vii)
actual or asserted invalidity of any loan documents or
security interests, (viii) Parent engaging in any
business or activity other than holding 100% of the
common stock of Borrower and other subsidiaries, (ix)
the failure of the Parent to own 100% of the issued
once outstanding capital stock of the Borrower, or (x)
Change in Control of the Borrower.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments to
other financial institutions approved by the Borrower
and the Agent, which approval shall not be unreasonably
withheld. Lenders will be permitted to sell
participations with voting rights limited to
significant matters such as changes in amount, rate,
and maturity date. An assignment fee of $3,500 is
payable by the Lender to the Agent upon any such
assignment occurring (including, but not limited to an
assignment by a Lender to another Lender).
WAIVERS &
AMENDMENTS: Amendments and waivers of the provisions of the loan
agreement and other definitive credit documentation
will require the approval of Lenders holding loans and
commitments representing more than 50% of the aggregate
amount of loans and commitments under the Credit
Facilities, except that (a) the consent of all the
Lenders affected thereby shall be required with respect
to (i) increases in
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<PAGE>
commitment amounts, (ii) reductions of principal
interest or fees, (iii) extensions of scheduled
maturities or times for payment, (iv) releases of all
or substantially all collateral and (v) releases of all
or substantially all guarantors.
INDEMNIFICATION: The Borrower shall indemnify the Lenders from and
against all losses, liabilities, claims, damages or
expenses relating to the Acquisition, their loans, the
Borrower's use of loan proceeds or the commitments,
including but not limited to reasonable attorneys' fees
and settlements costs, This indemnification shall
survive and continue for the benefit of the Lenders at
all times after The Borrower's acceptance of the
Lenders' commitment for the Credit Facilities,
notwithstanding any failure of the Credit Facilities to
close.
CLOSING: On or before November 30, 1996.
GOVERNING LAW: North Carolina.
FEES/EXPENSES: As outlined in ADDENDUM I
OTHER: This term sheet is intended as an outline only and does
not purport to summarize all the conditions covenants,
representations, warranties and other provisions which
would be contained in definitive legal documentation
for the Credit Facilities contemplated hereby. The
Borrower, the Agent and the Lenders shall each waive
their right to a trial by jury.
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<PAGE>
ADDENDUM I
FEES AND EXPENSES
COMMITMENT FEE: A 50 basis points per annum (calculated on the basis of
actual number of days elapsed in a year of 360 days)
Commitment Fee calculated on the unused portion of the
Credit Facilities shall commence to accrue upon
acceptance by the Borrower of the commitment letter to
which this term sheet is attached and shall be paid
upon execution of a definitive credit agreement and
thereafter quarterly in arrears.
UNDERWRITING FEE: 2.5% on the total amount of the facilities payable at
Closing.
ADMINISTRATIVE FEE: $50,000 per annum payable annually in advance.
INTEREST RATES: The Revolving Credit Facility and Tranche A Term Loan
Facility shall bear interest at a rate equal to LIBOR
plus 250 bps or the Alternate Base Rate (defined as the
higher of (i) the NationsBank prime rate and (ii) the
Federal Funds rate plus 1/2%) plus 150 bps; provided,
that if during the 180 day period following the
Closing, any breakup costs, charges or fees incurred
with respect to LIBOR loans on account of the
syndication of the Credit Facilities, the Borrower
shall immediately reimburse the Agent for any such
costs charges or fees. Such right of reimbursement to
be in addition to and not in limitation of customary
cost and yield protection.
The Borrower may select interest periods of 1, 2, 3 or
6 months for LIBOR loans, subject to availability.
A penalty rate shall apply on all loans in the event of
default at a rate per annum of 2% above the applicable
interest rate.
PERFORMANCE PRICING: The LIBOR and Alternate Base Rate margins for the
Revolving Credit Facility and the Tranche A Term Loan
Facility will be subject to performance pricing step-
downs commencing twelve months from
<PAGE>
closing , based upon the Borrower's Funded Debt to
EBITDA, to be mutually agreed upon.
COST AND YIELD
PROTECTION. The usual for transactions and facilities of this type,
including, without limitation, in respect of
prepayments, changes in capital adequacy and capital
requirements or the interpretation, illegality,
unavailability, reserves without proration or offset.
LETTER OF
CREDIT FEES: Letter of credit fees are due quarterly in arrears to
be shared proportionately by the Lenders. Fees will be
equal to the interest rate spread on LIBOR loans on a
per annual basis plus a fronting fee of 1/4% per annum
to be paid to Fronting Bank for its own account. Fees
will be calculated on the aggregate stated amount for
each letter of credit for the stated duration thereof.
EXPENSES: Borrower will pay all reasonable costs and expenses
associated with the preparation, due diligence,
administration, syndication and enforcement of all
documents executed in connection with the Credit
Facilities, including without limitation, the legal
fees of the Agent's counsel regardless of whether or
not the Credit Facilities are closed.
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<PAGE>
NATIONSBANK
October 1, 1996
CGW Southeast Partners III, L.P.
Suite 210
12 Piedmont Center
Atlanta, Georgia 30305
Re: Commitment Letter, dated October 1, 1996, among CGW Southeast Partners III,
L.P., NationsBank of Texas, N.A., ("NationsBank") and NationsBanc Capital
Markets, Inc. ("NCMI")
Ladies & Gentlemen:
This letter is delivered to you in connection with the above referenced
Commitment Letter (the "Commitment Letter") regarding arrangement and
syndication of credit facilities in an aggregate principal amount of $70
million (the "Credit Facilities") for the purpose of financing the proposed
acquisition by the Investor Group through an indirectly wholly-owned subsidiary
(the "Borrower") of specified assets of and specified liabilities of the
Gorges/Quick-to-Fix Foods division of Tyson Foods, Inc. (the "Acquisition") . A
summary of proposed terms relating to the Credit Facilities is attached to the
Commitment Letter (the "Term Sheet"). Unless otherwise defined herein,
capitalized terms shall have the meanings set forth in the Commitment Letter and
the Term Sheet. In connection with, and in consideration of the agreements
contained in the Commitment Letter, the Borrower agrees with NationsBank and
NCMI as follows:
1. Underwriting Fee: The Borrower will pay to NationsBank for its own
-----------------
account, a fee of 250 bps on the entire amount of the Credit Facilities. Such
fee shall be for underwriting, structuring and syndicating of the Credit
Facilities and shall be due and payable upon the earlier of the closing of the
Credit Facilities or the consummation of the Acquisition.
2. Administrative Fee. The Borrower will pay an annual administrative
------------------
fee of $50,000 to NationsBank, for its own account as Agent for the Banks under
the Credit Facilities, annually in advance on the date of closing of the Credit
Facilities and on each anniversary date thereafter, until the Credit Facilities
terminate.
If the foregoing is in accordance with your understanding, please sign and
return the enclosed duplicate copy of this letter.
<PAGE>
With best regards,
Very truly yours,
NATIONSBANK OF TEXAS, N.A.
By: /s/
-------------------------------
Title: Vice President
----------------------------
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/
-------------------------------
Title: Vice President
----------------------------
Accepted and agreed to as
of the date first above
written:
CGW SOUTHEAST PARTNERS III,
L.P.
By: CGW Southeast III, L.L.C.,
Its General Partner
By: /s/ William A. Davie
-----------------------------
Title: Partner
--------------------------
Date: 10/3/96
---------------------------
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<PAGE>
EXHIBIT C
---------
FORM OF TRANSITION SERVICE AGREEMENT
------------------------------------
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is executed and
made effective this ________ day of November, 1996, by and between TYSON FOODS,
INC., a Delaware corporation ("Tyson"), and GORGES/QUIK-TO-FIX FOODS, INC., a
Delaware corporation ("Buyer").
WHEREAS, prior to the date hereof, Tyson owned and operated as a
division its beef further processing operations under the name of Gorges/Quik-
to-Fix Foods (the "Business"); and
WHEREAS, pursuant to that certain Asset Purchase Agreement by and
among Tyson, certain subsidiaries of Tyson and Buyer dated October 17, 1996 (the
"Purchase Agreement"), Tyson has sold and/or caused to be sold to Buyer
substantially all of the assets of the Business; and
WHEREAS, as a material inducement to Buyer to enter into the Purchase
Agreement, Tyson has agreed to provide certain services to Buyer relating to the
Business on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DESCRIPTION OF SERVICES. Subject to the terms and provisions of
-----------------------
this Agreement, Tyson shall provide Buyer with those services with respect to
the operation of the Business as set forth on EXHIBITS A through C hereto (the
"Services"). Tyson shall supply all personnel and all equipment, software,
office supplies and other materials necessary or required for Tyson to perform
such Services to the standards and upon the terms set forth herein; provided,
however, that in performing such Services (i) Tyson may utilize any of Buyer's
personnel who were utilized in providing the Services to the Business
immediately prior to the date hereof and any equipment, software, office
supplies and other materials which constitute a part of the Purchased Assets (as
such term is defined in the Purchase Agreement), and (ii) Tyson shall not be
required to hire additional personnel or acquire additional equipment, software,
office supplies or other materials from that used in providing the Services to
the Business immediately prior to the date hereof (except that Tyson will
restock and replenish office supplies and other materials as necessary).
2. TERM OF SERVICES. Tyson shall provide the Services for the period
----------------
commencing on the date hereof and ending on the first anniversary of the date
hereof, subject to earlier termination of this Agreement and Tyson's obligations
hereunder as to all or a portion of the Services, as set forth in Section 8
hereof.
<PAGE>
3. CONSIDERATION FOR SERVICES. During the period beginning on the
--------------------------
date hereof and ending on the 180th day after the date hereof (the "Initial
Period"), Tyson shall provide the Services at no cost to Buyer, the parties
acknowledging and agreeing that such Services are being provided as part of the
consideration for Buyer's agreements under the Purchase Agreement. For any
Services provided after the Initial Period, Buyer shall pay Tyson an amount for
such Services as the parties shall agree upon, and each party shall negotiate in
good faith to agree upon a reasonable amount; provided, however, that if the
parties are not able to agree upon such an amount, Buyer shall pay to Tyson
$120,000 per calendar month for each calendar month in which all of the Services
are provided hereunder, it being the intent of the parties that such amount be
prorated if less than all of the Services are provided hereunder during such
month. In the event that, either during the Initial Period or after, Buyer
requests Tyson to increase the type or level of the Services beyond that which
was provided to the Business immediately prior to the date hereof, Buyer and
Tyson shall negotiate in good faith to determine a reasonable fee for such
increase which Buyer shall pay to Tyson therefor; provided, however, that Tyson
shall be under no obligation to provide any such increase in Services unless a
mutual agreement is reached with respect thereto. Any monthly amount payable as
provided in the preceding sentence shall be pro rated for any partial month.
4. TERMS OF PAYMENT. With respect to any Services for which payment
----------------
is required pursuant to Section 3 above, Tyson shall submit in writing invoices
covering said charge to Buyer hereunder not later than twenty (20) days
following the end of the calendar month in which such Services are provided.
Payment shall be made no later than thirty (30) days after the invoice date.
5. METHOD OF PAYMENT. All amounts payable by Buyer for any Services
-----------------
shall be remitted to Tyson in United States dollars to a bank to be designated
in the invoice or otherwise in writing by Tyson, unless otherwise provided for
and agreed upon in writing by the parties.
6. COORDINATORS. Each party shall appoint one individual who shall
------------
serve as a contact person for purposes of communicating with the other party and
carrying out this Agreement, and who shall be authorized to act on behalf of his
or her respective party as to matters pertaining to this Agreement. Effective
upon execution of this Agreement, such coordinators shall be as set forth in
SCHEDULE 1 hereto. Each party shall notify the other in writing as to the name,
address and telephone number of any replacement for such designated coordinator.
7. PERFORMANCE STANDARDS. Tyson will provide each Service to Buyer
---------------------
at the same levels of quality and timeliness of performance as Tyson achieved in
providing like or similar Services to the Business immediately prior to the date
hereof. In any event, all Services will be provided consistent with Tyson's
past practices.
<PAGE>
8. LIABILITY; INDEMNIFICATION.
--------------------------
(a) Except to the extent provided in Sections 8(b) and 8(c) below,
nothing in this Agreement is intended to impose upon Tyson, and Tyson does not
assume pursuant to this Agreement, any of the risks associated with operation of
the Business after the date hereof, including, without limitation, product
quality and liability therefor. Except as provided elsewhere in this Section 8
or in Section 3 hereof, neither party shall have any liability to the other
party for any Losses (as defined in Section 8(d) below) incurred by such other
party in connection with this Agreement or the performance of either party's
obligations hereunder, whether such claim of liability arises in an action at
law or in equity, and whether such claim sounds in contract or tort or
otherwise.
(b) Buyer agrees to indemnify, defend and hold harmless Tyson and its
officers, directors, shareholders, controlling persons, affiliates and
representatives (the "Tyson Indemnitees"), and each of them, from, against, for
and in respect of any and all Losses suffered or incurred by a Tyson Indemnitee
and resulting from, based upon or arising out of the provision of Services under
this Agreement, other than Losses resulting from, based upon or arising out of
any intentional breach of this Agreement by Tyson or the fraud, gross negligence
or willful misconduct of Tyson in connection with the performance of its
obligations under this Agreement.
(c) Tyson agrees to indemnify, defend and hold harmless Buyer and its
officers, directors, shareholders, controlling persons, affiliates and
representatives (the "Buyer Indemnitees"), and each of them, from, against, for
and in respect of any and all Losses suffered or incurred by a Buyer Indemnitee
and resulting from, based upon or arising out of any intentional breach of this
Agreement by Tyson or the fraud, gross negligence or willful misconduct of Tyson
in connection with the performance of its obligations under this Agreement.
(d) For purposes of this Agreement, a "Loss" shall mean any action,
suit, proceeding, claim, cost, damage, expense, liability, loss or obligation,
including but not limited to, interest or carrying costs, penalties, legal,
accounting and other professional fees and expenses incurred in the collection,
prosecution and defense of actions or claims and amounts paid in settlement
pursuant to the terms of this Agreement, that may be imposed or otherwise
incurred or suffered by the specified person (but a "Loss" shall not include
consequential, speculative or punitive damages unless asserted by a third
party).
9. TERMINATION. This Agreement shall terminate on the first anniversary
-----------
of the date hereof, but may be terminated earlier in accordance with the
following:
(a) upon the mutual written agreement of the parties;
(b) as to any Service provided hereunder, upon the lapse of fifteen
(15) days after Buyer has notified Tyson to cease providing such Service;
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<PAGE>
(c) by either Tyson or Buyer for material breach of any of the terms
hereof by Buyer or Tyson, as the case may be, if the breach is not corrected
within thirty (30) days after written notice of breach is delivered to the
defaulting party;
(d) by either Tyson or Buyer forthwith, upon written notice to Buyer
or Tyson, as the case may be, if Buyer or Tyson, as the case may be, shall
become insolvent or shall make an assignment for the benefit of creditors, or
shall be placed in receivership, reorganization, liquidation or bankruptcy.
Upon any such termination, Tyson shall be compensated for all Services performed
to the date of termination in accordance with the provisions of this Agreement.
10. FORCE MAJEURE. Any delays in or failure of performance by Tyson shall
-------------
not constitute a default hereunder if and to the extent such delay or failure of
performance is caused by occurrences beyond the reasonable control of Tyson,
including, but not limited to: acts of God or the public enemy; expropriation or
confiscation of facilities; compliance with any order or request of any
governmental authority; acts of war; riots or strikes or other concerted acts of
personnel; or any causes, whether or not of the same class or kind as those
specifically named above, which are not within the reasonable control of Tyson,
and which by the exercise of reasonable diligence, Tyson is unable to prevent.
11. CONFIDENTIALITY. Any and all information which is not generally
---------------
known to the public which is exchanged between the parties in connection with
this Agreement, or which is directly or indirectly obtained by one party from
the other in connection with the performance of Services hereunder, whether of a
technical or business nature, shall be considered to be confidential. The
parties agree that confidential information shall not be disclosed to any third
party or parties without the written consent of the other party. Each party
shall take reasonable measures to protect against nondisclosure of confidential
information by its officers and employees. Confidential information shall not
include any information (i) which is or becomes part of the public domain, (ii)
which is obtained from third parties who are not bound by confidentiality
obligations or (iii) which is required to be disclosed by law, regulation, legal
process or the rules of any state or federal regulatory agency or any national
stock exchange. It is further understood and agreed that money damages would
not be a sufficient remedy for any breach of this Section 11 and that the non-
breaching party shall be entitled to specific performance as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for
such breach but shall be in addition to all other remedies available hereunder,
at law or in equity, to the non-breaching party. The provisions of this section
shall survive the termination of this Agreement.
12. INDEPENDENT CONTRACTOR STATUS. Tyson shall be deemed to be an
-----------------------------
independent contractor to Buyer. Nothing contained in this Agreement shall
create or be deemed to create an employment, agency, joint venture or
partnership relationship between Buyer and Tyson.
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<PAGE>
13. ARBITRATION. If a dispute, controversy or claim arises out of or in
-----------
connection with the terms and conditions of this Agreement, it shall be
submitted to binding arbitration which shall be conducted as follows: (a) the
arbitrator shall be an independent third party knowledgeable of the beef further
processing and distribution industries and mutually satisfactory to Buyer and
Tyson; (b) the arbitrator, in conducting such arbitration, shall have access to
all relevant documents and records of the parties; (c) the arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date such arbitration is commenced and
shall be final and binding on the parties hereto; and (d) all arbitration
proceedings shall be conducted in English in a location mutually agreed upon by
the parties.
14. AMENDMENT AND WAIVER.
--------------------
(a) This Agreement may be amended, or any provision of this Agreement
may be waived, provided that any such amendment or waiver will be binding upon
Tyson only if set forth in a writing executed by Tyson, and any such amendment
or waiver will be binding upon Buyer only if set forth in a writing executed by
Buyer.
(b) No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
15. NOTICES. Except as otherwise expressly set forth in this Agreement,
-------
all notices, demands and other communications to be given or delivered under or
by reason of the provisions of this Agreement will be in writing and will be
deemed to have been given when delivered personally, or by documented overnight
delivery service, or sent by telecopy, telex, or other electronic transmission
service, provided a confirmation copy is also sent no later than the next
business day by first class mail, return receipt requested. Notices, demands and
communications to Buyer or Tyson will, unless another address is specified in
writing, be sent to the address indicated below:
If to Tyson, to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
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<PAGE>
With a copy to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: David L. Van Bebber, Esq.
(501) 290-4000
(501) 290-7967 (FAX)
If to Buyer, to: Gorges/Quik-to-Fix Foods, Inc.
c/o Cravey, Green & Wahlen
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
(404) 816-3255
(404) 816-3258 (FAX)
With a copy to: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin, Esq.
(404) 881-7000
(404) 881-7777 (FAX)
16. ASSIGNMENT. This Agreement and all of the provisions hereof will be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by either party
without prior written consent of the other party; provided, however, that Buyer
may assign its rights hereunder to any lender to Buyer upon the condition that
such lender may only exercise any of Buyer's rights hereunder if Buyer is then
and continues to be in default under any credit agreement with such lender.
17. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
18. NO THIRD PARTY BENEFICIARIES. This Agreement does not create any
----------------------------
rights in any person or party who is not a party to this Agreement.
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<PAGE>
19. NO STRICT CONSTRUCTION. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
20. SECTION HEADINGS. The headings of sections contained in this
----------------
Agreement are provided for convenience only. They form no part of this
Agreement and shall not affect its construction or interpretation. All
references to sections or subsections refer to the corresponding sections and
subsections of this Agreement. All words used herein shall be construed to be
of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement and the Exhibits and Schedule hereto as a whole and as the
same may, from time to time hereafter, be amended, supplemented or modified.
The words "herein," "hereby," "hereof," "hereinabove," and "hereinbelow," and
words of similar import, refer to this Agreement as whole and not to any
particular section, subsection, paragraph, clause or other subdivision hereof,
unless otherwise specifically noted.
21. COMPLETE AGREEMENT. This document and the documents referred to
------------------
herein or attached hereto contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
22. GOVERNING LAW. The substantive law (and not the law of conflicts) of
-------------
the State of Delaware will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
23. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts (including by means of FAXed signature pages), any one of which
need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same instrument.
24. DEFINED TERMS. Any capitalized term used but not defined herein
-------------
(including in the Exhibits hereto) shall have the meaning set forth in the
Purchase Agreement.
[Signatures on Next Page]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
TYSON FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By:____________________________
Name:__________________________
Title:_________________________
GORGES/QUIK-TO-FIX FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By:____________________________
Name:__________________________
Title:_________________________
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<PAGE>
SCHEDULE 1
INITIAL COORDINATORS
FOR TYSON:
Name: Matt Venable
Address: Tyson Foods, Inc.
2210 Oaklawn Drive
Springdale, Arkansas 72765
Phone: (501) 290-5709
Fax: (501) 290-7908
FOR BUYER:
Name: J. David Culwell
Address: 9330 LBJ Freeway
Suite 1055
Dallas, TX 75243
Phone: 972-497-1033
Fax: 972-994-1510
<PAGE>
EXHIBIT A
COMPUTER PROCESSING, ACCOUNTING, REPORTS,
SCHEDULING, CUSTOMER SERVICE AND RELATED FUNCTIONS
STATEMENT OF INTENT
It is the intent of this agreement that Buyer be provided computer processing
and related business services necessary to operate the Business on an ongoing
basis, including but not limited to information systems support, computer
processing time, telecommunications access, reporting, documentation, training,
functional and technical support, interim processing of transactions, online
access and others.
Detailed system and process requirements not specified in this document but
necessary for ongoing operations of Buyer will be considered included in this
agreement by this statement of intent.
Services described by this agreement are defined according to the time periods
covered, and include Transition, Conversion, and Post Conversion Support
services. In some cases, the time periods overlap.
. Transition includes all time from moment of Closing to the point at which
----------
the last remaining application is converted, and focuses on those services
necessary to operate Buyer as a going concern in the absence of its own
established systems and processes.
. Conversion includes all time from the point at which conversion planning
----------
begins for the first application up to and including the point at which the
last remaining application is converted to Buyer. The focus of conversion
services is on those services necessary to convert existing Tyson systems
and processes being run on behalf of Buyer to Buyer's own systems and
processes.
. Post Conversion Support includes all time from the point at which an
-----------------------
application is converted to Buyer systems to a point in time 60 days after
conversion date for that application. Each application will have a Post
Conversion Support period.
The terms "routine," "normal," and "reasonable" used throughout this document in
relation to Tyson services connote a level of service and performance that Tyson
management would expect of its own service departments.
<PAGE>
SERVICES PROVIDED DURING TRANSITION
- -----------------------------------
DATA PROCESSING
Applications
Application processing will be performed for the following applications in
support of the locations listed with an X. Table 1 is intended to represent
actual application processing services provided on the date of sale.
This service includes the appropriate handling and processing of all inbound
inputs, timely processing of inputs and printing and distribution of outputs
according to normal business priority.
TABLE 1
TABLE OF APPLICATIONS BY LOCATION
---------------------------------
<TABLE>
<CAPTION>
APPLICATIONS GARLAND HARLINGEN SIOUX ORANGE
- ------------ ------- --------- ----- ------
CENTER CENTER
------ ------
<S> <C> <C> <C> <C>
DECISION SUPPORT SYSTEMS
- ------------------------
Executive Information System X X X X
(EIS)
PLANT SYSTEMS
- -------------
Maintenance Management X X X X
System
SIM/RF X X X X
Production Planning and X X X X
Scheduling
WORKERS COMPENSATION X X X X
- --------------------
SOE/INV/TRK
- -----------
Sales Order Entry (SOE) X X X X
Inventory/Warehouse Mgmt X X X X
(INV/WMS)
Trucking X X X X
MTP X X
FINANCIAL SYSTEMS AND HR
- ------------------------
SYSTEMS
- -------
Purchasing Management X X X X
Vehicle Management X X X X
Materials Management X X X X
Vendor Application X X X X
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
GLM - General Ledger X X X X
FAM - Fixed Assets X X X X
CPM - Capital Project / CIR X X X X
APM - Accounts Payable X X X X
DAS - Deduct Admin X X X X
Payroll X X X X
*Insurance Benefits (per X X X X
Buyer's instructions)
*Cyborg HR System X X X X
*Time and Attendance X X X X
*Garnishments X X X X
*Credit Union X X X X
*Vision X X X X
*TALX X X X X
*Cobra X X X X
*PersMaster X X X
AS/400 X X X X
- ------
Product Specification X X
Bill of Materials X X
Production Line Scheduling X X
Product Costing X X
Lab Test Tracking X X
Blender System X X
Materials Management X X
Attendance Management X X
</TABLE>
NOTES TO TABLE 1:
. Product specifications that have been converted to the new system should be
available in acceptable format to be dumped to tape for conversion
purposes.
. The EIS system includes access to (in hard copy report form and not on-line
access) margin reports, cost accounting, fixed assets, inventory, and all
other data normally provided as part of this system.
. Lab tests and other data recorded on paper are considered to be data and
are transferable to Buyer.
. The PC-based Excel pricing system in marketing will be made available on
magnetic media along with authorization for its use and support in its use
from those within Tyson with knowledge of the system.
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<PAGE>
. The AS/400 applications are not currently in use at Garland and Harlingen.
However, both plants have access to the systems should they choose to use
them, and access to these systems will continue through transition.
. Each of the applications indicated by an asterisk (*) relates to human
resources/employee functions. With respect to these applications, Buyer
will provide Tyson with Buyer's preferred practices and policies, and the
parties will mutually determine a reasonable and practical method by which
Tyson will provide Services for Buyer in these application areas.
HARDWARE AND SOFTWARE
Hardware and software systems physically located in the four Facilities are to
be transferred to Buyer with the sale, and become property of Buyer, including
any third-party support agreements that are in place as of the date of sale,
including but not limited to the hardware and software shown in Table 1, except
any software that is proprietary to Tyson. Also, any hardware or software at
Tyson that is being stored on behalf of any of the Facilities, or is under
repair at any other facility or vendor, or for any reason is not located on site
but is the rightful property of one of the four Facilities, becomes property of
Buyer on the date of sale and should be transferred to Buyer in a timely manner.
Computer hardware and software, including but not limited to laptop/notebook
computers, in use by employees transferring to Buyer, regardless of whether they
are located at one of the four Facilities, will be transferred to Buyer.
PROCESS SERVICES
During the Transition period, there will be a need for certain business
processes to be performed by Tyson on behalf of Buyer. This will, in many cases,
require the commitment of Tyson resources (i.e. personnel) to perform the duties
described below. Some changes may be made by Buyer to daily duties and
responsibilities of those processing transactions on behalf of Buyer in order to
facilitate the transition.
As a condition of the sale, Tyson has agreed to provide process support for many
of the business functions necessary to continue smooth and efficient processing,
delivery, and accounting for customer orders and payments. It is the intent of
this agreement that Tyson employees acting on behalf of Buyer will do so in a
manner consistent with Tyson standards of operations and customer care,
notwithstanding exceptions expressly designated by Buyer.
In order to facilitate the transition of processes from Tyson employees to Buyer
employees, Buyer may require changes to processes that require more or less of
Tyson employee(s) time and effort. Also, toward this end, Tyson agrees to
provide training to Buyer employees in various areas including but not limited
to customers, products, shipping/delivery requirements, brokers, salesmen, and
other critical functions. The training may occur either at Tyson headquarters or
at Buyer, as designated by Buyer.
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<PAGE>
Implicit in this agreement is access by trainees to personnel and records
located at Tyson headquarters, for periods of time to be mutually agreed upon,
but not less than is reasonable for training purposes.
The functions to be provided by Tyson during the transition period include, but
are not limited to, the following:
BILLING/INVOICING
Responsible Party- Dede Kendrick, Billing Supervisor
Includes but not limited to invoice processing, exception handling,
bursting, decollating, preparing for mailing and mailing, and all
accounting and reporting processes required for adequate control.
Buyer will have the option of printing locally at the Garland Facility
any or all of the billing/invoicing forms and reports.
PAYROLL PROCESSING
Responsible Party - Mark Hayre, Payroll Manager
Plant sites will continue to gather time and attendance locally using
automated means for hourly and some clerical positions. Tyson will
provide full payroll processing services including printing and
delivery of checks and remittances, and the facilitation of direct
deposit where appropriate. Line and clerical personnel will be paid
weekly or 52 times per year. Management/salaried personnel will be
paid biweekly or 26 times per year. Monthly payroll exceptions will be
converted to biweekly. Buyer will provide stock forms for checks and
remittances.
Buyer will choose its own benefits provider, and will direct Tyson as
to the appropriate deductions and payments to be made for each payroll
period.
401k deductions will be terminated as of date of sale, as will any
applicable stock purchase programs.
The Human Resources department at Tyson will provide reasonable
assistance to Buyer's Human Resources department in preparing the
targeted jobs tax credits and other government program data.
Buyer will set up a separate transaction account for payroll
processing.
ACCOUNTS PAYABLE
Responsible Party -Rick Steichman, A/P Manager
Tyson will provide accounts payables processing and check printing and
mailing. Buyer will continue to use payables clerks at the plant
locations to
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<PAGE>
match invoices with purchase orders and receiving documents, and key
the payables data into the system.
Sales and marketing and other miscellaneous expense data will be
collected and keyed at the Garland Facility.
ACCOUNTS RECEIVABLE/CASH APPLICATION/CREDIT
Responsible Party - Joyce Harrelson, A/R Supervisor
Subject to the Collection Agreement (as defined in the Purchase
Agreement), Tyson will support Buyer by providing system support and
reporting for facilitating accounts receivable management, the
application of cash to open invoices, and the setting and managing of
credit and credit limits and exceptions. Buyer will assume appropriate
management decisions associated with credit processes including
granting initial credit and setting and changing credit limits.
Tyson will continue to support lockbox processing, and has agreed to
provide separate lockbox processing at NationsBank of Dallas, Texas.
GENERAL LEDGER PROCESSING
Responsible Party - Jim Beaty, Accounting Manager
Tyson will provide full general ledger processing for Buyer as a
separate company. Buyer will be granted authorization to make all
necessary entries to the general ledger including adjusting entries,
reclassifications, prior and current period adjustments, etc. Buyer
may make changes to the chart of accounts as required, subject to the
reasonableness of the request and Tyson's standard procedures.
BANK RECONCILIATION
Responsible Party - Jim Beaty, Accounting Manager
Bank reconciliation will occur at Buyer, and Tyson will provide Buyer
original documents concerning deposits, statements, lockbox listings,
system reports, etc., necessary to perform full account
reconciliation.
SALES ORDER ENTRY/INVENTORY MANAGEMENT
Responsible Party - Jamia Fields, Manager, Sales Support
Sales order entry will require Tyson employees to be staffed as needed
to process orders in a timely fashion. These employees will be
resident in Tyson facilities and remain as Tyson employees, and may be
asked to perform related duties including pricing, deductions
processing, expediting, product prorating, electronic data interchange
orders (EDI), responding to
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<PAGE>
bids, program paying processing, promotions, and other duties as
reasonably requested by Buyer.
Buyer will set prices and maintain the products and prices in the
system. Sales Order clerks will require a separate Purchase Order
number for Beef and Pork orders.
Buyer may, at its option, change the 1-800 inbound telephone number
used for beef and pork telephone orders. Buyer shall be responsible
for the cost of such change, and Tyson will accommodat this change
should it occur while orders are still being taken at Tyson
headquarters at Springdale.
PRICING
Responsible Party - Stacy Jaycox, Pricing Supervisor
A Tyson employee to be mutually determined will act as Pricing
Coordinator to verify order prices and publish/distribute price
schedules for Buyer, with all price information to be determined by
Buyer.
TRAFFIC/TRANSPORTATION
Responsible Party - Bryan McDuffie, Director of Distribution
Tyson will continue to provide services related to truckload building
and the contracting of carriers for delivery of Buyer product to
customer and distributor locations. Tyson will also provide at the
request of Buyer intra-and interstate transfers of inventory.
INVENTORY AND WAREHOUSE MANAGEMENT, SALES ACCRUAL TRACKING
Responsible Party - Marty Bryan, Director Sales and Distribution
Accounting
Buyer will continue to maintain regular and consigned inventory in
public and privately owned warehouses currently in use and at
additional locations designated by Buyer. Tyson will transfer all
Buyer inventory to accounts in Buyer's name at all inventory
locations. Buyer will be responsible for determining levels of
inventory to be held at each location.
It is understood by both parties that Buyer will establish its own
distribution network during the transition period, and may request
changes in process and procedure that will facilitate the transition.
Sales accrual tracking data will also be provided to Buyer on a
regular basis.
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<PAGE>
With respect to Sales Order Entry/Inventory Management,
Traffic/Transportation and Inventory and Warehouse Management, Sales
Accrual Tracking, Tyson shall continue to provide for all of Buyer's
products and customers all services that Tyson currently performs in
connection with the Business with respect to receiving, entering and
processing customer orders; scheduling production, storage and
distribution of products; providing customer service; and generally
performing logistical services. Without limiting the generality of the
immediately preceding sentence, Tyson will provide for Buyer to
maintain such regular and consigned inventory, in such amounts that
Buyer shall determine, in warehouses or other storage facilities which
are either owned or leased by Tyson or its subsidiaries and routinely
used by Tyson or its subsidiaries in conneciton with the Business. The
parties expressly agree, however, that the costs for the
transportation and storage of products shall be at Buyer's expense,
and Buyer shall pay the charges of any third-party provider of such
services that is scheduled by Tyson, or reimburse Tyson if it provides
such services (at rates that are reasonable and comparable to rates
charged by other providers in the marketplace and consistent with past
practices for the Business and for other Tyson business units).
TAX REMITTANCE
Responsible Party - Kevin Griffin, Director of Taxation
Tyson will remit sales and use taxes, payroll withholding taxes, and
supervise Buyer's selected agents in remittance of unemployment
insurance taxes to any and all taxing jurisdictions where such taxes
are due and payable. Buyer will provide Tyson with the applicable
Power of Attorney to perform these tasks.
Buyer reserves the right to access the Tyson records, files, data, and personnel
associated with the functions listed above for the purpose of performing routine
inspection and audits.
FORMS
Certain of the business functions listed above will require either new or
changes to existing computer printed forms, letterhead, invoices, and other
consumable items. Tyson agrees to make system changes to printed forms and
external reports to reflect new names and identifiers for Buyer. Buyer will
provide Tyson with those preprinted forms necessary to conduct business under
the new company name.
PRODUCTION OF REPORTS
Timing
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<PAGE>
Reports will be produced for Buyer on a timely basis and will be accurate
and free from defects as normally and routinely provided to Tyson
management.
Delivery of reports
Reports will be delivered using normal and routine processes as defined by
those processes to deliver reports used in the months up to and including
the date of sale. This should include shipping reports to Buyer
headquarters in Garland, TX, and/or directly to the other three Facilities
as defined by normal and routine use.
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<PAGE>
ACCESS TO INFORMATION DATABASES
Online-databases
The telecommunications network will be available to Buyer 24 hours each
day, seven days per week through the final post conversion support period.
Online access, to the extent that it is provided on the date of sale, to
all databases related to or incidental to the applications listed in Table
1, will be provided to Buyer employees using routine access policies and
procedures. New employees will be granted access in a timely manner, and
terminated employees will have access removed in a prudent and reasonable
timeframe. Response times and uptimes will be reasonable and will be no
worse than response times and uptimes provided to Tyson employees.
Additionally, Tyson will provide additional terminals and necessary
telecommunications to increase the number of available terminals at the
Garland, TX , Facility to a total of 15. Charges for this additional
service level will be paid by Buyer. The response times to all sites should
be maintained at levels incurred prior to the sale.
Archived databases
Access to archived data for three years prior to the date hereof, will be
granted to Buyer employees for the purposes of accessing prior period
information. Access, information, reports, and technical assistance will be
provided in a timely manner.
Hardcopy databases
To the extent that hardcopy data exist and related to the ongoing business
of Buyer, Tyson will provide access and/or a copy of such databases to
Buyer for use at their discretion.
HISTORICAL INFORMATION
Tyson will maintain three years historical data related to Buyer during the
transition period, at which time it will make historical data available to
Buyer. Access to historical information during the transition period will be
granted to Buyer employees in a manner consistent with that prior to the sale.
Reports of historical information will be produced according to routine business
practices at Tyson, and distributed to Buyer in a timely manner.
SYSTEM MAINTENANCE
Enhancements
Enhancements to current system processes will be made through routine
business procedures currently in process at Tyson, with Tyson providing a
number of hours of
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<PAGE>
maintenance development per month at a level consistent with past
practices. Unused maintenance hours in any given months will carry over to
the following months. Enhancements and additional maintenance hours
requested by Buyer in excess of 100 will be billed as contemplated in
Section 3 of this Agreement.
Correction of "bugs"
From time to time, software applications fail to perform as designed for
various reasons. Tyson will apply routine business practices toward
correcting software "bugs" in a timely fashion and will prioritize the
correction effort in a manner consistent with standards used at Tyson.
There will be no charges for or limits to the effort of Tyson on behalf of
Buyer systems toward correcting system deficiencies defined as "bugs".
Development
Buyer will make every effort to limit the need for development of new
functionality to software application development during the transition
period. However, should the need arise, Tyson will apply its routine
business procedures and policies in establishing priority for development
requested, and Buyer will agree to pay charges related to development as
contemplated in Section 3 of this Agreement.
USER SUPPORT
Functional
Functional support is defined as providing expertise to Buyer system users
in answering questions related to how application software works.
Functional support will be provided by Tyson to Buyer employees during the
transition, conversion and post conversion support periods in a manner
consistent with standard Tyson procedures. This will include help desk and
phone support and research requests made by Buyer employees.
Technical
Technical support is defined as providing expertise and corrective services
to problems related to application processing that transcend software
functionality. An example would be in the area of telecommunications, i.e.
a terminal is "down," but the software appears to be working elsewhere in
the company. Technical support will cover any and all requests of a
technical nature to restore the system to normal operating mode. To the
extent that the technical problem is determined to reside with equipment
owned entirely by Buyer, or related to a specific Buyer location, Tyson
will help facilitate Buyer employees resolving the issue. During the
conversion and post conversion support periods, technical support requests
from Buyer will be given the priority necessary to facilitate such
conversion.
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<PAGE>
Training
Tyson will provide system, application, functional and technical training
to Buyer employees to the extent that such training is not provided under
contract by a third party vendor. This training will be mutually
determined, and timing of delivery will be coordinated with Tyson. Due to
the fact that most of the packaged software in place at Tyson has been
heavily modified, Tyson will be responsible for training of packaged
software as well as software that is developed in-house.
ACCESS TO THIRD PARTY PROVIDERS
In many cases, Tyson has contracted with outside or third party providers for
software, hardware, telecommunications, functional and technical training and
support. To the extent that any service provided to Buyer during the transition
period involves a third party provider, Tyson will grant access to and use of
that provider to Buyer employees as if they were employees of Tyson. Buyer will
make every effort to rely on third party providers to answer questions and
receive support. All contact by Buyer with such third party providers shall be
only with Tyson's prior knowledge and approval.
DISASTER RECOVERY
Tyson will provide disaster recovery services necessary to support Buyer during
the transition period such that Buyer may resume operations in a reasonable
timeframe following a disaster. Disaster recovery plans and systems in place as
of the date of Closing, including but not limited to off-site processing sites,
contracts to provide disaster recovery services, telecommunications services,
and others, will be presumed to cover and include Buyer during the transition
period and extending through the conversion period. Disaster recovery plans,
policies and procedures will be made available to Buyer, and Buyer employees
will be kept updated with regard to changes to disaster recovery plans. Tyson
will include, where appropriate, Buyer employees in testing disaster recovery
preparedness.
DATABASE ADMINISTRATION
Normal and routine administration of all databases related to the list of
applications in Table 1 will continue during the transition period. From time to
time, special database administrative actions requested by Buyer will be
performed according to established priority and scheduling.
REMOTE ACCESS - EMAIL SYSTEMS
Buyer employees will be allowed all access and maintenance rights associated
with use of the corporate electronic mail systems. This will include Tyson
maintenance of the associated telecommunications systems and hardware necessary
to provide access and
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availability to all four Buyer locations, and to remotes users such as salesmen
who dial-in from time to time.
REPORT WRITER
Access to the various report writing utilities and software applications will
remain in use by Buyer employees during the transition period. Printed reports
will be delivered with daily printed reports produced by core applications and
included with daily shipments/deliveries.
ROUTINE CHANGES TO PRODUCTION SYSTEMS
Buyer will be made aware of all changes to production systems within a
reasonable timeframe prior to implementation of such changes. Training,
documentation, functional and technical support, and all other services
routinely provided to Tyson employees to implement the changes will be made
available to Buyer employees in a manner and timeframe conducive to effective
implementation.
Tyson will use its best efforts to avoid any changes to production systems that
may adversely impact the conversion of any application system listed in Table 1.
SYSTEM DOCUMENTATION
All system documentation currently in existence and that is developed in the
future relative to the applications in Table 1 will be made available to Buyer
at the same time it becomes available to Tyson employees. Tyson will provide at
least one copy per location of all pertinent documentation, and deliver each
copy to the individual location. All documentation relevant to Tyson owned
systems will be returned promptly following the transition period.
COMPUTER LICENSES
All licenses, contracts, bills of sale, and any other written proof of
ownership, right to do business with, right to access, etc., associated with
computer hardware, vendor support, telecommunications, written materials, or any
other aspect of business associated with Buyer and its acquired assets will be
transferred and/or made available to Buyer on date of Closing.
SERVICES PROVIDED DURING CONVERSION
- -----------------------------------
Conversion of applications processes from Tyson to Buyer will occur in phases
over the course of the transition period. There will be one "conversion" for
each of the applications listed in Table 1. Application conversion sequence and
timing will be closely coordinated with Tyson, as will the transition of
business processes (i.e. cash application). It is the
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intent of Buyer to make the conversion of all application systems at the
earliest possible time while not jeopardizing Buyer's ability to continue
successful operation.
Software, hardware, communications and related decisions concerning systems and
processes at Buyer will be made by Buyer.
It is the intent of Buyer to secure services from Tyson necessary to perform a
successful, timely, accurate conversion or in continuing successful business
operations. The parties agree that to the extent that a particular conversion
service is not listed in this agreement, but would be required to meet the
objectives of Buyer in performing a successful, timely, accurate conversion, and
it is reasonable that the service be provided in support of conversion effort,
that service will be provided by Tyson, subject to charges to Buyer as
contemplated in Section 3 of this Agreement.
TECHNICAL SUPPORT
The first and most important step in conversion is conversion planning. Subject
to Section 3 of the Agreement, Tyson will assist with technical support
necessary to ensure that all required data is identified and prepared in a
format acceptable by the new system. This will include but is not limited to,
data mapping (from Tyson to the new system), designing and programming
conversion programs, running conversion programs and producing magnetic media to
support transferring the data to the new system, and assisting in conversion
balancing and reconciliation where appropriate.
File layouts
Tyson will provide file layouts and field level technical details for all
records, forms, data sets and/or databases (for the three-year period prior
to Closing) as required to perform data mapping and design of conversion
programs.
Tape dumps
In an effort to perform a successful conversion, Buyer may desire to
perform one or more trial runs of the conversion effort prior to performing
the actual conversion. This will require Tyson to provide trial run samples
of conversion tapes. Tyson agrees to provide these tapes, up to three valid
and readable tapes, for each application conversion, on a schedule to be
agreed upon by both parties.
Assistance in data mapping
Data mapping is the process of mapping each data field in the present Tyson
systems to data fields in the new Buyer systems. Tyson will participate in
data mapping to the extent that assistance is needed concerning various
areas of the current systems including but not limited to definitions and
formatting of data, chart of accounts,
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translation of codes, or specific processing routines in the Tyson systems.
Tyson will not be expected to participate in understanding fields in the
Buyer systems.
Temporary Interfaces
In the process of converting from one application system to another over a
period of time, there will be a need to design, program and implement
temporary interface programs that format and transfer data from one
application to one or more additional applications. Subject to Section 3 of
the Agreement, Tyson will assist with the technical and functional support
necessary to design, program and implement necessary conversion programs
during the conversion period. Tyson further agrees to continue the
operation of the interfaces through the final post conversion period.
Access to functional and technical specialists at Tyson
As other conversion issues arise, Tyson will provide reasonable and timely
assistance concerning functional and technical areas of the current Tyson
systems covered in this agreement.
POST CONVERSION:
- ----------------
After conversion of data from each Tyson application system to Buyer systems,
Tyson will maintain the converted system on its computer in a usable format for
a period of 60 calendar days. During that period of time, Tyson will continue to
provide functional and technical support necessary to resolve conversion issues
that arise after data conversion, and support the first month-end closing
process of Buyer for each application. At the end of the 60 day period, Tyson
may remove data associated with Buyer from computer systems and archived
databases.
Tyson will provide reasonable assistance and support during year-end closing
process of all application systems listed in Table 1.
OTHER ISSUES
- ------------
Points of Contact
Tyson will provide a single point of contact for Buyer to report and
coordinate resolution of all issues regarding services provided under this
Exhibit A. At least two alternate points of contact will be provided as
back up for the primary point of contact. The primary and alternate points
of contact together will be available from 8:00 am to 5:00 p.m. each
business day, and from 8:00 to 5:00 on each of the three days prior to any
application conversion, which may include weekends and holidays.
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Notice of planned maintenance and downtime
From time to time system maintenance must be performed on an "emergency"
basis which may cause downtime to the application systems which was not
scheduled (unplanned). For purposes of this Agreement, unplanned
maintenance or downtime will be defined as any maintenance performed by
Tyson in which reasonable notice was not provided to Buyer. Tyson will make
every effort to notify Buyer of such maintenance effort prior to the
maintenance being implemented, to minimize its adverse impact.
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<PAGE>
EXHIBIT B
KITCHEN AND TEST FACILITY
Tyson will permit Buyer to use Tyson's kitchen, laboratory and other related
facilities that are used in connection with product research and development,
located at Tyson's Springdale, Arkansas facilities. Tyson will (i) permit
Buyer's employees to have full and complete access to such facilities, including
access to incidental supplies used in such research and development activities
(for example, spices and seasonings), and (ii) provide such Buyer's employees
with reasonable support services relating to their research and development
activities (including, but not limited to, purchasing supplies and
administrative and clerical support).
<PAGE>
EXHIBIT C
TRAVEL PLANNING
Tyson shall provide for Buyer's employees such business travel planning services
as Tyson currently provides for its own employees, which currently is provided
through a third-party travel agency. Buyer shall be responsible for all costs of
its employees' travel.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GORGES/QUIK-TO-FIX FOODS, INC.
Gorges/Quik-to-Fix Foods, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Gorges/Quik-to-Fix Foods, Inc. The
original Certificate of Incorporation of Gorges/Quik-to-Fix Foods, Inc. was
filed with the Secretary of the State of Delaware on October 1, 1996.
2. Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law, this Amended and Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Certificate of
Incorporation of this corporation. This Amended and Restated Certificate of
Incorporation was duly adopted by the Board of Directors and the stockholders of
the Corporation in accordance with Sections 242 and 245 of the Delaware General
Corporation Law.
3. The text of the Amended and Restated Certificate of Incorporation
as heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is Gorges/Quik-to-Fix Foods, Inc. (the
"Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
that address is The Corporation Trust Company.
<PAGE>
ARTICLE III
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law. It shall have all powers that may now or
hereafter be lawful for a corporation to exercise under the Delaware General
Corporation Law.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. TOTAL NUMBER OF SHARES OF STOCK. The total number of
shares of stock of all classes that the Corporation shall have authority to
issue is two thousand (2,000) shares, all of which shall be shares of Common
Stock with a par value of $.01 each (the "Common Stock").
SECTION 4.2. COMMON STOCK. The shares of Common Stock of the
Corporation shall be of one and the same class. The holders of Common Stock
shall have one vote per share of Common Stock on all matters on which holders of
Common Stock are entitled to vote.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. POWERS OF THE BOARD OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of its
Board of Directors. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to:
(a) adopt, amend, alter, change or repeal the Bylaws of the
Corporation; provided, however, that no Bylaws hereafter adopted shall
invalidate any prior act of the directors that would have been valid if such new
Bylaws had not been adopted;
(b) determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the business and
affairs of the Corporation, including the power to designate and empower
committees of the Board of Directors, to elect, appoint and empower the officers
and other agents of the Corporation, and to determine the time and place of, and
the notice requirements for, Board meetings, as well as quorum and voting
requirements for, and the manner of taking, Board action; and
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(c) exercise all such powers and do all such acts as may be exercised
or done by the Corporation, subject to the provisions of the laws of the State
of Delaware, this Certificate of Incorporation, and the Bylaws of the
Corporation.
SECTION 5.2. NUMBER OF DIRECTORS. The number of directors
constituting the Board of Directors shall be as specified in the Bylaws or fixed
in the manner provided therein.
SECTION 5.3. VACANCIES. Any vacancies in the Board of Directors for
any reason and any newly created directorships resulting by reason of any
increase in the number of directors may be filled by the Board of Directors,
acting by a majority of the remaining directors then in office, although less
than a quorum, or by a sole remaining director, and any directors so appointed
shall hold office until their successors are elected and qualified or their
earlier death, resignation or removal.
SECTION 5.4. FACTORS TO BE CONSIDERED BY THE DIRECTORS. In
connection with the exercise of its or their judgment in determining what is in
the best interests of the Corporation and its stockholders, the Board of
Directors, any committee of the Board of Directors or any individual director
may, but shall not be required to, in addition to considering the long-term and
short-term interests of the stockholders, consider all of the following factors
and any other factors which it deems relevant: (i) the social and economic
effects of the matter to be considered on the Corporation and its subsidiaries,
its and their employees, customers and creditors and the communities in which
the Corporation and its subsidiaries operate or are located; and (ii) when
evaluating a business combination or a proposal by another Person or Persons to
make a business combination or a tender or exchange offer or any other proposal
relating to a potential change of control of the Corporation, (x) the business
and financial condition and earnings prospects of the acquiring Person or
Persons, including, but not limited to, debt service and other existing
financial obligations, financial obligations to be incurred in connection with
the acquisition, and other likely financial obligations of the acquiring Person
or Persons, and the possible effect of such conditions upon the Corporation and
its subsidiaries and the communities in which the Corporation and its
subsidiaries operate or are located, (y) the competence, experience and
integrity of the acquiring Person or Persons and its or their management, and
(z) the prospects for successful conclusion of the business combination, offer
or proposal. The provisions of this Section shall be deemed solely to grant
discretionary authority to the directors and shall not be deemed to provide to
any constituency the right to be considered. As used in this Section, the term
"Person" means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity; when
two or more Persons act as a partnership, limited partnership, syndicate, or
other group acting in concert for the purpose of acquiring, holding, voting or
disposing of securities of the Corporation, such partnership, limited
partnership, syndicate or group shall also be deemed a "Person" for purposes of
this Section.
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ARTICLE VI
INDEMNIFICATION
SECTION 6.1. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact:
(a) that he or she, or a person of whom he or she is the legal
representative, is or was a director or Board-elected officer of the
Corporation, or
(b) that he or she, being at the time a director or Board-elected
officer of the Corporation, is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another corporation or of
a partnership, limited liability company, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"), whether either in
case (a) or in case (b) the basis of such proceeding is alleged action or
inaction (x) in an official capacity as a director or officer of the
Corporation, or as a director, trustee, officer, employee or agent of such other
enterprise, or (y) in any other capacity related to the Corporation or such
other enterprise while so serving as a director, trustee, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law (or any
successor provision or provisions) as the same exists or may hereafter be
amended (but, in the case of any such amendment, with respect to alleged action
or inaction occurring prior to such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including
without limitation attorneys' fees and expenses, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) actually and reasonably
incurred by such person in connection therewith. The persons indemnified by
this Article VI are hereinafter referred to as "indemnitees." Such
indemnification as to such alleged action or inaction shall continue as to an
indemnitee who has after such alleged action or inaction ceased to be a director
or officer of the Corporation, or director, trustee, officer, employee or agent
of such other enterprise; and shall inure to the benefit of the indemnitee's
heirs, executors and administrators. Notwithstanding the foregoing, except as
may be provided in the Bylaws or by the Board of Directors, the Corporation
shall not indemnify any such indemnitee in connection with a proceeding (or
portion thereof) initiated by such indemnitee (but this prohibition shall not
apply to a counterclaim, cross-claim or third-party claim brought by the
indemnitee in any proceeding) unless such proceeding (or portion thereof) was
authorized by the Board of Directors. The right to indemnification conferred in
this Article VI: (i) shall be a contract right; (ii) shall not be affected
adversely as to any indemnitee by any amendment of this Certificate of
Incorporation with respect to any alleged action or inaction occurring prior to
such amendment; and (iii) shall, subject to any requirements imposed by law and
the
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Bylaws, include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition.
SECTION 6.2. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
INDEMNIFICATION. The rights to indemnification and to the advancement of
expenses conferred in this Article VI shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Bylaws may contain such other
provisions concerning indemnification, including provisions specifying
reasonable procedures relating to and conditions to the receipt by indemnitees
of indemnification, provided that such provisions are not inconsistent with the
provisions of this Article VI.
SECTION 6.3. AGENTS AND EMPLOYEES. The Corporation may, to the
extent authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any other officer,
employee or agent of the Corporation (or any person serving at the Corporation's
request as a director, trustee, officer, employee or agent of another
enterprise) or to any person who is or was a director, officer, employee or
agent of any of the Corporation's affiliates, predecessor or subsidiary
corporations or of a constituent corporation absorbed by the Corporation in a
consolidation or merger or who is or was serving at the request of such
affiliate, predecessor or subsidiary corporation or of such constituent
corporation as a director, trustee, officer, employee or agent of another
enterprise, in each case as determined by the Board of Directors to the fullest
extent of the provisions of this Article VI in cases of the indemnification and
advancement of expenses of directors and Board-elected officers of the
Corporation, or to any lesser extent (or greater extent, if permitted by law)
determined by the Board of Directors. If so indemnified, such persons shall be
included in the term "indemnitee" or "indemnitees" as used in this Article VI
and in the Bylaws of the Corporation.
ARTICLE VII
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended hereafter to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the
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Delaware General Corporation Law, as so amended. Any amendment, repeal or
modification of this Article VII shall not adversely affect any right or
protection of a director of the Corporation existing hereunder with respect to
any act or omission occurring prior to such amendment, repeal or modification.
For purposes of this Article VII, "fiduciary duty as a director" also shall
include any fiduciary duty arising out of serving at the Corporation's request
as a director of another corporation, partnership, limited liability company,
joint venture or other enterprise, and "personal liability to the Corporation or
its stockholders" also shall include any liability to such other corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, and any liability to the Corporation in its capacity as a security
holder, joint venturer, partner, member, beneficiary, creditor or investor of or
in any such other corporation, partnership, limited liability company, joint
venture, trust or other enterprise.
ARTICLE VIII
COMPROMISE
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time
to amend, alter, change or repeal any provisions contained in this Certificate
of Incorporation; and other provisions authorized by the Delaware General
Corporation Law at the time in force
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may be added or inserted, in the manner now or hereafter prescribed by law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other person whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article.
ARTICLE X
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single Article, Section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are severable
and shall remain enforceable to the full extent permitted by law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed by a duly authorized officer this _____ day of
November, 1996.
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ James A. O'Donnell
------------------------------------
Name: James A. O'Donnell
-------------------------------
Title: President
-------------------------------
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<PAGE>
EXHIBIT 3.2
================================================================================
GORGES/QUIK-TO-FIX FOODS, INC.
BYLAWS
================================================================================
ADOPTED ON OCTOBER 17, 1996
<PAGE>
CONTENTS
SECTION I
Capital Stock
<TABLE>
<S> <C>
Section 1.1 Certificates....................................................1
Section 1.2 Record Ownership................................................1
Section 1.3 Transfer of Record Ownership....................................1
Section 1.4 Lost Certificates...............................................1
Section 1.5 Transfer Agents, Registrars; Rules Respecting Certificates......2
Section 1.6 Record Date.....................................................2
SECTION II
Meetings of Stockholders
Section 2.1 Annual Meetings.................................................2
Section 2.2 Special Meetings................................................2
Section 2.3 Notice..........................................................3
Section 2.4 List of Stockholders............................................3
Section 2.5 Quorum..........................................................3
Section 2.6 Organization and Procedure......................................3
Section 2.7 Voting..........................................................4
SECTION III
Board of Directors
Section 3.1 Number and Qualifications.......................................4
Section 3.2 Resignation.....................................................4
Section 3.3 Regular Meetings................................................4
Section 3.4 Special Meetings................................................4
Section 3.5 Notice of Special Meetings......................................4
Section 3.6 Place of Meetings...............................................5
Section 3.7 Telephonic Meeting and Participation............................5
Section 3.8 Action by Directors Without a Meeting...........................5
Section 3.9 Quorum and Adjournment..........................................5
Section 3.10 Organization....................................................5
Section 3.11 Compensation of Directors.......................................5
Section 3.12 Presumption of Assent...........................................6
SECTION IV
Committees
Section 4.1 Committees......................................................6
SECTION V
Officers
Section 5.1 Designation.....................................................6
Section 5.2 Election Term...................................................6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 5.3 Resignation.....................................................7
Section 5.4 Removal.........................................................7
Section 5.5 Vacancies.......................................................7
Section 5.6 Chief Executive Officer.........................................7
Section 5.7 Chairman of the Board...........................................7
Section 5.8 President ..................................................7
Section 5.9 Vice President..................................................7
Section 5.10 Treasurer.......................................................7
Section 5.11 Secretary.......................................................7
Section 5.12 Assistant Secretaries and Assistant Treasurers..................8
Section 5.13 Compensation of Officers........................................8
Section 5.14 Execution of Instruments........................................8
Section 5.15 Mechanical Endorsements.........................................8
SECTION VI
Indemnification
Section 6.1 Indemnification Provisions in Certificate of Incorporation......8
Section 6.2 Indemnification of Employees....................................8
Section 6.3 Undertakings for Advances of Expenses...........................9
Section 6.4 Claims for Indemnification......................................9
Section 6.5 Insurance.......................................................9
Section 6.6 Severability...................................................10
SECTION VII
Miscellaneous
Section 7.1 Seal...........................................................10
Section 7.2 Waiver of Notice...............................................10
Section 7.3 Voting of Stock Owned by the Corporation.......................10
Section 7.4 Fiscal Year....................................................10
SECTION VIII
Amendment of Bylaws
Section 8.1 Amendment of Bylaws............................................11
</TABLE>
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GORGES/QUIK-TO-FIX FOODS, INC.
BYLAWS
SECTION I
CAPITAL STOCK
SECTION 1.1. CERTIFICATES. Every holder of stock in the Corporation shall
be entitled to have a certificate signed in the name of the Corporation by the
Chairman of the Board of Directors or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation certifying the number of shares in the Corporation
owned by such holder. If such certificate is countersigned (a) by a transfer
agent other than the Corporation or its employee, or, (b) by a registrar other
than the Corporation or its employee, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent, or registrar at the date of issue.
SECTION 1.2. RECORD OWNERSHIP. A record of the name and address of the
holder of each certificate, the number of shares represented thereby and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
required by the laws of the State of Delaware.
SECTION 1.3. TRANSFER OF RECORD OWNERSHIP. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or such person's attorney, lawfully constituted in writing, and
only upon the surrender of the certificate therefor and a written assignment of
the shares evidenced thereby, which certificate shall be canceled before the new
certificate is issued.
SECTION 1.4. LOST CERTIFICATES. Any person claiming a stock certificate
in lieu of one lost, stolen or destroyed shall give the Corporation an affidavit
as to such person's ownership of the certificate and of the facts which go to
prove its loss, theft or destruction. Such person shall also, if required by
policies adopted by the Board of Directors, give the Corporation a bond, in such
form as may be approved by the Corporation, sufficient to indemnify the
Corporation against any claim that may be made
<PAGE>
against it on account of the alleged loss of the certificate or the issuance of
a new certificate.
SECTION 1.5. TRANSFER AGENTS; REGISTRARS; RULES RESPECTING CERTIFICATES.
The Board of Directors may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more registrars. The Board of
Directors may make such further rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates of the
Corporation.
SECTION 1.6. RECORD DATE. The Board of Directors may fix in advance a
future date, not exceeding 60 days (nor, in the case of a stockholders' meeting,
less than ten days) preceding the date of any meeting of stockholders, payment
of dividend or other distribution, allotment of rights, or change, conversion or
exchange of capital stock or for the purpose of any other lawful action, as the
record date for determination of the stockholders entitled to notice of and to
vote at any such meeting and any adjournment thereof, or to receive any such
dividend or other distribution or allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, or to
participate in any such other lawful action, and in such case such stockholders
and only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to such notice of and to vote at such meeting and any
adjournment thereof, or to receive such dividend or other distribution or
allotment of rights, or to exercise such rights, or to participate in any such
other lawful action, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
SECTION II
MEETINGS OF STOCKHOLDER
SECTION 2.1. ANNUAL MEETINGS. The annual meeting of stockholders for the
election of directors and the transaction of such other proper business shall be
held on a date to be determined by resolution of the Board of Directors, unless
that day is a legal holiday, and in that event on the next succeeding business
day, and at the time and place, within or without the State of Delaware, as
determined by the Board of Directors.
SECTION 2.2. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called by the Board of Directors, pursuant to a
resolution adopted by a majority of the members of the Board of Directors then
in office, or by the holders of not less than twenty-five percent (25%) of the
votes entitled to be cast at the meeting. Special meetings may be held at any
place, within or without the State of Delaware, as determined by the Board of
Directors. The only business which may be conducted at such a meeting, other
than procedural matters and matters relating to the conduct of the meeting,
shall be the matter or matters described in the notice of the meeting.
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<PAGE>
SECTION 2.3. NOTICE. Written notice of each meeting of stockholders,
stating the date, time, place and, in the case of a special meeting, the purpose
thereof, shall be given as provided by law by the Secretary or an Assistant
Secretary not less than ten (10) days nor more than sixty (60) days before such
meeting (unless a different time is specified by law) to every stockholder
entitled by law to notice of such meeting.
SECTION 2.4. LIST OF STOCKHOLDERS. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified at the place where the meeting is to be held, for at least ten days
before the meeting and at the place of the meeting during the whole time of the
meeting.
SECTION 2.5. QUORUM. The holders of shares of stock entitled to cast a
majority of the votes on the matters at issue at a meeting of stockholders,
present in person or represented by proxy, shall constitute a quorum, except as
otherwise required by the Delaware General Corporation Law. In the event of a
lack of a quorum, the chairman of the meeting or a majority in interest of the
stockholders present in person or represented by proxy may adjourn the meeting
from time to time without notice other than announcement at the meeting, until a
quorum shall be obtained. At any such adjourned meeting at which there is a
quorum, any business may be transacted that might have been transacted at the
meeting originally called.
SECTION 2.6. ORGANIZATION AND PROCEDURE.
(a) The Chairman of the Board, or, in the absence of the Chairman of the
Board, the President, or, in the absence of the President, any Vice President
designated by the Board of Directors, shall preside at meetings of stockholders.
The Secretary of the Corporation shall act as secretary, but in the absence of
the Secretary, the presiding officer may appoint a secretary.
(b) At each meeting of stockholders, the chairman of the meeting shall fix
and announce the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at the meeting and shall
determine the order of business and all other matters of procedure. Except to
the extent inconsistent with any such rules and regulations as adopted by the
Board of Directors, the chairman of the meeting may establish rules, which need
not be in writing, to maintain order for the conduct of the meeting, including,
without limitation, restricting attendance to bona fide stockholders of record
and their proxies and other persons in attendance at the invitation of the
chairman and making rules governing speeches and debates. The chairman of the
meeting acts in his or her absolute discretion and his or her rulings are not
subject to appeal.
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SECTION 2.7. VOTING. Unless the Certificate of Incorporation or the
Delaware General Corporation Law provides otherwise, each stockholder shall be
entitled to one vote, in person or by written proxy, for each share held of
record by such stockholder who is entitled to vote generally in the election of
directors. All elections for the Board of Directors shall be decided by a
plurality of the votes cast and all other questions shall be decided by a
majority of the votes cast, except as otherwise required by the Delaware General
Corporation Law or as provided for in the Certificate of Incorporation or these
Bylaws. Abstentions shall not be considered to be votes cast.
SECTION III
BOARD OF DIRECTORS
SECTION 3.1. NUMBER AND QUALIFICATIONS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. The number of directors constituting the Board of Directors shall be
as authorized from time to time by resolution of shareholders or of the Board of
Directors.
SECTION 3.2. RESIGNATION. A director may resign at any time by giving
written notice to the Chairman of the Board, to the President, or to the
Secretary. Unless otherwise stated in such notice of resignation, the acceptance
thereof shall not be necessary to make it effective; and such resignation shall
take effect at the time specified therein or, in the absence of such
specification, it shall take effect upon the receipt thereof.
SECTION 3.3. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without further notice at such time and at such place as shall from
time to time be determined by the Board of Directors. A meeting of the Board of
Directors for the election of officers and the transaction of such other
business as may come before it may be held without notice immediately following
the annual meeting of stockholders.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, or the President, or at the request
in writing of one-third of the members of the Board of Directors then in office.
SECTION 3.5. NOTICE OF SPECIAL MEETINGS. Notice of the date, time and
place of each special meeting shall be mailed by regular mail to each director
at his or her designated address at least four days before the meeting; or sent
by overnight courier to each director at his designated address at least two
days before the meeting (with delivery scheduled to occur no later than the day
before the meeting); or given orally by telephone or other means, or by
telegraph or telecopy, or by any other means comparable to any of the foregoing,
to each director at his designated address at least 24 hours before the meeting;
provided, however, that if less than five days' notice is provided and one-third
of the members of the Board of Directors then in office object in writing prior
to or at the commencement of the meeting, such meeting shall be postponed until
five days after such
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<PAGE>
notice was given pursuant to this sentence (or such shorter period to which a
majority of those who objected in writing agree), provided that notice of such
postponed meeting shall be given in accordance with this Section 3.5. The notice
of the special meeting shall state the general purpose of the meeting, but other
routine business may be conducted at the special meeting without such matter
being stated in the notice.
SECTION 3.6. PLACE OF MEETINGS. The Board of Directors may hold their
meetings and have an office or offices inside or outside of the State of
Delaware.
SECTION 3.7. TELEPHONIC MEETING AND PARTICIPATION. Any or all of the
directors may participate in a meeting of the Board of Directors or any
committee thereof by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at the meeting.
SECTION 3.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
SECTION 3.9. QUORUM AND ADJOURNMENT. A majority of the directors then
holding office shall constitute a quorum. The vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Whether or not a quorum is present to conduct a meeting,
any meeting of the Board of Directors (including an adjourned meeting) may be
adjourned by a majority of the directors present, to reconvene at a specific
time and place. It shall not be necessary to give to the directors present at
the adjourned meeting notice of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned;
provided, however, notice of such reconvened meeting, stating the date, time,
and place of the reconvened meeting, shall be given to the directors not present
at the adjourned meeting in accordance with the requirements of Section 3.5
hereof.
SECTION 3.10. ORGANIZATION. The Chairman of the Board, or, in the absence
of the Chairman of the Board, the President, or in the absence of the President,
a member of the Board selected by the members present, shall preside at meetings
of the Board. The Secretary of the Corporation shall act as secretary, but in
the absence of the Secretary, the presiding officer may appoint a secretary.
SECTION 3.11. COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services as the Board of Directors may determine. Any
director may serve the Corporation in any other capacity and receive
compensation therefor.
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<PAGE>
SECTION 3.12. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors when a vote on any matter is
taken is deemed to have assented to the action taken unless he votes against or
abstains from the action taken, or unless at the beginning of the meeting or
promptly upon arrival the director objects to the holding of the meeting or
transacting specified business at the meeting. Any such dissenting votes,
abstentions or objections shall be entered in the minutes of the meeting.
SECTION IV
COMMITTEES
SECTION 4.1. COMMITTEES. The Board of Directors may, by resolutions
passed by a majority of the members of the Board of Directors, designate members
of the Board of Directors to constitute committees which shall in each case
consist of such number of directors, and shall have and may execute such powers
as may be determined and specified in the respective resolutions appointing
them. Any such committee may fix its rules of procedure, determine its manner of
acting and the time and place, whether within or without the State of Delaware,
of its meetings and specify what notice thereof, if any, shall be given, unless
the Board of Directors shall otherwise by resolution provide. Unless otherwise
provided by the Board of Directors or such committee, the quorum, voting and
other procedures shall be the same as those applicable to actions taken by the
Board of Directors. A majority of the members of the Board of Directors then in
office shall have the power to change the membership of any such committee at
any time, to fill vacancies therein and to discharge any such committee or to
remove any member thereof, either with or without cause, at any time.
SECTION V
OFFICERS
SECTION 5.1. DESIGNATION. The officers of the Corporation shall be a
Chairman of the Board, a President, a Treasurer, and a Secretary. The Board of
Directors may elect or appoint, or provide for the appointment of, such other
officers, including one or more Vice Presidents and one or more Assistant
Secretaries, in such gradation as the Board of Directors may determine, or
agents as may from time to time appear necessary or advisable in the conduct of
the business and affairs of the Corporation. Any number of offices may be held
by the same person.
SECTION 5.2. ELECTION TERM. At its first meeting after each annual
meeting of stockholders, the Board of Directors shall elect the officers or
provide for the appointment thereof. Subject to Section 5.3 and Section 5.4
hereof, the term of each officer elected by the Board of Directors shall be
until the first meeting of the Board of Directors following
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<PAGE>
the next annual meeting of stockholders and until such officer's successor is
chosen and qualified.
SECTION 5.3. RESIGNATION. Any officer may resign at any time by giving
written notice to the President or the Secretary. Unless otherwise stated in
such notice of resignation, the acceptance thereof shall not be necessary to
make it effective; and such resignation shall take effect at the time specified
therein or, in the absence of such specification, it shall take effect upon the
receipt thereof.
SECTION 5.4. REMOVAL. Any officer may be removed at any time with or
without cause by the affirmative vote of a majority of the members of the Board
of Directors then in office. Any officer appointed by another officer may be
removed with or without cause by such officer or the Chief Executive Officer.
SECTION 5.5. VACANCIES. A vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors or, in the case of
offices held by officers who may be appointed by other officers, by any officer
authorized to appoint such officer.
SECTION 5.6. CHIEF EXECUTIVE OFFICER. The President shall initially be
the Chief Executive Officer of the Corporation and thereafter, at such time as
the Board of Directors shall determine, the Chief Executive Officer shall be
such officer as the Board of Directors shall designate from time to time. The
Chief Executive Officer shall be responsible for carrying out the policies
adopted by the Board of Directors.
SECTION 5.7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall have
such powers and perform such duties as may be provided for herein and as may be
incident to the office and as may be assigned by the Board of Directors.
SECTION 5.8. PRESIDENT. The President shall have general supervision of
the business of the Corporation and shall perform such other duties as may be
assigned by the Board of Directors.
SECTION 5.9. VICE PRESIDENT. Each Vice President shall have such powers
and perform such duties as may be provided for herein and as may be assigned by
the Chief Executive Officer, or the Board of Directors.
SECTION 5.10. TREASURER. The Treasurer shall have charge of all funds of
the Corporation and the custody and operation of the accounting books and
records of the Corporation and shall perform all acts incident to the position
of Treasurer, subject to the control of the Board of Directors.
SECTION 5.11. SECRETARY. The Secretary shall keep the minutes, and give
notices, of all meetings of stockholders and directors and of such committees as
directed by the Board of Directors. The Secretary shall have charge of such
books and papers as the
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<PAGE>
Board of Directors may require. The Secretary or any Assistant Secretary is
authorized to certify copies of extracts from minutes and of documents in the
Secretary's charge and anyone may rely on such certified copies to the same
effect as if such copies were originals and may rely upon any statement of fact
concerning the Corporation certified by the Secretary or any Assistant
Secretary. The Secretary shall perform all acts incident to the office of
Secretary, subject to the control of the Board of Directors.
SECTION 5.12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall have such powers and perform such
duties as usually pertain to their respective offices and as may be assigned by
the Board of Directors or an officer designated by the Board of Directors.
SECTION 5.13. COMPENSATION OF OFFICERS. The officers of the Corporation
shall receive such compensation for their services as the Board of Directors may
determine. The Board of Directors may delegate its authority to determine
compensation to designated officers of the Corporation.
SECTION 5.14. EXECUTION OF INSTRUMENTS. Checks, notes, drafts, other
commercial instruments, assignments, guarantees of signatures and contracts
(except as otherwise provided herein or by law) shall be executed by the
President, any Vice President or such officers or employees or agents as the
Board of Directors or any of such designated officers may direct.
SECTION 5.15. MECHANICAL ENDORSEMENTS. The President, any Vice President
or the Secretary may authorize any endorsement on behalf of the Corporation to
be made by such mechanical means or stamps as any of such officers may deem
appropriate.
SECTION VI
INDEMNIFICATION
SECTION 6.1. INDEMNIFICATION PROVISIONS IN CERTIFICATE OF INCORPORATION.
The provisions of this Section VI are intended to supplement Article VI of the
Certificate of Incorporation pursuant to Sections 6.2 and 6.3 thereof. To the
extent that this Section VI contains any provisions inconsistent with said
Article VI, the provisions of the Certificate of Incorporation shall govern.
Terms defined in such Article VI shall have the same meaning in this Section VI.
SECTION 6.2. INDEMNIFICATION OF EMPLOYEES. The Corporation may indemnify
and advance expenses to its employees to the same extent as to its directors and
officers, as set forth in the Certificate of Incorporation and in this Section
VI of the Bylaws of the Corporation.
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<PAGE>
SECTION 6.3. UNDERTAKINGS FOR ADVANCES OF EXPENSES. If and to the extent
the Delaware General Corporation Law requires, an advancement by the Corporation
of expenses incurred by an indemnitee pursuant to clause (iii) of the last
sentence of Section 6.1 of the Certificate of Incorporation (hereinafter an
"advancement of expenses") shall be made only upon delivery to the Corporation
of an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under Article VI of the Certificate of
Incorporation or otherwise.
SECTION 6.4. CLAIMS FOR INDEMNIFICATION. If a claim for indemnification
under Section 6.1 of the Certificate of Incorporation is not paid in full by the
Corporation within 60 days after it has been received in writing by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses only upon a final adjudication that,
the indemnitee has not met the applicable standard of conduct set forth in
Section 145 of the Delaware General Corporation Law (or any successor provision
or provisions). Neither the failure of the Corporation (including the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in Section 145 of the Delaware General
Corporation Law (or any successor provision or provisions), nor an actual
determination by the Corporation (including the Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to have or retain such
advancement of expenses, under Article VI of the Certificate of Incorporation or
this Section VI or otherwise, shall be on the Corporation.
SECTION 6.5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, trustee, officer, employee or agent
of the Corporation or another enterprise against any expense, liability or loss,
whether or not the Corporation
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<PAGE>
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 6.6. SEVERABILITY. In the event that any of the provisions of
this Section VI (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
SECTION VII
MISCELLANEOUS
SECTION 7.1. SEAL. The Corporation shall have a suitable seal, containing
the name of the Corporation. The Secretary shall be in charge of the seal and
may authorize one or more duplicate seals to be kept and used by any other
officer or person.
SECTION 7.2. WAIVER OF NOTICE. Whenever any notice is required to be
given, a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether before or after the time stated therein shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 7.3. VOTING OF STOCK OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board, the President,
any Vice President or such officers or employees or agents as the Board of
Directors or any of such designated officers may direct. Any such officer may,
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
powers incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may from time to time confer like powers upon any other
person or persons.
SECTION 7.4. FISCAL YEAR. The Board of Directors is authorized to fix the
fiscal year of the Corporation and to change the same from time to time as it
deems appropriate.
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SECTION VIII
AMENDMENT OF BYLAWS
SECTION 8.1 AMENDMENT OF BYLAWS. The Board of Directors, by the
affirmative vote of a majority of the whole Board of Directors, shall have power
to amend, alter, change, adopt or repeal the Bylaws of the Corporation at any
regular or special meeting; provided, however, that the stockholders entitled to
vote may prescribe that any Bylaw adopted by the stockholders may not be
amended, altered, changed or repealed by the Board of Directors. The
stockholders entitled to vote also shall have the power to amend, alter, change,
adopt or repeal the Bylaws of the Corporation at any annual or special meeting
subject to the requirements of the Certificate of Incorporation.
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EXHIBIT 4
================================================================================
GORGES/QUIK-TO-FIX FOODS, INC.
AS ISSUER
$100,000,000
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
------------------------------
INDENTURE
DATED AS OF NOVEMBER 25, 1996
------------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
AS TRUSTEE
================================================================================
<PAGE>
INDENTURE, dated as of November 25, 1996, between GORGES/QUIK-TO FIX FOODS,
INC., a Delaware corporation (the "Company"), having its principal office at 209
Range Road, Garland, Texas 75041, and IBJ Schroder Bank & Trust Company, a New
York corporation, as trustee hereunder (the "Trustee"), having its Corporate
National Trust Office at One State Street, New York, New York 10004.
RECITALS
The Company has duly authorized the creation and issue of its 11 1/2%
Senior Subordinated Notes Due 2006 (the "Initial Notes") of substantially the
tenor and amount hereinafter set forth and to provide therefor and for, if and
when issued in exchange for the Initial Notes pursuant to the Indenture and the
Registration Rights Agreement, the Company's 11 1/2% Senior Subordinated Notes
Due 2006 (the "New Notes," and together with the Initial Notes, the "Notes"),
the Company has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes, when executed by the Company
and authenticated and delivered by the Trustee hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid instrument of the Company, in accordance with their respective terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for and in
consideration of the premises and the purchase of the Initial Notes by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions. For all purposes of this Indenture,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Acquired Indebtedness" means, with respect to any specified Person,
---------------------
(i) any Indebtedness or Disqualified Stock of any other Person existing at the
time such other Person is merged with or into or becomes a Subsidiary of such
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured
by a Lien encumbering any asset acquired by such specified Person, and in either
case for purposes of this Indenture shall be deemed to be incurred by such
1
<PAGE>
specified Person at the time such other Person is merged with or into or becomes
a Subsidiary of such specified Person or at the time such asset is acquired by
such specified Person, as the case may be.
"Act" when used with respect to any Holder, has the meaning set forth
---
in Section 1.05 hereof.
"Affiliate" of any specified Person means (i) any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or executive officer of (a) such specified Person or (b) any Person
described in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of any class, or any series of
- --------
any class, of equity securities of a Person, whether or not voting, shall be
deemed to be control; and provided, however, that NBIC or any Affiliate (as
-------- -------
determined without giving effect to this proviso) of NBIC shall not be deemed to
be an Affiliate of any Person solely by reason of its ownership of non-voting
equity securities of such Person.
"Agent Bank" means NationsBank of Texas, N.A. and its successors under
----------
the Credit Agreement.
"Agent Members" has the meaning set forth in Section 2.05(a) hereof.
-------------
"Asset Sale" means with respect to any Person, the sale, lease,
----------
conveyance or other disposition, that does not constitute a Restricted Payment
or an Investment, by such Person of any of its assets (including, without
limitation, by way of a Sale and Leaseback Transaction and including the
issuance, sale or transfer of any Equity Interests in any Subsidiary of the
Company) other than to the Company (including the receipt of proceeds of
insurance paid on account of the loss of or damage to any asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceeding, and including the receipt of proceeds of business interruption
insurance), in each case, in one or a series of related transactions; provided,
--------
that notwithstanding the foregoing, the term "Asset Sale" shall not include:
(i) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company, in accordance with Section
5.01 hereof;
(ii) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business consistent with past practice;
(iii) a transfer of assets by the Company to a Wholly Owned Subsidiary
of the Company or by a Wholly Owned Subsidiary of the Company to the Company or
to another Wholly Owned Subsidiary of the Company;
(iv) an issuance of Equity Interests by a Wholly Owned Subsidiary of
the Company to the Company or to another Wholly Owned Subsidiary of the Company,
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<PAGE>
provided that the consideration paid by the Company or such Wholly Owned
- --------
Subsidiary of the Company for such Equity Interests shall be deemed to be an
Investment; or
(v) the sale or other disposition of cash or Cash Equivalents.
"Asset Sale Offer" has the meaning set forth in Section 4.08(d)
----------------
hereof.
"Asset Sale Offer Amount" has the meaning set forth in Section 4.08(d)
-----------------------
hereof.
"Asset Sale Purchase Date" has the meaning set forth in Section
------------------------
4.08(e)(ii) hereof.
"Bankruptcy Law" means Title 11, United States Code, or any other
--------------
applicable federal, state or foreign bankruptcy, insolvency or similar law as
now or hereafter constituted.
"Board" means the Board of Directors of the Company or any committee
-----
thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a duly adopted resolution of the Board in
----------------
full force and effect at the time of determination and certified as such by the
Secretary or an Assistant Secretary of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday that is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law, executive
order or regulation to close.
"Capital Lease Obligation" means, at the time any determination
------------------------
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, capital stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalent" means:
---------------
(i) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities not more than twelve months from the date of
acquisition;
(ii) U.S. dollar denominated (or foreign currency fully hedged) time
deposits, certificates of deposit, Eurodollar time deposits or Eurodollar
certificates of deposit of (a) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million or (b) any bank
3
<PAGE>
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent thereof
(any such bank being an "Approved Lender"), in each case with maturities of not
more than twelve months from the date of acquisition; and
(iii) commercial paper issued by any Approved Lender (or by the
parent company thereof) or any variable rate notes issued by, or guaranteed by,
any domestic corporation rated A-2 (or the equivalent thereof) or better by S&P
or P-2 (or the equivalent thereof) or better by Moody's and maturing within
twelve months of the date of acquisition.
"Certificated Notes" means Notes in certificated form.
------------------
"CGW" means CGW Southeast Partners, III, L.P., a Delaware limited
---
partnership.
"Change of Control" means such time as either:
-----------------
(i) prior to the initial Public Equity Offering by the Company or GHC
of its common stock, the Initial Stockholders cease to be, directly or
indirectly, the beneficial owners in the aggregate, of more than 50% of the
voting power of the Voting Stock of the Company and of GHC, in each case on a
fully-diluted basis, after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities of the Company or GHC, as the
case may be, convertible into or exercisable for Voting Stock of the Company or
GHC, as the case may be (whether or not such securities are then currently
convertible or exercisable); or
(ii) after the initial Public Equity Offering by the Company or GHC of
its common stock, (a) any "person" or "group" (within the meaning of Section
13(d) or 14(d) of the Exchange Act) (other than one or more of the Initial
Stockholders) has become, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), by way of merger, consolidation or
otherwise, of 35% or more of the voting power of the Voting Stock of the Company
or GHC on a fully-diluted basis, after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Company or GHC, as the case may be, convertible into or exercisable for Voting
Stock of the Company or GHC, as the case may be (whether or not such securities
are then currently convertible or exercisable) and (b) such person or group is
or becomes, directly or indirectly, the beneficial owner of a greater percentage
of the voting power of the Voting Stock of the Company or of GHC, as the case
may be, calculated on such fully-diluted basis, than the percentage then
beneficially owned by the Initial Stockholders; or
(iii) the Company merges with or into another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges with or into
the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (x) the
outstanding Voting Stock of the Company is converted into or exchanged for (1)
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation and/or (2) cash, securities and other property in an amount which
4
<PAGE>
could be paid by the Company as a Restricted Payment under the Indenture and (y)
immediately after such transaction no "person" or "group" (within the meaning of
Section 13(d) and 14(d) of the Exchange Act) (other than one or more of the
Initial Stockholders) is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of (1) 35% or more of the voting power of the
Voting Stock of the surviving or transferee corporation on a fully diluted
basis, after giving effect to the conversion and exercise of all outstanding
warrants, options and other securities of such surviving or transferee
corporation, convertible into or exercisable for Voting Stock or such surviving
or transferee corporation (whether or not such securities are then currently
convertible or exercisable) and (2) a greater percentage of the voting power of
the Voting Stock of such surviving or transferee corporation calculated on such
fully diluted basis, than the percentage then beneficially owned by the Initial
Stockholders; or
(iv) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted either the board of directors of
the Company or of GHC, as the case may be, together with any new members of such
board of directors (a) whose election by such board of directors or whose
nomination for election by the stockholders of the Company or the stockholders
of GHC, as the case may be, was approved by a vote of a majority of the members
of such board of directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved or (b) elected by the Initial Stockholders, cease for any
reason to constitute a majority of the directors of the Company or of GHC, as
the case may be, then in office.
"Change of Control Offer" has the meaning set forth in Section 4.07(a)
-----------------------
hereof.
"Change of Control Payment Date" has the meaning set forth in Section
------------------------------
4.07(a) hereof.
"Change of Control Purchase Price" has the meaning specified in
--------------------------------
Section 4.07(a) hereof.
"clearing agency" has the meaning set forth in Section 3(a)(23) of the
---------------
Exchange Act.
"Commission" means the United States Securities and Exchange
----------
Commission, as from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the party named as such in the preamble to this
-------
Indenture until a successor replaces it pursuant to the applicable provisions
hereof and, thereafter, means such successor.
5
<PAGE>
"Company Order" means a written order signed in the name of the
-------------
Company by (i) the Chairman of the Board, Chief Executive Officer, President,
Chief Operating Officer or any Vice President of the Company and (ii) the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee.
"Consolidated EBITDA" means, with respect to any Person for any
-------------------
period, the sum of, without duplication, (i) the Consolidated Net Income of such
Person and its Subsidiaries for such period, plus (ii) the Fixed Charges for
such period, plus (iii) amortization of deferred financing charges for such
period, plus (iv) provision for taxes based on income or profits for such period
(to the extent such income or profits were included in computing Consolidated
Net Income for such period), plus (v) consolidated depreciation, amortization
and other noncash charges of such Person and its Subsidiaries required to be
reflected as expenses on the books and records of such Person, minus (vi) cash
payments with respect to any nonrecurring, noncash charges previously added back
pursuant to clause (v), and excluding (vii) the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
noncash charges of, a Subsidiary of a Person shall be added to Consolidated Net
Income to compute Consolidated EBITDA only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to such Person
by such Subsidiary without any prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
-----------------------
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
- --------
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, and (iv) the cumulative effect
of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
----------------------
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
6
<PAGE>
Person upon issuance of such preferred stock, less (x) all write-ups subsequent
to the date of this Indenture in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person (other than purchase
accounting adjustments made, in connection with any acquisition of any entity
that becomes a consolidated Subsidiary of such Person after the date of this
Indenture, to the book value of the assets of such entity), (y) all investments
as of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined on a consolidated basis in accordance
with GAAP.
"Consulting Agreement" means that certain Consulting Agreement dated
--------------------
November 25, 1996, by and between the Company and the General Partner.
"Corporate National Trust Office" means the principal office of the
-------------------------------
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office is, at the date of execution of this
Indenture, One State Street, New York, New York 10004, Attention: Corporate
Trust Administration.
"Covenant Defeasance" has the meaning set forth in Section 8.03
-------------------
hereof.
"Credit Agreement" means that certain Credit Agreement, dated as of
----------------
the date of this Indenture, by and among the Company and NationsBank of Texas,
N.A., as Agent Bank, and the lenders parties thereto, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, increased, renewed,
refunded, replaced, restated or refinanced in whole or in part from time to
time.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
custodian or similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the
-------
giving of notice or both would be an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.11 hereof.
------------------
"Depositary" means The Depository Trust Company, its nominees, and
----------
their respective successors.
"Designated Senior Indebtedness" means, in respect of the Company, (i)
------------------------------
so long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii)
any other Senior Indebtedness permitted under this Indenture the principal
amount of which is $15.0 million or more and that has been designated by the
Company as "Designated Senior Indebtedness" and, in respect of any Guarantor,
any guarantee by such Guarantor of Designated Senior Indebtedness of the
Company.
"Disqualified Stock" means (i) with respect to any Person, Capital
------------------
Stock of such Person that, by its terms (or by the terms of any security into
7
<PAGE>
which it is convertible or for which it is exchangeable), or upon the happening
of any event matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date which is one year after the date on
which the Notes mature and (ii) with respect to any Subsidiary of such Person
(including with respect to any Subsidiary of the Company), any Capital Stock
other than any common stock with no preference, privileges, or redemption or
repayment provisions.
"Eligible Assets" means another business or any substantial part of
---------------
another business or other long-term assets, in each case, in, or used or useful
in, the same or a similar line of business as the Company or any of its
Subsidiaries was engaged in on the date of the Indenture or any reasonable
extensions or expansions thereof (including the Capital Stock of another Person
engaged in such business, provided such other Person is, or immediately after
--------
giving effect to any such acquisition shall become, a Wholly Owned Subsidiary of
the Company).
"Equity Interests" means Capital Stock and all warrants, options or
----------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock), whether outstanding prior
to, on or after the date of this Indenture.
"Event of Default" has the meaning set forth in Section 6.01 hereof.
----------------
"Excess Proceeds" has the meaning set forth in Section 4.08(c) hereof.
---------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"Exempt Affiliate Transactions" means (i) transactions between or
-----------------------------
among the Company and/or its Wholly Owned Subsidiaries, (ii) advances to
officers of the Company or any Subsidiary of the Company in the ordinary course
of business to provide for the payment of reasonable expenses incurred by such
persons in the performance of their responsibilities to the Company or such
Subsidiary or in connection with any relocation, (iii) fees and compensation
paid to and indemnity provided on behalf of directors, officers or employees of
the Company or any Subsidiary of the Company in the ordinary course of business,
(iv) any employment agreement that is in effect on the date of this Indenture in
the ordinary course of business and any such agreement entered into by the
Company or a Subsidiary of the Company after the date of this Indenture in the
ordinary course of business of the Company or such Subsidiary, (v) any
Restricted Payment that is not prohibited by Section 4.10 hereof; (vi) payments
to the General Partner of (a) retainer fees pursuant to the Consulting Agreement
not to exceed $30,000 per month and (b) annual performance bonuses as provided
for under the Consulting Agreement not to exceed $500,000 in any fiscal year,
(vii) the delegation by the General Partner of its rights and obligations under
the Consulting Agreement to the Management Company and (viii) payment to the
Management Company of an investment banking fee in an amount not to exceed $2.65
million.
"Exempt Asset Sale" means an Asset Sale on or after the date of this
-----------------
Indenture the Net Proceeds of which plus the Net Proceeds of all other Asset
Sales concurrently or previously made in the same fiscal year do not exceed $1.0
million.
8
<PAGE>
"Existing Indebtedness" means the Indebtedness of the Company and its
---------------------
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of this Indenture, until such amounts are repaid.
"Final Memorandum" means the final Offering Memorandum, dated November
----------------
20, 1996, used in connection with the Initial Placement.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
---------------------------
period, the ratio of the Consolidated EBITDA of such Person and its Subsidiaries
for such period to the Fixed Charges of such Person and its Subsidiaries for
such period. In the event that the Company or any of its Subsidiaries incurs,
assumes, guarantees or repays or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the four-quarter reference period for which the Fixed Charge
Coverage Ratio is being calculated but on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee, repayment or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
EBITDA for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated EBITDA attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date and (iv) in the event that any one
or more of the fiscal quarters included in the four-quarter reference period for
which the Fixed Charge Coverage Ratio of the Company is being calculated is a
fiscal quarter ending on or before September 28, 1996, Consolidated EBITDA for
each such quarter shall be deemed to be $9.25 million, subject to adjustment
with respect to events occurring after September 28, 1996 as required above.
"Fixed Charges" means, with respect to any Person for any period, the
-------------
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Subsidiaries for such period (net of any interest income)
including, without limitation, amortization of original issue discount, noncash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations but excluding amortization of deferred
financing charges for such period and (ii) the consolidated interest expense of
such Person and its Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is guaranteed
9
<PAGE>
by such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such guarantee or Lien is
called upon) and (iv) the product of (a) all cash dividend payments (and noncash
dividend payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person payable to a party other than the Company or a
Wholly Owned Subsidiary, multiplied by (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate for taxes based on the income or profits of
such Person, expressed as a decimal, on a consolidated basis and in accordance
with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession of the United States, that are applicable to the circumstances as of
the date of determination; provided that, except as specifically provided in
-------- ----
this Indenture, all calculations made for purposes of determining compliance
with the covenants set forth in Article IV and Section 5.01 of this Indenture
shall use GAAP as in effect on the date of this Indenture for financial
statements for fiscal years ending on or after September 28, 1996.
"General Partner" means CGW Southeast III L.L.C., a Delaware limited
---------------
liability company.
"GHC" means Gorges Holding Corporation, a Delaware corporation.
---
"Global Notes" means the Initial Global Note and the New Global Note.
------------
"guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary of the Company formed or acquired
---------
(and each other Person that becomes a Subsidiary of the Company) after the date
of this Indenture that guarantees the Company's obligations under the Credit
Agreement or any other Senior Indebtedness; provided that any Guarantor that is
--------
released from its guarantee of the Company's obligations under the Credit
Agreement and any other Senior Indebtedness shall also be released from its Note
Guarantee
"Hedging Obligations" means, with respect to any Person, the
-------------------
obligations of such Person entered into in the ordinary course of business under
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and other similar financial agreements or arrangements
designed to protect such Person against, or manage the exposure of such Person
to, fluctuations in interest rates.
10
<PAGE>
"Holder" means (i) in the case of any Certificated Note, the Person in
------
whose name such Certificated Note is registered on the Note Register and (ii) in
the case of any Global Note, the Depositary.
"incur" shall have the meaning specified in Section 4.09(a) hereof.
-----
"Indebtedness" means, with respect to any Person, any indebtedness of
------------
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations, or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable
incurred in the ordinary course of business, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the guarantee by such Person
of any indebtedness of any other Person.
"Indenture" means this instrument as originally executed or as it may
---------
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
and shall include, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument, and any such supplemental indenture,
respectively.
"independent financial advisor" means a nationally recognized
-----------------------------
investment banking firm that is, in the reasonable judgment of the Board,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company.
"Initial Certificated Notes" has the meaning set forth in Section
--------------------------
2.01(c) hereof.
"Initial Global Note" has the meaning set forth in Section 2.01(c)
-------------------
hereof.
"Initial Notes" has the meaning set forth in the Recitals hereto and,
-------------
more particularly, means any of the Notes authenticated and delivered under this
Indenture other than pursuant to the Registered Exchange Offer or in exchange
for New Notes.
"Initial Placement" means the initial sales of the Notes by the
-----------------
Initial Purchaser.
"Initial Purchaser" means NationsBanc Capital Markets Inc.
-----------------
"Initial Stockholders" means CGW, Management Stockholders, NBIC,
--------------------
Mellon Bank, N.A., as trustee of First Plaza Group Trust, a General Motors
pension plan ("FPGT") and any Affiliates of NBIC or FPGT.
11
<PAGE>
"Institutional Accredited Investors" means institutional "accredited
----------------------------------
investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act, other than Qualified Institutional Buyers.
"Interest Payment Date" means each semiannual interest payment date on
---------------------
June 1 and December 1 of each year, commencing June 1, 1997, in respect of the
Notes.
"Investments" means, with respect to any Person, all investments by
-----------
such Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding advances to officers of the type
specified in clause (ii) of the definition of Exempt Affiliate Transactions),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition by the Company for consideration consisting of
- --------
common equity securities of the Company shall not be deemed to be an Investment.
"Legal Defeasance" has the meaning set forth in Section 8.02 hereof.
----------------
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" shall have the meaning specified in Section 4 of
------------------
the Registration Rights Agreement.
"Management Company" means CGW Southeast Management III L.L.C., a
------------------
Georgia limited liability company.
"Management Stockholder" means any officer, director or employee of
----------------------
the Company or any Subsidiary of the Company who is the beneficial owner of any
Capital Stock of the Company or GHC; provided, however, that in no event shall
-------- -------
CGW, NBIC or any of their respective Affiliates (as determined without giving
effect to the second proviso of the definition of Affiliate set forth in this
Section 1.01) be deemed to be a Management Stockholder.
"Maturity" means, when used with respect to a Note, the date on which
--------
the principal of such Note becomes due and payable as provided therein or in
this Indenture, whether on the date specified in such Note as the fixed date on
which the principal of such Note is due and payable, on the Change of Control
Payment Date or Asset Sale Purchase Date, or by declaration of acceleration,
call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc., or if Moody's
-------
Investors Service, Inc. shall cease rating the specified debt securities and
such ratings business with respect thereto shall have been transferred to a
12
<PAGE>
successor Person, such successor Person; provided that if Moody's Investors
--------
Service, Inc. ceases rating the specified debt securities and its ratings
business with respect thereto shall not have been transferred to any successor
Person or such successor Person is S&P, then "Moody's" shall mean any other
nationally recognized rating agency (other than S&P) that rates the specified
debt securities and that shall have been designated by the Company in an
Officer's Certificate.
"NBIC" means NationsBanc Investment Corp., a Delaware corporation.
----
"Net Income" means, with respect to any Person for any period, the net
----------
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to Sale and Leaseback Transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
------------
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
noncash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), taxes paid or payable as a
result thereof, and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Certificated Notes" has the meaning set forth in Section 2.01(d)
----------------------
hereof.
"New Global Note" has the meaning set forth in Section 2.01(d) hereof.
---------------
"New Notes" has the meaning set forth in the Recitals hereto and more
---------
particularly means any of the Notes authenticated and delivered under this
Indenture pursuant to the Registered Exchange Offer.
"Non-U.S. Person" means any Person who is not a "U.S. person," as
---------------
defined in Rule 902(o) under the Securities Act.
"Note Guarantee" means the guarantee of the Notes by each Guarantor
--------------
under Article XI hereof.
"Note Register" has the meaning set forth in Section 2.03 hereof.
-------------
"Notes" has the meaning set forth in the Recitals hereto and more
-----
particularly means any of the Notes authenticated and delivered under this
Indenture.
13
<PAGE>
"Obligations" means any principal, interest, penalties, premiums,
-----------
fees, indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by (i) the Chairman
---------------------
of the Board, the Chief Executive Officer, President, Chief Operating Officer or
any Vice President of the Company and (ii) the Chief Financial Officer, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee, which certificate shall comply with
the provisions of Section 12.04 hereof; provided that any Officers' Certificate
-------- ----
delivered pursuant to the first paragraph of Section 4.20 hereof shall be signed
by the Chief Executive Officer or the Chief Financial Officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel (who
------------------
may be counsel to the Company or the Trustee) who is acceptable to the Trustee,
which opinion shall comply with the provisions of Section 12.04 hereof; provided
--------
that any Opinion of Counsel delivered pursuant to Section 8.04 hereof shall not
- ----
be rendered by an employee of the Company or any of its Subsidiaries.
"pari passu," as applied to the ranking of any Indebtedness of a
---- -----
Person in relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not subordinate in right of payment to any
Indebtedness or (ii) is subordinate in right of payment to the same Indebtedness
as is the other, and is so subordinate to the same extent, and is not
subordinate in right of payment to each other or to any Indebtedness as to which
the other is not so subordinate.
"Paying Agent" means any Person authorized by the Company to make
------------
payments of principal, premium, if any, or interest with respect to the Notes on
behalf of the Company.
"Payment Blockage Notice" has the meaning set forth in Section
-----------------------
10.03(a) (ii) hereof.
"Permitted Investments" means:
---------------------
(i) any Investments in the Company;
(ii) any Investments in Cash Equivalents;
(iii) Investments made as a result of the receipt of noncash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.08 hereof.
(iv) Investments outstanding as of the date of this Indenture; and
(v) Investments in Wholly Owned Subsidiaries of the Company and any
entity that (a) is engaged in the same or a similar line of business as the
Company or any of its Subsidiaries was engaged in on the date of this Indenture
or any reasonable extensions or expansions thereof, and (b) as a result of such
Investment, becomes a Wholly Owned Subsidiary of the Company.
14
<PAGE>
"Permitted Refinancing Indebtedness" means any Indebtedness of the
----------------------------------
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that:
--------
(i) the principal amount of such Permitted Refinancing Indebtedness
does not exceed the principal amount of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or by the
Subsidiary of the Company that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited or general
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Private Placement Legend" means the legend in the form set forth in
------------------------
Section 2.01(e)(i) hereof.
"pro forma" means, with respect to any calculation made or required to
--- -----
be made pursuant to the terms hereof, a calculation in accordance with Article
11 of Regulation S-X promulgated under the Securities Act (to the extent
applicable), as interpreted in good faith by the Board after consultation with
the independent certified public accountants of the Company, or otherwise a
calculation made in good faith by the Board after consultation with the
independent certified public accountants of the Company, as the case may be.
"Property" means, with respect to any Person, any interest of such
--------
Person in any kind of property or asset, whether real, personal or mixed,
tangible or intangible, excluding Capital Stock in any other Person.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of the common stock of the Company or of the common stock of GHC pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act (whether alone or in conjunction with a secondary public
offering).
15
<PAGE>
"Purchase Agreement" means the purchase agreement relating to the
------------------
Notes, dated November 20, 1996, between the Company and the Initial Purchaser.
"Purchase Money Obligations" of any Person means any obligations of
--------------------------
such Person to any seller or any other Person incurred or assumed to finance the
construction and/or acquisition of real or personal property to be used in the
business of such Person or any of its Subsidiaries in an amount that is not more
than 100% of the cost of such property, and incurred within 180 days after the
date of such construction or acquisition (excluding accounts payable to trade
creditors incurred in the ordinary course of business).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
---
"Record Date" means, for the interest payable on any Interest Payment
-----------
Date, the date specified in Section 2.11 hereof.
"Redemption Date" means, when used with respect to any Note or part
---------------
thereof to be redeemed hereunder, the date fixed for redemption of such Notes
pursuant to the terms of the Notes and this Indenture.
"Redemption Price" means, when used with respect to any Note or part
----------------
thereof to be redeemed hereunder, the price fixed for redemption of such Note
pursuant to the terms of the Notes and this Indenture, plus accrued and unpaid
interest thereon, if any, and Liquidated Damages, if any, to the Redemption
Date.
"Registered Exchange Offer" has the meaning set forth in the
-------------------------
Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03 hereof.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement relating to the Notes, dated November 25, 1996, between the Company
and the Initial Purchaser, in substantially the form of Exhibit J hereto.
"Regulation D" means Regulation D under the Securities Act (including
------------
any successor regulation thereto), as it may be amended from time to time.
"Regulation S" means Regulation S under the Securities Act (including
------------
any successor regulation thereto), as it may be amended from time to time.
"Regulation S-X" means Regulation S-X under the Securities Act
--------------
(including any successor regulation thereto), as it may be amended from time to
time.
"Representative" means the trustee, agent or representative (if any)
--------------
for an issue of Senior Indebtedness or, if no such trustee, agent or
representative exists, the holder thereof.
16
<PAGE>
"Resolution" means a copy of a resolution certified by the secretary
----------
or an assistant secretary of the Company to have been duly adopted by the Board
and to be in full force and effect on the date of such certification, delivered
to the Trustee.
"Restricted Payment" has the meaning set forth in Section 4.10 hereof.
------------------
"Rule 144" means Rule 144 under the Securities Act (including any
--------
successor regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
---------
successor regulation thereto), as it may be amended from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill
---
Corporation, or, if Standard & Poor's Ratings Group shall cease rating the
specified debt securities and such ratings business with respect thereto shall
have been transferred to a successor Person, such successor Person; provided
--------
that if Standard & Poor's Ratings Group ceases rating the specified debt
- ----
securities and its ratings business with respect thereto shall not have been
transferred to any successor Person or such successor Person is Moody's, then
"S&P" shall mean any other nationally recognized rating agency (other than
Moody's) that rates the specified debt securities and that shall have been
designated by the Company in an Officers' Certificate.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of any property, whether owned by
the Company or any Subsidiary as of the date of the Indenture or later acquired,
which has been or is to be sold or transferred by the Company or such Subsidiary
to such Person or to any other Person from whom funds have been or are to be
advanced by such person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Senior Bank Debt" means the Obligations outstanding under the Credit
----------------
Agreement.
"Senior Indebtedness" means, with respect to the Company, (i) the
-------------------
Senior Bank Debt and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of this Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to any Indebtedness for money borrowed. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include
(a) any liability for federal, state, local or other taxes owed or owing by the
Company, (b) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (c) any trade payables or (d) any Indebtedness to the extent that it
is incurred in violation of this Indenture (other than Senior Bank Debt of up to
$80 million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of the commitments with
respect to such Indebtedness pursuant to Section 4.08 and less any amount
17
<PAGE>
incurred pursuant to clause (vii) of Section 4.09(b) below). "Senior
Indebtedness" means, with respect to any Guarantor, any guarantee by such
Guarantor of Senior Indebtedness of the Company.
"Senior Revolving Debt" means revolving credit borrowings and letters
---------------------
of credit under the Credit Agreement and/or any successor facility or
facilities.
"Shelf Registration Statement" has the meaning set forth in the
----------------------------
Registration Rights Agreement.
"Special Record Date" means a date fixed by the Trustee pursuant to
-------------------
Section 2.11 for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security, the date
---------------
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred), and, when used with respect
to any installment of interest on such security, the fixed date on which such
installment of interest is due and payable.
"Subordinated Reorganization Securities" has the meaning specified in
--------------------------------------
Section 10.02(a) hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
----------
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Temporary Notes" has the meaning set forth in Section 2.09 hereof.
---------------
"trade payables" means, with respect to any Person, any accounts
--------------
payable or any Indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person arising in the ordinary course of business
of such Person in connection with the acquisition of goods or services.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
-------------------
(S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture except as
required by Section 9.04 hereof or if the Indenture is qualified under the Trust
Indenture Act, then as of the date of such qualification; provided that in the
--------
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
18
<PAGE>
"Trust Officer" means any officer or assistant officer of the Trustee
-------------
(or a successor trustee) assigned by the Trustee (or a successor trustee) to
administer this Indenture.
"Trustee" means the party named as such in the preamble to this
-------
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and, thereafter, means such successor Trustee.
"U.S. Government Obligations" means:
---------------------------
(i) securities that are (a) direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof; and
(ii) depositary receipts issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government
Obligation which is specified in clause (i) above and held by such bank for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal or interest on any U.S. Government Obligation
which is so specified and held, provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
or interest of the U.S. Government Obligation evidenced by such depositary
receipt.
"Voting Stock" of a corporation means all classes of Capital Stock of
------------
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
-----------------------
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. (a)
-------------------------------------------------
This Indenture is expressly made subject to the Trust Indenture Act as if this
Indenture were, on the Date hereof, subject to the Trust Indenture Act under the
provisions of such statute and such provisions are incorporated by reference in
this Indenture.
19
<PAGE>
(b) Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms incorporated by
reference in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors, or other obligors on the Notes, if any.
All other Trust Indenture Act terms used or incorporated by reference
in this Indenture that are defined by the Trust Indenture Act, defined by Trust
Indenture Act reference to another statute or defined by Commission rule have
the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(a) the words "herein," "hereof" and "hereunder," and other words of
similar import, refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(b) "or" is not exclusive;
(c) "including" means "including without limitation";
(d) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(e) when used with respect to the Notes, the term "principal amount"
shall mean the principal amount thereof at the Stated Maturity of such
principal amount.
SECTION 1.04. Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company or any
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
20
<PAGE>
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Company, or such Guarantor, as the case may be, stating that the
information with respect to such factual matters is in the possession of the
Company, or such Guarantor, as the case may be, unless such officer or counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.05. Acts of Holders. (a) Any request, demand,
---------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 7.01)
conclusive in favor of the Trustee, the Company, and the Guarantors, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by an acknowledgment of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of the signer's authority. The fact and date of the execution
of any such instrument or writing, or the authority of the person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register, and
the ownership of beneficial interests in the Global Note shall be proved by the
records of the Depositary.
(d) The Trustee may require such additional proof of any matter
referred to in this Section as it may reasonably request under the
circumstances.
SECTION 1.06. Satisfaction and Discharge. This Indenture shall cease
--------------------------
to be of further effect (except as to the rights of Holders under Sections 2.06,
2.07, 2.09, 4.02, 4.03 and 4.04 hereof) and the Trustee, on receipt of a Company
21
<PAGE>
Order requesting such action and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when (a) either (i) all outstanding Notes have been delivered to the Trustee for
cancellation or (ii) such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge the entire indebtedness on
such Notes, for principal, premium, if any, and interest and Liquidated Damages,
if any, to the date of such deposit together with irrevocable instructions from
the Company in form and substance satisfactory to the Trustee directing the
Trustee to apply such funds to the payment thereof; (b) the Company has paid or
caused to be paid all other sums payable hereunder by the Company; and (c) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all factual and legal conditions precedent,
respectively, herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with. Notwithstanding the satisfaction and
discharge of this Indenture pursuant to this Section 1.06, the obligations of
the Company and any Guarantors to the Trustee under Section 7.07 hereof, and, if
money shall have been deposited with the Trustee in trust for the Holders
pursuant to this Section 1.06, the obligations of the Trustee under this Section
1.06 and Section 4.03 hereof shall survive.
All money deposited with the Trustee pursuant to this Section 1.06
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent, to the Persons entitled thereto, of the principal, premium, if
any, and interest and Liquidated Damages, if any, for the payment of which such
money has been deposited with the Trustee. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Section 1.06 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's and any Guarantors'
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to this Section 1.06 until such time
as the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with this Section 1.06; provided, that if
--------
the Company or any Guarantors have made any payment on any Notes because of the
reinstatement of its obligations, the Company or such Guarantors, as the case
may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the cash or U.S. Government Obligations held by the
Trustee or Paying Agent.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charges imposed on or assessed against the U.S. Government Obligations
deposited pursuant to this Section 1.06 on the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of outstanding Notes.
22
<PAGE>
ARTICLE II
THE NOTES
SECTION 2.01. Form and Dating. (a) The Initial Notes and the
---------------
certificate of authentication of the Trustee thereon shall be substantially in
the form of Exhibit A or Exhibit B hereto, as applicable, which are hereby
incorporated in and expressly made a part of this Indenture. The New Notes and
the certificate of authentication of the Trustee thereon shall be substantially
in the form of Exhibit C or Exhibit D hereto, as applicable, which are hereby
incorporated in and expressly made a part of this Indenture.
(b) The Notes may have such letters, numbers or other marks of
identification and such legends and endorsements, stamped, printed, lithographed
or engraved thereon, (i) as the Company may deem appropriate and as are not
inconsistent with the provisions of this Indenture, (ii) as may be required to
comply with this Indenture, any law or any rule of any securities exchange on
which the Notes may be listed and (iii) as may be necessary to conform to
customary usage. Each Note shall be dated the date of its authentication by the
Trustee. The Notes shall be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof; provided
--------
that Initial Certificated Notes originally purchased by or transferred to
Institutional Accredited Investors shall be subject to a minimum denomination of
$250,000. Definitive Notes shall be typed, printed, lithographed or engraved or
produced by any combination of such methods or produced in any other manner
permitted by the rules of any securities exchange on which such Notes may be
listed, all as determined by the officers of the Company executing such Notes,
as evidenced by their execution of such Notes.
(c) Initial Notes offered and sold to QIBs in reliance on Rule 144A
as provided in the Purchase Agreement shall be issued initially in the form of a
single, permanent global note in definitive, fully registered form, without
coupons, substantially in the form set forth in Exhibit A hereto and shall bear
the legends set forth in Section 2.01(e)(i), Section 2.01(e)(ii) and Section
2.01(e)(iii) hereof (the "Initial Global Note"). Upon issuance, such Initial
Global Note shall be registered in the name of the Depositary or its nominee,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided and deposited on behalf of the purchasers of the Initial Notes
represented thereby with the Trustee at its Corporate National Trust Office, as
custodian for the Depositary. Owners of beneficial interests in the Initial
Global Note shall be entitled to receive physical delivery of Certificated Notes
pursuant to Section 2.06(b)(ii). Initial Notes offered and sold to
Institutional Accredited Investors as provided in the Purchase Agreement shall
be issued in the form of a note in definitive, fully registered form, without
coupons, substantially in the form set forth in Exhibit B hereto and shall bear
the legend set forth in Section 2.01(e)(i) hereof, except as provided in Section
2.06(a) (such Notes together with interests in the Initial Global Note that are
subsequently transferred or exchanged pursuant to Sections 2.06(b)(ii),
2.06(b)(iii), 2.06(b)(iv) or 2.06(c), the "Initial Certificated Notes") Upon
issuance, any such Initial Certificated Note shall be duly executed by the
Company and authenticated by the Trustee as hereinafter provided. Upon transfer
of any Initial Certificated Note to a QIB pursuant to Section 2.06(b)(i) hereof,
such Initial Certificated Note may be exchanged for a beneficial interest in the
Initial Global Note, except as provided in Section 2.06(c).
23
<PAGE>
(d) If the Initial Global Note is tendered in a Registered Exchange
Offer, it shall be exchanged for a single, permanent global note in definitive,
fully registered form, without coupons, substantially in the form set forth in
Exhibit C hereto and shall bear the legends set forth in Section 2.01(e)(ii) and
Section 2.01(e)(iv) hereof (the "New Global Note"). Upon issuance, such New
Global Note shall be registered in the name of the Depositary or its nominee,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided and deposited on behalf of the beneficial owners of the New Notes
represented thereby in accordance with the procedures of the Depositary.
If Initial Certificated Notes are tendered in a Registered Exchange
Offer, they will be exchanged for Certificated Notes in definitive, fully
registered form, without coupons and without legends, substantially in the form
set forth in Exhibit D hereto ("New Certificated Notes"). Upon issuance, any
such New Certificated Note shall be duly executed by the Company and
authenticated by the Trustee as hereinafter provided.
At the option of the Holder thereof, New Notes may be held either in
the form of a beneficial interest in the New Global Note or as New Certificated
Notes.
(e) The following legends shall appear on each Global Note and each
Certificated Note as indicated below:
(i) Except as provided in Section 2.06(a) hereof, the Initial Global
Note and each Initial Certificated Note shall bear the following legend
(the "Private Placement Legend") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION.
(ii) Each Global Note shall bear the following legend on the face
thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY TO GORGES/QUIK-TO-FIX FOODS, INC. OR A SUCCESSOR THEREOF OR THE
REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
24
<PAGE>
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(iii) The Initial Global Note shall bear the following legend on the
face thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN
PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.06 OF THE INDENTURE, DATED AS OF NOVEMBER 25, 1996, BETWEEN
GORGES/QUIK-TO-FIX FOODS, INC., AS ISSUER, AND IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE, PURSUANT TO WHICH THIS NOTE WAS ISSUED.
(iv) The New Global Note shall bear the following legend on the face
thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN
PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE.
SECTION 2.02. Execution and Authentication. The Notes may be issued
----------------------------
in two series, a series of Initial Notes and a series of New Notes. The
aggregate principal amount of Notes outstanding at any time shall not exceed
$100,000,000 except as provided in Section 2.07 hereof. The Notes shall be
executed on behalf of the Company by its Chief Executive Officer, President,
Chief Operating Officer, Treasurer or any Vice President, under its corporate
seal reproduced or imprinted on the Notes by facsimile or otherwise, and shall
be attested by the Company's Secretary or one of its Assistant Secretaries, in
each case by manual or facsimile signature.
The Notes shall be authenticated by manual signature of an authorized
signatory of the Trustee and shall not be valid for any purpose unless so
authenticated.
In case any officer of the Company whose signature shall have been
placed upon any of the Notes shall cease to be such officer of the Company
before authentication of such Notes by the Trustee and the issuance and delivery
thereof, such Notes may, nevertheless, be authenticated by the Trustee and
issued and delivered with the same force and effect as though such Person had
not ceased to be such officer of the Company.
The Trustee shall, upon receipt of a Company Order requesting such
action, authenticate (a) Initial Notes for original issue up to the aggregate
principal amount not to exceed $100,000,000 outstanding at any given time, or
(b) New Notes for issue pursuant to a Registered Exchange Offer for Initial
Notes in a principal amount equal to the principal amount of Initial Notes
exchanged in such Registered Exchange Offer. Such Company Order shall specify
the amount of Notes to be authenticated and the date on which, in the case of
clause (a) above, the Initial Notes or, in the case of clause (b) above, the New
Notes, are to be authenticated and shall further provide instructions concerning
registration, amounts for each Holder and delivery.
25
<PAGE>
Upon the occurrence of any event specified in Section 2.06(c) hereof,
the Company shall execute and the Trustee shall authenticate and make available
for delivery to each beneficial owner identified by the Depositary, in exchange
for such beneficial owner's interest in the Initial Global Note or New Global
Note, as the case may be, Initial Certificated Notes or New Certificated Notes,
as the case may be, representing Notes theretofore represented by the Initial
Global Note or New Global Note, as the case may be.
A Note shall not be valid or entitled to any benefits under this
Indenture or obligatory for any purpose unless executed by the Company and
authenticated by the manual signature of one of the authorized signatories of
the Trustee as provided herein. Such signature upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered under this Indenture and is entitled to the benefits
of this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Any authenticating agent of the
Trustee shall have the same rights hereunder as any Registrar or Paying Agent.
Notwithstanding the foregoing, if any Note shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Note to the Trustee for cancellation as
provided in Section 2.10 together with a written statement (which need not
comply with Section 1.04 and need not be accompanied by an Opinion of Counsel)
stating that such Note has never been issued and sold by the Company, for all
purposes of this Indenture such Note shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
SECTION 2.03. Registrar and Paying Agent. The Company shall
--------------------------
maintain, pursuant to Section 4.02 hereof, an office or agency where the Notes
may be presented for registration of transfer or for exchange (the "Registrar"),
an office or agency where Notes may be presented for payment (the "Paying
Agent") and an office or agency where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served.
The Company shall cause to be kept at such office a register (the
"Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes entitled to be registered or transferred as provided herein.
The Trustee, at its Corporate National Trust Office, is initially appointed
Registrar for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may, upon written notice to the Trustee, change the
designation of the Trustee as Registrar and appoint another Person to act as
Registrar for purposes of this Indenture. If any Person other than the Trustee
acts as Registrar, the Trustee shall have the right at any time, upon reasonable
notice, to inspect or examine the Note Register and to make such inquiries of
the Registrar as the Trustee shall in its discretion deem necessary or desirable
in performing its duties hereunder.
26
<PAGE>
The Company shall enter into an appropriate agency agreement with any
Person designated by the Company as Registrar or Paying Agent that is not a
party to this Indenture, which agreement shall incorporate the provisions of the
Trust Indenture Act and shall implement the provisions of this Indenture that
relate to such Registrar or Paying Agent. Prior to the designation of any such
Person, the Company shall, by written notice (which notice shall include the
name and address of such Person), inform the Trustee of such designation. The
Trustee, at its Corporate National Trust Office, is initially appointed Paying
Agent under this Indenture. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
Subject to Section 2.06 hereof, upon surrender for registration of
transfer of any Note at an office or agency of the Company designated for such
purpose, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Initial Notes or New Notes, as the case may be, of any
authorized denomination or denominations, of like tenor and aggregate principal
amount, all as requested by the transferor.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company, the Trustee or the Registrar)
be duly endorsed, or be accompanied by a duly executed instrument of transfer in
form satisfactory to the Company, the Trustee and the Registrar, by the Holder
thereof or such Holder's attorney duly authorized in writing.
SECTION 2.04. Paying Agent to Hold Money in Trust. On or prior to
-----------------------------------
each due date of the principal, premium, if any, or any payment of interest or
Liquidated Damages, if any, with respect to any Note, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal, premium, if any,
or interest or Liquidated Damages, if any, when so becoming due.
The Company shall require each Paying Agent (other than the Trustee)
to agree in writing that such Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all money held by such Paying Agent for the payment of
principal, premium, if any, or interest or Liquidated Damages, if any, with
respect to the Notes, shall notify the Trustee of any default by the Company in
making any such payment and at any time during the continuance of any such
default, upon the written request of the Trustee, shall forthwith pay to the
Trustee all sums held in trust by such Paying Agent.
The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section 2.04, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. Global Notes. (a) So long as a Global Note is
------------
registered in the name of the Depositary or its nominee, members of, or
participants in, the Depositary ("Agent Members") shall have no rights under
this Indenture with respect to the Global Note held on their behalf by the
Depositary or the Trustee as its custodian, and the Depositary may be treated by
the Company, any Guarantor, the Trustee and any agent of the Company, any
Guarantor or the Trustee as the absolute owner of such Global Note for all
27
<PAGE>
purposes. Notwithstanding the foregoing, nothing herein shall (i) prevent the
Company, any Guarantor, the Trustee or any agent of the Company, any Guarantor
or the Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or (ii) impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder.
(b) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in such Global Note through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
(c) Whenever, as a result of an optional redemption of Notes by the
Company, a Change of Control Offer, an Asset Sale Offer, a Registered Exchange
Offer or an exchange for Certificated Notes pursuant to the provisions of
Section 2.06(b) or Section 2.06(c) hereof, a Global Note is redeemed,
repurchased or exchanged in part, such Global Note shall be surrendered by the
Holder thereof to the Trustee who shall cause an adjustment to be made to
Schedule A thereof so that the principal amount of such Global Note will be
equal to the portion of such Global Note not redeemed, repurchased or exchanged
and shall thereafter return such Global Note to such Holder, provided that each
--------
such Global Note shall be in a principal amount of $1,000 or an integral
multiple thereof.
SECTION 2.06. Transfer and Exchange. (a) By its acceptance of any
---------------------
Initial Note represented by a certificate bearing the Private Placement Legend,
each Holder of, and beneficial owner of an interest in, such Initial Note
acknowledges the restrictions on transfer of such Initial Note set forth in the
Private Placement Legend and agrees that it will transfer such Initial Note only
in accordance with the Private Placement Legend. Upon the registration of
transfer, exchange or replacement of an Initial Note not bearing the Private
Placement Legend, the Trustee shall deliver an Initial Note or Initial Notes
that does not or do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of an Initial Note bearing the Private Placement Legend,
the Trustee shall deliver an Initial Note or Initial Notes bearing the Private
Placement Legend, unless such legend may be removed from such Note as provided
in this Section 2.06(a). If the Private Placement Legend has been removed from
an Initial Note, as provided herein, no other Initial Note issued in exchange
for all or any part of such Initial Note shall bear such legend, unless the
Company has reasonable cause to believe that such other Initial Note represents
a "restricted security" within the meaning of Rule 144 and instructs the Trustee
in writing to cause a legend to appear thereon. Each Initial Note shall bear
the Private Placement Legend unless and until:
(i) a transfer of such Initial Note is made pursuant to an
effective Shelf Registration Statement, in which case the Private Placement
Legend shall be removed from such Initial Note so transferred at the
request of the Holder; or
(ii) there is delivered to the Company such satisfactory
evidence, which may include an opinion of independent counsel licensed to
practice law in the State of New York, as may reasonably be requested by
the Company confirming that neither such legend nor the restrictions on
28
<PAGE>
transfer set forth therein are required to ensure that transfers of such
Initial Note will not violate the registration and prospectus delivery
requirements of the Securities Act; provided that the Trustee shall not be
--------
required to determine (but may rely on a determination made by the Company
with respect to) the sufficiency of any such evidence; and upon provision
of such evidence, the Trustee shall authenticate and deliver in exchange
for such Initial Note, an Initial Note or Initial Notes (representing the
same aggregate principal amount of the Initial Note being exchanged)
without such legend.
(b) Special Transfer Provisions. The following provisions of this
---------------------------
paragraph (b) are applicable only to Initial Notes bearing the Private Placement
Legend:
(i) Transfers to QIBs. If the Holder of an Initial Certificated
-----------------
Note wishes to transfer such Initial Certificated Note to a QIB pursuant to
Rule 144A, such Holder may, subject to the rules and procedures of the
Depositary, cause the exchange of such Initial Certificated Note for an
equivalent beneficial interest in the Initial Global Note. Upon receipt by
the Trustee, as Registrar, at its Corporate National Trust Office of (A)
such Initial Certificated Note, duly endorsed as provided herein, (B)
instructions from such Holder directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in the Initial Global
Note equal to the principal amount of the Initial Certificated Note to be
exchanged, such instructions to contain information regarding the
participant account with the Depositary to be credited with such increase
and (C) a certificate in the form of Exhibit E attached hereto from the
transferor, then the Trustee, as Registrar, shall cancel or cause to be
canceled such Initial Certificated Note and shall instruct the Depositary
to increase or cause to be increased such Initial Global Note by the
aggregate principal amount of the beneficial interest in the Initial
Certificated Note to be exchanged and to credit or cause to be credited to
the account of the Person specified in such instructions a beneficial
interest in the Initial Global Note equal to the principal amount of the
Initial Certificated Note so canceled;
(ii) Transfers to Institutional Accredited Investors and
---------------------------------------------------
Exchange of Interests in Global Notes.
-------------------------------------
(A) If a Holder of a beneficial interest in the Initial Global
Note deposited with the Depositary or the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in such Initial
Global Note to an Institutional Accredited Investor or to exchange
such interest for an Initial Certificated Note evidencing such
interest, such Holder may, subject to the rules and procedures of the
Depositary, cause the transfer or exchange of such interest for one or
more Initial Certificated Notes of any authorized denomination or
denominations and of the same aggregate principal amount. Upon
receipt by the Trustee, as Registrar, at its Corporate National Trust
Office of (I) instructions from the Depositary directing the Trustee,
as Registrar, to authenticate and deliver one or more Initial
Certificated Notes of the same aggregate principal amount as the
beneficial interest in the Initial Global Note to be transferred or
exchanged, such instructions to contain the name or names of the
29
<PAGE>
designated transferee or transferees, if any, the authorized
denomination or denominations of the Initial Certificated Notes to be
so issued and appropriate delivery instructions and (II) in the case
of a transfer, (x) a certificate in the form of Exhibit F attached
hereto from the transferor, (y) a certificate in the form of Exhibit G
attached hereto from the transferee and (z) such other certifications,
legal opinions or other information as the Company or the Trustee may
reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, then the Trustee, as
Registrar, will instruct the Depositary to reduce or cause to be
reduced such Initial Global Note by the aggregate principal amount of
the beneficial interest therein to be exchanged or transferred and to
debit or cause to be debited from the account of the Person making
such exchange or transfer the beneficial interest in the Initial
Global Note that is being exchanged or transferred, and concurrently
with such reduction and debit the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Initial
Certificated Notes of the same aggregate principal amount in
accordance with the instructions referred to above; and
(B) if a Holder of an Initial Certificated Note wishes to
transfer such Note to an Institutional Accredited Investor, such
Holder may, subject to the restrictions on transfer set forth herein
and in such Initial Certificated Note, cause the exchange of such
Initial Certificated Note for one or more Initial Certificated Notes
of any authorized denomination or denominations and of the same
aggregate principal amount. Upon receipt by the Trustee, as
Registrar, at its Corporate National Trust Office of (I) such Initial
Certificated Note, duly endorsed as provided herein, (II) instructions
from such Holder directing the Trustee, as Registrar, to authenticate
and deliver one or more Initial Certificated Notes of the same
aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions, (III) a certificate in the form of
Exhibit F attached hereto from the transferor, (IV) a certificate in
the form of Exhibit G attached hereto from the transferee and (V) such
other certifications, legal opinions or other information as the
Company or the Trustee may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, then the Trustee, as Registrar, shall cancel or cause
to be canceled such Initial Certificated Note and concurrently
therewith, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Initial Certificated Notes of
the same aggregate principal amount, in accordance with the
instructions referred to above;
(iii) Transfers to Non-U.S. Persons. (A) If a Holder of a
-----------------------------
beneficial interest in the Initial Global Note deposited with the
Depositary or the Trustee as custodian for the Depositary wishes at
any time to transfer its interest in such Initial Global Note to a
Non-U.S. Person pursuant to Regulation S who wishes to take delivery
thereof in the form of a Certificated Note, such Holder may, subject
30
<PAGE>
to the rules and procedures of the Depositary, cause the exchange of
such interest for one or more Initial Certificated Notes of any
authorized denomination or denominations and of the same aggregate
principal amount. Upon receipt by the Trustee, as Registrar, at its
Corporate National Trust Office of (I) instructions from the
Depositary directing the Trustee, as Registrar, to authenticate and
deliver one or more Initial Certificated Notes of the same aggregate
principal amount as the beneficial interest in the Initial Global Note
to be exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions, (II) a certificate in the form of
Exhibit H attached hereto from the transferor, (III) a certificate in
the form of Exhibit I attached hereto from the transferee and (IV)
such other certifications, legal opinions or other information as the
Company or the Trustee may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, then the Trustee, as Registrar, will instruct the
Depositary to reduce or cause to be reduced such Initial Global Note
by the aggregate principal amount of the beneficial interest therein
to be exchanged and to debit or cause to be debited from the account
of the Person making such transfer the beneficial interest in the
Initial Global Note that is being transferred, and concurrently with
such reduction and debit the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Initial Certificated Notes
of the same aggregate principal amount in accordance with the
instructions referred to above; and
(B) if a Holder of an Initial Certificated Note wishes to
transfer such Note to a Non-U.S. Person pursuant to Regulation S who
wishes to take delivery thereof in the form of a Certificated Note,
such Holder may, subject to the restrictions on transfer set forth
herein and in such Initial Certificated Note, cause the exchange of
such Initial Certificated Note for one or more Initial Certificated
Notes of any authorized denomination or denominations and of the same
aggregate principal amount. Upon receipt by the Trustee, as Registrar,
at its Corporate National Trust Office of (I) such Initial
Certificated Note, duly endorsed as provided herein, (II) instructions
from such Holder directing the Trustee, as Registrar, to authenticate
and deliver one or more Initial Certificated Notes of the same
aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Initial Certificated Notes to be so issued and
appropriate delivery instructions, (III) a certificate in the form of
Exhibit H attached hereto from the transferor, (IV) a certificate in
the form of Exhibit I attached hereto from the transferee and (V) such
other certifications, legal opinions or other information as the
Company or the Trustee may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, then the Trustee, as Registrar, shall cancel or cause
31
<PAGE>
to be canceled such Initial Certificated Note and concurrently
therewith, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Initial Certificated Notes of
the same aggregate principal amount, in accordance with the
instructions referred to above;
(iv) Transfers Pursuant to Other Exemptions. (A) If a Holder
--------------------------------------
of a beneficial interest in the Initial Global Note deposited with the
Depositary or the Trustee as custodian for the Depositary wishes at
any time to transfer its interest in such Initial Global Note pursuant
to another applicable exemption from the registration requirements of
the Securities Act, such Holder may, subject to the rules and
procedures of the Depositary, cause the exchange of such interest for
one or more Initial Certificated Notes of any authorized denomination
or denominations and of the same aggregate principal amount. Upon
receipt by the Trustee, as Registrar, at its Corporate National Trust
Office of (I) instructions from the Depositary directing the Trustee,
as Registrar, to authenticate and deliver one or more Initial
Certificated Notes of the same aggregate principal amount as the
beneficial interest in the Initial Global Note to be exchanged, such
instructions to contain the name or names of the designated transferee
or transferees, the authorized denomination or denominations of the
Initial Certificated Notes to be so issued and appropriate delivery
instructions and (II) such certifications, legal opinions or other
information as the Company or the Trustee may reasonably require to
confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act, then the Trustee, as Registrar,
will instruct the Depositary to reduce or cause to be reduced such
Initial Global Note by the aggregate principal amount of the
beneficial interest therein to be exchanged and to debit or cause to
be debited from the account of the Person making such transfer the
beneficial interest in the Initial Global Note that is being
transferred, and concurrently with such reduction and debit the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more Initial Certificated Notes of the same aggregate principal
amount in accordance with the instructions referred to above; and
(B) if a Holder of an Initial Certificated Note wishes to
transfer such Initial Certificated Note pursuant to another applicable
exemption from the registration requirements of the Securities Act,
such Holder may, subject to the restrictions on transfer set forth
herein and in such Initial Certificated Note, cause the exchange of
such Initial Certificated Note for one or more Initial Certificated
Notes of any authorized denomination or denominations and of the same
aggregate principal amount. Upon receipt by the Trustee, as
Registrar, at its Corporate National Trust Office of (I) such Initial
Certificated Note, duly endorsed as provided herein, (II) instructions
from such Holder directing the Trustee, as Registrar, to authenticate
and deliver one or more Initial Certificated Notes of the same
aggregate principal amount as the Initial Certificated Notes to be
exchanged, such instructions to contain the name or authorized
denomination or denominations of the Initial Certificated Notes to be
so issued and appropriate delivery instructions and (III) such
certifications, legal opinions or other information as the Company or
the Trustee may reasonably require to confirm that such transfer is
32
<PAGE>
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act, then
the Trustee, as Registrar, shall cancel or cause to be canceled such
Initial Certificated Note and concurrently therewith, the Company
shall execute, and the Trustee shall authenticate and deliver, one or
more Initial Certificated Notes of the same aggregate principal
amount, in accordance with the instructions referred to above.
The Company shall deliver to the Trustee, and the Trustee shall retain
for two years, copies of all documents received pursuant to this Section
2.06(b). The Company shall have the right to inspect and make copies of
all such documents at any reasonable time upon the giving of reasonable
written notice to the Trustee.
(c) The Initial Global Note or New Global Note, as the case may be,
shall be exchanged by the Company for one or more Initial Certificated Notes or
New Certificated Notes, as the case may be, if (i) the Depositary has notified
the Company that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act and a successor
to the Depositary registered as a clearing agency under Section 17A of the
Exchange Act is not able to be appointed by the Company within 90 calendar days,
or (ii) the Depositary is at any time unwilling or unable to continue as
Depositary and a successor to the Depositary is not able to be appointed by the
Company within 90 calendar days, or (iii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Notes. If an Event of Default occurs and is continuing, the
Company shall, at the request of the Holder thereof, exchange all or part of the
Initial Global Note or New Global Note, as the case may be, for one or more
Initial Certificated Notes or New Certificated Notes, as the case may be;
provided that the principal amount of each of such Initial Certificated Notes or
- --------
New Certificated Notes, as the case may be, and such Global Note, after such
exchange, shall be $1,000 or an integral multiple thereof. Whenever a Global
Note is exchanged as a whole for one or more Initial Certificated Notes or New
Certificated Notes, as the case may be, it shall be surrendered by the Holder
thereof to the Trustee for cancellation. Whenever a Global Note is exchanged in
part for one or more Initial Certificated Notes or New Certificated Notes, as
the case may be, it shall be surrendered by the Holder thereof to the Trustee
and the Trustee shall make the appropriate notations thereon pursuant to Section
2.05(c) hereof. All Initial Certificated Notes or New Certificated Notes, as
the case may be, issued in exchange for a Global Note or any portion thereof
shall be registered in such names, and delivered, as the Depositary shall
instruct the Trustee. Any Initial Certificated Notes issued pursuant to this
Section 2.06(c) shall include the Private Placement Legend, except as set forth
in Section 2.06(a) hereof.
(d) Any Initial Notes that are presented to the Registrar for
exchange pursuant to a Registered Exchange Offer shall be exchanged for New
Notes of equal principal amount upon surrender to the Registrar of the Initial
Notes to be exchanged in accordance with the terms of the Registered Exchange
Offer; provided that the Initial Notes so surrendered for exchange are
--------
accompanied by a letter of transmittal and duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Company, the Trustee
and the Registrar and duly executed by the Holder thereof or such Holder's
attorney who shall be duly authorized in writing to execute such document on
behalf of such Holder. Whenever any Initial Notes are so surrendered for
33
<PAGE>
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver to the surrendering Holder thereof, New Notes in the same aggregate
principal amount as the Initial Notes so surrendered.
(e) A Holder may transfer a Note only upon the surrender of such Note
for registration of transfer. No such transfer shall be effected until, and the
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer in the Note Register by the Registrar. When
Notes are presented to the Registrar with a request to register the transfer of,
or to exchange, such Notes, the Registrar shall register the transfer or make
such exchange as requested if the requirements for such transactions and any
applicable requirements hereunder are satisfied. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Certificated Notes at the Registrar's request.
(f) The Company shall not be required to make and the Registrar need
not register the transfer or exchange of Certificated Notes or portion thereof
selected for redemption (except, in the case of a Certificated Note to be
redeemed in part, the portion of such Note not to be redeemed) or any
Certificated Notes for a period of 15 calendar days before a selection of Notes
to be redeemed.
(g) No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer of Notes (other than in respect of a
Registered Exchange Offer, except as provided in the Registration Rights
Agreement).
(h) All Notes issued upon any registration of transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes surrendered for
such registration of transfer or exchange.
(i) Any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book-entry system maintained by such Holder (or its
agent), and that ownership of a beneficial interest in the Notes represented
thereby shall be required to be reflected in book-entry form. Transfers of a
Global Note shall be limited to transfers in whole and not in part, to the
Depositary, its successors, and their respective nominees. Interests of
beneficial owners in a Global Note shall be transferred in accordance with the
rules and procedures of the Depositary (or its successors), which shall, in the
case of the Initial Global Note, include restrictions designed to ensure that
the beneficial owners of such Initial Global Note are QIBs.
SECTION 2.07. Replacement Notes. If any mutilated Note is
-----------------
surrendered to the Trustee, the Company shall execute and upon its written
request the Trustee shall authenticate and make available for delivery, in
exchange for any such mutilated Note, a new Note containing identical provisions
and of like principal amount, bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) such security or indemnity as may be required by either of them to save
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either of them and any agent of each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Note has been acquired by a bona
fide purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and make available for delivery, in lieu of any such destroyed,
lost or stolen Note, a new Note containing identical provisions and of like
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 2.07, the Company
may require the payment by the Holder of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 2.07 in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.08. Outstanding Notes. Notes outstanding at any time are
-----------------
all Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation, those paid pursuant to Section 2.07 hereof and
those described in this Section 2.08 as not outstanding. A Note does not cease
to be outstanding because the Company or an Affiliate of the Company holds such
Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that such replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or Maturity date money sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
payable on that date with respect to the Notes (or portions thereof) to be
redeemed or maturing, as the case may be, then on and after that date such Notes
(or such portions thereof) shall cease to be outstanding and interest on them
shall cease to accrue.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent or any amendment,
modification or other change to this Indenture, Notes held or beneficially owned
35
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by the Company, any Subsidiary of the Company or any of their respective
Affiliates or by agents of any of the foregoing shall be disregarded, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Notes which a Trust Officer actually
knows are so owned shall be so disregarded. Notes so owned which have been
pledged in good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee such pledgee's right so to act with respect to the
Notes and that the pledgee is not the Company, any Subsidiary of the Company or
any of their respective Affiliates or any of their agents.
SECTION 2.09. Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Company may execute, and the Trustee shall authenticate, temporary
notes ("Temporary Notes") which are printed, lithographed, or otherwise
produced, substantially of the tenor of the definitive Notes in lieu of which
they are issued and with such appropriate insertions, omissions, substitutions
and other variations as the officer executing the Notes may reasonably
determine, as conclusively evidenced by such officer's execution of such Notes.
If Temporary Notes are issued, the Company shall cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the Temporary Notes shall be exchangeable for definitive Notes
upon surrender of the Temporary Notes to the Trustee, without charge to the
Holder. Until so exchanged, Temporary Notes will evidence the same debt and
will be entitled to the same benefits under this Indenture as the definitive
Notes in lieu of which they have been issued.
SECTION 2.10. Cancellation. The Company at any time may deliver
------------
Notes to the Trustee for prompt cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange, purchase or payment. The Trustee shall
cancel all Notes surrendered for registration of transfer, exchange, purchase,
payment or cancellation and shall return such canceled Notes to the Company.
The Company may not issue new Notes to replace Notes it has redeemed or paid or
that have been delivered to the Trustee for cancellation.
SECTION 2.11. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid to the Person in whose name such
Note is registered at the close of business on the Record Date for such interest
payment, which shall be the May 15 or November 15 (whether or not a Business
Day) immediately preceding such Interest Payment Date.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder on the
relevant Record Date, and, except as hereinafter provided, such Defaulted
Interest, and any interest payable on such Defaulted Interest, may be paid by
the Company, at its election, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest,
and any interest payable on such Defaulted Interest, to the Persons in whose
names the Notes are registered at the close of business on a Special Record Date
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for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on the Notes and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as provided in this Section 2.11(a). Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 calendar days and not less than 10
calendar days prior to the date of the proposed payment and not less than 10
calendar days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be sent, first-class mail, postage prepaid, to each Holder at such
Holder's address as it appears in the Note Register, not less than 10 calendar
days prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose names
the Notes are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (b); or
(b) The Company may make payment of any Defaulted Interest, and any
interest payable on such Defaulted Interest, on the Notes in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.11, each Note
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu of, any other Note, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Note.
SECTION 2.12. Computation of Interest. Interest on the Notes shall
-----------------------
be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.13. Persons Deemed Owners. Prior to the due presentation
---------------------
for registration of transfer of any Note, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person in whose
name such Note is registered as the absolute owner of such Note for the purpose
of receiving payment of principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Note and for all other purposes whatsoever,
whether or not such Note is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-Registrar shall be affected by notice to
the contrary.
SECTION 2.14. CUSIP Numbers. The Company, in issuing the Notes, may
-------------
use a "CUSIP" number for each series of Notes and, if so, the Trustee shall use
the relevant CUSIP number in any notices to Holders as a convenience to such
Holders; provided that any such notice may state that no representation is made
--------
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<PAGE>
as to the correctness or accuracy of the CUSIP number printed in the notice or
on the Notes and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP number used.
ARTICLE III
REDEMPTION
SECTION 3.01. Notice to Trustee. If the Company elects to redeem
-----------------
Notes pursuant to the optional redemption provisions thereof it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Notes to
be redeemed. The Company shall give each such notice to the Trustee at least 45
calendar days prior to the Redemption Date unless the Trustee consents to a
shorter period. Such notice shall be accompanied by an Officers' Certificate
and an Opinion of Counsel from the Company to the effect that such redemption
will comply with any conditions to such redemption set forth herein and in the
Notes.
SECTION 3.02. Selection of Notes to be Redeemed. If less than all
---------------------------------
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed by such method as the Trustee shall deem fair and appropriate and
that complies with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or if the Notes are not so
listed, on a pro rata basis; provided that no Notes of $1,000 or less shall be
--- ---- --------
redeemed in part. In selecting Notes to be redeemed pursuant to this Section
3.02, the Trustee shall make such adjustments, reallocations and eliminations as
it shall deem proper so that the principal amount of each Note to be redeemed
shall be $1,000 or an integral multiple thereof, by increasing, decreasing or
eliminating any amount less than $1,000 which would be allocable to any Holder.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 calendar days but
--------------------
not more than 60 calendar days before a Redemption Date, the Company shall send
or cause to be sent a notice of redemption, by first class mail, postage
prepaid, to Holders of Notes to be redeemed at the addresses of such Holders as
they appear in the Note Register.
The notice shall identify the Notes to be redeemed (including CUSIP
number) and shall state:
(a) the Redemption Date;
(b) the Redemption Price (and shall specify the portion of such
Redemption Price that constitutes the amount of accrued and unpaid interest and
Liquidated Damages to be paid, if any);
(c) the name and address of the Paying Agent;
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(d) that the Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(e) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, the Global Note, with a notation on Schedule A thereof adjusting the
principal amount thereof to be equal to the unredeemed portion, will be returned
to the Holder thereof;
(f) if any Certificated Note is being redeemed in part, the portion
of the principal amount of such Note to be redeemed and that, after the
Redemption Date, a new Certificated Note or Certificated Notes in principal
amount equal to the unredeemed portion will be issued;
(g) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be redeemed;
(h) that, unless the Company defaults in making the redemption
payment, interest on the Notes (or portions thereof) called for redemption shall
cease and such Notes (or portions thereof) shall cease to accrue interest on and
after the Redemption Date;
(i) the paragraph of the Notes pursuant to which the Notes are being
called for redemption; and
(j) any other information necessary to enable Holders to comply with
the notice of redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.03 in a timely manner and in no event less than 37 calendar days prior
to the Redemption Date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Notes called for redemption shall become due and payable
on the Redemption Date and at the Redemption Price stated in such notice. Upon
surrender to the Paying Agent, such Notes shall be paid at the Redemption Price
stated in such notice. Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to 10:00
---------------------------
a.m., New York City time, on each Redemption Date, the Company shall deposit
with the Paying Agent (or, if the Company, one of its Subsidiaries or any of
their Affiliates is the Paying Agent, the Paying Agent shall segregate and hold
in trust for the benefit of the Holders) money, in federal or other immediately
available funds, sufficient to pay the Redemption Price on all Notes or portions
thereof to be redeemed on that date other than Notes or portions of Notes called
for redemption on such date which have been delivered by the Company to the
Trustee for cancellation.
So long as the Company complies with the preceding paragraph and the
other provisions of this Article III, interest on the Notes or portions thereof
to be redeemed on the applicable Redemption Date shall cease to accrue from and
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<PAGE>
after such date and such Notes or portions thereof shall be deemed not to be
entitled to any benefit under this Indenture except to receive payment of the
Redemption Price on the Redemption Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). If any Note called for redemption shall not be so paid
upon surrender for redemption, then, from the Redemption Date until such
Redemption Price is paid, interest shall be paid on the unpaid principal and
premium and, to the extent permitted by law, on any accrued but unpaid interest
thereon, in each case at the rate prescribed therefor by such Notes.
SECTION 3.06. Notes Redeemed in Part. (a) Upon surrender and
----------------------
cancellation of a Certificated Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate and make available for delivery to the
surrendering Holder (at the Company's expense) a new Certificated Note equal in
principal amount to the unredeemed portion of the Certificated Note surrendered
and canceled, provided that each such Certificated Note shall be in a principal
-------- ----
amount of $1,000 or an integral multiple thereof.
(b) Upon surrender of a Global Note that is redeemed in part, the
Paying Agent shall forward such Global Note to the Trustee who shall make a
notation on Schedule A thereof to reduce the principal amount of such Global
Note to an amount equal to the unredeemed portion of such Global Note, as
provided in Section 2.05(c) hereof.
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall promptly pay the
----------------
principal of, premium, if any, and interest and Liquidated Damages, if any, on,
the Notes on the dates and in the manner provided in the Notes and in this
Indenture. Principal, premium, interest and overdue Liquidated Damages shall be
considered paid on the date due if, on such date, the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal, premium, interest and Liquidated Damages then due.
To the extent lawful, the Company shall pay interest on overdue
principal, overdue premium, Defaulted Interest and Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on the Notes.
The Company's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its Stated Maturity, as a result of the Company's
obligations pursuant to Sections 3.05, Section 4.07 or Section 4.08 hereof, or
otherwise.
All payments with respect to a Global Note or a Certificated Note
(including principal, premium, if any, interest and Liquidated Damages, if any)
the Holders of whom have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
account or (in the case of a Global Note) accounts specified by the Holders
thereof or, if no such account is specified, by sending via first-class mail,
postage prepaid, a check to each such Holders' registered address.
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SECTION 4.02. Maintenance of Office or Agency. The Company shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which office shall be initially the Corporate National Trust Office.
The Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate National Trust Office
of the Trustee, and the Company hereby appoints the Trustee its agent to receive
all presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes may
be presented or surrendered for any or all of such purposes, and may from time
to time rescind such designations; provided that no such designation or
--------
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation and any
change in the location of any such other office or agency.
The Company hereby designates the Corporate National Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
SECTION 4.03. Money for the Note Payments to be Held in Trust. If
-----------------------------------------------
the Company, any Subsidiary of the Company or any of their respective Affiliates
shall at any time act as Paying Agent with respect to the Notes, such Paying
Agent shall, on or before each due date of the principal of, premium, if any, or
interest or Liquidated Damages, if any, on any of the Notes, segregate and hold
in trust for the benefit of the Persons entitled thereto money sufficient to pay
the principal, premium, if any, or interest or Liquidated Damages, if any, so
becoming due until such money shall be paid to such Persons or otherwise
disposed of as herein provided, and shall promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents with respect
to the Notes, it shall, prior to or on each due date of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on any of the Notes,
deposit with a Paying Agent a sum sufficient to pay the principal, premium, if
any, or interest or Liquidated Damages, if any, so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest or Liquidated Damages, if any, and (unless such Paying Agent is the
Trustee) the Paying Agent shall promptly notify the Trustee of the Company's
action or failure so to act.
SECTION 4.04. Corporate Existence. Subject to the provisions of
-------------------
Article V hereof, the Company shall do or cause to be done all things necessary
to preserve and keep in full force and effect the corporate existence, rights
(charter and statutory) and franchises of the Company and each of its
Subsidiaries; provided that the Company and any such Subsidiary shall not be
--------
41
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required to preserve the corporate existence of any such Subsidiary or any such
right or franchise if the Board shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.05. Maintenance of Property. The Company shall cause all
-----------------------
Property used or useful in the conduct of its business or the business of any of
its Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as, in the judgment of the Company, may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided that nothing in this Section 4.05 shall prevent the
--------
Company from discontinuing the operation or maintenance of any of such Property
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any of its Subsidiaries and not
disadvantageous in any material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims. The Company shall
---------------------------------
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Subsidiaries or upon the income, profits
or Property of the Company or any of its Subsidiaries and (b) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon the Property of the Company or any of its Subsidiaries; provided that the
--------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP or other appropriate provision
has been made.
SECTION 4.07. Repurchase at the Option of Holders upon a Change of
----------------------------------------------------
Control. (a) Upon the occurrence of a Change of Control, each Holder shall
- -------
have the right to require the Company to purchase such Holder's Notes, in whole
or in part, in a principal amount that is an integral multiple of $1,000,
pursuant to the offer described in Section 4.07(b) hereof (the "Change of
Control Offer") at a purchase price (the "Change of Control Purchase Price") in
cash equal to 101% of the principal amount of such Notes (or portions thereof)
to be redeemed plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase (the "Change of Control Payment Date") (subject
to the right of each Holder of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date).
(b) Within 30 calendar days after the date of any Change of Control,
the Company, or the Trustee at the request and expense of the Company, shall
send to each Holder by first class mail, postage prepaid, a notice prepared by
the Company describing the transaction or transactions that constitute the
Change of Control and stating:
(i) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to this Section 4.07, and that all Notes that
are timely tendered will be accepted for payment;
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(ii) the Change of Control Purchase Price, and the Change of Control
Payment Date, which date shall be a Business Day no earlier than 30
calendar days nor later than 60 calendar days subsequent to the date such
notice is mailed;
(iii) that any Notes or portions thereof not tendered or accepted for
payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest from and after the Change of Control Payment Date;
(v) that any Holder electing to have any Notes or portions thereof
purchased pursuant to a Change of Control Offer will be required to tender
such Notes, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of such Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(vi) that any Holder shall be entitled to withdraw such election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter, setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing such Holder's election to have such Notes or portions
thereof purchased pursuant to the Change of Control Offer;
(vii) that any Holder electing to have Notes purchased pursuant to
the Change of Control Offer must specify the principal amount that is being
tendered for purchase, which principal amount must be $1,000 or an integral
multiple thereof;
(viii) if Certificated Notes have been issued, that any Holder of
Certificated Notes whose Certificated Notes are being purchased only in
part will be issued new Certificated Notes equal in principal amount to the
unpurchased portion of the Certificated Note or Notes surrendered, which
unpurchased portion will be equal in principal amount to $1,000 or an
integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global Note that
is being purchased in part, such Global Note with a notation on Schedule A
thereof adjusting the principal amount thereof to be equal to the
unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to tender
Notes and to have such Notes purchased pursuant to this Section 4.07.
If the Company requests that the Trustee provide such notice, the
Company shall provide the Trustee with the information required by this Section
4.07(b) in a timely manner and in no event more than 23 calendar days after the
date of such Change of Control.
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(c) On the Change of Control Payment Date, the Company shall, (i)
accept for payment all Notes or portions thereof properly tendered pursuant to
the Change of Control Offer, (ii) irrevocably deposit with the Paying Agent, by
10:00 a.m., New York City time, on such date, in immediately available funds, an
amount equal to the Change of Control Purchase Price in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so tendered together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. Subject to the provisions of Section 4.01 hereof, the Paying Agent
shall promptly send by first class mail, postage prepaid, to each Holder of
Notes so accepted for payment the Change of Control Purchase Price for such
Notes or portions thereof. The Company shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 4.07, the Trustee shall act
as the Paying Agent.
(d) Upon surrender and cancellation of a Certificated Note that is
purchased in part pursuant to the Change of Control Offer, the Company shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Note a new Certificated Note equal in
principal amount to the unpurchased portion of such surrendered Certificated
Note; provided that each such new Certificated Note shall be in a principal
--------
amount of $1,000 or an integral multiple thereof.
Upon surrender of a Global Note that is purchased in part pursuant to
a Change of Control Offer, the Paying Agent shall forward such Global Note to
the Trustee who shall make a notation on Schedule A thereof to reduce the
principal amount of such Global Note to an amount equal to the unpurchased
portion of such Global Note, as provided in Section 2.05(c) hereof.
(e) The Company shall comply with the requirements of Section 14(e)
of, and Rule 14e-1 under, the Exchange Act and any other securities laws or
regulations to the extent such laws and regulations are applicable in connection
with the purchase of Notes pursuant to a Change of Control Offer.
(f) Prior to complying with the provisions of this Section 4.07, but
in any event within 30 days following a Change of Control, the Company shall
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Indebtedness
to permit the repurchase of Notes required by this Section 4.07.
SECTION 4.08. Limitation on Asset Sales. (a) The Company shall not,
-------------------------
and shall not permit any of its Subsidiaries to, directly or indirectly, engage
in an Asset Sale (except an Exempt Asset Sale) unless:
(i) the Company (or such Subsidiary) receives consideration at the
time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of, and in the case of a lease of assets,
a lease providing for rent and other conditions which are no less favorable
to the Company (or such Subsidiary) in any material respect than the then
prevailing market conditions (as determined in each case by the Board,
whose determination shall be conclusive if made in good faith and evidenced
by a Board Resolution set forth in an Officers' Certificate delivered to
the Trustee); and
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(ii) at least 75% (100% in the case of lease payments) of the
consideration therefor received by the Company or such Subsidiary is in the
form of cash, Cash Equivalents or Eligible Assets.
(b) The Company may apply, and may permit its Subsidiaries to apply,
Net Proceeds of an Asset Sale (other than an Exempt Asset Sale), at its option,
in each case within 365 days after the consummation of such an Asset Sale:
(i) to permanently reduce Senior Indebtedness other than Senior
Revolving Debt;
(ii) to permanently reduce Senior Revolving Debt (and to
correspondingly reduce the commitments, if any, with respect thereto);
(iii) to acquire Eligible Assets or to reimburse the Company or
its Subsidiaries for expenditures previously made to acquire Eligible
Assets, provided that any such expenditures were made not more than 180
--------
days prior to the consummation of such Asset Sale and were made in
contemplation of such Asset Sale and for the purpose of replacing the
assets to be disposed of in such Asset Sale; or
(iv) to reimburse the Company or its Subsidiaries for
expenditures made, and costs incurred, to repair, rebuild, replace or
restore property subject to loss, damage or taking to the extent that the
Net Proceeds consist of insurance proceeds received on account of such
loss, damage or taking.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Revolving Debt or otherwise invest such Net Proceeds
temporarily in Cash Equivalents.
(c) Any Net Proceeds from Asset Sales (other than Exempt Asset Sales)
that are not applied as provided in paragraph (b) of this Section 4.08 within
365 days after the consummation of such an Asset Sale will be deemed to
constitute "Excess Proceeds."
(d) When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all Holders (an "Asset
Sale Offer"), to purchase, on a pro rata basis, the principal amount of Notes
equal in amount to the Excess Proceeds (and not just the amount thereof that
exceeds $5.0 million) (the "Asset Sale Offer Amount"), at a purchase price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon to the date of purchase (subject
to the right of each Holder or record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date), in accordance with the
procedures set forth in this Indenture, and in accordance with the following
standards:
(i) If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis, based on the principal amount of
--------
Notes tendered, with such adjustments as may be deemed appropriate by the
Trustee, so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased.
45
<PAGE>
(ii) If the aggregate principal amount of Notes tendered pursuant to
such Asset Sale Offer is less than the Excess Proceeds, the Company may use
any remaining Excess Proceeds following the completion of the Asset Sale
Offer for general corporate purposes (subject to the other provisions of
this Indenture).
Upon completion of an Asset Sale Offer, the amount of Excess Proceeds
then required to be otherwise applied in accordance with this covenant shall be
reset to zero, subject to any subsequent Asset Sale.
(e) Within 30 calendar days after the date the amount of Excess
Proceeds exceeds $5.0 million, the Company, or the Trustee at the request and
expense of the Company, shall send to each Holder by first-class mail, postage
prepaid, a notice prepared by the Company stating:
(i) that an Asset Sale Offer is being made pursuant to this
Section 4.08 and that all Notes that are timely tendered will be accepted
for payment, subject to proration if the amount of Excess Proceeds is less
than the aggregate principal amount of all Notes timely tendered pursuant
to the Asset Sale Offer;
(ii) the Asset Sale Offer Amount, the amount of Excess Proceeds
that are available to be applied to purchase tendered Notes, and the date
Notes are to be purchased pursuant to the Asset Sale Offer (the "Asset Sale
Purchase Date"), which date shall be a Business Day no earlier than 30
calendar days nor later than 60 calendar days subsequent to the date such
notice is mailed;
(iii) that any Notes or portions thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the
Asset Sale Offer Amount with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest from and after the Asset Sale Purchase Date;
(v) that any Holder electing to have any Notes or portions
thereof purchased pursuant to the Asset Sale Offer will be required to
surrender such Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of such Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
third Business Day preceding the Asset Sale Purchase Date;
(vi) that any Holder shall be entitled to withdraw such election
if the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Asset Sale Purchase Date, a facsimile
transmission or letter, setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing such Holder's election to have such Notes or portions thereof
purchased pursuant to the Asset Sale Offer;
46
<PAGE>
(vii) that any Holder electing to have Notes purchased pursuant
to the Asset Sale Offer must specify the principal amount that is being
tendered for purchase, which principal amount must be $1,000 or an integral
multiple thereof;
(viii) if Certificated Notes have been issued hereof, that any
Holder of Certificated Notes whose Certificated Notes are being purchased
only in part will be issued new Certificated Notes equal in principal
amount to the unpurchased portion of the Certificated Note or Notes
surrendered, which unpurchased portion will be equal in principal amount to
$1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global Note
that is being purchased in part, such Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to
tender Notes and to have such Notes purchased pursuant to this Section
4.08.
If the Company requests that the Trustee provide such notice, the
Company shall provide the Trustee with the information required by this Section
4.08(e) in a timely manner and in no event more than 23 calendar days after the
date the amount of Excess Proceeds exceeds $5.0 million
(f) On the Asset Sale Payment Date, the Company shall (i) accept for
payment any Notes or portions thereof properly tendered and selected for
purchase pursuant to the Asset Sale Offer and Section 4.08(e) hereof; (ii)
irrevocably deposit with the Paying Agent, by 10:00 a.m., New York City time, on
such date, in immediately available funds, an amount equal to the Asset Sale
Offer Amount in respect of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee the Notes so accepted together
with an Officers' Certificate listing the Notes or portions thereof tendered to
the Company and accepted for payment. Subject to the provisions of Section
4.01, the Paying Agent shall promptly send by first class mail, postage prepaid,
to each Holder of Notes so accepted for payment the Asset Sale Offer Amount for
such Notes or portions thereof. The Company shall publicly announce the results
of the Asset Sale Offer on or as soon as practicable after the Asset Sale
Purchase Date. For purposes of this Section 4.08, the Trustee shall act as the
Paying Agent.
(g) Upon surrender and cancellation of a Certificated Note that is
purchased in part, the Company shall promptly issue and the Trustee shall
authenticate and deliver to the surrendering Holder of such Certificated Note, a
new Certificated Note equal in principal amount to the unpurchased portion of
such surrendered Certificated Note; provided that each such new Certificated
--------
Note shall be in a principal amount of $1,000 or an integral multiple thereof.
(h) Upon surrender of a Global Note that is purchased in part, the
Paying Agent shall forward such Global Note to the Trustee who shall make a
notation on Schedule A thereof to reduce the principal amount of such Global
Note, as provided in Section 2.05(c) hereof.
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<PAGE>
(i) Upon completion of an Asset Sale Offer (including payment of the
Asset Sale Purchase Price for accepted Notes), any surplus Excess Proceeds that
were the subject of such offer shall cease to be Excess Proceeds, and the
Company may then use such amounts for general corporate purposes (subject to
other provisions of this Indenture).
(j) If at any time any non-cash consideration received by the Company
or any Subsidiary of the Company in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Proceeds thereof shall be applied in accordance with this Section 4.08.
(k) The provisions of this Section 4.08 shall not apply to a
transaction consummated in compliance with the provisions of Section 5.01
hereof. In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted by Section 5.01 hereof, the successor
corporation shall be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this covenant,
and shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the fair market value of
such properties and assets of the Company and its Subsidiaries deemed to be sold
shall be deemed to be Net Proceeds for purposes of this Section 4.08.
(l) The Company may use Net Proceeds from Exempt Asset Sales for
general corporate purposes (subject to the other provisions of this Indenture).
(m) The Company shall comply with the requirements of Section 14(e)
of, and Rule 14e-1 under, the Exchange Act and any other securities laws or
regulations, to the extent such laws and regulations are applicable in
connection with the purchase of Notes pursuant to an Asset Sale Offer.
SECTION 4.09. Limitation on Incurrence of Indebtedness and Issuance
-----------------------------------------------------
of Preferred Stock. (a) The Company shall not, and shall not permit any of its
- ------------------
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Indebtedness) and the Company shall not issue any Disqualified Stock and shall
not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
- -------- -------
Indebtedness) and the Company may issue shares of Disqualified Stock if:
(i) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been at least 2.0 to 1.0 with respect to any incurrence on or before
December 31, 1997, or 2.25 to 1.0 with respect to any incurrence
thereafter, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued,
as the case may be, at the beginning of such four-quarter period; and
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<PAGE>
(ii) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) The foregoing limitations on the incurrence of Indebtedness will
not apply to:
(i) the incurrence by the Company of Indebtedness under the Credit
Agreement (and the incurrence by Subsidiaries of the Company of guarantees
thereof) in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
not to exceed $80.0 million, less the aggregate amount of all Net Proceeds
of Asset Sales applied to permanently reduce the outstanding amount or the
commitments with respect to such Indebtedness pursuant to Section 4.08 and
less any amount incurred pursuant to clause (vii) below;
(ii) the incurrence by the Company and any Guarantors of Indebtedness
represented by the Notes and the Note Guarantees;
(iii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations (whether or not
incurred pursuant to Sale and Leaseback Transactions), mortgage financings
or Purchase Money Obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in the business of the Company or such
Subsidiary, or any Permitted Refinancing Indebtedness thereof (provided,
--------
that the requirements of clause (ii) of the definition of Permitted
Refinancing Indebtedness need not be met for purposes of this clause
(iii)), in an aggregate principal amount not to exceed $5.0 million at any
time outstanding;
(iv) the incurrence by the Company of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund, any Indebtedness
permitted under the Fixed Charge Coverage Ratio test set forth in a Section
4.09(a)(1).
(v) the incurrence by the Company or any of its Wholly Owned
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Subsidiaries or between or among any Wholly Owned
Subsidiaries; provided, however that (a) any subsequent issuance or
-------- -------
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned Subsidiary of the
Company and (b) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary of the
Company shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations; and
(vii) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this Section 4.09 other than
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<PAGE>
Indebtedness incurred pursuant to clause (i) above in excess of $70.0
million) in an aggregate principal amount at any time outstanding not to
exceed $10.0 million.
SECTION 4.10. Limitation on Restricted Payments. (a) The Company
---------------------------------
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
(i) declare or pay any dividend or make any distribution of any
kind or character (whether in cash, securities or other property) on
account of any class of the Company's or any of its Subsidiaries' Equity
Interests or to holders thereof (including, without limitation, any payment
to stockholders of the Company in connection with a merger or consolidation
involving the Company), other than (A) dividends or distributions payable
solely in Equity Interests (other than Disqualified Stock) of the Company
or (B) dividends or distributions payable solely to the Company or any
Wholly Owned Subsidiary of the Company;
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company, any Subsidiary of the Company or any
other Affiliate of the Company (other than any such Equity Interests owned
by the Company or any Wholly Owned Subsidiary of the Company);
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of the
Company or any Guarantor that is pari passu with or subordinated to the
----------
Notes or any Note Guarantees prior to any scheduled repayment date,
mandatory sinking fund payment date or final maturity date (other than the
Notes), other than through the purchase, redemption or acquisition by the
Company of Indebtedness of the Company or any of its Subsidiaries through
the issuance in exchange therefor of Equity Interests (other than
Disqualified Stock) of the Company; or
(iv) make any Investment (other than Permitted Investments)
(all such payments and other actions set forth in clauses (i) through (iv)
above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(I) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(II) at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, the
Company would have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth under Section 4.09(a) hereof; and
(III) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments declared or made by the
Company and its Subsidiaries on or after the date of this Indenture
(excluding Restricted Payments permitted by Sections 4.10(b)(ii),
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<PAGE>
4.10(b)(iii) and 4.10(b)(iv) hereof) is less than the sum of (A) 50%
of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Indenture to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (B) 100% of the aggregate
----
net cash proceeds received by the Company from the issue or sale after
the date of this Indenture of Equity Interests of the Company or of
debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or convertible debt
securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock).
(b) The foregoing clauses (II) and (III) of Section 4.10(a) will not
prohibit:
(i) the payment of any dividend on any class of Capital Stock of
the Company or any Subsidiary of the Company within 60 days after the date
of declaration thereof, if on the date on which such dividend was declared
such payment would have complied with the provisions of this Indenture; or
(ii) the making of any Investment in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than Disqualified
Stock); provided, that any net cash proceeds that are utilized for any such
--------
Investment, and any Net Income resulting therefrom, shall be excluded from
clause (III) of Section 4.10(a); or
(iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any Disqualified Stock); provided that any net cash proceeds that are
--------
utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from
clause (III) of Section 4.10(a); or
(iv) the defeasance, redemption or repurchase of pari passu or
----------
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock); provided, that any net cash
--------
proceeds that are utilized for any such defeasance, redemption or
repurchase, and any Net Income resulting therefrom, shall be excluded from
clause (III) of Section 4.10(a); or
(v) any payment by the Company or any of its Subsidiaries
directly or through any direct or indirect parent company (A) in connection
with the repurchase of outstanding shares of Capital Stock of the Company
or GHC following the death, disability or termination of employment of
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<PAGE>
Management Stockholders and (B) of amounts required to be paid to
participants or former participants in employee benefit plans upon any
termination of employment by such participants as provided in the documents
related thereto, in an aggregate amount (for both clauses (A) and (B)) not
to exceed $1.0 million in any fiscal year (provided that any unused amount
may be carried over to any subsequent fiscal year subject to a maximum
amount of $1.5 million in any fiscal year); or
(vi) payments to GHC pursuant to a tax sharing agreement under
which the Company is allocated its proportionate share of the tax liability
of the affiliated group of corporations that file consolidated federal
income tax returns (or that file state or local income tax returns on a
consolidated basis); or
(vii) loans, advances, dividends or distributions by the Company
or any of its Subsidiaries to GHC to pay for corporate, administrative and
operating expenses in the ordinary course of business, including payment of
directors' and officers' liability insurance premiums, directors' fees, and
fees, expenses and indemnities in connection with the Acquisition and
Financing Transactions and related transactions in an aggregate amount not
to exceed $1.0 million in any fiscal year; or
(viii) (A) loans, advances, dividends or distributions by the
Company or any of its Subsidiaries to GHC not to exceed an amount necessary
to permit GHC to pay (I) its costs (including all professional fees and
expenses) incurred to comply with its reporting obligations under federal
or state laws or in connection with reporting or other obligations under
the Credit Agreement or any related collateral documents or guarantees,
(II) its expenses incurred in connection with any public offering of equity
securities which has been terminated by the board of directors of GHC, the
net proceeds of which were specifically intended to be received by or
contributed or loaned to the Company and (B) loans or advances by the
Company or any of its Subsidiaries to GHC not to exceed an amount necessary
to permit GHC to pay its interim expenses incurred in connection with any
public offering of equity securities the net proceeds of which are
specifically intended to be received by or contributed or loaned to the
Company, which, unless such offering shall have been terminated by the
board of directors of GHC, shall be repaid to the Company promptly out of
the proceeds of such offering.
(d) The amount of all Restricted Payments (other than cash) shall be
the fair market value (as determined by the Board, whose determination shall be
conclusive if evidenced by a Board Resolution) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted, setting forth the basis upon which the calculations required by this
Section 4.10 were computed and accompanied by such Board Resolution, which
calculations may be based upon the Company's latest available financial
statements.
SECTION 4.11. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
- ----------------------
52
<PAGE>
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to:
(a) pay dividends or make any other distributions to the Company or
any of its Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits; or
(b) pay any Indebtedness or other obligation owed to the Company or
any of its Subsidiaries; or
(c) make loans or advances to the Company or any of its Subsidiaries;
or
(d) sell, lease or transfer any of its properties or assets to the
Company or any of its Subsidiaries; or
(e) guarantee the obligations of the Company evidenced by the Notes
or any renewals, refinancings, exchanges, refundings or extensions thereof,
except for such encumbrances or restrictions existing under or by reason of:
(i) this Indenture and the Notes;
(ii) applicable law;
(iii) any instrument governing Acquired Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Subsidiaries as in
effect at the time of such acquisition (except to the extent such Acquired
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that the
--------
Consolidated EBITDA of such Person is not taken into account in determining
whether such acquisition was permitted by the terms of this Indenture;
(iv) any document or instrument governing Indebtedness incurred
pursuant to Section 4.09(b)(iii) hereof, provided that any such restriction
--------
contained therein relates only to the asset or assets constructed or
acquired in connection therewith;
(v) Permitted Refinancing Indebtedness of Indebtedness described
in clause (iii) of this Section 4.11(e), provided that the restrictions
--------
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced; or
(vi) any provision of the Credit Agreement as such provision is
in effect on the date of initial issuance of the Notes.
SECTION 4.12. Limitation on Layering Debt. The Company shall not
---------------------------
incur, create, issue, assume , guarantee or otherwise become liable for any
53
<PAGE>
Indebtedness that is subordinate or junior in right of payment to any Senior
Indebtedness and senior in any respect in right of payment to the Notes.
SECTION 4.13. Limitation on Liens. The Company shall not, and shall
-------------------
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any of its assets, now owned or hereafter
acquired, securing any Indebtedness other than Senior Indebtedness or
Indebtedness specified in clauses (a) or (c) of the second sentence of the
definition of "Senior Indebtedness," unless the Notes, in the case of the
Company, or the Note Guarantees, in the case of the Guarantors, are secured
equally and ratably with such other Indebtedness; provided that, if such
--------
Indebtedness is by its terms expressly subordinate to the Notes or the Note
Guarantees, the Lien securing such subordinate or junior Indebtedness shall be
subordinate and junior to the Lien securing the Notes or the Note Guarantees
with the same relative priority as such subordinated or junior Indebtedness
shall have with respect to the Notes or the Note Guarantees.
SECTION 4.14. Limitation on Ownership of and Liens on Capital Stock.
-----------------------------------------------------
The Company (a) shall not permit any Person (other than the Company or any
Wholly Owned Subsidiary of the Company) to own any Capital Stock of any
Subsidiary of the Company, and (b) shall not permit any Subsidiary of the
Company to issue Capital Stock (except to the Company or to a Wholly Owned
Subsidiary) or create, incur, assume or suffer to exist any Lien thereon, in
each case except:
(i) directors' qualifying shares;
(ii) Capital Stock issued prior to the time such Person became a
Subsidiary of the Company, provided that such Capital Stock was not issued in
anticipation of such transaction;
(iii) if such Subsidiary merges with another Subsidiary of the
Company;
(iv) if such Subsidiary ceases to be a Subsidiary of the Company (as a
result of the sale of 100% of the shares of such Subsidiary, the Net Proceeds
from which are applied in accordance with Section 4.08 hereof);
(v) Liens on Capital Stock of any Subsidiary of the Company to secure
Indebtedness incurred under the Credit Agreement or other Senior Indebtedness
incurred in compliance with the Fixed Charge Coverage Ratio test set forth in
Section 4.09 (a)(i); or
(vi) Liens on Capital Stock of any Subsidiary of the Company granted
in accordance with the provisions of Section 4.13 hereof.
SECTION 4.15. Transactions with Affiliates. The Company shall not,
----------------------------
and shall not permit any of its Subsidiaries to, directly or indirectly, in any
one transaction or a series of related transactions, sell, lease, transfer or
otherwise dispose of any of its properties, assets or services to, or make any
payment to, or purchase any property, assets or services from, or enter into or
make any agreement, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), other than Exempt
Affiliate Transactions, unless:
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(a) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Subsidiary than those that would have been
obtained in a comparable arm's length transaction by the Company or such
Subsidiary with a Person that is not an Affiliate; and
(b) the Company delivers to the Trustee (i) with respect to any
Affiliate Transaction entered into after the date of this Indenture involving
aggregate consideration in excess of $1.0 million, a Board Resolution, as set
forth in an Officer's Certificate, certifying that such Affiliate Transaction
complies with clause (a) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board, and (ii) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $5.0 million, a written opinion issued by an independent financial advisor of
national standing that such Affiliate Transaction is fair to the Company or such
Subsidiary, as the case may be, from a financial point of view.
SECTION 4.16. Reports. Whether or not required by the rules and
-------
regulations of the Commission, so long as any Notes are outstanding, the Company
shall furnish to the Holders, and file with the Trustee, within 15 days after it
is or would have been required to file such with the Commission all information,
documents and reports specified in Section 13 and Section 15(d) of the Exchange
Act; provided, however, that the Company will not be required to furnish to the
-------- --------
Holders of Notes or file with the Commission a report on Form 10-K for fiscal
1996. In addition, whether or not required by the rules and regulations of the
Commission, at any time after the Company files a registration statement with
respect to the Exchange Offer or a Shelf Registration Statement, the Company
shall file a copy of all such information and reports with the Commission for
public availability (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, for so long as any Notes remain outstanding, the
Company shall furnish to the Holders and securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act. The Company also shall comply with
the other provisions of Section 314(a) of the Trust Indenture Act.
SECTION 4.17. Sale and Leaseback Transactions. The Company shall
-------------------------------
not, and shall not cause or permit any of its Subsidiaries to, enter into any
Sale and Leaseback Transaction. Notwithstanding the foregoing, the Company or
any Subsidiary may enter into a Sale and Leaseback Transaction if:
(a) after giving pro forma effect to any such Sale and Leaseback
Transaction, the Company shall be in compliance with Sections 4.09 and 4.13
hereof;
(b) the gross cash proceeds of such Sale and Leaseback Transaction
are at least equal to the fair market value of such property (as determined by
the Board, whose determination shall be conclusive if made in good faith and
evidenced by a Board Resolution);
(c) the aggregate rent payable by the Company in respect of such Sale
and Leaseback Transaction is not in excess of the fair market rental value of
the property leased pursuant to such Sale and Leaseback Transaction; and
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(d) the Company shall apply the net cash proceeds of the sale as
provided in Section 4.08 hereof, to the extent required therein.
SECTION 4.18. Payments for Consent, Waiver or Amendment. Neither the
-----------------------------------------
Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder for or as an inducement to any consent, waiver or amendment of any
terms or provisions of the Notes, unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Notes which so consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or amendment.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
and the Guarantors will not at any time, to the extent that they may lawfully
not do so, insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company or the Guarantors from paying all or
any portion of the principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Notes as contemplated herein, wherever enacted, now or
at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture; and, to the extent that they may lawfully do so,
the Company and the Guarantors hereby expressly waive all benefit or advantage
of any such law and expressly agree that they will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.20. Compliance Certificate; Notice of Default or Event of
-----------------------------------------------------
Default. (a) The Company shall deliver to the Trustee within 120 calendar days
- -------
after the end of each fiscal year of the Company ending after the date hereof,
an Officers' Certificate stating whether or not, to the best knowledge of such
officer, the Company has complied with all conditions and covenants under this
Indenture, and, if the Company shall be in Default, specifying all such Defaults
and the nature thereof of which such officer may have knowledge.
For the purposes of this Section 4.20(a), compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) The Company shall deliver written notice to the Trustee
immediately upon any executive officer of the Company becoming aware of the
occurrence of any event which constitutes, or with the giving of notice or the
lapse of time or both would constitute, a Default or Event of Default,
describing such Default or Event of Default, its status and what action the
Company is taking or proposes to take with respect thereto.
(c) So long as not contrary to the then-current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.16 hereof shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
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their attention that would lead them to believe that the Company has violated
any provisions of Article IV or Article V hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
SECTION 4.21. Investment Company Act. None of the Company or its
----------------------
Subsidiaries shall become an investment company subject to registration under
the Investment Company Act of 1940, as amended.
SECTION 4.22. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE V
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
SECTION 5.01. Merger, Consolidation or Sale of Assets. The Company
---------------------------------------
shall not, and shall not permit any Subsidiary of the Company to, in a single
transaction or series of related transactions, consolidate or merge with or into
(other than the consolidation or merger of a Wholly Owned Subsidiary of the
Company with another Wholly Owned Subsidiary of the Company or into the Company)
(whether or not the Company or such Subsidiary is the surviving corporation), or
directly and/or indirectly through its Subsidiaries sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the properties
or assets of the Company and its Subsidiaries (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, Person or entity unless:
(a) either (i) the Company, in the case of a transaction involving
the Company, or such Subsidiary, in the case of a transaction involving a
Subsidiary of the Company, is the surviving corporation or (ii) in the case of a
transaction involving the Company or a Guarantor, the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company or such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States of America, any state thereof or
the District of Columbia and expressly assumes all the obligations of the
Company under the Notes and this Indenture or such Guarantor under the relevant
Note Guarantee and this Indenture, as the case may be, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after such transaction no Default or Event of Default
exists;
(c) in the case of a transaction involving the Company, the Company
or, if other than the Company, the corporation formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (i) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction;
provided, however, that in the case of a transaction involving a merger or
- -------- -------
consolidation between GHC and the Company in contemplation of an underwritten
57
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primary public offering of the common stock of the corporation formed by or
surviving any such merger or consolidation, the Consolidated Net Worth of such
corporation immediately after the transaction may be up to $1.0 million less
than the Consolidated Net Worth of the Company immediately preceding the
transaction, and (ii) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09 hereof;
(d) if, as a result of any such transaction, property or assets of
the Company or a Guarantor would become subject to a Lien securing Indebtedness
not excepted from the provisions of this Indenture described in Section 4.13
hereof, the Company, any such Guarantor or the surviving entity, as the case may
be, shall have secured the Notes and the relevant Note Guarantee, as required by
such provisions; and
(e) the Company shall deliver, or cause to be delivered to the
Trustee, an Officers' Certificate and, except in the case of a merger of a
Subsidiary of the Company into the Company or into a Wholly Owned Subsidiary of
the Company, an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, lease or disposition and any supplemental indenture with
respect thereto, comply with this Section 5.01 and that all conditions precedent
herein provided relating to such transaction or series of transactions have been
complied with.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted. Upon any
---------------------------------
consolidation with, or merger by the Company with and into, any other
corporation, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Property of the Company and its
Subsidiaries taken as a whole in accordance with Section 5.01 hereof, the
successor corporation formed by such consolidation or into which the Company is
merged, or the Person to which such sale, conveyance, assignment, transfer,
lease, conveyance or other disposition is made, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person has been named
as the Company herein; and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the Notes,
except for the obligation to pay the principal of, premium, if any, and interest
- ------
or Liquidated Damages, if any, on the Notes.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. The term "Event of Default,"
-----------------
wherever used herein with respect to the Notes, means any one of the following
events (whatever the reason for such event, and whether it shall be voluntary or
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involuntary, or be effected by operation of law, pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the Company fails to make any payment of interest on, or
Liquidated Damages with respect to, any Note when the same becomes due and
payable and such failure continues for a period of 30 calendar days, whether or
not such payment is prohibited by the provisions of Article X hereof; or
(b) the Company fails to make any payment of the principal or of
premium, if any, on any Note when the same becomes due and payable at Maturity,
whether or not such payment is prohibited by the provisions of Article X hereof;
or
(c) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed pursuant to
Sections 4.07, 4.08, 4.09, 4.10, 4.14 and 5.01 hereof; or
(d) the Company fails to comply with any of its other agreements or
covenants in provisions of the Notes or this Indenture and such failure
continues for 60 days after written notice by the Trustee or Holders of at least
25% of the aggregate principal amount of the Notes outstanding; or
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay principal of such Indebtedness at final maturity thereof (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
as to which there has been a Payment Default or the maturity of which has been
so accelerated, exceeds in the aggregate $10.0 million; or
(f) a final judgment or final judgments for the payment of money not
fully covered by insurance are entered by a court or courts of competent
jurisdiction against the Company or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
--------
undischarged judgments exceeds $10.0 million; or
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Subsidiary of the
Company in an involuntary case or proceeding under any Bankruptcy Law or (ii) a
decree or order (A) adjudging the Company or any Subsidiary of the Company a
bankrupt or insolvent, or (B) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of, or in respect of, the
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Company or any Subsidiary of the Company under any Bankruptcy Law, or (C)
appointing a Custodian of the Company or any Subsidiary of the Company or of any
substantial part of the Property of the Company or any Subsidiary of the
Company, or (D) ordering the winding-up or liquidation of the affairs of the
Company or any Subsidiary of the Company, and in each case, the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive calendar days; or
(h) (i) the commencement by the Company or any Subsidiary of the
Company of a voluntary case or proceeding under any Bankruptcy Law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent; or (ii) the
consent by the Company or any Subsidiary of the Company to the entry of a decree
or order for relief in respect of the Company or any Subsidiary of the Company
in an involuntary case or proceeding under any Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against the
Company or any Subsidiary of the Company; or (iii) the filing by the Company or
any Subsidiary of the Company of a petition or answer or consent seeking
reorganization or relief under any Bankruptcy Law; or (iv) the consent by the
Company or any Subsidiary of the Company to the filing of such petition or to
the appointment of or taking possession by a Custodian of the Company or any
Subsidiary of the Company or of any substantial part of the Property of the
Company or any Subsidiary of the Company, or (v) the making by the Company or
any Subsidiary of the Company of an assignment for the benefit of creditors; or
(vi) the admission by the Company or any Subsidiary of the Company in writing of
its inability to pay its debts generally as they become due; or (vii) the
approval by stockholders of the Company or any Subsidiary of the Company of any
plan or proposal for the liquidation or dissolution of the Company or any
Subsidiary of the Company; or (viii) the taking of corporate action by the
Company or any Subsidiary of the Company in furtherance of any such action; or
(i) the Note Guarantee of any Guarantor is held in any judicial
proceeding to be unenforceable or invalid or ceases for any reason to be in full
force and effect (other than in accordance with the terms of this Indenture) or
any Guarantor or any Person acting on behalf of any Guarantor denies or
disaffirms such Guarantor's obligations under its Note Guarantee (other than by
reason of a release of such Guarantor from its Note Guarantee in accordance with
the terms of this Indenture).
SECTION 6.02. Acceleration. If an Event of Default (other than an
------------
Event of Default specified in Section 6.01(g) or Section 6.01(h)) occurs and is
continuing, then and in every such case the Trustee by notice to the Company, or
the Holders of at least 25% in aggregate principal amount of all of the then
outstanding Notes by written notice to the Company and the Trustee may declare
the unpaid principal of and any accrued interest on all the Notes then
outstanding to be immediately due and payable. Upon such declaration the
principal and interest shall be due and payable immediately (together with any
premium or Liquidated Damages, if applicable). If an Event of Default specified
in Section 6.01(g) or Section 6.01(h) hereof occurs, such an amount shall ipso
----
facto become and be immediately due and payable without any declaration or other
- -----
act on the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee and the Company may rescind
and annul such acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
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(except nonpayment of principal, interest, premium or Liquidated Damages that
have become due solely because of the acceleration) have been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies. The Company covenants that if an Event
--------------
of Default specified in Section 6.01(a) or Section 6.01(b) occurs the Company
shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the
Holders, the whole amount then due and payable on the Notes for principal (and
premium, if any) and interest (and Liquidated Damages, if any) and, to the
extent that payment of such interest shall be legally enforceable, interest upon
the overdue principal (and premium, if any) and upon Defaulted Interest (and
Liquidated Damages, if any) at the rate or rates prescribed therefor in the
Notes; and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents,
counsel, accountants, experts and other consultants and all other amounts due to
the Trustee pursuant to Section 7.07 hereof.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company, each Guarantor or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the Property of the Company, each Guarantor or any other obligor upon
the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.04. Waiver of Past Defaults. The Holders of not less than
-----------------------
a majority in principal amount of the outstanding Notes may, on behalf of the
Holders of all the Notes, waive any existing Default or Event of Default and its
consequences under this Article VI, except a continuing Default or Event of
Default (a) in the payment of the principal of, premium, if any, or interest or
Liquidated Damages, if any, on any Note (except a payment default resulting from
an acceleration that has been rescinded), or (b) in respect of a covenant or
provision hereof which under Section 9.02 hereof cannot be modified or amended
without the consent of the Holder of each outstanding Note. Any such waiver may
(but need not) be given in connection with a tender offer or exchange offer for
the Notes.
SECTION 6.05. Control by Majority. The Holders of not less than a
-------------------
majority in principal amount of the outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided that
--------
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(a) such direction shall not be in conflict with any rule of law or
with this Indenture or unduly prejudicial to the rights of other Holders and
would not subject the Trustee to personal liability, and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits. No Holder shall have any right to
-------------------
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Notes;
(b) the Holders of not less than 25% in principal amount of the
outstanding Notes shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder or Holders have offered to the Trustee security or
indemnity satisfactory to the Trustee in its reasonable discretion against the
costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 30 calendar days after its receipt of such
notice, request and offer of security or indemnity has failed to institute any
such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a majority in
principal amount of the outstanding Notes;
in any event, it being understood and intended that no one or more Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all Holders.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of, premium, if any, and interest and Liquidated Damages,
if any, on the Notes held by such Holder, on or after the respective due dates
expressed in the Notes or the Redemption Dates or purchase dates provided for
therein, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall be absolute and unconditional and shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Trustee May File Proofs of Claim. In case of the
--------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceedings, or any voluntary or involuntary case under any Bankruptcy Law,
relative to the Company or any other obligor upon the Notes or the Property of
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the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of such Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise, (i) to file and prove a claim for the whole
amount of principal of, premium, if any, and interest and Liquidated Damages, if
any, owing and unpaid in respect of the Notes, to file such other papers or
documents and to take such other actions, including participating as a member or
otherwise in any official committee of creditors appointed in the matter, as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel and all other amounts due to the Trustee
pursuant to Section 7.07 hereof) and of the Holders allowed in such judicial
proceeding, and (ii) to collect and receive any moneys or other Property payable
or deliverable on any such claims and to distribute the same; and any Custodian,
in any such proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 6.09. Priorities. Any money collected by the Trustee
----------
pursuant to this Article VI shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal, premium, if any, or interest or Liquidated Damages, if
any, upon presentation of the Notes and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
7.07 hereof;
SECOND: To the payment of the amounts then due and unpaid for
principal of, premium, if any, and interest and Liquidated Damages, if any,
on the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal,
premium, if any, and interest and Liquidated Damages, if any, respectively;
and
THIRD: To the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.09. At least 15 calendar days before such
record date, the Company shall mail to each Holder and the Trustee a notice that
states such record date, the payment date and amount to be paid. The Trustee
may mail such notice in the name and at the expense of the Company.
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SECTION 6.10. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the outstanding Notes, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, premium, if any, or interest or
Liquidated Damages, if any, on any Note on or after its Stated Maturity.
SECTION 6.11. Waiver of Stay or Extension Laws. The Company (to the
--------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.12. Trustee May Enforce Claims Without Possession of the
----------------------------------------------------
Notes. All rights of action and claims under this Indenture or the Notes may be
- -----
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name, as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes.
SECTION 6.13. Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case the Company, the Trustee and the Holders shall, subject
to any determination in such proceeding, be restored severally and respectively
to their former positions hereunder, and thereafter all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 6.14. Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided in Section 2.07 hereof, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
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SECTION 6.15. Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article VI or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and shall use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and (ii) in the absence
of bad faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; provided that in the case of any such
--------
certificates or opinions that by any provision of this Indenture are
specifically required to be furnished to the Trustee, the Trustee shall examine
such certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, provided that: (i) this paragraph (c) shall not limit the effect of
--------
paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
6.05 hereof.
(d) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk of liability is
not reasonably assured to it.
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(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Article VII and to the provisions of the Trust
Indenture Act.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
-----------------
document believed by it to be genuine and to have been signed or presented by
the proper Person. Except as provided in Section 7.01(b) hereof, the Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on any
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any such agent; provided that such agent was
--------
appointed with due care by the Trustee.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided that the Trustee's conduct does not constitute willful
--------
misconduct or negligence.
(e) The Trustee shall not be charged with knowledge of any Default or
Event of Default under Sections 6.01(c), 6.01(d), 6.01(e), 6.01(f), 6.01(g),
6.01(h) or 6.01(i) hereof, of the identity of any Subsidiary or of the existence
of any Change of Control or Asset Sale unless either (i) a Trust Officer with
responsibility for the administration of this Indenture shall have actual
knowledge thereof, or (ii) the Trustee shall have received notice thereof in
accordance with Section 12.02 hereof from the Company or any Holder.
(f) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, any Paying
----------------------------
Agent or Registrar, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company, the
Guarantors or their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent or Registrar hereunder, as the case may be; provided that
--------
the Trustee must in any event comply with Section 7.10 and Section 7.11 hereof.
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SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible (a) for any
statement of the Company in this Indenture, including the recitals contained
herein, or in any document issued in connection with the sale of the Notes or in
the Notes other than the Trustee's certificate of authentication or (b) for
compliance by the Company with the Registration Rights Agreement.
SECTION 7.05. Notice of Defaults. Within 90 calendar days after the
------------------
occurrence of any Default hereunder with respect to the Notes, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the Note
Register, notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided that, except in the case of a
--------
Default in the payment of the principal of (or premium, if any) or interest (or
Liquidated Damages) on any Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Trust Officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
Holders.
SECTION 7.06. Preservation of Information; Reports by Trustee to
--------------------------------------------------
Holders. (a) The Company shall furnish or cause to be furnished to the
- -------
Trustee:
(i) semiannually, not less than 10 calendar days prior to each
Interest Payment Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of the Record Date
immediately preceding such Interest Payment Date, and
(ii) at such other times as the Trustee may request in writing,
within 30 calendar days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than 15
calendar days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar for
- -------- -------
the Notes, no such list need be furnished with respect to the Notes.
(b) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.06(a) hereof and the
names and addresses of Holders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.06(a) hereof upon receipt of a new list so furnished.
(c) Holders may communicate as provided in Section 312(b) of the
Trust Indenture Act with other Holders with respect to their rights under this
Indenture or under the Notes.
(d) Each Holder, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
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and addresses of the Holders in accordance with this Section 7.06, regardless of
the source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a request
made under this Section 7.06.
(e) Within 60 calendar days after December 31 of each year commencing
with the year 1996, the Trustee shall transmit by mail to all Holders, a brief
report dated as of such December 31 if and to the extent required under Section
313(a) of the Trust Indenture Act.
(f) The Trustee shall comply with Sections 313(b) and 313(c) of the
Trust Indenture Act.
(g) A copy of each report described in Sections 7.06(e) and (f)
hereof shall, at the time of its transmission to Holders, be filed by the
Trustee with each stock exchange, if any, upon which the Notes are then listed,
with the Commission and also with the Company. The Company shall promptly
notify the Trustee of any stock exchange upon which the Notes are listed.
SECTION 7.07. Compensation and Indemnity. (a) The Company shall pay
--------------------------
to the Trustee from time to time such compensation for its services as the
Company and the Trustee shall from time to time agree. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants, experts and other consultants. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust.
(b) The Company shall indemnify the Trustee for, and hold it harmless
against, any and all loss, liability, damage, claim or expense (including
reasonable attorneys' fees and expenses) arising out of or incurred by it in
connection with the acceptance or administration of the trust created by this
Indenture and the performance of its duties hereunder, except as set forth in
the next paragraph. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend any such claim and the Trustee shall cooperate in the defense of
such claim. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld, conditioned or delayed.
(c) The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith.
(d) To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of, premium, if any, and interest and Liquidated Damages, if any, on,
particular Notes.
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(e) The Company's payment obligations pursuant to this Section 7.07
shall survive the resignation or removal of the Trustee and discharge of this
Indenture. Subject to any other rights available to the Trustee under
applicable bankruptcy law, when the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(g) or Section 6.01(h) hereof, the
expenses are intended to constitute expenses of administration under Bankruptcy
Law.
SECTION 7.08. Replacement of Trustee. (a) No resignation or removal
----------------------
of the Trustee and no appointment of a successor Trustee pursuant to this
Article VII shall become effective until the acceptance of appointment by the
successor Trustee under this Section 7.08.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 calendar days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the outstanding Notes, delivered to the Trustee
and to the Company. A successor Trustee may be appointed by Act of the Holders
with the Company's consent. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 calendar days
after the giving of notice of removal, the Trustee being removed may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 310(b) of the
Trust Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six months,
unless the Trustee's duty to resign is stayed in accordance with the
provisions of Section 310(b) of the Trust Indenture Act; or
(ii) the Trustee shall cease to be eligible under Section 7.10
hereof and shall fail to resign after written request therefor by the
Company or by any such Holder; or
(iii) the Trustee shall become incapable of acting or a decree
or order for relief by a court having jurisdiction in the premises shall
have been entered in respect of the Trustee in an involuntary case under
any Bankruptcy Law; or a decree or order by a court having jurisdiction in
the premises shall have been entered for the appointment of a Custodian of
the Trustee or of its Property or affairs, or any public officer shall take
charge or control of the Trustee or of its Property or affairs for the
purpose of rehabilitation, conservation, winding up or liquidation; or
(iv) the Trustee shall commence a voluntary case under any
Bankruptcy Law or shall consent to the appointment of or taking possession
by a Custodian of the Trustee or its Property or affairs, or shall make an
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assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to the Notes, or (ii) subject to Section 6.10 hereof, any
Holder who has been a bona fide Holder of a Note for at least six months may, on
behalf of such Holder and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee for the Notes. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 calendar days
after the giving of notice of removal, the Trustee being removed may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by the Holders of a majority in principal amount of the outstanding
Notes delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment in
accordance with this Section 7.08, become the successor Trustee and to that
extent replace any successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and shall
have accepted appointment in the manner hereinafter provided, any Holder that
has been a bona fide Holder for at least six months may, subject to Section 6.10
hereof, on behalf of such Holder and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such resignation, removal and appointment by first-class mail,
postage prepaid, to the Holders as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee with
respect to the Notes and the address of its Corporate National Trust Office.
(g) In the event of an appointment hereunder of a successor Trustee,
each such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all Property and money held by such former
Trustee hereunder, subject to its Liens, if any, provided for in Section 7.07
hereof.
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(h) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in Section 7.08(g) hereof.
(i) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article VII and under the Trust Indenture Act.
SECTION 7.09. Successor Trustee by Merger. Any corporation into
---------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder; provided that such
--------
corporation shall be otherwise qualified and eligible under this Article VII and
under the Trust Indenture Act, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any Notes
shall have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Notes so authenticated
with the same effect as if such successor Trustee had itself authenticated such
Notes. In the event that any Notes shall not have been authenticated by such
predecessor Trustee, any such successor Trustee may authenticate and deliver
such Notes, in either its own name or that of its predecessor Trustee, with the
full force and effect which this Indenture provides for the certificate of
authentication of the Trustee.
SECTION 7.10. Eligibility; Disqualification. (a) There shall at all
-----------------------------
times be a Trustee hereunder which shall be:
(i) a corporation organized and doing business under the laws of the
United States of America, any State or Territory thereof or the District of
Columbia, authorized under such laws to exercise corporate trust powers,
and subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority; or
(ii) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000.
(b) If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 7.10, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
Neither the Company nor any Guarantor nor any of their respective Affiliates
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shall serve as Trustee hereunder. If at any time the Trustee shall cease to be
eligible to serve as Trustee hereunder pursuant to the provisions of this
Section 7.10, it shall resign immediately in the manner and with the effect
specified in this Article VII.
(c) If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
the Company shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act. Nothing herein shall prevent the Trustee from
filing with the Commission the application referred to in the penultimate
paragraph of Section 310(b) of the Trust Indenture Act.
SECTION 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding
any creditor relationship listed in Section 311(b) of the Trust Indenture Act.
A Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.
ARTICLE VIII
DEFEASANCE
SECTION 8.01. Company's Option to Effect Legal Defeasance or Covenant
-------------------------------------------------------
Defeasance. The Company may elect, at its option, at any time, to have Section
- ----------
8.02 or Section 8.03 hereof applied to the outstanding Notes (in whole and not
in part) upon compliance with the conditions set forth below in this Article
VIII. Such election shall be evidenced by a Board Resolution delivered to the
Trustee and shall specify whether the Notes are being defeased to Stated
Maturity or to a specified Redemption Date determined in accordance with the
terms of this Indenture and the Notes.
SECTION 8.02. Legal Defeasance and Discharge. Upon the Company's
------------------------------
exercise under Section 8.01 hereof of its option to have this Section 8.02
applied to the outstanding Notes (in whole and not in part), the Company and the
Guarantors shall be deemed to have been discharged from their obligations with
respect to such Notes as provided in this Section 8.02 on and after the date the
conditions set forth in Section 8.04 hereof are satisfied (hereinafter called
"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by such Notes which shall thereafter be deemed to be "outstanding"
only for the purpose of Section 8.05 hereof and the other Section of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), subject to the
following which shall survive until otherwise terminated or discharged
hereunder:
(a) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when payments are due from the trust referred to
below,
(b) the Company's obligations with respect to such Notes under
Sections 2.03, 2.04, 2.06, 2.07, 2.09, 4.02, 4.03 and 4.04 hereof,
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(c) the Company's obligations under the Registration Rights
Agreement,
(d) the rights, powers, trusts, duties and immunities of the Trustee
under this Indenture and the Company's obligations in connection therewith,
(e) Article III hereof, and
(f) this Article VIII.
Subject to compliance with this Article VIII, the Company may exercise
its option to have this Section 8.02 applied to the outstanding Notes (in whole
and not in part) notwithstanding the prior exercise of its option to have
Section 8.03 hereof applied to such Notes.
SECTION 8.03. Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.01 hereof of its option to have this Section 8.03 applied to the
outstanding Notes (in whole and not in part):
(a) the Company shall be released from its obligations under Sections
4.05 through 4.17, inclusive, and Section 5.01(c);
(b) the occurrence of any event specified in Section 6.01(c), or
Section 6.01(d) hereof, with respect to any of Section 5.01(c) or Sections 4.05
through 4.17, inclusive, shall be deemed not to be or result in an Event of
Default, in each case with respect to such Notes as provided in this Section
8.03 on and after the date the conditions set forth in Section 8.04 hereof are
satisfied (hereinafter called "Covenant Defeasance"); and
(c) the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent, declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes).
For this purpose, such Covenant Defeasance means that, with respect to
such Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Sections 6.01(c) and 6.01(d)
hereof), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document; but the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01 (e) and 6.01(f) hereof shall thereafter not
constitute Events of Default.
SECTION 8.04. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to the application of Section 8.02 or
Section 8.03 hereof to the outstanding Notes:
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(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to the benefits of the Holders, (i) cash in United States dollars, or (ii) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, cash in United States
dollars, or (iii) a combination thereof, in each case sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or any such other qualifying trustee)
to pay and discharge, the principal of, premium, if any, and any installment of
interest and Liquidated Damages on the outstanding Notes on the Stated Maturity
thereof or applicable Redemption Date, as the case may be, in accordance with
the terms of this Indenture and such Notes;
(b) In the event of an election to have Section 8.02 hereof apply to
the outstanding Notes, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable to the Trustee
stating that (i) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (ii) since the date of this Indenture,
there has been a change in the applicable Federal income tax law, in either case
(i) or (ii) to the effect that, and based thereon such opinion shall confirm
that, the Holders will not recognize income, gain or loss for Federal income tax
purposes as a result of the deposit, Legal Defeasance and discharge to be
effected with respect to such Notes and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would be the case
if such deposit, Legal Defeasance and discharge were not to occur;
(c) In the event of an election to have Section 8.03 hereof apply to
the outstanding Notes, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States reasonably acceptable to the Trustee
stating that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of the deposit and Covenant Defeasance to be
effected with respect to such Notes and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would be the case
if such deposit and Covenant Defeasance were not to occur;
(d) No Default or Event of Default with respect to the outstanding
Notes shall have occurred and be continuing at the time of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds (or the
granting of a Lien as security therefor) to be applied to such deposit) after
giving effect thereto or, with respect to a Default or Event of Default
specified in Section 6.01(g) or Section 6.01(h), any time on or prior to the
123rd calendar day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 123rd calendar day);
(e) Such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming for the purpose of this clause (e) that all Notes are in default
within the meaning of such Act);
(f) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, the Credit Agreement or
any other material agreement or instrument (other than the Indenture) to which
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the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound;
(g) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or the
Guarantors or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company, the Guarantors or others;
(h) Such Legal Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder; and
(i) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Legal Defeasance or Covenant Defeasance have been
complied with.
SECTION 8.05. Deposited Money and U.S. Government Obligations to be
-----------------------------------------------------
Held in Trust; Miscellaneous Provisions. (a) All money and U.S. Government
- ---------------------------------------
Obligations (including the proceeds thereof) deposited with the Trustee pursuant
to Section 8.04 hereof in respect of the outstanding Notes shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any such
Paying Agent as the Trustee may determine, to the Holders of such Notes, of all
sums due and to become due thereon in respect of principal and any premium and
interest and Liquidated Damages, but money so held in trust need not be
segregated from other funds except to the extent required by law. Money and
U.S. Government Obligations so held in trust are not subject to Article X
hereof. The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.04 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of outstanding Notes.
(b) Anything in this Article VIII to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon receipt
of a Company Order any money or U.S. Government Obligations held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect the Legal Defeasance or Covenant
Defeasance, as the case may be, with respect to the outstanding Notes.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any money in accordance with this Article VIII with respect to
any Notes by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations under this Indenture and such Notes from which the Company and
the Guarantors have been discharged or released pursuant to Section 8.02 or 8.03
hereof shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII with respect to such Notes, until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust pursuant
to Section 8.05 hereof with respect to such Notes in accordance with this
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Article VIII; provided that if the Company makes any payment of principal of or
--------
any premium or interest or Liquidated Damages on any such Note following such
reinstatement of its obligations, the Company shall be subrogated to the rights
(if any) of the Holders of such Notes to receive such payment from the money so
held in trust.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders. The Company, the
--------------------------
Guarantors and the Trustee may, at any time, and from time to time, without
notice to or consent of any Holder, enter into one or more indentures
supplemental hereto, in form reasonably satisfactory to the Trustee, for any of
the following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by such successor of the covenants of the Company herein and
contained in the Notes; or
(b) to add to the covenants of the Company, for the benefit of the
Holders of all of the Notes, or to surrender any right or power herein conferred
upon the Company; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; or
(e) to evidence and provide for the acceptance of appointment
hereunder of a successor Trustee; or
(f) to secure the Notes; or
(g) to cure any ambiguity herein, or to correct or supplement any
provision hereof which may be inconsistent with any other provision hereof or to
add any other provisions with respect to matters or questions arising under this
Indenture; provided that such actions shall not adversely affect the interests
--------
of the Holders in any material respect; or
(h) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act; or
(i) to evidence the agreement or acknowledgment of a Subsidiary that
it is a Guarantor for all purposes under this Indenture (including, without
limitation, Article XI hereof).
SECTION 9.02. With Consent of Holders. (a) With the consent of the
-----------------------
Holders of not less than a majority in principal amount of the outstanding Notes
(which consent may, but need not, be given in connection with any tender offer
or exchange offer for the Notes), by Act of said Holders delivered to the
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Company and the Trustee, the Company, the Guarantors and the Trustee may enter
into one or more indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders
(including Sections 4.07 and 4.08 hereof); provided that no such supplemental
--------
indenture shall, without the consent of the Holder of each outstanding Note:
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver; or
(ii) reduce the principal of or premium on or change the Stated
Maturity of any Note or alter or waive any of the provisions with respect
to the redemption of the Notes, except as provided above with respect to
Sections 4.07 and 4.08 hereof; or
(iii) reduce the rate of or change the time for payment of interest,
including Defaulted Interest, on any Note;
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest or Liquidated Damages, if any, on any
Note (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding
Notes and a waiver of the payment default that resulted from such
acceleration); or
(v) make any Note payable in money other than that stated in the
Notes; or
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders to receive payments of
principal of or premium, if any, or interest or Liquidated Damages, if any,
on the Notes; or
(vii) waive a redemption payment with respect to any Note (other than
a payment required by Section 4.07 or Section 4.08 hereof); or
(viii) modify the ranking or priority of the Notes or the Note
Guarantee of any Guarantor; or
(ix) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture other than in accordance with the terms of this
Indenture; or
(x) make any change in Sections 6.04 or 6.07 hereof or the foregoing
amendment and waiver provisions.
(b) Notwithstanding the foregoing, without the consent of the holders
of not less than a majority in principal amount of all outstanding Senior
Indebtedness, as evidenced by a certificate from their Representative under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness may
have been issued, and receipt of a certificate from the Representative of the
Senior Bank Debt that the Required Lenders (as defined in the Credit Agreement)
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have so consented, no such supplemental indenture shall make any change in
Article X, this Section 9.02(b) or Sections 8.04(f) or 11.04 hereof, if such
change would adversely affect the rights of any holder of Senior Indebtedness.
The Trustee shall request such consent by sending a notice to such
Representative in accordance with Section 10.10 hereof.
(c) It shall not be necessary for any Act of Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
(d) After an amendment or supplement under this Section or a waiver
under Section 6.04 becomes effective, the Company shall mail to the Holders a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not however, in
any way impair or affect the validity of any such amended or supplemented
indenture or waiver.
SECTION 9.03. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture under this Article IX, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of a Note theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.04. Compliance with Trust Indenture Act. Every amendment
-----------------------------------
or supplement to this Indenture or the Notes shall comply with the Trust
Indenture Act as then in effect.
SECTION 9.05. Revocation and Effect of Consents and Waivers. (a) A
---------------------------------------------
consent to an amendment, supplement or a waiver by a Holder of a Note shall bind
the Holder and every subsequent Holder of such Note or portion of such Note that
evidences the same debt as the consenting Holder's Note, even if notation of the
consent or waiver is not made on such Note; provided that any such Holder or
--------
subsequent Holder may revoke the consent or waiver as to such Holder's Note or
portion of such Note if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective pursuant to this Article IX, it shall
bind every Holder.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
calendar days after such record date.
SECTION 9.06. Notation on or Exchange of Notes. If a supplemental
--------------------------------
indenture changes the terms of a Note, the Trustee may require the Holder
thereof to deliver such Note to the Trustee. The Trustee may place an
appropriate notation on such Note regarding the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
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Company in exchange for such Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment
or supplement.
SECTION 9.07. Trustee to Execute Supplemental Indentures. The
------------------------------------------
Trustee shall execute any supplemental indenture authorized pursuant to this
Article IX if such supplemental indenture does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does, the Trustee may,
but shall not be required to, execute such supplemental indenture. In executing
any supplemental indenture, the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive, and (subject to Section 7.01
hereof) shall be fully protected in relying upon, an Officers' Certificate
(which need only cover the matters set forth in clause (a) below) and an Opinion
of Counsel provided by the Company stating that:
(a) such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent to the execution, delivery and
performance of such supplemental indenture have been satisfied;
(b) the Company and each Guarantor have all necessary corporate power
and authority to execute and deliver the supplemental indenture and the
execution, delivery and performance of such supplemental indenture have been
duly authorized by all necessary corporate action of the Company and each
Guarantor;
(c) the execution, delivery and performance of the supplemental
indenture do not conflict with, or result in the breach of or constitute a
default under any of the terms, conditions or provisions of (i) this Indenture,
(ii) the charter documents and By-Laws of the Company or any Guarantor or (iii)
any material agreement or instrument to which the Company or any Guarantor is
subject;
(d) to the best knowledge and belief of legal counsel writing such
Opinion of Counsel, the execution, delivery and performance of the supplemental
indenture do not conflict with, or result in the breach of any of the terms,
conditions or provisions of (i) any law or regulation applicable to the Company
or any Guarantor or (ii) any material order, writ, injunction or decree of any
court or governmental instrumentality applicable to the Company or any
Guarantor;
(e) such supplemental indenture has been duly and validly executed
and delivered by the Company and each Guarantor, and this Indenture together
with such supplemental indenture constitutes a legal, valid and binding
obligation of the Company and each Guarantor enforceable against the Company and
each Guarantor in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles; and
(f) this Indenture together with such amendment or supplement
complies with the Trust Indenture Act.
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ARTICLE X
SUBORDINATION
SECTION 10.01. Agreement to Subordinate. The Company agrees, and
------------------------
each Holder by accepting a Note agrees, that Obligations owing with respect to
the Note or this Indenture (other than Section 7.07 hereof) are subordinated in
right of payment, to the extent and in the manner provided in this Article X, to
the prior payment in full in cash of all Obligations in respect of Senior
Indebtedness (whether outstanding on the date hereof or hereafter incurred), and
that the subordination is for the benefit of the holders of Senior Indebtedness.
This Article X shall constitute a continuing offer to all Persons who become
holders of, or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. Liquidation; Dissolution; Bankruptcy. Upon any
------------------------------------
distribution to creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, in an assignment for the
benefit of creditors or any marshaling of the Company's assets and liabilities:
(a) holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all Obligations due in respect of Senior Indebtedness
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Indebtedness regardless of whether such
interest is an allowed claim in such proceeding) before Holders shall be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Indebtedness are paid in full in cash, any
distribution to which the Holders would be entitled shall be made to the holders
of Senior Indebtedness (except that Holders may receive and retain (i)
securities of a Person that are subordinated ("Subordinated Reorganization
Securities") to at least the same extent as the Notes to (A) Senior Indebtedness
and (B) any securities issued in exchange for Senior Indebtedness, and (ii)
payments and other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof); and
(b) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (a) above) are paid in full in cash, any distribution to
which Holders would be entitled but for this Article shall be made to holders of
Senior Indebtedness (except that Holders may receive and retain (i) Subordinated
Reorganization Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof), as their
interests may appear.
SECTION 10.03. Default on Designated Senior Indebtedness. (a) The
-----------------------------------------
Company may not make any payment upon or with respect to the Notes (other than
(i) Subordinated Reorganization Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) if:
(i) a default in the payment of any principal of, premium, if
any, or interest on, or of any regularly accruing fees constituting,
Obligations in respect of Designated Senior Indebtedness occurs and is
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continuing beyond any applicable grace period in the agreement, indenture
or other document governing such Designated Senior Indebtedness; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness which permits holders of such Designated
Senior Indebtedness as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from a Person who may give it pursuant to Section 10.10
hereof. If the Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section 10.03 unless and until at least 360 days shall have elapsed since
the first day of the effectiveness of the immediately prior Payment
Blockage Notice. No default specified in this clause (ii) that existed or
was continuing on the date of delivery of any Payment Blockage Notice to
the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice, unless such default has been cured or waived for a period
of not less than 90 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them:
(i) in the case of a default referred to in Section 10.03(a)(i),
the date upon which such default is cured or waived, or
(ii) in the case of a default referred to in Section
10.03(a)(ii) hereof, the earlier of the date on which such default is cured
or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior
Indebtedness has been accelerated,
if this Article X otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04. Acceleration of Notes. If payment of the Notes is
---------------------
accelerated because of an Event of Default, the Company shall promptly notify
holders of Senior Indebtedness of the acceleration.
SECTION 10.05. When Distribution Must be Paid Over. In the event
-----------------------------------
that the Trustee or any Holder receives any payment of any Obligations with
respect to the Notes at a time when the Trustee or such Holder, as applicable,
has actual knowledge that such payment is prohibited by Section 10.03 hereof,
such payment shall be held by the Trustee or such Holder, in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Indebtedness as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, for application to the payment
of all Obligations with respect to Senior Indebtedness remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.
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With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article X or in Section 9.02(b), and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or any other Person money or assets to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article X, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
SECTION 10.06. Notice By Company. The Company shall promptly notify
-----------------
the Trustee and the Paying Agent of any facts known to the Company that would
cause a payment of any Obligations with respect to the Notes to violate this
Article X, but failure to give such notice shall not affect the subordination of
the Notes to Senior Indebtedness as provided in this Article X.
SECTION 10.07. Subrogation. After all Senior Indebtedness is paid in
-----------
full and until the Notes are paid in full, Holders shall be subrogated to the
rights of holders of Senior Indebtedness to receive distributions applicable to
Senior Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of Senior Indebtedness. A distribution
made under this Article X to holders of Senior Indebtedness that otherwise would
have been made to Holders is not, as between the Company and Holders, a payment
by the Company on Senior Indebtedness.
SECTION 10.08. Relative Rights. This Article X defines the relative
---------------
rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture
shall:
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of, premium, if
any, on and interest and Liquidated Damages, if any, on the Notes in accordance
with their terms;
(b) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior Indebtedness;
or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
and owners of Senior Indebtedness to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article X to pay principal of,
premium, if any, on or interest or Liquidated Damages, if any, on a Note on the
due date, the failure is still a Default or Event of Default.
SECTION 10.09. Subordination May Not be Impaired by Company. No
--------------------------------------------
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any Holder or by the failure of the Company or any Holder
to comply with this Indenture.
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SECTION 10.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative. In
the event that the Company incurs any Senior Indebtedness after the date of this
Indenture, the Company shall promptly notify the Trustee of the identity of the
Representative with respect to such Senior Indebtedness.
Upon any payment or distribution of assets of the Company referred to
in this Article X, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article X.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee or agent on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee or
agent on behalf of any such holder). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article X, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article X, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such Person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such Person to
receive such payment.
SECTION 10.11. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
the provisions of this Article X or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment or distribution by the Trustee, and the
Trustee and the Paying Agent may continue to make payments on the Notes, unless
the Trustee shall have received at its Corporate National Trust Office at least
two Business Days prior to the date of such payment written notice of facts that
would cause the payment of any Obligations with respect to the Notes to violate
this Article X. Only the holders of Designated Senior Indebtedness or a
Representative thereof may give the notice. Nothing in this Article X shall
impair the claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Paying Agent may do the same with like rights.
SECTION 10.12. Authorization to Effect Subordination. Each Holder of
-------------------------------------
a Note by the Holder's acceptance thereof authorizes and directs the Trustee on
the Holder's behalf to take such action as may be necessary or appropriate to
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effectuate the subordination as provided in this Article X, and appoints the
Trustee to act as the Holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any judicial proceeding relative to the Company (or any other
obligor upon the Notes), its creditors or its property at least 30 days before
the expiration of the time to file such claim, the Representative of the
Designated Senior Indebtedness (or, if no Designated Senior Indebtedness exists,
any Representative) is hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.
ARTICLE XI
NOTE GUARANTEES; SUBORDINATION OF NOTE GUARANTEES;
RELEASE OF NOTE GUARANTEES
SECTION 11.01. Note Guarantees. (a) Subject to the provisions of
---------------
this Article XI, each Person who shall become a Guarantor shall, jointly and
severally, irrevocably and unconditionally Guarantee to each Holder and to the
Trustee on behalf of the Holders (i) the due and punctual payment of principal
of, premium, if any, interest and Liquidated Damages, if any, in full on each
Note when and as the same shall become due and payable whether at Stated
Maturity, by declaration of acceleration, in connection with a Change of Control
Offer, Asset Sale Offer or redemption, or otherwise, (ii) the due and punctual
payment of interest on the overdue principal of, premium, if any, interest and
Liquidated Damages, if any, in full on the Notes, to the extent permitted by
law, and (iii) the due and punctual performance of all other Obligations of the
Company and the other Guarantors to the Holders or the Trustee, including
without limitation the payment of fees, expenses, indemnification or other
amounts, all in accordance with the terms of the Notes and this Indenture. In
case of the failure of the Company punctually to make any such principal or
interest payment or the failure of the Company or any other Guarantor to perform
any such other Obligation, each Guarantor shall cause any such payment to be
made punctually when and as the same shall become due and payable, whether at
Stated Maturity by declaration of acceleration, in connection with a Change of
Control Offer, Asset Sale Offer or redemption or otherwise, and as if such
payment were made by the Company and to perform any such other Obligation of the
Company immediately. Each Guarantor shall pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Trustee or the Holders in
enforcing any rights under these Note Guarantees. The Note Guarantees under
this Article XI shall be guarantees of payment and not of collection.
(b) The Company hereby waives and each Guarantor shall waive
diligence, presentment, demand of payment, filing of claims with a court in the
event of merger, insolvency or bankruptcy of the Company or any other Guarantor,
any right to require a proceeding first against the Company or any other
Guarantor, protest or notice with respect to the Notes or the Indebtedness
evidenced thereby and all demands whatsoever, and covenants that the Note
Guarantees will not be discharged except by complete performance of the
Obligations contained in the Notes, in this Indenture and pursuant to the Note
Guarantees.
(c) Each Guarantor shall waive and relinquish:
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(i) any right to require the Trustee, the Holders or the Company
(each, a "Benefited Party") to proceed against the Company, the
Subsidiaries of the Company or any other Person or to proceed against or
exhaust any security held by a Benefited Party at any time or to pursue any
other remedy in any secured party's power before proceeding against such
Guarantor;
(ii) any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other Person or Persons or the
failure of a Benefited Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person
or Persons;
(iii) demand, protest and notice of any kind (except as expressly
required by this Indenture), including but not limited to notice of the
existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of any of the
Guarantors, the Company, the Subsidiaries of the Company, any Benefited
Party, or any creditor of the Guarantors, the Company or the Subsidiaries
of the Company or on the part of any other Person whomsoever in connection
with any obligations the performance of which are hereby guaranteed;
(iv) any defense based upon an election of remedies by a Benefited
Party, including but not limited to an election to proceed against any
Guarantor for reimbursement;
(v) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(vi) any defense arising because of a Benefited Party's election, in
any proceeding instituted under the Bankruptcy Law, of the application of
Section 1111(b)(2) of the Bankruptcy Law; and
(vii) any defense based on any borrowing or grant of a security
interest under Section 364 of the Bankruptcy Law.
(d) Each Guarantor shall agree that, as between such Guarantor, on
the one hand, and Holders and the Trustee, on the other hand, (i) for purposes
of the relevant Note Guarantee, the maturity of the Obligations Guaranteed by
such Note Guarantee may be accelerated as provided in Article VI,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed thereby, and (ii) in the
event of any acceleration of such Obligations (whether or not due and payable)
such Obligations shall forthwith become due and payable by such Guarantor for
purposes of such Note Guarantee.
(e) The Note Guarantees shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of principal of, premium, if any, or interest or Liquidated Damages, if any, on
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any of the Notes is rescinded or must otherwise be returned by the Holders or
the Trustee upon the insolvency, bankruptcy or reorganization of the Company or
any of the Guarantors, all as though such payment had not been made.
(f) Each Guarantor shall be subrogated to all rights of the Holders
against the Company in respect of any amounts paid by such Guarantor pursuant to
the provisions of the Note Guarantees or this Indenture; provided, however, that
-------- -------
a Guarantor shall not be entitled to enforce or to receive any payments until
the principal of, premium, if any, interest and Liquidated Damages, if any, on
all Notes issued hereunder shall have been paid in full.
(g) Each Guarantor shall specifically designate the relevant Note
Guarantee as Indebtedness of such Guarantor for purposes of this Indenture.
SECTION 11.02. Obligations of Guarantors Unconditional. Each
---------------------------------------
Guarantor shall agree that its Obligations hereunder shall be guarantees of
payment and shall be unconditional, irrespective of and unaffected by the
validity, regularity or enforceability of the Notes or this Indenture, or of any
amendment thereto or hereto, the absence of any action to enforce the same, the
waiver or consent by any Holder or by the Trustee with respect to any provisions
thereof or of this Indenture, the entry of any judgment against the Company or
any other Guarantor or any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
SECTION 11.03. Limitation of Guarantor's Liability. Each Guarantor
-----------------------------------
shall confirm, and by its acceptance hereof each Holder hereby confirms, that it
is the intention of all such parties that the Note Guarantee by such Guarantor
pursuant to its Note Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal, state or
foreign law. To effectuate the foregoing intention, the Holders hereby
irrevocably agree and each Guarantor shall agree that the Obligations of such
Guarantor under this Article XI shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under this Article XI, result in the Obligations of such Guarantor
under its Note Guarantee not constituting a fraudulent transfer or conveyance
under applicable federal, state or foreign law.
SECTION 11.04. Subordination of Note Guarantees. (a) Each Guarantor
--------------------------------
shall agree, and each Holder by accepting a Note agrees, that the Note Guarantee
of such Guarantor shall be junior and subordinated to Obligations with respect
to Senior Indebtedness of such Guarantor on the same basis that the Notes are
junior and subordinated to Obligations with respect to Senior Indebtedness of
the Company pursuant to Article X hereof. Without limiting the foregoing
sentence, (i) each Guarantor shall be permitted to make, and the Trustee and the
Holders of the Notes shall have the right to receive and/or retain, payments by
such Guarantor only at such time as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article X hereof, and
(ii) the rights and obligations of the relevant parties relative to the Note
Guarantee of such Guarantor and Senior Indebtedness of such Guarantor shall be
the same as the respective rights and obligations relative to the Notes and
Senior Indebtedness of the Company pursuant to Article X hereof.
86
<PAGE>
(b) Upon any distribution to creditors of a Guarantor in a
liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to such Guarantor or its
property, in an assignment for the benefit of creditors or any marshaling of
such Guarantor's assets and liabilities:
(i) holders of Senior Indebtedness of such Guarantor or Senior
Indebtedness of the Company shall be entitled to receive and retain payment
in full in cash of all Obligations due in respect of Senior Indebtedness of
such Guarantor or Senior Indebtedness of the Company (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness of such Guarantor or Senior Indebtedness of
the Company regardless of whether such interest is an allowed claim in such
proceeding) before Holders shall be entitled to receive any payment with
respect to the relevant Note Guarantee, and until all Obligations with
respect to Senior Indebtedness of such Guarantor and Senior Indebtedness of
the Company are paid in full in cash, any distribution to which Holders
would be entitled shall be made to holders of Senior Indebtedness of such
Guarantor or Senior Indebtedness of the Company (except that Holders may
receive and retain (i) Subordinated Reorganization Securities that are
subordinated to at least the same extent as the Note Guarantees to (A)
Senior Indebtedness of such Guarantor and (B) any securities issued in
exchange for Senior Indebtedness of such Guarantor and (ii) payments and
other distributions made from any defeasance trust pursuant to Section 8.01
hereof); and
(ii) until all Obligations with respect to Senior Indebtedness
of such Guarantor and Senior Indebtedness of the Company (as provided in
subsection (a) above) are paid in full in cash, any distribution that would
have been made under such Note Guarantee but for this Article shall be made
to holders of Senior Indebtedness of such Guarantor or Senior Indebtedness
of the Company (except that Holders may receive and retain Subordinated
Reorganization Securities and payments and other distributions made from
any defeasance trust pursuant to Section 8.01 hereof), as their interests
may appear.
(c) Such Guarantor shall not be permitted to make any payment in
respect of its Note Guarantee (other than Subordinated Reorganization Securities
and payments and other distributions made from any defeasance trust pursuant to
Section 8.01 hereof) if:
(i) a default in the payment of any principal of, premium, if
any, or interest on, or of any regularly accruing fees constituting,
Obligations in respect of Designated Senior Indebtedness of such Guarantor
or of the Company occurs and is continuing beyond any applicable grace
period in the agreement, indenture or other document governing such
Designated Senior Indebtedness of such Guarantor or of the Company; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness of such Guarantor or Designated Senior
Indebtedness of the Company which then permits holders of such Designated
Senior Indebtedness of such Guarantor or Designated Senior Indebtedness of
the Company to accelerate its maturity and the Trustee receives a Payment
Blockage Notice from a holder of Designated Senior Indebtedness of such
Guarantor or Designated Senior Indebtedness of the Company or a
87
<PAGE>
Representative thereof. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section 11.04(c) unless and until at least 360 days shall
have elapsed since the first day of the effectiveness of the immediately
prior Payment Blockage Notice. No default specified in this clause (ii)
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice, unless such default has been cured or
waived for a period of not less than 90 days.
(d) Such Guarantor shall be permitted to and shall resume payments on
and distributions in respect of its Note Guarantee upon the earlier of:
(i) in the case of a default referred to in Section 11.04(c)(i),
the date upon which such default is cured or waived, or
(ii) in the case of a default referred to in Section
11.04(c)(ii) hereof, the earlier of the date on which such default is cured
or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior
Indebtedness of such Guarantor or Designated Senior Indebtedness of the
Company has been accelerated,
if this Article XI otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 11.05. Release of Note Guarantees. In the event of a sale or
--------------------------
other disposition of all or substantially all of the assets of any Guarantor, by
way of merger, consolidation or otherwise, or a sale or other disposition of all
of the Capital Stock of any Guarantor, by way of merger, consolidation or
otherwise, such Guarantor will be released and relieved of any obligations under
its Note Guarantee; provided, in each case, that (i) such transaction is
--------
carried out pursuant to and in accordance with Section 4.08 and Section 5.01
hereof and (ii) such Guarantor is also released from its guarantee of the
Company's Obligations under the Credit Agreement and does not guarantee any
Senior Indebtedness. Upon delivery by the Company to the Trustee of an
Officers' Certificate and Opinion of Counsel, to the effect that such sale or
other disposition was made by the Company in accordance with the provisions of
this Indenture, including without limitation Section 4.08 and Section 5.01
hereof, the Trustee shall execute any documents reasonably required in order to
evidence the release of any such Guarantor from its obligations under its Note
Guarantee.
In addition, any non-Wholly Owned Subsidiary of the Company that is
released from its guarantee of the Company's Obligations under the Credit
Agreement shall also be released from its Note Guarantee so long as such
Subsidiary does not guarantee any Senior Indebtedness. Upon delivery by the
Company to the Trustee of an Officers' Certificate to the effect that such
Guarantor (i) is not a Wholly Owned Subsidiary of the Company, (ii) has been
released from its guarantee of the Company's Obligations under the Credit
Agreement, and (iii) does not guarantee any Senior Indebtedness, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any such Guarantor from its obligations under its Note Guarantee.
88
<PAGE>
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of, premium, if
any, interest and Liquidated Damages, if any, on the Notes and for the other
Obligations of the Company, such Guarantor and any other Guarantor under this
Indenture as provided in this Article XI.
SECTION 11.06. Application of Certain Terms and Provisions to
----------------------------------------------
Guarantors. (a) For purposes of any provision of this Indenture which provides
- ----------
for the delivery by any Guarantor of an Officers' Certificate or an Opinion of
Counsel, or both, the definitions of such terms in Section 1.01 hereof shall
apply to such Guarantor as if references therein to the Company were references
to such Guarantor.
(b) Any request, direction, order or demand which by any provision of
this Indenture is to be made by any Guarantor, shall be sufficient if evidenced
by a Company Order; provided that the definition of such term in Section 1.01
--------
hereof shall apply to such Guarantor as if references therein to the Company
were references to such Guarantor.
(c) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders to
or on any Guarantor may be given or served as described in Section 12.02 hereof.
(d) Upon any demand, request or application by any Guarantor to the
Trustee to take any action under this Indenture, such Guarantor shall furnish to
the Trustee such certificates and opinions as are required in Section 12.03 and
Section 12.04 hereof as if all references therein to the Company were references
to such Guarantor.
SECTION 11.07. Guarantors. The Company shall cause each Person that
----------
becomes a Guarantor after the date of this Indenture to execute and deliver to
the Trustee, promptly upon becoming a Guarantor, (a) a supplemental indenture
in form and substance satisfactory to the Trustee pursuant to which such Person
agrees and acknowledges that it is a Guarantor for all purposes of this
Indenture (including, without limitation, Article X hereof) and which subjects
such Person to the provisions of this Indenture as a Guarantor, and (b) an
Opinion of Counsel to the effect that such supplemental indenture has been duly
authorized and executed by such Person and constitutes the legal, valid, binding
and enforceable obligation of such Person (subject to such customary exceptions
concerning fraudulent conveyance laws, creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. If and to the extent
----------------------------
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the Trust Indenture Act, such imposed duties or incorporated provision shall
control.
89
<PAGE>
SECTION 12.02. Notices. (a) Any notice or communication shall be in
-------
writing and any such notice may be given by first class mail, postage prepaid or
courier service, addressed as follows: if to the Company, or any Guarantor:
c/o Gorges/Quik to Fix Foods, Inc., 209 Range Road, Garland, Texas 75041,
Attention: President, with copies to CGW Southeast Partners III, L.P., Suite
210, Twelve Piedmont Center, Atlanta, Georgia 30305, Attention: William A.
Davies and to Alston & Bird, One Atlantic Center, 1201 West Peachtree Street,
Atlanta, Georgia 30309-3424, Attention: H. Sadler Poe; if to the Trustee: IBJ
Schroder Bank & Trust Company, One State Street, New York, New York 10004,
Attention: Corporate Trust Administration, and any such notice or communication
shall be effective when delivered or received or, if mailed, five days after
deposit in the United States mail with proper postage for first class mail
prepaid.
(b) The Company, a Guarantor or the Trustee, by notice to the others,
may designate additional or different addresses for subsequent notices or
communications. Any notice or communication mailed to a Holder shall be sent to
the Holder by first-class mail, postage prepaid, at the Holder's address as it
appears in the Note Register and shall be duly given if so sent within the time
prescribed. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed to the Company, the Trustee or a Holder in the
manner provided above, it is duly given, whether or not the addressee receives
it. In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give notice by mail to Holders,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
(c) Any notice or communication delivered to the Company under the
provisions herein shall constitute notice to the Guarantors.
SECTION 12.03. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee upon request: (a) an Officers' Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and (b) an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 12.04. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture (other than pursuant to Section 4.20 hereof)
shall include: (a) a statement that the individual making such certificate or
opinion has read such covenant or condition; (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based; (c) a statement
that, in the opinion of such individual, such person has made such examination
or investigation as is necessary to enable such person to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and (d) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
90
<PAGE>
SECTION 12.05. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Holders, and any
Registrar and Paying Agent may make reasonable rules for their functions;
provided that no such rule shall conflict with terms of this Indenture or the
- --------
Trust Indenture Act.
SECTION 12.06. Payments on Business Days. If a payment hereunder is
-------------------------
scheduled to be made on a date that is not a Business Day payment shall be made
on the next succeeding day that is a Business Day, and no interest shall accrue
with respect to that payment during the intervening period. If a regular record
date is a date that is not a Business Day, such record date shall not be
affected.
SECTION 12.07. Governing Law, Submission to Jurisdiction.
-----------------------------------------
(a) THIS INDENTURE, THE NOTE GUARANTEES AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(b) The Company hereby (i) agrees that any suit, action or proceeding
against it arising out of or relating to this Indenture or the Notes, as the
case may be, may be instituted in any Federal or state court sitting in The City
of New York, (ii) waives, to the extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding, and any claim that any suit, action or proceeding in
such a court has been brought in an inconvenient forum, (iii) irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding, (iv) agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding upon each and
may be enforced in the courts of the jurisdiction of which each is subject,
respectively, by a suit upon judgment, (v) agrees that service of process by
mail to the addressed specified in Section 12.02 hereof shall constitute
personal service of such process on it in any such suit, action or proceeding.
SECTION 12.08. No Recourse Against Others. No director, officer,
--------------------------
employee, incorporator or stockholder of the Company, as such, shall have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Company. No director, officer, employee,
incorporator or stockholder of any Guarantor, as such, shall have any liability
for any obligations of any Guarantor under its Note Guarantee or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of such Guarantor. By accepting a Note, each Holder
waives and releases all such liability (but only such liability) as part of the
consideration for issuance of such Note to such Holder.
SECTION 12.09. Successors. All agreements of the Company in this
----------
Indenture and the Notes shall bind its successors and assigns whether so
expressed or not. All agreements of the Trustee in this Indenture shall bind
its successors and assigns whether so expressed or not.
91
<PAGE>
SECTION 12.10. Counterparts. This Indenture may be executed in any
------------
number of counterparts and by the parties thereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 12.11. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 12.12. Severability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.13. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Company and each Guarantor will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purposes of this Indenture.
92
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
GORGES/QUIK-TO-FIX FOODS,
as Issuer
By /s/ James A. O'Donnell
------------------------------
Name: James A. O'Donnell
-----------------------------
Title: President
----------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By /s/ Max Volmar
--------------------------------
Name: Max Volmar
------------------------------
Title: Vice President
----------------------------
93
<PAGE>
STATE OF GEORGIA )
) SS.:
COUNTY OF DEKALB )
On the 25th day of November, 1996, before me personally came James A.
O'Donnell, to me known, who, being by me duly sworn, did depose and say that he
is President of Gorges/Quik-to-Fix-Foods, Inc., one of the corporations
described in and which executed the foregoing instrument, and that he signed his
name thereto by authority of the Board of Directors of such corporation.
/s/ Frankie L. Simmons
-------------------------------
Notary Public
State of Georgia
My commission expires 8/3/99
[Seal]
94
<PAGE>
EXHIBIT A
FORM OF INITIAL GLOBAL NOTE
---------------------------
FACE OF INITIAL GLOBAL NOTE
---------------------------
GORGES/QUIK-TO-FIX FOODS, INC.
No.
---- CUSIP
No. 382883AA4
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY
OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH
THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO GORGES/QUIK-TO-FIX FOODS, INC. OR A
SUCCESSOR THEREOF OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF INTERESTS IN
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE, DATED AS OF
NOVEMBER 25, 1996 AMONG GORGES/QUIK-TO-FIX FOODS, INC., AS ISSUER, AND IBJ
SCHRODER BANK & TRUST COMPANY AS TRUSTEE, PURSUANT TO WHICH THIS NOTE WAS
ISSUED.
GLOBAL NOTE
REPRESENTING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered assigns, the
principal sum indicated on Schedule A hereof, on December 1, 2006.
Interest Payment Dates: June 1 and December 1, commencing June
1, 1997.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
<PAGE>
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
IN WITNESS WHEREOF, Gorges/Quik-to-Fix Foods, Inc. has caused this
Note to be duly executed under its corporate seal.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
-------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
------------------
Dated:
-------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
----------------------------------------
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
-------------------------------------
Authorized Signatory
A-3
<PAGE>
REVERSE SIDE OF INITIAL GLOBAL NOTE
GORGES/QUIK-TO-FIX FOODS, INC.
GLOBAL NOTE
REPRESENTING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
1. Indenture.
---------
This Note is one of a duly authorized issue of debt securities of the
Company (as defined below) designated as its 11 1/2% Senior Subordinated Notes
Due 2006" (herein called the "Notes") limited in aggregate principal amount to
$100,000,000, issued under an indenture dated as of November 25, 1996 (as
amended or supplemented from time to time, the "Indenture") between the Company,
as issuer, and IBJ Schroder Bank & Trust Company as trustee (the "Trustee,"
which term includes any successor trustee under the Indenture). The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
of Notes are referred to the Indenture and such Act for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Guarantors, if any, the Trustee and each Holder and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
summary of the terms of this Note contained herein does not purport to be
complete and is qualified by reference to the Indenture. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture shall
control. All capitalized terms used in this Note which are not defined herein
shall have the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Company's ability to
incur additional indebtedness and issue preferred stock, pay dividends or make
certain other restricted payments, incur liens to secure pari passu or
subordinated indebtedness, sell stock of Subsidiaries, apply net proceeds from
certain asset sales, merge or consolidate with any other person, sell, assign,
transfer, lease, convey or otherwise dispose of substantially all of the assets
of the Company, enter into certain transactions with affiliates or incur
indebtedness that is subordinate in right of payment to any Senior Indebtedness
and senior in right of payment to the Notes.
A-4
<PAGE>
2. Principal and Interest.
----------------------
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay the principal
amount set forth on Schedule A of this Note to the Holder hereof on December 1,
2006.
The Company shall pay interest at a rate of 11 1/2% per annum, from
November 25, 1996 or from the most recent Interest Payment Date thereafter to
which interest has been paid or duly provided for, semiannually in arrears on
June 1 and December 1 of each year, commencing on June 1, 1997, in cash, to the
Holder hereof until the principal amount hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, subject to certain exceptions provided in the
Indenture, be paid to the Person in whose name this Note (or the Note in
exchange or substitution for which this Note was issued) is registered at the
close of business on the Record Date for interest payable on such Interest
Payment Date. The Record Date for any interest payment is the close of business
on May 15 or November 15, as the case may be, whether or not a Business Day,
immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.11 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in a Registered Exchange Offer prior to the
Record Date for the first Interest Payment Date following such exchange, accrued
and unpaid interest, if any, on this Note, up to but not including the date of
issuance of the New Note or New Notes issued in exchange for this Note, shall be
paid on the first Interest Payment Date for such New Note or New Notes to the
Holder or Holders of such New Note or New Notes on the first Record Date with
respect to such New Note or New Notes. If this Note is exchanged in a
Registered Exchange Offer subsequent to the Record Date for the first Interest
Payment Date following such exchange but on or prior to such Interest Payment
A-5
<PAGE>
Date, then any such accrued and unpaid interest with respect to this Note and
any accrued and unpaid interest on the New Note or New Notes issued in exchange
for this Note, through the day before such Interest Payment Date, shall be paid
on such Interest Payment Date to the Holder of this Note on such Record Date.
To the extent lawful, the Company shall pay interest on overdue
principal, overdue premium, Defaulted Interest and overdue Liquidated Damages
(without regard to any applicable grace period) at the interest rate borne on
this Note. The Company's obligation pursuant to the previous sentence shall
apply whether such overdue amount is due at its Stated Maturity, as a result of
the Company's obligations pursuant to Section 3.05, Section 4.07 or Section 4.08
of the Indenture, or otherwise.
3. Registration Rights; Liquidated Damages.
---------------------------------------
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated November 25, 1996, between the Company and
the Initial Purchasers (the "Registration Rights Agreement"), which agreement is
attached to the Indenture as Exhibit J thereto. Such benefits include the right
of the Holder to receive Liquidated Damages in the event of a failure on the
part of the Company to comply with certain registration covenants, as provided
in Section 4 of the Registration Rights Agreement.
4. Method of Payment.
-----------------
The Company, through the Paying Agent, shall pay interest on this Note
to the registered Holder of this Note, as provided above. The Holder must
surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal, premium, if any, and interest and Liquidated
Damages, if any, in money of the United States of America that at the time of
payment is legal tender for payment of all debts public and private. Principal,
premium, if any, and interest and Liquidated Damages, if any, shall be paid by
checks, mailed to the registered Holders at their registered addresses; provided
that all payments with respect to Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer immediately available funds to the accounts specified by the Holders
thereof.
A-6
<PAGE>
5. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar under
the Indenture. The Company may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Company or any of its Affiliates may
act as Paying Agent or Registrar; provided that if the Company or such Affiliate
--------
is acting as Paying Agent, the Company or such Affiliate shall segregate all
funds held by it as Paying Agent and hold them in trust for the benefit of the
Holders or the Trustee.
6. Note Guarantees.
---------------
There are currently no Note Guarantees. This Note may become entitled
to the benefits of future Note Guarantees to be made by each future direct or
indirect Subsidiary of the Company (each singularly, a "Guarantor" and together,
the "Guarantors"). Each Guarantor will, irrevocably and unconditionally,
jointly and severally, guarantee on a senior subordinated basis the punctual
payment when due, whether at Stated Maturity, by acceleration, in connection
with a Change of Control Offer, an Asset Sale Offer or redemption, or otherwise,
of all obligations of the Company under the Indenture and this Note, whether for
payment of principal of, premium, if any, interest or Liquidated Damages, if
any, on the Notes, expenses, indemnification or otherwise. A Guarantor shall be
released from its Note Guarantee upon the terms and subject to the conditions
set forth in the Indenture.
7. Subordination.
-------------
This Note is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all existing and future Senior
Indebtedness. The Company agrees, and each Holder by accepting a Note agrees,
to the subordination provisions set forth in the Indenture, authorizes the
Trustee to give them effect and appoints the Trustee as attorney-in-fact for
such purpose.
A-7
<PAGE>
8. Redemption.
----------
The Notes are not redeemable at the option of the Company prior to
December 1, 2001. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 calendar days' prior notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the applicable Redemption
Date (subject to the right of each Holder of record on the relevant Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the twelve-month period beginning December 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
2001 105.750%
2002 103.833%
2003 101.917%
2004 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 1999,
the Company, at its option, may redeem the Notes, in part, with the net proceeds
of a Public Equity Offering made by the Company or of a capital contribution
made by GHC to the common equity capital of the Company with the net proceeds of
a Public Equity Offering made by GHC, at the redemption prices (expressed as
percentages of the principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on December 1 of the years
indicated below; provided, however, that after any such redemption the aggregate
--------- -------
principal amount of the Notes outstanding must equal at least 65% of the
aggregate original principal amount of the Notes.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
1996 111.50%
1997 110.75%
1998 110.00%
The Notes are not subject to any sinking fund.
</TABLE>
A-8
<PAGE>
9. Notice of Redemption.
--------------------
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Company shall send, or cause to be sent, a notice of
redemption, by first-class mail, postage prepaid, to Holders of Notes to be
redeemed at the addresses of such Holders as they appear in the Note Register.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed by such method as the Trustee
shall deem fair and appropriate and that complies with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis; provided that the
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000 (Notes in denominations of $1,000 or less may be redeemed only in whole).
If any Note is redeemed subsequent to a Record Date with respect to any Interest
Payment Date specified above and on or prior to such Interest Payment Date, then
any accrued interest will be paid on such Interest Payment Date to the Holder of
the Note on such Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the applicable
Redemption Date and certain other conditions are satisfied, interest on the
Notes or portions thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
10. Repurchase at the Option of Holders upon Change of Control.
----------------------------------------------------------
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Company to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
A-9
<PAGE>
Within 30 calendar days after the date of any Change of Control, the
Company shall send, or cause to be sent, by first-class mail, postage prepaid, a
notice regarding the Change of Control Offer to each Holder. The Holder of this
Note may elect to have this Note or a portion hereof in an authorized
denomination purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below and tendering this Note pursuant to the Change
of Control Offer. Unless the Company defaults in the payment of the Change of
Control Purchase Price with respect thereto, all Notes or portions thereof
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing
Change of Control Offers, but in any event within 30 calendar days following a
Change of Control, the Company shall either repay all outstanding Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Indebtedness to permit the repurchase of Notes
required by the provisions of the Indenture governing Change of Control Offers.
11. Repurchase at the Option of Holders upon Asset Sale.
---------------------------------------------------
If at any time the Company or any Subsidiary engages in any Asset
Sale, as a result of which the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company shall, within 30 calendar days of the date the amount of
Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds to
make an offer to purchase from all Holders of Notes, on a pro rata basis, Notes
in an aggregate principal amount equal in amount to the then-existing Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date. Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for general corporate
purposes.
A-10
<PAGE>
Within 30 calendar days of the date the amount of Excess Proceeds
exceeds $5.0 million, the Company shall send, or cause to be sent, by first-
class mail, postage prepaid, a notice regarding the Asset Sale Offer to each
Holder. The Holder of this Note may elect to have this Note or a portion hereof
in an authorized denomination purchased by completing the form entitled "Option
of Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale Offer. Unless the Company defaults in the payment of the Asset
Sale Purchase Price with respect thereto, all Notes or portions thereof selected
for payment pursuant to the Asset Sale Offer will cease to accrue interest from
and after the Asset Sale Purchase Date.
12. The Global Note.
---------------
So long as this Global Note is registered in the name of the
Depository or its nominee, members of, or participants in, the Depository
("Agent Members") shall have no rights under the Indenture with respect to this
Global Note held on their behalf by the Depository or the Trustee as its
custodian, and the Depository may be treated by the Company, the Guarantors, if
any, the Trustee and any agent of the Company, the Guarantors, if any, or the
Trustee as the absolute owner of this Global Note for all purposes.
Notwithstanding the foregoing, nothing herein shall (i) prevent the Company, the
Guarantors, if any, the Trustee or any agent of the Company or the Trustee, from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or (ii) impair, as between the Depository and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder.
The Holder of this Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in this Global Note through Agent Members, to take any action which a
Holder is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company, a Change
of Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an
exchange for Certificated Notes, this Global Note is redeemed, repurchased or
exchanged in part, this Global Note shall be surrendered by the Holder thereof
to the Trustee who shall cause an adjustment to be made to Schedule A hereof so
that the principal amount of this Global Note will be equal to the portion not
A-11
<PAGE>
redeemed, repurchased or exchanged and shall thereafter return this Global Note
to such Holder; provided that this Global Note shall be in a principal amount of
--------
$1,000 or an integral multiple of $1,000.
13. The Registered Exchange Offer.
-----------------------------
Any Initial Notes represented by this Global Note that are presented
to the Registrar for exchange pursuant to the Registered Exchange Offer (as
defined in the Registration Rights Agreement) shall be exchanged for a Global
Note representing New Notes of equal principal amount upon surrender of this
Global Note to the Registrar in accordance with the terms of the Registered
Exchange Offer and the Indenture.
14. Transfer and Exchange.
---------------------
The transfer of this Note is subject to certain restrictions,
including those to which reference is made in the Private Placement Legend. A
Holder may transfer or exchange Notes as provided in the Indenture and subject
to certain limitations therein set forth. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes, fees and expenses required by law or permitted by the
Indenture.
15. Denominations.
-------------
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
16. Discharge and Defeasance.
------------------------
Subject to certain conditions, the Company may, at any time, terminate
some or all of the obligations of the Company and each Guarantor, if any, under
the Notes, each Note Guarantee, if any, and the Indenture if the Company
irrevocably deposits in trust with the Trustee cash or U.S. Government
Obligations for the payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes to redemption or maturity, as the case
may be.
A-12
<PAGE>
17. Amendment, Waiver.
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any Default and its consequences may be waived
with the written consent of the Holders of at least a majority in principal
amount of the outstanding Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder, the Company and the Trustee may
amend the Indenture or the Notes (i) to evidence the succession of another
Person to the Company and the assumption by such successor of the covenants of
the Company under the Indenture and contained in the Notes; (ii) to add to the
covenants of the Company, for the benefit of the Holders of all of the Notes, or
to surrender any right or power conferred on the Company under the Indenture;
(iii) to add any additional Events of Default; (iv) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (v) to
evidence and provide for the acceptance of appointment under the Indenture of a
successor Trustee; (vi) to secure the Notes; (vii) to cure any ambiguity in the
Indenture, or to correct or supplement any provision in the Indenture which may
be inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Indenture, provided that
such actions shall not adversely affect the interests of the Holders of Notes in
any material respect; (viii) to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (ix) to evidence the agreement or acknowledgment of a
Subsidiary that it is a Guarantor for all purposes under the Indenture
(including, without limitation, Article XI thereof).
18. Defaults and Remedies.
---------------------
Under the Indenture, Events of Default include: (i) a default for 30
days in the payment when due of interest on, or Liquidated Damages with respect
to, the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company to observe or perform certain
covenants, conditions, agreements or other provisions of the Indenture or this
Note (and, in the case of certain covenants, agreements or other provisions,
such failure has continued for 60 calendar days after written notice by the
A-13
<PAGE>
Trustee or the Holders of at least 25% in principal amount of the Notes); (iv)
default in the payment of Indebtedness of the Company or any of its Subsidiaries
at its final maturity or acceleration of such Indebtedness in an amount in
excess of $5.0 million in the aggregate; (v) certain events of bankruptcy or
insolvency with respect to the Company or any of its Subsidiaries; (vi) certain
undischarged judgments in excess of $5.0 million in the aggregate; or (vii) the
Note Guarantee of any Guarantor being held in any judicial proceeding to be
unenforceable or invalid or ceasing for any reason to be in full force and
effect (other than in accordance with the terms of the Indenture) or any
Guarantor or any Person acting on behalf of any Guarantor denying or
disaffirming the Note Guarantee of such Guarantor.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the Notes being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Company, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium or Liquidated Damages
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
19. Individual Rights of Trustee.
----------------------------
Subject to certain limitations imposed by the Trust Indenture Act, the
Trustee or any Paying Agent or Registrar, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
A-14
<PAGE>
the Company, the Guarantors, if any, or its or their Affiliates with the same
rights it would have if it were not Trustee, Paying Agent or Registrar, as the
case may be, under the Indenture.
20. No Recourse Against Certain Others.
----------------------------------
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or any such Guarantor under the Notes, the Note Guarantees, if
any, or the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation, solely by reason of its status as a
director, officer, employee, incorporator or stockholder of the Company or any
such Guarantor. By accepting a Note, each Holder waives and releases all such
liability (but only such liability) as part of the consideration for issuance of
such Note to such Holder.
21. Authentication.
--------------
This Note shall not be valid until the Trustee or an authenticating
agent manually signs the certificate of authentication on the other side of this
Note.Abbreviations.Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
23. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-15
<PAGE>
24. Governing Law.
-------------
THE INDENTURE, ANY NOTE GUARANTEES AND THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Note. Requests may be made to:
Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
Attention: President
A-16
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$ . The following decreases/increase in the principal amount in
------------
denominations of $1,000 or integral multiples thereof at maturity of this Note
have been made:
<TABLE>
<CAPTION>
Total
Principal
Amount at
Maturity Notation
Decrease in Increase in Following Made by
Date of Principal Principal such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
</TABLE>
A-17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
</TABLE>
A-18
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells, assigns
---------------------------
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------------------------------------
| |
| |
- ------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint
--------------------------------
Attorney to transfer this Note on the Security Register, with full power of
substitution.
Dated:
---------------
- ----------------------------------- ----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Note in every particular, without
alteration or any change whatsoever.
A-19
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
the entire principal amount
$ ($1,000 in principal amount or an integral multiple
----------------
thereof) of this Note repurchased by the Company. The undersigned hereby
directs the Trustee or Paying Agent to pay it or
-------------------------
an amount in cash equal to 101% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Change of Control Payment Date.
In connection with the Asset Sale Offer made pursuant to Section 4.08 of
the Indenture, the undersigned hereby elects to have
the entire principal amount $ ($1,000 in principal amount
----------------
or an integral multiple thereof) of this Note repurchased by the Company.
The undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 100% of the
-------------------------------
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Asset Sale
Purchase Date.
Dated:
---------------
A-20
<PAGE>
- ------------------------------------- ----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
A-21
<PAGE>
EXHIBIT B
FORM OF INITIAL CERTIFICATED NOTE
---------------------------------
FACE OF INITIAL CERTIFICATED NOTE
---------------------------------
GORGES/QUIK-TO-FIX FOODS, INC.
No. CUSIP No.
---- ------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO
WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
11 1/2% SENIOR SUBORDINATED NOTE DUE 2006
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation,
for value received, hereby promises to pay to , or its registered
--------
assigns, the principal amount of , on December 1, 2006.
------
Interest Payment Dates: June 1 and December 1, commencing
June 1, 1997.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been
duly executed by the Trustee referred to on the reverse hereof by manual
signature, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purposes.
IN WITNESS WHEREOF, Gorges/Quik-to-Fix Foods, Inc. has
caused this Note to be duly executed under its corporate seal.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
---------------------------------
Name:
Title:
[Corporate Seal]
Attest:
----------------------
Dated:
----------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
---------------------------------------,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:
-------------------------------------
Authorized Signatory
B-2
<PAGE>
REVERSE SIDE OF INITIAL CERTIFICATED NOTE
GORGES/QUIK-TO-FIX FOODS, INC.
11 1/2% SENIOR SUBORDINATED NOTE DUE 2006
1. Indenture.
This Note is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "11 1/2% Senior
Subordinated Notes Due 2006" (herein called the "Notes") limited in aggregate
principal amount to $100,000,000, issued under an indenture dated as of November
25, 1996 (as amended or supplemented from time to time, the "Indenture") between
the Company, as issuer and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and such Act for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, if any, the Trustee and each Holder and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
summary of the terms of this Note contained herein does not purport to be
complete and is qualified by reference to the Indenture. To the extent permitted
by applicable law, in the event of any inconsistency between the terms of this
Note and the terms of the Indenture, the terms of the Indenture shall control.
All capitalized terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Company's
ability to incur additional indebtedness and issue preferred stock, pay
dividends or make certain other restricted payments, incur liens to secure pari
passu or subordinated indebtedness, sell stock of Subsidiaries, apply net
proceeds from certain asset sales, merge or consolidate with any other person,
sell, assign, transfer, lease, convey or otherwise dispose of substantially all
of the assets of the Company, enter into certain transactions with affiliates or
incur indebtedness that is subordinate in right of payment to any Senior
Indebtedness and senior in right of payment to the Notes.
B-3
<PAGE>
2. Principal and Interest.
----------------------
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay the principal
amount of to the Holder hereof on December 1, 2006.
-------------
The Company shall pay interest at a rate of 11 1/2% per
annum, from November 25, 1996 or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, semiannually in
arrears on June 1 and December 1 of each year, commencing on June 1, 1997, in
cash, to the Holder hereof until the principal amount hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued) is registered
at the close of business on the Record Date for interest payable on such
Interest Payment Date. The Record Date for any interest payment is the close of
business on May 15 or November 15, as the case may be, whether or not a Business
Day, immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.11 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is exchanged in a Registered Exchange Offer,
prior to the Record Date for the first Interest Payment Date following such
exchange, accrued and unpaid interest, if any, on this Note, up to but not
including the date of issuance of the New Note or New Notes issued in exchange
for this Note, shall be paid on the first Interest Payment Date for such New
Note or New Notes to the Holder or Holders of such New Note or New Notes on the
first Record Date with respect to such New Note or New Notes. If this Note is
exchanged in a Registered Exchange Offer subsequent to the Record Date for the
first Interest Payment Date following such exchange but on or prior to such
B-4
<PAGE>
Interest Payment Date, then any such accrued and unpaid interest with respect to
this Note and any accrued and unpaid interest on the New Note or New Notes
issued in exchange for this Note, through the day before such Interest Payment
Date, shall be paid on such Interest Payment Date to the Holder of this Note on
such Record Date.
To the extent lawful, the Company shall pay interest on
overdue principal, overdue premium, Defaulted Interest and overdue Liquidated
Damages (without regard to any applicable grace period) at the interest rate
borne on this Note. The Company's obligation pursuant to the previous sentence
shall apply whether such overdue amount is due at its Stated Maturity, as a
result of the Company's obligations pursuant to Section 3.05, Section 4.07 or
Section 4.08 of the Indenture, or otherwise.
3. Registration Rights; Liquidated Damages.
---------------------------------------
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated November 25, 1996, between the Company and
the Initial Purchaser (the "Registration Rights Agreement"), which agreement is
attached to the Indenture as Exhibit J thereto. Such benefits include the right
of the Holder to receive Liquidated Damages in the event of a failure on the
part of the Company to comply with certain registration covenants, as provided
in Section 4 of the Registration Rights Agreement.
4. Method of Payment.
-----------------
The Company, through the Paying Agent, shall pay interest on
this Note to the registered Holder of this Note, as provided above. The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal, premium, if any, and interest and Liquidated
Damages, if any, in money of the United States of America that at the time of
payment is legal tender for payment of all debts public and private. Principal,
premium, if any, and interest and Liquidated Damages, if any, shall be paid by
check, mailed to the registered Holders at their registered addresses; provided
that all payments with respect to Notes that the Holders of which have given
wire transfer instructions to the Company, will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
B-5
<PAGE>
5. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar
under the Indenture. The Company may, upon written notice to the Trustee,
appoint and change any Paying Agent or Registrar. The Company or any of its
Affiliates may act as Paying Agent or Registrar; provided that if the Company or
--------
such Affiliate is acting as Paying Agent, the Company or such Affiliate shall
segregate all funds held by it as Paying Agent and hold them in trust for the
benefit of the Holders or the Trustee.
6. Note Guarantees.
---------------
There are currently no Note Guarantees. This Note may become
entitled to the benefits of the future Note Guarantees to be made by each future
direct or indirect Subsidiary of the Company (each singularly, a "Guarantor" and
together, the "Guarantors"). Each Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Note Guarantee upon the terms and subject
to the conditions set forth in the Indenture.
7. Subordination.
-------------
This Note is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all existing and future Senior
Indebtedness. The Company agrees, and each Holder by accepting a Note agrees, to
the subordination provisions set forth in the Indenture, authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
8. Redemption.
----------
The Notes are not redeemable at the option of the Company
prior to December 1, 2001. Thereafter, the Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 calendar days' prior notice, at the redemption prices (expressed as
B-6
<PAGE>
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon, and Liquidated Damages, if any, to the applicable Redemption
Date (subject to the right of each Holder of record on the relevant Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the twelve-month period beginning December 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 105.750%
2002 103.833%
2003 101.917%
2004 and 100.000%
thereafter
</TABLE>
Notwithstanding the foregoing, at any time prior to December
1, 1999, the Company, at its option, may redeem the Notes, in part, with the net
proceeds of a Public Equity Offering made by the Company or of a capital
contribution made by GHC to the common equity capital of the Company with the
net proceeds of a Public Equity Offering made by GHC, at the redemption prices
(expressed as percentages of the principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below; provided, however, that after any such redemption the
-------- -------
aggregate principal amount of the Notes outstanding must equal at least 65% of
the aggregate original principal amount of the Notes.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996 111.50%
1997 110.75%
1998 110.00%
</TABLE>
The Notes are not subject to any sinking fund.
B-7
<PAGE>
9. Notice of Redemption.
--------------------
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company shall send, or cause to be sent, a notice
of redemption, by first-class mail, postage prepaid, to Holders of Notes to be
redeemed at the addresses of such Holders as they appear in the Note Register.
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed by such method as the Trustee
shall deem fair and appropriate and that complies with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis; provided that the
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000 (Notes in denominations of $1,000 or less may be redeemed only in whole).
If any Note is redeemed subsequent to a Record Date with respect to any Interest
Payment Date specified above and on or prior to such Interest Payment Date, then
any accrued interest will be paid on such Interest Payment Date to the Holder of
the Note on such Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the applicable
Redemption Date and certain other conditions are satisfied, interest on the
Notes or portions thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
10. Repurchase at the Option of Holders upon Change of Control.
----------------------------------------------------------
Upon the occurrence of a Change of Control, each Holder
shall have the right in accordance with the terms hereof and the Indenture to
require the Company to purchase such Holder's Notes, in whole or in part, in a
principal amount that is an integral multiple of $1,000, pursuant to a Change of
Control Offer, at a purchase price in cash equal to 101% of the principal amount
of such Notes (or portions thereof) plus accrued and unpaid interest and
Liquidated Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days after the date of any Change of
Control, the Company shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Change of Control Offer to each Holder.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
B-8
<PAGE>
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Company defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture
governing Change of Control Offers, but in any event within 30 calendar days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by the provisions of the Indenture governing Change of Control
Offers.
11. Repurchase at the Option of Holders upon Asset Sale.
---------------------------------------------------
If at any time the Company or any Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date. Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for general corporate
purposes.Within 30 calendar days of the date the amount of Excess Proceeds
exceeds $5.0 million, the Company shall send, or cause to be sent, by first-
class mail, postage prepaid, a notice regarding the Asset Sale Offer to each
Holder. The Holder of this Note may elect to have this Note or a portion hereof
in an authorized denomination purchased by completing the form entitled "Option
of Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale Offer. Unless the Company defaults in the payment of the Asset
Sale Purchase Price with respect thereto, all Notes or portions thereof selected
for payment pursuant to the Asset Sale Offer will cease to accrue interest from
and after the Asset Sale Purchase Date.
B-9
<PAGE>
12. The Registered Exchange Offer.
-----------------------------
Any Initial Notes (including this Note) that are presented to
the Registrar for exchange pursuant to the Registered Exchange Offer (as defined
in the Registration Rights Agreement) shall be exchanged for New Notes of equal
principal amount upon surrender of such Notes to the Registrar in accordance
with the terms of the Registered Exchange Offer and the Indenture.
13. Transfer and Exchange.
---------------------
The transfer of this Note is subject to certain restrictions,
including those to which reference is made in the Private Placement Legend. A
Holder may transfer or exchange Notes as provided in the Indenture and subject
to certain limitations therein set forth. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes, fees and expenses required by law or permitted by the
Indenture. The Registrar need not register the transfer or exchange of
Certificated Notes or portions thereof selected for redemption (except, in the
case of a Certificated Note to be redeemed in part, the portion of such
Certificated Note not to be redeemed) or any Certificated Notes for a period of
15 calendar days before a selection of Notes to be redeemed.
14. Denominations.
-------------
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount; provided that Initial Certificated Notes originally purchased by or
transferred to Institutional Accredited Investors shall be subject to a minimum
denomination of $250,000.
15. Discharge and Defeasance.
------------------------
Subject to certain conditions, the Company may, at any time,
terminate some or all of the obligations of the Company and each Guarantor, if
any, under the Notes, each Note Guarantee, if any, and the Indenture if the
Company irrevocably deposits in trust with the Trustee cash or U.S. Government
Obligations for the payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes to redemption or maturity, as the case
may be.
B-10
<PAGE>
16. Amendment, Waiver.
-----------------
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes
(which consent may, but need not, be given in connection with any tender offer
or exchange offer for the Notes) and (ii) any Default and its consequences may
be waived with the written consent of the Holders of at least a majority in
principal amount of the outstanding Notes. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder, the Company and the
Trustee may amend the Indenture or the Notes (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company under the Indenture and contained in the Notes; (ii) to
add to the covenants of the Company, for the benefit of the Holders of all of
the Notes, or to surrender any right or power conferred on the Company under the
Indenture; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (v) to
evidence and provide for the acceptance of appointment under the Indenture of a
successor Trustee; (vi) to secure the Notes; (vii) to cure any ambiguity in the
Indenture, or to correct or supplement any provision in the Indenture which may
be inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Indenture, provided that
such actions shall not adversely affect the interests of the Holders of Notes in
any material respect; (viii) to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (ix) to evidence the agreement or acknowledgment of a
Subsidiary that it is a Guarantor for all purposes under the Indenture
(including, without limitation, Article XI thereof).
17. Defaults and Remedies.
---------------------
Under the Indenture, Events of Default include: (i) a default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued for 60 calendar days after written notice
by the Trustee or the Holders of at least 25% in principal amount of the Notes);
(iv) default in the payment of Indebtedness of the Company or any of its
B-11
<PAGE>
Subsidiaries at its final maturity or acceleration of such Indebtedness in an
amount in excess of $5.0 million in the aggregate; (v) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries;
(vi) certain undischarged judgments in excess of $5.0 million in the aggregate;
or (vii) the Note Guarantee of any Guarantor being held in any judicial
proceeding to be unenforceable or invalid or ceasing for any reason to be in
full force and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor denying or
disaffirming the Note Guarantee of such Guarantor
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Notes, subject to
certain limitations, may declare all the Notes to be immediately due and
payable. Certain events of bankruptcy or insolvency shall result in the Notes
being immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Notes unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or power under the
Indenture. The Holders of a majority in principal amount of the then outstanding
Notes, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived, except nonpayment of principal, interest, premium or
Liquidated Damages that has become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
18. Individual Rights of Trustee.
----------------------------
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, the Guarantors, if any, or its or their Affiliates with the
same rights it would have if it were not Trustee, Paying Agent or Registrar, as
the case may be, under the Indenture.
B-12
<PAGE>
19. No Recourse Against Certain Others.
----------------------------------
No director, officer, employee, incorporator or stockholder
of the Company or any Guarantor, as such, shall have any liability for any
obligations of the Company or any such Guarantor under the Notes, the Note
Guarantees, if any, or any such Guarantor or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation,
solely by reason of its status as a director, officer, employee, incorporator or
stockholder of the Company or any such Guarantor. By accepting a Note, each
Holder waives and releases all such liability (but only such liability) as part
of the consideration for issuance of such Note to such Holder.
20. Authentication.
--------------
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
other side of this Note.
21. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption, and reliance may be placed only on the
other identification numbers placed thereon.
23. Governing Law.
-------------
THE INDENTURE, ANY NOTE GUARANTEES AND THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
B-13
<PAGE>
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Note. Requests may be made to:
Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
Attention: President
B-14
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells,
---------------------------
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------------------------------------
| |
| |
- ------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint Attorney to
--------------------------------
transfer this Note on the Security Register, with full power of substitution.
Dated:
---------------
- ----------------------------------- ----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
B-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
the entire principal amount
$ ($1,000 in principal amount or an integral multiple
----------------
thereof) of this Note repurchased by the Company. The undersigned hereby
directs the Trustee or Paying Agent to pay it or
--------------------------
an amount in cash equal to 101% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Change of Control Payment Date.
In connection with the Asset Sale Offer made pursuant to Section 4.08 of
the Indenture, the undersigned hereby elects to have the entire principal
amount $ ($1,000 in principal amount or an integral multiple
-----------
thereof) of this Note repurchased by the Company. The undersigned hereby
directs the Trustee or Paying Agent to pay it or
---------------------------
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:
---------------
- ----------------------------------- ----------------------------------
Signature of Holder Signature Guaranteed:
B-16
<PAGE>
NOTICE: The signature to the foregoing must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
B-17
<PAGE>
EXHIBIT C
FORM OF NEW GLOBAL NOTE
-----------------------
FACE OF NEW GLOBAL NOTE
-----------------------
GORGES/QUIK-TO-FIX FOODS, INC.
No. CUSIP No.
---- ----------------
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO GORGES/QUIK-TO-FIX FOODS, INC. OR A
SUCCESSOR THEREOF OR THE REGISTRAR FOR REGISTRATION OF TRANSFER OR EXCHANGE
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE.
<PAGE>
GLOBAL NOTE
REPRESENTING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation, for
value received, hereby promises to pay to CEDE & CO., or its registered assigns,
the principal sum indicated on Schedule A hereof, on December 1, 2006.
Interest Payment Dates: June 1 and December 1, commencing
June 1, 1997.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
IN WITNESS WHEREOF, Gorges/Quik-to-Fix Foods, Inc. has
caused this Note to be duly executed under its corporate seal.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
---------------------------------
Name:
Title:
[Corporate Seal]
Attest:
----------------------
Dated:
----------------------
C-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
------------------------------------,
as Trustee, certifies that this is one of the Notes referred to
in the Indenture.
By:
------------------------------
Authorized Signatory
C-3
<PAGE>
REVERSE SIDE OF NEW GLOBAL NOTE
GORGES/QUIK-TO-FIX FOODS, INC.
GLOBAL NOTE
REPRESENTING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
1. Indenture.
This Note is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "11 1/2% Senior
Subordinated Notes Due 2006" (herein called the "Notes") limited in aggregate
principal amount to $100,000,000, issued under an indenture dated as of November
25, 1996 (as amended or supplemented from time to time, the "Indenture") between
the Company, as issuer, and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and such Act for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, if any, the Trustee and each Holder and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
summary of the terms of this Note contained herein does not purport to be
complete and is qualified by reference to the Indenture. To the extent permitted
by applicable law, in the event of any inconsistency between the terms of this
Note and the terms of the Indenture, the terms of the Indenture shall control.
All capitalized terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Company's
ability to incur additional indebtedness and issue preferred stock, pay
dividends or make certain other restricted payments, incur liens to secure pari
passu or subordinated indebtedness, sell stock of Subsidiaries, apply net
proceeds from certain asset sales, merge or consolidate with any other person,
sell, assign, transfer, lease, convey or otherwise dispose of substantially all
of the assets of the Company, enter into certain transactions with affiliates or
incur indebtedness that is subordinate in right of payment to any Senior
Indebtedness and senior in right of payment to the Notes.
C-4
<PAGE>
2. Principal and Interest.
----------------------
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay the principal
amount set forth on Schedule A of this Note to the Holder hereof on December 1,
2006.
The Company shall pay interest at a rate of 11 1/2% per
annum, from November 25, 1996 or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, semiannually in
arrears on June 1 and December 1 of each year, commencing on June 1, 1997, in
cash, to the Holder hereof until the principal amount hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued) is registered
at the close of business on the Record Date for interest payable on such
Interest Payment Date. The Record Date for any interest payment is the close of
business on May 15 or November 15, as the case may be, whether or not a Business
Day, immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.11 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange
Offer, on or prior to the Record Date for the first Interest Payment Date
following such exchange, accrued and unpaid interest, if any, on the equivalent
principal amount of the Initial Note in exchange for which this Note was issued,
up to but not including the date of issuance of this Note, shall be paid on the
first Interest Payment Date for this Note to the Holder of this Note on the
first Record Date with respect to this Note. If this Note is issued pursuant to
a Registered Exchange Offer, subsequent to the Record Date for the first
C-5
<PAGE>
Interest Payment Date following such exchange but on or prior to such Interest
Payment Date, then any such accrued and unpaid interest with respect to the
equivalent principal amount of the Initial Note in exchange for which this Note
was issued and any accrued and unpaid interest on this Note through the day
before such Interest Payment Date shall be paid on such Interest Payment Date to
the Holder of such Initial Note on such Record Date.
To the extent lawful, the Company shall pay interest on
overdue principal, overdue premium, Defaulted Interest and overdue Liquidated
Damages (without regard to any applicable grace period) at the interest rate
borne on this Note. The Company's obligation pursuant to the previous sentence
shall apply whether such overdue amount is due at its Stated Maturity, as a
result of the Company's obligations pursuant to Section 3.05, Section 4.07 or
Section 4.08 of the Indenture, or otherwise.
3. Method of Payment.
-----------------
The Company, through the Paying Agent, shall pay interest on
this Note to the registered Holder of this Note, as provided above. The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal, premium, if any, and interest and Liquidated
Damages, if any, in money of the United States of America that at the time of
payment is legal tender for payment of all debts public and private. Principal,
premium, if any, and interest and Liquidated Damages, if any, shall be paid by
checks, mailed to the registered Holders at their registered addresses; provided
that all payments with respect to Notes that the Holders of which have given
wire transfer instructions to the Company, will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
4. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar
under the Indenture. The Company may, upon written notice to the Trustee,
appoint and change any Paying Agent or Registrar. The Company or any of its
Affiliates may act as Paying Agent or Registrar; provided that if the Company or
--------
such Affiliate is acting as Paying Agent, the Company or such Affiliate shall
segregate all funds held by it as Paying Agent and hold them in trust for the
benefit of the Holders or the Trustee.
C-6
<PAGE>
5. Note Guarantees.
---------------
There are currently no Note Guarantees. This Note may become
entitled to the benefits of future Note Guarantees to be made by each future
direct or indirect Subsidiary of the Company (each singularly, a "Guarantor" and
together, the "Guarantors"). Each Guarantor will, irrevocably and
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Note Guarantee upon the terms and subject
to the conditions set forth in the Indenture.
6. Subordination.
-------------
This Note is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all existing and future Senior
Indebtedness. The Company agrees and each Holder by accepting a Note agrees, to
the subordination provisions set forth in the Indenture, authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
7. Redemption.
----------
The Notes are not redeemable at the option of the Company
prior to December 1, 2001. Thereafter, the Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 calendar days' prior notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the applicable Redemption
Date (subject to the right of each Holder of record on the relevant Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the twelve-month period beginning December 1 of the years indicated
below:
C-7
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 105.750%
2002 103.833%
2003 101.917%
2004 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December
1, 1999, the Company, at its option, may redeem the Notes, in part, with the net
proceeds of a Public Equity Offering made by the Company or of a capital
contribution made by GHC to the common equity capital of the Company with the
net proceeds of a Public Equity Offering made by GHC, at the redemption prices
(expressed as percentages of the principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below; provided, however, that after any such redemption the
-------- -------
aggregate principal amount of the Notes outstanding must equal at least 65% of
the aggregate original principal amount of the Notes.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996 111.50%
1997 110.75%
1998 110.00%
</TABLE>
The Notes are not subject to any sinking fund.
8. Notice of Redemption.
--------------------
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company shall send, or cause to be sent, a notice
of redemption, by first-class mail, postage prepaid, to Holders of Notes to be
redeemed at the addresses of such Holders as they appear in the Note Register.
C-8
<PAGE>
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed by such method as the Trustee
shall deem fair and appropriate and that complies with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis; provided that the
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000 (Notes in denominations of $1,000 or less may be redeemed only in whole).
If any Note is redeemed subsequent to a Record Date with respect to any Interest
Payment Date specified above and on or prior to such Interest Payment Date, then
any accrued interest will be paid on such Interest Payment Date to the Holder of
the Note on such Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the applicable
Redemption Date and certain other conditions are satisfied, interest on the
Notes or portions thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
9. Repurchase at the Option of Holders upon Change of Control.
----------------------------------------------------------
Upon the occurrence of a Change of Control, each Holder shall
have the right in accordance with the terms hereof and the Indenture to require
the Company to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days after the date of any Change of
Control, the Company shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Change of Control Offer to each Holder.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Company defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
C-9
<PAGE>
Prior to complying with the provisions of the Indenture
governing Change of Control Offers, but in any event within 30 calendar days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by the provisions of the Indenture governing Change of Control
Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
---------------------------------------------------
If at any time the Company or any Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date. Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for general corporate
purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $5.0 million, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder. The Holder of this Note may elect to have this Note or a portion
hereof in an authorized denomination purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below and tendering this Note
pursuant to the Asset Sale Offer. Unless the Company defaults in the payment of
the Asset Sale Purchase Price with respect thereto, all Notes or portions
thereof selected for payment pursuant to the Asset Sale Offer will cease to
accrue interest from and after the Asset Sale Purchase Date.
11. The Global Note.
---------------
So long as this Global Note is registered in the name of the
Depository or its nominee, members of, or participants in, the Depository
("Agent Members") shall have no rights under the Indenture with respect to this
Global Note held on their behalf by the Depository or the Trustee as its
C-10
<PAGE>
custodian, and the Depository may be treated by the Company, the Guarantors, if
any, the Trustee and any agent of the Company, the Guarantors, if any, or the
Trustee as the absolute owner of this Global Note for all purposes.
Notwithstanding the foregoing, nothing herein shall (i) prevent the Company, the
Guarantors, if any, the Trustee or any agent of the Company or the Trustee, from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or (ii) impair, as between the Depository and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder.
The Holder of this Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests in this Global Note through Agent Members, to take any action
which a Holder is entitled to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Company,
a Change of Control Offer, an Asset Sale Offer or an exchange for Certificated
Notes, this Global Note is redeemed, repurchased or exchanged in part, this
Global Note shall be surrendered by the Holder thereof to the Trustee who shall
cause an adjustment to be made to Schedule A hereof so that the principal amount
of this Global Note will be equal to the portion not redeemed, repurchased or
exchanged and shall thereafter return this Global Note to such Holder; provided
--------
that this Global Note shall be in a principal amount of $1,000 or an integral
multiple of $1,000.
12. Transfer and Exchange.
---------------------
A Holder may transfer or exchange Notes as provided in the
Indenture and subject to certain limitations therein set forth. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes, fees and expenses required by law or
permitted by the Indenture.
13. Denominations.
-------------
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
C-11
<PAGE>
14. Discharge and Defeasance.
------------------------
Subject to certain conditions, the Company may, at any time,
terminate some or all of the obligations of the Company and each Guarantor, if
any, under the Notes, each Note Guarantee, if any, and the Indenture if the
Company irrevocably deposits in trust with the Trustee cash or U.S. Government
Obligations for the payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes to redemption or maturity, as the case
may be.
15. Amendment, Waiver.
-----------------
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes
(which consent may, but need not, be given in connection with any tender offer
or exchange offer for the Notes) and (ii) any Default and its consequences may
be waived with the written consent of the Holders of at least a majority in
principal amount of the outstanding Notes. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder, the Company and the
Trustee may amend the Indenture or the Notes (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company under the Indenture and contained in the Notes; (ii) to
add to the covenants of the Company, for the benefit of the Holders of all of
the Notes, or to surrender any right or power conferred on the Company under the
Indenture; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (v) to
evidence and provide for the acceptance of appointment under the Indenture of a
successor Trustee; (vi) to secure the Notes; (vii) to cure any ambiguity in the
Indenture, or to correct or supplement any provision in the Indenture which may
be inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Indenture, provided that
such actions shall not adversely affect the interests of the Holders of Notes in
any material respect; (viii) to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (ix) to evidence the agreement or acknowledgment of a
Subsidiary that it is a Guarantor for all purposes under the Indenture
(including, without limitation, Article XI thereof).
C-12
<PAGE>
16. Defaults and Remedies.
---------------------
Under the Indenture, Events of Default include: (i) a default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued for 60 calendar days after written notice
by the Trustee or the Holders of at least 25% in principal amount of the Notes);
(iv) default in the payment of Indebtedness of the Company or any of its
Subsidiaries at its final maturity or acceleration of such Indebtedness in an
amount in excess of $5.0 million in the aggregate; (v) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries;
(vi) certain undischarged judgments in excess of $5.0 million in the aggregate;
or (vii) the Note Guarantee of any Guarantor being held in any judicial
proceeding to be unenforceable or invalid or ceasing for any reason to be in
full force and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor denying or
disaffirming the Note Guarantee of such Guarantor.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Notes, subject to
certain limitations, may declare all the Notes to be immediately due and
payable. Certain events of bankruptcy or insolvency shall result in the Notes
being immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Notes unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or power under the
Indenture. The Holders of a majority in principal amount of the then outstanding
Notes, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived, except nonpayment of principal, interest, premium or
Liquidated Damages that has become due solely because of acceleration. No such
C-13
<PAGE>
rescission shall affect any subsequent Default or impair any right consequent
thereto.
17. Individual Rights of Trustee.
----------------------------
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, the Guarantors, if any, or its or their Affiliates with the
same rights it would have if it were not Trustee, Paying Agent or Registrar, as
the case may be, under the Indenture.
18. No Recourse Against Certain Others.
----------------------------------
No director, officer, employee, incorporator or stockholder
of the Company or any Guarantor, as such, shall have any liability for any
obligations of the Company or any such Guarantor under the Notes, the Note
Guarantees, if any, or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation, solely by reason of its
status as a director, officer, employee, incorporator or stockholder of the
Company or any such Guarantor. By accepting a Note, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Note to such Holder.
19. Authentication.
--------------
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
other side of this Note.
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
C-14
<PAGE>
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption, and reliance may be placed only on the
other identification numbers placed thereon.
22. Governing Law.
-------------
THE INDENTURE, ANY NOTE GUARANTEES AND THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Note. Requests may be made to:
Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
Attention: President
C-15
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall
be $ . The following decreases/increase in the principal amount in
------------
denominations of $1,000 or integral multiples thereof at maturity of this Note
have been made:
<TABLE>
<CAPTION>
Total
Principal
Amount at
Maturity Notation
Decrease in Increase in Following Made by
Date of Principal Principal such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
</TABLE>
C-16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ---------- ----------
</TABLE>
C-17
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder if such Holder
desires to transfer this Note)
FOR VALUE RECEIVED hereby sells,
---------------------------
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -----------------------------------
| |
| |
- -----------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint
--------------------------------
Attorney to transfer this Note on the Security Register, with full power of
substitution.
Dated:
---------------
- ---------------------------------- ------------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Note in every particular, without
alteration or any change whatsoever.
C-18
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
the entire principal amount $ ($1,000 in principal amount or an
---------
integral multiple thereof) of this Note repurchased by the Company. The
undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 101% of the
---------------------------
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
In connection with the Asset Sale Offer made pursuant to Section 4.08 of
the Indenture, the undersigned hereby elects to have
the entire principal amount $ ($1,000 in principal amount or an
---------
integral multiple thereof) of this Note repurchased by the Company. The
undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 100% of the
--------------------------
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Asset Sale
Purchase Date.
Dated:
----------------
- -------------------------------- ------------------------------------
Signature of Holder Signature Guaranteed:
C-19
<PAGE>
NOTICE: The signature to the foregoing must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
C-20
<PAGE>
EXHIBIT D
FORM OF NEW CERTIFICATED NOTE
-----------------------------
FACE OF NEW CERTIFICATED NOTE
-----------------------------
GORGES/QUIK-TO-FIX FOODS, INC.
No. CUSIP No.
---- ---------------
11 1/2 SENIOR SUBORDINATED NOTE DUE 2006
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation, for
value received, hereby promises to pay to , or its registered assigns,
---------
the principal amount of , on December 1, 2006.
----------
Interest Payment Dates: June 1 and December 1, commencing
June 1, 1997.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purposes.
IN WITNESS WHEREOF, Gorges/Quik-to-Fix Foods, Inc. has
caused this Note to be duly executed under its corporate seal.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
---------------------
Dated:
----------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
---------------------------------------,
as Trustee, certifies that this is one of the Notes referred to
in the Indenture.
By:
----------------------------------
Authorized Signatory
D-2
<PAGE>
REVERSE SIDE OF NEW CERTIFICATED NOTE
-------------------------------------
GORGES/QUIK-TO-FIX FOODS, INC.
11 1/2% SENIOR SUBORDINATED NOTE DUE 2006
1. Indenture.
---------
This Note is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "11 1/2% Senior
Subordinated Notes Due 2006" (herein called the "Notes") limited in aggregate
principal amount to $100,000,000, issued under an indenture dated as of November
25, 1996 (as amended or supplemented from time to time, the "Indenture") between
the Company, as issuer and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and such Act for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, if any, the Trustee and each Holder and of the
terms upon which the Notes are, and are to be, authenticated and delivered. The
summary of the terms of this Note contained herein does not purport to be
complete and is qualified by reference to the Indenture. To the extent permitted
by applicable law, in the event of any inconsistency between the terms of this
Note and the terms of the Indenture, the terms of the Indenture shall control.
All capitalized terms used in this Note which are not defined herein shall have
the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Company's
ability to incur additional indebtedness and issue preferred stock, pay
dividends or make certain other restricted payments, incur liens to secure pari
passu or subordinated indebtedness, sell stock of Subsidiaries, apply net
proceeds from certain asset sales, merge or consolidate with any other person,
sell, assign, transfer, lease, convey or otherwise dispose of substantially all
of the assets of the Company, enter into certain transactions with affiliates or
incur indebtedness that is subordinate in right of payment to any Senior
Indebtedness and senior in right of payment to the Notes.
2. Principal and Interest.
----------------------
D-3
<PAGE>
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay the principal
amount of to the Holder hereof on December 1, 2006.
--------------
The Company shall pay interest at a rate of 11 1/2% per
annum, from November 25, 1996 or from the most recent Interest Payment Date
thereafter to which interest has been paid or duly provided for, semiannually in
arrears on June 1 and December 1 of each year, commencing on June 1, 1997, in
cash, to the Holder hereof until the principal amount hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
provided in the Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued) is registered
at the close of business on the Record Date for interest payable on such
Interest Payment Date. The Record Date for any interest payment is the close of
business on May 15 or November 15, as the case may be, whether or not a Business
Day, immediately preceding the Interest Payment Date on which such interest is
payable. Any such interest not so punctually paid or duly provided for
("Defaulted Interest") shall forthwith cease to be payable to the Holder on such
Record Date and shall be paid as provided in Section 2.11 of the Indenture.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Each payment of interest in respect of an Interest Payment
Date will include interest accrued through the day before such Interest Payment
Date. If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange
Offer, on or prior to the Record Date for the first Interest Payment Date
following such exchange, accrued and unpaid interest, if any, on the equivalent
principal amount of the Initial Note in exchange for which this Note was issued,
up to but not including the date of issuance of this Note, shall be paid on the
first Interest Payment Date for this Note to the Holder of this Note on the
first Record Date with respect to this Note. If this Note is issued pursuant to
a Registered Exchange Offer, subsequent to the Record Date for the first
Interest Payment Date following such exchange, but on or prior to such Interest
Payment Date, then any such accrued and unpaid interest with respect to the
equivalent principal amount of the Initial Note in exchange for which this Note
D-4
<PAGE>
was issued and any accrued and unpaid interest on this Note through the day
before such Interest Payment Date shall be paid on such Interest Payment Date to
the Holder of such Initial Note on such Record Date.
To the extent lawful, the Company shall pay interest on
overdue principal, overdue premium, Defaulted Interest and overdue Liquidated
Damages (without regard to any applicable grace period) at the interest rate
borne on this Note. The Company's obligation pursuant to the previous sentence
shall apply whether such overdue amount is due at its Stated Maturity, as a
result of the Company's obligations pursuant to Section 3.05, Section 4.07 or
Section 4.08 of the Indenture, or otherwise.
3. Method of Payment.
-----------------
The Company, through the Paying Agent, shall pay interest on
this Note to the registered Holder of this Note, as provided above. The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Company will pay principal, premium, if any, and interest and Liquidated
Damages, if any, in money of the United States of America that at the time of
payment is legal tender for payment of all debts public and private. Principal,
premium, if any, and interest and Liquidated Damages, if any, shall be paid by
check mailed to the registered Holders at their registered addresses; provided
that all payments with respect to Notes that the Holders of which have given
wire transfer instructions to the Company, will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
4. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar
under the Indenture. The Company may, upon written notice to the Trustee,
appoint and change any Paying Agent or Registrar. The Company or any of its
Affiliates may act as Paying Agent or Registrar; provided that if the Company or
--------
such Affiliate is acting as Paying Agent, the Company or such Affiliate shall
segregate all funds held by it as Paying Agent and hold them in trust for the
benefit of the Holders or the Trustee.
5. Note Guarantees.
---------------
There are currently no Note Guarantees. This Note may become
entitled to the benefits of future Note Guarantees to be made by each future
direct or indirect Subsidiary of the Company (each singularly, a "Guarantor" and
together, the "Guarantors"). Each Guarantor will, irrevocably and
D-5
<PAGE>
unconditionally, jointly and severally, guarantee on a senior subordinated basis
the punctual payment when due, whether at Stated Maturity, by acceleration, in
connection with a Change of Control Offer, an Asset Sale Offer or redemption, or
otherwise, of all obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, interest or Liquidated
Damages, if any, on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from its Note Guarantee upon the terms and subject
to the conditions set forth in the Indenture.
6. Subordination.
-------------
This Note is subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full of all existing and future Senior
Indebtedness. The Company agrees and each Holder, by accepting a Note, agrees to
the subordination provisions set forth in the Indenture, authorizes the Trustee
to give them effect and appoints the Trustee as attorney-in-fact for such
purpose.
7. Redemption.
----------
The Notes are not redeemable at the option of the Company
prior to December 1, 2001. Thereafter, the Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 calendar days' prior notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the applicable Redemption
Date (subject to the right of each Holder of record on the relevant Record Date
to receive interest due on the relevant Interest Payment Date), if redeemed
during the twelve-month period beginning December 1 of the years indicated
below:
D-6
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 105.750%
2002 103.833%
2003 101.917%
2004 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December
1, 1999, the Company, at its option, may redeem the Notes, in part, with the net
proceeds of a Public Equity Offering made by the Company or of a capital
contribution made by GHC to the common equity capital of the Company with the
net proceeds of a Public Equity Offering made by GHC, at the redemption prices
(expressed as percentages of the principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below; provided, however, that any such redemption the aggregate
-------- -------
principal amount of the Notes outstanding must equal at least 65% of the
aggregate original principal amount of the Notes.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996 111.50%
1997 110.75%
1998 110.00%
</TABLE>
The Notes are not subject to any sinking fund.
8. Notice of Redemption.
--------------------
At least 30 calendar days but not more than 60 calendar days
before a Redemption Date, the Company shall send, or cause to be sent, a notice
of redemption, by first-class mail, postage prepaid, to Holders of Notes to be
redeemed at the addresses of such Holders as they appear in the Note Register.
D-7
<PAGE>
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed by such method as the Trustee
shall deem fair and appropriate and that complies with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis; provided that the
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000 (Notes in denominations of $1,000 or less may be redeemed only in whole).
If any Note is redeemed subsequent to a Record Date with respect to any Interest
Payment Date specified above and on or prior to such Interest Payment Date, then
any accrued interest will be paid on such Interest Payment Date to the Holder of
the Note on such Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Paying Agent on or before the applicable
Redemption Date and certain other conditions are satisfied, interest on the
Notes or portions thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
9. Repurchase at the Option of Holders upon Change of Control.
----------------------------------------------------------
Upon the occurrence of a Change of Control, each Holder shall
have the right in accordance with the terms hereof and the Indenture to require
the Company to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date. Within 30 calendar days
after the date of any Change of Control, the Company shall send, or cause to be
sent, by first-class mail, postage prepaid, a notice regarding the Change of
Control Offer to each Holder. The Holder of this Note may elect to have this
Note or a portion hereof in an authorized denomination purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below and
tendering this Note pursuant to the Change of Control Offer. Unless the Company
defaults in the payment of the Change of Control Purchase Price with respect
thereto, all Notes or portions thereof accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest from and after the Change
of Control Payment Date.
Prior to complying with the provisions of the Indenture
governing Change of Control Offers, but in any event within 30 calendar days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
D-8
<PAGE>
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by the provisions of the Indenture governing Change of Control
Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
---------------------------------------------------
If at any time the Company or any Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages to the Asset Sale Purchase Date. Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for general corporate
purposes.
Within 30 calendar days of the date the amount of Excess
Proceeds exceeds $5.0 million, the Company shall send, or cause to be sent, by
first-class mail, postage prepaid, a notice regarding the Asset Sale Offer to
each Holder. The Holder of this Note may elect to have this Note or a portion
hereof in an authorized denomination purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below and tendering this Note
pursuant to the Asset Sale Offer. Unless the Company defaults in the payment of
the Asset Sale Purchase Price with respect thereto, all Notes or portions
thereof selected for payment pursuant to the Asset Sale Offer will cease to
accrue interest from and after the Asset Sale Purchase Date.
11. Transfer and Exchange.
---------------------
A Holder may transfer or exchange Notes as provided in the
Indenture and subject to certain limitations therein set forth. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes, fees and expenses required by law or
permitted by the Indenture. The Registrar need not register the transfer or
exchange of Certificated Notes or portions thereof selected for redemption
D-9
<PAGE>
(except, in the case of a Certificated Note to be redeemed in part, the portion
of such Certificated Note not to be redeemed) or any Certificated Notes for a
period of 15 calendar days before a selection of Notes to be redeemed.
12. Denominations.
-------------
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof of principal
amount.
13. Discharge and Defeasance.
------------------------
Subject to certain conditions, the Company may, at any time,
terminate some or all of the obligations of the Company and each Guarantor, if
any, under the Notes, each Note Guarantee, if any, and the Indenture if the
Company irrevocably deposits in trust with the Trustee, cash or U.S. Government
Obligations for the payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes to redemption or maturity, as the case
may be.
14. Amendment, Waiver.
-----------------
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Notes
(which consent may, but need not, be given in connection with any tender offer
or exchange offer for the Notes) and (ii) any Default and its consequences may
be waived with the written consent of the Holders of at least a majority in
principal amount of the outstanding Notes. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder, the Company and the
Trustee may amend the Indenture or the Notes (i) to evidence the succession of
another Person to the Company and the assumption by such successor of the
covenants of the Company under the Indenture and contained in the Notes; (ii) to
add to the covenants of the Company, for the benefit of the Holders of all of
the Notes, or to surrender any right or power conferred on the Company under the
Indenture; (iii) to add any additional Events of Default; (iv) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (v) to
evidence and provide for the acceptance of appointment under the Indenture of a
successor Trustee; (vi) to secure the Notes; (vii) to cure any ambiguity in the
D-10
<PAGE>
Indenture, or to correct or supplement any provision in the Indenture which may
be inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Indenture, provided that
--------
such actions shall not adversely affect the interests of the Holders of Notes in
any material respect; (viii) to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (ix) to evidence the agreement or acknowledgment of a
Subsidiary that it is a Guarantor for all purposes under the Indenture
(including, without limitation, Article XI thereof).
15. Defaults and Remedies.
---------------------
Under the Indenture, Events of Default include: (i) a default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued for 60 calendar days after written notice
by the Trustee or the Holders of at least 25% in principal amount of the Notes);
(iv) default in the payment of Indebtedness of the Company or any of its
Subsidiaries at its final maturity or acceleration of such Indebtedness in an
amount in excess of $5.0 million in the aggregate; (v) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries;
(vi) certain undischarged judgments in excess of $5.0 million in the aggregate;
or (vii) the Note Guarantee of any Guarantor being held in any judicial
proceeding to be unenforceable or invalid or ceasing for any reason to be in
full force and effect (other than in accordance with the terms of the Indenture)
or any Guarantor or any Person acting on behalf of any Guarantor, denying or
disaffirming the Note Guarantee of such Guarantor.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Notes, subject to
certain limitations, may declare all the Notes to be immediately due and
payable. Certain events of bankruptcy or insolvency shall result in the Notes
being immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Notes unless it receives reasonable indemnity or security.
D-11
<PAGE>
Subject to certain limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or power under the
Indenture. The Holders of a majority in principal amount of the then outstanding
Notes, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived, except nonpayment of principal, interest, premium or
Liquidated Damages that has become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
16. Individual Rights of Trustee.
----------------------------
Subject to certain limitations imposed by the Trust Indenture
Act, the Trustee or any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, the Guarantors, if any, or its or their Affiliates with the
same rights it would have if it were not Trustee, Paying Agent or Registrar, as
the case may be, under the Indenture.
17. No Recourse Against Certain Others.
----------------------------------
No director, officer, employee, incorporator or stockholder
of the Company or any Guarantor, as such, shall have any liability for any
obligations of the Company or any such Guarantor under the Notes, the Note
Guarantors, if any, or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation, solely by reason of its
status as a director, officer, employee, incorporator or stockholder of the
Company or any such Guarantor. By accepting a Note, each Holder waives and
releases all such liability (but only such liability) as part of the
consideration for issuance of such Note to such Holder.
18. Authentication.
--------------
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
other side of this Note.
D-12
<PAGE>
19. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder
or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption, and reliance may be placed only on the
other identification numbers placed thereon.
21. Governing Law.
-------------
THE INDENTURE, ANY FUTURE NOTE GUARANTEES AND THIS NOTE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Note. Requests may be made to:
Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
Attention: President
D-13
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED hereby sells, assigns
---------------------------
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------------------------------------
| |
| |
- ------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Note, together with all right, title and interest herein, and
does hereby irrevocably constitute and appoint
--------------------------------
Attorney to transfer this Note on the Security Register, with full power of
substitution.
Dated:
---------------
- ----------------------------------- ----------------------------------
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to
the Name as written upon the face of this Note in every particular, without
alteration or any change whatsoever.
D-14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
In connection with the Change of Control Offer made pursuant to Section
4.07 of the Indenture, the undersigned hereby elects to have
the entire principal amount $ ($1,000 in principal amount or an
----------
integral multiple thereof) of this Note repurchased by the Company. The
undersigned hereby directs the Trustee or Paying Agent to pay it
or an amount in cash equal to 101% of the
---------------------------------
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
In connection with the Asset Sale Offer made pursuant to Section 4.08 of
the Indenture, the undersigned hereby elects to have the entire principal
amount $ ($1,000 in principal amount or an integral multiple
-----------
thereof) of this Note repurchased by the Company. The undersigned hereby
directs the Trustee or Paying Agent to pay it or
--------------------------
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated:
---------------
- ------------------------------------ ---------------------------------
Signature of Holder Signature Guaranteed:
D-15
<PAGE>
NOTICE: The signature to the foregoing must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
D-16
<PAGE>
EXHIBIT E
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER TO A QIB
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: Gorges/Quik-to-Fix Foods, Inc. (the "Company")
11 1/2% Senior Subordinated Notes Due 2006 (the "Notes")
--------------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of November
25, 1996 (as amended and supplemented from time to time, the "Indenture")
between the Company, as issuer and IBJ Schroder Bank & Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture. This letter relates to $ aggregate
----------
principal amount of Notes which are held in the name of [name of transferor]
(the "Transferor") to effect the transfer of such Notes in exchange for an
equivalent beneficial interest in the Initial Global Note.
In connection with such request, and with respect to such Notes,
the Transferor does hereby certify that such Notes are being transferred in
accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended ("Rule
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
--------------------------------
[Name of Transferor]
By:
------------------------------
Name:
Title:
Date:
----------------------------
cc: Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
E-2
<PAGE>
EXHIBIT F
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO AN
INSTITUTIONAL ACCREDITED INVESTOR
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: Gorges/Quik-to-Fix Foods, Inc. (the "Company")
11 1/2% Senior Subordinated Notes Due 2006 (the "Notes")
--------------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of November
25, 1996 (as amended and supplemented from time to time, the "Indenture")
between the Company, as issuer, and IBJ Schroder Bank & Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.
This letter relates to U.S. $ aggregate principal
-----------
amount of Notes which are held [in certificated form in the name of [name of
transferor] (the "Transferor")] [through the beneficial interest of [name of
transferor] (the "Transferor") in the Initial Global Note] to effect the
transfer of such Notes to an institutional "accredited investor" as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of
1933, as amended ("Institutional Accredited Investor").
In connection with such request, and with respect to such Notes,
the Transferor does hereby certify that such Notes are being transferred (i) in
accordance with the transfer restrictions set forth in the Notes and (ii) to a
transferee that the Transferor reasonably believes is an Institutional
Accredited Investor that is acquiring at least $250,000 principal amount of
Notes for its own account or for one or more accounts as to which the transferee
exercises sole investment discretion and (iii) in accordance with applicable
<PAGE>
securities laws of any state of the United States or any other jurisdiction.
F-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
-----------------------------
[Name of Transferor]
By:
--------------------------
Name:
Title:
Date:
------------------------
cc: Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
F-3
<PAGE>
EXHIBIT G
FORM OF INVESTMENT LETTER
FOR INSTITUTIONAL ACCREDITED INVESTORS
IBJ Schroder Bank & Trust Company, as Trustee
One State Street
New York, New York 10004
Re: Gorges/Quik-to-Fix Foods, Inc.
(the "Company") 11 1/2% Senior Subordinated
Notes Due 2006 (the "Notes")
--------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of November 25,
1996 (as amended and supplemented from time to time, the "Indenture") between
the Company and IBJ Schroder Bank & Trust Company, as Trustee. Capitalized
terms used but not defined herein shall have the meanings given them in the
Indenture.
In connection with our proposed purchase of $ aggregate
-----------
principal amount of Notes, we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We understand and agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
<PAGE>
stated, (x) that such Notes are being offered only in a transaction not
involving any public offering within the meaning of the Securities Act, (y) that
if we should resell, pledge or otherwise transfer such Notes within three years
after the later of the date of the original issuance of the Notes and the last
date on which the Company or any affiliate (within the meaning of Rule 144 under
the Securities Act ("Rule 144")) of the Company was the owner of such Notes (or
any predecessor of such Notes), or within three months after we cease to be an
affiliate of the Company, such Notes may be resold, pledged or transferred only
(i) to the Company, (ii) so long as Notes are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A") to a person whom we reasonably
believe is a "qualified institutional buyer" (as defined in Rule 144A) ("QIB")
that purchases for its own account or for the account of a QIB to whom notice is
given that the resale, pledge or transfer is being made in reliance on Rule
144A, (iii) in an offshore transaction in accordance with Regulation S under the
Securities Act, (iv) to an institution that is an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act ("Institutional Accredited Investor") that has certified to the Company and
the Trustee that it is such an accredited investor and is acquiring the Notes
for investment purposes and not for distribution, (v) pursuant to an effective
registration statement under the Securities Act or (vi) pursuant to any other
available exemption from the registration requirements of the Securities Act, in
each case in accordance with any applicable securities laws of any state of the
United States, and we will notify any purchaser of the Notes from us of the
above resale restrictions, if then applicable. We further understand that, in
connection with any transfer of the Notes by us, the Company and the Trustee may
request, and if so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm that any such
transfer complies with the foregoing restrictions. We understand that the Notes
will be issued in registered form only and that any certificates issued will
bear a legend substantially to the effect set forth in the Indenture.
2. We are able to fend for ourselves in this transaction, we have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment and can afford the complete loss of such investment.
G-5
<PAGE>
3. We understand that the minimum principal amount of Notes that may
be purchased by an Institutional Accredited Investor is $250,000.
4. We understand that the Company, the Trustee and others will rely
upon the truth and accuracy of the foregoing acknowledgments, representations
and agreements, and we agree that if any of the acknowledgments, representations
and warranties deemed to have been made by us by our purchase of Notes, for our
own account or for one or more accounts as to each of which we exercise sole
investment discretion, are no longer accurate, we shall promptly notify the
Company and the Trustee.
5. We are acquiring the Notes purchased by us for investment
purposes, and not for distribution, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion and we are
or such account is an Institutional Accredited Investor.
6. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any
G-6
<PAGE>
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
------------------------------------
[Name of Purchaser]
By:
---------------------------------
Name:
Title:
Date:
-------------------------------
cc: Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
G-7
<PAGE>
EXHIBIT H
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
TO A NON-U.S. PERSON
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: Gorges/Quik-to-Fix Foods, Inc. (the "Company")
11 1/2% Senior Subordinated Notes Due 2006 (the "Notes")
-------------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of November 25,
1996 (as amended and supplemented from time to time, the "Indenture") between
the Company, as issuer, and IBJ Schroder Bank & Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $ aggregate principal amount of
-------------
Notes which are held [in certificated form in the name of [name of transferor]
(the "Transferor")] [through the beneficial interest of [name of transferor]
(the "Transferor") in the Initial Global Note] to effect the transfer of such
Notes in exchange for Initial Certificated Notes.
In connection with such request, the Transferor does hereby certify
that such Notes are being transferred in accordance with (i) the transfer
restrictions set forth in the Notes and (ii) Regulation S ("Regulation S") under
the United States Securities Act of 1933, as amended (the "Securities Act") and
does hereby further certify that:
(1) the offer of the Notes was not made to a person in the
United States;
<PAGE>
(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market, and neither the
Transferor, nor any person acting on its behalf, knows that the
transaction was pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
In addition, if the sale is made during a Restricted Period (as
defined in Regulation S) and the provisions of Rule 903(c)(2) or (3) or Rule
904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has
been made in accordance with the applicable provisions of Rule 903(c)(2) or (3)
or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
------------------------------
[Name of Transferor]
By:
---------------------------
Name:
Title:
Date:
--------------------------
H-2
<PAGE>
cc: Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
H-3
<PAGE>
EXHIBIT I
FORM OF INVESTMENT LETTER FOR REGULATION S PURCHASERS
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Administration
Re: Gorges/Quik-to-Fix Foods, Inc. (the "Company")
11 1/2% Senior Subordinated Notes Due 2006 (the "Notes")
--------------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Indenture dated as of November 25,
1996 (as amended and supplemented from time to time, the "Indenture") between
the Company, as issuer, and IBJ Schroder Bank & Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
In connection with our proposed purchase of $ aggregate
--------
principal amount of the Notes which are held [in certificated form in the name
of [name of transferor] (the "Transferor")] [through the beneficial interest of
[name of transferor] (the "Transferor") in the Initial Global Note], we hereby
certify that we are (or we will hold such Notes on behalf of) a person outside
the United States to whom the Notes could be transferred in accordance with Rule
904 of Regulation S promulgated under the United States Securities Act of 1933,
as amended.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
<PAGE>
Very truly yours,
--------------------------------------
[Name of Purchaser]
By:
-----------------------------------
Name:
Title:
Date:
---------------------------------
cc: Gorges/Quik-to-Fix Foods, Inc.
209 Range Road
Garland, Texas 75041
I-5
<PAGE>
Exhibit J
GORGES/QUIK-TO-FIX FOODS, INC.
$100,000,000
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
REGISTRATION RIGHTS AGREEMENT
November 25, 1996
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (the
"Borrower"), proposes to issue and sell (the "Initial Placement") to the Initial
Purchaser, upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement"), its 11 1/2% Senior Subordinated Notes Due
2006 (the "Notes"). The Notes will be unconditionally guaranteed, jointly and
severally, on a senior subordinated and unsecured basis the ("Note Guarantees")
by each future direct or indirect Subsidiary (as defined below) of the Borrower
(each, a "Guarantor"). The Initial Placement is to occur concurrently with, and
is conditioned upon, (i) the consummation of the acquisition (the "Acquisition")
by the Borrower of the Gorges/Quik-to-Fix Foods operations of Tyson Foods, Inc.,
pursuant to an asset purchase agreement dated as of October 17, 1996 (the "Asset
Purchase Agreement") by and among the Borrower, Tyson Foods, Inc., Gorges
Foodservice Inc. and Tyson Holding Company; (ii) the execution of, and initial
borrowings under, the senior bank credit facilities among the Borrower, Gorges
Holding Company ("GHC"), as guarantor, NationsBank of Texas, N.A., as agent and
lender, and the other lenders named therein; and (iii) the receipt by the
Borrower of a $45 million equity contribution from GHC. References herein to
the "Company" shall be deemed to refer to the Borrower. As an inducement to the
Initial Purchaser to enter into the Purchase Agreement and purchase the Notes
and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company agrees with you for the benefit of the holders from time
to time of the Notes (including the Initial Purchaser) (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
<PAGE>
"Affiliate" of any specified person means (i) any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person or (ii) any other person who is a
director or executive officer of (a) such specified person or (b) any person
described in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of any class, or any series of
- --------
any class, of equity securities of a person, whether or not voting, shall be
deemed to be control; and provided, however, that NBIC or any Affiliate (as
-------- -------
determined without giving effect to this proviso) of NBIC shall not be deemed to
be an Affiliate of any Person solely by reason of its ownership of non-voting
equity securities of such Person.
"Borrower" has the meaning set forth in the preamble hereto.
--------
"Closing Date" has the meaning set forth in the Purchase Agreement.
------------
"Commission" means the United States Securities and Exchange
----------
Commission.
"Company" has the meaning set forth in the preamble hereto.
-------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 180-day period
----------------------------------
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; provided, however,
-------- -------
that in the event that all resales of New Notes (including, subject to the time
periods set forth herein, any resales by Exchanging Dealers) covered by such
Exchange Offer Registration Statement have been made, the Exchange Offer
Registration Statement need not thereafter remain continuously effective for
such period.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Company on an appropriate form under the Securities Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
-----------------
Purchaser) that is a broker-dealer, electing to exchange Notes acquired for its
own account as a result of market-making activities or other trading activities
for New Notes.
"Final Memorandum" has the meaning set forth in the Purchase
----------------
Agreement.
"Guarantor" has the meaning set forth in the preamble hereto.
---------
2
<PAGE>
"Holder" has the meaning set forth in the preamble hereto.
------
"Indenture" means the indenture relating to the Notes and the New
---------
Notes, to be dated as of the Closing Date, between the Company and IBJ Schroder
Bank & Trust Company as trustee, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the terms
thereof. It shall include the provisions of the Trust Indenture Act that are
deemed to be part of and govern the indenture.
"Initial Placement" has the meaning set forth in the preamble hereto.
-----------------
"Initial Purchaser" has the meaning set forth in the Purchase
-----------------
Agreement.
"Liquidated Damages" has the meaning set forth in Section 4 hereof.
------------------
"Losses" has the meaning set forth in Section 7(d) hereto.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering
under a Shelf Registration Statement.
"New Notes" means debt securities of the Company identical in all
---------
material respects to the Notes (except that the Liquidated Damages provisions
and the transfer restrictions pertaining to the Notes will be modified or
eliminated, as appropriate), to be issued under the Indenture.
"Note Guarantees" has the meaning set forth in the preamble hereto and
---------------
shall, as applied to the New Notes, mean identical guarantees of the New Notes
by the Guarantors.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Notes or the New Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of New Notes.
3
<PAGE>
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Notes or the
New Notes (including any Note Guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Company pursuant to the provisions of Section 3 hereof, which covers some
or all of the Notes or New Notes, as applicable, on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Transfer Restricted Securities" means each Note or New Note, as the
------------------------------
case may be, until the earliest to occur of (i) the date on which such Note is
exchanged in the Registered Exchange Offer and entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) the date on which such Note or New Note
has been effectively registered under the Securities Act and disposed of in
accordance with a Shelf Registration Statement, and (iii) the date on which such
Note or New Note is resold pursuant to Rule 144 under the Securities Act or by a
broker-dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (the form of which is included as Annex C
hereto) (including delivery of the Prospectus contained therein).
"Trustee" means the trustee with respect to the Notes or New Notes, as
-------
applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection with an
-----------
offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Notes by Exchanging
-------------------------------------------------------------
Dealers; Private Exchange. (a) The Company shall prepare and, on or prior to
- -------------------------
January 31, 1997, shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Company shall use
its best efforts (i) to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or prior to March 31, 1997 and
(ii) to consummate the Registered Exchange Offer on or prior to April 30, 1997.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer and
use its best efforts to issue on or prior to 30 days after the date on which the
4
<PAGE>
Exchange Offer Registration Statement is declared effective by the Commission
New Notes in exchange for all Notes tendered prior thereto in the Registered
Exchange Offer. The objective of such Registered Exchange Offer is to enable
each Holder electing to exchange Notes for New Notes (assuming that such Holder
(x) is not an "affiliate" of the Company within the meaning of the Securities
Act, (y) is not a broker-dealer that acquired the Notes in a transaction other
than as a part of its market-making or other trading activities and (z) if such
Holder is not a broker-dealer, acquires the New Notes in the ordinary course of
such Holder's business, is not participating in the distribution of the New
Notes and has no arrangements or understandings with any person to participate
in the distribution of the New Notes) to resell such New Notes from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 30 days and not more than 45 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws relating
to the Registered Exchange Offer.
(d) As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder New Notes equal in principal amount to the Notes of such Holder so
accepted for exchange.
(e) The Initial Purchaser and the Company acknowledge that, pursuant
to interpretations by the staff of the Commission of Section 5 of the Securities
Act, and in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of any New
5
<PAGE>
Notes received by such Exchanging Dealer pursuant to the Registered Exchange
Offer in exchange for Notes acquired for its own account as a result of market-
making activities or other trading activities. Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the cover
of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the Registered
Exchange Offer, in Annex C hereto in the underwriting or plan of
distribution section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of New Notes
received pursuant to the Registered Exchange Offer, as contemplated by
Section 5(h) below.
(f) In the event that the Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Notes constituting any portion of an unsold allotment, upon the
effectiveness of the Shelf Registration Statement as contemplated by Section 3
hereof and at the request of the Initial Purchaser, the Company shall issue and
deliver to the Initial Purchaser, or to the party purchasing New Notes
registered under the Shelf Registration Statement from the Initial Purchaser, in
exchange for such Notes, a like principal amount of New Notes. The Company
shall use its best efforts to cause the CUSIP Service Bureau to issue the same
CUSIP number for such New Notes as for New Notes issued pursuant to the
Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
------------------
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) the
Registered Exchange Offer is not consummated on or prior to April 30, 1997, or
(iii) the Initial Purchaser so requests with respect to Notes held by it as a
result of the purchase of such Notes directly from the Company following
consummation of the Registered Exchange Offer, or (iv) any Holder (other than
the Initial Purchaser) is not eligible to participate in the Registered Exchange
Offer or the New Notes such Holder would receive in the Registered Exchange
Offer could only be reoffered and resold by such Holder upon compliance with the
registration and prospectus delivery requirements of the Securities Act and the
delivery of the Prospectus contained in the Exchange Offer Registration
Statement, as appropriately amended, is not a legally available alternative, or
(v) in the case where the Initial Purchaser participates in the Registered
Exchange Offer or acquires New Notes pursuant to Section 2(f) hereof, the
Initial Purchaser does not receive freely tradable New Notes in exchange for
Notes constituting any portion of an unsold allotment (it being understood that,
for purposes of this Section 3, (x) the requirement that the Initial Purchaser
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Securities Act in connection with sales of New Notes
acquired in exchange for such Notes shall result in such New Notes being not
"freely tradable" and (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of New Notes acquired in the Registered
Exchange Offer in exchange for Notes acquired as a result of market-making
6
<PAGE>
activities or other trading activities shall not result in such New Notes being
not "freely tradable"), the following provisions shall apply:
(a) The Company shall, as promptly as practicable (but in no event
more than 60 days after so required or requested pursuant to this Section 3),
file with the Commission a Shelf Registration Statement relating to the offer
and sale of the Notes or the New Notes, as applicable, by the Holders from time
to time in accordance with the methods of distribution elected by such Holders
and set forth in such Shelf Registration Statement and Rule 415 under the
Securities Act, provided, that with respect to New Notes received by the Initial
--------
Purchaser in exchange for Notes constituting any portion of an unsold allotment,
the Company may, if permitted by current interpretations by the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation S-K Items 507 and/or
508, as applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to 45 days after filing such Shelf Registration Statement pursuant to this
Section 3 and to keep such Shelf Registration Statement continuously effective
in order to permit the Prospectus contained therein to be usable by Holders for
a period of three years (or, if Rule 144(k) under the Securities Act is amended
to allow for resales pursuant to such Rule after a shorter period, such shorter
period) from the date the Shelf Registration Statement is declared effective by
the Commission or such shorter period that will terminate when all the Notes or
New Notes, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would result
in Holders of notes covered thereby not being able to offer and sell such notes
during that period, unless (i) such action is required by applicable law or (ii)
such action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 5(k) hereof, if applicable.
(c) No Holder of Notes or New Notes may include any of its Notes or
New Notes in any Shelf Registration Statement pursuant to this Agreement unless
and until such Holder furnishes to the Company in writing, within 20 business
days after receipt of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf Registration Statement
or Prospectus or preliminary Prospectus included therein. No Holder of Notes or
New Notes shall be entitled to Liquidated Damages pursuant to Section 4 hereof
unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not misleading.
7
<PAGE>
4. Liquidated Damages. If (i) either the Exchange Offer Registration
------------------
Statement or the Shelf Registration Statement is not filed with the Commission
on or prior to the date specified for such filing in this Agreement, (ii) either
the Exchange Offer Registration Statement or the Shelf Registration Statement
has not been declared effective by the Commission on or prior to the target date
specified for such effectiveness in this Agreement (the "Effectiveness Target
Date"), (iii) the Exchange Offer has not been consummated within 30 days after
the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) either the Exchange Offer Registration Statement or the Shelf
Registration Statement is filed and declared effective but thereafter ceases to
be effective during the applicable Exchange Offer Registration Period or Shelf
Registration Period, as the case may be (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes with respect
to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such Holder for each week or portion thereof during
which such Registration Default continues. The amount of the Liquidated Damages
payable to each Holder for such Registration Default will increase by an
additional $.05 per week per $1,000 in principal amount of Notes held by such
Holder with respect to each subsequent 90-day period until such Registration
Default has been cured, up to an aggregate maximum amount of Liquidated Damages
of $.30 per week per $1,000 principal amount of Notes for all Registration
Defaults. All accrued Liquidated Damages will be paid by the Company on each
Interest Payment Date (as such term is defined in the Indenture) to the Holders
of record with respect to such Interest Payment Date by wire transfer of
immediately available funds or by federal funds check. Liquidated Damages
payable (a) with respect to the Registration Default specified in clause (i)
above, shall cease to accrue upon filing of the Exchange Offer Registration
Statement (and, if applicable, the Shelf Registration Statement), (b) with
respect to the Registration Default specified in clause (ii) above, shall cease
to accrue upon the effectiveness of the Exchange Offer Registration Statement
(and, if applicable, the Shelf Registration Statement), (c) with respect to the
Registration Default specified in clause (iii) above, shall cease to accrue upon
consummation of the Exchange Offer, and (d) with respect to the Registration
Default specified in clause (iv) above, shall cease to accrue upon the filing of
a post-effective amendment to the Registration Statement that causes the
Exchange Offer Registration Statement (and, if applicable, the Shelf
Registration Statement) again to be declared effective, as the case may be.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease, and all accrued and unpaid Liquidated Damages shall be paid
to Holders of Notes promptly thereafter.
The Company shall notify the Trustee within five days after the
occurrence of each and every Registration Default. The parties hereto agree
that the Liquidated Damages provided for in this Section 4 constitute a
reasonable estimate of the damages that will be incurred by Holders by reason of
any Registration Default.
5. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to the Initial Purchaser, prior to the
filing thereof with the Commission, a copy of any Registration Statement, and
each amendment thereof and each amendment or supplement, if any, to the
8
<PAGE>
Prospectus included therein and shall use its best efforts to reflect in each
such document, when so filed with the Commission, such comments as the Initial
Purchaser reasonably may propose.
(b) The Company shall use its best efforts to provide that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations thereunder;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchaser and, in the
case of a Shelf Registration Statement, the Holders of notes covered thereby,
and, if requested by the Initial Purchaser or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchaser and, in the case of a Shelf Registration Statement, the Holders of
notes covered thereby, and, in the case of an Exchange Offer Registration
Statement, any Exchanging Dealer that has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if requested by the
Initial Purchaser or any such Holder or Exchanging Dealer, confirm such advice
in writing:
(i) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
9
<PAGE>
(ii) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the notes included therein for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of such
date, the Registration Statement or the Prospectus does not include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made).
Each Holder agrees by acquisition of a Note or a New Note that, upon
receipt of any notice from the Company of the existence of any fact of the kind
described in paragraph (iii) above, such Holder will forthwith discontinue
disposition of Notes or New Notes, as the case may be, pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or
until it is advised in writing by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus. If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus concerning such Notes or New Notes that was current at the time
of receipt of such notice.
(d) The Company shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of notes covered by any
Shelf Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of notes covered by any Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
included in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders of notes in connection with the offering and sale of the notes
covered by the Prospectus or any amendment or supplement thereto.
10
<PAGE>
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, any documents incorporated by reference therein and,
if the Exchanging Dealer so requests in writing, all exhibits thereto (including
those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer, without charge, as many copies of
the Prospectus included in such Exchange Offer Registration Statement and any
amendment or supplement thereto as such Exchanging Dealer may reasonably request
for delivery in connection with a sale of New Notes received by it pursuant to
the Registered Exchange Offer; and the Company consents to the use of the
Prospectus or any amendment or supplement thereto by any such Exchanging Dealer,
as provided in Section (2)(e) above.
(i) Prior to the Registered Exchange Offer or any other offering of
notes pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of notes included therein and their
respective counsel in connection with the registration or qualification of such
notes for offer and sale under the securities or blue sky laws of such states as
any such Holders reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such states of the
notes covered by such Registration Statement; provided, however, that the
-------- -------
Company will not be required to qualify as a foreign corporation or as a dealer
in securities in any jurisdiction in which it is not then so qualified, to file
any general consent to service of process or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(j) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing notes to be sold
pursuant to any Registration Statement free of any restrictive legends and in
denominations of $1,000 or an integral multiple thereof and registered in such
names as Holders may request prior to sales of notes pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Company shall use every reasonable effort to
promptly prepare and file a post-effective amendment to any Registration
Statement or an amendment or supplement to the related Prospectus or any other
required document so that, as thereafter delivered to purchasers of the notes
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Notes or
New Notes, as the case may be, registered under such Registration Statement, and
provide the Trustee with printed certificates for such Notes or New Notes, in a
form eligible for deposit with The Depository Trust Company.
11
<PAGE>
(m) The Company shall use every reasonable effort to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable, but in any event not
later than 15 months, after the effective date of the applicable Registration
Statement an earnings statement (which need not be audited) satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 under the
Securities Act.
(n) The Company shall use every reasonable effort to cause the
Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), in a timely manner.
(o) The Company may require each Holder of notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such notes as the Company may from
time to time reasonably require for inclusion in such Registration Statement and
such other information as may be necessary or advisable in the reasonable
opinion of the Company and its counsel, in connection with any Registration
Statement. No Holder of Notes or New Notes shall be entitled to use a
Prospectus unless and until such Holder shall have furnished the reasonably
requested information required by this Section 5(o), and shall have committed to
notify the Company promptly of any change in such information.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information to which the Company does not reasonably object as
the Managing Underwriters, if any, and Majority Holders reasonably agree should
be included therein, and shall make all required filings of such Prospectus
supplement or post-effective amendment promptly upon notification of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements in form and
scope as is customary for similar offerings of debt securities) and take all
other customary and appropriate actions in order to expedite or to facilitate
the registration or the disposition of any notes included therein, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 (or such other provisions and procedures acceptable
to the Majority Holders and the Managing Underwriters, if any) with respect to
all parties to be indemnified pursuant to Section 7.
(r) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the Holders of notes
to be registered thereunder, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
underwriter, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries;
12
<PAGE>
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement, as is customary for similar due diligence
examinations and make such representatives of the Company as shall be
reasonably requested by the Initial Purchaser available for discussion of
any such Registration Statement; provided, however, that any information
-------- -------
that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such underwriter, attorney, accountant
or agent, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes available to the
public generally or through a third party without an accompanying
obligation of confidentiality other than as a result of a disclosure of
such information by any such Holder, underwriter, attorney, accountant or
agent;
(iii) make such representations and warranties to the Holders of
notes registered thereunder and the underwriters, if any, in form,
substance and scope, and at such time or times, as are customarily made by
issuers to underwriters in similar underwritten offerings as may be
reasonably requested by them;
(iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters and
time periods as are customarily covered in opinions requested in similar
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
13
<PAGE>
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the underwriters, if any, and use
reasonable efforts to have such letter addressed to the selling Holders of
notes registered thereunder (to the extent consistent with Statement on
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants (AICPA) ("SAS 72")), in customary form and covering matters and
time periods of the type customarily covered in "cold comfort" letters in
connection with similar underwritten offerings; and
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
and customarily delivered in similar offerings, including those to evidence
compliance with Section 5(k) and with any conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 5(r) shall be performed at (A) the effectiveness of such Shelf
Registration Statement and each post-effective amendment thereto and (B) each
closing under any underwriting or similar agreement as and to the extent
required thereunder.
(s) The Company shall, if and to the extent required under the
Securities Act and/or the Trust Indenture Act and the rules and regulations
thereunder in order to register the Notes (including the Note Guarantees, if
any) under the Securities Act and qualify the Indenture under the Trust
Indenture Act, cause each Guarantor, if any, to sign any Registration Statement
and take all other action necessary to register the Note Guarantees, if any,
under the applicable Registration Statement.
6. Registration Expenses. The Company shall bear all expenses
---------------------
incurred in connection with the performance of its obligations under Sections 2,
3, 4 and 5 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchaser for the reasonable fees and
disbursements of counsel acting in connection therewith.
14
<PAGE>
7. Indemnification and Contribution. (a) In connection with any
--------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless to the
fullest extent lawful each Holder of notes covered thereby (including the
Initial Purchaser and, with respect to any Prospectus delivery as contemplated
by Sections 2(e) and 5(h) hereof, each Exchanging Dealer) the directors,
officers, employees and agents of such Holder and each person who controls such
Holder within the meaning of either the Securities Act or the Exchange Act,
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement as originally filed or in any amendment thereof, or in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage or liability (or action in respect thereof); provided, however,
-------- -------
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability (A) arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder specifically for
inclusion therein or (B) are caused by an untrue statement or omission that was
contained or made in any preliminary prospectus and corrected in the related
Prospectus or any supplement or amendment thereto and (1) any such losses,
claims, damages, liabilities or expenses suffered or incurred by any indemnified
party resulted from an action, claim or suit by any person who purchased Notes
or New Notes from a Holder in the offering to which such Prospectus relates, (2)
such Holder failed to deliver or provide a copy of such Prospectus or any such
supplement or amendment thereto to such person at or prior to the confirmation
of the sale of such Notes in any case where such delivery is required by the
Securities Act and (3) such Prospectus (as so amended and supplemented) would
have cured the defect giving rise to such loss, liability, claim, damage or
expense. The indemnification provided herein will be in addition to any
liability that the Company may otherwise have.
The Company also agrees to indemnify or contribute to the Losses of,
as provided in Section 7(d) hereof, any underwriters of notes registered under a
Shelf Registration Statement, their employees, officers, directors and agents
and each person who controls such underwriters on the same basis (including the
proviso) as that of the indemnification of the Initial Purchaser and the selling
Holders provided in this Section 7(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement, as provided in
Section 5(q) hereof.
15
<PAGE>
(b) Each Holder of notes covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 5(h) hereof, each Exchanging Dealer)
severally and not jointly agrees to indemnify and hold harmless the Company, its
directors, officers, employees, agents and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each such Holder, but only
with respect to written information furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of rights and defenses, and (ii) will
not, in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel (including local counsel) of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
- -------- -------
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
16
<PAGE>
counsel at the expense of the indemnifying party (it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for such indemnified persons). An indemnifying party or an indemnified
party will not, without the prior written consent of the indemnified parties or
the indemnifying parties, as the case may be, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties or the
indemnifying parties, as the case may be, are actual or potential parties to
such claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party or indemnifying party, as the
case may be, from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided, however, that in
-------- -------
no case shall the Initial Purchaser be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such Note,
or in the case of an Exchange Note, applicable to the Note that was exchangeable
into such Exchange Note, as set forth on the cover page of the Final Memorandum,
nor shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the notes purchased by such
underwriter under the Registration Statement that resulted in such Losses; and
provided further, however, that in no case shall any subsequent Holder of any
- -------- ------- -------
Note or Exchange Note be responsible, in the aggregate, for any amount in excess
of the total proceeds received by such Holder for the sale of Notes or New Notes
giving rise to the indemnification liability. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the sum of (x) the total
net proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Final Memorandum and (y) the total amount of Liquidated
Damages that the Company was not required to pay as a result of registering the
notes covered by the Registration Statement that resulted in such Losses.
Benefits received by the Initial Purchaser shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Final Memorandum received by such Initial Purchaser, and benefits received by
any other Holders shall be deemed to be equal to the total proceeds received by
such Holder upon the sale of Notes or New Notes giving rise to the
indemnification obligation Benefits received by any underwriter shall be deemed
17
<PAGE>
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
that resulted in such Losses received by such underwriter. Relative fault shall
be determined by reference to, among other things, whether any alleged untrue
statement or omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
person in connection with investigating or defending any such action or claim.
The parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation that did not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person who
controls a Holder within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act, each director, officer, employee and agent of the Company shall
have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8(d) or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
-------- -------
unreasonably withheld.
(e) The provisions of this Section 7 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred to
in Section 7 hereof, and will survive the sale by a Holder of notes covered by a
Registration Statement.
8. Miscellaneous.
-------------
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided herein, in the Indenture or in the Purchase Agreement
(provided that with respect to any Holder other than the Initial Purchaser, the
rights under the Purchase Agreement shall be limited to those set forth in
Section 5(i) thereof) or granted by law, including recovery of liquidated or
other damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages (including the Liquidated
Damages contemplated hereby) would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby waives the defense in any action for specific performance that a remedy
at law would be adequate.
18
<PAGE>
(b) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement that conflicts with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then-outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of New Notes); provided that, with respect to
--------
any matter that directly or indirectly affects the rights of the Initial
Purchaser hereunder, the Company shall obtain the written consent of the Initial
Purchaser. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose notes are being
sold pursuant to a Registration Statement, and that does not directly or
indirectly affect the rights of other Holders, may be given by the Majority
Holders, determined on the basis of notes being sold rather than registered
under such Registration Statement.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to the Initial Purchaser;
(ii) if to the Initial Purchaser, initially at NationsBank
Corporate Center, 100 North Tryon Street NC1-007-07-01, Charlotte, North
Carolina 28255-0001;
(iii) if to the Company, initially c/o CGW Southeast Partners III,
L.P., Suite 210, Twelve Piedmont Center, Atlanta, Georgia 30305, Attention:
William A. Davies and James A. O'Donnell, with a copy to Alston & Bird, One
Atlantic Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424,
Attention: Bryan E. Davis.
All such notices and communications shall be deemed to have been duly
given when received. The Initial Purchaser, on the one hand, or the Company, on
the other, by notice to the other party or parties may designate additional or
different addresses for subsequent notices or communications.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or New Notes; provided,
--------
however, that this Agreement shall not inure to the benefit of or be binding
- -------
19
<PAGE>
upon a sucessor or assign of a Holder unless and to the extent such successor or
assign acquired Transfer Restricted Securities from such Holder. Subject to the
proviso contained in the immediately preceding sentence, the Company hereby
agrees to extend the benefits of this Agreement to any Holder of Notes and/or
New Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(f) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
(i) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(j) Notes Held by the Company, etc. Whenever the consent or approval
-------------------------------
of Holders of a specified percentage of principal amount of Notes or New Notes
is required hereunder, Notes or New Notes, as applicable, held by the Company or
its Affiliates (other than subsequent Holders of Notes or New Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Notes or New Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
(k) Participation In Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten Shelf Registration hereunder unless such Holder
(a) agrees to sell such Holder's Notes or New Notes, as the case may be, on the
basis provided in any underwriting arrangements approved by the Company and the
Majority Holders and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
(l) Selection of Underwriters. The Holders of Notes or New Notes
-------------------------
covered by the Shelf Registration Statement who desire to do so may sell such
notes in an underwritten offering. In any such underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Majority Holders of notes
included in such offering; provided, that such investment bankers and managers
must be reasonably satisfactory to the Company.
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
GORGES/QUIK-TO-FIX FOODS, INC.
By:
------------------------------
Name: James A. O'Donnell
Title: President
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By:
------------------------------
Name: William Casperson
Title: Vice President
21
<PAGE>
ANNEX A
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date (as defined herein) and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See Plan of Distribution.
A-1
<PAGE>
ANNEX B
Each broker-dealer that receives New Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See Plan of Distribution.
B-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Notes
where such Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date and ending on the close of business 180 days after the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale. In addition, until
, 199 , all dealers effecting transactions in the New Notes may be
- ------------ --
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit from any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any broker-
dealers) against certain liabilities, including liabilities under the Securities
Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
C-1
<PAGE>
ANNEX D
Rider A
-------
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
-------------------------------------------------------
Address:
----------------------------------------------------
----------------------------------------------------
Rider B
-------
The undersigned represents that it is not an affiliate of the
Company, that any New Notes to be received by it will be acquired in the
ordinary course of business and that at the time of the commencement of the
Exchange Offer it had no arrangement with any person to participate in a
distribution of the New Notes.
In addition, if the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes. If the undersigned is a broker-dealer that
will receive New Notes for its own account in exchange for Notes, it represents
that the Notes to be exchanged for New Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
D-1
<PAGE>
EXHIBIT 10.1
AGREEMENT FOR INVESTMENT BANKING SERVICES
THIS AGREEMENT is entered into this November 25, 1996, by and between
GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation (the "Corporation"), and
CGW SOUTHEAST MANAGEMENT III, L.L.C., a Delaware limited liability company
("CGW").
BACKGROUND
CGW has heretofore provided investment banking services to the Company in
connection with the transactions contemplated by that certain Asset Purchase
Agreement, dated October 17, 1996, among the Corporation, Tyson Foods, Inc.,
Tyson Holding Company and Gorges Foodservice, Inc. (the "Asset Purchase
Agreement"), and in connection with structuring and negotiating certain senior
credit facilities and the terms of the issuance and sale by the Corporation of
senior subordinated notes and in arranging for contributions to the equity
capital of the Corporation (collectively, the "Financings"). The Corporation
desires to continue to engage CGW to provide such investment banking services in
connection with the consummation of the transactions contemplated by the Asset
Purchase Agreement and the Financings.
AGREEMENT
For and in consideration of the above premises and the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties hereto agree as
follows:
1. SCOPE OF CONSULTING SERVICES. CGW has provided and agrees to continue
to provide to the Corporation investment banking and advisory services in
connection with the structuring and negotiation of the transactions contemplated
by the Asset Purchase Agreement and the Financings and the consummation of such
transactions.
2. COMPENSATION. For the services rendered by CGW as herein described,
upon consummation of the transactions provided for in the Asset Purchase
Agreement and the Financings the Corporation shall pay to CGW Two Million Six
Hundred Fifty Thousand Dollars ($2,650,000) (the "Fee"). The Fee shall be paid
at the time of the consummation of such transactions by wire transfer of
immediately available funds.
3. EXPENSES. The Corporation shall reimburse CGW for all of CGW's costs
and expenses (other than ordinary overhead) reasonably incurred in connection
with providing the investment banking services hereunder. Such reimbursements
shall be paid to CGW upon submission by CGW of all documentation ordinarily
required by the Corporation's policy on reimbursement of expenses.
<PAGE>
4. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment or agency relationship between the Corporation and
CGW is intended to be created hereby.
5. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and its
affiliates, their respective officers, directors, controlling
persons (within the meaning of Section 15 of the Securities Act
of 1933 or Section 20(a) of the Securities Exchange Act of 1934),
if any, employees and agents of CGW or any of CGW's affiliates
(each such person being an "Indemnified Person") from and against
any losses, claims, damages or liabilities related to, arising
out of or in connection with CGW's engagement hereunder.
(b) The Corporation shall reimburse each Indemnified Person for all
reasonable expenses (including fees and expenses of counsel) as
they are incurred in connection with investigating, preparing,
pursuing or defending any action, claim, suit, investigation or
proceeding related to, arising out of or in connection with CGW's
engagement hereunder, whether or not pending or threatened and
whether or not any Indemnified Person is a party; provided
however, that if a final judicial determination is made that any
losses, claims, damages or liabilities (or expenses related
thereto) have resulted from the bad faith or gross negligence of
any Indemnified Person, then each Indemnified Person will remit
to the Corporation any amounts reimbursed under this subparagraph
8(b).
(c) The Corporation will not be responsible for any losses, claims,
damages or liabilities (or expenses related thereto) that are
finally judicially determined to have resulted from the bad faith
or gross negligence of any Indemnified Person. The Corporation
further agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or
otherwise) to the Corporation or to any person claiming through
the Corporation (including, without limitation, equity holders
and creditors of the Corporation) for or in connection with CGW's
engagement hereunder except for any such liability for losses,
claims, damages or liabilities incurred by the Corporation that
are finally judicially determined to have resulted from the bad
faith or gross negligence of such Indemnified Person. If
multiple claims are brought against CGW in an arbitration, with
respect to at least one of which indemnification is permitted
under applicable law and provided for under this Agreement, the
Corporation agrees that any arbitration award shall be
2
<PAGE>
conclusively deemed to be based on claims as to which
indemnification is permitted and provided for, except to the
extent the arbitration award expressly states that the award, or
any portion thereof, is based solely on a claim as to which
indemnification is not available.
(d) The Corporation agrees that each Indemnified Person is entitled
to retain separate counsel of its choice in connection with any
of the matters to which the indemnification and reimbursement
commitments set forth in subparagraphs 8(a) and 8(b) above
relate.
(e) No Indemnified Person seeking indemnification, reimbursement or
contribution under this Agreement will, without the Corporation's
prior written consent, settle, compromise, consent to the entry
of any judgment in or otherwise seek to terminate any action,
claim, suit, investigation or proceeding referred to in this
subparagraph 8(a) above.
(f) The foregoing rights to indemnity and contribution shall be in
addition to any rights that CGW and/or any other Indemnified
Person may have at common law or otherwise and shall remain in
full force and effect following the completion or any termination
of CGW's engagement. The Corporation hereby consents to personal
jurisdiction and to service and venue in any court in which any
claim which is subject to this Agreement is brought against CGW
or any other Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification or
reimbursement sought pursuant to this Section 8 is finally
judicially determined to be unavailable (except by reason of the
gross negligence or bad faith of any Indemnified Person), then,
whether or not CGW is the person entitled to indemnification or
reimbursement, the Corporation and CGW shall contribute to the
losses, claims, damages, liabilities and expenses for which such
indemnification or reimbursement is held unavailable in such
proportion as is appropriate to reflect the relative benefits to
the Corporation on the one hand, and CGW on the other, in
connection with the transaction to which such indemnification or
reimbursement relates, and other equitable considerations;
provided however, that in no event shall the amount to be
contributed by CGW exceed the amount of the fee actually received
by CGW hereunder.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ James A. O'Donnell
------------------------------------
Name: James A. O'Donnell
------------------------------
Title: President
-----------------------------
CGW SOUTHEAST MANAGEMENT L.L.C.
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
------------------------------
Managing Director
4
<PAGE>
EXHIBIT 10.2
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is executed and made
effective this 25th day of November, 1996, by and between TYSON FOODS, INC., a
Delaware corporation ("Tyson"), and GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation ("Buyer").
WHEREAS, prior to the date hereof, Tyson owned and operated as a division
its beef further processing operations under the name of Gorges/Quik-to-Fix
Foods (the "Business"); and
WHEREAS, pursuant to that certain Asset Purchase Agreement by and among
Tyson, certain subsidiaries of Tyson and Buyer dated October 17, 1996 (the
"Purchase Agreement"), Tyson has sold and/or caused to be sold to Buyer
substantially all of the assets of the Business; and
WHEREAS, as a material inducement to Buyer to enter into the Purchase
Agreement, Tyson has agreed to provide certain services to Buyer relating to the
Business on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DESCRIPTION OF SERVICES. Subject to the terms and provisions of this
-----------------------
Agreement, Tyson shall provide Buyer with those services with respect to the
operation of the Business as set forth on EXHIBITS A through C hereto (the
"Services"). Tyson shall supply all personnel and all equipment, software,
office supplies and other materials necessary or required for Tyson to perform
such Services to the standards and upon the terms set forth herein; provided,
however, that in performing such Services (i) Tyson may utilize any of Buyer's
personnel who were utilized in providing the Services to the Business
immediately prior to the date hereof and any equipment, software, office
supplies and other materials which constitute a part of the Purchased Assets (as
such term is defined in the Purchase Agreement), and (ii) Tyson shall not be
required to hire additional personnel or acquire additional equipment, software,
office supplies or other materials from that used in providing the Services to
the Business immediately prior to the date hereof (except that Tyson will
restock and replenish office supplies and other materials as necessary).
2. TERM OF SERVICES. Tyson shall provide the Services for the period
----------------
commencing on the date hereof and ending on the first anniversary of the date
hereof, subject to earlier termination of this Agreement and Tyson's obligations
hereunder as to all or a portion of the Services, as set forth in Section 8
hereof.
<PAGE>
3. CONSIDERATION FOR SERVICES. During the period beginning on the date
--------------------------
hereof and ending on the 180th day after the date hereof (the "Initial Period"),
Tyson shall provide the Services at no cost to Buyer, the parties acknowledging
and agreeing that such Services are being provided as part of the consideration
for Buyer's agreements under the Purchase Agreement. For any Services provided
after the Initial Period, Buyer shall pay Tyson an amount for such Services as
the parties shall agree upon, and each party shall negotiate in good faith to
agree upon a reasonable amount; provided, however, that if the parties are not
able to agree upon such an amount, Buyer shall pay to Tyson $120,000 per
calendar month for each calendar month in which all of the Services are provided
hereunder, it being the intent of the parties that such amount be prorated if
less than all of the Services are provided hereunder during such month. In the
event that, either during the Initial Period or after, Buyer requests Tyson to
increase the type or level of the Services beyond that which was provided to the
Business immediately prior to the date hereof, Buyer and Tyson shall negotiate
in good faith to determine a reasonable fee for such increase which Buyer shall
pay to Tyson therefor; provided, however, that Tyson shall be under no
obligation to provide any such increase in Services unless a mutual agreement is
reached with respect thereto. Any monthly amount payable as provided in the
preceding sentence shall be pro rated for any partial month.
4. TERMS OF PAYMENT. With respect to any Services for which payment is
----------------
required pursuant to Section 3 above, Tyson shall submit in writing invoices
covering said charge to Buyer hereunder not later than twenty (20) days
following the end of the calendar month in which such Services are provided.
Payment shall be made no later than thirty (30) days after the invoice date.
5. METHOD OF PAYMENT. All amounts payable by Buyer for any Services
-----------------
shall be remitted to Tyson in United States dollars to a bank to be designated
in the invoice or otherwise in writing by Tyson, unless otherwise provided for
and agreed upon in writing by the parties.
6. COORDINATORS. Each party shall appoint one individual who shall serve
------------
as a contact person for purposes of communicating with the other party and
carrying out this Agreement, and who shall be authorized to act on behalf of his
or her respective party as to matters pertaining to this Agreement. Effective
upon execution of this Agreement, such coordinators shall be as set forth in
SCHEDULE 1 hereto. Each party shall notify the other in writing as to the name,
address and telephone number of any replacement for such designated coordinator.
7. PERFORMANCE STANDARDS. Tyson will provide each Service to Buyer at
---------------------
the same levels of quality and timeliness of performance as Tyson achieved in
providing like or similar Services to the Business immediately prior to the date
hereof. In any event, all Services will be provided consistent with Tyson's
past practices.
2
<PAGE>
8. LIABILITY; INDEMNIFICATION.
--------------------------
(a) Except to the extent provided in Sections 8(b) and 8(c) below,
nothing in this Agreement is intended to impose upon Tyson, and Tyson does not
assume pursuant to this Agreement, any of the risks associated with operation of
the Business after the date hereof, including, without limitation, product
quality and liability therefor. Except as provided elsewhere in this Section 8
or in Section 3 hereof, neither party shall have any liability to the other
party for any Losses (as defined in Section 8(d) below) incurred by such other
party in connection with this Agreement or the performance of either party's
obligations hereunder, whether such claim of liability arises in an action at
law or in equity, and whether such claim sounds in contract or tort or
otherwise.
(b) Buyer agrees to indemnify, defend and hold harmless Tyson and its
officers, directors, shareholders, controlling persons, affiliates and
representatives (the "Tyson Indemnitees"), and each of them, from, against, for
and in respect of any and all Losses suffered or incurred by a Tyson Indemnitee
and resulting from, based upon or arising out of the provision of Services under
this Agreement, other than Losses resulting from, based upon or arising out of
any intentional breach of this Agreement by Tyson or the fraud, gross negligence
or willful misconduct of Tyson in connection with the performance of its
obligations under this Agreement.
(c) Tyson agrees to indemnify, defend and hold harmless Buyer and its
officers, directors, shareholders, controlling persons, affiliates and
representatives (the "Buyer Indemnitees"), and each of them, from, against, for
and in respect of any and all Losses suffered or incurred by a Buyer Indemnitee
and resulting from, based upon or arising out of any intentional breach of this
Agreement by Tyson or the fraud, gross negligence or willful misconduct of Tyson
in connection with the performance of its obligations under this Agreement.
(d) For purposes of this Agreement, a "Loss" shall mean any action,
suit, proceeding, claim, cost, damage, expense, liability, loss or obligation,
including but not limited to, interest or carrying costs, penalties, legal,
accounting and other professional fees and expenses incurred in the collection,
prosecution and defense of actions or claims and amounts paid in settlement
pursuant to the terms of this Agreement, that may be imposed or otherwise
incurred or suffered by the specified person (but a "Loss" shall not include
consequential, speculative or punitive damages unless asserted by a third
party).
9. TERMINATION. This Agreement shall terminate on the first anniversary
-----------
of the date hereof, but may be terminated earlier in accordance with the
following:
(a) upon the mutual written agreement of the parties;
(b) as to any Service provided hereunder, upon the lapse of fifteen
(15) days after Buyer has notified Tyson to cease providing such Service;
3
<PAGE>
(c) by either Tyson or Buyer for material breach of any of the terms
hereof by Buyer or Tyson, as the case may be, if the breach is not corrected
within thirty (30) days after written notice of breach is delivered to the
defaulting party;
(d) by either Tyson or Buyer forthwith, upon written notice to Buyer
or Tyson, as the case may be, if Buyer or Tyson, as the case may be, shall
become insolvent or shall make an assignment for the benefit of creditors, or
shall be placed in receivership, reorganization, liquidation or bankruptcy.
Upon any such termination, Tyson shall be compensated for all Services performed
to the date of termination in accordance with the provisions of this Agreement.
10. FORCE MAJEURE. Any delays in or failure of performance by Tyson shall
-------------
not constitute a default hereunder if and to the extent such delay or failure of
performance is caused by occurrences beyond the reasonable control of Tyson,
including, but not limited to: acts of God or the public enemy; expropriation or
confiscation of facilities; compliance with any order or request of any
governmental authority; acts of war; riots or strikes or other concerted acts of
personnel; or any causes, whether or not of the same class or kind as those
specifically named above, which are not within the reasonable control of Tyson,
and which by the exercise of reasonable diligence, Tyson is unable to prevent.
11. CONFIDENTIALITY. Any and all information which is not generally known
---------------
to the public which is exchanged between the parties in connection with this
Agreement, or which is directly or indirectly obtained by one party from the
other in connection with the performance of Services hereunder, whether of a
technical or business nature, shall be considered to be confidential. The
parties agree that confidential information shall not be disclosed to any third
party or parties without the written consent of the other party. Each party
shall take reasonable measures to protect against nondisclosure of confidential
information by its officers and employees. Confidential information shall not
include any information (i) which is or becomes part of the public domain, (ii)
which is obtained from third parties who are not bound by confidentiality
obligations or (iii) which is required to be disclosed by law, regulation, legal
process or the rules of any state or federal regulatory agency or any national
stock exchange. It is further understood and agreed that money damages would
not be a sufficient remedy for any breach of this Section 11 and that the non-
breaching party shall be entitled to specific performance as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for
such breach but shall be in addition to all other remedies available hereunder,
at law or in equity, to the non-breaching party. The provisions of this section
shall survive the termination of this Agreement.
12. INDEPENDENT CONTRACTOR STATUS. Tyson shall be deemed to be an
-----------------------------
independent contractor to Buyer. Nothing contained in this Agreement shall
create or be deemed to create an employment, agency, joint venture or
partnership relationship between Buyer and Tyson.
4
<PAGE>
13. ARBITRATION. If a dispute, controversy or claim arises out of or in
-----------
connection with the terms and conditions of this Agreement, it shall be
submitted to binding arbitration which shall be conducted as follows: (a) the
arbitrator shall be an independent third party knowledgeable of the beef further
processing and distribution industries and mutually satisfactory to Buyer and
Tyson; (b) the arbitrator, in conducting such arbitration, shall have access to
all relevant documents and records of the parties; (c) the arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date such arbitration is commenced and
shall be final and binding on the parties hereto; and (d) all arbitration
proceedings shall be conducted in English in a location mutually agreed upon by
the parties.
14. AMENDMENT AND WAIVER.
--------------------
(a) This Agreement may be amended, or any provision of this Agreement
may be waived, provided that any such amendment or waiver will be binding upon
Tyson only if set forth in a writing executed by Tyson, and any such amendment
or waiver will be binding upon Buyer only if set forth in a writing executed by
Buyer.
(b) No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
15. NOTICES. Except as otherwise expressly set forth in this Agreement,
-------
all notices, demands and other communications to be given or delivered under or
by reason of the provisions of this Agreement will be in writing and will be
deemed to have been given when delivered personally, or by documented overnight
delivery service, or sent by telecopy, telex, or other electronic transmission
service, provided a confirmation copy is also sent no later than the next
business day by first class mail, return receipt requested. Notices, demands
and communications to Buyer or Tyson will, unless another address is specified
in writing, be sent to the address indicated below:
If to Tyson, to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
5
<PAGE>
With a copy to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: David L. Van Bebber, Esq.
(501) 290-4000
(501) 290-7967 (FAX)
If to Buyer, to: Gorges/Quik-to-Fix Foods, Inc.
c/o Cravey, Green & Wahlen
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
(404) 816-3255
(404) 816-3258 (FAX)
With a copy to: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin, Esq.
(404) 881-7000
(404) 881-7777 (FAX)
16. ASSIGNMENT. This Agreement and all of the provisions hereof will be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by either party
without prior written consent of the other party; provided, however, that Buyer
may assign its rights hereunder to any lender to Buyer upon the condition that
such lender may only exercise any of Buyer's rights hereunder if Buyer is then
and continues to be in default under any credit agreement with such lender.
17. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
18. NO THIRD PARTY BENEFICIARIES. This Agreement does not create any
----------------------------
rights in any person or party who is not a party to this Agreement.
6
<PAGE>
19. NO STRICT CONSTRUCTION. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
20. SECTION HEADINGS. The headings of sections contained in this
----------------
Agreement are provided for convenience only. They form no part of this
Agreement and shall not affect its construction or interpretation. All
references to sections or subsections refer to the corresponding sections and
subsections of this Agreement. All words used herein shall be construed to be
of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement and the Exhibits and Schedule hereto as a whole and as the
same may, from time to time hereafter, be amended, supplemented or modified.
The words "herein," "hereby," "hereof," "hereinabove," and "hereinbelow," and
words of similar import, refer to this Agreement as whole and not to any
particular section, subsection, paragraph, clause or other subdivision hereof,
unless otherwise specifically noted.
21. COMPLETE AGREEMENT. This document and the documents referred to
------------------
herein or attached hereto contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
22. GOVERNING LAW. The substantive law (and not the law of conflicts) of
-------------
the State of Delaware will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
23. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts (including by means of FAXed signature pages), any one of which
need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same instrument.
24. DEFINED TERMS. Any capitalized term used but not defined herein
-------------
(including in the Exhibits hereto) shall have the meaning set forth in the
Purchase Agreement.
[Signatures on Next Page]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
TYSON FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ David L. Van Bebber
-----------------------------------
Name: David L. Van Bebber
-----------------------------------
Title: Assistant Secretary
-----------------------------------
GORGES/QUIK-TO-FIX FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ William A. Davies
-----------------------------------
Name: William A. Davies
-----------------------------------
Title: Secretary
-----------------------------------
8
<PAGE>
SCHEDULE 1
INITIAL COORDINATORS
FOR TYSON:
Name: Matt Venable
Address: Tyson Foods, Inc.
2210 Oaklawn Drive
Springdale, Arkansas 72765
Phone: (501) 290-5709
Fax: (501) 290-7908
FOR BUYER:
Name: J. David Culwell
Address: 9330 LBJ Freeway
Suite 1055
Dallas, TX 75243
Phone: 972-497-1033
Fax: 972-994-1510
9
<PAGE>
EXHIBIT A
COMPUTER PROCESSING, ACCOUNTING, REPORTS,
SCHEDULING, CUSTOMER SERVICE AND RELATED FUNCTIONS
STATEMENT OF INTENT
It is the intent of this agreement that Buyer be provided computer processing
and related business services necessary to operate the Business on an ongoing
basis, including but not limited to information systems support, computer
processing time, telecommunications access, reporting, documentation, training,
functional and technical support, interim processing of transactions, online
access and others.
Detailed system and process requirements not specified in this document but
necessary for ongoing operations of Buyer will be considered included in this
agreement by this statement of intent.
Services described by this agreement are defined according to the time periods
covered, and include Transition, Conversion, and Post Conversion Support
services. In some cases, the time periods overlap.
. Transition includes all time from moment of Closing to the point at which the
----------
last remaining application is converted, and focuses on those services
necessary to operate Buyer as a going concern in the absence of its own
established systems and processes.
. Conversion includes all time from the point at which conversion planning
----------
begins for the first application up to and including the point at which the
last remaining application is converted to Buyer. The focus of conversion
services is on those services necessary to convert existing Tyson systems and
processes being run on behalf of Buyer to Buyer's own systems and processes.
. Post Conversion Support includes all time from the point at which an
-----------------------
application is converted to Buyer systems to a point in time 60 days after
conversion date for that application. Each application will have a Post
Conversion Support period.
The terms "routine," "normal," and "reasonable" used throughout this document in
relation to Tyson services connote a level of service and performance that Tyson
management would expect of its own service departments.
<PAGE>
SERVICES PROVIDED DURING TRANSITION
- -----------------------------------
DATA PROCESSING
Applications
Application processing will be performed for the following applications in
support of the locations listed with an X. Table 1 is intended to represent
actual application processing services provided on the date of sale.
This service includes the appropriate handling and processing of all inbound
inputs, timely processing of inputs and printing and distribution of outputs
according to normal business priority.
TABLE 1
TABLE OF APPLICATIONS BY LOCATION
---------------------------------
<TABLE>
<CAPTION>
SIOUX ORANGE
APPLICATIONS GARLAND HARLINGEN CENTER CENTER
- ------------ ------- --------- ------ ------
<S> <C> <C> <C> <C>
DECISION SUPPORT SYSTEMS
- ------------------------
Executive Information System (EIS) X X X X
PLANT SYSTEMS
- -------------
Maintenance Management System X X X X
SIM/RF X X X X
Production Planning and Scheduling X X X X
WORKERS COMPENSATION X X X X
- --------------------
SOE/INV/TRK
- -----------
Sales Order Entry (SOE) X X X X
Inventory/Warehouse Mgmt (INV/WMS) X X X X
Trucking X X X X
MTP X X
FINANCIAL SYSTEMS AND HR SYSTEMS
- --------------------------------
Purchasing Management X X X X
Vehicle Management X X X X
Materials Management X X X X
Vendor Application X X X X
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
GLM - General Ledger X X X X
FAM - Fixed Assets X X X X
CPM - Capital Project / CIR X X X X
APM - Accounts Payable X X X X
DAS - Deduct Admin X X X X
Payroll X X X X
*Insurance Benefits (per Buyer's
instructions) X X X X
*Cyborg HR System X X X X
*Time and Attendance X X X X
*Garnishments X X X X
*Credit Union X X X X
*Vision X X X X
*TALX X X X X
*Cobra X X X X
*PersMaster X X X
AS/400 X X X X
- ------
Product Specification X X
Bill of Materials X X
Production Line Scheduling X X
Product Costing X X
Lab Test Tracking X X
Blender System X X
Materials Management X X
Attendance Management X X
</TABLE>
NOTES TO TABLE 1:
. Product specifications that have been converted to the new system should be
available in acceptable format to be dumped to tape for conversion purposes.
. The EIS system includes access to (in hard copy report form and not on-line
access) margin reports, cost accounting, fixed assets, inventory, and all
other data normally provided as part of this system.
. Lab tests and other data recorded on paper are considered to be data and are
transferable to Buyer.
. The PC-based Excel pricing system in marketing will be made available on
magnetic media along with authorization for its use and support in its use
from those within Tyson with knowledge of the system.
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. The AS/400 applications are not currently in use at Garland and Harlingen.
However, both plants have access to the systems should they choose to use
them, and access to these systems will continue through transition.
. Each of the applications indicated by an asterisk (*) relates to human
resources/employee functions. With respect to these applications, Buyer will
provide Tyson with Buyer's preferred practices and policies, and the parties
will mutually determine a reasonable and practical method by which Tyson will
provide Services for Buyer in these application areas.
HARDWARE AND SOFTWARE
Hardware and software systems physically located in the four Facilities are to
be transferred to Buyer with the sale, and become property of Buyer, including
any third-party support agreements that are in place as of the date of sale,
including but not limited to the hardware and software shown in Table 1, except
any software that is proprietary to Tyson. Also, any hardware or software at
Tyson that is being stored on behalf of any of the Facilities, or is under
repair at any other facility or vendor, or for any reason is not located on site
but is the rightful property of one of the four Facilities, becomes property of
Buyer on the date of sale and should be transferred to Buyer in a timely manner.
Computer hardware and software, including but not limited to laptop/notebook
computers, in use by employees transferring to Buyer, regardless of whether they
are located at one of the four Facilities, will be transferred to Buyer.
PROCESS SERVICES
During the Transition period, there will be a need for certain business
processes to be performed by Tyson on behalf of Buyer. This will, in many
cases, require the commitment of Tyson resources (i.e. personnel) to perform the
duties described below. Some changes may be made by Buyer to daily duties and
responsibilities of those processing transactions on behalf of Buyer in order
to facilitate the transition.
As a condition of the sale, Tyson has agreed to provide process support for many
of the business functions necessary to continue smooth and efficient processing,
delivery, and accounting for customer orders and payments. It is the intent of
this agreement that Tyson employees acting on behalf of Buyer will do so in a
manner consistent with Tyson standards of operations and customer care,
notwithstanding exceptions expressly designated by Buyer.
In order to facilitate the transition of processes from Tyson employees to Buyer
employees, Buyer may require changes to processes that require more or less of
Tyson employee(s) time and effort. Also, toward this end, Tyson agrees to
provide training to Buyer employees in various areas including but not limited
to customers, products, shipping/delivery requirements, brokers, salesmen, and
other critical functions. The training may occur either at Tyson headquarters
or at Buyer, as designated by Buyer. Implicit in this agreement is access by
4
<PAGE>
trainees to personnel and records located at Tyson headquarters, for periods of
time to be mutually agreed upon, but not less than is reasonable for training
purposes.
The functions to be provided by Tyson during the transition period include, but
are not limited to, the following:
BILLING/INVOICING
Responsible Party- Dede Kendrick, Billing Supervisor
Includes but not limited to invoice processing, exception handling,
bursting, decollating, preparing for mailing and mailing, and all
accounting and reporting processes required for adequate control.
Buyer will have the option of printing locally at the Garland Facility
any or all of the billing/invoicing forms and reports.
PAYROLL PROCESSING
Responsible Party - Mark Hayre, Payroll Manager
Plant sites will continue to gather time and attendance locally using
automated means for hourly and some clerical positions. Tyson will
provide full payroll processing services including printing and
delivery of checks and remittances, and the facilitation of direct
deposit where appropriate. Line and clerical personnel will be paid
weekly or 52 times per year. Management/salaried personnel will be
paid biweekly or 26 times per year. Monthly payroll exceptions will
be converted to biweekly. Buyer will provide stock forms for checks
and remittances.
Buyer will choose its own benefits provider, and will direct Tyson as
to the appropriate deductions and payments to be made for each payroll
period.
401k deductions will be terminated as of date of sale, as will any
applicable stock purchase programs.
The Human Resources department at Tyson will provide reasonable
assistance to Buyer's Human Resources department in preparing the
targeted jobs tax credits and other government program data.
Buyer will set up a separate transaction account for payroll
processing.
ACCOUNTS PAYABLE
Responsible Party -Rick Steichman, A/P Manager
Tyson will provide accounts payables processing and check printing and
mailing. Buyer will continue to use payables clerks at the plant
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<PAGE>
locations to match invoices with purchase orders and receiving
documents, and key the payables data into the system.
Sales and marketing and other miscellaneous expense data will be
collected and keyed at the Garland Facility.
ACCOUNTS RECEIVABLE/CASH APPLICATION/CREDIT
Responsible Party - Joyce Harrelson, A/R Supervisor
Subject to the Collection Agreement (as defined in the Purchase
Agreement), Tyson will support Buyer by providing system support and
reporting for facilitating accounts receivable management, the
application of cash to open invoices, and the setting and managing of
credit and credit limits and exceptions. Buyer will assume
appropriate management decisions associated with credit processes
including granting initial credit and setting and changing credit
limits.
Tyson will continue to support lockbox processing, and has agreed to
provide separate lockbox processing at NationsBank of Dallas, Texas.
GENERAL LEDGER PROCESSING
Responsible Party - Jim Beaty, Accounting Manager
Tyson will provide full general ledger processing for Buyer as a
separate company. Buyer will be granted authorization to make all
necessary entries to the general ledger including adjusting entries,
reclassifications, prior and current period adjustments, etc. Buyer
may make changes to the chart of accounts as required, subject to the
reasonableness of the request and Tyson's standard procedures.
BANK RECONCILIATION
Responsible Party - Jim Beaty, Accounting Manager
Bank reconciliation will occur at Buyer, and Tyson will provide Buyer
original documents concerning deposits, statements, lockbox listings,
system reports, etc., necessary to perform full account
reconciliation.
SALES ORDER ENTRY/INVENTORY MANAGEMENT
Responsible Party - Jamia Fields, Manager, Sales Support
Sales order entry will require Tyson employees to be staffed as needed
to process orders in a timely fashion. These employees will be
resident in Tyson facilities and remain as Tyson employees, and may
be asked to perform related duties including pricing, deductions
processing, expediting, product prorating, electronic data interchange
orders (EDI), responding to bids, program paying processing,
promotions, and other duties as reasonably requested by Buyer.
6
<PAGE>
Buyer will set prices and maintain the products and prices in the
system. Sales Order clerks will require a separate Purchase Order
number for Beef and Pork orders.
Buyer may, at its option, change the 1-800 inbound telephone number
used for beef and pork telephone orders. Buyer shall be responsible
for the cost of such change, and Tyson will accommodat this change
should it occur while orders are still being taken at Tyson
headquarters at Springdale.
PRICING
Responsible Party - Stacy Jaycox, Pricing Supervisor
A Tyson employee to be mutually determined will act as Pricing
Coordinator to verify order prices and publish/distribute price
schedules for Buyer, with all price information to be determined by
Buyer.
TRAFFIC/TRANSPORTATION
Responsible Party - Bryan McDuffie, Director of Distribution
Tyson will continue to provide services related to truckload building
and the contracting of carriers for delivery of Buyer product to
customer and distributor locations. Tyson will also provide at the
request of Buyer intra- and interstate transfers of inventory.
INVENTORY AND WAREHOUSE MANAGEMENT, SALES ACCRUAL TRACKING
Responsible Party - Marty Bryan, Director Sales and Distribution
Accounting
Buyer will continue to maintain regular and consigned inventory in
public and privately owned warehouses currently in use and at
additional locations designated by Buyer. Tyson will transfer all
Buyer inventory to accounts in Buyer's name at all inventory
locations. Buyer will be responsible for determining levels of
inventory to be held at each location.
It is understood by both parties that Buyer will establish its own
distribution network during the transition period, and may request
changes in process and procedure that will facilitate the transition.
Sales accrual tracking data will also be provided to Buyer on a
regular basis.
7
<PAGE>
With respect to Sales Order Entry/Inventory Management, Traffic/
Transportation and Inventory and Warehouse Management, Sales Accrual
Tracking, Tyson shall continue to provide for all of Buyer's products
and customers all services that Tyson currently performs in connection
with the Business with respect to receiving, entering and processing
customer orders; scheduling production, storage and distribution of
products; providing customer service; and generally performing
logistical services. Without limiting the generality of the
immediately preceding sentence, Tyson will provide for Buyer to
maintain such regular and consigned inventory, in such amounts that
Buyer shall determine, in warehouses or other storage facilities which
are either owned or leased by Tyson or its subsidiaries and routinely
used by Tyson or its subsidiaries in conneciton with the Business. The
parties expressly agree, however, that the costs for the
transportation and storage of products shall be at Buyer's expense,
and Buyer shall pay the charges of any third-party provider of such
services that is scheduled by Tyson, or reimburse Tyson if it provides
such services (at rates that are reasonable and comparable to rates
charged by other providers in the marketplace and consistent with past
practices for the Business and for other Tyson business units).
TAX REMITTANCE
Responsible Party - Kevin Griffin, Director of Taxation
Tyson will remit sales and use taxes, payroll withholding taxes, and
supervise Buyer's selected agents in remittance of unemployment
insurance taxes to any and all taxing jurisdictions where such taxes
are due and payable. Buyer will provide Tyson with the applicable
Power of Attorney to perform these tasks.
Buyer reserves the right to access the Tyson records, files, data, and personnel
associated with the functions listed above for the purpose of performing routine
inspection and audits.
FORMS
Certain of the business functions listed above will require either new or
changes to existing computer printed forms, letterhead, invoices, and other
consumable items. Tyson agrees to make system changes to printed forms and
external reports to reflect new names and identifiers for Buyer. Buyer will
provide Tyson with those preprinted forms necessary to conduct business under
the new company name.
PRODUCTION OF REPORTS
Timing
8
<PAGE>
Reports will be produced for Buyer on a timely basis and will be accurate and
free from defects as normally and routinely provided to Tyson management.
Delivery of reports
Reports will be delivered using normal and routine processes as defined by
those processes to deliver reports used in the months up to and including the
date of sale. This should include shipping reports to Buyer headquarters in
Garland, TX, and/or directly to the other three Facilities as defined by
normal and routine use.
9
<PAGE>
ACCESS TO INFORMATION DATABASES
Online-databases
The telecommunications network will be available to Buyer 24 hours each day,
seven days per week through the final post conversion support period. Online
access, to the extent that it is provided on the date of sale, to all
databases related to or incidental to the applications listed in Table 1, will
be provided to Buyer employees using routine access policies and procedures.
New employees will be granted access in a timely manner, and terminated
employees will have access removed in a prudent and reasonable timeframe.
Response times and uptimes will be reasonable and will be no worse than
response times and uptimes provided to Tyson employees.
Additionally, Tyson will provide additional terminals and necessary
telecommunications to increase the number of available terminals at the
Garland, TX , Facility to a total of 15. Charges for this additional service
level will be paid by Buyer. The response times to all sites should be
maintained at levels incurred prior to the sale.
Archived databases
Access to archived data for three years prior to the date hereof, will be
granted to Buyer employees for the purposes of accessing prior period
information. Access, information, reports, and technical assistance will be
provided in a timely manner.
Hardcopy databases
To the extent that hardcopy data exist and related to the ongoing business of
Buyer, Tyson will provide access and/or a copy of such databases to Buyer for
use at their discretion.
HISTORICAL INFORMATION
Tyson will maintain three years historical data related to Buyer during the
transition period, at which time it will make historical data available to
Buyer. Access to historical information during the transition period will be
granted to Buyer employees in a manner consistent with that prior to the sale.
Reports of historical information will be produced according to routine business
practices at Tyson, and distributed to Buyer in a timely manner.
SYSTEM MAINTENANCE
Enhancements
Enhancements to current system processes will be made through routine business
procedures currently in process at Tyson, with Tyson providing a number of
10
<PAGE>
hours of maintenance development per month at a level consistent with past
practices. Unused maintenance hours in any given months will carry over to
the following months. Enhancements and additional maintenance hours requested
by Buyer in excess of 100 will be billed as contemplated in Section 3 of this
Agreement.
Correction of "bugs"
From time to time, software applications fail to perform as designed for
various reasons. Tyson will apply routine business practices toward
correcting software "bugs" in a timely fashion and will prioritize the
correction effort in a manner consistent with standards used at Tyson. There
will be no charges for or limits to the effort of Tyson on behalf of Buyer
systems toward correcting system deficiencies defined as "bugs".
Development
Buyer will make every effort to limit the need for development of new
functionality to software application development during the transition
period. However, should the need arise, Tyson will apply its routine business
procedures and policies in establishing priority for development requested,
and Buyer will agree to pay charges related to development as contemplated in
Section 3 of this Agreement.
USER SUPPORT
Functional
Functional support is defined as providing expertise to Buyer system users in
answering questions related to how application software works. Functional
support will be provided by Tyson to Buyer employees during the transition,
conversion and post conversion support periods in a manner consistent with
standard Tyson procedures. This will include help desk and phone support and
research requests made by Buyer employees.
Technical
Technical support is defined as providing expertise and corrective services to
problems related to application processing that transcend software
functionality. An example would be in the area of telecommunications, i.e. a
terminal is "down," but the software appears to be working elsewhere in the
company. Technical support will cover any and all requests of a technical
nature to restore the system to normal operating mode. To the extent that the
technical problem is determined to reside with equipment owned entirely by
Buyer, or related to a specific Buyer location, Tyson will help facilitate
Buyer employees resolving the issue. During the conversion and post
conversion support periods, technical support requests from Buyer will be
given the priority necessary to facilitate such conversion.
11
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Training
Tyson will provide system, application, functional and technical training to
Buyer employees to the extent that such training is not provided under
contract by a third party vendor. This training will be mutually determined,
and timing of delivery will be coordinated with Tyson. Due to the fact that
most of the packaged software in place at Tyson has been heavily modified,
Tyson will be responsible for training of packaged software as well as
software that is developed in-house.
ACCESS TO THIRD PARTY PROVIDERS
In many cases, Tyson has contracted with outside or third party providers for
software, hardware, telecommunications, functional and technical training and
support. To the extent that any service provided to Buyer during the transition
period involves a third party provider, Tyson will grant access to and use of
that provider to Buyer employees as if they were employees of Tyson. Buyer will
make every effort to rely on third party providers to answer questions and
receive support. All contact by Buyer with such third party providers shall be
only with Tyson's prior knowledge and approval.
DISASTER RECOVERY
Tyson will provide disaster recovery services necessary to support Buyer during
the transition period such that Buyer may resume operations in a reasonable
timeframe following a disaster. Disaster recovery plans and systems in place as
of the date of Closing, including but not limited to off-site processing sites,
contracts to provide disaster recovery services, telecommunications services,
and others, will be presumed to cover and include Buyer during the transition
period and extending through the conversion period. Disaster recovery plans,
policies and procedures will be made available to Buyer, and Buyer employees
will be kept updated with regard to changes to disaster recovery plans. Tyson
will include, where appropriate, Buyer employees in testing disaster recovery
preparedness.
DATABASE ADMINISTRATION
Normal and routine administration of all databases related to the list of
applications in Table 1 will continue during the transition period. From time
to time, special database administrative actions requested by Buyer will be
performed according to established priority and scheduling.
REMOTE ACCESS - EMAIL SYSTEMS
Buyer employees will be allowed all access and maintenance rights associated
with use of the corporate electronic mail systems. This will include Tyson
maintenance of the associated telecommunications systems and hardware necessary
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to provide access and availability to all four Buyer locations, and to remotes
users such as salesmen who dial-in from time to time.
REPORT WRITER
Access to the various report writing utilities and software applications will
remain in use by Buyer employees during the transition period. Printed reports
will be delivered with daily printed reports produced by core applications and
included with daily shipments/deliveries.
ROUTINE CHANGES TO PRODUCTION SYSTEMS
Buyer will be made aware of all changes to production systems within a
reasonable timeframe prior to implementation of such changes. Training,
documentation, functional and technical support, and all other services
routinely provided to Tyson employees to implement the changes will be made
available to Buyer employees in a manner and timeframe conducive to effective
implementation.
Tyson will use its best efforts to avoid any changes to production systems that
may adversely impact the conversion of any application system listed in Table 1.
SYSTEM DOCUMENTATION
All system documentation currently in existence and that is developed in the
future relative to the applications in Table 1 will be made available to Buyer
at the same time it becomes available to Tyson employees. Tyson will provide at
least one copy per location of all pertinent documentation, and deliver each
copy to the individual location. All documentation relevant to Tyson owned
systems will be returned promptly following the transition period.
COMPUTER LICENSES
All licenses, contracts, bills of sale, and any other written proof of
ownership, right to do business with, right to access, etc., associated with
computer hardware, vendor support, telecommunications, written materials, or any
other aspect of business associated with Buyer and its acquired assets will be
transferred and/or made available to Buyer on date of Closing.
SERVICES PROVIDED DURING CONVERSION
- -----------------------------------
Conversion of applications processes from Tyson to Buyer will occur in phases
over the course of the transition period. There will be one "conversion" for
each of the applications listed in Table 1. Application conversion sequence
and timing will be closely coordinated with Tyson, as will the transition of
business processes (i.e. cash application). It is the intent of Buyer to make
13
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the conversion of all application systems at the earliest possible time while
not jeopardizing Buyer's ability to continue successful operation.
Software, hardware, communications and related decisions concerning systems and
processes at Buyer will be made by Buyer.
It is the intent of Buyer to secure services from Tyson necessary to perform a
successful, timely, accurate conversion or in continuing successful business
operations. The parties agree that to the extent that a particular conversion
service is not listed in this agreement, but would be required to meet the
objectives of Buyer in performing a successful, timely, accurate conversion, and
it is reasonable that the service be provided in support of conversion effort,
that service will be provided by Tyson, subject to charges to Buyer as
contemplated in Section 3 of this Agreement.
TECHNICAL SUPPORT
The first and most important step in conversion is conversion planning. Subject
to Section 3 of the Agreement, Tyson will assist with technical support
necessary to ensure that all required data is identified and prepared in a
format acceptable by the new system. This will include but is not limited to,
data mapping (from Tyson to the new system), designing and programming
conversion programs, running conversion programs and producing magnetic media to
support transferring the data to the new system, and assisting in conversion
balancing and reconciliation where appropriate.
File layouts
Tyson will provide file layouts and field level technical details for all
records, forms, data sets and/or databases (for the three-year period prior to
Closing) as required to perform data mapping and design of conversion
programs.
Tape dumps
In an effort to perform a successful conversion, Buyer may desire to perform
one or more trial runs of the conversion effort prior to performing the actual
conversion. This will require Tyson to provide trial run samples of
conversion tapes. Tyson agrees to provide these tapes, up to three valid and
readable tapes, for each application conversion, on a schedule to be agreed
upon by both parties.
Assistance in data mapping
Data mapping is the process of mapping each data field in the present Tyson
systems to data fields in the new Buyer systems. Tyson will participate in
data mapping to the extent that assistance is needed concerning various areas
of the current systems including but not limited to definitions and formatting
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<PAGE>
of data, chart of accounts, translation of codes, or specific processing
routines in the Tyson systems. Tyson will not be expected to participate in
understanding fields in the Buyer systems.
Temporary Interfaces
In the process of converting from one application system to another over a
period of time, there will be a need to design, program and implement
temporary interface programs that format and transfer data from one
application to one or more additional applications. Subject to Section 3 of
the Agreement, Tyson will assist with the technical and functional support
necessary to design, program and implement necessary conversion programs
during the conversion period. Tyson further agrees to continue the operation
of the interfaces through the final post conversion period.
Access to functional and technical specialists at Tyson
As other conversion issues arise, Tyson will provide reasonable and timely
assistance concerning functional and technical areas of the current Tyson
systems covered in this agreement.
POST CONVERSION:
- ----------------
After conversion of data from each Tyson application system to Buyer systems,
Tyson will maintain the converted system on its computer in a usable format for
a period of 60 calendar days. During that period of time, Tyson will continue
to provide functional and technical support necessary to resolve conversion
issues that arise after data conversion, and support the first month-end closing
process of Buyer for each application. At the end of the 60 day period, Tyson
may remove data associated with Buyer from computer systems and archived
databases.
Tyson will provide reasonable assistance and support during year-end closing
process of all application systems listed in Table 1.
OTHER ISSUES
- ------------
Points of Contact
Tyson will provide a single point of contact for Buyer to report and
coordinate resolution of all issues regarding services provided under this
Exhibit A. At least two alternate points of contact will be provided as back
up for the primary point of contact. The primary and alternate points of
contact together will be available from 8:00 am to 5:00 p.m. each business
day, and from 8:00 to 5:00 on each of the three days prior to any application
conversion, which may include weekends and holidays.
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Notice of planned maintenance and downtime
From time to time system maintenance must be performed on an "emergency" basis
which may cause downtime to the application systems which was not scheduled
(unplanned). For purposes of this Agreement, unplanned maintenance or
downtime will be defined as any maintenance performed by Tyson in which
reasonable notice was not provided to Buyer. Tyson will make every effort to
notify Buyer of such maintenance effort prior to the maintenance being
implemented, to minimize its adverse impact.
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EXHIBIT B
KITCHEN AND TEST FACILITY
Tyson will permit Buyer to use Tyson's kitchen, laboratory and other related
facilities that are used in connection with product research and development,
located at Tyson's Springdale, Arkansas facilities. Tyson will (i) permit
Buyer's employees to have full and complete access to such facilities, including
access to incidental supplies used in such research and development activities
(for example, spices and seasonings), and (ii) provide such Buyer's employees
with reasonable support services relating to their research and development
activities (including, but not limited to, purchasing supplies and
administrative and clerical support).
<PAGE>
EXHIBIT C
TRAVEL PLANNING
Tyson shall provide for Buyer's employees such business travel planning services
as Tyson currently provides for its own employees, which currently is provided
through a third-party travel agency. Buyer shall be responsible for all costs
of its employees' travel.
<PAGE>
EXHIBIT 10.3
COLLECTION AGREEMENT
THIS COLLECTION AGREEMENT (this "Agreement") is executed and made effective
this November 25, 1996, by and between TYSON FOODS, INC., a Delaware corporation
("Tyson"), and GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation ("Buyer").
BACKGROUND
----------
Pursuant to that certain Asset Purchase Agreement by and among Buyer,
Tyson, Gorges Foodservice, Inc., a Texas corporation ("Gorges"), and Tyson
Holding Company, a Delaware corporation ("Tyson Holding") (Tyson, Gorges and
Tyson Holding are collectively "Sellers"), dated October 17, 1996 (the "Purchase
Agreement"), Sellers have sold to Buyer substantially all of the assets of
Sellers used exclusively in the operation of Sellers' beef further processing
operations, operated by Sellers under the name of Gorges/Quik-to-Fix Foods (the
"Business"). Such assets transferred to Buyer do not include any of the
accounts receivable of Sellers relating to the Business that arose prior to the
date hereof (the "Sellers Receivables"), and all such Sellers Receivables remain
the sole property of Sellers.
Prior to the date hereof, Buyer has established a separate lockbox account
(the "Lockbox") at NationsBank of Texas, N.A. (the "Bank"), and beginning on the
date hereof, and for so long as Tyson is providing billing/invoicing and
accounts receivable posting services for Buyer pursuant to the Transition
Services Agreement (as defined in the Purchase Agreement), Tyson shall direct
customers of the Business to remit payments for accounts receivable arising on
or after the date hereof (the "Buyer Receivables") to the Lockbox. Pursuant to
the terms and conditions of this Agreement, the parties desire that Buyer remit
to Tyson, on behalf of it and the other Sellers, any funds received in the
Lockbox as payment for the Sellers Receivables.
IN CONSIDERATION of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
COLLECTION OF RECEIVABLES
1.1 COLLECTION AND PAYMENT.
----------------------
(a) Beginning on the date hereof, Buyer shall have sole and complete
control of the Lockbox, subject to Buyer's obligations under this Agreement.
For so long as Tyson is providing billing/invoicing and accounts receivable
posting services for Buyer pursuant to the Transition Services Agreement (as
defined in the Purchase Agreement):
<PAGE>
(i) Buyer shall direct the Bank to provide to Tyson on a daily basis a
listing, including copies of checks, check stubs and all other information
accompanying payment, in hard copy and/or electronic format as requested by
Buyer, of all payments received in the Lockbox.
(ii) Tyson shall, on a daily basis, provide to Buyer and the Bank a
listing of all such payments that are payment of any of the Buyers Receivables
(the "Buyers Receivables Proceeds").
(iii) Tyson shall, on a daily basis, provide to Buyer and the Bank a
listing of all such payments that are in payment of any of the Sellers
Receivables (the "Sellers Receivables Proceeds").
(iv) Buyer shall direct the Bank to transfer from Buyer's account to
Tyson's designated account at the Bank, on a daily basis, the amount of the
Sellers Receivables Proceeds reflected on the listing provided by Tyson for the
previous day. Buyer expressly acknowledges that the Sellers Receivables
Proceeds do not constitute the property of Buyer.
(b) If a payment received in the Lockbox from a customer of the Business
does not specifically identify that it is in payment of a particular invoice, or
that it is payment for particular goods or services which Buyer can clearly
trace to a particular invoice, Buyer and Tyson shall deem such payment to be
applicable to outstanding invoices of such customer in order of maturity (e.g.,
the first collections shall be deemed to be payments of the oldest invoices).
(c) Tyson shall deliver to Buyer on the first (1st) and fifteenth (15th)
day of each month a detailed report identifying invoice numbers, payment history
and such other information relating to the Sellers Receivables and the Buyer
Receivables reasonably requested by Buyer.
(d) If any check, draft or other form of payment of a Seller Receivable is
dishonored for any reason after the amount thereof has been included in any
remittance to Seller of Seller Receivables hereunder, the amount of such check,
draft or other payment so dishonored shall be deducted from any subsequent
remittance of Seller Receivables Proceeds hereunder.
(e) Upon the last day of the sixth full calendar month from the date
hereof, Tyson shall have no further obligation to provide Buyer with the reports
described in Section 1.1(c) above. Buyer will, however, continue to remit to
Tyson any Seller Receivables Proceeds in accordance with Section 1.1(a), except
that Buyer may remit such amounts only as received, or on any other reasonable
time schedule.
2
<PAGE>
1.2 COLLECTION EFFORTS. Buyer shall have no obligation to collect the
------------------
Seller Receivables, and Buyer shall have no obligation or right to take any
action against any customer in respect of any Seller Receivable. If Buyer
receives any notice from a customer that it disputes its obligation to pay any
Seller Receivable, Buyer shall give Tyson prompt written notice of such dispute.
In the event that Tyson takes collection or other action against a customer in
respect of a Seller Receivable, Buyer will use all reasonable efforts to comply
with any written direction given to it by Tyson with respect to such Seller
Receivable, unless the account debtor of such Seller Receivable is a customer or
supplier of Buyer and Buyer determines in good faith that the action requested
of Buyer shall impair Buyer's continuing relations with such customer or
supplier, and, subject to the foregoing limitation, Buyer shall cooperate as
reasonably requested with representatives of Tyson in connection with Seller's
efforts to resolve the dispute.
1.3 POWER OF ATTORNEY. Buyer hereby appoints Tyson as the attorney-in-
-----------------
fact of Buyer to exercise at any time any and all of the following powers
relating to the Buyer Receivables: (i) to receive, open and dispose of all mail
addressed to Buyer and reasonably believed by Tyson to relate to the Buyer
Receivables; (ii) to endorse the name of Buyer on any checks, money orders, or
other evidences of indebtedness that Tyson receives in payment of Buyer
Receivables; and (iii) to do any other acts and things that Tyson believes in
good faith to be necessary to fulfill its obligations with respect to the Buyer
Receivables in accordance with this Agreement. The appointment of Buyer as the
attorney-in-fact of Buyer is coupled with an interest and shall be irrevocable,
except that Buyer may revoke such appointment at any time if Tyson has failed to
perform any of its obligations under this Agreement.
1.4 INSPECTION RIGHTS. Buyer at its expense shall have full access to,
-----------------
and the right to examine and make copies from, the records maintained by Tyson
with respect to the Buyer Receivables at all reasonable times upon at least two
(2) business days' prior notice to Buyer.
1.5 CONSIDERATION. The parties acknowledge and agree that the obligations
-------------
of each party hereunder are in further consideration of the parties' agreements
under the Purchase Agreement.
ARTICLE II
INDEMNIFICATION
2.1 LIMITATION OF LIABILITY. Except to the extent provided in Sections
-----------------------
2.2 and 2.3 below, nothing in this Agreement is intended to impose upon Tyson,
and Tyson does not intend to assume in this Agreement, any of the risks
associated with collection of the Buyer Receivables. Except as provided
elsewhere in this Article II, neither party shall have any liability to the
other party for any Losses (as defined in Section 2.4 below) incurred by such
other party in connection with this Agreement or the performance of either
party's obligations hereunder, whether such claim of liability arises in an
action at law or in equity, and whether such claim sounds in contract or tort or
otherwise.
3
<PAGE>
2.2 INDEMNIFICATION BY SELLER. Tyson agrees to indemnify, defend and hold
-------------------------
harmless Buyer and its officers, directors, shareholders, controlling persons,
affiliates and representatives (the "Buyer Indemnitees"), and each of them,
from, against, for and in respect of any and all Losses suffered or incurred by
a Buyer Indemnitee and resulting from, based upon or arising out of the
provision of services under this Agreement, other than Losses resulting from,
based upon or arising out of any intentional breach of this Agreement by Buyer
or the fraud, gross negligence or willful misconduct of Buyer in connection with
the performance of its obligations under this Agreement.
2.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and hold
------------------------
harmless Tyson and its officers, directors, shareholders, controlling persons,
affiliates and representatives (the "Tyson Indemnitees"), and each of them,
from, against, for and in respect of any and all Losses suffered or incurred by
a Tyson Indemnitee and resulting from, based upon or arising out of any
intentional breach of this Agreement by Buyer or the fraud, gross negligence or
willful misconduct of Buyer in connection with the performance of its
obligations under this Agreement.
2.4 DEFINITION OF "LOSS." For purposes of this Agreement, a "Loss" shall
-------------------
means any action, suit, proceeding, claim, cost, damage, expense, liability,
loss or obligation, including but not limited to, interest or carrying costs,
penalties, legal, accounting and other professional fees and expenses incurred
in the collection, prosecution and defense of actions or claims and amounts paid
in settlement pursuant to the terms of this Agreement, that may be imposed or
otherwise incurred or suffered by the specified person (but a "Loss" shall not
include consequential, speculative or punitive damages unless asserted by a
third party).
ARTICLE III
TERMINATION
3.1 TERMINATION. This Agreement shall continue in full force and effect
-----------
for so long as Tyson is providing billing/invoicing and accounts receivable
posting services to Buyer pursuant to the Transition Services Agreement, unless
the Agreement is terminated in accordance with any of the following:
(a) by Buyer upon written notice to Tyson;
(b) by either Tyson or Buyer for material breach of any of the terms
hereof by Buyer or Tyson, as the case may be, if the breach is not corrected
within thirty (30) days after written notice of breach is delivered to the
defaulting party;
(c) By either Tyson or Buyer forthwith, upon written notice to Buyer
or Tyson, as the case may be, if Buyer or Tyson, as the case may be, shall
become insolvent or shall make an assignment for the benefit of creditors, or
shall be placed in receivership, reorganization, liquidation or bankruptcy.
4
<PAGE>
ARTICLE IV
MISCELLANEOUS
4.1 FORCE MAJEURE. Any delays in or failure of performance by Buyer shall
-------------
not constitute a default hereunder if and to the extent such delay or failure of
performance is caused by occurrences beyond the reasonable control of Buyer,
including, but not limited to: acts of God or the public enemy; expropriation or
confiscation of facilities; compliance with any order or request of any
governmental authority; acts of war; riots or strikes or other concerted acts of
personnel; or any causes, whether or not of the same class or kind as those
specifically named above, which are not within the reasonable control of Buyer,
and which by the exercise of reasonable diligence, Buyer is unable to prevent.
4.2 CONFIDENTIALITY. Any and all information which is not generally known
---------------
to the public which is exchanged between the parties in connection with this
Agreement or which is directly or indirectly obtained by one party from the
other in connection with the performance of services hereunder, whether of a
technical or business nature, shall be considered to be confidential. The
parties agree that confidential information shall not be disclosed to any third
party or parties without the written consent of the other party. Each party
shall take reasonable measures to protect against nondisclosure of confidential
information by its officers and employees. Confidential information shall not
include any information (i) which is or becomes part of the public domain, (ii)
which is obtained from third parties who are not bound by confidentiality
obligations or (iii) which is required to be disclosed by law, regulation, legal
process or the rules of any state or federal regulatory agency or any national
stock exchange. It is further understood and agreed that money damages would
not be a sufficient remedy for any breach of this Section 4.2 and that the non-
breaching party shall be entitled to specific performance as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for
such breach but shall be in addition to all other remedies available hereunder,
at law or in equity, to the non-breaching party. The provisions of this section
shall survive the termination of this Agreement.
4.3 INDEPENDENT CONTRACTOR STATUS. Buyer shall be deemed to be an
-----------------------------
independent contractor to Tyson. Nothing contained in this Agreement shall
create or be deemed to create an employment, agency, joint venture or
partnership relationship between Buyer and Seller.
4.4 ARBITRATION. If a dispute, controversy or claim arises out of or in
-----------
connection with the terms and conditions of this Agreement, it shall be
submitted to binding arbitration which shall be conducted as follows: (a) the
arbitrator shall be an independent third party knowledgeable of the beef further
processing and distribution industries and mutually satisfactory to Buyer and
Tyson; (b) the arbitrator, in conducting such arbitration, shall have access to
all relevant documents and records of the parties; (c) the arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date such arbitration is commenced and
5
<PAGE>
shall be final and binding on the parties hereto; and (d) all arbitration
proceedings shall be conducted in English in a location mutually agreed upon by
the parties.
4.5 AMENDMENT AND WAIVER.
--------------------
(a) This Agreement may be amended, or any provision of this Agreement
may be waived, provided that any such amendment or waiver will be binding upon
Tyson only if set forth in a writing executed by Tyson, and any such amendment
or waiver will be binding upon Buyer only if set forth in a writing executed by
Buyer.
(b) No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
4.6 NOTICES. Except as otherwise expressly set forth in this Agreement,
-------
all notices, demands and other communications to be given or delivered under or
by reason of the provisions of this Agreement will be in writing and will be
deemed to have been given when delivered personally, or by documented overnight
delivery service, or sent by telecopy, telex, or other electronic transmission
service, provided a confirmation copy is also sent no later than the next
business day by first class mail, return receipt requested. Notices, demands
and communications to Buyer or Seller will, unless another address is specified
in writing, be sent to the address indicated below:
If to Tyson, to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
With a copy to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: David L. Van Bebber, Esq.
(501) 290-4000
(501) 290-7967 (FAX)
If to Buyer, to: Gorges/Quik-to-Fix Foods, Inc.
c/o/ CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
6
<PAGE>
Atlanta, Georgia 30335
Attn: William A. Davies
(404) 816-3255
(404) 816-3258 (FAX)
With a copy to: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin, Esq.
(404) 881-7000
(404) 881-7777 (FAX)
4.7 ASSIGNMENT. This Agreement and all of the provisions hereof will be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by either party
without prior written consent of the other party; provided, however, that Buyer
may assign its rights hereunder to any lender to Buyer upon the condition that
such lender may only exercise any of Buyer's rights hereunder if Buyer is then
and continues to be in default under any credit agreement with such lender.
4.8 SEVERABILITY. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
4.9 NO THIRD PARTY BENEFICIARIES. This Agreement does not create any
----------------------------
rights in any person or party who is not a party to this Agreement.
4.10 NO STRICT CONSTRUCTION. The language used in this Agreement will be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
4.11 SECTION HEADINGS. The headings of sections contained in this
----------------
Agreement are provided for convenience only. They form no part of this
Agreement and shall not affect its construction or interpretation. All
references to sections or subsections refer to the corresponding sections and
subsections of this Agreement. All words used herein shall be construed to be
of such gender or number as the circumstances require. This "Agreement" shall
mean this Agreement and the Exhibits hereto as a whole and as the same may, from
time to time hereafter, be amended, supplemented or modified. The words
"herein," "hereby," "hereof," "hereinabove," and "hereinbelow," and words of
similar import, refer to this Agreement as whole and not to any particular
section, subsection, paragraph, clause or other subdivision hereof, unless
otherwise specifically noted.
7
<PAGE>
4.12 COMPLETE AGREEMENT. This document and the documents referred to
------------------
herein or attached hereto contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way.
4.13 GOVERNING LAW. The substantive law (and not the law of conflicts) of
-------------
the State of Delaware will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
4.14 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts (including by means of FAXed signature pages), any one of which
need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same instrument.
4.15 DEFINED TERMS. Any capitalized term used but not defined herein shall
-------------
have the meaning set forth in the Purchase Agreement.
[Signatures on Next Page]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
TYSON FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ David L. VanBebber
----------------------------
Name: David L. VanBebber
--------------------------
Title: Assistant Secretary
-------------------------
GORGES/QUIK-TO-FIX FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ William A. Davies
----------------------------
Name: William A. Davies
--------------------------
Title: Secretary
-------------------------
9
<PAGE>
EXHIBIT 10.4
TRADEMARK LICENSE AGREEMENT
---------------------------
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement") is executed and made
effective this 25th day of November, 1996, by and between TYSON HOLDING
COMPANY, a Delaware corporation ("LICENSOR"), and GORGES/QUIK-TO-FIX FOODS,
INC., a Delaware corporation ("LICENSEE").
W I T N E S S E T H
WHEREAS, LICENSOR is a wholly owned subsidiary of Tyson Foods, Inc., a
Delaware company ("Tyson"); and
WHEREAS, Tyson, LICENSOR, another subsidiary of Tyson (collectively, the
"Sellers") and LICENSEE have entered into that certain Asset Purchase Agreement
(the "Purchase Agreement") pursuant to which LICENSEE shall acquire from Sellers
substantially all of the assets of the beef further processing division of Tyson
known as Gorges/Quik-to-Fix Foods (the "Business"); and
WHEREAS, LICENSOR is the owner of trademarks and trade names which consist
in whole or in part of the term TYSON in both stylized and un-stylized versions,
with and without design, including both common law uses and uses under federal
and state registrations which are used in the Business (the "Marks"); and
WHEREAS, the Marks have acquired significant goodwill as a result of the
substantial and continuous use of the Marks in the United States in connection
with the Business; and
WHEREAS, LICENSEE desires to use the Marks for a limited period in
connection with the Business; and
WHEREAS, LICENSOR desires to grant to LICENSEE a royalty-free, non-
exclusive right to use the Marks for a limited period in connection with the
Business and in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
1. GRANT OF LICENSE
----------------
(a) LICENSOR hereby grants to LICENSEE a non-exclusive, nontransferable,
royalty-free license within the United States to use the Marks in connection
with the Business, strictly as set forth herein.
(b) LICENSEE's use of the Marks shall be limited solely to continuing to
use, in connection with the Business, any packaging, labeling and similar
materials that exist on the date of this Agreement and contain any of the Marks
(the "Existing Materials"), and such use by LICENSEE hereunder shall be
consistent with past practices of the Business in all respects.
2. TERM
----
The Term of this Agreement shall commence on the date of execution of this
Agreement and shall continue until the earlier of (i) 180 days after the date of
this Agreement, or (ii) the date upon which all of the Existing Materials have
been used. LICENSEE agrees to destroy any Existing Materials remaining in its
possession at the end of said 180 day period. LICENSEE hereby agrees it is not
entitled to any compensation whatsoever for such destroyed Existing Materials.
3. OWNERSHIP OF MARKS
------------------
(a) LICENSEE acknowledges that LICENSOR is the sole owner of all right,
title and interest in and to the Marks and all registrations thereof in any form
or embodiment thereof and is also the sole owner of all goodwill attached to the
Marks in connection with its use by LICENSEE. LICENSEE agrees that it will not,
directly or indirectly, challenge LICENSOR's ownership of or the validity of the
Marks or any registrations or applications for registration thereof.
(b) LICENSEE acknowledges that any use of the Marks shall not create in
LICENSEE's favor any right, title or interest in or to the Marks, except as
specifically granted in this Agreement. LICENSEE expressly agrees and
understands that all uses of the Marks by LICENSEE, and any goodwill created in
the Marks thereby, shall inure solely to the benefit of, and be owned
exclusively by, LICENSOR.
(c) This Section 3 shall survive the termination or expiration of this
Agreement.
4. INSPECTION
----------
LICENSOR or its duly authorized representatives shall have the right,
during regular business hours and upon reasonable prior notice to LICENSEE, to
examine the Existing Materials and any other documents or materials in the
possession or under the control of LICENSEE reasonably relating to LICENSEE's
use of the Marks pursuant to this Agreement.
5. WARRANTY OF LICENSOR
--------------------
LICENSOR warrants that it has the right to use and license the Marks as set
forth in this Agreement. In the event that any third party asserts a claim
against LICENSEE for service mark or trademark infringement based upon
LICENSEE's use of the Marks in accordance with the provisions of this Agreement,
LICENSOR shall indemnify LICENSEE against any and all damages for which LICENSEE
<PAGE>
is held liable, and for all reasonable attorneys' fees, costs, and expenses
incurred by LICENSEE in connection with the defense thereof.
6. INDEMNIFICATION BY LICENSEE
---------------------------
LICENSEE agrees to defend, indemnify, and hold harmless LICENSOR, its
subsidiaries and affiliates, successors and assigns, and their respective
officers, directors, agents, employees and affiliates against any claim, suit,
loss, liability or damage, including the expenses of investigating and defending
against any claim or suit, and any amount paid in settlement thereof, arising
out of or relating to (i) LICENSEE's breach of this Agreement, and (ii) any
product liability claims relating to products sold by LICENSEE bearing the Marks
(subject to the provisions of the Purchase Agreement). Notwithstanding the
foregoing, LICENSOR shall notify LICENSEE, within ten (10) days after receipt by
LICENSOR of notice of any claim, suit, loss, liability or damage ("Indemnified
Claim"), that it is tendering such claim to LICENSEE for defense, settlement,
resolution and/or indemnification; provided, however, that any failure to
provide such notice shall not affect LICENSEE's obligation to indemnify LICENSOR
except to the extent that LICENSEE is harmed by such failure. LICENSEE shall
keep LICENSOR reasonably advised of the progress of the matter, including
providing LICENSOR with copies of all pleadings and correspondence. LICENSEE
shall not settle, compromise or discharge any Indemnified Claim without the
prior written consent of LICENSOR after advising LICENSOR as to the complete
terms of such settlement, which consent will not be unreasonably withheld or
delayed. It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement by LICENSEE ,and LICENSOR
shall be entitled to specific performance as a remedy for any such breach. Such
remedy shall not be deemed to be the exclusive remedy for such breach, but shall
be in addition to all other remedies available hereunder, at or in equity, to
LICENSOR. This Section 6 shall survive termination of this Agreement.
7. MAINTENANCE AND PROTECTION OF MARKS
-----------------------------------
LICENSEE, at LICENSOR's expense, agrees to assist LICENSOR in the
protection of LICENSOR's rights to the Marks to the extent that LICENSOR may
commence or prosecute in its own name any claims or suits relating to the Marks,
and LICENSEE agrees, if reasonably required by LICENSOR and at LICENSOR's
expense, to join as a party thereto. LICENSEE shall notify LICENSOR of any
threatened or actual unauthorized use or infringements, imitations or dilutions
by others of the Marks that may come to LICENSEE's attention. LICENSOR shall
have the sole right to determine whether or not any action shall be taken
against any such infringements, imitations or dilutions; provided, however, that
if LICENSOR elects not to take any action, LICENSEE may institute suit or take
action on its own behalf at its own expense, and shall be entitled to all
damages, costs, and attorneys' fees recovered therein.
8. TERMINATION
-----------
This Agreement shall terminate as set forth in Section 2, unless it is
terminated earlier as follows:
(a) upon mutual agreement of the parties; or
<PAGE>
(b) by LICENSOR for material breach of any of the terms hereof by LICENSEE,
if such breach is not corrected within ten (10) days after written notice of
breach is delivered to LICENSEE.
9. EFFECT OF TERMINATION
---------------------
Upon termination of this Agreement, LICENSEE shall cease and desist from
any and all use of the Marks.
10. AMENDMENT AND WAIVER
--------------------
(a) This Agreement may be amended, or any provision of this Agreement may
be waived, provided that any such amendment or waiver will be binding upon
LICENSOR only if set forth in a writing executed by LICENSOR, and any such
amendment or waiver will be binding upon LICENSEE only if set forth in a writing
executed by LICENSEE.
(b) No course of dealing between or among any persons having any interest
in this Agreement will be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any person under or by
reason of this Agreement.
11. NOTICES
-------
Except as otherwise expressly set forth in this Agreement, all notices,
demands and other communications to be given or delivered under or by reason of
the provisions of this Agreement will be in writing and will be deemed to have
been given when delivered personally, or by documented overnight delivery
service, or sent by telecopy, telex, or other electronic transmission service,
provided a confirmation copy is also sent no later than the next business day by
first class mail, return receipt requested. Notices, demands and communications
to LICENSOR or LICENSEE will, unless another address is specified in writing, be
sent to the address indicated below:
If to LICENSOR, to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
<PAGE>
With a copy to: Tyson Foods, Inc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: David L. Van Bebber, Esq.
(501) 290-4000
(501) 290-7967 (FAX)
If to LICENSEE, to: Gorges/Quik-to-Fix Foods, Inc.
c/o Cravey, Green & Wahlen
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
(404) 816-3255
(404) 816-3258 (FAX)
With a copy to: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin, Esq.
(404) 881-7000
(404) 881-7777 (FAX)
12. ASSIGNMENT.
----------
This Agreement and all of the provisions hereof will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party without prior
written consent of the other party.
13. SEVERABILITY
------------
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
14. NO THIRD PARTY BENEFICIARIES
----------------------------
This Agreement does not create any rights in any person or party who is not
a party to this Agreement.
<PAGE>
15. NO STRICT CONSTRUCTION
----------------------
The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
16. SECTION HEADINGS
----------------
The headings of sections contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect its
construction or interpretation. All references to sections or subsections refer
to the corresponding sections and subsections of this Agreement. All words used
herein shall be construed to be of such gender or number as the circumstances
require. This "Agreement" shall mean this Agreement as a whole and as the same
may, from time to time hereafter, be amended, supplemented or modified. The
words "herein," "hereby," "hereof," "hereinabove," and "hereinbelow," and words
of similar import, refer to this Agreement as whole and not to any particular
section, subsection, paragraph, clause or other subdivision hereof, unless
otherwise specifically noted.
17. COMPLETE AGREEMENT
------------------
This document and the documents referred to herein or attached hereto
contain the complete agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
18. GOVERNING LAW
-------------
The substantive law (and not the law of conflicts) of the State of Delaware
will govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement.
19. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts (including by
means of FAXed signature pages), any one of which need not contain the
signatures of more than one party, but all such counterparts taken together will
constitute one and the same instrument.
[Signatures on Next Page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the day and year first above written.
TYSON HOLDING COMPANY
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ David L. Van Bebber
----------------------------
Name: David L. Van Bebber
--------------------------
Title: Assistant Secretary
-------------------------
GORGES/QUIK-TO-FIX FOODS, INC.,
A DELAWARE CORPORATION
[Corporate Seal]
By: /s/ William A. Davies
----------------------------
Name: William A. Davies
--------------------------
Title: Secretary
-------------------------
<PAGE>
EXHIBIT 10.5
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT is entered into this November 25, 1996 by and
among GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation (the "Purchaser")
and TYSON FOODS, INC., a Delaware corporation, GORGES FOODSERVICE, INC., a Texas
corporation and TYSON HOLDING CORPORATION, a Delaware corporation (each a
"Seller" and collectively the "Sellers").
WHEREAS, pursuant to that certain Asset Purchase Agreement dated as of
October 17, 1996 (the "Asset Purchase Agreement") by and among Purchaser and
Sellers, Sellers agreed to sell to Purchaser and Purchaser agreed to purchase
from Sellers certain of the assets, properties, and rights of Seller as the same
are described in Section 2.1(a) of the Asset Purchase Agreement (the "Acquired
Assets"); and
WHEREAS, pursuant to Section 2.2(c)(i) of the Asset Purchase Agreement,
Purchaser has agreed to assume certain obligations of Sellers as partial
consideration for the purchase of the Acquired Assets; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to such terms in the Asset Purchase Agreement.
NOW, THEREFORE, pursuant to the Asset Purchase Agreement and in
consideration of the premises, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed
that:
1. Purchaser Undertaking. Purchaser hereby assumes and agrees timely to
---------------------
pay and perform all of the Assumed Liabilities. Other than as specifically
stated herein or in the Asset Purchase Agreement, Purchaser assumes no debt,
liability or obligation of Sellers other than such Assumed Liabilities.
2. The Asset Purchase Agreement. Nothing contained in this Assumption
----------------------------
Agreement supersedes any of the obligations, agreements, covenants or warranties
of Seller or Purchaser under the Asset Purchase Agreement (all of which survive
the execution and delivery of this Assumption Agreement as provided and subject
to the limitations set forth in the Asset Purchase Agreement), or shall be
deemed to require Purchaser to pay or discharge any Assumed Liability so long as
Purchaser shall in good faith contest or cause to be contested the amount or
validity thereof. If any conflict exists between the terms of this Assumption
Agreement and the Asset Purchase Agreement, then the terms of the Asset Purchase
Agreement shall govern and control.
<PAGE>
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Agreement to be executed in their names as of the date first above written.
SELLERS:
TYSON FOODS, INC.
/s/ David L. Van Bebber
---------------------------------------
Name: David L. Van Bebber
---------------------------------
Title: Assistant Secretary
---------------------------------
GORGES FOODSERVICE, INC.
/s/ David L. Van Bebber
---------------------------------------
Name: David L. Van Bebber
---------------------------------
Title: Assistant Secretary
---------------------------------
TYSON HOLDING CORPORATION
/s/ David L. Van Bebber
---------------------------------------
Name: David L. Van Bebber
---------------------------------
Title: Assistant Secretary
---------------------------------
PURCHASER:
GORGES/QUIK-TO-FIX FOODS, INC.
/s/ William A. Davies
---------------------------------------
Name: William A. Davies
---------------------------------
Title: Secretary
---------------------------------
2
<PAGE>
EXHIBIT 10.6
[EXECUTION COPY]
CREDIT AGREEMENT
among
GORGES/QUIK-TO-FIX FOODS, INC.,
as Borrower,
and
GORGES HOLDING CORPORATION,
as Guarantor,
THE LENDERS IDENTIFIED HEREIN,
AND
NATIONSBANK OF TEXAS, N.A.,
as Agent
DATED AS OF NOVEMBER 25, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.......................... 1
1.1 Definitions............................................. 1
1.2 Computation of Time Periods and Other Definitional
Provisions.............................................. 27
1.3 Accounting Terms........................................ 28
SECTION 2 CREDIT FACILITIES......................................... 28
2.1 Revolving Loans......................................... 28
2.2 Letter of Credit Subfacility............................ 29
2.3 Term Loans.............................................. 35
2.4 Continuations and Conversions........................... 36
2.5 Minimum Amounts......................................... 37
2.6 Notes................................................... 37
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT.................................................... 37
3.1 Interest................................................ 37
3.2 Place and Manner of Payments............................ 38
3.3 Prepayments............................................. 38
3.4 Fees.................................................... 40
3.5 Payment in full at Maturity............................. 41
3.6 Computations of Interest and Fees....................... 41
3.7 Pro Rata Treatment...................................... 42
3.8 Allocation of Payments After Event of Default........... 43
3.9 Sharing of Payments..................................... 44
3.10 Capital Adequacy........................................ 45
3.11 Inability To Determine Interest Rate.................... 45
3.12 Illegality.............................................. 46
3.13 Requirements of Law..................................... 46
3.14 Taxes................................................... 47
3.15 Indemnity............................................... 50
SECTION 4 GUARANTY.................................................. 50
4.1 Guaranty of Payment..................................... 50
4.2 Obligations Unconditional............................... 50
4.3 Modifications........................................... 51
4.4 Waiver of Rights........................................ 52
4.5 Reinstatement........................................... 52
4.6 Remedies................................................ 53
4.7 Limitation of Guaranty.................................. 53
4.8 Rights of Contribution.................................. 53
SECTION 5 CONDITIONS PRECEDENT...................................... 54
5.1 Closing Conditions...................................... 54
5.2 Conditions to All Extensions of Credit.................. 60
SECTION 6 REPRESENTATIONS AND WARRANTIES............................ 61
6.1 Financial Condition..................................... 61
6.2 No Material Change...................................... 62
<PAGE>
6.3 Organization and Good Standing.......................... 62
6.4 Due Authorization....................................... 62
6.5 No Conflicts............................................ 62
6.6 Consents................................................ 62
6.7 Enforceable Obligations................................. 63
6.8 No Default.............................................. 63
6.9 Ownership............................................... 63
6.10 Indebtedness............................................ 63
6.11 Litigation.............................................. 63
6.12 Taxes................................................... 64
6.13 Compliance with Law..................................... 64
6.14 ERISA................................................... 64
6.15 Subsidiaries............................................ 65
6.16 Use of Proceeds; Margin Stock........................... 66
6.17 Government Regulation................................... 66
6.18 Environmental Matters................................... 66
6.19 Intellectual Property................................... 67
6.20 Solvency................................................ 67
6.21 Investments............................................. 68
6.22 Location of Collateral.................................. 68
6.23 Disclosure.............................................. 68
6.24 Licenses, etc........................................... 68
6.25 No Burdensome Restrictions.............................. 68
6.26 Brokers' Fees........................................... 69
6.27 Labor Matters........................................... 69
6.28 Nature of Business...................................... 69
6.29 Farm Products, etc...................................... 69
SECTION 7 AFFIRMATIVE COVENANTS..................................... 69
7.1 Information Covenants................................... 69
7.2 Preservation of Existence and Franchises................ 73
7.3 Books and Records....................................... 73
7.4 Compliance with Law..................................... 73
7.5 Payment of Taxes and Other Indebtedness................. 73
7.6 Insurance............................................... 74
7.7 Maintenance of Property................................. 74
7.8 Performance of Obligations.............................. 75
7.9 Collateral.............................................. 75
7.10 Use of Proceeds......................................... 75
7.11 Audits/Inspections...................................... 75
7.12 Financial Covenants..................................... 76
7.13 Additional Credit Parties............................... 77
7.14 Interest Rates.......................................... 78
7.15 Covenants Relating to Packers and Stockyard Act......... 78
7.16 Covenants Relating to Food Security Act................. 78
<PAGE>
SECTION 8 NEGATIVE COVENANTS......................................... 79
8.1 Indebtedness............................................ 79
8.2 Liens................................................... 80
8.3 Nature of Business...................................... 80
8.4 Consolidation and Merger................................ 80
8.5 Asset Dispositions...................................... 81
8.6 Investments............................................. 81
8.7 Restricted Payments..................................... 81
8.8 Transactions with Affiliates............................ 82
8.9 Restrictions on the Parent and Ownership of
Subsidiaries............................................ 83
8.10 Fiscal Year; Organizational Documents................... 83
8.11 Prepayment or Modification of Indebtedness.............. 83
8.12 Payments in respect of Subordinated Debt................ 84
8.13 Limitations............................................. 84
8.14 Sale Leasebacks......................................... 84
8.15 Negative Pledges........................................ 85
8.16 No Foreign Subsidiaries................................. 85
SECTION 9 EVENTS OF DEFAULT.......................................... 85
9.1 Events of Default....................................... 85
9.2 Acceleration; Remedies.................................. 88
SECTION 10 AGENCY PROVISIONS......................................... 89
10.1 Appointment............................................. 89
10.2 Delegation of Duties.................................... 89
10.3 Exculpatory Provisions.................................. 89
10.4 Reliance on Communications.............................. 90
10.5 Notice of Default....................................... 91
10.6 Non-Reliance on Agent and Other Lenders................. 91
10.7 Indemnification......................................... 91
10.8 Agent in Its Individual Capacity........................ 92
10.9 Successor Agent......................................... 92
SECTION 11 MISCELLANEOUS............................................. 93
11.1 Notices................................................. 93
11.2 Right of Set-Off........................................ 93
11.3 Benefit of Agreement.................................... 93
11.4 To Waiver; Remedies Cumulative.......................... 96
11.5 Payment of Expenses; Indemnification.................... 96
11.6 Amendments, Waivers and Consents........................ 97
11.7 Counterparts............................................ 98
11.8 Pleadings............................................... 98
11.9 Defaulting Lender....................................... 98
11.10 Survival of Indemnification and Representations and
Warranties.............................................. 99
11.11 Governing Law; Venue.................................... 99
11.12 Waiver of Jury Trial.................................... 99
11.13 Time.................................................... 100
11.14 Severability............................................ 100
11.15 Entirety................................................ 100
11.16 Binding Effect.......................................... 100
11.17 Confidentiality......................................... 100
<PAGE>
SCHEDULES
- ---------
Schedule 1.1(a) Pre-Closing Consolidated Capital Expenditures, Consolidated
EBITDA and Consolidated Scheduled Funded Debt Payments
Schedule 1.1(b) Commitment Percentages
Schedule 5.1(f) Mortgaged Properties
Schedule 5.1(i) Corporate Structure of the Borrower
Schedule 6.6 Consents, Approvals and Authorizations
Schedule 6.10 Indebtedness
Schedule 6.11 Litigation
Schedule 6.15 Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.19 Intellectual Property
Schedule 6.22(a) Real Property Locations
Schedule 6.22(b) Personal Property Locations
Schedule 6.22(c) Leased Locations where Collateral of at least $250,000 is
Located
Schedule 6.22(d) Chief Executive Offices
Schedule 6.27 Labor Matters
Schedule 7.6 Insurance
Schedule 11.1 Notices
EXHIBITS
- --------
Exhibit 2.1 Form of Notice of Borrowing
Exhibit 2.4 Form of Notice of Continuation/Conversion
Exhibit 2.6(a) Form of Revolving Loan Note
Exhibit 2.6(c) Form of Term Loan Note
Exhibit 7.1(c) Form of Officer's Certificate
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Credit Agreement"), is entered into as of
----------------
November 25, 1996 among GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation,
(the "Borrower"), GORGES HOLDING CORPORATION, a Delaware corporation ("Parent"),
-------- ------
the Lenders (as defined herein) and NATIONSBANK OF TEXAS, N.A., as Agent for the
Lenders (in such capacity, the "Agent").
-----
RECITALS
WHEREAS, the Borrower has requested that the Lenders provide a $70,000,000
credit facility (comprised of a $40,000,000 term facility and a $30,000,000
revolving credit facility with a sublimit of the $7,000,000 for letters of
credit) to the Borrower; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 DEFINITIONS.
-----------
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Acquired Company" means the business and operation of the beef
----------------
division of Tyson acquired pursuant to the Purchase Agreement.
"Acquisition" means the purchase of (i) the Capital Stock of a Person,
-----------
(ii) the assets of such Person through merger or consolidation with such
Person or (iii) the plant, property and equipment of such Person, or a
portion thereof, together with the related current assets and intangible
assets of such Person.
"Additional Credit Party" means each Person that becomes a Guarantor
-----------------------
after the Closing Date, as provided in Section 7.13.
"Adjusted Base Rate" means the Base Rate plus the Applicable
------------------ ----
Percentage.
1
<PAGE>
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
------------------------ ----
Applicable Percentage.
"Affiliate" of any specified Person means (i) any other Person
---------
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person
who is a director or executive officer of (a) such specified Person or (b)
any Person described in the preceding clause (i). For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership
--------
of 10% or more of any class, or any series of any class, of equity
securities of a Person, whether or not voting, shall be deemed to be
control; and provided, however, that NBIC or any Affiliate (as determined
-------- -------
without giving effect to this proviso) of NBIC shall not be deemed to be an
Affiliate of any Person solely by reason of its ownership of non-voting
equity securities of such Person.
"Agency Services Address" means NationsBank of Texas, N.A., TX-492-13-
-----------------------
05, 901 Main Street, Dallas, Texas 75202, Attn: Agency Services, or such
other address as may be identified by written notice from the Agent to the
Borrower.
"Agent" shall have the meaning assigned to such term in the heading
-----
hereof, together with any successors or assigns.
"Applicable Percentage" means for the Revolving Loans, Term Loans,
---------------------
Standby Letter of Credit Fee, Trade Letter of Credit Fee and Commitment
Fees, the appropriate applicable percentages corresponding to the Leverage
Ratio in effect as of the most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
==================================================================================================================================
Applicable Applicable Applicable Applicable
Percentage For Percentage For Percentage For Percentage for Applicable
Pricing Leverage Eurodollar Base Rate Standby Letter Trade Letter of Percentage For
Level Ratio Loans Loans of Credit Fee Credit Fee Commitment Fees
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
greater than or
I equal to 4.00 to 1.0 2.50% 1.50% 2.50% 1.25% 0.50%
II less than 4.00 to 1.0 2.25% 1.25% 2.25% 1.125% 0.50%
but
greater than or
equal to 3.75 to 1.0
III less than 3.75 to 1.0 2.00% 1.00% 2.00% 1.00% 0.50%
but
$ 3.50 to 1.0
IV less than 3.50 to 1.0 1.75% 0.75% 1.75% 0.875% 0.375%
but
$ 3.25 to 1.0
V less than 3.25 to 1.0 1.50% 0.50% 1.50% 0.75% 0.375%
==================================================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly on
the date (each a "Calculation Date") five Business Days after the date by
----------------
which the Borrower is required to provide the officer's certificate in
accordance with the provisions of Section 7.1(c); provided, however that
(i) the initial Applicable Percentages shall be based on Pricing Level I
2
<PAGE>
(as shown above) and shall remain at Pricing Level I until the first
Calculation Date subsequent to December 30, 1997, and, thereafter, the
Pricing Level shall be determined by the then current Leverage Ratio, and
(ii) if the Borrower fails to provide the officer's certificate to the
Agency Services Address as required by Section 7.1(c) on or before the most
recent Calculation Date, the Applicable Percentages from such Calculation
Date shall be based on Pricing Level I until such time as an appropriate
officer's certificate is provided, whereupon the Pricing Level shall be
determined by the then current Leverage Ratio. Except as set forth above,
each Applicable Percentage shall be effective from one Calculation Date
until the next Calculation Date. Any adjustment in the Applicable
Percentages shall be applicable to all existing Loans and Letters of Credit
as well as any new Loans made or Letters of Credit issued.
"Application Period" shall have the meaning assigned to such term in
------------------
Section 8.5.
"Asset Disposition" means, with respect to any Person, the sale,
-----------------
lease, conveyance or other disposition, that does not constitute an Equity
Issuance, a Restricted Payment or an Investment, by such Person of any of
its assets (including, without limitation, by way of a Sale and Leaseback
Transaction and including a sale of a Subsidiary) other than to the
Borrower (including the receipt of proceeds of insurance paid on account of
the loss of or damage to any asset and awards of compensation for any asset
taken by condemnation, eminent domain or similar proceeding, and including
the receipt of proceeds of business interruption insurance), in each case,
in one or a series of related transactions; provided, that notwithstanding
--------
the foregoing, the term "Asset Disposition" shall not include: (a) the sale
or lease of equipment, inventory, accounts receivable or other assets in
the ordinary course of business consistent with past practice, (b) a
transfer of assets by the Borrower to a Wholly Owned Subsidiary of the
Borrower or by a Wholly Owned Subsidiary of the Borrower to the Borrower or
to another Wholly Owned Subsidiary of the Borrower or (c) the sale or other
disposition of cash or Cash Equivalents.
"Asset Disposition Prepayment Event" means, with respect to any Asset
----------------------------------
Disposition, the failure of the Borrower to apply (or cause to be applied)
the Net Proceeds of such Asset Disposition to the purchase, acquisition or
construction of Eligible Assets during the Application Period for such
Asset Disposition.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence
----------------
of any of the following with respect to such Person: (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against such
Person an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
3
<PAGE>
for any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such Person
shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of its Property or make any general
assignment for the benefit of creditors; or (iv) such Person shall be
unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"Base Rate" means, for any day, the rate per annum (rounded upwards,
---------
if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the
greater of (a) the Federal Funds Rate in effect on such day plus 2 of 1% or
----
(b) the Prime Rate in effect on such day. If for any reason the Agent
shall have determined (which determination shall be conclusive absent
manifest error) that it is unable after due inquiry to ascertain the
Federal Funds Rate for any reason, including the inability or failure of
the Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (a) of
the first sentence of this definition until the circumstances giving rise
to such inability no longer exist. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Rate shall be effective on
the effective date of such change in the Prime Rate or the Federal Funds
Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate determined
--------------
by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading hereof,
--------
together with any successor and permitted assigns.
"Business Day" means any day other than a Saturday, a Sunday, a legal
------------
holiday or a day on which banking institutions are authorized or required
by law or other governmental action to close in Dallas, Texas or New York,
New York; provided that in the case of Eurodollar Loans, such day is also a
day on which dealings between banks are carried on in U.S. dollar deposits
in the London interbank market.
"Calculation Date" has the meaning set forth in the definition of
----------------
Applicable Percentage.
"Capital Expenditures" means, with respect to any Person for any
--------------------
period, the aggregate of all expenditures of such Person which, in
accordance with GAAP, would be classified as capital expenditures,
including, without limitation, Capital Lease Obligations of such Person for
such period; provided, however, that Capital Expenditures for the Credit
-------- -------
4
<PAGE>
Parties for any fiscal quarter ended prior to September 30, 1996 shall be
the amount indicated for such period on Schedule 1.1(a).
---------------
"Capital Lease" means, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Capital Lease Obligations" means, with respect to any Person as of
-------------------------
any date, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet of such
Person as of such date in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, capital stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation
that confers on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, the issuing Person.
"Cash Equivalent" means (a) securities issued or directly and fully
---------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities not more
than twelve months from the date of acquisition, (b) U.S. dollar
denominated (or foreign currency fully hedged) time deposits, certificates
of deposit, Eurodollar time deposits or Eurodollar certificates of deposit
of (i) any domestic commercial bank of recognized standing having capital
and surplus in excess of $500,000,000 or (ii) any bank whose short-term
commercial paper rating from S&P is a least A-1 or the equivalent thereof
or from Moody's is at least P-1 or the equivalent thereof (any such bank
referred to in this clause (b) being an "Approved Lender"), in each case
---------------
with maturities of not more than twelve months from the date of
acquisition, and (c) commercial paper issued by any Approved Lender (or by
the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent
thereof) or better by S&P or P-2 (or the equivalent thereof) or better by
Moody's and maturing within twelve months of the date of acquisition.
"Cash Taxes" means, with respect to any Person for any period, the
----------
aggregate of all taxes of such Person, as determined in accordance with
GAAP, to the extent the same are paid in cash during such period.
"CGW " means CGW Southeast Partners III, L.P., a Delaware limited
----
partnership.
"Change of Control" means any of the following events:
-----------------
(i) prior to the initial Public Equity Offering, (a) the failure
of the Parent to own directly all of the issued and outstanding
Capital Stock of the Borrower, (b) the failure of the members of the
5
<PAGE>
Sponsor Group to own directly at least 51% of the Capital Stock of the
Parent, (c) the failure of CGW to own directly a larger percentage of
the Capital Stock of the Parent than any other member of the Sponsor
Group, (d) any Person other than members of the Sponsor Group or two
or more Persons acting in concert other than members of the Sponsor
Group shall have acquired beneficial ownership, directly or
indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control
over, 35% or more of the Capital Stock of the Parent or (e) a "Change
of Control" as defined in the Indenture shall occur; and
(ii) after the initial Public Equity Offering (a) the failure of
the members of the Sponsor Group to own directly at least 51% of the
Capital Stock of the Borrower or of the Parent that was issued and
outstanding immediately prior to giving effect to such initial Public
Equity Offering, (b) the failure of CGW to own directly a larger
percentage of the Capital Stock of the Borrower or of the Parent that
was issued and outstanding immediately prior to giving effect to such
initial Public Equity Offering than any other member of the Sponsor
Group, (c) any Person other than members of the Sponsor Group or two
or more Persons acting in concert other than members of the Sponsor
Group shall own, directly or indirectly, or shall have acquired by
contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their
acquisition of, control over, 35% or more of the Capital Stock of the
Borrower or of the Parent that was issued and outstanding immediately
prior to giving effect to such initial Public Equity Offering or (d) a
"Change of Control" as defined in the Indenture shall occur.
For purposes of this definition, references to the term "Capital Stock"
shall be deemed to mean voting common stock and any other class of stock
having the right to vote on matters coming before the shareholders of such
Person generally. For purposes of clause (i) of this definition, the term
"Capital Stock of the Parent" shall include the shares thereof which are
issued and outstanding as of the date of determination plus the number of
shares thereof which may be purchased pursuant to vested options on such
date of determination. For purposes of clause (ii) of this definition, the
phrase "issued and outstanding immediately prior to giving effect to such
initial Public Equity Offering", when used with respect to a number of
shares of Capital Stock, shall include the number of shares thereof which
are issued and outstanding as of the date of such initial Public Equity
Offering plus the number of shares thereof which may be purchased pursuant
to vested options on the date of such initial Public Equity Offering.
"Closing Date" means the date hereof.
------------
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute thereto, as interpreted by the rules and regulations
6
<PAGE>
issued thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections.
"Collateral" means all collateral referred to in and covered by the
----------
Collateral Documents.
"Collateral Documents" means the Security Agreements, the Pledge
--------------------
Agreements, the Mortgages and such other documents executed and delivered
in connection with the attachment and perfection of the Lenders' security
interests in the assets of the Credit Parties, including without
limitation, UCC financing statements and patent and trademark filings.
"Commitment Fees" means the fees payable to the Lenders pursuant to
---------------
Section 3.4(a).
"Commitments" means the Revolving Committed Amount and the Term Loan
-----------
Committed Amount.
"Consolidated EBITDA" means, with respect to any Person for any
-------------------
period, the sum of, without duplication, (i) the Consolidated Net Income of
such Person and its Subsidiaries for such period, plus (ii) the Interest
----
Expense of such Person and its Subsidiaries for such period, plus (iii)
----
amortization of deferred financing charges for such period, plus (iv)
provision for taxes based on income or profits for such period (to the
extent such income or profits were included in computing Consolidated Net
Income for such period), plus (v) consolidated depreciation, amortization
and other non-cash charges of such Person and its Subsidiaries required to
be reflected as expenses on the books and records of such Person, minus
(vi) cash payments with respect to any non-recurring, noncash charges
previously added back pursuant to clause (v), and excluding (vii) the
impact of foreign currency translations. Notwithstanding the foregoing,
(x) the provision for taxes based on the income or profits of, and the
depreciation and amortization and other noncash charges of, a Subsidiary of
a Person shall be added to Consolidated Net Income to compute Consolidated
EBITDA only to the extent (and in the same proportion) that the Net Income
of such Subsidiary was included in calculating the Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to such Person by such Subsidiary without
any prior approval (unless such approval has been obtained) pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders and (y) Consolidated EBITDA of the Credit
Parties on a consolidated basis for any fiscal quarter ended prior to
September 30, 1996 shall be the amount indicated for such period on
Schedule 1.1(a).
---------------
"Consolidated Net Income" means, with respect to any Person for any
-----------------------
period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with
GAAP; provided that (i) the Net Income (but not loss) of any Person that is
--------
not a Subsidiary or that is accounted for by the equity method of
7
<PAGE>
accounting shall be included only to the extent of the amount of dividends
or distributions paid in cash to the relevant Person or a Wholly Owned
Subsidiary thereof, (ii) the Net Income of any Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior approval (unless such approval
has been obtained) pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders, (iii) the
Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, and
(iv) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
----------------------
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock that by its terms is not
entitled to the payment of dividends unless such dividends may be declared
and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
subsequent to the Closing Date in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person (other than purchase
accounting adjustments made, in connection with any acquisition of any
entity that becomes a consolidated Subsidiary of such Person after the
Closing Date, to the book value of the assets of such entity), (y) all
Investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments),
and (z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined on a consolidated
basis in accordance with GAAP.
"Consolidated Scheduled Funded Debt Payments" means, for any period,
-------------------------------------------
the sum of all scheduled payments of principal on Funded Debt of the Credit
Parties on a consolidated basis for such period (including the principal
component of payments due on Capital Leases during the applicable period
ending on such date); it being understood that Consolidated Scheduled
Funded Debt Payments shall not include voluntary prepayments or the
mandatory prepayments required pursuant to Section 3.3; provided, however,
-------- -------
that Consolidated Scheduled Funded Debt Payments for any fiscal quarter
ended prior to September 30, 1996 shall be the amount indicated for such
period on Schedule 1.1(a)..
---------------
"Consulting Agreement " means that certain Consulting Agreement by and
---------------------
among the Borrower and the Parent, dated as of the Closing Date, as
amended, modified, extended, renewed or replaced from time.
"Contingent Obligations" means, with respect to any Person, without
----------------------
duplication, any obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection)
8
<PAGE>
guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations of any other Person in any manner, whether direct or
indirect, and including without limitation any obligation, whether or not
contingent, (a) to purchase any such Indebtedness or other obligation or
any property constituting security therefor, (b) to advance or provide
funds or other support for the payment or purchase of such indebtedness or
obligation or to maintain working capital, solvency or other balance sheet
condition of such other Person (including, without limitation, maintenance
agreements, comfort letters, take or pay arrangements, put agreements or
similar agreements or arrangements) for the benefit of the holder of
Indebtedness of such other Person, (c) to lease or purchase property,
securities or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation, or (d) to otherwise assure or hold
harmless the owner of such Indebtedness or obligation against loss in
respect thereof; provided, however, that the term "Contingent Obligations"
-------- -------
shall not include (x) endorsements of instruments for deposit or collection
in the ordinary course of business or (y) guarantees made by a Person of
the obligations of a Subsidiary of such Person that do not constitute
Indebtedness of such Subsidiary and are incurred in the ordinary course of
business of such Subsidiary. The amount of any Contingent Obligation
hereunder shall (subject to any limitations set forth therein) be deemed to
be an amount equal to the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness in respect of which such
Contingent Obligation is made.
"Credit Documents" means this Credit Agreement, the Notes, any Joinder
----------------
Agreement, the Collateral Documents, the LOC Documents, the Fee Letter and
all other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Credit Parties" means the Borrower and the Guarantors, and "Credit
-------------- ------
Party" means any one of them.
-----
"Credit Party Obligations" means, without duplication, (a) all of the
------------------------
obligations of the Credit Parties to the Lenders (including the Issuing
Lender) and the Agent, whenever arising, under this Credit Agreement, the
Notes, the Collateral Documents or any of the other Credit Documents to
which the Borrower or any other Credit Party is a party and (b) all Hedging
Obligations owing from a Credit Party to any Lender, or any Affiliate of a
Lender.
"Default" means any event, act or condition which with notice or lapse
-------
of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a) has failed
-----------------
to make a Loan or purchase a Participation Interest required pursuant to
the term of this Credit Agreement within one Business Day of when due, (b)
other than as set forth in (a) above, has failed to pay to the Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement within one Business Day of when due, unless such amount is
subject to a good faith dispute or (c) has been deemed insolvent or has
9
<PAGE>
become subject to a bankruptcy or insolvency proceeding or with respect to
which (or with respect to any of assets of which) a receiver, trustee or
similar official has been appointed.
"Dollars" and "$" means dollars in lawful currency of the United
------- -
States of America.
"Eligible Assets" means another business or any substantial part of
---------------
another business or other long-term assets, in each case, in, or used or
useful in, the same or a similar line of business as the Borrower or any of
its Subsidiaries was engaged in on the Closing Date or any reasonable
extensions or expansions thereof (including the Capital Stock of another
Person engaged in such business, provided such other Person is, or
--------
immediately after giving effect to any such acquisition shall become, a
Wholly Owned Subsidiary of the Borrower.
"Eligible Assignee" means (a) any Lender or Affiliate of a Lender and
-----------------
(b) any other commercial bank, financial institution, institutional lender
or "accredited investor" (as defined in Regulation D of the Securities and
Exchange Commission) reasonably acceptable to the Agent and the Borrower.
"Environmental Laws" means any current or future Federal, state or
------------------
local statutes, rules, regulations, ordinances or judicial orders
pertaining to (a) the protection of the indoor or outdoor environment, (b)
the conservation, management, or use of natural resources and wildlife, (c)
the protection or use of surface water and groundwater, (d) the generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal or remediation of any hazardous or toxic substance or
material or (e) pollution (including any release of any hazardous or toxic
substance or material to the air, land, surface water, and groundwater) and
includes, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and Hazardous and Solid Waste Amendment of 1984, 42 USC 6901 et
seq., Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, 33 USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC
7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq.,
Hazardous Materials Transportation Act, 49 USC App. 1801 et seq., Oil
Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National
Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking Water
Act of 1974, as amended, 42 USC 300(f) et seq., and any amendment, rule or
regulation issued thereunder.
"Equity Interest" means Capital Stock and all warrants, options or
---------------
rights to acquire Capital Sock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock), whether outstanding
prior to , on or after the Closing Date.
"Equity Issuance" means any issuance by any Credit Party to any Person
---------------
of (a) shares of its Capital Stock, (b) any shares of its Capital Stock
10
<PAGE>
pursuant to the exercise of options or warrants or (c) any shares of its
Capital Stock pursuant to the conversion of any debt securities to equity,
except for (w) an Equity Issuance by a Wholly Owned Subsidiary of the
Borrower to the Borrower or to another Wholly Owned Subsidiary of the
Borrower, (x) an Equity Issuance to any Management Shareholder, (y) an
issuance by the Borrower of common equity securities in consideration of
assets, Equity Interests or other securities in a transaction which would
not constitute an Investment and (z) dividends by a Person to holders or a
class of such Person's Capital Stock paid only in shares of such Capital
Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity which is under common control with
---------------
any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is
a member of a group which includes any Credit Party and which is treated as
a single employer under Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence of a
-----------
Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any Credit
Party from a Multiple Employer Plan during a plan year in which it was a
substantial employer (as such term is defined in Section 4001(a)(2) of
ERISA), or the termination of a Multiple Employer Plan; (iii) the
distribution of a notice of intent to terminate or the actual termination
of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the
institution of proceedings to terminate or the actual termination of a Plan
by the PBGC under Section 4042 of ERISA; (v) any event or condition which
could reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (vi) the complete or partial withdrawal of any
Credit Party from a Multiemployer Plan; (vii) the conditions for imposition
of a lien under Section 302(f) of ERISA exist with respect to any Plan; or
(vii) the adoption of an amendment to any Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means a Loan bearing interest based at a rate
---------------
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
---------------
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Eurodollar Rate = London Interbank Offered Rate
------------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
-----------------------------
(expressed as a decimal) which is in effect from time to time under
11
<PAGE>
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" has the meaning specified in Section 9.1.
----------------
"Excess Cash Flow" means, with respect to the Credit Parties on a
----------------
consolidated basis for any fiscal year period, an amount equal to (a)
Consolidated EBITDA for such period minus (b) Capital Expenditures for such
period, minus (c) Interest Expense for such period, minus (d) Federal,
state and other income taxes actually paid during such period, minus (e)
Consolidated Scheduled Funded Debt Payments for such period, minus (f) all
prepayments of the Term Loan for such period, minus (g) all reductions in
the Revolving Committed Amount for such period, minus (h) any cash loss (or
plus any cash gain) of an extraordinary nature otherwise excluded in
calculating Consolidated EBITDA for such period, minus (i) any cash gain
from an Asset Disposition (to the extent included in Consolidated EBITDA
for such period and paid to the Lenders as a mandatory prepayment pursuant
to Section 3.3(b)(iii)).
"Excess Payables" means, as of any date, an amount equal to the amount
---------------
by which total PSA Payables on such date exceeds $7,500,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"Excluded Asset Disposition" means any Asset Disposition by any Credit
--------------------------
Party to the Borrower or any other Credit Party other than the Borrower or
the Parent if (i) the Agent is given prior written notice of such Asset
Disposition, and the Credit Parties execute and deliver such documents,
instruments and certificates as the Agent may request in order to maintain
the perfection and priority of the Liens on the assets of the Credit
Parties and (ii) after giving effect such Asset Disposition, no Default or
Event of Default exists.
"Executive Officer" of any Person means any of the chief executive
-----------------
officer, chief operating officer, president, executive vice president,
chief financial officer or treasurer or such Person.
12
<PAGE>
"Exempt Affiliate Transactions" means (a) transactions between or
-----------------------------
among the Borrower and/or its Wholly Owned Subsidiaries, (b) advances to
officers of any Credit Party in the ordinary course of business to provide
for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the relevant Credit Party or in
connection with any relocation, (c) fees and compensation paid to and
indemnity provided on behalf of directors, officers or employees of any
Credit Party in the ordinary course of business, (d) any employment
agreement that is in effect on the Closing Date and any such agreement
entered into by any Credit Party after the Closing Date in the ordinary
course of business of such Credit Party, (e) any Restricted Payment that is
not prohibited by Section 8.7, (f) payments to CGW Southeast III, L.L.C., a
Delaware limited liability company and the general partner of CGW, of (i)
retainer fees pursuant to the Consulting Agreement not to exceed $30,000
per month and (ii) annual performance bonuses as provided for under the
Consulting Agreement not to exceed $500,000 in any fiscal year, (g) the
delegation by CGW of its rights and obligations under the Consulting
Agreement to the Management Company and (h) payment to the Management
Company of an investment banking fee in an amount not to exceed $2,650,000.
"Extension of Credit" means, as to any Lender, the making of a Loan or
-------------------
the purchase of a Participation Interest by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest per
------------------
annum (rounded upwards, if necessary, to the nearest whole multiple of
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 by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (A) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day and (B) if no such rate is so published on such next preceding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Agent on such day on such transactions as determined by the
Agent.
"Fee Letter" means that certain letter agreement, dated as of the
----------
Closing Date, between the Agent and the Borrower, as amended, modified,
supplemented or replaced from time to time.
"Fixed Charges" means, with respect to any Person for any period, the
-------------
sum of (i) cash Interest Expense of such Person for such period (after
giving effect to the Interim Adjustments for the calculations occurring on
December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997)
plus (ii) Consolidated Scheduled Funded Debt Payments for such period.
----
"Fixed Charge Coverage Ratio" means, with respect to the Credit
---------------------------
Parties on a consolidated basis for the twelve month period ending on the
last day of any fiscal quarter of the Credit Parties, the ratio of (a)
Consolidated EBITDA for the applicable period minus Capital Expenditures
13
<PAGE>
for the applicable period minus Cash Taxes for the applicable period to (b)
Fixed Charges for the applicable period. In the event that any Credit
Party assumes, guarantees or repays or redeems any Indebtedness (other than
revolving credit borrowings) subsequent to the commencement of the four-
quarter reference period for which the Fixed Charge Coverage Ratio is being
calculated but on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Determination
-------------
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
----
forma effect to such incurrence, assumption, guarantee, repayment or
redemption of Indebtedness as if the same had occurred at the beginning of
the applicable four-quarter reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by any
Credit Party, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period but on or prior to the Determination
Date shall be deemed to have occurred on the first day of the four-quarter
reference period, and (ii) Consolidated EBITDA and Capital Expenditures
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Determination
Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Determination Date, shall
be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges will not be obligations of the relevant Person or any of
its Subsidiaries following the Determination Date.
"Food Security Act" means the Food Security Act of 1985, as amended,
-----------------
and any successor statute thereto, including all rules and regulations
thereunder, all as the same may be in effect from time to time.
"FPGT" means First Plaza Group Trust, a General Motors pension plan.
----
"Funded Debt" of any Person means, without duplication, the sum of (a)
-----------
all Indebtedness of such Person other than Indebtedness of the types
referred to in clause (e), (f), (i), (k),(l) and (m) of the definition of
"Indebtedness" set forth in Section 1.1, (b) all Indebtedness of another
Person of the type referred to in clause (a) above secured by (or for which
the holder of such Funded Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (c) all Guaranty
Obligations of such Person with respect to Indebtedness of the type
referred to in clause (a) above of another Person and (d) Indebtedness of
the type referred to in clause (a) above of any partnership or
unincorporated joint venture in which such Person is legally obligated or
has a reasonable expectation of being liable with respect thereto .
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accounts and statements and
14
<PAGE>
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession of the United States, that are
applicable to the circumstances as of the date of determination; provided
--------
that, except as specifically provided in the Indenture, all calculations
made for purposes of determining compliance with the covenants set forth in
Section 7.12 and Section 8 shall use GAAP as in effect on the Closing Date
for financial statements for fiscal years ending on or after September 28,
1996.
"Governmental Authority" means any Federal, state, local, provincial
----------------------
or foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means the Parent and each Additional Credit Party,
---------
together with their successors and assigns.
"Guaranty Obligations" means, with respect to any Person, any
--------------------
Contingent Obligations of such Person in respect of any Indebtedness of any
other Person (other than Indebtedness of the kind described in clause (f)
of the definition of "Indebtedness" set forth in this Section 1.1 that is
not itself a Contingent Obligation in respect of Indebtedness).
"Hazardous Materials" means any substance, material or waste defined
-------------------
as hazardous or toxic or otherwise regulated in or under any Environmental
Laws.
"Hedging Obligations" means, with respect to any Person, the
-------------------
obligations of such Person entered into in the ordinary course of business
under interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements and other similar financial agreements or
arrangements designed to protect such Person against, or manage the
exposure of such Person to, fluctuations in interest rates.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of
such Person under conditional sale or other title retention agreements
relating to property purchased by such Person to the extent of the value of
such property (other than customary reservations or retentions of title
under agreements with suppliers entered into in the ordinary course of
business), (d) all obligations, other than intercompany items, of such
Person issued or assumed as the deferred purchase price of property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such
Person, (e) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (f) all Guaranty Obligations of such
Person, (g) the amount of all Capital Lease Obligations of such Person, (h)
the principal portion of all obligations of such Person under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
15
<PAGE>
off-balance sheet financing product where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP (collectively, "TROLS"), (i) all
-----
Hedging Obligations of such Person, (j) the maximum amount of all
performance and standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed), (k) all preferred
stock issued by such Person and required by the terms thereof to be
redeemed, or for which mandatory sinking fund payments are due, by a fixed
date, (l) the aggregate amount of uncollected accounts receivable of such
Person subject at such time to a sale of receivables (or similar
transaction) regardless of whether such transaction is effected without
recourse to such Person or in a manner that would not be reflected on the
balance sheet of such Person in accordance with GAAP and (m) the
Indebtedness of any partnership or unincorporated joint venture in which
such Person is legally obligated or has a reasonable expectation of being
liable with respect thereto.
"Indenture" means that certain Indenture dated as of November 25,
---------
1996, among the Borrower as issuer, the guarantors named therein and IBJ
Schroder Bank & Trust Company, as trustee, as the same may be modified,
supplemented or amended from time to time.
"Interest Coverage Ratio" means, with respect to the Credit Parties on
-----------------------
a consolidated basis for the twelve month period ending on the last day of
any fiscal quarter of the Credit Parties, the ratio of (a) Consolidated
EBITDA for such period to (b) cash Interest Expense for such period (after
giving effect to the Interim Adjustments for the calculations occurring on
December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997).
"Interest Expense" means, with respect to any Person for any period,
----------------
all net interest expense, including the interest component under Capital
Leases, of such Person for such period as determined in accordance with
GAAP; it being understood that Interest Expense shall, at the option of the
Borrower, include the amortized cost of any interest rate protection
agreements to the extent permitted by GAAP.
"Interest Payment Date" means (a) as to Base Rate Loans, the last day
---------------------
of any fiscal quarter of the Borrower and on the Maturity Date and (b) as
to Eurodollar Loans, on the last day of each applicable Interest Period and
on the Maturity Date and, in addition where the applicable Interest Period
for a Eurodollar Loan is greater than three months, then also on the date
three months from the beginning of the Interest Period and each three
months thereafter.
"Interest Period" means, as to Eurodollar Loans, a period of one, two,
---------------
three or six months' duration, as the Borrower may elect, commencing, in
each case, on the date of the borrowing (including continuations and
conversions thereof); provided, however, (a) if any Interest Period would
end on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that where the next
16
<PAGE>
succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (b) no Interest Period shall extend
beyond the Maturity Date and (c) where an Interest Period begins on a day
for which there is no numerically corresponding day in the calendar month
in which the Interest Period is to end, such Interest Period shall end on
the last Business Day of such calendar month.
"Interim Adjustments" means, that for the first four fiscal quarters
-------------------
following the Closing Date, the Fixed Charge Coverage Ratio and the
Interest Coverage Ratio shall be calculated using the adjustments and
assumptions regarding Cash Taxes and Interest Expense set forth below:
(a) for the partial fiscal quarter ending December 31, 1996 and
for the three full fiscal quarters ending March 31, 1997, June 30,
1997 and September 30, 1997,
(i) Interest Expense of the Credit Parties on a
consolidated basis for the twelve month period for which the
Fixed Charge Coverage Ratio and the Interest Coverage Ratio are
being calculated shall be deemed to be the result obtained by
multiplying (A) the actual cash Interest Expense of the Credit
Parties on a consolidated basis for the period from the Closing
Date through the last day of such fiscal quarter times (B) a
ratio equal to (1) 365 divided by (2) the number of days elapsed
from the Closing Date until the last day of such quarter; and
(ii) Cash Taxes of the Credit Parties on a consolidated
basis for the twelve month period for which the Fixed Charge
Coverage Ratio is being calculated shall be deemed to be the
result obtained by multiplying (A) the actual Cash Taxes of the
Credit Parties on a consolidated basis for the period from the
Closing Date through the last day of such fiscal quarter times
(B) a ratio equal to (1) 365 divided by (2) the number of days
elapsed from the Closing Date until the last day of such quarter;
and
(b) for the fiscal quarter ending December 31, 1997 and each
fiscal quarter thereafter,
(i) cash Interest Expense of the Credit Parties on a
consolidated basis shall be the actual cash Interest Expense for
the twelve month period ending on the last day of such fiscal
quarter; and
(ii) Cash Taxes shall be the actual Cash Taxes of the Credit
Parties on a consolidated basis for the twelve month period
ending on the last day of such fiscal quarter.
"Investment" in any Person means (a) the acquisition (whether for
----------
cash, property, services, assumption of Indebtedness, securities or
otherwise, but exclusive of the acquisition of inventory, supplies,
17
<PAGE>
equipment and other assets used or consumed in the ordinary course of
business of the applicable Credit Party and Capital Expenditures by the
Credit Parties not otherwise prohibited hereunder) of assets, shares of
capital stock, bonds, notes, debentures, partnership, joint ventures or
other ownership interests or other securities of such Person or (b) any
deposit (other than (i) deposits made in connection with the purchase of
equipment or other assets in the ordinary course of business and (ii)
deposits of the kinds referred to in clauses (d), (e), (f) and (j)of the
definition of "Permitted Liens" set forth in this Section 1.1) with, or
advance, loan or other extension of credit (other than advances , loans or
other extensions of credit described in clause (b) of the definition of
"Exempt Affiliate Transactions" set forth in this Section 1.1 and other
than sales of inventory on credit in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms) to, such
Person or (c) any other capital contribution to or investment in such
Person, including, without limitation, any Guaranty Obligation (including
any support for a Letter of Credit issued on behalf of such Person)
incurred for the benefit of such Person; provided that an acquisition of
--------
assets, Equity Interests or other securities by the Borrower for
consideration consisting of common equity securities of the Borrower shall
not be deemed to be an Investment.
"Issuing Lender" means NationsBank of Texas, N.A.
--------------
"Issuing Lender Fees" has the meaning set forth in Section
-------------------
3.4(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in the
-----------------
form of Exhibit 7.13.
------------
"Lender" means any of the Persons identified as a "Lender" on the
------
signature pages hereto, and any Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their
successors and permitted assigns.
"Letter of Credit" means a Letter of Credit issued for the account of
----------------
a Credit Party by the Issuing Lender pursuant to Section 2.2, as such
Letter of Credit may be amended, modified, extended, renewed or replaced.
"Leverage Ratio" means, with respect to the Credit Parties on a
--------------
consolidated basis for the twelve month period ending on the last day of
any fiscal quarter, the ratio of (a) Funded Debt of the Credit Parties on a
consolidated basis on the last day of such period to (b) Consolidated
EBITDA for such period.
"Lien" means, with respect to any assets, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement
to sell or give a security interest in and any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
18
<PAGE>
"Loan" or "Loans" means the Revolving Loans and/or the Term Loans (or
---- -----
a portion of any Revolving Loan or Term Loan bearing interest at the
Adjusted Base Rate or the Adjusted Eurodollar Rate), individually or
collectively, as appropriate.
"LOC Documents" means, with respect to any Letter of Credit, such
-------------
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for (a)
the rights and obligations of the parties concerned or at risk or (b) any
collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the maximum
---------------
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit plus
----
(b) the aggregate amount of all drawings under Letters of Credit honored by
the Issuing Lender but not theretofore reimbursed.
"LOC Participants" means all Lenders whose Revolving Loan Commitment
----------------
Percentage is greater than zero.
"London Interbank Offered Rate" means, for the Interest Period for
-----------------------------
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal
to the rate of interest, determined by the Agent on the basis of the
offered rates for deposits in dollars for a period of time corresponding to
such Interest Period (and commencing on the first day of such Interest
Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate
Page 3750 is not available, the Reuters Screen LIBO Page) as of
approximately 11:00 A.M. (London time) two (2) Business Days before the
first day of such Interest Period. As used herein, "Telerate Page 3750"
means the display designated as page 3750 by Dow Jones Telerate, Inc. (or
such other page as may replace such page on that service for the purpose of
displaying the British Bankers Association London interbank offered rates)
and "Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"Management Company" means CGW Southeast Management III, L.L.C., a
------------------
Georgia limited liability company wholly-owned by CGW.
"Management Shareholder" means an officer, director or employee of the
----------------------
Borrower or any Subsidiary of the Borrower who is the beneficial owner of
any Capital Stock of the Borrower or the Parent; provided, however, in no
-------- -------
event shall CGW, NBIC or any of their respective Affiliates (as determined
19
<PAGE>
without giving effect to the second proviso of the definition of
"Affiliate" set forth in this Section 1.1) be deemed to be a Management
Shareholder.
"Mandatory Borrowing" has the meaning set forth in Section 2.2(e).
-------------------
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
operations, financial condition, business or prospects of any Credit Party,
(b) the ability of a Credit Party to perform its respective obligations
under this Credit Agreement or any of the other Credit Documents, or (c)
the validity or enforceability of this Credit Agreement, any of the other
Credit Documents, or the rights and remedies of the Lenders hereunder or
thereunder taken as a whole.
"Maturity Date" means November 30, 2001.
-------------
"Moody's" means Moody's Investors Service, Inc., or any successor or
-------
assignee of the business of such company in the business of rating
securities.
"Mortgage Policies" has the meaning set forth in Section 5.1(f).
-----------------
"Mortgage" and "Mortgages" have the meanings set forth in Section
-------- ---------
5.1(f).
"Mortgaged Properties" has the meaning set forth in Section 5.1(f).
--------------------
"Multiemployer Plan" means a Plan which is a multiemployer plan as
------------------
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Credit Party and at
----------------------
least one employer other than the Credit Parties are contributing sponsors.
"NBIC" means NationsBanc Investment Corp.
----
"Net Income" means, with respect to any Person for any period, the net
----------
income (loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding, however,
(i) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with (a) any Asset
Disposition (including, without limitation, any Sale and Leaseback
Transaction) or (b) the disposition of any securities by such Person or any
of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries and (ii) any extraordinary or non-
recurring gain (but not loss), together with any related provision for
taxes on such extraordinary or non-recurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by any
------------
Credit Party in respect of any Asset Disposition or Equity Issuance
(including, without limitation, any cash received upon the sale or other
disposition of any noncash consideration received in any Asset Disposition
or Equity Issuance), net of the direct costs relating to such Asset
20
<PAGE>
Disposition or Equity Issuance (including, without limitation, legal,
accounting and investment banking fees, and sales commissions), taxes paid
or payable as a result thereof, and, in connection with any Asset
Disposition, repayment of any Indebtedness secured by Liens upon the
related asset or assets and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Non-Excluded Taxes" has the meaning set forth in Section 3.14.
------------------
"Note" or "Notes" means the Revolving Loan Notes and/or the Term Loan
---- -----
Notes, individually or collectively, as appropriate.
"Notice of Borrowing" means a request by the Borrower for a Revolving
-------------------
Loan, in the form of Exhibit 2.1.
-----------
"Notice of Continuation/Conversion" means a request by the Borrower to
---------------------------------
continue an existing Eurodollar Loan to a new Interest Period or to convert
a Eurodollar Loan to a Base Rate Loan or a Base Rate Loan to a Eurodollar
Loan, in the form of Exhibit 2.4.
-----------
"Packers and Stockyard Act" means the Packers and Stockyards Act of
-------------------------
1921, as amended, and any successor statute thereto, including all rules
and regulations thereunder, all as the same may be in effect from time to
time.
"Parent" means the Person identified as such in the heading hereof,
------
together with any successors and permitted assigns.
"Participation Interest" means a purchase by a Lender of a
----------------------
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2 or in any Loans as provided in Section 3.9.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Permitted Acquisitions" means an Acquisition by the Borrower or any
----------------------
Subsidiary of the Borrower for the fair market value of the assets or
Capital Stock acquired in such transaction, provided that (i) the assets or
--------
Capital Stock acquired in such Acquisition relate to a line of business
similar to the business of the Borrower or any of its Subsidiaries engaged
in on the Closing Date or any reasonable extensions or expansions thereof,
(ii) the liabilities (determined in accordance with GAAP and in any event
including contingent obligations) acquired by the Borrower and its
Subsidiaries on a consolidated basis in such Acquisition shall not in the
aggregate exceed 10% of the purchase price paid for the related assets or
Capital Stock, (iii) the Agent shall have received all items in respect of
the assets or Capital Stock acquired in such Acquisition (and/or the
seller thereof) required to be delivered by the terms of Section 7.9 and/or
Section 7.13, (iv) after giving effect to such Acquisition on a Pro Forma
Basis, the Credit Parties shall be in compliance with all of the covenants
set forth in Section 7.12, (v) the representations and warranties made by
21
<PAGE>
the Credit Parties in any Credit Document shall be true and correct in all
material respects at and as if made as of the date of such Acquisition
(after giving effect thereto) except to the extent such representations and
warranties expressly relate to an earlier date, (vi) after giving effect to
such Acquisition, the Revolving Committed Amount shall be at least
$10,000,000 greater than the sum of the Revolving Loans outstanding plus
LOC Obligations outstanding plus the Excess Payables and (vii) the
aggregate cost (including cash and non-cash consideration) for all such
Acquisitions occurring after the Closing Date shall not exceed $20,000,000.
"Permitted Investments" means (a) any Investments in any Credit Party
---------------------
other than the Parent, (b) any Investments in Cash Equivalents, (c)
Investments made as a result of the receipt of non-cash consideration from
any Asset Disposition that was made pursuant to and in compliance with
Section 8.5 and (d) Permitted Acquisitions.
"Permitted Liens" means (a) Liens in favor of the Agent on behalf of
---------------
the Lenders, (b) Liens for taxes not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and as
to which the property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof), (c) Liens in respect of
property imposed by law arising in the ordinary course of business such as
materialmen's, mechanics', warehousemen's, carrier's, landlords' and other
nonconsensual statutory Liens which are not yet due and payable, which have
been in existence less than 90 days or which are being contested in good
faith by appropriate proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which the property
subject to any such Lien is not yet subject to foreclosure, sale or loss on
account thereof), (d) pledges or deposits made in the ordinary course of
business to secure payment of worker's compensation insurance, unemployment
insurance, pensions or social security programs, (e) Liens arising from
good faith deposits in connection with or to secure performance of tenders,
bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of business
(other than obligations in respect of the payment of borrowed money), (f)
Liens arising from good faith deposits in connection with or to secure
performance of statutory obligations and surety and appeal bonds, (g)
easements, rights-of-way, restrictions (including zoning restrictions),
minor defects or irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use of the
encumbered property for its intended purposes, (h) judgment Liens that
would not constitute an Event of Default, (i) Liens in connection with
Indebtedness allowed under Section 8.1(d) (including without limitation
Sale and Leaseback Transactions permitted thereunder and under Section
8.14), (j) Liens arising by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights as to
deposit accounts or other funds maintained with a creditor depository
institution, (k) Permitted Encumbrances (as defined in any Mortgage or
Mortgage Policy) and (l) any interest of title of a lessor under, and Liens
arising from UCC financing statements relating to, leases not prohibited by
this Credit Agreement.
22
<PAGE>
"Person" means any individual, partnership, joint venture, firm,
------
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated), or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3) of
----
ERISA) which is covered by ERISA and with respect to which any Credit Party
is (or, if such plan were terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Pledge Agreements" means any Pledge Agreement executed and delivered
-----------------
by a Credit Party in favor of the Agent, for the benefit of the Lenders, to
secure its obligations under the Credit Documents, as amended, modified,
extended, renewed or replaced from time to time.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by the Agent as its prime rate in effect at its principal
office in Dallas, Texas, with each change in the Prime Rate being effective
on the date such change is publicly announced as effective (it being
understood and agreed that the Prime Rate is a reference rate used by the
Agent in determining interest rates on certain loans and is not intended to
be the lowest rate of interest charged on any extension of credit by the
Agent to any debtor).
"Principal Amortization Payment" means a principal payment on the Term
------------------------------
Loans as set forth in Section 2.3(d).
"Principal Amortization Payment Date" means the date a Principal
-----------------------------------
Amortization Payment is due.
"Pro Forma Basis" means, with respect to a proposed Acquisition by the
---------------
Borrower of the assets or Capital Stock of another Person, that such
transaction shall be deemed to have occurred as of the first day of the
four fiscal-quarter period ending as of the most recent fiscal quarter end
preceding the date of such transaction with respect to which the Agent and
the Lenders have received the officer's certificate in accordance with the
provisions of Section 7.1(c). In connection with any calculation under
Section 7.12 upon giving effect to any such proposed Acquisition on a Pro
Forma Basis, (i) any Indebtedness incurred by any Credit Party in order to
consummate such transaction (A) shall be deemed to have been incurred on
the first day of the applicable period and (B) if such Indebtedness has a
floating or formula rate of interest, then the implied rate of interest for
such Indebtedness for the applicable period shall be determined by
utilizing the rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination and (ii) income
statement items (whether positive or negative) attributable to the assets
or Capital Stock proposed to be acquired in such transaction shall be
included to the extent relating to the applicable period.
23
<PAGE>
"PSA Payables" means total payables of the Borrower and its
------------
Subsidiaries on a consolidated basis which are due and payable for
livestock delivered by a cash seller.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of the common stock of the Parent or, subject to the definition of the term
"Change of Control" set forth in Section 1.1, of the common stock of the
Borrower pursuant to an effective registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act
(whether alone or in connection with a secondary public offering).
"Purchase Agreement" means that certain Asset Purchase Agreement by
------------------
and among Tyson, Gorges Foodservice, Inc., a Texas corporation, Tyson
Holding Company, a Delaware corporation, and the Borrower, dated as of
October 17, 1996, as it may be amended on or prior to the Closing Date.
"Real Properties" means each of facilities and properties owned,
----------------
leased or operated by any Credit Party.
"Regulation G, T, U, or X" means Regulation G, T, U or X,
------------------------
respectively, of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor to all or a portion thereof.
"Reportable Event" means a "reportable event" as defined in Section
----------------
4043(c) of ERISA, other than those events as to which the notice
requirements or penalties for failure to provide notice have been waived by
regulation or administrative action of the PBGC.
"Required Lenders" means Lenders whose aggregate Credit Exposure (as
----------------
hereinafter defined) constitutes at least 51% of the Credit Exposure of all
Lenders at such time; provided, however, that if any Lender shall be a
Defaulting Lender at such time then there shall be excluded from the
determination of Required Lenders the aggregate principal amount of Credit
Exposure of such Lender at such time. For purposes of the preceding
sentence, the term "Credit Exposure" as applied to each Lender shall mean
(a) at any time prior to the termination of the Commitments, the sum of (i)
the Revolving Commitment Percentage of such Lender multiplied by the
Revolving Committed Amount, plus (ii) the Term Loan Commitment Percentage
of such Lender multiplied by the aggregate principal amount of Term Loans
outstanding at such time and (b) at any time after the termination of any
of the Commitments pursuant to Section 9.2, the sum of (i) the principal
balance of the outstanding Loans of such Lender plus (ii) such Lender's
Participation Interests in the face amount of the outstanding Letters of
Credit.
"Requirement of Law" means, as to any Person, any law, treaty, rule or
------------------
regulation or final, non-appealable determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
24
<PAGE>
"Restricted Payment" means (i) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of stock of any
Credit Party, now or hereafter outstanding, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock of any
Credit Party, now or hereafter outstanding, (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of any Credit Party,
now or hereafter outstanding, and (iv) any payment or prepayment of
principal of, premium, interest or liquidated damages on, redemption,
purchase, retirement, defeasance, sinking fund or similar payment with
respect to, the Subordinated Debt.
"Revolving Loan Commitment Percentage" means, for each Lender, the
------------------------------------
percentage identified as its Revolving Loan Commitment Percentage on
Schedule 1.1(b), as such percentage may be modified in connection with any
---------------
assignment made in accordance with the provisions of Section 11.3.
"Revolving Committed Amount" means THIRTY MILLION DOLLARS
--------------------------
($30,000,000) or such lesser amount as the Revolving Committed Amount may
be reduced pursuant to Section 2.1(d) or Section 3.3(c).
"Revolving Loans" means the Revolving Loans made to the Borrower
---------------
pursuant to Section 2.1.
"Revolving Note" or "Revolving Notes" means the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
provided pursuant to Section 2.1, individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time and as
evidenced in the form of Exhibit 2.6(a).
--------------
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Credit Party of any property, whether
owned by such Credit Party as of the Closing Date or later acquired, which
has been or is to be sold or transferred by such Credit Party to such
Person or to any other Person from whom funds have been or are to be
advanced by such Person on the security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Security Agreements" means any Security Agreement executed and
-------------------
delivered by a Credit Party in favor of the Agent for the benefit of the
25
<PAGE>
Lenders to secure its obligations under the Credit Documents, as such may
be amended, modified, extended, renewed, restated or replaced from time to
time.
"Single Employer Plan" means any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"Solvent" means, with respect to any Person as of a particular date,
-------
that on such date (a) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in
the normal course of business, (b) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature in their ordinary
course, (c) such Person is not engaged in a business or a transaction, and
is not about to engage in a business or a transaction, for which such
Person's assets would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which such
Person is engaged or is to engage, (d) the fair value of the assets of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (e) the present fair
saleable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured. In computing the amount of
contingent liabilities at any time, it is intended that such liabilities
will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Sponsor Group" means any of CGW, NBIC and Mellon Bank, N.A, as
-------------
trustee of FPGT, any Affiliates of FPGT and any of the Management
Shareholders.
"Standby Letter of Credit Fee" shall have the meaning assigned to such
----------------------------
term in Section 3.4(b)(i).
"Subordinated Debt" means up to $100,000,000 of Indebtedness issued
-----------------
pursuant to the Indenture, together with the guarantees thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
----------
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
such Person (or a combination thereof) and (ii) any partnership (a) the
sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"Term Loans" means the Term Loans made to the Borrower pursuant to
----------
Section 2.3(a).
26
<PAGE>
"Term Loan Commitment Percentage" means, for each Lender, the
-------------------------------
percentage identified as its Term Loan Commitment Percentage on Schedule
--------
1.1(b), as such percentage may be modified in connection with any
------
assignment made in accordance with the provisions of Section 11.3.
"Term Loan Committed Amount" means FORTY MILLION DOLLARS
--------------------------
($40,000,000).
"Term Loan Note" or "Term Loan Notes" means the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Lenders evidencing the Term Loans
provided pursuant to Section 2.3(a), individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time as evidenced
in the form of Exhibit 2.6(b).
--------------
"Trade Letter of Credit Fee" shall have the meaning assigned to such
--------------------------
term in Section 3.4(b)(ii).
"TROLS" has the meaning set forth in the definition of Indebtedness.
-----
"Tyson" means Tyson Foods, Inc., a Delaware corporation.
-----
"Unused Revolving Commitment" means, for any period, the amount by
---------------------------
which (a) the then applicable aggregate Revolving Committed Amount exceeds
(b) the daily average sum for such period of the outstanding aggregate
principal amount of all Revolving Loans plus the aggregate amount of LOC
Obligations outstanding.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
-----------------------
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned
by such Person or by one or more Wholly Owned Subsidiaries of such Person.
1.2 COMPUTATION OF TIME PERIODS AND OTHER DEFINITIONAL PROVISIONS.
-------------------------------------------------------------
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
27
<PAGE>
1.3 ACCOUNTING TERMS.
----------------
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 REVOLVING LOANS.
---------------
(a) Revolving Loan Commitment. Subject to the terms and conditions
-------------------------
set forth herein, each Lender severally agrees to make revolving loans
(each a "Revolving Loan" and collectively the "Revolving Loans") to the
-------------- ---------------
Borrower, in Dollars, at any time and from time to time, during the period
from and including the Closing Date to but not including the Maturity Date
(or such earlier date if the Revolving Committed Amount has been terminated
as provided herein); provided, however, that (i) the sum of the aggregate
-------- -------
amount of Revolving Loans outstanding plus the aggregate amount of LOC
Obligations outstanding shall not exceed the Revolving Committed Amount
minus the Excess Payables and (ii) with respect to each individual Lender,
-----
the Lender's pro rata share of outstanding Revolving Loans plus such
Lender's pro rata share of outstanding LOC Obligations shall not exceed
such Lender's Revolving Loan Commitment Percentage of the Revolving
Committed Amount. Subject to the terms of this Credit Agreement (including
Section 3.3), the Borrower may borrow, repay and reborrow Revolving Loans.
(b) Method of Borrowing for Revolving Loans. By no later than 10:00
---------------------------------------
a.m. (i) on the date of the requested borrowing of Revolving Loans that
will be Base Rate Loans or (ii) three Business Days prior to the date of
the requested borrowing of Revolving Loans that will be Eurodollar Loans,
the Borrower shall submit a written Notice of Borrowing in the form of
Exhibit 2.1 to the Agent setting forth (A) the amount requested, (B)
-----------
whether such Revolving Loans shall accrue interest at the Adjusted Base
Rate or the Adjusted Eurodollar Rate, (C) with respect to Revolving Loans
that will be Eurodollar Loans, the Interest Period applicable thereto and
(D) certification that the Borrower has complied in all respects with
Section 5.2;
(c) Funding of Revolving Loans. Upon receipt of a Notice of
--------------------------
Borrowing, the Agent shall promptly inform the applicable Lenders as to the
terms thereof. Each such Lender shall make its Revolving Loan Commitment
Percentage of the requested Revolving Loans available to the Agent by 1:00
p.m. on the date specified in the Notice of Borrowing by deposit, in
Dollars, of immediately available funds at the offices of the Agent at its
principal office in Dallas, Texas or at such other address as the Agent may
designate in writing. The amount of the requested Revolving Loans will
28
<PAGE>
then be made available to the Borrower by the Agent by crediting the
account of the Borrower on the books of such office of the Agent, to the
extent the amount of such Revolving Loans are made available to the Agent.
No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make Revolving Loans hereunder; provided,
however, that the failure of any Lender to fulfill its obligations
hereunder shall not relieve any other Lender of its obligations hereunder.
Unless the Agent shall have been notified by any Lender prior to the time
of any such Revolving Loan that such Lender does not intend to make
available to the Agent its portion of the Revolving Loans to be made on
such date, the Agent may assume that such Lender has made such amount
available to the Agent on the date of such Revolving Loans, and the Agent
in reliance upon such assumption, may (in its sole discretion but without
any obligation to do so) make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the
Agent, the Agent shall be able to recover such corresponding amount from
such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent will promptly notify
the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Agent. The Agent shall also be entitled to recover from the
Lender or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was
made available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for such Revolving Loan pursuant to the
Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate.
(d) Reductions of Revolving Committed Amount. Upon at least three
----------------------------------------
Business Days' notice, the Borrower shall have the right to permanently
terminate or reduce the aggregate unused amount of the Revolving Committed
Amount at any time or from time to time; provided that (i) each partial
reduction shall be in an aggregate amount at least equal to $5,000,000 and
in integral multiples of $1,000,000 above such amount and (ii) no reduction
shall be made which would reduce the Revolving Committed Amount to an
amount less than the aggregate amount of outstanding Revolving Loans plus
the aggregate amount of outstanding LOC Obligations. Any reduction in (or
termination of) the Revolving Committed Amount shall be permanent and may
not be reinstated.
2.2 LETTER OF CREDIT SUBFACILITY.
----------------------------
(a) Issuance. Subject to the terms and conditions hereof and of the
--------
LOC Documents, if any, and any other terms and conditions which the Issuing
Lender may reasonably require, the Issuing Lender shall from time to time
upon request issue, in Dollars, and the LOC Participants shall participate
in, letters of credit (the "Letters of Credit") for the account of the
-----------------
Borrower or any of its Subsidiaries, from the Closing Date until the date
five (5) days prior to the Maturity Date, in a form reasonably acceptable
to the Issuing Lender; provided, however, that (i) the aggregate amount of
-------- -------
LOC Obligations shall not at any time exceed SEVEN MILLION DOLLARS
($7,000,000), (ii) the sum of the aggregate amount of LOC Obligations
29
<PAGE>
outstanding plus Revolving Loans outstanding shall not exceed the Revolving
Committed Amount minus the Excess Payables and (iii) with respect to each
-----
individual LOC Participant, the LOC Participant's pro rata share of
outstanding Revolving Loans plus its pro rata share of outstanding LOC
Obligations shall not exceed such LOC Participant's Revolving Loan
Commitment Percentage of the Revolving Committed Amount. The issuance and
expiry date of each Letter of Credit shall be a Business Day. Except as
otherwise expressly agreed upon by all the LOC Participants, no Letter of
Credit shall have an original expiry date more than one year from the date
of issuance, or as extended, shall have an expiry date extending beyond the
date five (5) days prior to the Maturity Date. Each Letter of Credit shall
be either (x) a standby letter of credit issued to support the obligations
(including pension or insurance obligations), contingent or otherwise, of
the Borrower or any of its Subsidiaries, or (y) a commercial letter of
credit in respect of the purchase of goods or services by the Borrower or
any of its Subsidiaries in the ordinary course of business. Each Letter of
Credit shall comply with the related LOC Documents.
(b) Notice and Reports. The request for the issuance of a Letter of
------------------
Credit shall be submitted to the Issuing Lender at least three Business
Days prior to the requested date of issuance. The Issuing Lender will, at
least quarterly and more frequently upon request, provide to the Agent for
dissemination to the Lenders a detailed report specifying the Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report, and
including therein, among other things, the account party, the beneficiary,
the face amount, and the expiry date as well as any payments or expirations
which may have occurred. The Issuing Lender will further provide to the
Agent, promptly upon request, copies of the Letters of Credit.
(c) Participations. Each LOC Participant, upon issuance of a Letter
--------------
of Credit, shall be deemed to have purchased without recourse a risk
participation from the Issuing Lender in such Letter of Credit and the
obligations arising thereunder and any collateral relating thereto, in each
case in an amount equal to its Revolving Loan Commitment Percentage of the
obligations under such Letter of Credit, and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its Revolving Loan Commitment Percentage of the
obligations arising under such Letter of Credit. Without limiting the
scope and nature of each LOC Participant's participation in any Letter of
Credit, to the extent that the Issuing Lender has not been reimbursed as
required hereunder or under any such Letter of Credit, each such LOC
Participant shall pay to the Issuing Lender its Revolving Loan Commitment
Percentage of such unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing pursuant to
the provisions of subsection (d) hereof. The obligation of each LOC
Participant to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of the Borrower or any
other Credit Party to reimburse the Issuing Lender under any Letter of
Credit, together with interest as hereinafter provided.
30
<PAGE>
(d) Reimbursement. In the event of any drawing under any Letter of
-------------
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender of its intent to
otherwise reimburse the Issuing Lender, the Borrower shall be deemed to
have requested a Revolving Loan at the Adjusted Base Rate in the amount of
the drawing as provided in subsection (e) hereof, the proceeds of which
will be used to satisfy the reimbursement obligations. The Borrower shall
reimburse the Issuing Lender on the day of drawing under any Letter of
Credit either with the proceeds of a Revolving Loan obtained hereunder or
otherwise in same day funds as provided herein or in the LOC Documents. If
the Borrower shall fail to reimburse the Issuing Lender as provided
hereinabove, the unreimbursed amount of such drawing shall bear interest at
a per annum rate equal to the Base Rate plus the Applicable Percentage for
the Base Rate Loans that are Revolving Loans plus two percent (2%). The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of (but without waiver
of) any rights of set-off, counterclaim or defense to payment the
applicable account party or the Borrower may claim or have against the
Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of
Credit drawn upon or any other Person, including without limitation, any
defense based on any failure of the applicable account party, the Borrower
or any other Credit Party to receive consideration or the legality,
validity, regularity or unenforceability of the Letter of Credit. The
Issuing Lender will promptly notify the LOC Participants of the amount of
any unreimbursed drawing and each LOC Participant shall promptly pay to the
Agent for the account of the Issuing Lender, in Dollars and in immediately
available funds, the amount of such LOC Participant's Revolving Loan
Commitment Percentage of such unreimbursed drawing. Such payment shall be
made on the day such notice is received by such Lender from the Issuing
Lender if such notice is received at or before 2:00 p.m., otherwise such
payment shall be made at or before 12:00 Noon on the Business Day next
succeeding the day such notice is received. If such LOC Participant does
not pay such amount to the Issuing Lender in full upon such request, such
LOC Participant shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from the
date the LOC Participant received the notice regarding the unreimbursed
drawing until such LOC Participant pays such amount to the Issuing Lender
in full at a rate per annum equal to, if paid within two Business Days of
the date of drawing, the Federal Funds Rate and thereafter at a rate equal
to the Base Rate. Each LOC Participant's obligation to make such payment
to the Issuing Lender, and the right of the Issuing Lender to receive the
same, shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a Default
or Event of Default or the acceleration of the obligations hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a LOC
Participant to the Issuing Lender, such LOC Participant shall,
automatically and without any further action on the part of the Issuing
Lender or such LOC Participant, acquire a participation in an amount equal
to such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed drawing
portion of the LOC Obligation and in the interest thereon and in the
31
<PAGE>
related LOC Documents, and shall have a claim against the Borrower and the
other Credit Parties with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower
------------------------------
shall have requested, or been deemed to have requested, a Revolving Loan
borrowing to reimburse a drawing under a Letter of Credit, the Agent shall
give notice to the applicable Lenders that a Revolving Loan has been
requested or deemed requested in connection with a drawing under a Letter
of Credit, in which case a Revolving Loan borrowing comprised solely of
Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be
-------------------
immediately made from all applicable Lenders (without giving effect to any
termination of the Commitments pursuant to Section 9.2) pro rata based on
--- ----
each Lender's respective Revolving Loan Commitment Percentage and the
proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective LOC Obligations. Each such Lender hereby
irrevocably agrees to make such Revolving Loans immediately upon any such
request or deemed request on account of each such Mandatory Borrowing in
the amount and in the manner specified in the preceding sentence and on the
same such date notwithstanding (i) the amount of Mandatory Borrowing may
---------------
not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or Event of Default
then exists, (iv) failure of any such request or deemed request for
Revolving Loans to be made by the time otherwise required hereunder, (v)
the date of such Mandatory Borrowing, or (vi) any reduction in the
Revolving Committed Amount or any termination of the Commitments. In the
event that any Mandatory Borrowing cannot for any reason be made on the
date otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with respect
to the Borrower or any other Credit Party), then each such Lender hereby
agrees that it shall forthwith fund (as of the date the Mandatory Borrowing
would otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) its
Participation Interest in the outstanding LOC Obligations; provided,
--------
further, that in the event any Lender shall fail to fund its Participation
-------
Interest on the day the Mandatory Borrowing would otherwise have occurred,
then the amount of such Lender's unfunded Participation Interest therein
shall bear interest payable to the Issuing Lender upon demand, at the rate
equal to, if paid within two Business Days of such date, the Federal Funds
Rate, and thereafter at a rate equal to the Base Rate.
(f) Designation of Subsidiaries as Account Parties. Notwithstanding
----------------------------------------------
anything to the contrary set forth in this Credit Agreement, a Letter of
Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Subsidiary of the Borrower;
provided that notwithstanding such statement, the Borrower shall be the
actual account party for all purposes of this Credit Agreement for such
Letter of Credit and such statement shall not affect the Borrower's
reimbursement obligations hereunder with respect to such Letter of Credit.
32
<PAGE>
(g) Modification and Extension. The issuance of any supplement,
--------------------------
modification, amendment, renewal, or extensions to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have the
-----------------------------
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (Publication No. 500 or the most recent
publication, the "UCP"), in which case the UCP may be incorporated therein
---
and deemed in all respects to be a part thereof.
(i) Responsibility of Issuing Lender. It is expressly understood and
--------------------------------
agreed that the obligations of the Issuing Lender hereunder to the LOC
Participants are only those expressly set forth in this Credit Agreement
and that the Issuing Lender shall be entitled to assume that the conditions
precedent set forth in Section 5 have been satisfied unless it shall have
acquired actual knowledge that any such condition precedent has not been
satisfied; provided, however, that nothing set forth in this Section 2.2
shall be deemed to prejudice the right of any LOC Participant to recover
from the Issuing Lender any amounts made available by such LOC Participant
to the Issuing Lender pursuant to this Section 2.2 in the event that it is
determined by a court of competent jurisdiction that the payment with
respect to a Letter of Credit constituted gross negligence or willful
misconduct on the part of the Issuing Lender.
(j) Conflict with LOC Documents. In the event of any conflict between
---------------------------
this Credit Agreement and any LOC Document, this Credit Agreement shall
govern.
(k) Indemnification of Issuing Lender.
---------------------------------
(i) In addition to its other obligations under this Credit
Agreement, the Borrower hereby agrees to protect, indemnify, pay and
save the Issuing Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) that the Issuing Lender may
incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or (B) the failure of the Issuing
Lender to honor a drawing under a Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all
such acts or omissions, herein called "Government Acts").
---------------
(ii) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter
of Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects
33
<PAGE>
invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (C) failure of the
beneficiary of a Letter of Credit to comply fully with conditions
required in order to draw upon a Letter of Credit; (D) errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (E) errors in interpretation of technical
terms; (F) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under a Letter of Credit
or of the proceeds thereof; and (G) any consequences arising from
causes beyond the control of the Issuing Lender, including, without
limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of the Issuing Lender's rights or
powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted
by the Issuing Lender, under or in connection with any Letter of
Credit or the related certificates, if taken or omitted in good faith,
shall not put the Issuing Lender under any resulting liability to the
Borrower or any other Credit Party. It is the intention of the
parties that this Credit Agreement shall be construed and applied to
protect and indemnify the Issuing Lender against any and all risks
involved in the issuance of the Letters of Credit, all of which risks
are hereby assumed by the Borrower, including, without limitation, any
and all risks of the acts or omissions, whether rightful or wrongful,
of any present or future Government Acts.
(iv) Nothing in this subsection (k) is intended to limit the
reimbursement obligation of the Borrower contained in this Section
2.2. The obligations of the Borrower under this subsection (k) shall
survive the termination of this Credit Agreement. No act or omission
of any current or prior beneficiary of a Letter of Credit shall in any
way affect or impair the rights of the Issuing Lender to enforce any
right, power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (k), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing
Lender arising solely out of the gross negligence or willful
misconduct of the Issuing Lender, as determined by a court of
competent jurisdiction.
34
<PAGE>
2.3 TERM LOANS.
----------
(a) Term Loans. Subject to the terms and conditions set forth herein,
----------
each Lender severally agrees, on the Closing Date, to make a term loan
(collectively, the "Term Loans") to the Borrower, in Dollars, in an amount
----------
equal to such Lender's Term Loan Commitment Percentage, if any, of the Term
Loan Committed Amount; provided that the aggregate amount of such Term
Loans made on the Closing Date shall not exceed the Term Loan Committed
Amount. Once repaid, Term Loans cannot be reborrowed.
(b) Funding of Term Loans. On the Closing Date, each applicable
---------------------
Lender will make its Term Loan Commitment Percentage of the Term Loan
Committed Amount available to the Agent by deposit, in Dollars and in
immediately available funds, at the offices of the Agent at its principal
office in Dallas, Texas or at such other address as the Agent may designate
in writing. The amount of the Term Loans will then be made available to
the Borrower by the Agent by crediting the account of the Borrower on the
books of such office of the Agent, to the extent the amount of such Term
Loans are made available to the Agent. All Term Loans on the Closing Date
shall be Base Rate Loans. Thereafter, all or any portion of the Term Loans
may be converted into Eurodollar Loans in accordance with the terms of
Section 2.4.
No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make a Term Loan hereunder; provided, however,
that the failure of any Lender to fulfill its obligations hereunder shall
not relieve any other Lender of its obligations hereunder. If the Agent
shall have received an executed signature page to this Credit Agreement
(whether an original or via telecopy) from a Lender, the Agent may assume
that such Lender has or will make the amount of its Term Loans available to
the Agent on the Closing Date, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do
so) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the Agent
shall be able to recover such corresponding amount from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the
Agent's demand therefor, the Agent will promptly notify the Borrower, and
the Borrower shall immediately pay such corresponding amount to the Agent.
The Agent shall also be entitled to recover from the Lender or the
Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for such Term Loan and (ii) from a Lender
at the Federal Funds Rate.
(c) Amortization. The principal amount of the Term Loans shall be
------------
repaid in quarterly payments on the dates set forth below:
35
<PAGE>
Principal Amortization Term Loan Principal
Payment Dates Amortization Payment
---------------------- --------------------
March 31, 1997 $ 1,250,000
June 30, 1997 $ 1,250,000
September 30, 1997 $ 1,250,000
December 31, 1997 $ 1,250,000
March 31, 1998 $ 1,750,000
June 30, 1998 $ 1,750,000
September 30, 1998 $ 1,750,000
December 31, 1998 $ 1,750,000
March 31, 1999 $ 2,250,000
June 30, 1999 $ 2,250,000
September 30, 1999 $ 2,250,000
December 31, 1999 $ 2,250,000
March 31, 2000 $ 2,250,000
June 30, 2000 $ 2,250,000
September 30, 2000 $ 2,250,000
December 31, 2000 $ 2,250,000
March 31, 2001 $ 2,500,000
June 30, 2001 $ 2,500,000
September 30, 2001 $ 2,500,000
Maturity Date $ 2,500,000
Total $40,000,000
2.4 CONTINUATIONS AND CONVERSIONS.
-----------------------------
Subject to the terms of Section 5.2, the Borrower shall have the option, on
any Business Day, to continue existing Eurodollar Loans for a subsequent
Interest Period, to convert Base Rate Loans into Eurodollar Loans or to convert
Eurodollar Loans into Base Rate Loans; provided, however, that (a) each such
continuation or conversion must be requested by the Borrower pursuant to a
written Notice of Continuation/Conversion, in the form of Exhibit 2.4, in
-----------
compliance with the terms set forth below, (b) except as provided in Section
3.12, Eurodollar Loans may only be continued or converted into Base Rate Loans
on the last day of the Interest Period applicable hereto, (c) Eurodollar Loans
may not be continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default and (d)
any request to extend a Eurodollar Loan that fails to comply with the terms
hereof or any failure to request an extension of a Eurodollar Loan at the end of
an Interest Period shall constitute a conversion to a Base Rate Loan on the last
day of the applicable Interest Period. Each continuation or conversion must be
requested by the Borrower no later than 11:00 a.m. (i) on the date for a
requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three
Business Days prior to the date for a requested continuation of a Eurodollar
Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each case
pursuant to a written Notice of Continuation/Conversion submitted to the Agent
which shall set forth (A) whether the Loans to be continued or converted are
Revolving Loans or Term Loans, (B) whether the Borrower wishes to continue or
convert such Loans and (C) if the request is to continue a Eurodollar Loan or
convert a Base Rate Loan to a Eurodollar Loan, the Interest Period applicable
thereto.
36
<PAGE>
2.5 MINIMUM AMOUNTS.
---------------
Each request for a borrowing, conversion or continuation shall be subject
to the requirements that (a) each Eurodollar Loan shall be in a minimum amount
of $5,000,000 and in integral multiples of $1,000,000 in excess thereof, (b)
each Base Rate Loan shall, subject to the terms of Section 2.2(e), be in a
minimum amount of the lesser of $1,000,000 (and integral multiples of $500,000
in excess thereof) or the remaining amount available under the Revolving
Committed Amount or the Term Committed Amount, as applicable and (c) no more
than 5 Eurodollar Loans shall be outstanding hereunder at any one time. For the
purposes of this Section, all Eurodollar Loans with the same Interest Periods
shall be considered as one Eurodollar Loan, but Eurodollar Loans with different
Interest Periods, even if they begin on the same date, shall be considered as
separate Eurodollar Loans.
2.6 NOTES.
-----
(a) Revolving Loan Notes. The Revolving Loans made by each Lender
--------------------
shall be evidenced by a duly executed promissory note of the Borrower to
each applicable Lender in the face amount of its Revolving Loan Commitment
Percentage of the Revolving Committed Amount in substantially the form of
Exhibit 2.6(a).
--------------
(b) Term Loan Notes. The Term Loan made by each Lender shall be
---------------
evidenced by a duly executed promissory note of the Borrower to each
applicable Lender in the face amount of its Term Loan Commitment Percentage
of the Term Loan Committed Amount in substantially the form of Exhibit
-------
2.6(b).
------
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
------------------------------------------------------------
3.1 INTEREST.
---------
(a) Interest Rate. All Base Rate Loans shall accrue interest at the
-------------
Adjusted Base Rate and all Eurodollar Loans shall accrue interest at the
Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and during the
------------------------
continuance, of an Event of Default, the principal of and, to the extent
permitted by law, interest on the Loans and any other amounts owing (but
not timely paid) hereunder or under the other Credit Documents (including
without limitation fees and expenses) shall bear interest, payable on
demand, at a per annum rate equal to 2% plus the rate which would otherwise
be applicable (or if no rate is applicable, then the Adjusted Base Rate
plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and payable in
-----------------
arrears on each Interest Payment Date. If an Interest Payment Date falls
37
<PAGE>
on a date which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day, except that in the case of
Eurodollar Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day.
3.2 PLACE AND MANNER OF PAYMENTS.
----------------------------
All payments of principal, interest, fees, expenses and other amounts to be
made by a Credit Party under this Credit Agreement shall be received not later
than 2:00 p.m. on the date when due, in Dollars and in immediately available
funds, by the Agent at its offices at 901 Main Street, Dallas, Texas 75202.
Payments received after such time shall be deemed to have been received on the
next Business Day. The Borrower shall, at the time it makes any payment under
this Credit Agreement, specify to the Agent, the Loans, Letters of Credit, fees
or other amounts payable by the Borrower hereunder to which such payment is to
be applied (and in the event that it fails to specify, or if such application
would be inconsistent with the terms hereof, the Agent shall, subject to Section
3.7, distribute such payment to the Lenders in such manner as the Agent may deem
appropriate). The Agent will distribute. on the same day of receipt, such
payments to the applicable Lenders if any such payment is received prior to 2:00
p.m.; otherwise the Agent will distribute such payment to the applicable Lenders
on the next succeeding Business Day. Whenever any payment hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day (subject to accrual of
interest and fees for the period of such extension), except that in the case of
Eurodollar Loans, if the extension would cause the payment to be made in the
next following calendar month, then such payment shall instead be made on the
next preceding Business Day.
3.3 PREPAYMENTS.
-----------
(a) Voluntary Prepayments. The Borrower shall have the right to
---------------------
prepay Loans in whole or in part from time to time without premium or
penalty; provided, however, that (i) Eurodollar Loans may only be prepaid
on three Business Days' prior written notice to the Agent and any
prepayment of Eurodollar Loans will be subject to Section 3.15; (ii) each
such partial prepayment of Loans shall be in the minimum principal amount
of $5,000,000 and integral multiples of $1,000,000 in excess thereof and
(iii) voluntary prepayments with respect to the Term Loans shall be pro
rata among the remaining Principal Amortization Payments. Subject to the
foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied
as the Borrower may elect; provided that if the Borrower fails to specify a
--------
voluntary prepayment then such prepayment shall be applied first to Term
Loans and then to Revolving Loans and, in each case first to Base Rate
Loans and then to Eurodollar Loans in direct order of Interest Period
maturities.
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<PAGE>
(b) Mandatory Prepayments.
---------------------
(i) Revolving Committed Amount. If at any time the sum of the
--------------------------
aggregate amount of Revolving Loans outstanding plus LOC Obligations
outstanding exceeds the Revolving Committed Amount minus the Excess
-----
Payables, the Borrower shall immediately make a principal payment to
the Agent in the manner and in an amount necessary to be in compliance
with Section 2.1.
(ii) Excess Cash Flow. Within 10 days after the date the audited
----------------
financial statements are required to be delivered pursuant to Section
7.1(a) (commencing with the fiscal year ending September 30, 1997),
the Borrower shall make a prepayment of the Loans in an amount equal
to (x) 50% of the Excess Cash Flow earned during such prior fiscal
year less (y) the amount of any voluntary prepayments of the Term
Loans or (to the extent accompanied by a reduction in the Revolving
Committed Amount) of the Revolving Loans during such prior fiscal
year. Any payments of Excess Cash Flow shall be applied as set forth
in clause (v) below.
(iii) Asset Dispositions. Immediately upon the occurrence of
------------------
any Asset Disposition Prepayment Event, the Borrower shall prepay the
Loans in an aggregate amount equal to the Net Proceeds of the related
Asset Disposition not applied (or caused to be applied) by the
Borrower during the related Application Period to the purchase,
acquisition or construction of Eligible Assets as contemplated by the
terms of Section 8.5(v) (such prepayment to be applied as set forth in
clause (v) below). For purposes or this clause (iii), acquisitions of
Eligible Assets during the 180-day period preceding such Asset
Disposition shall be deemed to satisfy the application of Net Proceeds
required in the preceding sentence.
(iv) Issuances of Equity. Immediately upon receipt by a Credit
-------------------
Party of proceeds from any Equity Issuance, the Borrower shall forward
50% of the Net Proceeds of such Equity Issuance to the Lenders as a
prepayment of the Loans (such prepayment to be applied as set forth in
clause (v) below).
(v) Application of Mandatory Prepayments. All amounts required
------------------------------------
to be prepaid pursuant to this Section 3.3(b) shall be applied as
follows: (i) with respect to all amounts prepaid pursuant to Section
3.3(b)(i), to Revolving Loans and (after all Revolving Loans have been
repaid) to a cash collateral account in respect of LOC Obligations,
(ii) with respect to all amounts prepaid pursuant to Section
3.3(b)(ii), (iii) and (iv), (A) first to the outstanding Term Loans
-----
(pro rata among the remaining Principal Amortization Payments) and (B)
second to the Revolving Loans and (after all Revolving Loans have been
------
repaid) to a cash collateral account in respect of LOC Obligations
(with a corresponding reduction in the Revolving Committed Amount in
an amount equal to all amounts applied pursuant to this clause (B)).
39
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Within the parameters of the applications set forth above, prepayments
shall be applied first to Base Rate Loans and then to Eurodollar Loans
in direct order of Interest Period maturities. All prepayments
hereunder shall be subject to Section 3.15.
3.4 FEES.
----
(a) Commitment Fees.
---------------
In consideration of the Revolving Committed Amount being made
available by the Lenders hereunder, the Borrower agrees to pay to the
Agent, for the pro rata benefit of each applicable Lender (based on each
Lender's Revolving Loan Commitment Percentage of the Revolving Committed
Amount), a per annum fee equal to the Applicable Percentage of the Unused
Revolving Commitment (the "Commitment Fees"). The accrued Commitment Fees
---------------
shall commence to accrue on the Closing Date and shall be due and payable
in arrears on the last Business Day of each fiscal quarter of the Borrower
(as well as on the Maturity Date and on any date that the Revolving
Committed Amount is reduced) for the immediately preceding fiscal quarter
(or portion thereof), beginning with the first of such dates to occur after
the Closing Date.
(b) Letter of Credit Fees.
---------------------
(i) Standby Letter of Credit Issuance Fee. In consideration of
-------------------------------------
the issuance of standby Letters of Credit hereunder, the Borrower
promises to pay to the Agent for the account of each Lender a fee (the
"Standby Letter of Credit Fee") on such Lender's Commitment Percentage
----------------------------
of the average daily maximum amount available to be drawn under each
such standby Letter of Credit computed at a per annum rate for each
day from the date of issuance to the date of expiration equal to the
Applicable Percentage. The Standby Letter of Credit Fee be payable
quarterly in arrears 15 days after the end of each fiscal quarter of
the Borrower and on the Maturity Date.
(ii) Trade Letter of Credit Drawing Fee. In consideration of
----------------------------------
the issuance of trade Letters of Credit hereunder, the Borrower
promises to pay to the Agent for the account of each Lender a fee (the
"Trade Letter of Credit Fee") equal to the Applicable Percentage on
--------------------------
such Lender's Commitment Percentage of the amount of each drawing
under any such trade Letter of Credit. The Trade Letter of Credit Fee
will be payable on each date of drawing under a trade Letter of
Credit.
(iii) Issuing Lender Fees. In addition to the Standby Letter of
-------------------
Credit Fee and the Trade Letter of Credit Fee payable pursuant to
subsections (i) and (ii) above, the Borrower shall pay to the Issuing
Lender for its own account, without sharing by the other Lenders, the
letter of credit fronting and negotiation fees agreed to by the
Borrower and the Agent from time to time and the customary charges
from time to time to the Issuing Lender for its services in connection
with the issuance, amendment, payment, transfer, administration,
cancellation and conversion of, and drawings under, such Letters of
Credit (collectively, the "Issuing Lender Fees").
-------------------
40
<PAGE>
(c) Administrative Fees. The Borrower agrees to pay to the Agent, for
-------------------
its own account, an annual fee as agreed to between the Borrower and the
Agent in the Fee Letter.
3.5 PAYMENT IN FULL AT MATURITY.
---------------------------
(a) On the Maturity Date, the entire outstanding principal balance of
all Revolving Loans, together with accrued but unpaid interest and all
other sums owing with respect thereto, shall be due and payable in full,
unless accelerated sooner pursuant to Section 9.
(b) On the Maturity Date, the entire outstanding principal balance of
all Term Loans, together with accrued but unpaid interest and all other
sums owing with respect thereto, shall be due and payable in full, unless
accelerated sooner pursuant to Section 9.
3.6 COMPUTATIONS OF INTEREST AND FEES.
---------------------------------
(a) Except for Base Rate Loans, in which case interest shall be
computed on the basis of a 365 or 366 day year as the case may be (unless
the Base Rate is determined by reference to the Federal Funds Rate), all
computations of interest and fees hereunder shall be made on the basis of
the actual number of days elapsed over a year of 360 days. Interest shall
accrue from and include the date of borrowing (or continuation or
conversion) but exclude the date of payment.
(b) It is the intent of the Lenders and the Credit Parties to conform
to and contract in strict compliance with applicable usury law from time to
time in effect. All agreements between the Lenders and the Borrower are
hereby limited by the provisions of this paragraph which shall override and
control all such agreements, whether now existing or hereafter arising and
whether written or oral. In no way, nor in any event or contingency
(including but not limited to prepayment or acceleration of the maturity of
any obligation), shall the interest taken, reserved, contracted for,
charged, or received under this Credit Agreement, under the Notes or
otherwise, exceed the maximum non-usurious amount permissible under
applicable law. If, from any possible construction of any of the Credit
Documents or any other document, interest would otherwise be payable in
excess of the maximum non-usurious amount, any such construction shall be
subject to the provisions of this paragraph and such documents shall be
automatically reduced to the maximum non-usurious amount permitted under
applicable law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest on the Loans under applicable law and which
would, apart from this provision, be in excess of the maximum lawful
amount, an amount equal to the amount which would have been excessive
41
<PAGE>
interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Loans and not to the payment of interest, or
refunded to the Borrower or the other payor thereof if and to the extent
such amount which would have been excessive exceeds such unpaid principal
amount of the Loans. The right to demand payment of the Loans or any other
indebtedness evidenced by any of the Credit Documents does not include the
right to receive any interest which has not otherwise accrued on the date
of such demand, and the Lenders do not intend to charge or receive any
unearned interest in the event of such demand. All interest paid or agreed
to be paid to the Lenders with respect to the Loans shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term (including any renewal or extension) of the
Loans so that the amount of interest on account of such indebtedness does
not exceed the maximum non-usurious amount permitted by applicable law.
3.7 PRO RATA TREATMENT.
------------------
Except to the extent otherwise provided herein:
(a) Loans. Each Revolving Loan borrowing (including, without
-----
limitation, each Mandatory Borrowing), each payment or prepayment of
principal of any Loan, each payment of fees (other than the Issuing Lender
Fees retained by the Issuing Lender for its own account and the
Administrative Fees retained by the Agent for its own account), each
reduction of the Revolving Committed Amount, and each conversion or
continuation of any Loan, shall (except as otherwise provided in Section
3.3(c)) be allocated pro rata among the relevant Lenders in accordance with
the respective Revolving Loan Commitment Percentages and Term Loan
Commitment Percentages, as applicable, of such Lenders (or, if the
Commitments of such Lenders have expired or been terminated, in accordance
with the respective principal amounts of the outstanding Revolving Loans
and Participation Interests and outstanding Term Loans, as applicable, of
such Lenders); provided that, if any Lender shall have failed to pay its
--------
applicable pro rata share of any Loan, then any amount to which such Lender
would otherwise be entitled pursuant to this subsection (a) shall instead
be payable to the Agent; provided further, that in the event any amount
-------- -------
paid to any Lender pursuant to this subsection (a) is rescinded or must
otherwise be returned by the Agent, each Lender shall, upon the request of
the Agent, repay to the Agent the amount so paid to such Lender, with
interest for the period commencing on the date such payment is returned by
the Agent until the date the Agent receives such repayment at a rate per
annum equal to, during the period to but excluding the date two Business
Days after such request, the Federal Funds Rate, and thereafter, the Base
Rate plus two percent (2%) per annum; and
----
(b) Letters of Credit. Each payment of unreimbursed drawings in
-----------------
respect of LOC Obligations shall be allocated to each LOC Participant pro
rata in accordance with its Revolving Loan Commitment Percentage; provided
--------
that, if any LOC Participant shall have failed to pay its applicable pro
rata share of any drawing under any Letter of Credit, then any amount to
which such LOC Participant would otherwise be entitled pursuant to this
subsection (b) shall instead be payable to the Issuing Lender; provided
--------
further, that in the event any amount paid to any LOC Participant pursuant
-------
42
<PAGE>
to this subsection (b) is rescinded or must otherwise be returned by the
Issuing Lender, each LOC Participant shall, upon the request of the Issuing
Lender, repay to the Agent for the account of the Issuing Lender the amount
so paid to such LOC Participant, with interest for the period commencing on
the date such payment is returned by the Issuing Lender until the date the
Issuing Lender receives such repayment at a rate per annum equal to, during
the period to but excluding the date two Business Days after such request,
the Federal Funds Rate, and thereafter, the Base Rate plus two percent (2%)
----
per annum.
3.8 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.
---------------------------------------------
Notwithstanding any other provisions of this Credit Agreement, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of the
Agent in connection with enforcing the rights of the Lenders under the
Credit Documents and any protective advances made by the Agent with respect
to the Collateral under or pursuant to the terms of the Collateral
Documents;
SECOND, to payment of any fees owed to the Agent or the Issuing
Lender;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses, (including, without limitation, reasonable attorneys' fees) of
each of the Lenders in connection with enforcing its rights under the
Credit Documents;
FOURTH, to the payment of all accrued fees and interest payable to the
Lenders hereunder;
FIFTH, to the payment of the outstanding principal amount of the
Loans, to the payment or cash collateralization of the outstanding LOC
Obligations, and, in the case of any proceeds of Collateral, to the
outstanding principal portion of any Hedging Obligations, pro rata, as set
forth below;
SIXTH, to all other obligations which shall have become due and
payable under the Credit Documents and not repaid pursuant to clauses
"FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
43
<PAGE>
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans, LOC
Obligations and Hedging Obligations held by such Lender bears to the aggregate
then outstanding Loans, LOC Obligations and Hedging Obligations held by all of
the Lenders) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH," "FIFTH," and "SIXTH" above; and (c) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of an outstanding Letter of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (x) first,
to reimburse the Issuing Lender from time to time for any drawings under such
Letter of Credit and (y) then, following the expiration of such Letter of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 3.8.
3.9 SHARING OF PAYMENTS.
-------------------
The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Loan, unreimbursed drawing with respect to any LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly pay in cash or purchase
from the other Lenders a participation in such Loans, LOC Obligations, and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by payment in cash or a repurchase of a participation
theretofore sold, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligation or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.9 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
44
<PAGE>
claim in a manner consistent with the rights of the Lenders under this Section
3.9 to share in the benefits of any recovery on such secured claim.
3.10 CAPITAL ADEQUACY.
----------------
If, after the date hereof, any Lender reasonably has determined that the
adoption or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender, or its parent corporation, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's (or parent corporation's)
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which such Lender, or its parent corporation, could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's (or parent corporation's) policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrower, the
Borrower shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender on an after-tax basis (after taking into
account applicable deductions and credits in respect of the amount indemnified)
for such reduction. Notwithstanding the foregoing, if any Lender fails to
notify the Borrower of any event that will entitle such Lender to compensation
under this Section 3.10 within 90 days after such Lender becomes aware of such
event, then such Lender shall not be entitled to any compensation from the
Borrower for any reduction in rate of return on capital arising prior to the
date that is 90 days before the date on which such Lender notifies the Borrower
of such event. Each determination by any such Lender of amounts owing under
this Section shall, absent manifest error, be conclusive and binding on the
parties hereto. This covenant shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.
3.11 INABILITY TO DETERMINE INTEREST RATE.
------------------------------------
If prior to the first day of any Interest Period, the Agent shall have
determined in good faith (which determination shall be conclusive and binding
upon the Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Agent shall give telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as practicable
thereafter. If such notice is given (a) any Eurodollar Loans requested to be
made on the first day of such Interest Period shall be made as Base Rate Loans,
(b) any Loans that were to have been converted on the first day of such Interest
Period to or continued as Eurodollar Loans shall be converted to or continued as
Base Rate Loans and (c) any outstanding Eurodollar Loans shall be converted, on
the first day of such Interest Period, to Base Rate Loans. Until such notice
has been withdrawn by the Agent, no further Eurodollar Loans shall be made or
continued as such, nor shall the Borrower have the right to convert Base Rate
Loans to Eurodollar Loans.
45
<PAGE>
3.12 ILLEGALITY.
----------
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans, such
Lender shall then have a commitment only to make a Base Rate Loan when a
Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days or the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.15.
3.13 REQUIREMENTS OF LAW.
-------------------
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
covered by Section 3.14 (including Non-Excluded Taxes imposed solely by
reason of any failure of such Lender to comply with its obligations under
Section 3.14(b)) and changes in taxes measured by or imposed upon the
overall net income, or franchise tax (imposed in lieu of such net income
tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(c) shall impose on such Lender any other condition (excluding any tax
of any kind whatsoever);
46
<PAGE>
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount indemnified) for such
increased cost or reduced amount receivable, provided that, in any such case,
--------
the Borrower may elect to convert the Eurodollar Loans made by such Lender
hereunder to Base Rate Loans by giving the Agent at least one Business Day's
notice of such election, in which case the Borrower shall promptly pay to such
Lender, upon demand, without duplication, such amounts, if any, as may be
required pursuant to Section 3.15. If any Lender becomes entitled to claim any
additional amounts pursuant to this Section 3.13, it shall provide prompt notice
thereof to the Borrower, through the Agent, certifying (x) that one of the
events described in this Section 3.13 has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof.
Notwithstanding the foregoing, if any Lender fails to notify the Borrower of any
event that will entitle such Lender to compensation under this Section 3.13
within 180 days after such Lender becomes aware of such event, then such Lender
shall not be entitled to any compensation from the Borrower for any such amounts
arising prior to the date that is 180 days before the date on which such Lender
notifies the Borrower of such event. Such a certificate as to any additional
amounts payable pursuant to this Section 3.13 submitted by such Lender, through
the Agent, to the Borrower shall be conclusive and binding on the parties hereto
in the absence of manifest error. This covenant shall survive the termination
of this Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
3.14 TAXES.
-----
(a) Except as provided below in this Section 3.14, all payments made
by the Borrower under this Credit Agreement and any Notes shall be made
free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any court, or
governmental body, agency or other official, excluding taxes measured by or
imposed upon the overall net income of any Lender or its applicable lending
office, or any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net worth
of any Lender or its applicable lending office, or any branch or affiliate
thereof, in each case imposed in lieu of net income taxes, imposed: (i) by
the jurisdiction under the laws of which such Lender, applicable lending
office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii) by
reason of any connection between the jurisdiction imposing such tax and
such Lender, applicable lending office, branch or affiliate other than a
connection arising solely from such Lender having executed, delivered or
performed its obligations, or received payment under or enforced, this
47
<PAGE>
Credit Agreement or any Notes. If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded
------------
Taxes") are required to be withheld from any amounts payable to the Agent
-----
or any Lender hereunder or under any Notes, (A) the amounts so payable to
the Agent or such Lender shall be increased to the extent necessary to
yield to the Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Credit Agreement and any Notes, provided,
--------
however, that the Borrower shall be entitled to deduct and withhold any
-------
Non-Excluded Taxes and shall not be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with
the requirements of paragraph (b) of this Section 3.14 whenever any Non-
Excluded Taxes are payable by the Borrower, and (B) as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower, if any, showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrower
shall indemnify the Agent and any Lender for any incremental taxes,
interest or penalties that may become payable by the Agent or any Lender as
a result of any such failure. The agreements in this subsection shall
survive the termination of this Credit Agreement and the payment of the
Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) (A) on or before the date of any payment by the Borrower
under this Credit Agreement or Notes to such Lender, deliver to the
Borrower and the Agent (x) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and any Notes without deduction
or withholding of any United States federal income taxes and (y) an
Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be, certifying that it is entitled to an
exemption from United States backup withholding tax;
(B) deliver to the Borrower and the Agent two further copies of
any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(C) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower
or the Agent; or
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<PAGE>
(ii) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (A)
represent to the Borrower (for the benefit of the Borrower and the
Agent) that it is not a bank within the meaning of Section
881(c)(3)(A) of the Internal Revenue Code, (B) agree to furnish to the
Borrower, on or before the date of any payment by the Borrower, with a
copy to the Agent, two accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable form
certifying to such Lender's legal entitlement at the date of such
certificate to an exemption from U.S. withholding tax under the
provisions of Section 881(c) of the Internal Revenue Code with respect
to payments to be made under this Credit Agreement and any Notes (and
to deliver to the Borrower and the Agent two further copies of such
form on or before the date it expires or becomes obsolete and after
the occurrence of any event requiring a change in the most recently
provided form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing and
completing such forms), and (C) agree, to the extent legally entitled
to do so, upon reasonable request by the Borrower, to provide to the
Borrower (for the benefit of the Borrower and the Agent) such other
forms as may be reasonably required in order to establish the legal
entitlement of such Lender to an exemption from withholding with
respect to payments under this Credit Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation has
occurred after the date such Person becomes a Lender hereunder which
renders all such forms (including successor forms) inapplicable or which
would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender so advises the Borrower and the Agent
then such Lender shall be exempt from such requirements. Each Person that
shall become a Lender or a participant of a Lender pursuant to Section 11.3
shall, upon the effectiveness of the related transfer, be required to
provide all of the forms, certifications and statements required pursuant
to this subsection (b); provided that in the case of a participant of a
--------
Lender, the obligations of such participant of a Lender pursuant to this
subsection (b) shall be determined as if the participant of a Lender were a
Lender except that such participant of a Lender shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
(c) If any such taxes shall be or become applicable after the Closing
Date to such payments by the Borrower to a Lender, such Lender shall use
reasonable efforts to make, fund or maintain the Loan or Loans, as the case
may be, through another lending office located in another jurisdiction so
as to reduce, to the fullest extent possible, the Borrower's liability
thereunder, if the making, funding or maintenance or such Loan or Loans
through such other office does not, in the reasonable judgment of such
Lender, materially affect such Lender. If the Borrower is required to make
any additional payment to a Lender pursuant to this Section 3.14, and any
such tax paid or payable by it in respect of , or calculated with reference
to, the taxes giving rise to such payment, such Lender shall, within a
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reasonable time after it receives such credit, relief, remission or
repayment, reimburse the Borrower the amount of any such credit, relief,
remission or repayment
3.15 INDEMNITY.
---------
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender actually sustains or incurs
(other than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a written
notice requesting the same in accordance with the provisions of this Credit
Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar
Loan after the Borrower has given a written notice thereof in accordance with
the provisions of this Credit Agreement and (c) the making of a prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification may include an amount equal to (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Percentage
included therein, if any) minus (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. The agreements in this Section shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
SECTION 4
GUARANTY
--------
4.1 GUARANTY OF PAYMENT.
-------------------
Subject to Section 4.7 below, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Lender, each Affiliate of Lender
that enters into any agreement with a Credit Party giving rise to Hedging
Obligations of such Credit Party and the Agent the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise). The Guarantors additionally, jointly
and severally, unconditionally guarantee to each Lender the timely performance
of all other obligations under the Credit Documents and any agreements giving
rise to Hedging Obligations of any Credit Party. This guaranty is a guaranty of
payment and not of collection and is a continuing guaranty and shall apply to
all Credit Party Obligations whenever arising.
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4.2 OBLIGATIONS UNCONDITIONAL.
-------------------------
The obligations of the Guarantors hereunder are absolute and unconditional,
irrespective of the value, genuineness, validity, regularity or enforceability
of any of the Credit Documents or any agreements giving rise to Hedging
Obligations on the part of any Credit Party, or any other agreement or
instrument referred to therein, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Guarantor agrees that this guaranty may be enforced by the Lenders without
the necessity at any time of resorting to or exhausting any other security or
collateral and without the necessity at any time of having recourse to the Notes
or any other of the Credit Documents or any collateral, if any, hereafter
securing the Credit Party Obligations or otherwise and each Guarantor hereby
waives the right to require the Lenders to proceed against the Borrower or any
other Person (including a co-guarantor) or to require the Lenders to pursue any
other remedy or enforce any other right. Each Guarantor further agrees that it
shall have no right of subrogation, indemnity, reimbursement or contribution
against the Borrower or any other Guarantor of the Credit Party Obligations for
amounts paid under this guaranty until such time as the Lenders (and any
Affiliates of Lenders entering into any agreement with any Credit Party giving
rise to Hedging Obligations of such Credit Party) have been paid in full, all
Commitments under the Credit Agreement have been terminated and no Person or
Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents. Each Guarantor further agrees that nothing contained
herein shall prevent the Lenders from suing on the Notes or any of the other
Credit Documents or any agreements giving rise to Hedging Obligations on the
part of any Credit Party or foreclosing its security interest in or Lien on any
collateral, if any, securing the Credit Party Obligations or from exercising any
other rights available to it under this Credit Agreement, the Notes, any other
of the Credit Documents, or any other instrument of security, if any, and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of any of any Guarantor's
obligations hereunder; it being the purpose and intent of each Guarantor that
its obligations hereunder shall be absolute, independent and unconditional under
any and all circumstances. Neither any Guarantor's obligations under this
guaranty nor any remedy for the enforcement thereof shall be impaired, modified,
changed or released in any manner whatsoever by an impairment, modification,
change, release or limitation of the liability of the Borrower or by reason of
the bankruptcy or insolvency of the Borrower. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Credit Party
Obligations and notice of or proof of reliance of by the Agent or any Lender
upon this Guarantee or acceptance of this Guarantee. The Credit Party
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee. All dealings between the Borrower and any of the
Guarantors, on the one hand, and the Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee.
4.3 MODIFICATIONS.
-------------
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
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obligation to protect, perfect, secure or insure any such security interests,
liens or encumbrances now or hereafter held, if any, for the Credit Party
Obligations or the properties subject thereto; (c) the time or place of payment
of the Credit Party Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise, and may be renewed or accelerated, in whole or
in part; (d) the Borrower and any other party liable for payment under the
Credit Documents may be granted indulgences generally; (e) any of the provisions
of the Notes or any of the other Credit Documents may be modified, amended or
waived; (f) any party (including any co-guarantor) liable for the payment
thereof may be granted indulgences or be released; and (g) any deposit balance
for the credit of the Borrower or any other party liable for the payment of the
Credit Party Obligations or liable upon any security therefor may be released,
in whole or in part, at, before or after the stated, extended or accelerated
maturity of the Credit Party Obligations, all without notice to or further
assent by such Guarantor, which shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.4 WAIVER OF RIGHTS.
----------------
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Credit Party Obligations; (c)
protest and notice of dishonor or of default (except as specifically required in
the Credit Agreement) with respect to the Credit Party Obligations or with
respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Credit Party Obligations, or the
Lenders' subordinating, compromising, discharging or releasing such security
interests, liens or encumbrances, if any; (e) all other notices to which such
Guarantor might otherwise be entitled; and (f) demand for payment under this
guaranty. Without limiting the generality of any other provision of this Section
4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat.
Sections 26-7 through 26-9, inclusive. Each Guarantor further agrees that such
Guarantor shall have no right of recourse to security for the Credit Parties'
Obligations, except through the exercise of the rights of subrogation pursuant
to Section 4.2.
4.5 REINSTATEMENT.
-------------
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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4.6 REMEDIES.
--------
The Guarantors agree that, as between the Guarantors, on the one hand, and
the Agent and the Lenders, on the other hand, the Credit Party Obligations may
be declared to be forthwith due and payable as provided in Section 9 (and shall
be deemed to have become automatically due and payable in the circumstances
provided in Section 9) notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Credit Party Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such declaration (or such Credit Party Obligations being deemed to
have become automatically due and payable), such Credit Party Obligations
(whether or not due and payable by any other Person) shall forthwith become due
and payable by the Guarantors. The Guarantors acknowledge and agree that their
obligations hereunder are secured in accordance with the terms of the Security
Agreements and the other Collateral Documents and that the Lenders may exercise
their remedies thereunder in accordance with the terms thereof.
4.7 LIMITATION OF GUARANTY.
----------------------
Notwithstanding any provision to the contrary contained herein or in any of
the other Credit Documents, to the extent the obligations of any Guarantor shall
be adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
4.8 RIGHTS OF CONTRIBUTION.
----------------------
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence hereof), pay to such Excess Funding Guarantor an amount equal to
such Guarantor's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the properties, assets, liabilities and debts of
such Excess Funding Guarantor) of such Excess Payment (as defined below). The
payment obligation of any Guarantor to any Excess Funding Guarantor under this
Section 4.8 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Section 4, and such Excess Funding Guarantor shall not exercise any
right or remedy with respect to such excess until payment and satisfaction in
full of all of such obligations. For purposes hereof, (i) "Excess Funding
--------------
Guarantor" shall mean, in respect of any obligations arising under the other
- ---------
provisions of this Section 4 (hereafter, the "Guaranteed Obligations"), a
----------------------
Guarantor that has paid an amount in excess of its Pro Rata Share of the
Guaranteed Obligations; (ii) "Excess Payment" shall mean, in respect of any
--------------
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranteed Obligations; and (iii) "Pro Rata
--------
Share", for the purposes of this Section 4.8, shall mean, for any Guarantor, the
ratio (expressed as a percentage) of (a) the amount by which the aggregate
present fair saleable value of all of its assets and properties exceeds the
amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
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obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.8 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date). Notwithstanding the
foregoing, all rights of contribution against any Guarantor shall terminate from
and after the date such Guarantor shall be relieved of its obligations pursuant
to Section 8.4.
SECTION 5
CONDITIONS PRECEDENT
--------------------
5.1 CLOSING CONDITIONS.
------------------
The obligation of the Lenders to enter into this Credit Agreement and make
the initial Extension of Credit is subject to satisfaction of the following
conditions:
(a) Executed Credit Documents. Receipt by the Agent of duly executed
-------------------------
copies of: (i) this Credit Agreement; (ii) the Notes; (iii) the Collateral
Documents and (iv) all other Credit Documents, each in form and substance
acceptable to the Lenders in their sole discretion.
(b) Corporate Documents. Receipt by the Agent of the following:
-------------------
(i) Charter Documents. Copies of the articles or certificates of
-----------------
incorporation or other charter documents of each Credit Party
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other jurisdiction
of its incorporation and certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of the
Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit Party certified
------
by a secretary or assistant secretary of such Credit Party to be true
and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board of
-----------
Directors of each Credit Party approving and adopting the Credit
Documents to which it is a party, the transactions contemplated
therein and authorizing execution and delivery thereof, certified by
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<PAGE>
a secretary or assistant secretary of such Credit Party to be true and
correct and in force and effect as of the Closing Date.
(iv) Good Standing. Copies of (A) certificates of good standing,
-------------
existence or its equivalent with respect to each Credit Party
certified as of a recent date by the appropriate Governmental
Authorities of the state or other jurisdiction of incorporation and
each other jurisdiction in which the failure to so qualify and be in
good standing would have a Material Adverse Effect on the business or
operations of a Credit Party in such jurisdiction and (B) to the
extent available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each Credit Party
----------
certified by a secretary or assistant secretary to be true and correct
as of the Closing Date.
(c) Financial Statements. Receipt by the Agent and the Lenders of (i)
--------------------
a satisfactory pro forma consolidated balance sheet of the Parent as of the
Closing Date giving effect to the acquisition of the Acquired Company and
the transactions contemplated by the Purchase Agreement and reflecting
estimated purchase price accounting adjustments, prepared by independent
public accountants of recognized national standing, and (ii) such other
information relating to the Acquired Company as the Agent may reasonably
require in connection with the structuring and syndication of credit
facilities of the type described herein.
(d) Opinion(s) of Counsel. Receipt by the Agent of an opinion, or
---------------------
opinions (which shall cover, among other things, authority, legality,
validity, binding effect, enforceability and attachment and perfection of
liens), satisfactory to the Agent, addressed to the Agent on behalf of the
Lenders and dated as of the Closing Date, from legal counsel to the Credit
Parties.
(e) Personal Property Collateral. The Agent shall have received:
----------------------------
(i) searches of Uniform Commercial Code ("UCC") filings in the
---
jurisdiction of the chief executive office of each Credit Party and
such other jurisdictions where Collateral is located (as reasonably
determined by the Agent), copies of the financing statements on file
in such jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements for each appropriate
jurisdiction as is necessary, in the Agent's sole discretion, to
perfect the Lenders' security interest in the Collateral;
(iii) in the case of facilities owned or used by Tyson where,
pursuant to the Transition Services Agreement, inventory of the
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Borrower will be maintained as of the Closing Date, a subordination
agreement from Tyson in form and substance reasonably satisfactory to
the Agent;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) all stock certificates evidencing the stock pledged to the
Agent pursuant to the Pledge Agreements, together with duly executed
in blank undated stock powers attached thereto;
(vi) all instruments and chattel paper in the possession of a
Credit Party, as required by the Security Agreements, together with
allonges or assignments as may be necessary or appropriate to perfect
the Lenders' security interest in the Collateral;
(vii) duly executed consents as are necessary, in the Agent's
sole discretion, to perfect the Lenders' security interest in the
Collateral.
(f) Real Property Collateral. The Agent shall have received:
------------------------
(i) fully executed and notarized mortgages, deeds of trust or
deeds to secure debt (each a "Mortgage" and collectively the
--------
"Mortgages") encumbering the fee interest of the Credit Parties in
----------
each real property asset owned by a Credit Party set forth on Schedule
--------
5.1(f) (each a "Mortgaged Property" and collectively the "Mortgaged
------ ------------------ ---------
Properties"), together with such UCC-1 financing statements as the
----------
Agent shall deem appropriate with respect to each such Mortgaged
Property;
(ii) an opinion of counsel (which counsel shall be reasonably
satisfactory to the Agent) in the state in which each Mortgaged
Property is located with respect to the enforceability of the form of
Mortgage and sufficiency of the form of UCC-1 financing statements to
be recorded or filed in such state and such other matters as the Agent
may request, in form and substance satisfactory to the Agent;
(iii) ALTA or other appropriate form mortgagee title insurance
policies (the "Mortgage Policies") issued by Chicago Title Insurance
-----------------
Company or other title insurers satisfactory to the Agent (the "Title
-----
Insurance Company"), in an amount satisfactory to the Agent with
-----------------
respect to each Mortgaged Property assuring the Agent that the
applicable Mortgages, as applicable, create valid and enforceable
first priority mortgage liens on the respective Mortgaged Properties,
free and clear of all defects and encumbrances except Permitted Liens
which Mortgage Policies shall be in form and substance satisfactory to
the Agent and containing such endorsements as shall be satisfactory to
the Agent and for any other matters that the Agent may request, and
providing affirmative insurance and such reinsurance as the Agent may
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request, all of the foregoing in form and substance satisfactory to
the Agent;
(iii) maps or plats of an as-built survey of the sites of the
Mortgaged Properties certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
satisfactory to the Agent and the Title Insurance Company by an
independent professional licensed land surveyor reasonably
satisfactory to the Agent and the Title Insurance Company, which maps
or plats and the surveys on which they are based shall be sufficient
to delete any standard printed survey exception contained in the
applicable title policy and be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without
limiting the generality of the foregoing, there shall be surveyed and
shown on such maps, plats or surveys the following: (A) the locations
on such sites of all the buildings, structures and other improvements
and the established building setback lines; (B) the lines of streets
abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites necessary to use the sites; (D) all
roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site, whether
recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (E) any encroachments on any
adjoining property by the building structures and improvements on the
sites; and (F) if the site is described as being on a filed map, a
legend relating the survey to said map;
(iv) certification from a registered engineer or land surveyor in
a form reasonably satisfactory to the Agent or other evidence
acceptable to the Agent that none of the improvements on the Mortgaged
Properties are located within any area designated by the Director of
the Federal Emergency Management Agency as a "special flood hazard"
area or if any improvements on the Mortgaged Properties are located
within a "special flood hazard" area, evidence of a flood insurance
policy from a company and in an amount satisfactory to the Agent for
the applicable portion of the premises, naming the Agent, for the
benefit of the Lenders, as mortgagee; and
(v) evidence satisfactory to the Agent that each of the Mortgaged
Properties, and the uses of the Mortgaged Properties, are in
compliance with all applicable laws, regulations and ordinances
including without limitation health and environmental protection laws,
erosion control ordinances, storm drainage control laws, doing
business and/or licensing laws, zoning laws (the evidence submitted as
to zoning should include the zoning designation made for each of the
Mortgaged Properties, the permitted uses of each such Mortgaged
Properties under such zoning designation and zoning requirements as to
parking, lot size, ingress, egress and building setbacks) and laws
regarding access and facilities for disabled persons including, but
not limited to, the federal Architectural Barriers Act, the Fair
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Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990.
(g) Availability. After giving effect to the initial Loans made and
------------
Letters of Credit issued hereunder on the Closing Date, the sum of the
Revolving Loans outstanding plus LOC Obligations outstanding plus the
Excess Payables shall not exceed $10,000,000.
(h) Evidence of Insurance. Receipt by the Agent of copies of
---------------------
insurance policies or certificates of insurance of the Credit Parties
evidencing liability and casualty insurance meeting the requirements set
forth in the Credit Documents, including, but not limited to, naming the
Agent as sole loss payee on behalf of the Lenders.
(i) Corporate Structure. The corporate capital and ownership
-------------------
structure of the Borrower and the Guarantors (after giving effect to the
purchase of the Acquired Company) shall be as described in Schedule 5.1(i).
---------------
(j) Equity Investment. Receipt by the Agent of evidence that a cash
-----------------
equity investment of at least $45,000,000 shall have been made in the
Parent by members of the Sponsor Group (and, net of reasonable expenses
payable to third parties, immediately thereafter in the Borrower in
exchange for common stock of the Borrower) on terms that are satisfactory
to the Agent.
(k) Government Consent. Receipt by the Agent of evidence that all
------------------
governmental, shareholder and material third party consents (including
Hart-Scott-Rodino clearance) and approvals necessary or desirable in
connection with the acquisition of the Acquired Company and the related
financings and other transactions contemplated hereby and expiration of all
applicable waiting periods without any action being taken by any authority
that could reasonably be likely to restrain, prevent or impose any material
adverse conditions on the acquisition of the Acquired Company or such other
transactions or that could reasonably be likely to seek or threaten any of
the foregoing, and no law or regulation shall be applicable which in the
judgment of the Agent could reasonably be likely to have such effect.
(l) Material Adverse Effect. There shall not have occurred a change
-----------------------
since September 28, 1996 that has had or could reasonably be expected to
have a Material Adverse Effect, including specifically without limitation
any such change resulting from any matter not disclosed in the Purchase
Agreement or resulting from a change in status of any matter disclosed in
the Purchase Agreement (including matters related to litigation, tax,
accounting, labor, insurance and pension liabilities).
(m) Litigation. There shall not exist any (i) order, decree,
----------
judgment, ruling or injunction which restrains the consummation of the
acquisition of the Acquired Company in the manner contemplated by the
Purchase Agreement or (ii) any pending or threatened action, suit,
investigation or proceeding against a Credit Party that would have or would
reasonably be expected to have a Material Adverse Effect.
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(n) Other Indebtedness. Receipt by the Agent of evidence that after
------------------
the acquisition of the Acquired Company, the Credit Parties shall have no
borrowed money Indebtedness other than (i) the Indebtedness under the
Credit Documents and (ii) the Subordinated Debt.
(o) Solvency Opinion. Receipt by the Agent of an opinion from
----------------
Valuation Research Corporation or another independent auditor or appraiser
acceptable to the Agent in usual and customary form as to the financial
condition, solvency and related matters of the Borrower and the Parent, in
each case after giving effect to the acquisition of the Acquired Company
and the initial borrowings under the Credit Documents.
(p) Purchase Agreement. There shall not have been any material
------------------
modification, amendment, supplement or waiver to the Purchase Agreement
without the prior written consent of the Agent, including, but not limited
to, any modification, amendment, supplement or waiver relating to the
amount or type of consideration to be paid in connection with the
acquisition of the Acquired Company and the contents of all disclosure
schedules and exhibits, and the acquisition of the Acquired Company shall
have been consummated in accordance with the terms of the Purchase
Agreement and the expenses related to such acquisition shall not exceed
$195,000,000. Receipt by the Agent of the final Purchase Agreement,
together with all exhibits and schedules thereto, certified by an Executive
Officer of the Borrower.
(q) Subordinated Debt. Receipt by the Agent of (i) evidence that the
-----------------
Borrower shall have received at least $100,000,000 in proceeds from the
issuance of the Subordinated Debt on the terms set forth in that certain
Offering Memorandum dated November 20, 1996, and, to the extent not
specifically set forth in such Offering Memorandum, otherwise pursuant to
terms, covenants, subordination provisions and other provisions that are
acceptable to the Lenders, including, without limitation, that the stated
interest rate applicable to the Subordinated Debt shall at no time exceed
12% per annum and (ii) the Agent shall have received complete copies of the
Indenture certified by an Executive Officer of the Borrower.
(r) Change in Market. The absence of any material disruption of, or a
----------------
material adverse change in, financial, banking or capital market
conditions.
(s) Officer's Certificates.
----------------------
(i) The Agent shall have received a certificate or certificates
executed by an Executive Officer of the Borrower as of the Closing
Date stating that (A) each Credit Party is in compliance with all
existing financial obligations, (B) all governmental, shareholder and
third party consents and approvals, if any, with respect to the Credit
Documents and the transactions contemplated thereby have been
obtained, (C) no action, suit, investigation or proceeding is pending
or threatened in any court or before any arbitrator or governmental
instrumentality that purports to affect any Credit Party or any
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transaction contemplated by the Credit Documents, if such action,
suit, investigation or proceeding could have or could be reasonably
expected to have a Material Adverse Effect, (D) the transactions
contemplated by the Purchase Agreement have been consummated in
accordance with the terms thereof and (E) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all
the transactions contemplated therein to occur on such date, (1) each
of the Credit Parties is Solvent, (2) no Default or Event of Default
exists, (3) all representations and warranties contained herein and in
the other Credit Documents are true and correct in all material
respects, and (4) the Credit Parties are in compliance with each of
the financial covenants set forth in Section 7.12.
(ii) The Agent shall have received a certificate or certificates
executed by an Executive Officer of the Parent as of the Closing Date
stating that (A) the Parent is in compliance with all existing
financial obligations and (B) immediately after giving effect to this
Credit Agreement, the other Credit Documents and all the transactions
contemplated therein, the Parent is Solvent.
(t) Fees and Expenses. Payment by the Credit Parties of all fees and
-----------------
expenses owed by them to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth in the Fee Letter.
(u) Other. Receipt by the Lenders of such other documents,
-----
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding litigation,
tax, accounting, labor, insurance, pension liabilities (actual or
contingent), real estate leases, material contracts, debt agreements,
property ownership and contingent liabilities of the Credit Parties.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
--------------------------------------
In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make, continue or convert Loans nor shall an
Issuing Lender be required to issue or extend a Letter of Credit unless:
(a) Notice. The Borrower shall have delivered (i) in the case of any
------
new Revolving Loan, a Notice of Borrowing, duly executed and completed, by
the time specified in Section 2.1, (ii) in the case of any Letter of
Credit, the Issuing Lender shall have received an appropriate request for
issuance in accordance with the provisions of Section 2.2 and (iii) in the
case of any continuation or conversion of a Loan, a duly executed and
completed Notice of Continuation/Conversion by the time specified in
Section 2.4;
(b) Representations and Warranties. The representations and
------------------------------
warranties made by the Credit Parties in any Credit Document are true and
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correct in all material respects at and as if made as of such date except
to the extent they expressly relate to an earlier date;
(c) No Default. No Default or Event of Default shall exist or be
----------
continuing either prior to or after giving effect thereto;
(d) No Bankruptcy Event. A Bankruptcy Event with respect to any
-------------------
Credit Party shall not have occurred and remain undismissed, undischarged
or unbonded;
(e) No Material Adverse Effect. No Material Adverse Effect shall have
--------------------------
occurred since September 28, 1996; and
(f) Availability. Immediately after giving effect to the making of a
------------
Revolving Loan (and the application of the proceeds thereof) or to the
issuance of a Letter of Credit, as the case may be, the sum of the
Revolving Loans outstanding plus LOC Obligations plus the Excess Payables
---- ----
outstanding shall not exceed the Revolving Commitment Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit shall constitute a representation and
warranty by the Borrower of the correctness of the matters specified in
subsections (b), (c), (d), (e) and (f) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 FINANCIAL CONDITION.
-------------------
The financial statements delivered to the Lenders pursuant to Section
5.1(c) and Section 7.1(a) and (b), (a) have been prepared in accordance with
GAAP (except as may otherwise be permitted under Section 7.1(a) and (b)) and (b)
present fairly (on the basis disclosed in the footnotes to such financial
statements) the consolidated and consolidating (as applicable) financial
condition, results of operations and cash flows of the Credit Parties as of such
date and for such periods. Since September 28, 1996, there has been no sale,
transfer or other disposition by any Credit Party of any material part of the
business or property of the Credit Parties, taken as a whole, and no purchase or
other acquisition by any of them of any business or property (including any
Capital Stock of any other Person) material in relation to the consolidated
financial condition of the Credit Parties, taken as a whole, in each case,
which, is not (x) reflected in the most recent financial statements delivered to
the Lenders pursuant to Section 7.1 or in the notes thereto or (y) otherwise
permitted by the terms of this Credit Agreement and communicated to the Agent.
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6.2 NO MATERIAL CHANGE.
------------------
Since September 28, 1996, (a) there has been no development or event
relating to or affecting a Credit Party which has had or would be reasonably
expected to have a Material Adverse Effect and (b) except as otherwise permitted
under this Credit Agreement, no dividends or other distributions have been
declared, paid or made upon the Capital Stock in a Credit Party nor has any of
the Capital Stock in a Credit Party been redeemed, retired, purchased or
otherwise acquired for value.
6.3 ORGANIZATION AND GOOD STANDING.
------------------------------
Each Credit Party (a) is a corporation duly incorporated, validly existing
and in good standing under the laws of the State (or other jurisdiction) of its
incorporation, (b) is duly qualified and in good standing as a foreign
corporation and authorized to do business in every jurisdiction unless the
failure to be so qualified, in good standing or authorized would have a Material
Adverse Effect and (c) has the requisite corporate power and authority to own
its properties and to carry on its business as now conducted and as proposed to
be conducted.
6.4 DUE AUTHORIZATION.
-----------------
Each Credit Party (a) has the requisite corporate power and authority to
execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and therein
provided for and (b) is duly authorized to, and has been authorized by all
necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
6.5 NO CONFLICTS.
------------
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any indenture, loan agreement, mortgage, deed of
trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, the violation of which would have or might be reasonably
expected to have a Material Adverse Effect, or (d) result in or require the
creation of any Lien (other than those contemplated in or created in connection
with the Credit Documents) upon or with respect to its properties.
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6.6 CONSENTS.
--------
Except for consents, approvals and authorizations (a) which have been
obtained or (b) which are listed on Schedule 6.6, no consent, approval,
------------
authorization or order of, or filing, registration or qualification with, any
court or Governmental Authority or third party in respect of any Credit Party is
required in connection with the execution, delivery or performance of this
Credit Agreement or any of the other Credit Documents by such Credit Party.
6.7 ENFORCEABLE OBLIGATIONS.
-----------------------
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
6.8 NO DEFAULT.
----------
No Credit Party is in default in any respect under any contract, lease,
loan agreement, indenture, mortgage, security agreement or other agreement or
obligation to which it is a party or by which any of its properties is bound
which default would have or would be reasonably expected to have a Material
Adverse Effect. No Default or Event of Default has occurred or exists except as
previously disclosed in writing to the Lenders.
6.9 OWNERSHIP.
---------
Each Credit Party is the owner of, and has good and marketable title to,
all of its respective assets and none of such assets is subject to any Lien
other than Permitted Liens.
6.10 INDEBTEDNESS.
------------
The Credit Parties have no Indebtedness except (a) as disclosed in the
financial statements referenced in Section 6.1, (b) as set forth on Schedule
--------
6.10 and (c) as otherwise permitted by this Credit Agreement.
- ----
6.11 LITIGATION.
----------
Except as disclosed in Schedule 6.11, there are no actions, suits or legal,
-------------
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Credit Party which will
have or might be reasonably expected to have a Material Adverse Effect.
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6.12 TAXES.
-----
Each Credit Party has filed, or caused to be filed, all tax returns
(federal, state, local and foreign) required to be filed and paid (a) all
amounts of taxes shown thereon to be due (including interest and penalties) and
(b) all other taxes, fees, assessments and other governmental charges (including
mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing
by it, except for such taxes (i) which are not yet delinquent or (ii) that are
being contested in good faith and by proper proceedings, and against which
adequate reserves are being maintained in accordance with GAAP. No Credit Party
is aware as of the Closing Date of any proposed tax assessments against it or
any other Credit Party.
6.13 COMPLIANCE WITH LAW.
-------------------
Each Credit Party is in compliance with all Requirements of Law and all
other laws, rules, regulations, orders and decrees (including without limitation
Environmental Laws) applicable to it, or to its properties, unless such failure
to comply would not have or would not be reasonably expected to have a Material
Adverse Effect. No Requirement of Law would be reasonably expected to cause a
Material Adverse Effect.
6.14 ERISA.
-----
Except as would not result or be reasonably expected to result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred,
and, to the best knowledge of the Credit Parties, no event or condition has
occurred or exists as a result of which any ERISA Event could reasonably be
expected to occur, with respect to any Plan; (ii) no "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and Section
412 of the Code, whether or not waived, has occurred with respect to any
Plan; (iii) each Plan has been maintained, operated, and funded in
compliance with its own terms and in material compliance with the
provisions of ERISA, the Code, and any other applicable federal or state
laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is
reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the
date on which this representation is made or deemed made (determined, in
each case, utilizing the actuarial assumptions used in such Plan's most
recent actuarial valuation report), did not exceed as of such valuation
date the fair market value of the assets of such Plan, or by more than
$250,000 in the aggregate as to all such Plans.
(c) No Credit Party has incurred, or, to the best knowledge of the
Credit Parties, could be reasonably expected to incur, any withdrawal
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liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any of the Subsidiaries of the Borrower would
become subject to any withdrawal liability under ERISA if any Credit Party
or any ERISA Affiliate were to withdraw completely from all Multiemployer
Plans and Multiple Employer Plans as of the valuation date most closely
preceding the date on which this representation is made or deemed made. No
Credit Party has received any notification that any Multiemployer Plan is
in reorganization (within the meaning of Section 4241 of ERISA), is
insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no Multiemployer
Plan is, to the best knowledge of the Credit Parties, reasonably expected
to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility
has occurred with respect to a Plan which has subjected or may subject the
Borrower or any of the Subsidiaries of the Borrower to any liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code,
or under any agreement or other instrument pursuant to which any Credit
Party has agreed or is required to indemnify any Person against any such
liability.
(e) No Credit Party has any material liability with respect to
"expected post-retirement benefit obligations" within the meaning of the
Financial Accounting Standards Board Statement 106.
(f) No event has occurred or failed to occur with respect to Single
Employer Plan, Multiemployer Plan or Multiple Employer Plan sponsored,
maintained or contributed to by an ERISA Affiliate of any Credit Party that
is reasonably likely to result in a Material Adverse Effect.
6.15 SUBSIDIARIES.
------------
Set forth on Schedule 6.15 is a complete and accurate list of all
-------------
Subsidiaries of each Credit Party. Information on Schedule 6.15 includes
-------------
jurisdiction of incorporation, the number of shares of each class of Capital
Stock outstanding, the number and percentage of outstanding shares of each class
owned (directly or indirectly) by such Credit Party; and the number and effect,
if exercised, of all outstanding options, warrants, rights of conversion or
purchase and all other similar rights with respect thereto. The outstanding
Capital Stock of all such Subsidiaries is validly issued, fully paid and non-
assessable and is owned by each such Credit Party, directly or indirectly, free
and clear of all Liens (other than those arising under or contemplated in
connection with the Credit Documents). Other than as set forth in Schedule
--------
6.15, no Credit Party has outstanding any securities convertible into or
- ----
exchangeable for its Capital Stock nor does any such Person have outstanding any
rights to subscribe for or to purchase or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to its Capital Stock.
Schedule 6.15 may be updated from time to time by the Borrower by giving written
- -------------
notice thereof to the Agent.
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<PAGE>
6.16 USE OF PROCEEDS; MARGIN STOCK.
-----------------------------
The proceeds of the Loans hereunder will be used solely for the purposes
specified in Section 7.10. None of the proceeds of the Loans will be used for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation G, Regulation U or Regulation X, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
G, T, U, or X. No Credit Party owns any "margin stock".
6.17 GOVERNMENT REGULATION.
---------------------
No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940
or the Interstate Commerce Act, each as amended. In addition, No Credit Party
is an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or controlled by such a company, or
a "holding company," or a "Subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "Subsidiary" or a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended. No director, executive officer or principal shareholder of any Credit
Party is a director, executive officer or principal shareholder of any Lender.
For the purposes hereof the terms "director", "executive officer" and "principal
shareholder" (when used with reference to any Lender) have the respective
meanings assigned thereto in Regulation O issued by the Board of Governors of
the Federal Reserve System.
6.18 ENVIRONMENTAL MATTERS.
---------------------
Except as set forth on Schedule 6.18 or except as would not have or be
-------------
reasonably expected to have a Material Adverse Effect:
(i) Each of the Real Properties and all operations of any Credit
Party at the Real Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any applicable
Environmental Law with respect to the Real Properties or the
businesses operated by any Credit Party (the "Businesses"), and there
----------
are no conditions relating to Businesses or Real Properties that would
be reasonably expected to give rise to liability under any applicable
Environmental Laws.
(ii) No Credit Party has received any written notice from any
Governmental Authority of any violation, alleged violation, non-
compliance, liability or potential liability regarding Hazardous
Materials or compliance with Environmental Laws with regard to any of
the Real Properties or the Businesses, nor does any Credit Party have
knowledge that any such notice is being threatened.
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(iii) Hazardous Materials have not been transported or disposed
of from the Real Properties, or generated, treated, stored or disposed
of at, on or under any of the Real Properties or any other location in
a manner that would give rise to liability on the part of any Credit
Party under any applicable Environmental Law.
(iv) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Credit Party,
threatened, under any applicable Environmental Law to which any Credit
Party is named as a party, nor are there any governmental or
administrative consent decrees or consent orders outstanding under any
Environmental Law with respect to any Credit Party, the Real
Properties or the Businesses.
(v) There has been no release or threat of release, in
violation of applicable Environmental Law, of Hazardous Materials at
or from the Real Properties, or arising from or related to the
operations (including, without limitation, disposal) of any Credit
Party in connection with the Real Properties or otherwise in
connection with the Businesses.
(vi) No Credit Party has assumed any liability of any Person
(other than another Credit Party) under any applicable Environmental
Law with respect to the Real Properties or otherwise in connection
with the Businesses.
6.19 INTELLECTUAL PROPERTY.
---------------------
Each Credit Party owns, or has the legal right to use, all trademarks,
tradenames, copyrights, technology, know-how and processes (the "Intellectual
------------
Property") necessary for each of them to conduct its business as currently
- --------
conducted except for those the failure to own or have such legal right to use
would not have or be reasonably expected to have a Material Adverse Effect. Set
forth on Schedule 6.19 is a list of all Intellectual Property owned by each
-------------
Credit Party or that any Credit Party has the right to use. Except as provided
on Schedule 6.19, no claim has been asserted and is pending by any Person
-------------
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does any Credit
Party know of any such claim, and to the Credit Parties' knowledge the use of
such Intellectual Property by any Credit Party does not infringe on the rights
of any Person, except for such claims and infringements that in the aggregate,
would not have or be reasonably expected to have a Material Adverse Effect.
Schedule 6.19 may be updated from time to time by the Borrower by giving written
- -------------
notice thereof to the Agent.
6.20 SOLVENCY.
--------
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement (including without limitation the
acquisition of the Acquired Company by the Borrower), will be Solvent.
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6.21 INVESTMENTS.
-----------
All Investments of each Credit Party are Permitted Investments.
6.22 LOCATION OF COLLATERAL.
----------------------
Set forth on Schedule 6.22(a) is a list of all Real Properties with street
----------------
address, county and state where located. Set forth on Schedule 6.22(b) is a
----------------
list of all locations where any tangible personal property of a Credit Party is
located, including county and state where located. Set forth on Schedule 6.22(c)
----------------
is a list of all locations where tangible Collateral having an aggregate book
value of at least $250,000 is located, including county and state where located.
Set forth on Schedule 6.22(d) is the chief executive office and principal place
----------------
of business of each Credit Party. Schedule 6.22(a), 6.22(b) ), 6.22(c) and
---------------- --------- -------
6.22(d) may be updated from time to time by the Borrower by giving written
- -------
notice thereof to the Agent.
6.23 DISCLOSURE.
----------
(a) Neither this Credit Agreement nor any financial statements delivered
to the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Credit Party in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not misleading, it being understood that the representation
set forth in this Section 6.23(a) shall not apply to any financial projections
or other pro forma financial information.
(b) The financial projections and other pro forma financial information
contained in the information referred to in subsection (a) above were based on
good faith estimates and assumptions believed by the applicable Credit Parties
to be reasonable at the time made and at the time furnished to the Agent and/or
any Lender, it being recognized by the Lenders that such projections and other
pro forma financial information as to future events such projections and other
pro forma financial information may differ from the projected results for such
period or periods.
6.24 LICENSES, ETC.
--------------
The Credit Parties have obtained and hold in full force and effect, all
franchises, licenses, permits, certificates, authorizations, qualifications,
accreditations, easements, rights of way and other rights, consents and
approvals (the "Franchises and Rights") which are necessary for the operation of
their respective businesses as presently conducted unless the failure to obtain
such Franchises and Rights would not result in the occurrence of a Material
Adverse Effect.
6.25 NO BURDENSOME RESTRICTIONS.
--------------------------
No Credit Party is a party to any agreement or instrument or subject to any
other obligation or any charter or corporate restriction or any provision of any
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applicable law, rule or regulation which, individually or in the aggregate,
would have or be reasonably expected to have a Material Adverse Effect.
6.26 BROKERS' FEES.
-------------
Except as permitted by Section 8.8, no Credit Party has any obligation to
any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents.
6.27 LABOR MATTERS.
-------------
Except as set forth in Schedule 6.27, none of such the Credit Parties has
-------------
suffered any strikes, walkouts, work stoppages or other material labor
difficulty within the last five years.
6.28 NATURE OF BUSINESS.
------------------
As of the Closing Date, the Borrower is engaged in the business of
producing, processing, marketing and distributing value-added beef, pork and
poultry products and ground beef.
6.29 FARM PRODUCTS, ETC.
------------------
(i) None of the Collateral constitutes Farm Products, or proceeds
thereof.
(ii) None of the Credit Parties is a live poultry dealer (as defined
in the Packers and Stockyard Act).
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans and LOC Obligations, together with
interest, fees and other obligations hereunder, have been paid in full and the
Commitments and Letters of Credit hereunder shall have terminated:
7.1 INFORMATION COVENANTS.
---------------------
The Borrower will furnish, or cause to be furnished, to the Agent and each
of the Lenders:
(a) Annual Financial Statements. As soon as available, and in any
---------------------------
event within 90 days after the close of each fiscal year (commencing with
the fiscal year ending September 27, 1996) of the Borrower, a consolidated
and consolidating balance sheet and income statement of the Credit Parties,
as of the end of such fiscal year, together with related consolidated and
consolidating statements of operations and retained earnings and of cash
flows for such fiscal year, setting forth in comparative form consolidated
69
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figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and audited (with
respect to consolidated financial statements only) by independent certified
public accountants of recognized national standing reasonably acceptable to
the Agent and whose opinion shall be to the effect that such financial
statements have been prepared in accordance with GAAP (except for changes
with which such accountants concur) and shall not be limited as to the
scope of the audit or qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and in any
------------------------------
event within 45 days after the close of each fiscal quarter (commencing
with the fiscal quarter ending December 31, 1996) of the Borrower (other
than the fourth fiscal quarter) a consolidated and consolidating balance
sheet and income statement of the Credit Parties, as of the end of such
fiscal quarter, together with related consolidated and consolidating
statements of operations and retained earnings and of cash flows for such
fiscal quarter in each case setting forth in comparative form consolidated
and consolidating figures for the corresponding period of the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of an Executive Officer of the Borrower to the
effect that such quarterly financial statements fairly present in all
material respects the financial condition of the Credit Parties and have
been prepared in accordance with GAAP (except for the absence of
footnotes), subject to changes resulting from audit and normal year-end
audit adjustments.
(c) Officer's Certificate. At the time of delivery of the financial
---------------------
statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate
of an Executive Officer of the Borrower substantially in the form of
Exhibit 7.1(c), (i) demonstrating compliance with the financial covenants
--------------
contained in Section 7.12 by calculation thereof as of the end of each such
fiscal period and (ii) stating that no Default or Event of Default exists,
or if any Default or Event of Default does exist, specifying the nature and
extent thereof and what action the Borrower proposes to take with respect
thereto.
(d) Annual Business Plan and Budgets. Within 30 days after the end of
--------------------------------
each fiscal year of the Borrower, beginning with the fiscal year ending
September 30, 1997, an annual business plan and budget of the Credit
Parties on a consolidated basis containing, among other things, pro forma
financial statements for the next fiscal year.
(e) Compliance With Certain Provisions of the Credit Agreement.
----------------------------------------------------------
Within 90 days after the end of each fiscal year of the Borrower, the
Borrower shall deliver a certificate, containing information regarding (i)
the calculation of Excess Cash Flow and (ii) the amount of all Asset
Dispositions and Equity Issuances that were made during the prior fiscal
year.
(f) Accountant's Certificate. Within the period for delivery of the
------------------------
annual financial statements provided in Section 7.1(a), a certificate of
the accountants conducting the annual audit stating that they have reviewed
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this Credit Agreement and stating further whether, in the course of their
audit, they have become aware of any Default or Event of Default and, if
any such Default or Event of Default exists, specifying the nature and
extent thereof.
(g) Auditor's Reports. Promptly upon receipt thereof, a copy of any
-----------------
"management letter" submitted by independent accountants to any Credit
Party in connection with any annual, interim or special audit of the books
of any Credit Party.
(h) Reports. Promptly upon transmission or receipt thereof, (a)
-------
copies of any filings and registrations with, and reports to or from, the
Securities and Exchange Commission, or any successor agency, and copies of
all financial statements, proxy statements, notices and reports as any
Credit Party shall send to its shareholders generally or to a holder of any
Indebtedness owed by any Credit Party (including, without limitation, the
Subordinated Debt) in its capacity as such a holder and (b) upon the
written request of the Agent, all reports and written information to and
from the United States Environmental Protection Agency, or any state or
local agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or local agency
responsible for health and safety matters, or any successor agencies or
authorities concerning environmental, health or safety matters.
(i) Notices. Upon any Executive Officer of a Credit Party obtaining
-------
knowledge thereof, such Credit Party will give written notice to the Agent
immediately of (a) the occurrence of an event or condition consisting of a
Default or Event of Default, specifying the nature and existence thereof
and what action the Borrower proposes to take with respect thereto, and (b)
the occurrence of any of the following with respect to any Credit Party (i)
the pendency or commencement of any litigation, arbitral or governmental
proceeding against any Credit Party which if adversely determined would
have or would be reasonably expected to have a Material Adverse Effect or
(ii) the institution of any proceedings against any Credit Party with
respect to, or the receipt of notice by such Person of potential liability
or responsibility for violation, or alleged violation of any federal, state
or local law, rule or regulation, including but not limited to,
Environmental Laws, which violation would have or would be reasonably
expected to have a Material Adverse Effect. Upon its receipt of any notice
pursuant to this Section 7.1(i), the Agent will promptly notify each of the
Lenders.
(j) ERISA. Upon any Credit Party obtaining knowledge thereof, the
-----
Borrower will give written notice to the Agent promptly (and in any event
within five Business Days) of: (i) of any event or condition, including,
but not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, an ERISA Event which ERISA Event would have or would be
reasonably expected to have a Material Adverse Effect, (ii) with respect to
any Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against any Credit Party, or
of a determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA) which in either
case would have or would be reasonably expected to have a Material Adverse
Effect; (iii) the failure to make full payment on or before the due date
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(including extensions) thereof of all amounts which any Credit Party or any
ERISA Affiliate is required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in
ERISA and the Code with respect thereto which would have or would be
reasonably expected to have a Material Adverse Effect; (iv) any event has
occurred or failed to occur with respect to a Single Employer Plan,
Multiemployer Plan or Multiple Employer Plan sponsored, maintained or
contributed to by an ERISA Affiliate of any Credit Party which would have
or would be reasonably expected to have a Material Adverse Effect or (v)
any change in the funding status of any Plan that could have a Material
Adverse Effect, together with a description of any such event or condition
or a copy of any such notice and a statement by an Executive Officer of the
Borrower briefly setting forth the details regarding such event, condition,
or notice, and the action, if any, which has been or is being taken or is
proposed to be taken by the Credit Parties with respect thereto. Promptly
upon request, the Borrower shall furnish the Agent and the Lenders with
such additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and attachments
thereto required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA and the Code, respectively, for
each "plan year" (within the meaning of Section 3(39) of ERISA).
(k) Environmental.
-------------
(i) Upon the reasonable written request of the Agent (in any
event not to be given more frequently than once during any single
calendar year), the Borrower will furnish or cause to be furnished to
the Agent, at the Borrower's expense, a report of an environmental
assessment of reasonable scope, form and depth, (including, where
appropriate, invasive soil or groundwater sampling) by a consultant
reasonably acceptable to the Agent as to the nature and extent of the
presence of any Hazardous Materials on any Real Property and as to the
compliance by the Credit Parties with Environmental Laws at such Real
Property. If the Borrower fails to deliver such an environmental
report within seventy-five (75) days after receipt of such written
request then the Agent may arrange for same, and the Borrower hereby
grants to the Agent and their representatives access to the Real
Properties to reasonably undertake such an assessment (including,
where appropriate, invasive soil or groundwater sampling). The
reasonable cost of any assessment arranged for by the Agent pursuant
to this provision will be payable by the Borrower on demand and added
to the obligations secured by the Collateral Documents.
(ii) Each Credit Party will, during the term of this Credit
Agreement, conduct and complete all investigations, studies, sampling,
and testing and all remedial, removal, and other actions necessary to
address all Hazardous Materials released at any of the Real Properties
in violation of applicable Environmental Laws to the extent necessary
to be in compliance with all Environmental Laws and with the validly
issued orders and directives of all Governmental Authorities with
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jurisdiction over such Real Properties to the extent any failure would
have or be reasonably expected to have a Material Adverse Effect.
(l) Other Information. With reasonable promptness upon any such
-----------------
request, such other information regarding the business, properties or
financial condition of the Credit Parties as the Agent or the Required
Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
----------------------------------------
Each of the Credit Parties will do all things necessary to preserve and
keep in full force and effect its existence, rights, franchises and authority,
except as otherwise permitted by Section 8.4 or Section 8.5, unless the failure
to do so would not have a Material Adverse Effect.
7.3 BOOKS AND RECORDS.
-----------------
Each of the Credit Parties will keep complete and accurate books and
records of its transactions in accordance with good accounting practices on the
basis of GAAP (including the establishment and maintenance of appropriate
reserves).
7.4 COMPLIANCE WITH LAW.
-------------------
Each of the Credit Parties will comply with all laws, rules, regulations
and orders, and all applicable restrictions imposed by all Governmental
Authorities, applicable to it and its property (including, without limitation,
Environmental Laws) if noncompliance with any such law, rule, regulation, order
or restriction would have or reasonably be expected to have a Material Adverse
Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
---------------------------------------
Each of the Credit Parties will pay, settle or discharge all taxes,
assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any of its properties, before they shall become
delinquent, all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, might give rise to a Lien upon any of its
properties, and except as prohibited hereunder, all of its other Indebtedness
as it shall become due; provided, however, that a Credit Party shall not be
required to pay any such tax, assessment, charge, levy, claim or Indebtedness
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves therefor have been established in accordance with GAAP,
unless the failure to make any such payment (i) would give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) would have a Material
Adverse Effect.
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7.6 INSURANCE.
---------
Each of the Credit Parties will at all times maintain in full force and
effect insurance (including worker's compensation insurance, liability
insurance, casualty insurance and business interruption insurance) in such
amounts, covering such risks and liabilities and with such deductibles or self-
insurance retentions as are in accordance with normal industry practice. All
liability policies shall have the Agent, on behalf of the Lenders, as an
additional insured and all casualty policies shall have the Agent, on behalf of
the Lenders, as loss payee.
In the event there occurs any material loss, damage to or destruction of
the Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Agent generally describing the
nature and extent of such damage or destruction. Subsequent to any loss, damage
to or destruction of the Collateral of any Credit Party or any part thereof,
such Credit Party, whether or not the insurance proceeds, if any, received on
account of such damage or destruction shall be sufficient for that purpose, at
such Credit Party's cost and expense, will promptly repair or replace the
Collateral of such Credit Party so lost, damaged or destroyed; provided,
--------
however, that such Credit Party need not repair or replace the Collateral of
- -------
such Credit Party so lost, damaged or destroyed to the extent the failure to
make such repair or replacement is desirable to the proper conduct of the
business of such Credit Party in the ordinary course and otherwise is in the
best interest of such Credit Party and would not materially impair the rights
and benefits of the Agent or the Lenders under this Credit Agreement or any
other Credit Document. In the event a Credit Party shall receive any insurance
proceeds, as a result of any loss, damage or destruction, in a net amount in
excess of $1,000,000, such Credit Party will immediately pay over such proceeds
to the Agent, to be held by the Agent, for the benefit of the Lenders, in a cash
collateral account as additional security for the Credit Party Obligations;
provided, however, that the Agent agrees to release such insurance proceeds to
- -------- -------
such Credit Party for replacement or restoration of the portion of the
Collateral of such Credit Party lost, damaged or destroyed if, (A) no Default or
Event of Default shall have occurred and be continuing at the time of release,
(B) written application for such release is received by the Agent from such
Credit Party within 30 days of receipt of such insurance proceeds and (C) the
Agent has received evidence reasonably satisfactory to it that the Collateral
lost, damaged or destroyed has been or will be replaced or restored to its
condition immediately prior to the loss, destruction or other event giving rise
to the payment of such insurance proceeds. All insurance proceeds shall be
subject to the security interest of the Lenders under the Collateral Documents.
The present insurance coverage of the Credit Parties is outlined as to
carrier, policy number, expiration date, type and amount on Schedule 7.6, as
------------
Schedule 7.6 may be amended from time to time by written notice to the Agent.
- ------------
7.7 MAINTENANCE OF PROPERTY.
-----------------------
Each of the Credit Parties will maintain and preserve its properties and
equipment in good repair, working order and condition, normal wear and tear
excepted, and will make, or cause to be made, in such properties and equipment
from time to time all repairs, renewals, replacements, extensions, additions,
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betterments and improvements thereto as may be needed or proper, to the extent
and in the manner customary for companies in similar businesses.
7.8 PERFORMANCE OF OBLIGATIONS.
--------------------------
Each of the Credit Parties will perform in all respects all of its
obligations under the terms of all agreements, indentures, mortgages, security
agreements or other debt instruments to which it is a party or by which it is
bound unless the failure to do so will not have or be reasonably expected to
have a material adverse effect on the ability of a Credit Party to perform its
respective obligations under this Credit Agreement or the other Credit
Documents.
7.9 COLLATERAL.
----------
Subject to the terms hereof and of the other Credit Documents, each Credit
Party will cause all of its owned Real Properties and (to the extent deemed to
be material by the Agent or the Required Lenders in its or their sole reasonable
discretion) all of its leased Real Properties, and all of its personal property
deemed to be material by the Agent or the Required Lenders in its or their sole
reasonable discretion (including without limitation 100% of its equity ownership
interest in its Subsidiaries) to be subject at all times to first priority,
perfected and, in the case of Real Property (whether leased or owned), title
insured Liens in favor of the Agent pursuant to the terms and conditions of the
Collateral Documents or, with respect to any such property acquired subsequent
to the Closing Date, such other additional security documents as the Agent shall
reasonably request. In furtherance of the foregoing terms of this Section 7.9,
the Credit Parties shall, as soon as practicable after the Closing Date and in
any event not later than February 28, 1997, cause to be delivered to the Agent,
in form and substance reasonably satisfactory to the Agent, such estoppel
letters, consents and waivers as may be required by the Agent from the landlords
of any location leased by a Credit Party where Collateral having an aggregate
book value of at least $250,000 is located, which estoppel letters, consents and
waivers shall be in the form and substance reasonably satisfactory to the Agent.
7.10 USE OF PROCEEDS.
---------------
The Credit Parties will use proceeds of the Loans solely (a) to pay a part
of the cash portion of the purchase price for the Acquired Company pursuant to
the Purchase Agreement, (b) to pay related fees and expenses in connection with
the foregoing, (c) to provide for the working capital needs of the Borrower and
its Subsidiaries and (d) for general corporate purposes of the Borrower and its
Subsidiaries. The Borrower will use the Letters of Credit solely for the
purposes set forth in Section 2.2(a).
7.11 AUDITS/INSPECTIONS.
------------------
Upon reasonable written notice and during normal business hours, each
Credit Party will permit representatives appointed by the Agent, including,
without limitation, independent accountants, agents, attorneys and appraisers to
visit and inspect such Credit Party's property, including its books and records,
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its accounts receivable and inventory, its facilities and its other business
assets, and to make photocopies or photographs thereof and to write down and
record any information such representative obtains and shall permit the Agent or
its representatives to investigate and verify the accuracy of information
provided to the Lenders and to discuss all such matters with the officers,
employees and representatives of the Credit Parties. The Agent shall notify the
Lenders prior to any visit, inspection, investigation or discussion with
accountants pursuant to this Section 7.11, and the Credit Parties agree that any
Lender shall be entitled to accompany the Agent (or its duly appointed
representative(s)) in connection with any such visit, inspection, investigation
or discussion with accountants. The Credit Parties agree that the Agent, and
its representatives, may conduct an annual audit of the Collateral, at the
expense of the Borrower.
7.12 FINANCIAL COVENANTS.
-------------------
(a) Interest Coverage Ratio. The Interest Coverage Ratio, as of the
-----------------------
last day of each fiscal quarter, shall be greater than or equal to:
(i) for the period from the Closing Date to and including
December 30, 1997, 1.85 to 1.00;
(ii) for the period from December 31, 1997 to and including
September 29, 1998, 2.00 to 1.00;
(iii) for the period from September 30, 1998 to and including
September 29, 1999, 2.25 to 1.00; and
(iv) for the period from September 30, 1999 and at all times
thereafter, 2.50 to 1.00.
(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as
---------------------------
of the last day of each fiscal quarter, shall be greater than or equal to:
(i) for the period from the Closing Date to and including
September 29, 1998, 1.20 to 1.00; and
(ii) for the period from September 30, 1999 and at all times
thereafter, 1.25 to 1.00.
(c) Leverage Ratio. The Leverage Ratio, as of the last day of each
--------------
fiscal quarter, shall be less than or equal to:
(i) for the period from the Closing Date to and including
September 29, 1998, 5.00 to 1.00;
(ii) for the period from September 30, 1998 to and including
September 29, 1999, 4.50 to 1.00;
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(iii) for the period from September 30, 1999 to and including
September 29, 2000, 4.00 to 1.00;
(iv) for the period from September 30, 2000 to and including
September 29, 2001, 3.50 to 1.00; and
(v) for the period from September 30, 2001 and at all times
thereafter, 3.00 to 1.00.
(d) Consolidated Net Worth. At all times the Consolidated Net Worth
----------------------
of the Borrower shall be greater than or equal to the sum of $40,000,000,
increased on a cumulative basis as of the end of each fiscal quarter of the
Credit Parties, commencing with the fiscal quarter ending December 31, 1996
by an amount equal to 50% of Consolidated Net Income (to the extent
positive) for the fiscal quarter then ended.
7.13 ADDITIONAL CREDIT PARTIES.
-------------------------
At the time any Person becomes a Subsidiary of a Credit Party, the Borrower
shall so notify the Agent and promptly thereafter (but in any event within 30
days after the date thereof or, if earlier, contemporaneously with such Person
becoming a guarantor of any other Indebtedness of the Borrower or any other
Credit Party) shall cause such Person to execute a Joinder Agreement in
substantially the same form as Exhibit 7.13, (b) cause all of the Capital Stock
------------
of such Person to be delivered to the Agent (together with undated stock powers
signed in blank) and pledged to the Agent pursuant to an appropriate pledge
agreement in substantially the form of the Pledge Agreements and otherwise in a
form acceptable to the Agent, (c) pledge all of its assets to the Lenders
pursuant to a security agreement in substantially the form of the Security
Agreements and otherwise in a form acceptable to the Agent, (d) if such Person
has any Subsidiaries, (i) deliver all of the Capital Stock of such Subsidiaries
(together with undated stock powers signed in blank) to the Agent and (ii)
execute a pledge agreement in substantially the form of the Pledge Agreements
and otherwise in a form acceptable to the Agent, (e) if such Person owns any
real property in the United States, execute any and all necessary mortgages,
deeds of trust, deeds to secure debt or other appropriate real estate collateral
documentation in a form reasonably satisfactory to the Agent, (f) if such Person
leases any real property in the United States deemed to be material by the Agent
or the Required Lenders in its or their sole reasonable discretion, execute any
and all necessary mortgages, deeds of trust, deeds to secure debt, leasehold
mortgages, collateral assignments of leaseholds or other appropriate real estate
collateral documentation as reasonably requested by the Agent and in a form
reasonably satisfactory to the Agent and (g) deliver such other documentation as
the Agent may reasonably request in connection with the foregoing, including,
without limitation, appropriate UCC-1 financing statements, real estate title
insurance policies, environmental reports, landlord waivers, certified
resolutions and other organizational and authorizing documents of such Person
and favorable opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to above), all in form, content and scope reasonably
satisfactory to the Agent.
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7.14 INTEREST RATES.
--------------
The Credit Parties shall at all times cause to bear interest at a fixed
rate of interest Funded Debt of the Credit Parties in an amount at least equal
to the lesser of (i) 50% of the sum of (A) all Funded Debt of the Credit Parties
on a consolidated basis and (B) the Unused Revolving Commitment and (ii) all
Funded Debt of the Credit Parties on a consolidated basis.
7.15 COVENANTS RELATING TO PACKERS AND STOCKYARD ACT.
-----------------------------------------------
Unless the failure to do so would not have a Material Adverse Effect, each
of the Credit Parties shall:
(i) Comply with all applicable provisions of the Packers and Stockyard
Act, including, without limitation, those governing bond requirements and
prompt repayment.
(ii) Maintain written records pertaining to livestock and by-products
in its possession to which it does not yet have title, including, without
limitation, livestock for which payment is not yet made.
All terms used in this Section 7.15 and defined in the Packers and Stockyard Act
shall have the meanings ascribed to such terms therein.
7.16 COVENANTS RELATING TO FOOD SECURITY ACT.
---------------------------------------
Unless the failure to do so would not have a Material Adverse Effect, each
of the Credit Parties shall:
(i) Promptly provide the Agent with a copy of any notice received by
such Credit Party with respect to a security interest created by a seller
of farm products.
(ii) With respect to any farm products produced in a State with a
central filing system, register with the Secretary of State of such State
prior to the purchase of such farm products.
All terms used in this Section 7.16 and defined in the Food Security Act shall
have the meanings ascribed to such terms therein.
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SECTION 8
NEGATIVE COVENANTS
------------------
Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans and LOC Obligations, together with
interest and fees hereunder, have been paid in full and the Commitments and
Letters of Credit hereunder shall have terminated:
8.1 INDEBTEDNESS.
------------
No Credit Party will contract, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;
(b) the Subordinated Debt;
(c) Indebtedness owing by one Credit Party other than the Parent to
another Credit Party;
(d) purchase money Indebtedness (including Capital Leases) or TROLS
incurred by the Borrower or any of its Subsidiaries to finance the purchase
or lease of capital assets, whether tangible or intangible; provided that
--------
(i) the total of all such Indebtedness for all such Persons taken together
shall not exceed an aggregate principal amount of $1,000,000 at any one
time outstanding (including any such Indebtedness referred to in subsection
(c) above) and (ii) such Indebtedness when incurred shall not exceed the
purchase price of the asset(s) financed;
(e) Hedging Obligations;
(f) other unsecured Indebtedness of the Borrower and its Subsidiaries
(in addition to Indebtedness otherwise permitted by any other clause of
this Section 8.1); provided that the aggregate principal amount of such
--------
Indebtedness at any time outstanding does not to exceed $1,000,000; and
(g) renewals, refinancings and extensions of any Indebtedness incurred
pursuant to Section 8.1(d) or (f), provided that (I) the terms and
--------
conditions of such Indebtedness as so renewed, refinanced or extended shall
be no less favorable to the applicable obligor and (ii) the principal
amount of such Indebtedness as so renewed, refinanced or extended shall not
exceed in principal amount the principal balance outstanding thereon at the
time of such renewal, refinancing or extension.
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8.2 LIENS.
-----
No Credit Party will contract, create, incur, assume or permit to exist any
Lien with respect to any of its property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or after acquired, except
for Permitted Liens.
8.3 NATURE OF BUSINESS.
------------------
No Credit Party will alter the character of its business from that
conducted as of the Closing Date or engage in any business other than the
business conducted as of the Closing Date and reasonable extensions and
expansions thereof.
8.4 CONSOLIDATION AND MERGER.
------------------------
No Credit Party will enter into any transaction of merger or consolidation
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); provided that, notwithstanding the foregoing provisions of this
--------
Section 8.4, (i) any Credit Party other than the Parent may be merged or
consolidated with or into the Borrower or any other Credit Party other than the
Parent if (a) if such transaction shall be between the Borrower and another
Credit Party, the Borrower shall be the continuing or surviving corporation, (b)
the Agent is given prior written notice of such action, and the Credit Parties
execute and deliver such documents, instruments and certificates as the Agent
may request in order to maintain the perfection and priority of the Liens on the
assets of the Credit Parties, and (c) after giving effect thereto, no Default or
Event of Default exists, (ii) the Borrower or any Subsidiary of the Borrower may
merge with any Person (other than the Parent) in connection with a Permitted
Acquisition if (a) the Borrower or such Subsidiary shall be the continuing or
surviving corporation and (b) after giving effect thereto, no Default or Event
of Default exists and (iii) the Borrower may merge with the Parent in connection
with the Public Equity Offering if (a) the Borrower shall be the continuing or
surviving corporation, (b) after giving effect thereto, no Default or Event of
Default exists and (c) the Borrower shall (1) receive aggregate cash proceeds of
at least $30,000,000 from the Public Equity Offering and (2) prepay the
obligations of the Credit Parties under the Credit Documents with 50% of the Net
Proceeds from the Public Equity Offering as contemplated by the terms of Section
3.3(b)(iv).
Upon the consummation of the merger of the Parent into the Borrower in
accordance with the terms of Section 8.4(iii), the Agent shall deliver to the
Borrower, upon the Borrower's request and at the Borrower's expense, such
documentation as is reasonably necessary to evidence the release of the Lenders'
security interest in the assets of the Parent (including, without limitation,
any stock in the Borrower), including, without limitation, amendments or
terminations of UCC financing statements, the return of stock certificates and
the release of a Guarantor from its obligations under the Credit Documents.
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8.5 ASSET DISPOSITIONS.
------------------
No Credit Party will make any Asset Disposition (including, without
limitation, any Sale and Leaseback Transaction) other than Excluded Asset
Dispositions, unless (i) at least 90% of the consideration paid in connection
therewith is cash or Cash Equivalents, (ii) if such transaction is a Sale and
Leaseback Transaction, such transaction is permitted by the terms of Section
8.14, (iii) such transaction does not involve the sale or other disposition of a
minority equity interest in any Credit Party, (iv) the aggregate net book value
of all of the assets sold or otherwise disposed of by the Credit Parties in all
such transactions during any fiscal year of the Borrower shall not to exceed
$1,000,000 and (v) no later than 14 days prior to such Asset Disposition, the
Agent and the Lenders shall have received a certificate of an Executive Officer
of the Borrower specifying the anticipated or actual date of such Asset
Disposition, briefly describing the assets to be sold or otherwise disposed of
and setting forth the net book value of such assets, the aggregate consideration
and the Net Proceeds to be received for such assets in connection with such
Asset Disposition, and thereafter the Borrower shall, within the period of 180
days prior to and 120 days following the consummation of such Asset Disposition
(with respect to any such Asset Disposition, the "Application Period"), apply
------------------
(or cause to be applied) an amount equal to the Net Proceeds of such Asset
Disposition to (A) the purchase, acquisition or, in the case of improvements to
real property, construction of Eligible Assets or (B) to the prepayment of the
Loans in accordance with the terms of Section 3.3(b)(iii). The requirements of
clauses (iv) and (v) of the immediately preceding sentence shall not be
applicable in the event of any involuntary Asset Disposition.
Upon a sale of assets or the sale of stock of a Subsidiary of the Borrower
permitted by this Section 8.5, the Agent shall (provided that such Subsidiary
has been or concurrently is released from any Guaranty Obligations in respect of
any other Indebtedness of the Borrower) deliver to the Borrower, upon the
Borrower's request and at the Borrower's expense, such documentation as is
reasonably necessary to evidence the release of the Lenders' security interest
in such assets or stock, including, without limitation, amendments or
terminations of UCC financing statements, the return of stock certificates and
the release of a Guarantor from its obligations under the Credit Documents.
8.6 INVESTMENTS.
-----------
No Credit Party will make any Investments except for Permitted Investments.
8.7 RESTRICTED PAYMENTS.
-------------------
No Credit Party will, directly or indirectly, declare, order, make or set
apart any sum for or pay any Restricted Payment, except (i) to make dividends
payable solely in the same class of Capital Stock of such Person, (ii) to make
dividends or other distributions payable to any Credit Party other than the
Parent, (iii) as permitted by Section 8.8, Section 8.11 or Section 8.12, (iv)
any payment by any Credit Party directly or through any direct or indirect
parent company (a) in connection with the repurchase of outstanding shares of
Capital Stock of the Borrower or the Parent following the death, disability or
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termination of employment of Management Shareholders and (b) of amounts required
to be paid to participants or former participants in employee benefit plans upon
any termination of employment by such participants as provided in the documents
related thereto, in an aggregate amount (for both clauses (a) and (b)) not to
exceed $1,000,000 in any fiscal year (provided that any unused amount may be
carried over to any subsequent fiscal year subject to a maximum amount of
$1,500,000 in any fiscal year), (v) payments to the Parent pursuant to a tax
sharing agreement under which the Borrower is allocated its proportionate share
of the tax liability of the affiliated group of corporations that file
consolidated federal income tax returns (or that file state or local income tax
returns on a consolidated basis), (vi) loans, advances, dividends or
distributions by any Credit Party to the Parent to pay for corporate,
administrative and operating expenses in the ordinary course of business,
including payment of directors' and officers' liability insurance premiums,
directors' fees, and fees, expenses and indemnities in connection with the
purchase of the Acquired Company and the Indebtedness arising under the Credit
Documents and the Indenture and related transactions, in an aggregate amount not
to exceed $1,000,000 in any fiscal year and (vii) (A) loans, advances, dividends
or distributions by any Credit Party to the Parent not to exceed an amount
necessary to permit the Parent to pay (1) its costs (including all professional
fees and expenses) incurred to comply with its reporting obligations under
federal or state laws or in connection with reporting or other obligations under
this Credit Agreement and the Credit Documents, (2) its expenses incurred in
connection with any public offering of equity securities which has been
terminated by the board of directors of the Parent, the net proceeds of which
were specifically intended to be received by or contributed or loaned to the
Borrower and (B) loans or advances by any Credit Party to the Parent not to
exceed an amount necessary to permit the Parent to pay its interim expenses
incurred in connection with any public offering of equity securities the net
proceeds of which are specifically intended to be received by or contributed or
loaned to the Borrower, which, unless such offering shall have been terminated
by the board of directors of the Parent, shall be repaid to the Borrower
promptly out of the proceeds of such offering.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the board of directors of the
Borrower set forth in a certificate of an Executive Officer of the Borrower
delivered to the Agent and each of the Lenders) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the applicable Credit
Party pursuant to such Restricted Payment. Not later than the date of making
any Restricted Payment, the Borrower shall deliver to the Agent and each of the
Lenders a certificate of an Executive Officer of the Borrower stating that such
Restricted Payment is permitted.
8.8 TRANSACTIONS WITH AFFILIATES.
----------------------------
No Credit Party will, directly or indirectly, in any one transaction or a
series of related transactions, sell, lease, transfer or otherwise dispose of
any of its properties, assets or services to, or make any payment to, or
purchase any property, assets or services from, or enter into or make any
agreement, loan, advance or guarantee with, or for the benefit of, any Affiliate
(each of the foregoing, an "Affiliate Transaction"), other than Exempt Affiliate
---------------------
Transactions, unless (i) such Affiliate Transaction is on terms that are no less
favorable to the relevant Credit Party than those that would have been obtained
in a comparable arm's length transaction by such Credit Party with a Person that
is not an Affiliate and (ii) the Borrower delivers to the Agent and each of the
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Lenders (a) with respect to any Affiliate Transaction entered into after the
Closing Date involving aggregate consideration in excess of $1,000,000, a
resolution of the board of directors of the Borrower set forth in a certificate
of an Executive Officer of the Borrower certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the board of
directors of the Borrower and (b) with respect to any Affiliate Transaction
involving aggregate consideration equal to or in excess of $5,000,000, a written
opinion issued by an investment banking firm of recognized national standing
that such Affiliate Transaction is fair to the relevant Credit Party from a
financial point of view.
8.9 RESTRICTIONS ON THE PARENT AND OWNERSHIP OF SUBSIDIARIES.
--------------------------------------------------------
(a) The Parent shall (i) not hold any assets other than (A) the Capital
Stock of the Borrower and (B) other assets the aggregate net book value of which
does not exceed $100,000 at any time, (ii) not have any liabilities other than
(A) the liabilities under the Credit Documents, (B) in respect of the
Subordinated Debt, (C) tax liabilities in the ordinary course of business, (D)
loans and advances permitted under Section 8.7(vi) and (E) corporate,
administrative and operating expenses in the ordinary course of business and
(iii) not engage in any business other than (A) owning the Capital Stock of the
Borrower and activities incidental or related thereto and (B) acting as a
Guarantor hereunder and pledging its assets to the Agent, for the benefit of the
Lenders, pursuant to the Collateral Documents to which it is a party.
(b) The Borrower (i) will not permit any Person (other than the Borrower or
any Wholly Owned Subsidiary of the Borrower) to own any Capital Stock of any
Subsidiary of the Borrower, (ii) will not permit any Subsidiary of the Borrower
to issue Capital Stock (except to the Borrower or to a Wholly Owned Subsidiary
of the Borrower) or create, incur, assume or suffer to exist any Lien thereon,
in each case except (a) directors' qualifying shares, (b) if such Subsidiary
merges with another Subsidiary of the Borrower, (c) if such Subsidiary ceases to
be a Subsidiary of the Borrower (as a result of the sale of 100% of the Equity
Interests in such Subsidiary) or (d) Permitted Liens and (iii) notwithstanding
anything to the contrary contained in clause (ii) above, will not permit any
Subsidiary of the Borrower to issue any shares of preferred Capital Stock.
8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
-------------------------------------
No Credit Party will change its fiscal year (except for the change as of
the Closing Date to a fiscal year ending December 31) or materially change its
articles or certificate of incorporation without the prior written consent of
the Required Lenders.
8.11 PREPAYMENT OR MODIFICATION OF INDEBTEDNESS.
------------------------------------------
If any Default or Event of Default has occurred and is continuing or would
be directly or indirectly caused as a result thereof, no Credit Party will (a)
after the issuance thereof, amend or modify (or permit the amendment or
modification of) any of the terms of any Indebtedness if such amendment or
modification would add or change any terms in a manner adverse to the Lenders,
including, but not limited to, shortening the final maturity or average life to
maturity or requiring any payment to be made sooner than originally scheduled or
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increasing the interest rate applicable thereto or changing any subordination
provision thereof, or (b) make (or give any notice with respect thereto) any
voluntary or optional payment or any prepayment or any redemption or any
acquisition for value of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any other
Indebtedness.
8.12 PAYMENTS IN RESPECT OF SUBORDINATED DEBT.
----------------------------------------
No Credit Party will (a) make or offer to make any payment or prepayment of
principal of, premium, interest or liquidated damages on, redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, the
Subordinated Debt, (b) redeem or offer to redeem any of the Subordinated Debt or
(c) deposit any funds intended to discharge or defease any or all of the
Subordinated Debt. Notwithstanding the above, (i) so long as no Default or
Event of Default has occurred and is continuing at such time or would be
directly or indirectly caused as a result thereof, the Borrower may apply up to
50% of the Net Proceeds of the initial Public Equity Offering to the prepayment
or redemption of the Subordinated Debt, provided that the aggregate principal
--------
amount of the Subordinated Debt so prepaid or redeemed shall not exceed 35% of
the aggregate initial principal amount of the Subordinated Debt and (ii) unless
such payments are prohibited by Section 10.03 of the Indenture, the Borrower may
make scheduled payments of interest on the Subordinated Debt and payments of
liquidated damages on the Subordinated Debt. The Indenture or any guarantee or
other document executed in connection with the Subordinated Debt may not be
amended or modified in any manner that would adversely affect the Lenders
without the prior written consent of the Required Lenders.
8.13 LIMITATIONS.
-----------
No Credit Party will, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any such Person to (i) pay dividends or make any other distributions
to any Credit Party on its Capital Stock or with respect to any other interest
or participation in, or measured by, its profits, (ii) pay any Indebtedness or
other obligation owed to any Credit Party, (iii) make loans or advances to any
Credit Party, (iv) sell, lease or transfer any of its properties or assets to
any Credit Party, or (v) guarantee the obligations of the Borrower arising under
the Credit Agreement and the other Credit Documents or any renewals,
refinancings, exchanges, refundings or extension thereof, except for such
encumbrances or restrictions existing under or by reason of (A) this Credit
Agreement, (B) applicable law, (C) any document or instrument governing
Indebtedness incurred pursuant to Section 8.1(d), provided that any such
--------
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith or (D) the Indenture as in effect as of the
Closing Date.
8.14 SALE LEASEBACKS.
---------------
No Credit Party will, directly or indirectly, become or remain liable as
lessee or as guarantor or other surety with respect to any Sale and Leaseback
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Transaction in respect of any property (whether real or personal or mixed), now
owned or hereafter acquired, (a) which such Credit Party has sold or transferred
or is to sell or transfer to any other Person other than a Credit Party or (b)
which such Credit Party intends to use for substantially the same purpose as any
other property which has been sold or is to be sold or transferred by such
Credit Party to any Person in connection with such lease; provided, however,
that the Credit Parties may enter into such transactions with respect to
personal property, in an aggregate amount of up to $500,000 in Net Proceeds
during the term of this Credit Agreement, if (i) such transaction is otherwise
permitted pursuant to Section 8.5, (ii) after giving effect to any such
transaction the Borrower shall be in compliance with all other provisions of
this Credit Agreement, including Section 8.1 and Section 8.2, (iii) the gross
cash proceeds of any such transaction are at least equal to the fair market
value of such property (as determined by the Board of Directors of such Credit
Party, whose determination shall be conclusive if made in good faith and
evidenced by an appropriate resolution), (iv) the aggregate rent payable by the
Credit Parties in respect of any such transaction is not in excess of the fair
market rental value of the property leased pursuant to such transaction and (v)
the Net Proceeds are applied in accordance with Section 3.3(b)(iii) to the
extent required therein.
8.15 NEGATIVE PLEDGES.
----------------
Except (i) pursuant to this Credit Agreement and the other Credit
Documents, (ii) pursuant to any document or instrument governing Indebtedness
incurred pursuant to Section 8.1(d), provided that any such restriction
--------
contained therein relates only to the asset or assets constructed or acquired in
connection therewith and (iii) pursuant to the Indenture as in effect on the
Closing Date, no Credit Party will enter into, assume or become subject to any
agreement prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given for
some other obligation.
8.16 NO FOREIGN SUBSIDIARIES.
-----------------------
No Credit Party will create, acquire or permit to exist any direct or
indirect Subsidiary which is not incorporated or organized under the laws of any
State of the United States or the District of Columbia.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 EVENTS OF DEFAULT.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------
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(a) Payment. Any Credit Party shall:
-------
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligation arising from drawings
under Letters of Credit; or
(ii) default, and such default shall continue for three or more
Business Days, in the payment when due of any interest on the Loans,
or on any reimbursement obligations arising from drawings under
Letters of Credit or of any fees or other amounts owing hereunder,
under any of the other Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement made
---------------
or deemed to be made by any Credit Party herein, in any of the other Credit
Documents, or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove untrue in any material
respect on the date as of which it was made or deemed to have been made.
(c) Covenants. Any Credit Party shall:
---------
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.2, 7.5, 7.6, 7.9, 7.10,
7.12, 7.13, 7.14 or 8.1 through 8.16, inclusive; or
(ii) default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 9.1) contained in this
Credit Agreement and such default shall continue unremedied for a
period of at least 30 days after the earlier of an Executive Officer
of a Credit Party becoming aware of such default or notice thereof
given by the Agent.
(d) Other Credit Documents. (i) Any Credit Party shall default in the
----------------------
due performance or observance of any term, covenant or agreement in any of
the other Credit Documents and such default shall continue unremedied for a
period of at least 30 days after the earlier of an Executive Officer of a
Credit Party becoming aware of such default or notice thereof given by the
Agent, (ii) except pursuant to the terms thereof, any Credit Document shall
fail to be in full force and effect or any Credit Party shall so assert or
(iii) except pursuant to the terms thereof, any Credit Document shall fail
to give the Agent and/or the Lenders the security interests, liens, rights,
powers and privileges purported to be created thereby.
(e) Guaranties. The guaranty hereunder given by any Guarantor or any
----------
provision thereof shall, except pursuant to the terms thereof, cease to be
in full force and effect, or any guarantor thereunder or any Person acting
by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under such guaranty.
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(f) Bankruptcy Events. Any Bankruptcy Event shall occur with respect
-----------------
to any Credit Party.
(g) Defaults under Other Agreements. With respect to any Indebtedness
-------------------------------
(other than Indebtedness outstanding under this Credit Agreement) of one or
more of the Credit Parties in an aggregate principal amount in excess of
$250,000, including, without limitation, the Subordinated Debt (i) a Credit
Party shall (A) default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness, or (B)
default (after giving effect to any applicable grace period) in the
observance or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or permit, the
holder or holders of such Indebtedness (or trustee or agent on behalf of
such holders) to cause (determined without regard to whether any notice or
lapse of time is required) any such Indebtedness to become due prior to its
stated maturity; or (ii) any such Indebtedness shall be declared due and
payable prior to the stated maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees shall be
---------
entered against any one or more of the Credit Parties involving a liability
of $250,000 or more, in the aggregate, (to the extent not paid or covered
by insurance provided by a carrier who has acknowledged coverage) and such
judgments, orders or decrees (i) are the subject of any enforcement
proceeding commenced by any creditor or (ii) shall continue unsatisfied,
undischarged and unstayed for a period ending on the first to occur of (A)
the last day on which such judgment, order or decree becomes final and
unappealable or (B) 30 days.
(i) ERISA. Any of the following events or conditions, if such event or
-----
condition would cause or be reasonably expected to cause a Material Adverse
Effect: (1) any "accumulated funding deficiency," as such term is defined
in Section 302 of ERISA and Section 412 of the Code, whether or not waived,
shall exist with respect to any Plan, or any lien shall arise on the assets
of any Credit Party or any ERISA Affiliate in favor of the PBGC or a Plan;
(2) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA
Event shall occur with respect to a Multiemployer Plan or Multiple Employer
Plan, which is, in the reasonable opinion of the Agent, likely to result in
(i) the termination of such Plan for purposes of Title IV of ERISA, or (ii)
any Credit Party or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the meaning of
Section 4241 of ERISA), or insolvency or (within the meaning of Section
4245 of ERISA) such Plan; (4) any event occurring or failing to occur with
respect to a Single Employer Plan, Multiemployer or Multiple Employer Plan
sponsored, maintained or contributed to by an ERISA Affiliate of any Credit
Party; or (5) any prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility
shall occur which may any Credit Party or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section
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4975 of the Code, or under any agreement or other instrument pursuant to
which any Credit Party or any ERISA Affiliate has agreed or is required to
indemnify any Person against any such liability.
(j) Ownership. There shall occur a Change of Control.
---------
(k) Subordinated Debt. (i) Any Governmental Authority with applicable
-----------------
jurisdiction determines that the Lenders are not holders of Designated
Senior Indebtedness (as defined in the Indenture) or (ii) the subordination
provisions creating the Subordinated Debt shall, in whole or in part,
terminate, cease to be effective or cease to be legally valid, binding and
enforceable as to any holder of the Subordinated Debt.
9.2 ACCELERATION; REMEDIES.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions without prejudice to the rights of
the Agent or any Lender to enforce its claims against the Credit Parties, except
as otherwise specifically provided for herein:
(a) Termination of Commitments. Declare the Commitments terminated
--------------------------
whereupon the Commitments shall be immediately terminated.
(b) Acceleration of Loans. Declare the unpaid principal of and any
---------------------
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by a Credit Party
to any of the Lenders hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Credit Parties.
(c) Cash Collateral. Direct the Borrower to pay (and the Borrower
---------------
agrees that upon receipt of such notice, or upon the occurrence of an Event
of Default under Section 9.1(f), it will immediately pay) to the Agent
additional cash, to be held by the Agent, for the benefit of the Lenders,
in a cash collateral account as additional security for the LOC Obligations
in respect of subsequent drawings under all then outstanding Letters of
Credit in an amount equal to the maximum aggregate amount which may be
drawn under all Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and interests
---------------------
created and existing under the Credit Documents, including, without
limitation, all rights and remedies existing under the Collateral
Documents, all rights and remedies against a Guarantor and all rights of
set-off.
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Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agent or the
Lenders, which notice or other action is expressly waived by the Credit Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Lender has, to the extent permitted by law, a separate right of
payment and shall be considered a separate "creditor" holding a separate "claim"
within the meaning of Section 101(5) of the Bankruptcy Code or any other
insolvency statute.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 APPOINTMENT.
-----------
Each Lender hereby designates and appoints NationsBank of Texas, N.A. as
Agent of such Lender to act as specified herein and the other Credit Documents,
and each such Lender hereby authorizes the Agent, as the agent for such Lender,
to take such action on its behalf under the provisions of this Credit Agreement
and the other Credit Documents and to exercise such powers and perform such
duties as are expressly delegated by the terms hereof and of the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and no Credit Party shall have any rights as a third
party beneficiary of the provisions hereof. In performing its functions and
duties under this Credit Agreement and the other Credit Documents, the Agent
shall act solely as an agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for any Credit Party.
10.2 DELEGATION OF DUTIES.
--------------------
The Agent may execute any of its duties hereunder or under the other Credit
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
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10.3 EXCULPATORY PROVISIONS.
----------------------
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection herewith or in
connection with any of the other Credit Documents (except for its or such
Person's own gross negligence or willful misconduct) or responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by any of the Credit Parties contained herein or in any of the
other Credit Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by the Agent under or in connection herewith or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by the Borrower or any Credit Party in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or of the existence or
possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Credit Parties. The Agent is not trustee
for the Lenders and owes no fiduciary duty to the Lenders.
10.4 RELIANCE ON COMMUNICATIONS.
--------------------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of its interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 11.3(b). The Agent
shall be fully justified in failing or refusing to take any action under this
Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder or under
any of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
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10.5 NOTICE OF DEFAULT.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or a Credit Party referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Credit Party, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties and made its own decision to make its Loans hereunder and enter into
this Credit Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Credit Parties which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 INDEMNIFICATION.
---------------
The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitments (or if the
Commitments have expired or been terminated, in accordance with the respective
principal amounts of outstanding Loans and Participation Interest of the
Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following payment in full of the Credit Party Obligations) be imposed
on, incurred by or asserted against the Agent in its capacity as such in any way
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relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
--------
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent, be insufficient or become impaired,
the Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished;
provided that the Agent shall not be indemnified for any event caused by its
gross negligence or willful misconduct. The agreements in this Section shall
survive the payment of the Credit Party Obligations and all other amounts
payable hereunder and under the other Credit Documents.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or any other Credit
Party as though the Agent were not the Agent hereunder. With respect to the
Loans made and Letters of Credit issued and all obligations owing to it, the
Agent shall have the same rights and powers under this Credit Agreement as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
---------------
The Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 45 days after the notice of resignation, then the retiring Agent shall
select a successor Agent provided such successor is a Lender hereunder or a
commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$400,000,000. Upon the acceptance of any appointment as the Agent hereunder by
a successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as the
Agent, as appropriate, under this Credit Agreement and the other Credit
Documents and the provisions of this Section 10.9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was the Agent under
this Credit Agreement.
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SECTION 11
MISCELLANEOUS
-------------
11.1 NOTICES.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
--------
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 RIGHT OF SET-OFF.
----------------
In addition to any rights now or hereafter granted under applicable law or
otherwise, and not by way of limitation of any such rights, upon the occurrence
of an Event of Default and the commencement of remedies described in Section
9.2, each Lender is authorized at any time and from time to time, without
presentment, demand, protest or other notice of any kind (all of which rights
being hereby expressly waived), to set-off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by such Lender (including, without limitation, branches, agencies or
Affiliates of such Lender wherever located) to or for the credit or the account
of any Credit Party against obligations and liabilities of such Credit Party to
the Lenders hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether the Agent or the Lenders shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured, and any such set-off shall be deemed to have
been made immediately upon the occurrence of an Event of Default even though
such charge is made or entered on the books of such Lender subsequent thereto.
The Credit Parties hereby agree that to the extent permitted by law any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 11.3(c) or 3.9 may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
11.3 BENEFIT OF AGREEMENT.
--------------------
(a) Generally. This Credit Agreement shall be binding upon and inure
---------
to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that no Credit Party may assign and
--------
transfer any of its interests without the prior written consent of the
Lenders; and provided further that the rights of each Lender to transfer,
-------- -------
assign or grant participations in its rights and/or obligations hereunder
shall be limited as set forth below in subsections (b) and (c) of this
Section 11.3. Notwithstanding the above (including anything set forth in
subsections (b) and (c) of this Section 11.3), nothing herein shall
restrict, prevent or prohibit any Lender from (A) pledging its Loans
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hereunder to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank, or (B) granting assignments or
participations in such Lender's Loans and/or Commitments hereunder to its
parent company and/or to any Affiliate of such Lender or to any existing
Lender or Affiliate thereof.
(b) Assignments. Each Lender may, with the prior written consent of
-----------
the Borrower and the Agent (provided that no consent of the Borrower shall
be required for an assignment to any existing Lender or an Affiliate of any
existing Lender or an assignment made during the existence and continuation
of an Event of Default), which consent shall not be unreasonably withheld
or delayed, assign all or a portion of its rights and obligations hereunder
pursuant to an assignment agreement substantially in the form of Exhibit
-------
11.3 to one or more Eligible Assignees; provided that any such assignment
---- --------
shall (i) unless to a Lender or an Affiliate of a Lender, be in a minimum
aggregate amount of $5,000,000 of the Commitments and in integral multiples
of $1,000,000 above such amount (or the remaining amount of Commitments
held by such Lender) and (ii) be of a constant, not varying, percentage
of all of the assigning Lender's rights and obligations under the
Commitment being assigned. Any assignment hereunder shall be effective
upon satisfaction of the conditions set forth above and delivery to the
Agent of a duly executed assignment agreement together with a transfer fee
of $3,500 payable to the Agent for its own account. Upon the effectiveness
of any such assignment, the assignee shall become a "Lender" for all
purposes of this Credit Agreement and the other Credit Documents and, to
the extent of such assignment, the assigning Lender shall be relieved of
its obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees that upon
notice of any such assignment and surrender of the appropriate Note or
Notes, it will promptly provide to the assigning Lender and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note or Notes (but with notation
thereon that it is given in substitution for and replacement of the
original Note or Notes or any replacement notes thereof). Notwithstanding
the above, a Lender may assign all or a portion of its Commitments to
another Lender without the consent of the Borrower and without regard to
any minimum amount of such assignment.
By executing and delivering an assignment agreement in accordance with this
Section 11.3(b), the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each other and the
other parties hereto as follows: (i) such assigning Lender warrants that it
is the legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim and the assignee warrants that it is an
Eligible Assignee; (ii) except as set forth in clause (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement, any of
the other Credit Documents or any other instrument or document furnished
pursuant hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement,
any of the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto or the financial condition of any
Credit Party or the performance or observance by any Credit Party of any of
94
<PAGE>
its obligations under this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such assignment agreement; (iv) such assignee
confirms that it has received a copy of this Credit Agreement, the other
Credit Documents and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
assignment agreement; (v) such assignee will independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under this Credit Agreement and the other Credit Documents; (vi)
such assignee appoints and authorizes the Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Credit Agreement
and the other Credit Documents are required to be performed by it as a
Lender.
(c) Participations. Each Lender may sell, transfer, grant or assign
--------------
participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall remain a
--------
"Lender" for all purposes under this Credit Agreement (such selling
Lender's obligations under the Credit Documents remaining unchanged) and
the participant shall not constitute a Lender hereunder, (ii) no such
participant shall have, or be granted, rights to approve any amendment or
waiver relating to this Credit Agreement or the other Credit Documents
except to the extent any such amendment or waiver would (A) reduce the
principal of or rate of interest on or fees in respect of any Loans in
which the participant is participating or increase any Commitments with
respect thereto, (B) postpone the date fixed for any payment of principal
(including the extension of the final maturity of any Loan or the date of
any mandatory prepayment pursuant to Section 2.3(d)), interest or fees in
which the participant is participating, or (C) release all or substantially
all of the collateral or guaranties (except as expressly provided in the
Credit Documents) supporting any of the Loans or Commitments in which the
participant is participating and (iii) sub-participations by the
participant (except to an Affiliate, parent company or Affiliate of a
parent company of the participant) shall be prohibited. In the case of any
such participation, the participant shall not have any rights under this
Credit Agreement or the other Credit Documents (the participant's rights
against the selling Lender in respect of such participation to be those set
forth in the participation agreement with such Lender creating such
participation) and all amounts payable by the Borrower hereunder shall be
determined as if such Lender had not sold such participation; provided,
--------
however, that such participant shall be entitled to receive additional
amounts under Section 3.15 to the same extent that the Lender from which
such participant acquired its participation would be entitled to the
benefit of such cost protection provisions.
95
<PAGE>
(d) Registration. The Agent, acting for this purpose solely on behalf
------------
of the Borrower, shall maintain a register (the "Register") for the
--------
recordation of the names and addresses of the Lenders and the principal
amount of the Loans owing to each Lender from time to time. The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Loan or other obligation
hereunder for all purposes of this Credit Agreement and the other Credit
Documents, notwithstanding notice to the contrary. Any assignment of any
Loan or other obligation hereunder shall be effective only upon appropriate
entries with respect thereto being made in the Register. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
11.4 TO WAIVER; REMEDIES CUMULATIVE.
------------------------------
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Borrower or any Credit Party and the Agent or
any Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES; INDEMNIFICATION.
------------------------------------
The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Agent in connection with (A) the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, special counsel to the Agent and the fees and expenses of
counsel for the Agent in connection with collateral issues), and (B) any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (ii) the Agent and the Lenders in
connection with (A) enforcement of the Credit Documents and the documents and
instruments referred to therein, including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders (including the allocated costs of internal
counsel), and (B) any bankruptcy or insolvency proceeding of a Credit Party and
(b) indemnify the Agent and each Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not the Agent or any
96
<PAGE>
Lender is a party thereto) related to (i) the entering into and/or performance
of any Credit Document or the use of proceeds of any Loans (including other
extensions of credit) hereunder or the consummation of any other transactions
contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of gross negligence or willful misconduct on the part of the Person to be
indemnified), (ii) any breach, violation or failure to comply with applicable
Environmental Laws with respect to any Real Properties owned by Tyson prior to
the Closing Date or by any of the Credit Parties after the Closing Date and
during the term of this Credit Agreement and (iii) any claims for Non-Excluded
Taxes.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
--------------------------------
Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the then Credit Parties; provided
--------
that no such amendment, change, waiver, discharge or termination shall
(a) without the consent of each Lender affected thereby,
(i) extend the final maturity of any Loan or extend or waive any
Principal Amortization Payment of any Loan, or any portion thereof,
(ii) reduce the rate or extend the time of payment of interest (other
than as a result of waiving the applicability of any post-default increase
in interest rates) thereon or fees hereunder,
(iii) reduce or waive the principal amount of any Loan,
(iv) increase the Commitment of a Lender over the amount thereof in
effect (it being understood and agreed that a waiver of any Default or
Event of Default or a mandatory reduction in the Commitments shall not
constitute a change in the terms of any Commitment of any Lender),
(v) release all or substantially all of the Collateral securing the
Credit Party Obligations hereunder (provided that the Agent may, without
consent from any other Lender, release any Collateral that is sold or
transferred by a Credit Party in conformance with Section 8.5),
(vi) release the Borrower or substantially all of the other Credit
Parties from its obligations under the Credit Documents (provided that the
Agent may, without consent from any other Lender, release any Guarantor
that is sold or transferred in conformance with Section 8.5),
97
<PAGE>
(vii) amend, modify or waive any provision of this Section or Section
3.4(a), 3.4(b)(i), 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,
9.1(a), 11.2, 11.3 or 11.5,
(viii) reduce any percentage specified in, or otherwise modify, the
definition of Required Lenders or
(ix) consent to the assignment or transfer by the Borrower (or
substantially all of the other Credit Parties) of any of its rights and
obligations under (or in respect of) the Credit Documents except as
permitted thereby; and
(b) without the consent of Lenders holding in the aggregate more than 50%
of the outstanding Term Loans, extend the time for or the amount or the manner
of application of proceeds of any mandatory prepayment required by Section
3.3(b)(ii), (iii) or (iv). No provision of Section 10 may be amended without
the consent of the Agent. Notwithstanding the above, the right to deliver a
Payment Blockage Notice (as defined in the Indenture) shall reside solely with
the Agent and the Agent shall deliver such Payment Blockage Notice only upon the
direction of the Required Lenders.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans or the Letters of Credit, and each Lender acknowledges that the provisions
of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 COUNTERPARTS.
------------
This Credit Agreement may be executed in any number of counterparts, each
of which where so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 PLEADINGS.
---------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 DEFAULTING LENDER.
-----------------
Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders adversely
affected thereby; provided, however, that all other benefits and obligations
under the Credit Documents shall apply to such Defaulting Lender.
98
<PAGE>
11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.
--------------------------------------------------------------
All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, the issuance of the Letters of Credit and the repayment
of the Loans, LOC Obligations and other obligations and the termination of the
Commitments hereunder.
11.11 GOVERNING LAW; VENUE.
--------------------
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect
to this Credit Agreement or any other Credit Document may be brought in the
courts of the State of North Carolina, or of the United States for the
Western District of North Carolina, and, by execution and delivery of this
Credit Agreement, each Credit Party hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforementioned courts
in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it at the address for
notices pursuant to Section 11.1, such service to become effective 3 days
after such mailing. Nothing herein shall affect the right of a Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against a Credit Party in any other
jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Credit
Agreement or any other Credit Document brought in the courts referred to in
subsection (a) hereof and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
11.12 WAIVER OF JURY TRIAL.
--------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT
AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
99
<PAGE>
11.13 TIME.
----
All references to time herein shall be references to Eastern Standard Time
or Eastern Daylight time, as the case may be, unless specified otherwise.
11.14 SEVERABILITY.
------------
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.15 ENTIRETY.
--------
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.16 BINDING EFFECT.
--------------
This Credit Agreement shall become effective at such time when all of the
conditions set forth in Section 5.1 have been satisfied or waived by the Lenders
and it shall have been executed by the Borrower, the Guarantors and the Agent,
and the Agent shall have received copies hereof (telefaxed or otherwise) which,
when taken together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the Borrower,
the Guarantors, the Agent and each Lender and their respective successors and
assigns.
11.17 CONFIDENTIALITY.
---------------
Each Lender agrees that it will use its reasonable best efforts to keep
confidential and to cause any representative designated under Section 7.11 to
keep confidential any non-public information from time to time supplied to it
under any Credit Document; provided, however, that nothing herein shall affect
-------- -------
the disclosure of any such information to (i) the extent such Lender in good
faith believes is required by statute, rule, regulation or judicial process,
(ii) counsel for such Lender or to its accountants, (iii) bank examiners or
auditors or comparable Persons, (iv) any affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any potential assignee,
transferee or participant, of all or any portion of any Lender's rights under
this Credit Agreement who is notified of the confidential nature of the
information and agrees to be bound by this provision or provisions reasonably
comparable hereto, or (vi) any other Person in connection with any litigation to
which any one or more of the Lenders is a party; and provided further that no
-------- -------
Lender shall have any obligation under this Section 11.17 to the extent any such
information becomes available on a non-confidential basis from a source other
than a Credit Party or that any information becomes publicly available other
than by a breach of this Section 11.17. Each Lender agrees it will use all
confidential information exclusively for the purpose of evaluating, monitoring,
100
<PAGE>
selling, protecting or enforcing its Loans and other rights under the Credit
Documents. Without affecting any other rights of the Borrower and the Credit
Parties, each Lender acknowledges that the Borrower shall be entitled to seek
the remedies of injunction, specific performance and other equitable relief for
any breach of the provisions of this Section 11.17.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
101
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: GORGES/QUIK-TO-FIX FOODS, INC.,
- -------- a Delaware corporation
By: /s/ William A. Davies
----------------------------
Name: William A. Davies
--------------------------
Title: VP-Secretary
-------------------------
GUARANTORS: GORGES HOLDING CORPORATION,
- ---------- a Delaware corporation
By: /s/ William A. Davies
----------------------------
Name: William A. Davies
--------------------------
Title: VP-Secretary
-------------------------
102
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
NATIONSBANK OF TEXAS, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ Elton Vogel
----------------------------
Name: Elton Vogel
--------------------------
Title: Vice President
-------------------------
103
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
HARRIS TRUST AND SAVINGS BANK
By: /s/ H. Glen Clarke
----------------------------
Name: H. Glen Clarke
--------------------------
Title: Vice President
-------------------------
104
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/
----------------------------
Name:
--------------------------
Title: Vice President
-------------------------
105
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
CREDITANSTALT BANKVEREIN
By: /s/ Robert M. Biringer
----------------------------
Name: Robert M. Biringer
--------------------------
Title: Executive Vice President
-------------------------
By: /s/ Carl G. Drake
----------------------------
Name: Carl G. Drake
--------------------------
Title: Senior Associate
-------------------------
106
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
THE FIRST NATIONAL BANK OF BOSTON
(A NATIONAL BANKING ASSOCIATION)
By: /s/ Harold E. Blatt
----------------------------
Name: Harold E. Blatt
--------------------------
Title: Director
-------------------------
107
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
SUNTRUST BANK, ATLANTA
By: /s/ Rainer Zeck
----------------------------
Name: Rainer Zeck
--------------------------
Title: Vice President
-------------------------
By: /s/ Andrew McGhee
----------------------------
Name: Andrew McGhee
--------------------------
Title: Group Vice President
-------------------------
108
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ James A. Fink
----------------------------
Name: James A. Fink
--------------------------
Title: VP
-------------------------
109
<PAGE>
SCHEDULE 1.1(a)
PRE-CLOSING FINANCIAL INFORMATION
<TABLE>
<CAPTION>
For the Fiscal For the Fiscal For the Fiscal
Quarter Ended Quarter Ended Quarter Ended
December 31, 1995 March 31, 1996 June 30, 1996
<S> <C> <C> <C>
CONSOLIDATED
CAPITAL
EXPENDITURES $1,125,000 $1,125,000 $1,125,000
CONSOLIDATED
EBITDA $9,250,000 $9,250,000 $9,250,000
CONSOLIDATED
SCHEDULED FUNDED
DEBT PAYMENT $ 937,500 $ 937,500 $ 937,500
</TABLE>
<PAGE>
SCHEDULE 1.1(B)
---------------
COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
REVOLVING LOAN TERM LOAN
COMMITMENT REVOLVING COMMITMENT
NAME OF LENDERS PERCENTAGE LOANS PERCENTAGE TERM LOANS
- --------------- -------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NationsBank of Texas, N.A. 17.14285714% $ 5,142,857.14 17.14285714% $ 6,857,142.86
The First National Bank of Boston 12.85714287% $ 3,857,142.85 12.85714287% $ 5,142,857.15
The CIT Group/Business Credit, Inc. 14.28571428% $ 4,285,714.29 14.28571428% $ 5,714,285.71
Creditanstalt Bankverein 14.28571428% $ 4,285,714.29 14.28571428% $ 5,714,285.71
Harris Trust and Savings Bank 14.28571428% $ 4,285,714.29 14.28571428% $ 5,714,285.71
PNC Bank, National Association 12.85714287% $ 3,857,142.85 12.85714287% $ 5,142,857.15
SunTrust Bank, Atlanta
14.28571428% $ 4,285,714.29 14.28571428% $ 5,714,285.71
TOTAL: 100.00% $30,000,000.00 100.00% $40,000,000.00
</TABLE>
<PAGE>
SCHEDULE 5.1(F)
---------------
MORTGAGED PROPERTIES
--------------------
GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
1. Garland Facility
----------------
209 Range Drive
Garland, Dallas County, Texas 75040
2. Harlingen Facility
------------------
1130 Expressway 77
Harlingen, Cameron County, Texas 78550
3. Orange City Facility
--------------------
101 14th Street, S.E.
Industrial Air Park
Orange City, Sioux County, Iowa 51041
4. Sioux Center Facility
---------------------
251 15th Street, N.E.
Sioux Center, Sioux County, Iowa 51250
GORGES HOLDING CORPORATION
--------------------------
None.
-----
<PAGE>
SCHEDULE 5.1(I)
---------------
CORPORATE STRUCTURE
-------------------
1. GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
STOCK PERCENTAGE
CERTIFICATE ISSUED NUMBER OF OF
SHAREHOLDER NAME NUMBER SHARES OWNERSHIP
<S> <C> <C> <C>
Gorges Holding Corporation 3 1000 100%
- ---------------------------------------------------------------------------------------
</TABLE>
2. GORGES HOLDING CORPORATION
--------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
STOCK PERCENTAGE
CERTIFICATE ISSUED NUMBER OF OF
SHAREHOLDER NAME NUMBER SHARES OWNERSHIP
<S> <C> <C> <C>
CGW Southeast 2 250,000 55.6%
Partners III, L.P. (Class A)
- ---------------------------------------------------------------------------------------
NationsBanc 1 90,000 20.0%
Investment (Class B)
Corporation
- ---------------------------------------------------------------------------------------
Mellon Bank, N.A., as 3 110,000 24.4%
Trustee for First (Class A)
Plaza Group Trust
- ---------------------------------------------------------------------------------------
</TABLE>
The Parent has reserved for issuance under the 1996 Stock Incentive Plan
112,500 shares of Class A Voting Common Stock.
The Parent has also agreed to issue an aggregate amount of 5,600 shares of
Class A Voting Common Stock to the "Management Purchasers" under and as defined
in that certain Securities Purchase and Stockholders Agreement dated November
25, 1996 among the Parent, NationsBanc Investment Corporation, Mellon Bank,
N.A., as trustee for First Plaza Group Trust, CGW, J. David Culwell, Richard E.
Mitchell, Randall H. Collins, Robert M. Powers, Hernando Aviles and Stuart A.
Ensor.
<PAGE>
SCHEDULE 6.6
------------
CONSENTS, APPROVALS AND AUTHORIZATIONS
--------------------------------------
No consent, approval, authorization or order of, or filing, registration or
qualification with, any court or Governmental Authority or third party in
respect of any Credit Party that is required in connection with the execution,
delivery or performance of the Credit Agreement or any of the other Credit
Documents has not been obtained.
Several consents, approvals and authorizations which are necessary to
conduct the business of the Borrower have not yet been obtained. The status of
such consents, approvals and authorizations is as follows:
The Borrower has provided notice to various federal and state environmental
agencies by letter or other form of notification of the transfer of permits
currently in the name of Tyson Foods, Inc. ("Tyson") or a related Tyson entity
to Gorges/Quik-to-Fix Foods, Inc. Such notice of transfer is required in
connection with the operation of the processing facilities. Once such notice of
transfer is received by such agencies, the Borrower will be in compliance with
applicable law. The Borrower, however, has not received any written
notification from such agencies that such permits have been transfered and has
not received any new permits.
<PAGE>
SCHEDULE 6.10
-------------
INDEBTEDNESS
------------
GORGES QUIK-TO-FIX FOODS, INC.
------------------------------
None.
GORGES HOLDING CORPORATION
--------------------------
None.
<PAGE>
SCHEDULE 6.11
-------------
LITIGATION
----------
None.
<PAGE>
SCHEDULE 6.15
-------------
SUBSIDIARIES
------------
A. SUBSIDIARIES
------------
1. GORGES/QUIK-TO-FIX FOODS, INC. SUBSIDIARIES
None.
2. GORGES HOLDING CORPORATION SUBSIDIARIES
(a) Name: Gorges/Quik-to-Fix Foods, Inc.
-----
(b) Jurisdiction of Incorporation: Delaware
------------------------------
(c) Outstanding Capital Stock
------------------------------
or Equity Interests: 1000 shares of common stock
-------------------- outstanding
(d) Number of Shares Owned
----------------------
(Directly or Indirectly): 1000 shares (Directly)
-------------------------
(e) Percentage of Ownership: 100%
------------------------
(f) Outstanding Options, Warrants,
-------------------------------
Rights of Conversion or Purchase
--------------------------------
and other similar rights: None.
-------------------------
B. PURCHASE OPTIONS
----------------
1. GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
None.
2. GORGES HOLDING CORPORATION
--------------------------
Stock Options delivered to the following management employees:
NAME ISSUE DATE EXERCISE PRICE NUMBER OF SHARES
- -------------------------------------------------------------------
David Culwell 11/25/96 $100/share 28,125 Class A
- -------------------------------------------------------------------
Richard E. Mitchell 11/25/96 $100/share 16,875 Class A
- -------------------------------------------------------------------
Randall H. Collins 11/25/96 $100/share 16,875 Class A
- -------------------------------------------------------------------
Robert M. Powers 11/25/96 $100/share 7,030 Class A
- -------------------------------------------------------------------
Hernando Aviles 11/25/96 $100/share 1,757 Class A
- -------------------------------------------------------------------
Stuart Alan Ensor 11/25/96 $100/share 1,757 Class A
- -------------------------------------------------------------------
<PAGE>
SCHEDULE 6.18
-------------
ENVIRONMENTAL MATTERS
---------------------
1. Phase I Environmental Site Assessment of Tyson Foods, Inc. ("Tyson")
facility in Harlingen, Texas, prepared by Professional Service Industries,
Inc. ("PSI") for Tyson Foods, Inc. ("Tyson"), dated June 19, 1996, Project
# 519-6E035;
2. Phase I Environmental Site Assessment of Tyson Foods, Inc. ("Tyson")
facility in Orange City, Iowa, prepared by Professional Service Industries,
Inc. ("PSI") for Tyson Foods, Inc. ("Tyson"), dated June, 1996, Project #
519-6L039;
3. Phase I Environmental Site Assessment of Tyson Foods, Inc. ("Tyson")
facility in Sioux Center, Iowa, prepared by Professional Service
Industries, Inc. ("PSI") for Tyson Foods, Inc. ("Tyson"), dated June 19,
1996, Project # 519-6LO38;
4. Phase I Environmental Site Assessment of Tyson Foods, Inc. ("Tyson")
facility in Garland, Texas, prepared by Professional Service Industries,
Inc. ("PSI") for Tyson Foods, Inc. ("Tyson"), dated June 19, 1996, Project
# 519-6E037;
5. Environmental Records Audit of Tyson Foods, Inc. ("Tyson") facility in
Orange City, Iowa, prepared by Professional Service Industries, Inc.
("PSI") for Tyson Foods, Inc. ("Tyson"), dated June, 1996, Project # 519-
6L039-1;
6. Environmental Records Audit of Tyson Foods, Inc. ("Tyson") facility in
Harlingen, Texas, prepared by Professional Service Industries, Inc. ("PSI")
for Tyson Foods, Inc. ("Tyson"), dated June, 1996, Project # 519-6LO35-1;
7. Environmental Records Audit of Tyson Foods, Inc. ("Tyson") facility in
Sioux Center, Iowa, prepared by Professional Service Industries, Inc.
("PSI") for Tyson Foods, Inc. ("Tyson"), dated June, 1996, Project # 519-
6L038-1;
8. Environmental Records Audit of Tyson Foods, Inc. ("Tyson") facility in
Garland, Texas, prepared by Professional Service Industries, Inc. ("PSI")
for Tyson Foods, Inc. ("Tyson"), dated June, 1996, Project # 519-6L037-1.
<PAGE>
SCHEDULE 6.19
-------------
INTELLECTUAL PROPERTY
---------------------
GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
1. TRADEMARKS
----------
A. REGISTERED TRADEMARKS
----------------------
MARK US REGISTRATION NUMBER
---- ----------------------
Char D'oeuvre 1,662,616
Charsteaks 1,558,271
Crispntender 1,567,718
Gorges 1,480,931
Grill-etts 1,271,964
Quik-to-Fix 1,040,675
Redi Ribs 1,693,360
Tastycut 1,668,673
Tastyrib 1,669,611
Tejitas 1,537,517
Tejita Bites 1,537,518
Tenderbroil 1,479,792
B. REGISTERED TRADEMARKS (LICENSED)
--------------------------------
The following registered trademarks are licensed to the Borrower pursuant to
that certain License Agreement dated as of November 9, 1990, by and between
Harker's Distribution, Inc. and Tyson Foods, Inc. which has been assigned to the
Borrower pursuant to that certain Assignment, Assumption and Consent Agreement,
dated as of November 25, 1996, by and among Tyson Foods, Inc., the Borrower, and
Harker's Distribution, Inc.:
MARK US REGISTRATION NUMBER
---- ----------------------
Harker's 1,051,980
Harker's Homestyle 1,528,452
Harker's Homestyle & 1,523,685
Design
Harker's Homestyle 1,465,698
Burgers
Harker's Homestyle 1,465,699
Burgers & Design
Harker's Homestyle Entree 1,465,696
Harker's Homestyle Entree 1,465,697
& Design
Harker's Ready Lean 1,570,005
<PAGE>
C. TRADENAMES
----------
Harkers
Quik-to-Fix
Circle H
Gorges Food Service
Harkers, Inc.
Quik-to-Fix Products, Inc.
D. CORPORATE NAMES, COMPANY NAMES
------------------------------
Gorges/Quik-to-Fix Foods, Inc.
E. LOGOS
-----
See attached picture
2. COPYRIGHT REGISTRATIONS
-----------------------
None.
3. PATENTS
-------
None.
4. LICENSED TECHNOLOGY
-------------------
Licensing of computer software by the Borrower in the ordinary course of
business.
2
<PAGE>
GORGES HOLDING CORPORATION
--------------------------
1. TRADEMARKS
----------
A. REGISTERED TRADEMARKS
---------------------
None.
B. TRADENAMES
----------
None.
C. CORPORATE NAMES, COMPANY NAMES
------------------------------
Gorges Holding Corporation
D. LOGOS
-----
None
2. COPYRIGHT REGISTRATIONS
-----------------------
None.
3. PATENTS
-------
None.
4. LICENSED TECHNOLOGY
-------------------
None.
3
<PAGE>
SCHEDULE 6.22(A)
----------------
REAL PROPERTY LOCATIONS
-----------------------
GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
1. Garland Facility
----------------
209 Range Drive
Garland, Dallas County, Texas 75040
113 Range Drive
Garland, Dallas County, Texas 75040
202 Range Drive
Garland, Dallas County, Texas 75040
210 Range Drive (Leased Property)
Garland, Dallas County, Texas 75040
214 Range Drive (Leased Property)
Garland, Dallas County, Texas 75040
222A Range Drive (Leased Property)
Garland, Dallas County, Texas 75040
2. Harlingen Facility
------------------
1130 Expressway 77
Harlingen, Cameron County, Texas 78550
3. Orange City Facility
--------------------
101 14th Street, S.E.
Industrial Air Park
Orange City, Sioux County, Iowa 51041
4. Sioux Center Facility
---------------------
251 15th Street, N.E.
Sioux Center, Sioux County, Iowa 51250
GORGES HOLDING CORPORATION
--------------------------
None.
-----
<PAGE>
SCHEDULE 6.22(B)
----------------
PERSONAL PROPERTY LOCATIONS
---------------------------
GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
1. Garland Facility
----------------
209 Range Drive
Garland, Dallas County, Texas 75040
113 Range Drive
Garland, Dallas County, Texas 75040
202 Range Drive
Garland, Dallas County, Texas 75040
210 Range Drive
Garland, Dallas County, Texas 75040
214 Range Drive
Garland, Dallas County, Texas 75040
222A Range Drive
Garland, Dallas County, Texas 75040
2. Harlingen Facility
------------------
1130 Expressway 77
Harlingen, Cameron County, Texas 78550
3. Orange City Facility
--------------------
101 14th Street, S.E.
Industrial Air Park
Orange City, Sioux County, Iowa 51041
4. Sioux Center Facility
---------------------
251 15th Street, N.E.
Sioux Center, Sioux County, Iowa 51250
<PAGE>
5. Chief Executive Office
----------------------
c/o Tyson Foods, Inc.
2210 West Oaklawn Drive
Springdale, Washington County, Arkansas 72762-6999
After the Closing Date, Gorges/Quik-to-Fix Foods, Inc. will relocate its
chief executive office to:
209 Range Drive
Garland, Dallas County, Texas 75040
6. Third Party Warehouse Locations
-------------------------------
Carmar Springdale
1200 Old Missouri Road
Springdale, Washington County, Arkansas 72764
United States Cold Storage
P.O. Box 1903
1500 Island Street
Laredo, Webb County, Texas 78044-1903
United Refrigerated Services
1740B Westgate Parkway, S.W.
Atlanta, Fulton County, Georgia 30336
United Refrigerated Services
3320 South Arlington Avenue
Indianapolis, Marion County, Indiana 46203
Rochelle Cold Storage
975 South Caron Road
Rochelle, Ogle County, Illinois 61068
Cloverleaf Cold Storage
18th Street & Lincoln Streets, S.E.
LeMars, Plymouth County, Iowa 51031
Cloverleaf Cold Storage
223 Cloverleaf Court
Sioux City, Woodbury County, Iowa 51103
Nordic Fisheries
23rd and Smallman
Pittsburgh, Allegheny County, Pennsylvania 15222
2
<PAGE>
United Refrigerated Services
100 Exchange Street
Charlotte, Mecklenburg County, North Carolina 28208
Southwest Cold Storage
One North 59th Avenue
Phoenix, Maricopa County, Arizona 85043
Tex Mex Cold Storage
6665 E. 14th Street
P.O. Box 4960
Brownsville, Cameron County, Texas 78523
United States Cold Storage
5150 Pulaski Street
Dallas, Dallas County, Texas 75247
United Refrigerator Services
RD 2 Orchard Lane
P.O. Box AD
Leesport, Berks County, Pennsylvania 19533
Zero Mountain, Inc.
515 North Bloomington
Lowell, Benton County, Arkansas 72745
Americold
4475 E. 50th Avenue
Denver, Denver County, Colorado 80216
Carmar Valley Distribution
203 Industrial Boulevard
Russelville, Pope County, Arkansas 72801
City Ice Cold Storage
Pier 91, Building 391
Seattle, King County, Washington 98119
Carmar Russelville
300 Elmira Avenue
Russelville, Pope County, Arkansas 72901
3
<PAGE>
United States Cold Storage
P.O. Box 590066
2292 Sand Lake Road
Orlando, Orange County, Florida 32859-0066
United States Cold Storage
3300 E. Park Row Drive
Arlington, Tarrant County, Texas 75010
Henderson Cold Storage
830 Horizon Drive
Henderson, Clark County, Nevada 89014
GORGES HOLDING CORPORATION
--------------------------
1. 209 Range Drive
Garland, Dallas County, Texas 75040
4
<PAGE>
SCHEDULE 6.22(C)
----------------
LEASED LOCATIONS WHERE COLLATERAL OF AT LEAST $250,000 IS LOCATED
-----------------------------------------------------------------
1. Garland Facility
----------------
210 Range Drive
Garland, Dallas County, Texas 75040
214 Range Drive
Garland, Dallas County, Texas 75040
222A Range Drive
Garland, Dallas County, Texas 75040
2. Warehouse Locations
-------------------
Carmar Springdale
1200 Old Missouri Road
Springdale, Washington County, Arkansas 72764
United Refrigerated Services
1740B Westgate Parkway, S.W.
Atlanta, Fulton County, Georgia 30336
United Refrigerated Services
3320 South Arlington Avenue
Indianapolis, Marion County, Indiana 46203
Rochelle Cold Storage
975 South Caron Road
Rochelle, Ogle County, Illinois 61068
Cloverleaf Cold Storage
18th Street & Lincoln Streets, S.E.
LeMars, Plymouth County, Iowa 51031
Cloverleaf Cold Storage
223 Cloverleaf Court
Sioux City, Woodbury County, Iowa 51103
<PAGE>
Tex Mex Cold Storage
6665 E. 14th Street
P.O. Box 4960
Brownsville, Cameron County, Texas 78523
United States Cold Storage
5150 Pulaski Street
Dallas, Dallas County, Texas 75247
United Refrigerator Services
RD 2 Orchard Lane
P.O. Box AD
Leesport, Berks County, Pennsylvania 19533
Carmar Valley Distribution
203 Industrial Boulevard
Russelville, Pope County, Arkansas 72801
Carmar Russelville
300 Elmira Avenue
Russelville, Pope County, Arkansas 72901
United States Cold Storage
3300 E. Park Row Drive
Arlington, Tarrant County, Texas 75010
Henderson Cold Storage
830 Horizon Drive
Henderson, Clark County, Nevada 89014
2
<PAGE>
SCHEDULE 6.22(D)
----------------
CHIEF EXECUTIVE OFFICES
-----------------------
GORGES/QUIK-TO-FIX FOODS, INC.
------------------------------
c/o Tyson Foods, Inc.
2210 West Oaklawn Drive
Springdale, Washington County, Arkansas 72762-6999
After the Closing Date, Gorges/Quik-to-Fix Foods, Inc. will relocate its
chief executive office to:
209 Range Drive
Garland, Dallas County, Texas 75040
GORGES HOLDING CORPORATION
--------------------------
209 Range Drive
Garland, Dallas County, Texas 75040
<PAGE>
SCHEDULE 6.27
-------------
LABOR MATTERS
-------------
None.
-----
<PAGE>
SCHEDULE 11.1
-------------
NOTICES
NAME AND ADDRESS OF LENDERS
- ---------------------------
NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75202
Attn: Gilda Digges
Telephone: (214) 508-2138
Facsimile: (214) 508-2515
The First National Bank of Boston
115 Perimeter Center Place NE
Suite 500
Atlanta, Georiga 30346
Attn: Dennis Wilson
Telephone: (770) 390-6528
Facsimile: (770) 393-4166
The CIT Group/Business Credit, Inc.
900 Ashwood Parkway
Atlanta, GA 30338
Attn: Bob Bermier
Telephone: (770) 551-7922
Telecopier: (770) 551-7899
Creditanstalt Bankverein
Two Ravinia Drive, Suite 1680
Atlanta, Georgia 30346
Attn: Carl Drake
Telephone: (770) 390-1850
Telecopier: (770) 390-1851
Harris Trust and Savings Bank
111 W. Monroe Street/18 W
Chicago, Illinois 60603
Attn: Glenn Clark
Telephone: (312) 461-7991
Telecopier: (312) 765-8095
PNC Bank, National Association
249 5th Avenue
Pittsburgh, Pennsylvania 15222
Attn: Jim Fink
Telephone: (412) 762-8746
Telecopier: (412) 762-5944
<PAGE>
SunTrust Bank, Atlanta
25 Park Place, 23rd Floor
MC075
Atlanta, Georgia 30302
Attn: Rainer Zeck
Telephone: (404) 588-7824
Telecopier: (404) 588-8833
<PAGE>
EXHIBIT 2.1
-----------
FORM OF NOTICE OF BORROWING
NationsBank of Texas, N.A.,
as Agent for the Lenders
901 Main Street
Dallas, Texas 75202
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, GORGES/QUIK-TO-FIX FOODS, INC. (the "Borrower"), refers to
--------
the Credit Agreement dated as of November 25, 1996 (as amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
----------------
Borrower, the other Credit Parties party thereto, the Lenders party thereto and
NationsBank of Texas, N.A., as Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Borrower hereby gives notice pursuant to Section 2.1(b)
of the Credit Agreement that it requests a Revolving Loan advance under the
Credit Agreement, and in connection therewith sets forth below the terms on
which such Loan advance is requested to be made:
(A) Date of Borrowing
(which is a Business Day) __________
(B) Principal Amount of
Borrowing __________
(C) Interest rate basis __________
(D) Interest Period and the
last day thereof __________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
Very truly yours,
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 2.4
-----------
FORM OF NOTICE OF CONTINUATION/CONVERSION
NationsBank of Texas, N.A.,
as Agent for the Lenders
901 Main Street
Dallas, Texas 75202
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, GORGES/QUIK-TO-FIX FOODS, INC. (the "Borrower"), refers to
--------
the Credit Agreement dated as of November 25, 1996 (as amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
----------------
Borrower, the other Credit Parties party thereto, the Lenders party thereto and
NationsBank of Texas, N.A., as Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Borrower hereby gives notice pursuant to Section 2.4 of
the Credit Agreement that it requests a continuation or conversion of a
Revolving Loan outstanding under the Credit Agreement, and in connection
therewith sets forth below the terms on which such continuation or conversion is
requested to be made:
(A) Date of Continuation or Conversion
(which is the last day of the
the applicable Interest Period) __________
(B) Principal Amount of
Continuation or Conversion __________
(C) Interest rate basis __________
(D) Interest Period and the
last day thereof __________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
Very truly yours,
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 2.6(A)
--------------
FORM OF REVOLVING NOTE
$ November 25, 1996
------------------
FOR VALUE RECEIVED, GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
--------
, its successors and permitted assigns (the "Lender"),
- --------------------------
at the office of NationsBank of Texas, N.A., as Agent (the "Agent"), at 901 Main
-----
Street, Dallas, Texas 75202 (or at such other place or places as the holder
hereof may designate in writing to the Borrower pursuant to the terms of the
Credit Agreement), at the times set forth in the Credit Agreement dated as of
the date hereof among the Borrower, the other Credit Parties party thereto, the
Lenders party thereto and the Agent (as it may be amended, modified, extended or
restated from time to time, the "Credit Agreement"; all capitalized terms not
----------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement), but in no event later than the Maturity Date, in Dollars and in
immediately available funds, the principal amount of
---------------------------
DOLLARS ($ ) or, if less than such principal amount, the aggregate
------------
unpaid principal amount of all Revolving Loans made by the Lender to the
Borrower pursuant to the Credit Agreement, and to pay interest from the date
hereof on the unpaid principal amount hereof, in like money, at said office, on
the dates and at the rates provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1(b)
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective dates thereof shall
be endorsed by the holder hereof on Schedule A attached hereto and incorporated
----------
herein by reference, or on a continuation thereof which shall be attached hereto
and made a part hereof; provided, however, that any failure to endorse such
-------- -------
information on such schedule or continuation thereof shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Note.
<PAGE>
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(d) of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A TO THE
REVOLVING NOTE
OF GORGES/QUIK-TO-FIX FOODS, INC.
DATED NOVEMBER 25, 1996
<TABLE>
<CAPTION>
Name of
Type Payments Person
of Interest -------------------- Balance Unpaid Making
Date Loan Period Principal Interest of Note Principal Notation
- ---- ---- -------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 2.6(B)
--------------
FORM OF TERM NOTE
$ November 25, 1996
--------------------
FOR VALUE RECEIVED, GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
--------
, its successors and permitted assigns (the "Lender"),
- ------------------------- ------
at the office of NationsBank of Texas, N.A., as Agent (the "Agent"), at 901 Main
-----
Street, Dallas, Texas 75202 (or at such other place or places as the holder
hereof may designate in writing to the Borrower pursuant to the terms of the
Credit Agreement), at the times set forth in the Credit Agreement dated as of
the date hereof among the Borrower, the other Credit Parties party thereto, the
Lenders party thereto and the Agent (as it may be amended, modified, extended or
restated from time to time, the "Credit Agreement"; all capitalized terms not
----------------
otherwise defined herein shall have the meanings set forth in the Credit
Agreement), but in no event later than the Maturity Date, in Dollars and in
immediately available funds, the principal amount of
-------------------------
DOLLARS ($ ), and to pay interest from the date hereof on the
------------
unpaid principal amount hereof, in like money, at said office, on the dates
and at the rates provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1(b)
of the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective dates thereof shall
be endorsed by the holder hereof on Schedule A attached hereto and incorporated
----------
herein by reference, or on a continuation thereof which shall be attached hereto
and made a part hereof; provided, however, that any failure to endorse such
-------- -------
information on such schedule or continuation thereof shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Note.
<PAGE>
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(d) of the Credit Agreement.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A TO THE
TERM NOTE
OF GORGES/QUIK-TO-FIX FOODS, INC.
DATED NOVEMBER 25, 1996
<TABLE>
<CAPTION>
Name of
Type Payments Person
of Interest -------------------- Balance Unpaid Making
Date Loan Period Principal Interest of Note Principal Notation
- ---- ---- -------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 7.1(C)
--------------
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the fiscal quarter ended , .
---------------- ----
I, , [Title] of GORGES/QUIK-TO-FIX FOODS, INC. (the
---------------------
"Borrower") hereby certify that, to the best of my knowledge and belief, with
- ---------
respect to that certain Credit Agreement dated as of November 25, 1996 (as
amended, modified, extended or restated from time to time, the "Credit
------
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) among the Borrower, the other Credit Parties party thereto,
the Lenders party thereto and NationsBank of Texas, N.A., as Agent:
a. The company-prepared financial statements which accompany this
certificate are true and correct in all material respects and have been prepared
in accordance with GAAP applied on a consistent basis, subject to changes
resulting from normal year-end audit adjustments.
b. Since (the date of the last similar certification, or, if
-----------
none, the Closing Date) no Default or Event of Default has occurred and is
continuing under the Credit Agreement; and
Delivered herewith are detailed calculations demonstrating compliance by the
Credit Parties with the financial covenants contained in Section 7.12 of the
Credit Agreement as of the end of the fiscal period referred to above.
This day of , .
------ ----------- ----
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
Attachment to Officer's Certificate
-----------------------------------
COMPUTATION OF FINANCIAL COVENANTS
<PAGE>
SCHEDULE 7.6
------------
GORGES HOLDING CORPORATION, AND/OR
GORGES/QUIK-TO-FIX FOODS, INC.
SCHEDULE OF INSURANCE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE POLICY EXPIRATION COVERAGE LIMIT OF
CARRIER NUMBER DATE TYPE INSURANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Travelers Indemnity KTJCMB266T268-0-96 11/25/97 Property-Iowa 128,925,094
Company of Illinois
KTJCMB266T268-0-96 11/25/97 Property-Texas INCLUDED IN ABOVE
The Travelers Lloyds Company
The Travelers Indemnity UJGLSA395J053-0 11/25/97 General Liability 1,000,000-Occurrence
Company of Illinois 5,000,000-Aggregate
The Travelers Indemnity JUCAP395J054-02 11/25/97 Automobile 1,000,000
Company of Illinois
The Travelers Indemnity UEEUB395J051-7 11/25/97 Workers Compensation A-STATUTORY
Company of Connecticut B-500,000.
The Travelers Indemnity UJUB395J052-9 11/25/97 Workers Compensation-CA A-STATUTORY
Company of Illinois B-500,000.
Federal Insurance Company 7974-96-90 11/25/97 Umbrella 10,000,000
American National Fire TUE21834444 11/25/97 Excess Liability 40,000,000
Federal Insurance Company 81476718 11/25/97 Executive Protection SEE BELOW
Directors & Officers 10,000,000
Crime 1,000,000
Fiduciary Liability 2,000,000
Comprehensive Extortion 1,000,000
</TABLE>
<PAGE>
EXHIBIT 7.13
------------
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement"), dated as of , ,
--------- ------------- ----
is by and between , a (the
--------------------- --------------------
"Subsidiary"), and NATIONSBANK OF TEXAS, N.A., in its capacity as Agent under
----------
that certain Credit Agreement (as it may be amended, modified, extended or
restated from time to time, the "Credit Agreement"), dated as of November 25,
----------------
1996, by and among Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (the
"Borrower"), the other Credit Parties party thereto, the Lenders party thereto
- ---------
and NationsBank of Texas, N.A., as Agent. All of the defined terms in the
Credit Agreement are incorporated herein by reference.
The Subsidiary is an Additional Credit Party, and, consequently, the Credit
Parties are required by Section 7.13 of the Credit Agreement to cause the
Subsidiary to become a "Guarantor".
---------
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for the
benefit of the Lenders:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and
shall have all of the obligations of a Guarantor thereunder as if it had
executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Guarantors contained in the Credit Agreement. Without
limiting the generality of the foregoing terms of this paragraph 1, the
Subsidiary hereby, jointly and severally together with the other Guarantors,
guarantees to each Lender and the Agent, as provided in Section 4 of the Credit
Agreement, the prompt payment and performance of the Borrower's Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof.
2. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement and an "Obligor" for all purposes of the Security Agreement,
and shall have all of the obligations of an Obligor thereunder as if it had
executed the Security Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Obligors contained in the Security Agreement. Without limiting
the generality of the foregoing terms of this paragraph 2, the Subsidiary hereby
grants to the Agent, for the benefit of the Lenders, a continuing security
interest in, and a right of set off against, any and all right, title and
interest of the Subsidiary in and to the Collateral (as such term is defined in
Section 2 of the Security Agreement) of the Subsidiary. The Subsidiary hereby
represents and warrants to the Agent that:
<PAGE>
(i) The Subsidiary's chief executive office and chief place of
business are (and for the prior four months have been) located at the
locations set forth in Schedule 1 attached hereto and the Subsidiary keeps
its books and records at such locations.
(ii) The type of Collateral owned by the Subsidiary and the location of
all Collateral owned by the Subsidiary is as shown on Schedule 2 attached
hereto.
(iii) The Subsidiary's legal name is as shown in this Agreement and the
Subsidiary has not changed its name, been party to a merger, consolidation
or other change in structure or used any tradenames except as set forth in
Schedule 3 attached hereto.
(iv) The patents, trademarks and copyrights listed on Schedule 4
attached hereto constitute all of the registrations and applications for
the patents, trademarks and copyrights owned by the Subsidiary.
3. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Pledge Agreement and a "Pledgor" for all purposes of the Pledge Agreement, and
shall have all of the obligations of a Pledgor thereunder as if it had executed
the Pledge Agreement. The Subsidiary hereby ratifies, as of the date hereof,
and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Pledgors contained in the Pledge Agreement. Without limiting
the generality of the foregoing terms of this paragraph 3, the Subsidiary hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of the Subsidiary in and to the Pledged Shares
(as such term is defined in Section 2 of the Pledge Agreement) listed on
Schedule 5 attached hereto and the other Pledged Collateral (as such term is
defined in Section 2 of the Pledge Agreement).
4. The address of the Subsidiary for purposes of all notices and other
communications is , , Attention
-------------------- ----------------------------
of (Facsimile No. ).
-------------- ------------
5. The Subsidiary hereby waives acceptance by the Agent and the Lenders of
the guaranty by the Subsidiary under Section 4 of the Credit Agreement upon the
execution of this Agreement by the Subsidiary.
6. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
7. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
<PAGE>
IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be
duly executed by its authorized officers, and the Agent, for the benefit of the
Lenders, has caused the same to be accepted by its authorized officer, as of the
day and year first above written.
[SUBSIDIARY]
By:
Name:
Title:
Acknowledged and accepted:
NATIONSBANK OF TEXAS, N.A., as Agent
By:
Name:
Title:
<PAGE>
EXHIBIT 11.3
------------
FORM OF ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE dated as of , is entered
--------------- ----
into between ("Assignor") and
---------------- --------------------
("Assignee").
--------
Reference is made to the Credit Agreement dated as of November 25, 1996, as
amended and modified from time to time thereafter (the "Credit Agreement") among
----------------
Gorges/Quik-To-Fix Foods, Inc., the other Credit Parties party thereto, the
Lenders party thereto and NationsBank of Texas, N.A., as Agent. Terms defined
in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor,
effective as of the Effective Date set forth below, the interests set forth
below (the "Assigned Interest") in the Assignor's rights and obligations under
-----------------
the Credit Agreement, including, without limitation, the interests set forth
below in the Commitments and outstanding Loans of the Assignor on the effective
date of the assignment designated below (the "Effective Date"), together with
--------------
unpaid fees accrued on the assigned Commitments to the Effective Date and unpaid
interest accrued on the assigned Loans to the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 11.3(b) of the
Credit Agreement, a copy of which has been received by the Assignee. From and
after the Effective Date (i) the Assignee, if it is not already a Lender under
the Credit Agreement, shall be a party to and be bound by the provisions of the
Credit Agreement and, to the extent of the interests purchased and assumed by
the Assignee under this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of
the interests sold and assigned by the Assignor under this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of North Carolina.
3. Terms of Assignment
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment:
<PAGE>
(e) Revolving Loan Commitment
Percentage Assigned (expressed
as a percentage set forth to at
least 8 decimals) %
(f) Revolving Loan Commitment
Percentage of Assignee after
giving effect to this Assignment
and Acceptance as of the Effective
Date (set forth to at least 8 decimals) %
(g) Revolving Loan Commitment
Percentage of Assignor after
giving effect to this Assignment
and Acceptance as of the Effective
Date (set forth to at least 8 decimals) %
(h) Revolving Committed Amount
as of Effective Date $
-----------
(i) Dollar Amount of Assignor's
Revolving Loan Commitment
Percentage as of the Effective
Date (the amount set forth in
(h) multiplied by the percentage
set forth in (g)) $
-----------
(j) Dollar Amount of Assignee's
Revolving Loan Commitment
Percentage as of the Effective
Date (the amount set forth in
(h) multiplied by the percentage
set forth in (f)) $
-----------
(k) Term Loan Commitment Percentage
Assigned (expressed as a
percentage set forth to at
least 8 decimals) %
(l) Term Loan Commitment Percentage
of Assignee after giving effect
to this Assignment and Acceptance
on the Effective Date (set forth
to at least 8 decimals) %
(m) Term Loan Commitment Percentage
of Assignor after giving effect
to this Assignment and Acceptance
on the Effective Date (set forth
to at least 8 decimals) %
<PAGE>
(n) Outstanding Balance of Term Loan
as of Effective Date $
-----------
(o) Principal Amount of Assignor's
portion of the Term Loan after
giving effect to this Assignment
and Acceptance on Effective
Date (the amount set forth
in (n) multiplied by the
percentage set forth in (m)) $
----------
(p) Principal Amount of Assignee's
portion of the Term Loan after
giving effect to this Assignment
and Acceptance on Effective
Date (the amount set forth
in (n) multiplied by the
percentage set forth in (l)) $
----------
4. This Assignment and Acceptance shall be effective only upon consent of the
Borrower and the Agent, if applicable, delivery to the Agent of this Assignment
and Acceptance together with the transfer fee payable pursuant to Section
11.3(b) in connection herewith and recordation in the Register pursuant to
Section 11.3(d) of the terms hereof.
5. This Assignment and Acceptance may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Assignment and Acceptance to
produce or account for more than one such counterpart.
The terms set forth above
are hereby agreed to:
, as Assignor
- ---------------------
By:
Name:
Title:
, as Assignee
- ---------------------
By:
Name:
Title:
<PAGE>
Notice address of Assignee:
[[Assignee]]
--------------------------
--------------------------
Attn:
____________________
Telephone: ( )
--- --------
Telecopy: ( )
--- --------
<PAGE>
EXHIBIT 10.6
CONSENTED TO:
NATIONSBANK OF TEXAS, N.A.,
as Agent
By:
Name:
Title:
GORGES/QUIK-TO-FIX FOODS, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 10.7
GORGES/QUIK-TO-FIX FOODS, INC.
$100,000,000
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
REGISTRATION RIGHTS AGREEMENT
November 25, 1996
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street, NC1-007-07-01
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (the
"Borrower"), proposes to issue and sell (the "Initial Placement") to the Initial
Purchaser, upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement"), its 11 1/2% Senior Subordinated Notes Due
2006 (the "Notes"). The Notes will be unconditionally guaranteed, jointly and
severally, on a senior subordinated and unsecured basis the ("Note Guarantees")
by each future direct or indirect Subsidiary (as defined below) of the Borrower
(each, a "Guarantor"). The Initial Placement is to occur concurrently with, and
is conditioned upon, (i) the consummation of the acquisition (the "Acquisition")
by the Borrower of the Gorges/Quik-to-Fix Foods operations of Tyson Foods, Inc.,
pursuant to an asset purchase agreement dated as of October 17, 1996 (the "Asset
Purchase Agreement") by and among the Borrower, Tyson Foods, Inc., Gorges
Foodservice Inc. and Tyson Holding Company; (ii) the execution of, and initial
borrowings under, the senior bank credit facilities among the Borrower, Gorges
Holding Company ("GHC"), as guarantor, NationsBank of Texas, N.A., as agent and
lender, and the other lenders named therein; and (iii) the receipt by the
Borrower of a $45 million equity contribution from GHC. References herein to
the "Company" shall be deemed to refer to the Borrower. As an inducement to the
Initial Purchaser to enter into the Purchase Agreement and purchase the Notes
and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company agrees with you for the benefit of the holders from time
to time of the Notes (including the Initial Purchaser) (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Affiliate" of any specified person means (i) any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person or (ii) any other person who is a
director or executive officer of (a) such specified person or (b) any person
described in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
<PAGE>
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of any class, or any series of
- --------
any class, of equity securities of a person, whether or not voting, shall be
deemed to be control; and provided, however, that NBIC or any Affiliate (as
-------- -------
determined without giving effect to this proviso) of NBIC shall not be deemed to
be an Affiliate of any Person solely by reason of its ownership of non-voting
equity securities of such Person.
"Borrower" has the meaning set forth in the preamble hereto.
--------
"Closing Date" has the meaning set forth in the Purchase Agreement.
------------
"Commission" means the United States Securities and Exchange
----------
Commission.
"Company" has the meaning set forth in the preamble hereto.
-------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 180-day period
----------------------------------
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; provided, however,
-------- -------
that in the event that all resales of New Notes (including, subject to the time
periods set forth herein, any resales by Exchanging Dealers) covered by such
Exchange Offer Registration Statement have been made, the Exchange Offer
Registration Statement need not thereafter remain continuously effective for
such period.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Company on an appropriate form under the Securities Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the Initial
-----------------
Purchaser) that is a broker-dealer, electing to exchange Notes acquired for its
own account as a result of market-making activities or other trading activities
for New Notes.
"Final Memorandum" has the meaning set forth in the Purchase
----------------
Agreement.
"Guarantor" has the meaning set forth in the preamble hereto.
---------
"Holder" has the meaning set forth in the preamble hereto.
------
"Indenture" means the indenture relating to the Notes and the New
---------
Notes, to be dated as of the Closing Date, between the Company and IBJ Schroder
2
<PAGE>
Bank & Trust Company as trustee, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the terms
thereof. It shall include the provisions of the Trust Indenture Act that are
deemed to be part of and govern the indenture.
"Initial Placement" has the meaning set forth in the preamble hereto.
-----------------
"Initial Purchaser" has the meaning set forth in the Purchase
-----------------
Agreement.
"Liquidated Damages" has the meaning set forth in Section 4 hereof.
------------------
"Losses" has the meaning set forth in Section 7(d) hereto.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of notes registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering
under a Shelf Registration Statement.
"New Notes" means debt securities of the Company identical in all
---------
material respects to the Notes (except that the Liquidated Damages provisions
and the transfer restrictions pertaining to the Notes will be modified or
eliminated, as appropriate), to be issued under the Indenture.
"Note Guarantees" has the meaning set forth in the preamble hereto and
---------------
shall, as applied to the New Notes, mean identical guarantees of the New Notes
by the Guarantors.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Notes or the New Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of New Notes.
3
<PAGE>
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Notes or the
New Notes (including any Note Guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Company pursuant to the provisions of Section 3 hereof, which covers some
or all of the Notes or New Notes, as applicable, on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Transfer Restricted Securities" means each Note or New Note, as the
------------------------------
case may be, until the earliest to occur of (i) the date on which such Note is
exchanged in the Registered Exchange Offer and entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) the date on which such Note or New Note
has been effectively registered under the Securities Act and disposed of in
accordance with a Shelf Registration Statement, and (iii) the date on which such
Note or New Note is resold pursuant to Rule 144 under the Securities Act or by a
broker-dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (the form of which is included as Annex C
hereto) (including delivery of the Prospectus contained therein).
"Trustee" means the trustee with respect to the Notes or New Notes, as
-------
applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection with an
-----------
offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Notes by Exchanging
-------------------------------------------------------------
Dealers; Private Exchange. (a) The Company shall prepare and, on or prior to
- -------------------------
January 31, 1997, shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Company shall use
its best efforts (i) to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or prior to March 31, 1997 and
(ii) to consummate the Registered Exchange Offer on or prior to April 30, 1997.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer and
use its best efforts to issue on or prior to 30 days after the date on which the
4
<PAGE>
Exchange Offer Registration Statement is declared effective by the Commission
New Notes in exchange for all Notes tendered prior thereto in the Registered
Exchange Offer. The objective of such Registered Exchange Offer is to enable
each Holder electing to exchange Notes for New Notes (assuming that such Holder
(x) is not an "affiliate" of the Company within the meaning of the Securities
Act, (y) is not a broker-dealer that acquired the Notes in a transaction other
than as a part of its market-making or other trading activities and (z) if such
Holder is not a broker-dealer, acquires the New Notes in the ordinary course of
such Holder's business, is not participating in the distribution of the New
Notes and has no arrangements or understandings with any person to participate
in the distribution of the New Notes) to resell such New Notes from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 30 days and not more than 45 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder New Notes equal in principal amount to the Notes of such Holder so
accepted for exchange.
(e) The Initial Purchaser and the Company acknowledge that, pursuant
to interpretations by the staff of the Commission of Section 5 of the Securities
Act, and in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of any New
Notes received by such Exchanging Dealer pursuant to the Registered Exchange
Offer in exchange for Notes acquired for its own account as a result of market-
making activities or other trading activities. Accordingly, the Company shall:
5
<PAGE>
(i) include the information set forth in Annex A hereto on the cover
of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the Registered
Exchange Offer, in Annex C hereto in the underwriting or plan of
distribution section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of New Notes
received pursuant to the Registered Exchange Offer, as contemplated by
Section 5(h) below.
(f) In the event that the Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Notes constituting any portion of an unsold allotment, upon the
effectiveness of the Shelf Registration Statement as contemplated by Section 3
hereof and at the request of the Initial Purchaser, the Company shall issue and
deliver to the Initial Purchaser, or to the party purchasing New Notes
registered under the Shelf Registration Statement from the Initial Purchaser, in
exchange for such Notes, a like principal amount of New Notes. The Company
shall use its best efforts to cause the CUSIP Service Bureau to issue the same
CUSIP number for such New Notes as for New Notes issued pursuant to the
Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
------------------
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) the
Registered Exchange Offer is not consummated on or prior to April 30, 1997, or
(iii) the Initial Purchaser so requests with respect to Notes held by it as a
result of the purchase of such Notes directly from the Company following
consummation of the Registered Exchange Offer, or (iv) any Holder (other than
the Initial Purchaser) is not eligible to participate in the Registered Exchange
Offer or the New Notes such Holder would receive in the Registered Exchange
Offer could only be reoffered and resold by such Holder upon compliance with the
registration and prospectus delivery requirements of the Securities Act and the
delivery of the Prospectus contained in the Exchange Offer Registration
Statement, as appropriately amended, is not a legally available alternative, or
(v) in the case where the Initial Purchaser participates in the Registered
Exchange Offer or acquires New Notes pursuant to Section 2(f) hereof, the
Initial Purchaser does not receive freely tradable New Notes in exchange for
Notes constituting any portion of an unsold allotment (it being understood that,
for purposes of this Section 3, (x) the requirement that the Initial Purchaser
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Securities Act in connection with sales of New Notes
acquired in exchange for such Notes shall result in such New Notes being not
"freely tradable" and (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of New Notes acquired in the Registered
Exchange Offer in exchange for Notes acquired as a result of market-making
activities or other trading activities
6
<PAGE>
shall not result in such New Notes being not "freely tradable"), the following
provisions shall apply:
(a) The Company shall, as promptly as practicable (but in no event
more than 60 days after so required or requested pursuant to this Section 3),
file with the Commission a Shelf Registration Statement relating to the offer
and sale of the Notes or the New Notes, as applicable, by the Holders from time
to time in accordance with the methods of distribution elected by such Holders
and set forth in such Shelf Registration Statement and Rule 415 under the
Securities Act, provided, that with respect to New Notes received by the Initial
--------
Purchaser in exchange for Notes constituting any portion of an unsold allotment,
the Company may, if permitted by current interpretations by the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation S-K Items 507 and/or
508, as applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to 45 days after filing such Shelf Registration Statement pursuant to this
Section 3 and to keep such Shelf Registration Statement continuously effective
in order to permit the Prospectus contained therein to be usable by Holders for
a period of three years (or, if Rule 144(k) under the Securities Act is amended
to allow for resales pursuant to such Rule after a shorter period, such shorter
period) from the date the Shelf Registration Statement is declared effective by
the Commission or such shorter period that will terminate when all the Notes or
New Notes, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would result
in Holders of notes covered thereby not being able to offer and sell such notes
during that period, unless (i) such action is required by applicable law or (ii)
such action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 5(k) hereof, if applicable.
(c) No Holder of Notes or New Notes may include any of its Notes or
New Notes in any Shelf Registration Statement pursuant to this Agreement unless
and until such Holder furnishes to the Company in writing, within 20 business
days after receipt of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf Registration Statement
or Prospectus or preliminary Prospectus included therein. No Holder of Notes or
New Notes shall be entitled to Liquidated Damages pursuant to Section 4 hereof
unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not misleading.
7
<PAGE>
4. Liquidated Damages. If (i) either the Exchange Offer Registration
------------------
Statement or the Shelf Registration Statement is not filed with the Commission
on or prior to the date specified for such filing in this Agreement, (ii) either
the Exchange Offer Registration Statement or the Shelf Registration Statement
has not been declared effective by the Commission on or prior to the target date
specified for such effectiveness in this Agreement (the "Effectiveness Target
Date"), (iii) the Exchange Offer has not been consummated within 30 days after
the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) either the Exchange Offer Registration Statement or the Shelf
Registration Statement is filed and declared effective but thereafter ceases to
be effective during the applicable Exchange Offer Registration Period or Shelf
Registration Period, as the case may be (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes with respect
to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such Holder for each week or portion thereof during
which such Registration Default continues. The amount of the Liquidated Damages
payable to each Holder for such Registration Default will increase by an
additional $.05 per week per $1,000 in principal amount of Notes held by such
Holder with respect to each subsequent 90-day period until such Registration
Default has been cured, up to an aggregate maximum amount of Liquidated Damages
of $.30 per week per $1,000 principal amount of Notes for all Registration
Defaults. All accrued Liquidated Damages will be paid by the Company on each
Interest Payment Date (as such term is defined in the Indenture) to the Holders
of record with respect to such Interest Payment Date by wire transfer of
immediately available funds or by federal funds check. Liquidated Damages
payable (a) with respect to the Registration Default specified in clause (i)
above, shall cease to accrue upon filing of the Exchange Offer Registration
Statement (and, if applicable, the Shelf Registration Statement), (b) with
respect to the Registration Default specified in clause (ii) above, shall cease
to accrue upon the effectiveness of the Exchange Offer Registration Statement
(and, if applicable, the Shelf Registration Statement), (c) with respect to the
Registration Default specified in clause (iii) above, shall cease to accrue upon
consummation of the Exchange Offer, and (d) with respect to the Registration
Default specified in clause (iv) above, shall cease to accrue upon the filing of
a post-effective amendment to the Registration Statement that causes the
Exchange Offer Registration Statement (and, if applicable, the Shelf
Registration Statement) again to be declared effective, as the case may be.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease, and all accrued and unpaid Liquidated Damages shall be paid
to Holders of Notes promptly thereafter.
The Company shall notify the Trustee within five days after the
occurrence of each and every Registration Default. The parties hereto agree
that the Liquidated Damages provided for in this Section 4 constitute a
reasonable estimate of the damages that will be incurred by Holders by reason of
any Registration Default.
5. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to the Initial Purchaser, prior to the
filing thereof with the Commission, a copy of any Registration Statement, and
8
<PAGE>
each amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its best efforts to reflect in each
such document, when so filed with the Commission, such comments as the Initial
Purchaser reasonably may propose.
(b) The Company shall use its best efforts to provide that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations thereunder;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchaser and, in the
case of a Shelf Registration Statement, the Holders of notes covered thereby,
and, if requested by the Initial Purchaser or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchaser and, in the case of a Shelf Registration Statement, the Holders of
notes covered thereby, and, in the case of an Exchange Offer Registration
Statement, any Exchanging Dealer that has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if requested by the
Initial Purchaser or any such Holder or Exchanging Dealer, confirm such advice
in writing:
(i) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the notes included therein for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
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<PAGE>
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of such
date, the Registration Statement or the Prospectus does not include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made).
Each Holder agrees by acquisition of a Note or a New Note that, upon receipt of
any notice from the Company of the existence of any fact of the kind described
in paragraph (iii) above, such Holder will forthwith discontinue disposition of
Notes or New Notes, as the case may be, pursuant to the applicable Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
concerning such Notes or New Notes that was current at the time of receipt of
such notice.
(d) The Company shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of notes covered by any
Shelf Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits thereto (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of notes covered by any Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
included in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders of notes in connection with the offering and sale of the notes
covered by the Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, any documents incorporated by reference therein and,
if the Exchanging Dealer so requests in writing, all exhibits thereto (including
those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer, without charge, as many copies of
the Prospectus included in such Exchange Offer Registration Statement and any
amendment or supplement thereto as such Exchanging Dealer may reasonably request
10
<PAGE>
for delivery in connection with a sale of New Notes received by it pursuant to
the Registered Exchange Offer; and the Company consents to the use of the
Prospectus or any amendment or supplement thereto by any such Exchanging Dealer,
as provided in Section (2)(e) above.
(i) Prior to the Registered Exchange Offer or any other offering of
notes pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of notes included therein and their
respective counsel in connection with the registration or qualification of such
notes for offer and sale under the securities or blue sky laws of such states as
any such Holders reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such states of the
notes covered by such Registration Statement; provided, however, that the
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Company will not be required to qualify as a foreign corporation or as a dealer
in securities in any jurisdiction in which it is not then so qualified, to file
any general consent to service of process or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(j) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing notes to be sold
pursuant to any Registration Statement free of any restrictive legends and in
denominations of $1,000 or an integral multiple thereof and registered in such
names as Holders may request prior to sales of notes pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Company shall use every reasonable effort to
promptly prepare and file a post-effective amendment to any Registration
Statement or an amendment or supplement to the related Prospectus or any other
required document so that, as thereafter delivered to purchasers of the notes
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Notes or
New Notes, as the case may be, registered under such Registration Statement, and
provide the Trustee with printed certificates for such Notes or New Notes, in a
form eligible for deposit with The Depository Trust Company.
(m) The Company shall use every reasonable effort to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable, but in any event not
later than 15 months, after the effective date of the applicable Registration
Statement an earnings statement (which need not be audited) satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 under the
Securities Act.
(n) The Company shall use every reasonable effort to cause the
Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), in a timely manner.
11
<PAGE>
(o) The Company may require each Holder of notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such notes as the Company may from
time to time reasonably require for inclusion in such Registration Statement and
such other information as may be necessary or advisable in the reasonable
opinion of the Company and its counsel, in connection with any Registration
Statement. No Holder of Notes or New Notes shall be entitled to use a
Prospectus unless and until such Holder shall have furnished the reasonably
requested information required by this Section 5(o), and shall have committed to
notify the Company promptly of any change in such information.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information to which the Company does not reasonably object as
the Managing Underwriters, if any, and Majority Holders reasonably agree should
be included therein, and shall make all required filings of such Prospectus
supplement or post-effective amendment promptly upon notification of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements in form and
scope as is customary for similar offerings of debt securities) and take all
other customary and appropriate actions in order to expedite or to facilitate
the registration or the disposition of any notes included therein, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 (or such other provisions and procedures acceptable
to the Majority Holders and the Managing Underwriters, if any) with respect to
all parties to be indemnified pursuant to Section 7.
(r) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the Holders of notes
to be registered thereunder, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
underwriter, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement, as is customary for similar due diligence
examinations and make such representatives of the Company as shall be
reasonably requested by the Initial Purchaser available for discussion of
any such Registration Statement; provided, however, that any information
-------- -------
that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such underwriter, attorney, accountant
or agent, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes available to the
public generally or through a third party without an accompanying
obligation of confidentiality
12
<PAGE>
other than as a result of a disclosure of such information by any such Holder,
underwriter, attorney, accountant or agent;
(iii) make such representations and warranties to the Holders of
notes registered thereunder and the underwriters, if any, in form,
substance and scope, and at such time or times, as are customarily made by
issuers to underwriters in similar underwritten offerings as may be
reasonably requested by them;
(iv) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters and
time periods as are customarily covered in opinions requested in similar
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the underwriters, if any, and use
reasonable efforts to have such letter addressed to the selling Holders of
notes registered thereunder (to the extent consistent with Statement on
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants (AICPA) ("SAS 72")), in customary form and covering matters and
time periods of the type customarily covered in "cold comfort" letters in
connection with similar underwritten offerings; and
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
and customarily delivered in similar offerings, including those to evidence
compliance with Section 5(k) and with any conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 5(r) shall be performed at (A) the effectiveness of such Shelf
Registration Statement and each post-effective amendment thereto and (B) each
closing under any underwriting or similar agreement as and to the extent
required thereunder.
(s) The Company shall, if and to the extent required under the
Securities Act and/or the Trust Indenture Act and the rules and regulations
thereunder in order to register the Notes (including the Note Guarantees, if
any) under the Securities Act and qualify the Indenture under the Trust
Indenture Act, cause each Guarantor, if any, to sign any Registration Statement
and take all other action necessary to register the Note Guarantees, if any,
under the applicable Registration Statement.
6. Registration Expenses. The Company shall bear all expenses
---------------------
incurred in connection with the performance of its obligations under Sections 2,
13
<PAGE>
3, 4 and 5 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchaser for the reasonable fees and
disbursements of counsel acting in connection therewith.
7. Indemnification and Contribution. (a) In connection with any
--------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless to the
fullest extent lawful each Holder of notes covered thereby (including the
Initial Purchaser and, with respect to any Prospectus delivery as contemplated
by Sections 2(e) and 5(h) hereof, each Exchanging Dealer) the directors,
officers, employees and agents of such Holder and each person who controls such
Holder within the meaning of either the Securities Act or the Exchange Act,
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement as originally filed or in any amendment thereof, or in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage or liability (or action in respect thereof); provided, however,
-------- -------
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability (A) arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder specifically for
inclusion therein or (B) are caused by an untrue statement or omission that was
contained or made in any preliminary prospectus and corrected in the related
Prospectus or any supplement or amendment thereto and (1) any such losses,
claims, damages, liabilities or expenses suffered or incurred by any indemnified
party resulted from an action, claim or suit by any person who purchased Notes
or New Notes from a Holder in the offering to which such Prospectus relates, (2)
such Holder failed to deliver or provide a copy of such Prospectus or any such
supplement or amendment thereto to such person at or prior to the confirmation
of the sale of such Notes in any case where such delivery is required by the
Securities Act and (3) such Prospectus (as so amended and supplemented) would
have cured the defect giving rise to such loss, liability, claim, damage or
expense. The indemnification provided herein will be in addition to any
liability that the Company may otherwise have.
The Company also agrees to indemnify or contribute to the Losses of,
as provided in Section 7(d) hereof, any underwriters of notes registered under a
Shelf Registration Statement, their employees, officers, directors and agents
and each person who controls such underwriters on the same basis (including the
proviso) as that of the indemnification of the Initial Purchaser and the selling
Holders provided in this Section 7(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement, as provided in
Section 5(q) hereof.
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<PAGE>
(b) Each Holder of notes covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 5(h) hereof, each Exchanging Dealer)
severally and not jointly agrees to indemnify and hold harmless the Company, its
directors, officers, employees, agents and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each such Holder, but only
with respect to written information furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of rights and defenses, and (ii) will
not, in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel (including local counsel) of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
- -------- -------
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party (it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for such indemnified persons). An indemnifying party or an indemnified
party will not, without the prior written consent of the indemnified parties or
the indemnifying parties, as the case may be, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties or the
indemnifying parties, as the case may be, are actual or potential parties to
15
<PAGE>
such claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party or indemnifying party, as the
case may be, from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided, however, that in
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no case shall the Initial Purchaser be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such Note,
or in the case of an Exchange Note, applicable to the Note that was exchangeable
into such Exchange Note, as set forth on the cover page of the Final Memorandum,
nor shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the notes purchased by such
underwriter under the Registration Statement that resulted in such Losses; and
provided further, however, that in no case shall any subsequent Holder of any
- -------- ------- -------
Note or Exchange Note be responsible, in the aggregate, for any amount in excess
of the total proceeds received by such Holder for the sale of Notes or New Notes
giving rise to the indemnification liability. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the sum of (x) the total
net proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Final Memorandum and (y) the total amount of Liquidated
Damages that the Company was not required to pay as a result of registering the
notes covered by the Registration Statement that resulted in such Losses.
Benefits received by the Initial Purchaser shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Final Memorandum received by such Initial Purchaser, and benefits received by
any other Holders shall be deemed to be equal to the total proceeds received by
such Holder upon the sale of Notes or New Notes giving rise to the
indemnification obligation Benefits received by any underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
that resulted in such Losses received by such underwriter. Relative fault shall
be determined by reference to, among other things, whether any alleged untrue
statement or omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
person in connection with investigating or defending any such action or claim.
The parties agree that it would not be just and equitable if contribution were
16
<PAGE>
determined by pro rata allocation or any other method of allocation that did not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person who
controls a Holder within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act, each director, officer, employee and agent of the Company shall
have the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8(d) or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
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unreasonably withheld.
(e) The provisions of this Section 7 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred to
in Section 7 hereof, and will survive the sale by a Holder of notes covered by a
Registration Statement.
8. Miscellaneous.
-------------
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided herein, in the Indenture or in the Purchase Agreement
(provided that with respect to any Holder other than the Initial Purchaser, the
rights under the Purchase Agreement shall be limited to those set forth in
Section 5(i) thereof) or granted by law, including recovery of liquidated or
other damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages (including the Liquidated
Damages contemplated hereby) would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby waives the defense in any action for specific performance that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement that conflicts with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then-outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of New Notes); provided that, with respect to
--------
17
<PAGE>
any matter that directly or indirectly affects the rights of the Initial
Purchaser hereunder, the Company shall obtain the written consent of the Initial
Purchaser. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose notes are being
sold pursuant to a Registration Statement, and that does not directly or
indirectly affect the rights of other Holders, may be given by the Majority
Holders, determined on the basis of notes being sold rather than registered
under such Registration Statement.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to the Initial Purchaser;
(ii) if to the Initial Purchaser, initially at NationsBank
Corporate Center, 100 North Tryon Street NC1-007-07-01, Charlotte, North
Carolina 28255-0001;
(iii) if to the Company, initially c/o CGW Southeast Partners III,
L.P., Suite 210, Twelve Piedmont Center, Atlanta, Georgia 30305, Attention:
William A. Davies and James A. O'Donnell, with a copy to Alston & Bird, One
Atlantic Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424,
Attention: Bryan E. Davis.
All such notices and communications shall be deemed to have been duly
given when received. The Initial Purchaser, on the one hand, or the Company, on
the other, by notice to the other party or parties may designate additional or
different addresses for subsequent notices or communications.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or New Notes; provided,
--------
however, that this Agreement shall not inure to the benefit of or be binding
- -------
upon a sucessor or assign of a Holder unless and to the extent such successor or
assign acquired Transfer Restricted Securities from such Holder. Subject to the
proviso contained in the immediately preceding sentence, the Company hereby
agrees to extend the benefits of this Agreement to any Holder of Notes and/or
New Notes and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(f) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this agreement are for convenience of
--------
18
<PAGE>
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
(i) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(j) Notes Held by the Company, etc. Whenever the consent or approval
-------------------------------
of Holders of a specified percentage of principal amount of Notes or New Notes
is required hereunder, Notes or New Notes, as applicable, held by the Company or
its Affiliates (other than subsequent Holders of Notes or New Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Notes or New Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
(k) Participation In Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten Shelf Registration hereunder unless such Holder
(a) agrees to sell such Holder's Notes or New Notes, as the case may be, on the
basis provided in any underwriting arrangements approved by the Company and the
Majority Holders and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
(l) Selection of Underwriters. The Holders of Notes or New Notes
-------------------------
covered by the Shelf Registration Statement who desire to do so may sell such
notes in an underwritten offering. In any such underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Majority Holders of notes
included in such offering; provided, that such investment bankers and managers
must be reasonably satisfactory to the Company.
19
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement between the
Company and you.
Very truly yours,
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ James A. O'Donnell
--------------------------------
Name: James A. O'Donnell
Title: President
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ William Casperson
--------------------------------
Name: William Casperson
Title: Vice President
20
<PAGE>
ANNEX A
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Notes where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date (as defined herein) and ending on
the close of business 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
A-1
<PAGE>
ANNEX B
Each broker-dealer that receives New Notes for its own account in exchange for
Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
B-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Notes
where such Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date and ending on the close of business 180 days after the Expiration Date, it
will make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale. In addition, until
____________, 199__, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit from any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any broker-
dealers) against certain liabilities, including liabilities under the Securities
Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
C-1
<PAGE>
ANNEX D
Rider A
- -------
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
Rider B
- -------
The undersigned represents that it is not an affiliate of the Company,
that any New Notes to be received by it will be acquired in the ordinary course
of business and that at the time of the commencement of the Exchange Offer it
had no arrangement with any person to participate in a distribution of the New
Notes.
In addition, if the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes. If the undersigned is a broker-dealer that
will receive New Notes for its own account in exchange for Notes, it represents
that the Notes to be exchanged for New Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
D-1
<PAGE>
Exhibit 10.8
Certain portions of this exhibit have been deleted and confidentially filed
with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated by
"[*****]" inserted in place of such confidential information.
[*] confindentiality requested
<PAGE>
EXHIBIT 10.8
TO: Richard E. Mitchell
President
Gorges/Quik-to-Fix Foods, Inc.
FROM: John Tyson
President, Beef & Pork Division
Tyson Foods, Inc.
DATE: November 25, 1996
RE: Co-Pack Pricing Agreement
This agreement (the "Agreement") sets forth the terms and conditions
pursuant to which Tyson Foods, Inc. ("Tyson") will purchase from Gorges/Quik-to-
Fix Foods, Inc. ("Gorges") certain "Tyson beef" "work in process" products as
identified in the attached Exhibits "B", "C" and "D" (the "Products") formerly
produced at Tyson's Garland, Texas facility that was purchased by Gorges
pursuant to the Asset Purchase Agreement, dated October 17, 1996, by and among
Tyson, Gorges Foodservice, Inc., Tyson Holding Company and Gorges. The purpose
of this Agreement is to establish a set of standard costs and yields for the
Products, which will be produced by Gorges and marketed and sold by Tyson.
[***************************************************************************
****************************************************************************
***********************************************]
[**************************************************************************
***************************************************************************
*************************************************************************
*****************************************************************************
****************************************************************************
**************************************************************************
******************************************************************************
***************************************************************************
*****************] All orders will be billed on the day of shipment using the
purchase price in effect on the date of shipment.
[*] confidentiality requested
<PAGE>
Anticipated volumes of the Products are annualized in Exhibit A hereto.
---------
These volumes are anticipated to be averaged on a twelve month basis, provided
however, that except as set forth herein, there shall be no restriction on the
minimum or maximum amounts of the Products purchased by Tyson in any calendar
month, provided further, that Tyson will use commercially reasonable best
efforts to notify Gorges in writing by the tenth day of such month if it expects
to purchase substantially more or less than 100,000 pounds of the Products in
the following month. Gorges shall have five days from the receipt of such
notice to notify Tyson if it is unable to fulfill Tyson's Product requirements
for the following month. Such notice shall state that amount of Tyson's Product
requirements that Gorges intends to fulfill. Tyson shall then be entitled to
purchase its surplus Product requirements from a third party source during the
following month only (a "Surplus Month"). During a Surplus Month and each month
subsequent to a Surplus Month, Tyson and Gorges shall have the same rights and
obligations regarding the purchase and sale of Tyson's entire Product
requirements as in the months prior to such Surplus Month.
Non-meat ingredients will be priced [**********************************
*******] at which such ingredients will be used. All finished Products will be
priced F.O.B. the Gorges facility at which such Products are produced.
The following exhibits are incorporated by reference into this Agreement
and are to be used in determining the appropriate prices for the Products. From
time to time, at the request of Tyson, it may be necessary to develop formulas
for new products to be produced by Gorges. Upon such request, Tyson and Gorges
will used commercially reasonable best efforts to develop mutually agreeable
standards for production and pricing.
Exhibit Description
------- -----------
A Tyson-Gorges Processing Agreements
B 3514-001 Oriental Beef Strips
C 2275,5333-001 Cooked Seasoned Beef Strips
D 5176-001 Cooked Seasoned Beef Strips.
Please indicate your acceptance of the terms of this Agreement by signing
below.
TYSON FOODS, INC.
By: /s/ John Tyson
--------------------------------
John Tyson
President, Beef & Pork Division
Accepted and Agreed:
2
<PAGE>
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ Richard E. Mitchell
------------------------
Richard E. Mitchell
President
3
<PAGE>
Exhibit A
TYSON-GORGES/QUIK-TO-FIX FOODS PROCESSING AGREEMENTS
<TABLE>
<CAPTION>
Actual Projected
ANCILLARY AGREEMENT PRODUCT LISTING lbs. FY96 lbs. FY97
---------------------------------------------- -----------------------
<C> <S> <C> <C> <C>
3514-001 Oriental Beef Strips Club [*******] [*******]
2275-001 Cooked Seasoned Beef Strips Retail [*******] [*******]
5333-001 Cooked Seasoned Beef Strips Retail [*******] [*******]
5176-001 Cooked Seasoned Beef Strips Schwan's [******] [*******]
----------------------------------------------
Totals [*********] [*********]
*Guaranteed Operating Income [*********]
Targeted Adder for COGS (Operating Income/lb.) [*********]
</TABLE>
- ------------
* Guaranteed Operating Income based on pounds listed from product codes printed
in section 8.15 "Ancillary Agreements" paragraph (b) in the Asset Purchase
Agreement
[*] confidentiality requested
<PAGE>
Exhibit B
3514-001 ORIENTAL BEEF STRIPS FOR SAM'S
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FORMULA PROPOSAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Beef Skirts (a) [*******][*******][********]
Marinade [******] [********]
Credit: Beef 75's (b) [*******][*******][********]
Cook Loss [*******][*******][********]
------ --------
Yield [******] [********]
Yielded Meat [********]
Overage** [********]
- -------------------------------------------------------------------------------
FOB GARLAND, TX $/LB [********]
- -------------------------------------------------------------------------------
</TABLE>
** Includes [*********] for guaranteed operating income.
- -------------------------------------------------------------------------------
USDA BLUE SHEET WTD AVG FOR PREVIOUS MONTH.
PRICES EFFECTIVE THE 1ST OF EVERY MONTH.
PRICES EFFECTIVE ON DATE OF SHIPMENT.
- -------------------------------------------------------------------------------
(a) Beef 75's = (USDA Blue Sheet Beef 90's/90) *75:
Beef 90's [*******]
Beef 75's [*******]
Formulation does not include Fallout from Tyson Gorges/QTF products.
[*] confidentiality requested
<PAGE>
Exhibit C
2275-001 COOKED SEASONED BEEF STRIPS
5333-001 COOKED SEASONED BEEF STRIPS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FORMULA PROPOSAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cap Blade Rib Lifter Meat [*****] [*****] [*****]
Marinade [*****] [*****]
Cook Loss [*****] [*****] [*****]
-------
Yield [*****] [*****]
Yielded Meat [*****]
Overage** [*****]
- -------------------------------------------------------------------------------
FOB GARLAND, TX $/LB [*****]
- -------------------------------------------------------------------------------
</TABLE>
** Includes [********] for guaranteed operating income.
- -------------------------------------------------------------------------------
USDA BLUE SHEET WTD AVG FOR PREVIOUS MONTH.
PRICES EFFECTIVE THE 1ST OF EVERY MONTH.
PRICES EFFECTIVE ON DATE OF SHIPMENT.
- -------------------------------------------------------------------------------
[*] confidentiality requested
<PAGE>
Exhibit D
5176-001 COOKED SEASONED BEEF STRIPS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FORMULA PROPOSAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cap Blade Rib Lifter Meat (a) [*****] [*****] [*****]
Marinade [****] [*****]
Cook Loss [*****] [*****] [*****]
-------
Yield [*****] [*****]
Yielded Meat [*****]
Overage** [*****]
- -------------------------------------------------------------------------------
FOB GARLAND, TX $/LB [*****]
- -------------------------------------------------------------------------------
</TABLE>
** Includes [********] for guaranteed operating income.
- -------------------------------------------------------------------------------
USDA BLUE SHEET WTD AVG FOR PREVIOUS MONTH.
PRICES EFFECTIVE THE 1ST OF EVERY MONTH.
PRICES EFFECTIVE ON DATE OF SHIPMENT.
- -------------------------------------------------------------------------------
[*] confidentiality requested
<PAGE>
EXHIBIT 10.9
The State of Texas, )
) THIS AGREEMENT OF LEASE,
County of ________________ )
Made this 15th day of December, A.D. 1995, by and between STOVER STEEL
STRUCTURES, INC., known herein as LESSOR, and TYSON FOOD, INC. 209 Range,
Garland, Texas, known herein as LESSEE,
(the terms "Lessor" and "Lessee" shall be construed in the singular or plural
number according as they respectively represent one or more than one person).
WITNESSETH, That the said Lessor does by these presents Lease and Demise
unto the said Lessee the following described property, to-wit: Lying and being
in the City of Garland and County of Dallas, State of Texas, and being located
at 222A Range, Garland, Texas being east half of 90' x 75' building and 100' x
150' lot with common entrance driveway for the term of 12 months beginning the
1st day of January A.D. 1996, and ending the 31st day of December 1996, to be
occupied as Storage and not otherwise, Lessee paying therefor the sum of Nine
Thousand and no/100 Dollars, Payable in monthly installments of $750.00 in
advance. The payment of $1,500.00 for the first and last month's credit on
lease having been paid with the execution of this instrument, the receipt of
which is hereby acknowledged by Lessor. A payment of $750.00 being due on 1st
February and a like amount being due on the same date in each succeeding month
during the remainder of the term of said lease, except the last month., upon the
conditions and covenants following:
1st. That the Lessee shall pay the rent at (See below) Texas, monthly in
advance as aforesaid, as the same shall fall due.
2nd. That the Lessee shall take good care of the property and its
fixtures, and suffer no waste; and shall, at Lessee's own expense and cost, keep
said premises (including plate glass) in good repair; keep the plumbing work,
closets, pipes and fixtures belonging thereto in repair; and keep the water
pipes and connections free from ice and other obstructions, to the satisfaction
of the municipal and police authorities, during the term of this lease, and at
the end or other expiration of the term shall deliver up the demised premises in
good order and condition, natural deterioration and damage by fire and the
elements only excepted; all alterations, additions and improvements, except
trade fixtures, put in at the expense of Lessee shall be the property of the
Lessor and shall remain upon and be surrendered with the premises as a part
thereof at the termination of this lease. Lessee agrees to accept possession of
the premises in their present condition and to allow for changes in such
condition occurring by reasonable deterioration between the date hereof and the
date Lessee occupies said premises; that no improvements or alterations shall be
made in or to the hereby demised premises without the consent of the Lessor in
writing.
<PAGE>
That the Lessee shall pay the water tax imposed on the hereby leased
premises as the same shall become due during the term of this lease.
3rd. That the Lessee shall promptly execute and fulfill all the ordinances
of the city corporation applicable to said premises and all orders and
requirements imposed by the Board of Health, Sanitary and Police Departments,
for the correction, prevention and abatement of nuisances in or upon or
connected with said premises during the said term, at Lessee's expense.
4th. That the Lessee shall not assign this agreement or underlet the
premises, or any part thereof (except as may be mentioned herein) or make any
alterations in the building (except as may be mentioned herein), without the
consent of the Lessor in writing; or occupy or permit or suffer the same to be
occupied for any business or purpose deemed extra hazardous on account of fire.
5th. That Lessee shall, in case of fire, give immediate notice to the
Lessor, who shall thereupon cause the damage to be repaired forthwith; but if
the premises be by the Lessor deemed so damaged as to be unfit for occupancy, or
if the Lessor shall decide to rebuild or remodel the said building, the lease
shall cease, and the rent be paid to the time of the fire.
6th. That in case of default in any of the covenants herein, Lessor may
enforce the performance of this lease in any modes provided by law, and this
lease may be forfeited at Lessor's discretion if such default continue for a
period of ten days after Lessor notified said Lessee of such default and his
intention to declare the lease forfeited, such notice to be sent by the Lessor
by mail or otherwise to the demised premises; and thereupon (unless the Lessee
shall have completely removed or cured said default) this lease shall cease and
come to an end as if that were the day originally fixed herein for the
expiration of the term hereof, and Lessor's agent or attorney shall have the
right, without further notice or demand, to re-enter and remove all persons and
Lessee's property therefrom without being deemed guilty of any manner of
trespass, and without prejudice to any remedies for arrears of rent or breach of
covenant, or Lessor's agent or attorney may resume possession of the premises
and re-let the same for the remainder of the term at the best rent said agent or
attorney may obtain, for account of the Lessee, who shall make good any
deficiency; and the Lessor shall have a lien as security for the rent aforesaid
upon all the goods, wares, chattels, implements, fixtures, furniture, tools and
other personal property which are or may be put on the demised premises.
7th. That the Lessor shall not be liable to Lessee or to Lessee's
employees, patrons, or visitors, for any damage to person or property, caused by
the act or negligence of any other tenant of said demised premises, or due to
the building on said premises or any appurtenances thereof being improperly
constructed, or being or becoming out of repair, nor for any damage from the
defects or want of repair of any part of the building of which the leased
premises form a part, but the Lessee accepts such premises as suitable for the
purposes for which same are leased and accepts the building and each and every
- 2 -
<PAGE>
appurtenance thereof, and waives defects therein and agrees to hold the Lessor
harmless from all claims for any such damage.
8th. That the Lessee shall not place any signs at, on, or about the
premises except as and where first approved by the Lessor; and the Lessor shall
have the right to remove any sign or signs in order to paint the building or
premises or make any other repairs or alterations.
9th. It is expressly understood that in the event that the Lessor herein
shall not be the owner of the premises herein leased, and shall hold a lease of
the property of which the demised premises are a part, then this sublease is and
shall remain subject to all of the terms and conditions of such existing lease
to the Lessor, so far as they shall be applicable to the premises herein leased.
10th. In the event that the Lessee shall become bankrupt or shall make a
voluntary assignment for the benefit of creditors, or in the event that a
receiver of the Lessee shall be appointed, then, at the option of the Lessor and
upon five (5) days' notice to the Lessee of the exercise of such option, this
lease shall cease and come to an end.
11th. It is agreed and understood that any holding over by the Lessee of
the hereby leased premises after the expiration of this lease shall operate and
be construed as a tenancy from month to month at a rental of $750.00.
12th. Subject to lease escalation for taxes and insurance increases upon
expiration of this lease 12-31-96.
IN TESTIMONY WHEREOF, The parties to this agreement have hereunto set their
hands in duplicate, the day and year above written.
STOVER STEEL STRUCTURES, INC.
By:/s/
-------------------------------
Lessor
TYSON FOOD, INC.
By:/s/
-------------------------------
Lessee
- 3 -
<PAGE>
MAIL MONTHLY RENTAL
CHECKS TO: Stover Steel Structures
c/o George H. Stover
11124 Yorksprings
Dallas, Texas 75218
- 4 -
<PAGE>
EXHIBIT 10.10
LAW OFFICES OF TERRY W. COZBY
Suite 300
8344 East R. L Thornton
Dallas, Texas 75228
(214) 328-4101
August 25, 1992
Tyson Foods, Inc.
113 Range Drive
Garland, TX 75040
ATTENTION: Mr. Mike Myers
IN RE: Lease Arrangement
210-214 Range Drive
Garland, Texas
Dear Mr. Myers:
Pursuant to our telephone conversation of last week, I provide you with
this proposed letter agreement as to the above-referenced property.
Whereas, Tyson Foods,, Inc. (Tyson) is currently leasing on a month-to-
month basis the 210 Range Drive building from Cope Properties (Cope) Pursuant to
a lease agreement between the parties dated May 21, 1992, and, the parties being
desirous of consummating a purchase/sale of the building and property
municipally known as 210 and 214 Range Drive, the parties agree to the following
amended lease terms:
1. Tyson agrees to additionally lease 214A/B Range Drive at a rental rate
of $900 per month on a month-to-month basis on the same terms and conditions as
the existing lease on 210 Range;
2. It is further agreed that if a sale is consummated and closed on or
before October 30, 1992, then Tyson shall receive a credit towards the purchase
price in the amount of the rent paid by Tyson to Cope for the month of September
($1,800) and the month of October ($1,800), 1992;
3. In the event the purchase/sale of 210-214 Range property is not closed
on or before October 30, 1992, Tyson shall not be entitled to any credit towards
the purchase of the subject buildings as outlined in paragraph 2.
If this accurately reflects our agreement, please sign and return one of
the originals to me at your first opportunity.
- 1 -
<PAGE>
Please call immediately if changes need to be made to this letter
agreement.
/s/ /s/ Terry W. Cozby
- ------------------------------- ---------------------------------------
TYSON FOOD, INC. COPE PROPERTIES by authorized
partner, TERRY W. COZBY
Plant Manager
- -------------------------------
Title
TWC/bp
Enclosures
- 2 -
<PAGE>
[LETTERHEAD OF LAW OFFICES OF TERRY W. COZBY APPEARS HERE]
Tyson Foods, Inc.
113 Range Drive
Garland, TX 75040
ATTENTION: Mr. Mike Myers
IN RE: Lease Arrangement
210-214 Range Drive
Garland, Texas
Dear Mr. Myers:
Pursuant to our recent telephone conversation, I provide you with this
proposed letter agreement as to the above-referenced property.
Whereas, Tyson Foods, Inc., (Tyson) is currently leasing on a month-
to-month basis the property/buildings municipally known as 210 & 214 Range Drive
from Cope Properties (Cope) pursuant to a lease agreement between the parties
dated 5/21/92, and a subsequent letter agreement dated 8/25/92, and, the parties
being desirous of extending the lease tenancy, the parties agree to the
following amended lease terms:
1. Tyson agrees to lease the subject premises for a term of twenty-
four (24) months for the sum of $2,070. per month beginning on July 1, 1995, and
a like sum the 1st day of each mouth thereafter through and including June 1,
1997.
2. The terms and conditions of the existing lease shall remain the
same with the exception it is agreed that if a purchase/sale is consummated
between the parties during the lease term, the balance of lease term obligation
shall cease.
If this accurately reflects our agreement, please sign and return one
of the originals to me in the enclosed self-addressed envelope.
Please call if there are any questions or comments regarding this
letter agreement.
/s/ /s/ Terry W. Cozby
- ------------------------------- ---------------------------------------
TYSON FOOD, INC. COPE PROPERTIES by authorized
partner, TERRY W. COZBY
EVP Finance
- -------------------------------
Title
TWC/bp
Enclosures
<PAGE>
LAW OFFICES OF TERRY W. COZBY
Suite 300
8344 East R. L. Thornton
Dallas, Texas 75228
(214) 328-4101
May 18, 1992
Tyson Foods, Inc.
P. O. Box 462368
Garland TX 75046
ATTENTION: Mr. John Yingling
IN RE: Lease Agreement
210 Range Drive
Dear John:
Per our conversation of last week, enclosed please find Lease
Agreement which provides for the month-to-month tenancy and no security deposit.
Also, enclosed please find the key to the building.
If the terms of the Lease conforms with our agreement, please sign and
return one of the duplicate originals, together with, the initial month's rent
of $900 payable to Cope Properties.
Should Cope not be able to effective a sale of the property to Tyson,
please be reminded that either Landlord or Tenant must give the other party at
least thirty (30) days advance written notice of intent to terminate the lease
arrangement.
Please contact me if there are any questions or comments at this time.
Very truly yours,
/s/ Terry W. Cozby
TERRY W. COZBY
TWC/bp
Enclosures: duplicate originals of the Lease Agreement
building key
self-addressed stamped envelope
<PAGE>
STATE OF TEXAS )
)
COUNTY OF DALLAS )
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT made and entered into by and between Cope
Properties, hereinafter referred to as "Landlord" and TYSON FOODS, INC.,
hereinafter referred to as "Tenant".
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby takes from Landlord
the following described premises (hereinafter referred to as the "demised
premises") situated within the County of Dallas, State of Texas:
Approximately 4,000 square foot building, together with parking
area directly in front and rear of building. Property municipally
known as 210 Range Drive, Garland, Texas.
TO HAVE AND TO HOLD the same on a month-to-month basis beginning on
June 1, 1992, upon the following terms and conditions: Tenant agrees to pay
Landlord at P. O. Box 8743, Horseshoe Bay, Texas 78654-9205, or at such other
place as the Landlord shall designate from time to time in writing, as rent for
the leased premises, the sum of:
The sum of $900.00 on June 1, 1992, and a like sum the 1st day of each
month thereafter until this lease is terminated by either party upon
thirty(30) days advance notice.
1. LATE PAYMENT PENALTY:
A. Tenant shall pay a late charge of $50.00 in the event the monthly
payment is not received by the Landlord on or before the day of each
----------------------------
month the rent is due during the term of this lease.
---------------------
B. Landlord has waived the security deposit requirement.
PAGE 1 of 13 PAGES
<PAGE>
The security deposit is not an advance payment of rental or the full measure of
liquidated damages in case of default by Tenant. Upon the occurrence of any
event of default, Landlord may, from time to time, without prejudice to any
other remedy provided herein or provided by law, use the security deposit to the
extent necessary to make good any arrears of rent and any other damage, injury,
expense or liability caused to Landlord by such event of default. Following any
such application of the security deposit, Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the security deposit to its
original amount. If Tenant is not in default, hereunder, any remaining balance
of such deposit shall be returned by Landlord to Tenant upon expiration or
termination of this lease.
2. ACCEPTANCE OF PREMISES: Tenant acknowledges that it has fully
inspected the demised premises and accepts the demised premises, and any
buildings and improvements situated thereon, as suitable for the purposes for
which the same are leased in their present condition, except
"AS IS"
(If this lease provides for a building to be constructed for Tenant, refer to
Exhibit B attached to this lease. In such case this paragraph 2 shall become
inapplicable, and Exhibit B shall be incorporated into and become a part of this
lease when physically attached hereto.)
3. USE OF PREMISES: The demised premises shall be used and occupied only
for the purpose of any lawful activity associated with the TYSON FOODS operation
and not otherwise. Tenant shall at its own expense obtain any and all
governmental licenses and permits necessary for such use.
4. COMPLIANCE WITH LAW: Tenant shall comply with all governmental laws,
ordinances and regulations applicable to the use of the demised premises, and
shall promptly comply with all governmental orders and directives for the
correction, prevention and abatement of nuisances in or upon, or connected with
the demised premises, all at Tenant's sole expense.
Provision 5.
5. REAL ESTATE TAXES: A, B, and C DELETED
A. Tenant shall pay as additional rental upon receipt of statement his
pro rata share of any increase in real estate taxes on the property of which the
demised premises form a part. The base year shall be _____________________.
B. In the event the real estate taxes levied against the demised premises
for the real estate tax year in which the lease term commences are increased as
a result of any alterations, additions or improvements made by Tenant or by
Landlord at the request of
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<PAGE>
Tenant, Tenant shall pay to Landlord upon demand the amount of such increase.
For the purpose of the calculations under Section B, the amount of the real
estate taxes during the real estate tax year in which the lease term commences
shall not include any taxes resulting from any such alterations, additions,
additions or improvements made in or to the demised premises. Landlord shall
obtain from the tax assessor or assessors a written statement of the total
amount of such increase.
C. For purposes of determining Tenant's obligation under Section B for any
real estate tax year, if real estate taxes are assessed against the demised
premises jointly with other real property not constituting a part of the demised
premises, the "real estate taxes levied against the demised premises" for such
year shall be equal to the amount bearing the same proportion to the aggregate
assessment that the total square feet of building area in the demised premises
bears to the total square feet of building area included in the joint
assessment.
6. MAINTENANCE BY LANDLORD:
A. Landlord shall at its expense maintain the roof, foundation and the
structural soundness of the exterior walls (excluding all windows, window glass,
plate glass and all doors) of the building in good repair and condition,
reasonable wear and tear excepted. Landlord shall not be required to make
repairs occasioned by the act or negligence of Tenant, its employees,
subtenants, licensees or concessionaires (unless such act or negligence results
in damage covered by valid and collectible fire and extended coverage insurance
policies and is collectible thereunder). Tenant shall give immediate written
notice to Landlord of the need for repairs or corrections, and Landlord shall
proceed promptly to make such repairs or corrections. In the event any repairs
are required to be made by Landlord, Tenant shall, at Tenant's sole cost and
expense, promptly remove Tenant's fixtures, inventory and other property and
equipment maintained by Tenant to the extent required to enable Landlord to make
such repairs. Landlord's liability hereunder shall be limited to the cost of
such repairs or corrections.
B. Landlord represents that at the commencement of the lease term, the
plumbing, electrical system and exterior doors, and any fire protection
sprinkler system, heating system, air conditioning equipment and elevators
existing on the date of this lease to be provided by Landlord, are or will be in
good operating condition.
7. MAINTENANCE BY TENANT:
A. Tenant shall maintain in good repair and condition at its expense and
risk all other parts of the building and other improvements and equipment on the
demised premises not required to be maintained by Landlord including but not
limited to repairs (including all necessary replacements) of the windows, window
glass, plate glass, doors, heating system, air conditioning equipment, fire
protection sprinkler system, elevators, interior and exterior plumbing, and the
interior of the building in general, and including
PAGE 3 of 13 PAGES
<PAGE>
care of landscaping and regular mowing of grass, and maintenance of any paving
and railroad siding.
B. Tenant shall, throughout the lease term, take good care of the
building and other improvements and keep them free from waste or nuisance and,
at the expiration or termination of this lease, deliver up the demised premises
clean and free of trash and in good repair and condition, with all equipment
situated in the demised premises on the beginning date of this lease, or
replacement thereof, in working order (reasonable wear and tear and damage for
fire, tornado or other casualty excepted).
C. In the event Tenant shall fail to maintain the demised premises and
any paving, landscaping or railroad siding in accordance with this paragraph 7,
Landlord shall have the right (but not the obligation) to cause all repairs or
other maintenance to be made and the reasonable costs therefor expended by
Landlord shall be reimbursed by Tenant on demand.
8. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: Tenant shall not create any
openings in the roof or exterior walls, or make any alterations, additions or
improvements to the demised premises without prior written consent of Landlord.
Consent for non-structural alterations, additions or improvements shall not be
unreasonably withheld by Landlord. Tenant shall have the right to erect or
install shelves, bins, machinery, air conditioning or heating equipment and
trade futures, provided that Tenant complies with all applicable governmental
laws, ordinances and regulations. At the expiration or termination of this
lease, Tenant shall have the right to remove such items so installed, provided
Tenant is not in default at the time of such removal and provided further that
Tenant shall, at the time of removal of such items, repair in a good and
workmanlike manner any damage caused by installation or removal thereof.
Tenant shall pay for all costs incurred or arising out of alterations,
additions or improvements in or to the demised premises and shall not permit a
mechanic's or materialman's lien to be asserted against the demised premises.
Upon request by Landlord, Tenant shall deliver to Landlord proof of payment
reasonably satisfactory to Landlord of all costs incurred or arising out of any
such alterations, additions or improvements.
All alterations, additions or improvements in or to the demised premises
shall become the property of Landlord at the expiration or termination of this
lease; however, Landlord may direct the removal of alterations, additions or
improvements by giving written notice to Tenant prior to the expiration or
termination of this lease. At the direction of Landlord, Tenant shall promptly
remove all alterations, additions and improvements and any other property placed
in the demised premises by Tenant and Tenant shall repair in a good and
workmanlike manner any damage caused by such removal.
PAGE 4 of 13 PAGES
<PAGE>
9. SIGNS. Tenant shall not place or affix any signs or other objects
upon or to the roof or exterior walls of the demised premises or paint or
otherwise deface the exterior walls of the demised premises without the prior
written consent of Landlord. Any signs installed by Tenant shall conform with
applicable laws and deed and other restrictions. Tenant shall remove all signs
at the termination of this lease and shall repair any damage and close any holes
caused or revealed by such removal.
10. INCREASING PREMIUMS OR CAUSING SUSPENSION OR CANCELLATION OF
LANDLORD'S INSURANCE POLICY:
A. If Tenant's use and occupancy of the demised premises causes an
increase in the premiums for any fire and extended coverage insurance policy
carried by Landlord on the date Tenant shall have first gone in possession of
the demised premises under this lease, Tenant shall pay, as additional rental,
the amount of such increase to Landlord upon demand and presentation of written
evidence of the increase by Landlord.
B. Tenant shall not permit any operation or activity to be conducted or
storage or use of any volatile or any other materials in the demised premises
that would cause suspension or cancellation of any fire and extended coverage
insurance policy carried by Landlord, or increase the premiums therefor, without
prior written consent of Landlord.
C. Any insurance which may be carried by Landlord or Tenant against loss
or damage to the building and other improvements situated on the demised
premises shall be for the sole benefit of the party carrying such insurance and
under its sole control.
11. WAIVER OF SUBROGATION: Each party hereto waives any every claim which
arises or may arise in its favor against the other party hereto during the term
of this lease or any renewal or extension thereof for any and all loss of, or
damage to, any of its property located within or upon, or constituting a part
of, the demised premises, which loss or damage is covered by valid and
collectible fire and extended coverage insurance policies, to the extent that
such loss or damage is recoverable under such insurance policies. Such mutual
waivers shall be in addition to, and not in limitation of derogation of , any
other waiver or release contained in this lease with respect to any loss of, or
damage to, property of the parties hereto. Inasmuch as such mutual waivers will
preclude the assignment of any aforesaid claim by way of subrogation or
otherwise to an insurance company (or any other person), each party hereby
agrees immediately to give to each insurance company which has issued to its
policies of fire and extended coverage insurance, written notice of the terms of
such mutual waivers, and to cause such insurance policies to be properly
endorsed, if necessary, to prevent the invalidation of such insurance coverages
by reason of such waivers.
12. LANDLORD'S RIGHT OF ENTRY: Landlord and its authorized agents shall
have the right, during normal business hours, to enter the demised premises (a)
to inspect the general condition and state of repair thereof, (b) to make
repairs required or
PAGE 5 of 13 PAGES
<PAGE>
permitted under this lease, (c) to show the premises to any prospective tenant
or purchaser or (d) for any other reasonable purpose.
During the final 150 days of the lease term, Landlord and its authorized
agents shall have the right to erect and maintain on or about the demised
premises customary signs advertising the property for lease or for sale.
13. UTILITY SERVICES: Tenant shall pay the cost of all utility services,
including but not limited to initial connection charges, all charges for gas,
water and electricity used on the demised premises, and for all electric lights,
lamps and tubes.
14. ASSIGNMENT AND SUBLEASING: Tenant shall not, without the prior
written consent of Landlord, assign this lease or sublet the demised premises or
any portion thereof. Any assignment or subletting shall be expressly subject to
all terms and provisions of this lease, including the provisions of paragraph 3
pertaining to the use of the demised premises. In the event of any assignment
or subletting, Tenant shall remain fully liable for the full performance of all
Tenant's obligations under this lease. Tenant shall not assign his rights
hereunder or sublet the premises without first obtaining a written agreement
from assignee or sublessee whereby assignee or sublessee agrees to be bound by
the terms of this lease. No such assignment or subletting shall constitute a
novation. In the event of the occurrence of an event of default while the
demised premises are assigned or sublet, Landlord, in addition to any other
remedies provided herein or by law, may at Landlord's option, collect directly
from such assignee or subtenant all rents becoming due under such assignment or
subletting and apply such rent against any sums due to Landlord hereunder. No
direct collection by Landlord from any such assignee or subtenant shall release
Tenant from the performance of its obligations hereunder.
15. FIRE AND CASUALTY DAMAGE:
A. If the building or other improvements on the demised premises should
be damaged or destroyed by fire, tornado or other casualty, Tenant shall give
immediate written notice thereof to Landlord.
B. If the building situated on the demised premises should be
substantially or totally destroyed by fire, tornado or other casualty, or so
damaged that rebuilding or repairs cannot reasonably be completed within 120
days from the date of written notification by Tenant to Landlord of the
happening of the damage, this lease shall terminate at the option of Landlord
and rent shall be abated for the unexpired portion of this lease, effective from
the date of actual receipt by Landlord of such written notification. If this
lease is not terminated, the building and other improvements shall be rebuilt or
repaired and rent abated to the extent provided under Section C.
C. If the building or other improvements situated on the demised premises
should be damaged by fire, tornado or other casualty but not to such an extent
that rebuilding or repairs cannot reasonably be completed within 120 days from
the date of
PAGE 6 of 13 PAGES
<PAGE>
written notification by Tenant to Landlord of the happening of the damage, this
lease shall not terminate, but Landlord shall, at its sole cost and risk,
proceed forthwith and use reasonable diligence to rebuild or repair such
building and other improvements on the demised premises (other than leasehold
improvements made by Tenant or any assignee, subtenant or other occupant of the
demised premises) to substantially the condition in which they existed prior to
such damage; provided, however, if the casualty occurs during the final 18
months of the lease term, Landlord shall not be required to rebuild or repair
such damage unless Tenant shall exercise its renewal option (if any is contained
herein) within 15 days after the date of receipt by Landlord of the notification
of the occurrence of the damage. If Tenant does not elect to exercise its
renewal option or if there is no renewal option contained herein or previously
unexercised at such time, this lease shall terminate at the option of Landlord
and rent shall be abated for the unexpired portion of this lease, effective form
the date of actual receipt by Landlord of the written notification of the
damage. If the building and other improvements are to be rebuilt or repaired and
are untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be adjusted
equitably.
16. INDEMNITY AND PUBLIC LIABILITY INSURANCE:
A. Landlord shall not be liable to Tenant or to Tenant's employees,
agents or visitors, or to any other person whomsoever, for any injury to persons
or damage to property on or about the demised premises or any adjacent area
owned by Landlord caused by the negligence or misconduct of Tenant, its
employees, subtenants, licenses or concessionaires or any other person entering
the demised premises under express or implied invitation of Tenant, or arising
out of the use of the demised premises by Tenant and the conduct of its business
therein, or arising out of any breach of default by Tenant in the performance of
its obligations hereunder; and Tenant hereby agrees to indemnify Landlord and
hold it harmless from any loss, expense or claims arising out of such damage or
injury. Tenant shall not be liable for any injury or damage caused by the
negligence or misconduct of Landlord, or its employees or agents, and landlord
agrees to indemnify Tenant and hold it harmless from any loss, expense or damage
arising out of such damage or injury.
B. Landlord and Landlord's agents and employees shall not be liable to
Tenant for any injury to persons or damage to property resulting from the
demised premises or other premises or owned by Landlord becoming out of repair
or by defect in or failure of equipment, pipes, or wiring, or broken glass, or
by the backing up of drains, or by gas, water, steam, electricity or oil
leaking, escaping or flowing into the demised premises, regardless of the
source, or by dampness (except where due to Landlord's willful failure to make
repairs required to be made hereunder, after the expiration of a reasonable time
after written notice to Landlord of the need for such repairs) or by fire,
explosion, failing plaster or ceiling. Landlord shall not be liable to Tenant
for any loss or damage that may be occasioned by or through the acts or
omissions of other tenants of the Landlord or caused by operations in
construction of any private, public or quasi-public work, or of any other
persons whomsoever, excepting only duly authorized employees and agents of
Landlord.
PAGE 7 of 13 PAGES
<PAGE>
17. CONDEMNATION:
A. If, during the term of this lease or any extension or renewal thereof,
all or a substantial part of the demised premises should be taken for any public
or quasi-public use under any governmental law, ordinance or regulation or by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective from the date of taking of
the demised premises by the condemning authority.
B. If less than a substantial part of the demised premises is taken for
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain, or is sold to the condemning authority under
threat of condemnation, Landlord, at its option, may by written notice terminate
this lease or shall forthwith at its sole expense restore and reconstruct the
buildings and improvements (other than leasehold improvements made by Tenant or
any assignee, subtenant or other occupant of the demised premises) situated on
the demised premises in order to make the same reasonably tenantable and
suitable for the uses for which the demised premises are leased as defined in
paragraph 3. The rent payable hereunder during the unexpired portion of this
lease shall be adjusted equitably.
C. Landlord and Tenant shall each be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings. The termination of this
lease shall not affect the rights of the respective parties to such awards.
18. HOLDING OVER: Should Tenant, or any of its successors in interest
fail to surrender the demised premises, or any part thereof, on the expiration
of the term of this lease, such holding over shall constitute a tenancy from
month to month, at a monthly rental equal to 110% of the rent paid for the last
month of the term of this lease unless otherwise agreed in writing.
19. DEFAULT BY TENANT: The following events shall be deemed to be events
of default under this lease:
A. Failure of Tenant to pay any installment of the rent or other sum
payable to Landlord hereunder on the date that same is due.
B. Failure of Tenant to comply with any term, condition or covenant of
this lease, other than the payment of rent or other sum of money, and such
failure shall not be cured within 30 days after written notice thereof to
Tenant.
C. Insolvency, the making of a transfer in fraud of creditors, or the
making of any assignment for the benefit of creditors by Tenant or any guarantor
of Tenant's obligation.
PAGE 8 of 13 PAGES
<PAGE>
D. Filing of a petition under any section or chapter of the National
Bankruptcy Act, as amended, or under any similar law or statute of the United
States or any State thereof by Tenant or any guarantor of Tenant's obligations,
or adjudication as a bankrupt or insolvent in proceedings filed against Tenant
or such guarantor.
E. Appointment of a receiver or trustee for all or substantially all of
the assets of Tenant or any guarantor of Tenant's obligations hereunder.
F. Abandonment by Tenant of any substantial portion of the demised
premises or cessation of use of the demised premises for the purpose leased.
20. REMEDIES OF LANDLORD: Upon the occurrence of any of the events of
default listed in Section 19, Landlord shall have the option to pursue any one
or more of the following remedies without any notice or demand whatsoever:
A. Terminate this lease, in which event Tenant shall immediately
surrender the demised premises to Landlord. If Tenant fails to so surrender
such premises, Landlord may, without prejudice to any other remedy which it may
have for possession of the demised premises or arrearages in rent, enter upon
and take possession of the demised premises and expel or remove Tenant and any
other person who may be occupying such premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages
therefor. Tenant shall pay to Landlord on demand the amount of all loss and
damage which Landlord may suffer by reason of such termination, whether through
inability to relet the demised premises on satisfactory terms or otherwise.
B. Enter upon and take possession of the demised premises, by force if
necessary, without terminating this lease and without being liable for
prosecution or for any claim for damages therefor, and expel or remove Tenant
and any other person who may be occupying such premises or any part thereof.
Landlord may relet the demised premises and receive the rent therefor. Tenant
agrees to pay to Landlord monthly or on demand from time to time any deficiency
that may arise by reason of any such reletting. In determining the amount of
such deficiency, the brokerage commission, attorney's fees, remodeling expenses
and other costs of reletting shall be subtracted from the amount of rent
received under such reletting.
C. Enter upon the demised premises, by force, if necessary, without
terminating this lease and without being liable for prosecution or for any claim
for damages therefor, and do whatever Tenant is obligated to do under the terms
of this lease. Tenant agrees to pay Landlord on demand for expenses which
Landlord may incur in thus _____________ compliance with Tenant's obligations
under this lease, together with interest thereon at the _______________ of
_________________% per annum from the date _________. Landlord shall not be
liable for any damages resulting to the Tenant from such action, whether caused
by negligence of Landlord or otherwise. [Best copy available.]
PAGE 9 of 13 PAGES
<PAGE>
Pursuit of any of the foregoing, remedies shall not ______________
pursuant to any of the ____________________ or any other remedies
____________________ by law, nor shall _________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________. [Best copy available.]
PROVISION NO. 25 DELETED
21. LANDLORD'S LIEN: In addition to the statutory Landlord's lien, Tenant
hereby grants to Landlord a security interest to secure payment of all rent and
other sums of money becoming due hereunder from Tenant, upon all goods, wares,
equipment, fixtures, furniture and other personal property of Tenant situated in
or upon the demised premises, together with the proceeds from the sale or lease
thereof. Such property shall not be removed without the consent of Landlord
until all arrearages in rent and other sums of money then due to Landlord
hereunder shall first have been paid and discharged. Upon the occurrence of any
event of default, Landlord may, in addition to any other remedies provided
herein or by law, enter upon the demised premises and take possession of any and
all goods, wares, equipment, fixtures furniture and other personal property of
Tenant situated on the premises without liability for trespass or conversion,
and sell the same at public or private sale, with or without having such
property at the sale, after giving Tenant reasonable notice of the time and
place of any such sale. Unless otherwise required by law, notice to Tenant of
such sale shall be deemed sufficient if given in the manner prescribed in this
lease at least 10 days before the time of the sale. Any public sale made under
this paragraph shall be deemed to have been conducted in a commercially
reasonable manner if held in the demised premises or where the property is
located, after the time, place and method of sale and a general description of
the types of property to be sold have been advertised in a daily newspaper
published in Dallas County, Texas, for five consecutive days before the date of
the sale. Landlord or its assigns may purchase at a public sale and, unless
prohibited by law, at a private sale. The proceeds from any disposition dealt
with in this paragraph, less any and all expenses connected with the taking of
possession, holding and selling of the property (including reasonable attorneys'
fees and legal expenses), shall be applied as a credit against the indebtedness
secured by the security interest granted herein. Any surplus shall be paid to
Tenant or as otherwise required by law; Tenant shall pay any deficiencies
forthwith. Upon request by Landlord, Tenant agrees to execute and deliver to
Landlord a financing statement in form sufficient to perfect the security
interest of Landlord in the aforementioned property and proceeds thereof under
the provisions of the Uniform Commercial Code in force in the State of Texas.
The statutory lien for rent is expressly reserved; the security interest herein
granted is in addition and supplementary thereto.
22. ATTORNEYS' FEES: If, on account of any breach or default by Landlord
or Tenant of their respective obligations under this lease, it shall become
necessary for the
PAGE 10 of 13 PAGES
<PAGE>
other to employ an attorney to enforce or defend any of its rights or remedies
hereunder, and should such party prevail, it shall be entitled to any reasonable
attorneys' fees incurred in such connection.
23. QUIET ENJOYMENT: Landlord warrants that it has full right and power
to execute and perform this lease and to grant the estate demised herein and
that Tenant, on payment of the rent and performing the covenants herein
contained, shall peaceably and quietly have, hold and enjoy the demised premises
during the full term of this lease and any extension or renewal hereof;
provided, however, that Tenant accepts this lease subject and subordinate to any
recorded mortgage, deed of trust or other lien presently existing upon the
demised premises. Landlord is hereby irrevocably vested with full power and
authority to subordinate Tenant's interest hereunder to any mortgage, deed or
trust or other lien hereafter placed on the demised premises, and Tenant agrees
upon demand to execute such further instruments subordinating this lease as
Landlord may request, provided such further subordination shall be upon the
express condition that this lease shall be recognized by the mortgagee and that
the rights of Tenant shall remain in full force and effect during the term of
this lease so long as Tenant shall continue to perform all of the covenants of
this lease.
24. WAIVER OF DEFAULT: No waiver by the parties hereto of any default or
breach of any term, condition or covenant of this lease shall be deemed to be
waiver of any subsequent default or breach of the same or any other term,
condition or covenant contained herein.
26. CERTIFICATE OF OCCUPANCY: Tenant may, prior to the commencement of
the term of this lease, apply for a Certificate of Occupancy to be issued by the
municipality in which the demised premises are located, but this lease shall not
be contingent upon issuance thereof. Nothing herein contained shall obligate
Landlord to install any additional electrical wiring, plumbing or plumbing
fixtures which are not presently existing in the demised premises, or which have
not been expressly agreed upon by Landlord in writing.
27. FORCE MAJEURE: In the event performance by Landlord of any term,
condition or covenant in this lease is delayed or prevented by any Act of God,
strike, lockout, shortage of material or labor, restriction by any governmental
authority, civil riot, flood, and any other cause not within the control of
Landlord, the period for performance of such term, condition or covenant shall
be extended for a period equal to the period Landlord is so delayed or hindered.
28. EXHIBITS: All exhibits, attachments, annexed instruments and addenda
referred to herein shall be considered a part hereof for all purposes with the
same force and effect as if copied at full length herein.
PAGE 11 of 13 PAGES
<PAGE>
29. USE OF LANGUAGE: Words of any gender used in this lease shall be held
and construed to include any other gender, and words in the singular shall be
held to include the plural, unless the context otherwise requires.
30. CAPTIONS: The captions or headings of paragraphs in this lease are
inserted for convenience only, and hall not be considered in construing the
provisions hereof if any questions of intent should arise.
31. SUCCESSORS: The terms, conditions and covenants contained in this
lease shall apply to, inure to the benefit of, and be binding upon the parties
hereto and their respective successors in interest and legal representatives
except as otherwise herein expressly provided. All rights, powers, privileges,
immunities and duties of Landlord under this lease, including, but not limited
to, any notices required or permitted to be delivered by Landlord to Tenant
hereunder, may, at Landlord's option, be exercised or performed by Landlord's
agent or attorney.
32. SUBLEASE: If this lease is in fact a sublease, Tenant accepts this
lease subject to all of the terms and conditions of the lease under which
Landlord holds the demised premises as lessee. Tenant covenants that it will do
no act or thing which would constitute a violation by Landlord of its obligation
sunder such lease.
33. SEVERABILITY: If any provision in this lease should be held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this lease shall not be affected thereby.
34. NOTICES: Any notice or document required or permitted to be delivered
hereunder may be delivered in person or shall be deemed to be delivered, whether
actually received or not, when deposited in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed to
the parties at the addresses indicated below, or at such other addresses as may
have theretofore been specified by written notice delivered in accordance
herewith.
35. Miscellaneous:
A. At no time shall Tenant park any vehicles or objects in the area
between the buildings 210 Range and 214 Range (other than for loading and
unloading).
36. Tenant shall maintain all trash receptacles at the front of the
building on the Range Drive side of the property.
37. Tenant or Landlord shall give the other WRITTEN NOTICE thirty (30)
--------------------------
days prior to Tenant's or Landlord's intention to terminate the lease.
- ---------------------------------------------------------------------
PAGE 12 of 13 PAGES
<PAGE>
38. Tenant is aware that the subject property is placed on the market for
sale. The Landlord is permitted access to the property for purpose of showing
to prospective purchasers upon reasonable notice to Tenant.
EXECUTED IN DUPLICATE ORIGINALS this ______ day of May, 1992.
/s/ /s/ Terry W. Cozby
- ---------------------------------- ---------------------------------------
TYSON FOODS, INC. COPE PROPERTIES
Tenant By: Authorized Partner
By:
-------------------------------
- ----------------------------------
Title
PAGE 13 of 13 PAGES
<PAGE>
Exhibit 10.11
Certain portions of this exhibit have been deleted and confidentially filed
with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated
by "[*****]" inserted in place of such confidential information.
<PAGE>
EXHIBIT 10.11
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (herein the "Agreement"), is made on the date of
execution hereof by and between HARKER'S DISTRIBUTION, INC., a corporation
organized under the laws of the State of Iowa, (herein the "Purchaser") and
TYSON FOODS, INC., a corporation organized under the laws of the State of
Delaware (herein "Tyson").
WHEREAS, Harker's, Inc., a corporation organized and existing under the laws
of the State of Iowa (herein "Harker's"), is an indirect subsidiary of Tyson;
and
WHEREAS, the Purchaser has entered into an Asset Purchase Agreement with
Harker's, whereby the Purchaser will purchase and Harker's will sell certain
assets as set forth therein; and
WHEREAS, immediately after the Closing of the Asset Purchase Agreement, it
is anticipated that Tyson will cause the corporate name of Harker's to be
changed to a new name acceptable to Tyson, not including the name "Harker's,"
and that the Purchaser will change its corporate name to Harker's, Inc.; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to Closing under the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Sale and Purchase of Products. Subject to the terms and conditions of
-----------------------------
this Agreement, Tyson agrees to sell and the Purchaser agrees to purchase
certain Products within certain Product Categories as set forth in Paragraph 2
herein, in quantities as set forth in Paragraph 3 herein, in accordance with the
quality requirements set forth in Paragraph 4 herein, at prices as calculated in
Paragraph 5 herein.
2. Products. This Agreement shall include food Products within the
--------
Product Categories ("Product Categories") described in column one of Exhibit A,
attached hereto. Within the various Product Categories described in column one
of Exhibit A shall be food products ("Products") described in column two of
Exhibit A. New products may be added to this Agreement by mutual agreement, in
writing, signed by both parties.
3. Quantity.
--------
A. Output. The maximum amounts in pounds of each of the various
------
Product Categories included in column one of Exhibit A that Tyson shall
be required to sell to the Purchaser during the term of this Agreement
shall equal the amounts, in pounds, set forth in Exhibit B, Part One,
attached hereto.
<PAGE>
B. Purchase. The minimum amounts in pounds of each of the various
--------
Product Categories included in column one of Exhibit A that the
Purchaser shall be required to purchase from Tyson during the term of
this Agreement shall equal the amounts, in pounds, set forth in Exhibit
B, Part Two, attached hereto.
4. Quality. Tyson shall sell to the Purchaser Products meeting
-------
"Specifications" in effect at the time of execution of this Agreement, in the
same "Product Mix" then in existence, except as otherwise provided in this
Agreement. Any substantial change in Product Mix or Specifications shall
require the written approval of both parties. "Product Mix" shall mean the
relative percentages of each Product Category, measured in pounds, identified in
Column three of Exhibit A, hereto, to the sum of the Products in all Product
Categories, measured in pounds, identified in Exhibit A. "Specifications" shall
mean all those matters set forth in the "Product Specification Book" identified
as Exhibit C, a copy of which is attached hereto.
5. Price.
-----
A. Calculation. Tyson shall sell each of the Products within the
-----------
Product Categories hereunder to the Purchaser at a price equal to the
lower of (i) the price mutually agreed upon by the Purchaser and Tyson
for the particular Product or (ii) the price calculated in the
following manner:
(a) Ground Beef Products. Prices per pound for Ground Beef
Products shall equal the sum of total raw cost per pound, as
hereinafter defined, in addition to Plus Factors per pound, as
hereinafter defined. Prices per pound for Ground Beef Products
shall be established on a formula basis utilizing the
[**************************************************************
*****************************************] to establish "total
raw cost". An example of the method to be utilized in the
calculation of "total raw cost" is attached hereto as Exhibit D.
The "Plus Factors" (as hereinafter defined) to be utilized in
establishing prices for Period One described in Exhibit B shall
be established as of August 1, 1990, and as of each succeeding
August 1 for each succeeding period thereafter, as described in
Exhibit B. "Plus Factors" for each packaging configuration shall
be established by [*********************************************
***************************************************************]
[*] confidentiality requested
-2-
<PAGE>
[**************************************************************
*****************************************************************
*****************************************************************
*****************************************************************
************************************************************
*********************************************************
****************************]The weighted averages shall be
calculated as follows. First, the plus factors for each of the
-----
[************************************************************
*********************] (illustrated in Exhibit E, Column 1) as of
August 1, 1990, and August 1 of each succeeding applicable annual
period as described in Exhibit B, shall be multiplied by the
weight in pounds purchased by each such customer for each of the
Four Packaging Configurations for the preceeding twelve month
period, illustrated in Exhibit E, Column 2. The result,
illustrated in Exhibit E, Column 3, shall represent the total
incremental cost produced by each such customer's plus factor for
the total annual pounds of each of the Four Packaging
Configurations purchased in the preceding year. Second, the
------
total pounds of each of the Four Packaging Configurations
purchased in the preceeding annual period by each of [***********
****************************] shall be added to arrive at the
total pounds of ground beef in each of the Four Packaging
Configurations purchased by [*******************************
********] in the preceeding annual period, illustrated as the
"Total" in Exhibit E, Column 2. Third, the incremental cost
-----
related to the plus factors of each of [*******************
********************] for ground beef products for each of the
Four Packaging Configurations for the preceeding annual period
shall be added to produce the total incremental cost related to
the plus factors of [*****************************************]
for each of the Four Packaging Configurations for the preceeding
annual period, illustrated as the "Total" in Exhibit E, Column 3.
Finally, the total incremental cost of [*******************
-------
********************] related to their plus factors for each of
the Four Packaging Configurations (illustrated as "Total", in
Exhibit E, Column 3) shall be divided by the total pounds of
ground beef in each of the Four Packaging Configuration purchased
by [****************************************] in the preceeding
annual period (illustrated as "Total", in Exhibit E, Column 2) to
produce the weighted average of the plus factors of [***********
****************************] for the preceeding annual period
for each of the Four Packaging Configurations (illustrated in
Exhibit E, Column 4). An example of the formula to be utilized in
[*] confidentiality requested
-3-
<PAGE>
the calculation of Plus Factors for each packaging configuration
is attached hereto as Exhibit E. The weighted averages so
calculated shall constitute the Plus Factors for the succeeding
annual period as described in Exhibit B. [**********************
****************************************************************
***************************************************************
**************************************************************
***************************************************************
***************************************************************
***************************************************************
*****************************************************************
*****************************************************************
****************************************************************
****************************************************************
***************************************************************
*****************************************************************
*****************************************************************
****************************************************************
*************************************************] Tyson shall
deliver all Ground Beef Products F.O.B. the Purchaser's receiving
dock in Le Mars, Iowa.
(b) Beef Steak Products. [*****************************
-------------------
************************************************************
****************************************************************
************************************************************
****************************************************************
************************************************************
**********************************************] Tyson shall
deliver all Beef Steak Products F.O.B. the Purchaser's receiving
dock in Le Mars, Iowa.
(c) Chicken Products. [****************************************
----------------
************************************************************
****************************************************************
************************************************************
****************************************************************
************************************************************
************************************************************
******************] Unless otherwise mutually agreed upon by the
parties, Chicken Products shall be sold by Tyson to the Purchaser
on a delivered basis with freight to the Purchaser's receiving
dock, Le Mars, Iowa, paid by Tyson. The risk of loss for all
[*] confidentiality requested
-4-
<PAGE>
Chicken Products shall remain with Tyson until receipt of the
Product by the Purchaser at its receiving dock, Le Mars, Iowa.,
unless otherwise mutually agreed upon by the parties.
(d) Pork Products.
-------------
(1) [*****************************************************
******************************************************
*********************************************************
***************************************************
***********************************************************
********************************************************
**********************************************************
**********************************************************
******************************************************
*********************************************************
********************************] No later than August 1,
1992, the parties will attempt to agree upon new terms of
sale for the succeeding one year renewal of this Agreement.
Thereafter, if the parties have agreed upon terms for the
current period, the parties will attempt to agree upon new
terms for the succeeding one-year period. If no mutually
acceptable terms of sale can be agreed upon for any such
renewal period, the Purchaser may, in its sole discretion,
cancel its obligation to purchase Pork Products, including
chops, sausage, patties and links. In the event of such
cancellation, the obligation of Tyson to sell Pork Products
to the Purchaser under this Agreement shall terminate and
the Purchaser shall, for each ensuing one year period, meet
the Pork Product purchase requirements established in
Exhibit B, Part Two, by purchasing other Products identified
in Exhibit A, exclusive of Ground Beef Products.
(2) [****************************************************
**********************************************************
***********************************************************
**********************************************************
***********************************************************
************************************************************
******************]
[*] confidentiality requested
-5-
<PAGE>
(3) Tyson shall deliver all Pork Products F.O.B. the
Purchaser's receiving dock in Le Mars, Iowa.
(4) Tyson shall give the Purchaser written notice of any
change in the location of its pork production facilities no
less than thirty (30) days prior to such change,.
(5) The Purchaser shall give Tyson written notice of any
cancellation of its obligation to purchase Pork Products
under this Agreement no later than August 1, 1992, or August
1 preceding each succeeding one-year renewal period, which
termination shall be effective the end of Period Two
described in Exhibit B or the end of the relevant succeeding
annual period, respectively.
(e) Breaded or Battered Vegetable Products. [*******************
--------------------------------------
****************************************************************
***************************************************************
****************************************************************
***************************************************************
****************************************************************
***************************************************************
****************************************************************
***************************************************************
***************************************************************
*********************************] No later than August 1, 1992,
the parties will attempt to agree upon new terms of sale for the
succeeding one year renewal of this Agreement. If the parties
have agreed upon terms for the current period, the parties will
attempt to agree upon new terms for the succeeding one-year
period. Tyson shall deliver all Breaded or Battered Vegetable
Products F.O.B. the Purchaser's receiving dock in Le Mars, Iowa.
(f) Cooked Roast Beef Products. [****************************
--------------------------
**************************************************************
***************************************************************
***************************************************************
**************************************************************
**************************************************************
***************************************************************
***************************************************************
**************************************************************]
[*] confidentiality requested
-6-
<PAGE>
[****************************************************************
***************************************************************
*****************************************************************
****************************************************************
*****************************************************************
****************************************************************
***********************************] Tyson shall deliver all
Cooked Roast Beef Products F.O.B. the Purchaser's receiving dock
in Le Mars, Iowa.
(g) Breaded or Battered and Special Portion Products. [*********
------------------------------------------------
*****************************************************************
************************************************************
****************************************************************
*****************************************************************
***************************************************************
***************************************************************
**************] Tyson shall deliver all Breaded or Battered and
Special Portion Products F.O.B. the Purchaser's receiving dock in
Le Mars, Iowa.
B. The terms and conditions for spoils, returns, and sample credits will
be equal to the best terms and conditions offered to any of Tyson's food
service distributor customers for the particular Product or Product
Category.
C. Verification. [**********************************************
------------
************************************************************************
************************************************************************
*************************************************************************
***************************************************************************
************************************************************************
************************************************************************
*************************************************************************
***************************************************************************
************************************************************************
************************************************************************
*************************************************************************
**************************************************************************]
6. Orders. All orders shall be handled as follows:
------
(A) The Purchaser will advise Tyson of the levels of Products that the
Purchaser desires to maintain in the Purchaser's Le Mars, Iowa, freezer.
[*] confidentiality requested
-7-
<PAGE>
The inventory levels will be based upon minimum and maximum poundage
amounts for each Product. The Purchaser shall not change the inventory
levels to be maintained more frequently than every thirty (30) days, except
for bids and special orders as provided in paragraph 6(C) of this
Agreement. Tyson shall comply with such changes within seven (7) days of
the Purchaser's notice. Tyson will have access to the Purchaser's sales
volumes in pounds and the Purchaser's Product inventory levels in pounds in
order to plan production schedules to comply with the minimum and maximum
levels for each Product.
(B) Tyson will submit to the Purchaser the content of each anticipated
shipment of Products to be sent to the Purchaser's Le Mars freezer. Each
such shipment will be assigned a purchase order number generated by the
Purchaser. All shipments of Products received from Tyson will have a bill
of lading, or a manifest, and a purchase order number generated by the
Purchaser.
(C) The minimum for a special order will be [******************************
*******]. Bids and special orders will require seven (7) days prior
notification from the Purchaser to Tyson.
7. Acceptance of Product. All Products shall be accepted by the Purchaser
---------------------
by endorsement of the manifest or bill of lading at the Purchaser's receiving
dock, Le Mars, Iowa.
8. Taxes. Each party shall be responsible for the satisfaction of any tax
-----
liability accruing to it under this Agreement. Upon the request of Tyson, the
Purchaser shall execute an Iowa sales tax resale exemption certificate.
9. Payment. Except as otherwise agreed in writing, payment by the
-------
Purchaser to Tyson for Products shall be made in cash, due within fourteen (14)
days after the date of the invoice for such Products. Payment by the Purchaser
shall not constitute waiver of any of the Purchaser's rights. In the event any
payment is not made when due under this Section 9, Tyson shall not be obligated
to sell or deliver Products hereunder until such payment is made.
10. Guarantee and Indemnification. Tyson shall give to the Purchaser a
-----------------------------
Continuing Guarantee and Indemnity Agreement in a form substantially similar to
Exhibit H, attached hereto, relating to all Products sold hereunder to the
Purchaser by Tyson or any of its directly or indirectly owned subsidiaries,
including Harker's.
11. Term of Agreement. This Agreement shall become effective on the date
-----------------
of execution hereof, and shall continue in effect until its expiration on
October 3, 1992, unless terminated sooner as provided in Paragraph 12 below;
provided, however, that, the Purchaser shall thereafter have four successive
[*] confidentiality requested
-8-
<PAGE>
options to extend the term of this Agreement for four additional one-year
periods. Each such option shall be exercisable, in writing, on or prior to the
following exercise dates:
<TABLE>
<CAPTION>
<S> <C>
First One-Year Period Last Exercise Date
- --------------------- ------------------
October 4, 1992 to
October 2, 1993 August 1, 1992
Second One-Year Period Last Exercise Date
- ---------------------- ------------------
October 3, 1993 to
October 1, 1994 August 1, 1993
Third One-Year Period Last Exercise Date
- --------------------- ------------------
October 2, 1994 to
September 30, 1995 August 1, 1994
Fourth One-Year Period Last Exercise Date
- ---------------------- ------------------
October 1, 1995 to
September 28, 1996 August 1, 1995
</TABLE>
12. Termination. In addition to any other rights and remedies which the
-----------
Purchaser or Tyson may have under the laws of the State of Iowa or pursuant to
the terms of this Agreement (other than the resort to judicial remedies), the
Purchaser or Tyson shall have the right to terminate this Agreement under the
following circumstances and in the following manner:
A. Whether or not Tyson is in default under this Agreement, the Purchaser
may at any time and in its sole discretion terminate this Agreement by
giving Tyson written notice of its intent to so terminate. Such written
notice must be given at least six (6) months prior to termination. Upon
the expiration of such six (6) month notice period, this Agreement shall
terminate without further notice or action and the Purchaser's obligation
to purchase any additional amount of any Product or Product Category shall
cease.
B. In the event the Purchaser deems Tyson to have failed to perform its
obligations under this Agreement ,with respect to the price, quality, or in
any other respect, the Purchaser may give Tyson written notice of such
default. Tyson shall have sixty (60) days from the date of receipt of the
notice to cure the default by refunding any amount charged to the Purchaser
in excess of the price calculated pursuant to Paragraph 5(A) of this
-9-
<PAGE>
Agreement, with interest on such amount at the statutory rate, by remedying
any defect in product quality, or by remedying any other breach in the
appropriate manner. If Tyson fails to cure such default within sixty (60)
days, the Purchaser may, in its sole discretion either:
(i) elect to waive any default, in which event this Agreement shall
remain in full force and affect, and submit all disagreements between
the Purchaser and Tyson to binding arbitration pursuant to Chapter
679(A), Code of Iowa, 1989, under the rules and procedures of the
------------
American Arbitration Association, or
(ii) terminate this Agreement at the end of the sixty (60) day cure
period and submit all disagreements between the Purchaser and Tyson to
binding arbitration pursuant to Chapter 679(A), Code of Iowa, 1989,
------------
under the rules and procedures of the American Arbitration
Association. In the event of such termination, the Purchaser's
obligation to purchase any additional amount of any Product or Product
Category shall cease without regard to any requirement set forth in
this Agreement after the expiration of the sixty (60) day cure period.
C. In the event that Tyson deems the Purchaser to have failed to perform
its obligations under this Agreement Tyson may give the Purchaser written
notice of such default. The Purchaser shall have sixty (60) days from the
date of receipt of the notice to cure the default. If the Purchaser fails
to cure such default within sixty (60) days, Tyson may, in its sole
discretion either:
(i) elect to waive any default, in which event this Agreement shall
remain in full force and effect, and submit all disagreements between
Tyson and the Purchaser to binding arbitration pursuant to Chapter
679(A), Code of Iowa, 1989, under the rules and procedures of the
------------
American Arbitration Association, or
(ii) terminate this Agreement at the end of the sixty (60) day cure
period and submit all disagreements between Tyson and the Purchaser to
binding arbitration pursuant to Chapter 679(A), Code of Iowa, 1989,
------------
under the rules and procedures of the American Arbitration
Association. In the event of such termination, Tyson's obligation to
sell any additional amount of any Product or Product Category shall
cease without regard to any requirement set forth in this Agreement
after the expiration of the sixty (60) day cure period.
-10-
<PAGE>
13. Confidential Information.
------------------------
A. Confidentiality. Each party hereto agrees that, except as otherwise
---------------
provided herein, any Confidential Information disclosed to it in
connection with the performance of the terms of this Agreement shall
be retained in confidence in a manner adequate to protect the
disclosing party's trade secrets or other rights therein.
B. Description of Confidential Information. The term "Confidential
---------------------------------------
Information" as used herein shall mean any and all proprietary
information disclosed by one party to the other in connection with the
performance of the terms of this Agreement, whether disclosed in
writing, orally, visually or by samples; provided, however, that
"Confidential Information" shall not include any information that (i)
was publicly available at the time of disclosure by the disclosing
party, (ii) became publicly available after disclosure by the
disclosing party through no fault of the recipient, or (iii) was in
the recipient's possession prior to disclosure by the disclosing
party.
C. Exception. Nothing contained herein shall restrict the parties
---------
hereto from making Confidential Information available to employees or
agents in connection- with the discharge of the respective duties
imposed by this Agreement.
D. Period of Retention. The obligations imposed by this Paragraph 13
-------------------
shall remain in effect for one (1) year from the date of expiration or
termination of this Agreement, including any one-year extensions
thereof.
E. Nonessential Information. The Purchaser and Tyson both hereby
------------------------
represent and warrant that each of them have, prior to the execution
of this Agreement, delivered to the other all Confidential Information
in the possession of each or its officers, directors, employees, or
agents that is not essential to the performance of its obligations
hereunder. Such information includes, without limitation, all
information, whether written or electronically stored, not available
to food service distributor customers of Tyson or food service
distributor competitors of the Purchaser in the ordinary course of
business.
14. Backhauls. Tyson shall give the Purchaser an option on backhauls to
---------
the Le Mars, Orange City and Sioux Center, Iowa, area, provided that mutually
agreeable price terms and schedules can be reached by the parties.
15. Assignment. Tyson's rights or obligations under this Agreement shall
----------
not be assigned to any other person or entity without the prior written consent
of the Purchaser, which consent shall not be unreasonably withheld. The
Purchaser's rights or obligations under this Agreement shall not be assigned to
-11-
<PAGE>
any other person or entity without the prior written consent of Tyson, which
consent shall not be unreasonably withheld. Nothing in this Paragraph 15 shall
be deemed to prohibit the pledge by the Purchaser, or the grant by the Purchaser
of a security interest in the Purchaser's right, title and interest in this
Agreement, if such pledge or security interest is required at any time by any of
the Purchaser's lenders.
16. Notices. All notices to be given by either party to this Agreement to
-------
the other party hereto shall be in writing, and shall be given in person, by
facsimile or-telecopy, or by depositing such notice in the United States mail by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
A. If to the Purchaser:
Harkers Distribution, Inc.
Ronald R. Geiger, President
P.O. Box 1308
521 Eighth Avenue S.W.
Le Mars, IA 51031
With copies to:
Harold N. Schneebeek
Brown, Winick, Graves, Donnelly,
Baskerville and Schoenebaum
Suite 1100, Two Ruan Center
601 Locust Street
Des Moines, Iowa 50309
B. If to Tyson:
Tyson Foods, Inc.
P.O. Box 2020
2210 West Oaklawn Avenue
Springdale, Arkansas 72764
Attention: David L. Van Bebber, Esq.
-12-
<PAGE>
With copies to:
Robert A. Gamble
Julie Johnson McLean
Gamble, Riepe, Webster, Davis & Green
2600 Ruan Center
Des Moines, Iowa 50309
Notices shall be deemed given on the date personally delivered or sent by
facsimile or telecopy or on the date deposited in the United States mail. Any
party to whom notices are to be given pursuant to this Agreement may from time
to time change its address for further communications hereunder by giving notice
in the manner prescribed herein to all other parties hereto.
17. Construction. Words and phrases herein shall be construed as in the
------------
singular or plural number, and as masculine, feminine, or neuter gander
according to the context. Capitalized terms shall have the meanings assigned
herein or in the Asset Purchase Agreement heretofore entered into between
Purchaser and Harker's, as the context may require. All terms not otherwise
defined shall have the meaning assigned to them under the laws of the state of
Iowa. If any provision of this Agreement shall for any reason be held invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein. In addition, the
following rules shall apply in construing the meaning of this Agreement:
A. Tyson. To the extent required to satisfy the obligations and obtain
-----
the benefits of this Agreement, Tyson will cause its direct and indirect
subsidiaries, including Harker's, to comply with the terms and conditions
hereof.
B. Governing Law. The Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Iowa.
C. Paragraph Headings. The paragraph headings contained in or affixed to
------------------
this Agreement are for convenience only and shall in no manner limit any of
the provisions of this Agreement.
D. Waiver. No waiver of any term, provision or condition of this
------
Agreement in any one or more instances shall be deemed to be or be
construed as a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement. Further, the exercise of any remedy under this Agreement by
either party shall not be deemed a waiver of any other remedy available at
law, in equity, or under this Agreement.
-13-
<PAGE>
E. Entire Agreement. This Agreement supersedes all Agreements, either
----------------
oral or written, concerning the subject matter hereof, existing prior to
this date between the parties hereto. This Agreement may not be altered,
modified or amended unless agreed to by the parties hereto in writing and
signed by their duly authorized representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 9th day of
November, 1990.
TYSON FOODS, INC. HARKER'S DISTRIBUTION, INC.
By /s/ David L. VanBebber By /s/ Ronald R. Geiger
---------------------------- ----------------------------
Its Asst. Secretary Its President
----------------------- -----------------------
Tyson The Purchaser
-14-
<PAGE>
EXHIBIT A - PRODUCTS AND PRODUCT MIX
Page 2
<TABLE>
<CAPTION>
<S> <C> <C>
PORK PRODUCTS PORK CHOPS [*******]
SAUSAGE LINKS AND PATTIES
CHICKEN PRODUCTS SPEC PRDTS PRE-FRIED [*******]
SPEC PRDTS PRE-COOKED
SPEC PRDTS BREADED ITEMS
BONE-IN OR BONELESS CHICKEN
OTHER RELATED CHICKEN PRODUCTS
OTHER PRODUCTS PRE-COOKED ROASTS [********]
SPEC PRDTS BEEF/VEAL UNBRD ----------
SPEC PRDTS BREADED ITEMS
SPEC PRDTS CONVENIENCE
SPEC PRDTS PORK ITEMS
SPEC PRDTS PRE-FRIED
SPEC PRDTS PRE-COOKED
TOTAL POUNDS [********]
----------
</TABLE>
[*] confidentiality requested
-15-
<PAGE>
EXHIBIT B
PART ONE - OUTPUT REQUIREMENTS (IN POUNDS):
<TABLE>
<CAPTION>
PERIOD ONE PERIOD TWO PERIOD THREE PERIOD FOUR PERIOD FIVE PERIOD SIX
Sept. 30, 1990 Sept. 29, 1991 Oct. 4, 1992 to Oct. 3 1993 to Oct. 2, 1994 Oct. 1, 1995
to Sept. 28, to Oct. 3, 1992 Oct. 2, 1993 Oct. 1, 1994 to Sept. 30, to Sept. 28,
1991 1995 1996
PRODUCT CATEGORY
<S> <C> <C> <C> <C> <C> <C>
GROUND BEEF PRODUCTS [********] [********] [********] [********] [********] [********]
BEEF STEAK PRODUCTS [*******] [*******] [*******] [*******] [*******] [*******]
PORK PRODUCTS [*******] [*******] [*******] [*******] [*******] [*******]
CHICKEN PRODUCTS [********] [********] [********] [********] [********] [********]
OTHER PRODUCTS [********] [********] [********] [********] [********] [********]
PART TWO - PURCHASE REQUIREMENTS (IN POUNDS):
PERIOD ONE PERIOD TWO PERIOD THREE PERIOD FOUR PERIOD FIVE PERIOD SIX
Sept. 30, 1990 Sept. 29, 1991 Oct. 4, 1992 to Oct. 3, 1993 Oct. 2, 1994 Oct. 1, 1995
to Sept. 28, to Oct. 3, 1992 Oct. 2, 1993 to Oct. 1, 1994 to Sept. 30, to Sept. 28,
1991 1995 1996
PRODUCT CATEGORY
GROUND BEEF PRODUCTS [********] [********] [********] [********] [********] [********]
BEEF STEAK PRODUCTS [*******] [*******] [*******] [*******] [*******] [*******]
PORK PRODUCTS [*******] [*******] [*******] [*******] [*******] [*******]
CHICKEN PRODUCTS [*******] [*******] [*******] [*******] [*******] [*******]
OTHER PRODUCTS [********] [********] [********] [********] [********] [********]
</TABLE>
[*] confidentiality requested
-16-
<PAGE>
[SALES SPECIFICATIONS CHART]
[Best copy available - illegible]
-17-
<PAGE>
CUSTOMER HARKER'S
ITEM NO.S 1814 1020
FORMULA NO. 3000 PURE GRD BEEF BULK -- 80/20
PACK 4/10 LB TUBES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
QTY PRICE
A700 FROZ BEEF 90'S [*****] * [******] * [*****]
A701 FRSH BEEF 90'S [*****] * [******] * [*****]
A708 FRSH BEEF 50's [*****] * [*****] * [*****]
------
TOTAL = [******]
RAW / YIELD FACTOR [*****] MEAT COST = [******]
------
TOTAL RAW COST = [******]
PLUS FACTOR = [*****]
------
TOTAL = [******]
PRICE = [****]
HARKER'S INC.
<S> <C> <C> <C>
USDA MARKET QUOTE USDA MARKET QUOTE USDA MARKET QUOTE
DATE FROZ BEEF 90'S FRSH BEEF 90'S FRSH BEEF 50'S
7/31/90 [******] [******] [*****]
7/30/90 [******] [******] [*****]
7/27/90 [******] [******] [*****]
7/26/90 [******] [******] [*****]
7/25/90 [******] [******] [*****]
AVERAGES [******] [******] [*****]
</TABLE>
EXHIBIT D
-18-
[*] confidentiality requested
<PAGE>
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
----------- ----------- ------------ ----------
PLUS POUNDS INCREMENTAL PLUS
FACTOR PURCHASED COST FACTOR
@ 08/01/YY 08/01/YY RELATED TO WEIGHTED
($s) TO 07/31/YY PLUS AVERAGE
FACTORS ($s) ($s)
<S> <C> <C> <C> <C>
TYSON'S FIVE LARGEST FOOD SERVICE DISTRIBUTION
CUSTOMERS FOR ALL GROUND BEEF PRODUCTS
CUSTOMER 1 [*********]
CUSTOMER 2 [*********]
CUSTOMER 3 [*********]
CUSTOMER 4 [*********]
CUSTOMER 5 [*********]
TOTAL [**********]
FIVE POUND BULK
CUSTOMER 1 [****] [*******] [******]
CUSTOMER 2 [*****] [*******] [******]
CUSTOMER 3 [*****] [*******] [******]
CUSTOMER 4 [****] [*********] [*******]
CUSTOMER 5 [*****] [*********] [*******]
---------- -------
TOTAL [*********] [*******] [*****]
TEN POUND BULK
CUSTOMER 1 [****] [*******] [******]
CUSTOMER 2 [*****] [*******] [******]
CUSTOMER 3 [*****] [*******] [******]
CUSTOMER 4 [****] [*********] [*******]
CUSTOMER 5 [*****] [*********] [*******]
---------- -------
TOTAL [*********] [*******] [*****]
TEN POUND PATTIES
CUSTOMER 1 [****] [*******] [******]
CUSTOMER 2 [*****] [*******] [******]
CUSTOMER 3 [*****] [*******] [******]
CUSTOMER 4 [****] [*******] [*******]
CUSTOMER 4 [*****] [*******] [******]
CUSTOMER 5 [*****] [*******] [******]
CUSTOMER 5 [******] [*********] [*******]
---------- -------
TOTAL [*********] [*******][********]
TWENTY POUND OR GREATER PATTIES
CUSTOMER 1 [*****] [*******] [******]
CUSTOMER 2 [******] [*******] [******]
CUSTOMER 3 [***** [*******] [******]
CUSTOMER 3 [******] [*******] [******]
CUSTOMER 4 [******] [*********] [*******]
CUSTOMER 5 [*****] [*******] [******]
CUSTOMER 5 [******] [*********] [*******]
---------- -------
TOTAL [*********] [*******][********]
</TABLE>
* These calculations are for illustration purposes only. The actual figures
will be derived from Tyson's regularly maintained books and records per this
Agreement.
[*] confidentiality requested
-19-
<PAGE>
HARKER'S, INC.
FORMULA PRICING EFFECTIVE 8/06/90
CUSTOMER HARKER'S
ITEM NOS. 1502 1521 1523 1531 1536 1541 1551 1561 1571
1581 1601
FORMULA NO. 3090 PURE BEEF PATTIES - 74/26
PACK 20 LB BOX
QUANTITY PRICE
A700 FROZEN BEEF 90'S [*****] x [******] = [*****]
A701 FRESH BEEF 90'S [*****] x [******] = [*****]
A708 FRESH BEEF 50'S [*****] x [*****] = [*****]
A713 FROZEN BEEF 50'S [*****] x [*****] = [*****]
------
TOTAL [******]
RAW/YIELD FACTOR .9858 MEAT COST = [******]
A718 LEAST COST FORMULA
REDUCTION [******] x [******] = [******]
------
TOTAL = [******]
RAW COST
PLUS = [*****]
FACTOR ------
TOTAL = [******]
PRICE = [****]
<TABLE>
<CAPTION>
USDA MARKET QUOTE USDA MARKET QUOTE USDA MARKET QUOTE USDA MARKET QUOTE
DATE FROZEN BEEF 90'S FRESH BEEF 90'S FRESH BEEF 50'S FROZEN BEEF 50'S
<S> <C> <C> <C> <C>
7/31/90 [******] [******] [*****] [*****]
7/30/90 [******] [******] [*****] [*****]
7/27/90 [******] [******] [*****] [*****]
7/26/90 [******] [******] [*****] [*****]
7/25/90 [******] [******] [*****] [*****]
AVERAGES [******] [******] [*****] [*****]
</TABLE>
EXHIBIT F
[*] confidentiality requested
-20-
<PAGE>
EXHIBIT G
CERTIFICATE OF
TYSON FOODS, INC.
I, , an officer or employee of Tyson
----------------------------------
Foods, Inc., do hereby certify as follows:
1. I am duly authorized to execute and deliver this Certificate on behalf
of Tyson Foods, Inc.
2. I have examined the prices charged by Tyson Foods, Inc., to Harker's
Distribution, Inc., under the Supply Agreement dated September 15, 1990, and the
prices charged by Tyson Foods, Inc., to its other food service distributor
customers. Both examinations involved the period of time from the date of the
last Certificate provided to Harker's Distribution, Inc., by Tyson Foods, Inc.,
pursuant to said Supply Agreement to the date of this Certificate.
3. [***********************************************************************
********************************************************************************
******************************************************************************
*****************************************************************************
******************************************************************************
****************************************************************************
**********]
IN WITNESS WHEREOF, I have executed this Certificate on behalf of Tyson
Foods, Inc., as of the day of , 199 .
------ ------------------ --
----------------------------------------
[*] confidentiality requested
-21-
<PAGE>
Exhibit H
CONTINUING GUARANTY
AND INDEMNITY AGREEMENT
TO:
The articles and products comprising each shipment or other delivery hereby
made by the undersigned to or on the order of
----------------------------------
or any of its affiliated companies are, when sold, shipped and/or delivered by
the undersigned, guaranteed:
1. Not adulterated or misbranded within the meaning of the Federal Food,
Drug and Cosmetic Act and all Regulations issued thereunder to the extent
said Act and Regulations are then effective and applicable.
2. In compliance with and are not adulterated or misbranded within the
requirements of the Poultry Products Inspection Act, Meat Inspection Act,
the Food Additives Amendment to the Federal Food, Drug and Cosmetic Act, and
all Regulations issued thereunder, and any other Federal law then effective
and applicable.
3. In compliance with and not adulterated or misbranded within the meaning
of any identical or substantially similar state or municipal law, on the
subject, to the extent said law is then effective and applicable.
Provided, however, that the undersigned does not guarantee against such
goods becoming adulterated or misbranded within the meaning of the aforesaid
Acts, Statutes, Ordinances, or Rules and Regulations after shipment by reason of
causes beyond Seller's control.
-2-
<PAGE>
The undersigned further agrees to indemnify and save the aforesaid
or any of its affiliates and customers
- ---------------------------------
harmless against any expense which they may incur, damage which they may suffer,
loss they may sustain or judgment which may be entered, by reason of a breach of
the above guaranty or warranties and, further, by reason of any negligence on
the part of the undersigned which causes or contributes to cause any such
expense, damage, loss or judgment.
The undersigned further agrees at its expense to answer and defend any
action, claim, suit, demand and proceeding instituted against the above company
or companies for any loss, damage, and injuries sustained or claimed to have
been sustained by any individual, firm, corporation or other person, directly or
indirectly, arising out of or in connection with the consumption or use of any
article of food, drug, cosmetic and device from any sale, shipment and/or
delivery by the undersigned, its subsidiaries, affiliates and divisions.
This Guaranty and Indemnity Agreement shall be continuing until revoked by
giving ten days written notice by guarantor to said guarantees.
DATED this day of , 19 .
----- -------------------- ---
TYSON FOODS, INC.
Its Subsidiaries and Divisions
By:
---------------------------------------------
Robert Womack, Group
Vice President, Domestic
Sales and Marketing
-3-
<PAGE>
EXHIBIT A
MODIFICATION TO SUPPLY AGREEMENT
THIS MODIFICATION TO SUPPLY AGREEMENT (the "Modification") is entered into
as of the 14th day of September, 1993 by and between Harker's Distribution,
Inc., an Iowa corporation ("Purchaser"), and Tyson Foods, Inc., a Delaware
corporation ("Tyson").
W I T N E S S E T H :
-------------------
WHEREAS, Purchaser and Tyson entered into that certain Supply Agreement
dated November 9, 1990 (the "Supply Agreement"); and
WHEREAS, the parties hereto and thereto desire to amend and modify the
Supply Agreement in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. The terms used in this Modification, to the extent not otherwise
defined, shall have the same meanings as in the Supply Agreement, as amended
hereby.
2. Part Two of Exhibit B to the Supply Agreement is hereby amended by
changing the Product Category amounts in Periods Four, Five and Six therein as
follows:
PRODUCT
CATEGORY PERIOD FOUR PERIOD FIVE PERIOD SIX
- -------- ----------- ----------- ----------
GROUND BEEF PRODUCTS [**********] [**********] [**********]
BEEF STEAK PRODUCTS [*********] [*********] [*********]
PORK PRODUCTS [*******] [*******] [*******]
CHICKEN PRODUCTS [*********] [*********] [*********]
OTHER PRODUCTS [*********] [*********] [*********]
provided, however, that notwithstanding the minimum purchase amounts for each
- -----------------
Product Category set forth above, Purchaser agrees to purchase the total amount
of products, regardless of category, set forth below:
[*] confidentiality requested
<PAGE>
PERIOD FOUR PERIOD FIVE PERIOD SIX
----------- ----------- ----------
[********] [********] [********]
3. Except as amended hereby, the Supply Agreement shall continue in full
force and effect.
IN WITNESS WHEREOF, each party has executed this Modification or a
counterpart hereof on the date first above written.
HARKER'S DISTRIBUTION, INC. TYSON FOODS, INC.
By: /s/ By: /s/ Donald E. Wray
----------------------------- ------------------------------------
Title: VP Sales and Marketing Donald E. Wray
Chief Operating Officer
[*] confidentiality requested
-2-
<PAGE>
SECOND MODIFICATION TO SUPPLY AGREEMENT
This Second Modification to Supply Agreement is made as of May 1, 1995
hereof by and between Tyson Food's Inc., PO Box 2020, Springdale, AK 72765-2020
("Tyson") and Harker's Distribution, Inc., 905 Sixth Street, SW, PO Box 61031,
LeMars, Iowa, ("HDI") (collectively the "Parties").
RECITALS
A. Tyson, through its then subsidiary, Harker's, Inc. executed an Asset
Purchase Agreement dated June 22, 1990, wherein Harker's, Inc. agreed
to sell to HDI that portion of its distribution business located a
LeMars, Iowa.
B. As a part of the transactions contemplated by the Asset Purchase
Agreement, HDI and Tyson executed a Supply Agreement dated November 9,
1990, as amended by Modification to Supply Agreement (the "First
Modification") dated September 14, 1993, (collectively the "Supply
Agreement").
C. Subsequently, Harker's, Inc. was merged into Tyson.
D. The Parties hereby intend to further modify the Supply Agreement as
set forth herein.
Now, therefore, in consideration of the premises and the mutual covenants
and Agreements herein contained, it is agreed by and between Tyson and HDI that
the Supply Agreement is amended as follows:
1. The purchase requirements (in pounds) set forth in Part Two to Exhibit "B"
of the Supply Agreement, shall, for the period October 1, 1995 to September
28, 1999, be that amount reflected for each product category during Period
Six, provided however, that the obligation of HDI to purchase a minimum
total amount of products, regardless of category, shall remain as provided
in the First Modification. A copy of the First Modification is attached
hereto marked Exhibit A and by this reference made a part hereof.
2. Section 6 of the Supply Agreement is deleted.
3. Section 11 of the Supply Agreement is deleted and substituted in lieu
thereof is the following:
11. Term of Agreement. This Agreement shall remain in full force and
-----------------
effect through September 28, 1999, unless sooner terminated as provided in
Section 12.
<PAGE>
4. Section 12 of the Supply Agreement is deleted and substituted in lieu
thereof is the following:
12. Termination. In the event either the Purchaser or Tyson fails to
-----------
perform its obligations under this Agreement, the defaulting party shall
have sixty (60) days from the date of receipt of notice to cure such
default by remedying the default in the appropriate manner. In the event
such default is not cured within the sixty day period by the defaulting
party, the non-defaulting party shall have the right to terminate this
Agreement and to assert such rights and remedies for breach of this
Agreement as are provided by law.
Except as modified by this Second Modification to Supply Agreement, the Supply
Agreement shall remain in full force and effect.
Dated as of May 1, 1995.
TYSON FOODS, INC.
By: /s/
---------------------------------
Attest: /s/
-----------------------------
HARKER'S DISTRIBUTION, INC.
By: /s/ Ronald R. Geiger
---------------------------------
Attest: /s/
-----------------------------
-2-
<PAGE>
Exhibit A
[Filed previously within this exhibit]
-3-
<PAGE>
ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT
This ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT (the "Agreement") is
entered into as of the 25th day of November, 1996, by and among Tyson Foods,
Inc., a Delaware corporation ("Assignor"), Gorges/Quik-to-Fix Foods, Inc., a
Delaware corporation ("Assignee"), and Harker's Distribution, Inc., an Iowa
corporation ("Purchaser").
WITNESSETH:
WHEREAS, Assignor and Assignee entered into that certain Asset Purchase
Agreement dated as of October 17, 1996 (the "Purchase Agreement") pursuant to
which Assignee agreed to purchase from Assignor all of the assets used in the
operations of the beef further processing business of Assignor (other than
certain excluded assets) (collectively, the "Business"); and
WHEREAS, in Assignor's operation of the Business, Assignor and Purchaser
entered into that certain Supply Agreement dated as of November 9, 1990 which
has been subsequently modified by that certain Modification to Supply Agreement
dated as of September 14, 1993 and that certain Second Modification to Supply
Agreement dated as of May 1, 1995 (as modified to date, the "Supply Agreement")
pursuant to which Assignor sells to Purchaser and Purchaser buys from Assignor
certain Products of Assignor, and
WHEREAS, Assignor and Purchaser also entered into that certain License
Agreement dated as of November 9, 1990 (the "License Agreement") pursuant to
which Purchaser has granted a license to Assignor to use the Trademarks (as such
term is defined in the License Agreement); and
WHEREAS, Assignor desires to assign certain of its obligations under the
Supply Agreement and the right to use certain of the Trademarks under the
License Agreement to Assignee; and
WHEREAS, Assignor and Purchaser desire to terminate any obligation of
either party with respect to those obligations under the Supply Agreement which
are not assigned to Assignee pursuant hereto;
NOW, THEREFORE, in consideration of the premises recited, of the covenants,
agreements and provisions of this Agreement, and of other good and valuable
-4-
<PAGE>
consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the parties hereby agree as follows:
1. ASSIGNMENT. Assignor hereby assigns to Assignee (a) all of its rights
----------
under the Supply Agreement with respect to the providing of food products to
Purchaser within the Product Categories (as such term is defined in the Supply
Agreement) other than Chicken Products (as such term is defined in the Supply
Agreement) and (b) all of its right under Sections l(a) and l(b) of the License
Agreement with respect to the use of the Trademarks listed on Exhibit "A"
attached hereto and made a part hereof.
2. ASSUMPTION. Assignee hereby accepts such assignment and hereby agrees
----------
to assume, and does assume, the due and full performance of the obligations of
the Assignor under or pursuant to the Supply Agreement and the License Agreement
accruing on or after the date of this Agreement, but not before, insofar as such
obligations relate to the rights assigned by Assignor to Assignee hereunder.
3. ADDITIONAL AGREEMENT. It is expressly agreed, as between Assignor and
--------------------
Assignee, that the assignment hereunder is given pursuant to and subject to all
of the terms, provisions, covenants, warranties, representations and indemnities
contained in the Purchase Agreement.
4. CONSENT. Purchaser (a) hereby consents to the assignments hereunder
-------
and (b) acknowledges that Assignee is relying on the consent of Purchaser in
accepting the assignment hereunder.
5. TERMINATION.
-----------
(a) Assignor and Purchaser hereby agree that as of the date hereof
Assignor has no further obligation to supply to Purchaser and Purchaser has
no further obligation to purchase from Assignor any food products under the
Supply Agreement.
(b) Assignee and Purchaser hereby agree that the license under the
License Agreement transferred and assigned to Assignee hereunder shall
terminate two (2) years from the date hereof. After such date, Assignee
shall not use or make any use of such assigned Trademarks.
6. NOTICES. Any notice or communication required or permitted to be given
-------
hereunder shall be in writing and shall be deemed to have been duly given (i)
when received if personally delivered or sent by telex or facsimile transmission
(with confirmed receipt), (ii) three (3) days after being sent by registered or
-5-
<PAGE>
certified mail, return receipt requested, postage prepaid, or regular airmail,
postage prepaid, to the parties, or (iii) one (1) day after sent by express
courier (e.g. FedEx), if receipt is confirmed by the delivery agent, at their
respective addresses set forth below (or such other address as may be designated
pursuant hereto):
If to Assignor, to: Tyson Foods, lnc.
2210 Oaklawn Drive
P.O. Box 2020
Springdale, Arkansas 72765-2020
Attn: John H. Tyson
(501) 290-4000
(501) 290-4028 (FAX)
If to Assignee, to: Gorges/Quik-to-Fix Foods, Inc.
c/o Cravey, Green & Wahlen
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attn: Bill Davies
(404) 816-3255
(404) 816-3258 (FAX)
If to Purchaser, to: Harker's Distribution, Inc.
P.O. Box 1308
521 Eighth Avenue
Le Mars, Iowa 51031
Attn: Ronald R. Geiger
(712) 546-3168
(712) 546-3159 (FAX)
7. MISCELLANEOUS:
-------------
(a) Governing Law. This Agreement shall be construed in accordance
-------------
with, and governed by, the laws of the State of Delaware.
(b) Entire Agreement. This Agreement constitutes the entire agreement
----------------
among Assignor, Assignee and Purchaser with respect to the subject matter
hereof, and supersedes all prior agreements and understandings among
Assignor, Assignee and Purchaser with respect to the subject matter hereof.
(c) Amendments. This Agreement shall not be modified or amended
----------
except by an instrument, in writing, signed by Assignor and Assignee.
-6-
<PAGE>
(d) Waiver. The failure of any party to insist, in one or more
------
instances, on the performance by another party in strict accordance with
any term or condition of this Agreement shall not be deemed a waiver or
relinquishment of any right granted hereunder or of any right to demand
future performance of any such term or condition of this Agreement, unless
such waiver is set forth in a written instrument signed by such party or a
duly authorized representative of the waiving party and then only to the
extent set forth therein. No waiver of any provision or provisions of this
Agreement shall be deemed to constitute a waiver of any other provision.
(e) Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
(f) Titles and Headings. Titles and headings to Sections herein are
-------------------
for purposes of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any of the provisions of
this Agreement.
(g) Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective successors
and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
ASSIGNOR:
TYSON FOODS, INC.
By: /s/ David L. Van Bebber
------------------------------
Title: Assistant Secretary
---------------------------
ASSIGNEE:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
------------------------------
Title: /s/ Secretary
---------------------------
-7-
<PAGE>
PURCHASER:
HARKER'S DISTRIBUTION, INC.
By: /s/ Ronald R. Geiger
--------------------------------
Title: /s/ President and CEO
----------------------------
-8-
<PAGE>
EXHIBIT "A"
-----------
ASSIGNED TRADEMARKS
-------------------
<TABLE>
<CAPTION>
TRADEMARKS REGISTRATION/SERIAL NO.
---------- -------------------------
<S> <C>
Harker's Registration No. 1,051,980
Harker's Homestyle Registration No. 1,528,452
Harker's Homestyle & Design Registration No. 1,523,685
Harker's Homestyle Burgers Registration No. 1,465,698
Harker's Homestyle Burgers & Design Registration No. 1,465,699
Harker's Homestyle Entree Registration No. 1,465,696
Harker's Homestyle Entree & Design Registration No. 1,465,697
Harker's Ready Lean Registration No. 1,570,005
</TABLE>
-9-
<PAGE>
Exhibit 10.12
Certain portions of this exhibit have been deleted and confidentially filed
with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated by
"[*****]" inserted in place of such confidential information.
[*] confidentiality requested
<PAGE>
EXHIBIT 10.12
[Gorges/Quick-To-Fix Foods, Inc. Letterhead]
September 12, 1996
Mr. Drew Ritger
Sonic Corporation
101 Park Avenue
Oklahoma City, OK 73102
Dear Drew:
This letter confirms our conversation regarding pricing of Sonic Beef Patties.
[******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
**********]
If you have any questions, please call.
Sincerely,
GORGES/QUICK-TO-FIX
/s/ Randy Collins
Randy Collins
Vice President - Sales & Marketing
RC:kls
cc: Dick Mitchell
[*]confidentiality requested
-1-
<PAGE>
Exhibit 10.13
Certain portions of this exhibit have been deleted and confidentially filed
with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 under the Securities Act of 1933, as amended.
The confidential portions of the exhibit that have been deleted are indicated by
"[*****]" inserted in place of such confidential information.
[*] confidentiality requested
<PAGE>
EXHIBIT 10.13
[TYSON LOGO] WHOLESALE CLUB SALES [TASTYBIRD LOGO]
BEEF PATTIE CONTRACT
1. 4/1 Beef Patties 80% Lean
Quantity: Minimum [*********************************************
************]
Distribution: All Clubs
Pricing: Delivered Price: [*******]
Rebate/Accrual [*******]
Invoiced Price [*******]
2. 3/1 Ground Sirloin Patties 85% Lean
Quantity: Minimum [********************************************
*************]
Distribution: All Clubs
Pricing: Delivered Price: [*******]
Rebate/Accrual [*******]
Invoiced Price [*******]
The above prices were based on an assumption of purchasing raw materials at
given market costs. Production for summer months will require raw material
purchases during the January - March time period. Per Sam's recommendation, if
it appears that raw materials cannot be purchased at acceptable cost, then both
parties will evaluate market conditions to arrive at a mutually beneficial
solution.
The [******][*******] may be taken as an authorized deduction [****************]
/s/ John Curran /s/ Duane Wilson
- -------------------------------- -------------------------------
John Curran Date Duane Wilson Date
V.P. Wholesale Club Division V.P., GMM
Sales and Marketing
/s/ Adurn da Costa 11/1/95
-------------------------------
Adurn da Costa Date
V.P., DMM
/s/ Greg Patton 10/31/95
-------------------------------
Greg Patton Date
Buyer
[*] confidentiality requested
<PAGE>
EXHIBIT 10.14
GAS SALES AGREEMENT
THIS AGREEMENT, made and entered into effective as of the lst day of
December, 1995, by and between Tyson Foods, Inc. ("Purchaser") and U S Gas
Services LLC ("Seller"),
RECITALS
WHEREAS, Seller desires to sell gas; and
WHEREAS, Purchaser desires to purchase said gas from Seller;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties do hereby covenant and agree as
follows:
I. DEFINITIONS
-----------
As used herein, the following terms shall be construed to have meanings as
follows:
1. The term "day" shall mean a period of twenty-four (24) consecutive
hours beginning and ending at 8:00 o'clock a.m., Central Time (CT).
2. The term "month" shall mean a period beginning at 8:00 o'clock a.m., on
the first day of a calendar month and ending at 8:00 o'clock a.m., on the first
day of the next succeeding calendar month.
3. The term "natural gas" shall mean natural gas including both gas well
gas and casinghead gas and the residue gas therefrom.
4. The term "Mcf" shall mean one thousand (1,000) cubic feet at a
temperature of sixty degrees (60 degrees) Fahrenheit and at a pressure base of
14.73 psia.
5. The term "Btu" shall mean British Thermal Unit and the term "MMBtu"
shall mean one million British Thermal Units.
II. SCOPE OF AGREEMENT
------------------
Purchaser agrees to Purchase and Seller agrees to sell natural gas during
the Term of this Agreement in the quantities at the prices, at the time and
delivered to the location specified in the Sales Specification sheet (see
Exhibit "A" attached hereto).
<PAGE>
III. TERM
This Agreement shall be effective as of December 1, 1995 and shall continue
and remain in full force and effect until November 30, 2005. This Agreement
shall further continue year to year thereafter unless terminated by the parties
by giving at least ninety (90) days written notice prior to any anniversary date
of this Agreement.
IV. QUANTITY, POINT(S) OF DELIVERY, PRICE, AND PERIOD
-------------------------------------------------
1. Purchaser and Seller shall agree upon (a) the quantity of gas to be
delivered by Seller and received by Purchaser, (b) the point(s) of delivery to
be utilized, (c) the price per MMBtu to be paid by Purchaser to Seller for all
gas delivered including measurement conditions (i.e., saturated/dry and pressure
base), and (d) the period during which the specified quantity, point(s) of
delivery, and price shall be effective. Upon such agreement, Purchaser and
Seller shall execute a Sales Specification Agreement (See Exhibit "A" attached
hereto) specifying the quantity, point(s) of delivery, price, and period agreed
upon, after which Seller will commence deliveries as agreed. Purchaser agrees
to pay Seller for all gas requested by Purchaser and delivered by Seller in
accordance with the terms and conditions of the Agreement.
2. Any change in daily quantities desired by Purchaser shall be
communicated to Seller no later than 11:00 a.m., CT two (2) days preceding the
desired date of change and shall be followed by written confirmation to Seller.
Should Purchaser desire a daily quantity which exceeds that specified in the
Sales Specification Agreement referenced in Paragraph 1 above, Seller shall
advise Purchaser of the availability or non-availability of such gas, and, if
available, when deliveries can commence.
3. In the event that Seller's transportation costs to the Point of
Delivery referred to in the attached Sales Specification Sheet are increased or
decreased during the effective pricing period, the Price per MMBtu will be
adjusted by a like amount Such transportation costs should be independently
verified by a party of the Purchaser's choice.
V. TRANSPORTATION
--------------
Transporter's rules, guidelines, and policies as may be changed from time
to time shall define and set forth, among other things, the manner in which gas
purchased and sold under this Agreement is transported. Purchaser and Seller
agree that the receipt and delivery of gas purchased and sold under this
Agreement shall always be subject to the operational and nomination procedures
established by Transporter(s). Purchaser shall be responsible for any under or
over delivery charges assessed by Transporter(s) which are caused by variances
in Purchaser's receipts/takes from quantities requested/nominated by Purchaser
to Seller for the effective period agreed upon in the Sales Specification
Agreement referenced in Article IV above.
-2-
<PAGE>
VI. QUALITY AND MEASUREMENT
-----------------------
Transporter's rules, guidelines and policies as may be changed from time to
time, shall define and set forth, among other things, the units of measurement,
measurement specifications, quality, heating value, testing specifications,
required delivery pressure and specifications of the gas to be delivered to
Purchaser pursuant hereto unless stated otherwise in Article IV above. All such
definitions, specification, procedures and terms and all other terms and
provisions of Transporter(s) relating to the delivery of gas are hereby
expressly incorporated herein by reference.
VII. BILLINGS
--------
1. By the tenth day of the month following the month in which deliveries
actually occurred, Seller shall provide Purchaser an invoice, based upon
Purchaser's nominations for the month in which deliveries actually occurred.
Said invoice shall detail the total nominations by Purchaser and the price per
MMBtu agreed to for the month in which deliveries actually occurred. Purchaser
shall pay said invoice by the twenty fifth (25th) day of the month in which said
invoice was received.
Should third party Transporters' statements reflect a difference in volumes
received or delivered and volumes nominated, the party to this Agreement who is
owed money as a result of said difference shall immediately notify the other
party of the discrepancy and provide supporting documentation for said claim.
The party so notified will pay any amounts due within thirty (30) days of
receipt of said notice. Any party not receiving payment within the above time
limits shall have the right to suspend any further transactions under this
Agreement until payment is received. Seller's statement shall be presumed to be
received by Purchaser within five (5) days of the postmark date on the envelope
containing the statement. Beginning on the first (lst) day of the second month
following the production month, interest shall accrue at the lesser of (a) the
prime rate published in the "Money Markets" section of The Wall Street Journal
-----------------------
on the first business day of the month during which deliveries were made or (b)
the maximum lawful rate. Purchaser shall make payment by check to Seller's
account as noted below:
2. Each party shall have the right to reasonably examine the books,
records and charts of the other party to the extent necessary to verify the
accuracy of any statement, charge or computation made pursuant to the provisions
of any article hereof. In the event an error is discovered in the amount billed
in any statement rendered to Purchaser, such error shall be adjusted within
thirty (30) days of the determination thereof, provided that claim thereof shall
have been made within sixty (60) days from the date of discovery of such error.
No error will be adjusted after twenty-four (24) months from the date of such
statement.
-3-
<PAGE>
VIII.ADDRESSES
---------
Until Seller is otherwise notified in writing by Purchaser, the address of
Purchaser is and shall remain:
Tyson Foods, Inc.
P. 0. Box 2020
2210 Oaklawn Drive
Springdale, AR 72765-2020
and unless Purchaser is otherwise notified in writing by Seller, the address of
Seller is and shall remain:
U S Gas Services LLC
P. 0. Box 54219
Tulsa, OK 74155-0219
ALL notices required to be given in writing hereunder shall be given to the
respective parties at such addresses or such other addresses as the parties
respectively shall designate by written notice.
IX. FORCE MAJEURE
-------------
In the event either party is rendered unable, wholly or in part, by force
majeure to carry out its obligations under this Agreement, other than to make
payments due hereunder, the obligations of each party, so far as they are
affected by such force majeure, shall be suspended during the continuance of the
same. Such party shall give notice and full particulars at such force majeure,
in writing, to the other party as soon as reasonably possible after the
occurrence of the cause relied on. The term "Force Majeure" as employed herein
shall mean strikes, lockouts or other industrial disturbances, acts of the
public enemy, wars, blockades, riots, landslides, hurricanes, lightning,
earthquakes, fires, floods, washouts, unavoidable freezing of pipes and
explosions. Refusal of either Seller or Purchaser to accede to the demand of
laborers or labor unions which, in its sole discretion, it considers
unreasonable shall not deny that party the benefits of this provision.
X. DEFAULT OR TERMINATION
----------------------
1. If either party shall fail to perform any of the covenants or
obligations imposed upon it by the terms and conditions of this Agreement, the
other party may, at its option, terminate this Agreement by giving thirty (30)
days prior written notice and stating specifically the cause for terminating
this Agreement. Any termination of this Agreement shall be without waiver of
remedy to which the party not in default may be entitled for violations of this
Agreement. No waiver by either party hereto of any one or more
-4-
<PAGE>
defaults by the other in the performance of any provision of this Agreement
shall operate or be construed as a waiver of any future default or defaults,
whether of a like or of a different character.
2. Notwithstanding any other provision contained in this Agreement, in
the event this Agreement is terminated as to all or any portion of the gas
subject hereto or all or any portion of such gas is released from this
Agreement, such termination or release shall be without prejudice to any rights
or obligations of the parties accruing prior to such termination or release.
XI. POSSESSION AND WARRANTY OF TITLE
--------------------------------
1. As between the parties hereto, Seller shall be in exclusive control
and possession of the gas deliverable hereunder and responsible for any damage
or injury caused thereby until the same shall have been delivered to the
point(s) of delivery. After the gas has been delivered to the point(s) of
delivery, Purchaser shall be deemed to be in exclusive control and possession
thereof and the Purchaser shall be responsible for any injury or damage caused
thereby. Title to the gas delivered hereunder shall pass at the point(s) of
delivery.
2. Seller hereby warrants the title to all gas delivered by Seller to
Purchaser hereunder and the right to sell the same.
XII. ASSIGNMENTS
-----------
This Agreement shall be binding upon and inure to the benefit of the heirs,
legal representatives, successors and assigns of the Seller and the Purchaser.
Neither party shall assign its rights under this Agreement or any obligations
hereunder without the prior consent in writing of the other party. Such consent
shall not be unreasonably withheld. Notwithstanding the foregoing, either party
may assign this Agreement or any of its rights or obligations hereunder to a
corporate affiliate of the party making the assignment without the prior consent
of the other party. It is further agreed, that nothing contained in this
Agreement shall in any manner prevent either party from pledging or mortgaging
its rights hereunder for security of any loan made by such party.
XIII.MISCELLANEOUS
-------------
1. The Seller and Purchaser recognize that the Purchaser may be required
to obtain third-party transportation to enable Purchaser to purchase and receive
gas into its facilities. In the event Seller, in any manner, assists Purchaser
in seeking or arranging third-party transportation, the Purchaser hereby agrees
to indemnify and hold Seller harmless from any event, occurrence or failure
thereof arising directly or indirectly from the third-party transportation of
such gas.
-5-
<PAGE>
2. This Agreement may signed in counterpart, each of which shall
constitute an original and together which shall constitute one and the same
Agreement.
3. This Agreement shall be governed by the laws of the State of Arkansas.
4. This Agreement and the Purchaser's and the Seller's written
confirmation(s) of quantity, point(s) of delivery, price, and period as provided
for in Article IV shall constitute the sole and entire agreement between the
parties. Further, all prior oral and written agreements are hereby expressly
merged into the terms and conditions of this Agreement. No modification of the
terms and provisions this Agreement shall be or become effective except by the
execution of a supplementary written agreement executed by the party sought to
be charged.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective on the day and year first above written.
SELLER: PURCHASER:
By:/s/ By:/s/
---------------------------- ---------------------------
Title: President Title: VP Purchasing
-6-
<PAGE>
EXHIBIT "A"
-----------
Sale Specification Sheet
------------------------
This Sale Specification Sheet is attached to and made a part of that
certain Gas Sales Agreement entered into as of the date and between the parties
set forth below. it is contemplated that this Sales Specification Agreement and
all the terms noted herein shall remain in full force and effect for the term
set forth herein. In the event the parties desire to extend or modify the terms
set forth in the Sales Specification Agreement, then an amended Sales
Specification Sheet shall be executed by the parties and appended to the
Contract.
Date of Agreement: December 1, 1995
Sales Specification Date: January 1, 1996
Seller: U S Gas Services L L C
Purchaser: Tyson Foods, Inc.
Quantity: up to 1000 MMBtu/Day
Price: $ 2.21 /MMBtu Dry Renegotiable at the end of each contract year.
Term: 1-1-96 Through 12-31-2001
Point(s) of Delivery: Into Lone Star Pipeline
Various Pool(s) and Interconnects
Transporter: Lone Star Pipeline
Credit Requirement: N/A
SELLER: PURCHASER:
U S Gas Services L L C Tyson Foods, Inc.
By:/s/ By:/s/
---------------------------- ---------------------------
Title: President Title: VP Purchasing
-7-
<PAGE>
November 11, 1996
Via FedEx - Priority
- --------------------
Mr. Larry Bruce, President
US GAS SERVICES LLC
15 W. 6th Street
Tulsa, Oklahoma 74119
RE: SALE OF BEEF DIVISION OF TYSON FOODS, INC. ("Tyson")
Dear Mr. Bruce:
On October 17, 1996 Tyson entered into a definitive agreement (the
"Purchase Agreement") pursuant to which it agreed to sell its beef further
processing facilities and operations (the "Business") to Gorges/Quik-to-Fix
Foods, Inc. ("Buyer"), an entity formed by CGW Southeast Partners III, L.P.
("CGW") for the purpose of acquiring the Business. Under the terms of the
Purchase Agreement, the sale of the Business is expected to be consummated (the
"Closing") on November 22, 1996. Until such date, Tyson will own and operate
the Business. After the Closing, the Business will continue to be operated with
the same facilities employed by Tyson in its operation of the Business and will
be managed primarily by the people who now manage the Business for Tyson.
Pursuant to the Purchase Agreement, Tyson has agreed to assign all of its
rights, and Buyer has agreed to assume all of Tyson's obligations arising on or
after the Closing, under that certain Gas Sales Agreement (the "Contract") dated
December 1, 1995 by and between Tyson and US Gas Services LLC ("US Gas").
Pursuant to Section XII of the Contract, US Gas's consent is required in order
for Tyson to assign the Contract to Buyer.
On behalf of Tyson and Buyer, I am writing to request US Gas's consent to
Tyson's assignment of the Contract to Buyer. Please sign below where indicated
to confirm US Gas's consent to the assignment and return a copy of this letter
to my attention via fax (501-290-7967) and the original via the enclosed FedEx
envelope. By consenting to this assignment, US Gas acknowledges and affirms its
duties and obligations under the Contract as if the Contract were entered into
between US Gas and Buyer. This consent does not constitute a consent to further
assignment of the Contract and, except as set forth herein, the Contract remains
in full force and effect, enforceable against US Gas and Buyer.
<PAGE>
US Gas Services LLC
November 11, 1996
Page 2
Your assistance in this matter is greatly appreciated. If you have any
questions, please contact Courtney Smith (501-290-7330) or Read Hudson
(501-290-7023) in Tyson's legal department, or Jim O'Donnell with Buyer
(404-816-3255).
TYSON FOODS, INC.
/s/Courtney A. Smith
Courtney A. Smith
Corporate Counsel
The undersigned hereby consents to the assignment of the Contract (as
defined hereinabove) from Tyson Foods, Inc. to Gorges/Quik-To-Fix Foods, Inc.
US GAS SERVICES LLC
By: /s/ Larry D. Bruce
Name: Larry D. Bruce
Title: President
cc: Jim Doss
<PAGE>
EXHIBIT 10.15
CONTRACT FOR INDUSTRIAL GAS SERVICE
LONE STAR GAS COMPANY, called "Company", agrees to sell and deliver natural
gas to TYSON FOODS, INC. called "Customer," whose mailing address is P. O. Box
462368, Garland, Texas 75046-2368 and Customer agrees to purchase and receive
such gas from Company to meet Customer's natural gas requirement at Customer's
premises located in Dallas County, State of Texas, and more fully described as:
Frozen meat products plant located at 209 Range Drive in Garland, Texas subject
to and in accordance with all the terms and conditions contained in this
contract.
This contract shall be effective as of February 14, 1996, and shall cover
service for a period extending to the end of the first contract year and from
year to year thereafter; provided, that either party may terminate this contract
at the end of any contract year by giving written notice to the other party at
least fifteen (15) days prior to the end of any contract year. The first
contract year shall commence on the first official meter reading date after the
date gas is first delivered to Customer hereunder and shall terminate at the end
of the twelfth (12th) monthly billing period thereafter.
This contract covers Customer's entire natural gas requirements in the
aforesaid premises, and Customer shall not use gas under this contract for
service other than that classified by Company as industrial. Customer has
elected to receive and pay for gas under this contract during the first contract
year in accordance with Rate 3 within the attached Schedule of Industrial Rates
which is incorporated herein and made a part of this contract; provided,
however, it is understood the Rate Schedule applicable to such service may be
changed from time to time as provided in Article I of the General Terms. For
any succeeding contract year Customer may, at his option, and upon written
notice to Company of his intent to do so, elect to receive service under this
contract at any rate within the Company's then applicable Schedule of Industrial
Rates, provided Customer makes such election and gives such notice within twenty
(20) days after the beginning of such contract year.
Bills rendered for gas delivered hereunder shall be payable at Company's
office located at P.O. Box 910255, Dallas, Texas 75391-0255
This contract includes the additional terms, provisions and conditions
contained in Articles I through VII, entitled "General Terms," which are
attached hereto and shall be a part of this agreement and such "General Terms"
shall be applicable to the service rendered hereunder.
This contract shall be binding upon Company, its successors and assigns,
but shall not be assignable by Customer without the written consent of Company.
WITNESS THE EXECUTION HEREOF as of the 14th day of February, 1996
TYSON FOODS, INC. LONE STAR GAS COMPANY
By: /s/ By: /s/ Nancy F. Perry
------------------------- --------------------------
Nancy F. Perry
Title: EVP Finance Title: Attorney-in-Fact
---------------------- ----------------------
"CUSTOMER' "COMPANY"
<PAGE>
GENERAL TERMS
I.
(a) Company's Schedule of Industrial Rates may be revised from time to time
in the future and any such revised or new Schedule of Industrial Rates, when
lawfully established, shall be applicable to gas purchased and sold under this
contract commencing with gas delivered after the effective date of such change.
Company shall give Customer written notice of any such change, together with a
copy of the revised Schedule of Industrial Rates, and Customer may cancel this
contract by written notice to Seller within thirty (30) days following the date
of Company's notice, which cancellation shall be effective fifteen (15) days
after receipt of such notice by Company; provided the new or revised rate shall
be payable for gas service during any applicable period before cancellation. If
Customer fails to give the Company such notice of cancellation, this contract
shall continue. The notices herein provided for shall be deemed to have been
given when forwarded by the party giving the same addressed to the other party
at the address shown in this contract by first class mail, postage prepaid.
(b) At Company's request Customer shall from time to time deposit with
Company such amount of money as Company may determine is reasonably necessary to
guarantee the payment of gas bills hereunder and all other bills due by Customer
to Company. All money deposited by Customer with Company shall bear interest at
the rate prescribed by law. Interest shall be payable annually at Company's
office from which bills are rendered under this contract. Upon the termination
of this contract, said deposit, plus any accrued interest thereon, less any
amount due Company by Customer, shall be refunded to Customer.
II.
(a) The gas shall be measured at a single meter location by standard meter
or meters furnished and installed by and at Company's expense at a place
mutually agreed upon. Customer shall provide, in accordance with Company's
specifications, the necessary service line on Customer's premises to connect
with Company's line and suitable space and easement for Company's lines and
other equipment. Customer shall use due care to protect Company's property
which is located on Customer's premises from damage and shall permit no person
other than an agent of Company, or a person otherwise lawfully authorized, to
tamper with, inspect or remove same. All property belonging to Company and
located on Customer's premises shall be removable by Company at any time during
the term of this contract and within a reasonable time after its termination or
after reasonable notice of Customer's desire to have such property removed,
title thereto remaining in Company at all times. Company shall have full and
free ingress to and egress from Customer's premises for the construction,
inspection, maintenance, repair and removal of Company's property thereon or for
any purpose connected with the service of gas hereunder.
<PAGE>
(b) Customer agrees to keep the gas-burning equipment and appurtenances
which may be located on the aforesaid premises in good condition and in
conformity with the requirements of any applicable city ordinance, state law,
rule, order or regulation of any governmental authority having jurisdiction and
to comply with all of Company's reasonable rules and regulations.
(c) For the purpose of this contract the unit of measurement shall be 1,000
cubic feet of gas at a base pressure of 14.65 pounds per square inch absolute
and a base temperature of 60 degrees Fahrenheit. All volumes of gas measured
shall be adjusted by computation in accordance with the Ideal Gas Laws,
corrected for deviation from the pressure and temperature conditions set forth
in the immediate preceding sentence. In such computations, a value of 60
degrees Fahrenheit shall be used for the flowing temperature of the gas;
however, Company, at its sole option, may install standard temperature recording
instruments on Company's meter and correct the volume measured based on the
actual flowing temperature of the gas.
(d) Meter measurements computed by Company according to its standard
operating practices shall be conclusive except where meter is found to be
inaccurate by as much as 1 per cent fast or slow or failed to register, in
either of which cases Company shall repair or replace the meter. The quantity
of gas delivered while the meter was inaccurate or failed to register shall be
determined by correcting the error if the percentage of error is ascertainable
by calibration test or mathematical calculation. If not so ascertainable, then
it shall be determined by estimating the quantity on a basis of deliveries under
similar conditions when the meter was registering accurately. No adjustment or
correction for meter inaccuracy or failure shall be made for a period longer
than 90 days.
-2-
<PAGE>
SCHEDULE OF INDUSTRIAL RATES -- N
STATE OF TEXAS
Availability:
The rates hereinafter set out are available to gas customers who can be
served from, and without exceeding the capacity of, Company's existing system
upon the terms, conditions, and limitations recited herein, in the contract of
which this Schedule of Industrial Rates forms a part, and in reasonable rules
and regulations adopted by Company. These rates shall not be available for
standby use. The gas delivered hereunder is for the individual use of Customer
and shall not be resold.
These rates shall not be available to residential customers and shall be
available to schools, churches, rooming or boarding houses, orphanages, homes
for the elderly, dormitories, hospitals, motels, hotels, apartment buildings or
other buildings used primarily as living quarters, or any other use which may be
considered human need, only if Customer has standby equipment for the use of
other fuel of at least equal capacity to that normally required by the Customer,
and fuel in storage in an amount adequate to fulfill Customer's fuel
requirements during periods of curtailment, interruption and discontinuance of
gas service. Company shall not be responsible for determining the type or
amount of standby fuel or equipment; such determination shall be the sole
responsibility of Customer.
This Schedule of Industrial Rates is based on Customer's use of gas service
for twelve full months during the contract year. This Schedule of Industrial
Rates may be applicable to service to a Customer's temporary facilities for less
than twelve full months during a contract year by the payment by Customer to
Company, upon execution of such temporary contract, of a non-refundable amount
which shall be the estimated cost of installing and removing facilities
necessary to provide such service.
Measurement and Billing:
The gas shall be measured at a single meter location and shall not be
combined with gas measured through any other meter location for the purpose of
billing under this schedule. Amounts billed shall be due and payable within ten
(10) days from monthly billing date.
The first step of each rate shall be applicable when the service period for
which bill is rendered is for 16 days or more. Whenever the initial service
period is for 15 days or less during a billing period, the Customer's
consumption shall be carried forward and added to Customer's consumption during
the next succeeding monthly service period for billing purposes.
-3-
<PAGE>
Curtailment:
Subject to governmental regulation, gas service under this Schedule of
Industrial Rates shall be subject to curtailment, interruption or discontinuance
in a particular service area when necessary in the judgment of the Company for
it to maintain Residential and Commercial Rate service and Industrial service
having a higher priority. Service shall be furnished by Company and received by
Customer in accordance with the following order of priority:
Adjustment For Heat Content:
This Schedule of Industrial Rates is based upon the delivery of gas having
an average total heat value of 1,000 British thermal units (Btu) per cubic foot.
Should the average total heating value of gas delivered in any monthly period be
more or less than 1,000 Btu per cubic foot, the measured volume for such period
shall be increased or decreased, respectively, in the percentage by which the
average heating value of such gas is greater or less than 1,000 Btu per cubic
foot. The monthly average total heating value of the gas at a pressure of four
ounces plus 14.4 pounds per square inch and at a temperature of 60 degrees
Fahrenheit shall be determined at Company's expense by the use of standard
methods and procedures.
Adjustment for Gas Cost:
The foregoing rates are based upon a weighted average cost of gas purchased
by Lone Star Gas Company of $1.00 per 1,000 cubic feet (Mcf) based on a pressure
of four ounces per square inch above an assumed atmospheric pressure of 14.4
pounds per square inch and at a temperature of 60 degrees Fahrenheit. The
"weighted average cost of gas purchased," as used herein, shall be computed by
dividing the total amount paid or accrued by Company (as reflected by Company's
Gas Purchase Accounts), including any production, severance, dedication or
gathering tax paid or accrued by Company directly or by way of reimbursement to
its gas suppliers, to producers, processors, transporters, or other sellers of
gas in the latest available fiscal month by the total volume of pipeline quality
gas in Mcf purchased by Company during said period.
Whenever the weighted average cost of gas purchased is more or less than
$1.00 per Mcf, the amount billed under this schedule shall be increased or
decreased by the amount of such difference multiplied by the consumption in Mcf,
without adjustment for heating value. In applying the gas cost adjustment
clause, the adjustment shall be computed to the nearest one-hundredth of one
cent.
Company, from time to time, may be required by the terms of a gas purchase
contract (including an agreed settlement of a disputed claim) or by a
determination of a regulatory body or court to make additional payments with
respect to gas previously purchased by Company. In such case, appropriate
adjustments to compensate therefor
-4-
<PAGE>
shall be made in the price payable for gas hereunder as soon as practicable
after the time of such payment so that Customer shall bear a proportionate part
of any such payment which has not been previously included in the weighted
average cost of gas purchased as defined above.
Adjustment for Taxes, Licenses, Fees, Charges, And Rentals:
Customer shall pay Company an amount equivalent to a proportionate part of
all taxes or rentals which now are or which may be levied, charged or imposed by
any governmental body under authority of any law, ordinance or contract for the
use of the public streets, alleys and thoroughfares in the conduct of Company's
business, or because of Company's occupation; and Customer shall pay Company an
amount equivalent to a proportionate part of any new tax or increased tax or any
other governmental imposition, rental, fee or charge levied or charged after
July 1, 1976, (except state, county, city, and special district ad valorem
taxes, taxes on net income and any production or similar tax included in the
weighted average cost of gas as provided in the gas cost adjustment clause).
-5-
<PAGE>
AMENDMENT OF CONTRACT FOR INDUSTRIAL GAS SERVICE
THIS AMENDMENT, made and entered into as of the 14 day of February 1996 by
and between LONE STAR GAS COMPANY, a Division of ENSERCH Corporation, a Texas
corporation, hereinafter referred to as "Company", and TYSON FOODS, INC., a
Delaware corporation, hereinafter referred to as "Customer";
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company and Customer entered into a Contract for Industrial Gas
Service dated February 14, 1996 (hereinafter referred to as the "Contract") for
the sale and purchase of natural gas to Customer's frozen meat products plant
located in Garland, Texas (hereinafter referred to as "Customer's plant"); and
WHEREAS, Customer qualifies for Company's Industrial Rate 1, 2, or 3 class
of gas sales service and desires to purchase a portion of its fuel requirements
from Company and to purchase certain volumes of gas from third parties and have
Company transport such third party gas; and
WHEREAS, Company and Customer mutually desire to amend such Contract;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, Company and Customer hereby agree to amend the aforesaid
Contract as provided below, effective the first day of the month following the
latest of (i) February 29, 1996, (ii) the date Company receives this Amendment
after execution by Customer or (iii) the date Customer provides, at Customer's
expense, a telephone connection to, and a compatible and operational telephone
line for, Company's automatic meter reading system(s) located at the meter(s) at
or near Customer's plant:
I.
The second paragraph of the signatory page shall be deleted, and the
following paragraph shall be substituted in lieu thereof:
"This contract shall cover service for a primary term ending February 28,
2001 and from year to year thereafter, provided that either party may
cancel this contract at the end of the primary term, or at the end of any
contract year subsequent to the primary term, by giving written notice to
the other party at least thirty (30) days prior to the effective date of
such cancellation. Each contract year hereunder shall begin February 28th
and shall consist of twelve (12) monthly billing periods (billing months)."
-6-
<PAGE>
II.
The fourth paragraph of the signatory page shall be deleted, and the
following paragraph shall be substituted in lieu thereof:
"Bills rendered for gas sold and delivered hereunder shall be payable at P.
O. Box 910255, Dallas, Texas 75391-0255, or such other address as may be
from time to time designated by Company on reasonable notice. Company's
mailing address for notices hereunder is 301 S. Harwood Street, Attention:
Gas Marketing, Contract Administration, Dallas, Texas 75201."
III.
The Roman Numeral "VII" in the fifth paragraph of the signatory page shall
be deleted, and the Roman Numeral "IX" shall be substituted in lieu thereof.
IV.
The first sentence of Article V of the General Terms shall be deleted, and
the following three (3) sentences shall be substituted in lieu thereof:
"In the event Customer fails to timely pay any amount(s) due hereunder,
Customer agrees to pay interest at the rate of eighteen percent (18%) per
annum, or the highest rate allowed by law, whichever is less, on such past
due amount(s). Should litigation on any amount(s) due under this contract
be required, Customer agrees to reimburse Company for its reasonable
attorneys fees. Additionally, if Customer shall fail to pay bills for
service within twenty (20) days from the date they are rendered hereunder
or shall otherwise default under this contract, Company may suspend service
and deliveries of gas and such suspension shall not prevent enforcement by
Company of any other of its legal rights."
V.
The following new Article VIII shall be added to the General Terms of the
Contract:
"VIII.
(a) Customer may purchase natural gas from other suppliers to cover any
portion of Customer's plant's natural gas requirements, subject to the
other terms and conditions contained herein. To provide for transportation
of such gas volumes to Customer's plant, the Addendum attached hereto
entitled Interruptible Gas Transportation Agreement (hereinafter referred
to as the "Transportation Agreement") is hereby incorporated into this
contract and made a part hereof by this reference. During the term of the
Transportation Agreement, Customer may purchase and have transported
pursuant to the terms thereof during each billing month a total aggregate
volume of gas from such other suppliers of up to nine
-7-
<PAGE>
hundred seventy (970) Mcf per day on an average daily basis, provided,
however, Customer pays Company under this contract at least the minimum
amount for the applicable rate at which Customer has elected to receive
service hereunder ($202.39 per month for Rate-1 service to Customer,
$905.26 per month for Rate-2, or $1,748.12 per month for Rate-3) during
such time period. Company and Customer hereby recognize and agree that
Customer shall purchase from Company hereunder and/or have Company
transport under the Transportation Agreement as provided herein, Customer's
plant's entire natural gas requirements during the term hereof.
(b) Customer agrees to purchase and receive from Company under this
contract any volumes of gas used at Customer's plant which are in excess of
the transportation volumes delivered to Customer by Company during each
billing month, except for any imbalances that are timely corrected as
provided in Article 1, subparagraph 1.2(c) of the Transportation Agreement.
(c) It is understood and agreed that it will be necessary for Company to
install an automatic meter reading system for each meter hereunder at or
near Customer's plant in order to comply with the various measurement and
monitoring provisions herein. Customer hereby agrees it shall, upon
Company's invoicing, pay to Company the sum of $2,300.00 to cover the
initial cost of such system(s) and related set-up expenses, unless such
system(s) were installed by Company and paid for by Customer prior to the
effective date of the Transportation Agreement. Additionally, Customer
agrees to provide and maintain, at Customer's expense, a telephone
connection to, and a compatible and operational telephone line for,
Company's automatic meter reading system(s); provided further, in the event
Customer fails to maintain such telephone line in an operational state and
Company directly or indirectly provides repair service(s) thereto, then
Customer agrees to reimburse Company, upon Company's invoicing, the total
cost for each such repair service which is performed or caused to be
performed by Company. Such automatic meter reading system(s) shall be the
sole property of Company and shall be operated and maintained by Company at
Company's expense.
(d) Customer understands that in order to provide the transportation
service as described herein, Company will incur additional costs for which
Customer hereby agrees to provide compensation by paying to Company each
month hereunder a fee (for gas cost equalization) equal to eleven and one-
half cents (11.5c) for each MMBtu which Customer, as allowed under this
contract, purchases from such other suppliers and receives under the
Transportation Agreement during each billing month.
(e) Both Company and Customer recognize that if Customer's volumes of gas
purchased from the aforesaid suppliers and transported under the
Transportation Agreement are interrupted for any period of time, Company
shall supply standby gas to Customer's plant under this contract at the
industrial rate in effect hereunder
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<PAGE>
during such time period (provided, however, nothing shall prevent Company
------------------------------------------------
from exercising its contractual rights to curtail gas as specified in
---------------------------------------------------------------------
Article IV hereof), and Customer hereby agrees to pay Company each and
-------------------
every month an amount computed by multiplying Customer's applicable standby
fee, as set forth below, times the volume of all gas, on a MMBtu basis (as
determined by the method described in the paragraph "Adjustment for Heat
Content" in the attached Schedule of Industrial Rates), which Customer, as
allowed under this contract, purchases from such other suppliers and
receives under the Transportation Agreement during such billing month,
regardless of whether or not Company is actually called upon to supply
standby gas to Customer during such billing month. Customer's standby fee
shall be an amount equal to fifteen cents (15c) per MMBtu if Customer has
elected to receive Rate-1 service hereunder, ten cents (10c) for Rate-2
service and five cents (5c) for Rate-3 service.
(f) Customer also agrees to pay Company, by way of reimbursement, all
taxes imposed upon the gross receipts accruing to Company under paragraphs
(c), (d) and (e) above and any other taxes Company pays relative to such
paragraphs. Company shall invoice Customer monthly for any amounts due
under said paragraphs for the preceding billing month, and such amounts
will be due and payable within ten (10) days of the billing date.
(g) Upon termination of the aforementioned Transportation Agreement, this
Article VIII shall simultaneously therewith be null and void except for the
requirement to make payment of any amount(s) due hereunder."
VI.
The following new Article IX shall be added to the General Terms of the
Contract:
"IX.
Pursuant to the Federal Arbitration Act, the parties hereby agree that any
controversy, claim, or alleged breach, including but not limited to torts
and statutory claims, arising out of or related to this contract shall be
settled by binding arbitration administered by the American Arbitration
Association ("AAA") in accordance with its Commercial Arbitration Rules.
Demand for arbitration may be made no later than the time that such act
would be permitted under the applicable Texas statute of limitation. Any
disputes regarding the timeliness of the demand for arbitration shall be
decided by the arbitrator(s). Judgment upon the award rendered by the
arbitrator(s) may be entered in any Court having jurisdiction thereof in
order to obtain compliance therewith. Any case in which any claim, or
combination of claims, exceeds $500,000 shall be subject to the AAA's Large
Complex Case Procedures and decided by the majority of a panel of three (3)
neutral arbitrators. In rendering the award, the arbitrator(s) shall
determine the rights and obligations of the parties according to
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<PAGE>
the laws of the State of Texas. The arbitration proceedings and hearings
shall be conducted at the Dallas Regional Office of the AAA or at such
other place as may be selected by mutual agreement. No party nor the
arbitrator(s) may disclose the existence, content or results of any
arbitration hereunder without the prior written consent of all parties."
This Amendment and all operations hereunder are subject to the applicable
federal and state laws and the applicable ordinances, orders, rules and
regulations of any local, state or federal governmental authority having or
asserting jurisdiction; but nothing contained herein shall be construed as a
waiver of any right to question or contest any such law, ordinance, order, rule
or regulation in any forum having jurisdiction in the premises.
Except as modified or changed hereby, all other terms and conditions of the
Contract shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed in duplicate originals
by the parties hereto as of the day and year first herein written.
TYSON FOODS, INC. LONE STAR GAS COMPANY, a
Division of ENSERCH Corporation
By: /s/ Gerald Johnston By: /s/ Nancy F. Perry
------------------------- -------------------------
Name: Gerald Johnston Name: Nancy F. Perry
----------------------- -----------------------
Title: EVP Finance Title: Attorney-in-Fact
---------------------- ----------------------
"CUSTOMER" "COMPANY"
-10-
<PAGE>
ADDENDUM TO AMENDMENT OF CONTRACT FOR INDUSTRIAL GAS SERVICE
THIS AGREEMENT is attached to and made a part of that certain "Amendment of
Contract for Industrial Gas Service" dated February 14, 1996 between LONE STAR
GAS COMPANY, a Division of ENSERCH Corporation, a Texas corporation, and TYSON
FOODS, INC., a Delaware corporation.
INTERRUPTIBLE GAS TRANSPORTATION AGREEMENT
THIS AGREEMENT, made and entered into February 14, 1996, by and between
LONE STAR GAS COMPANY and LONE STAR PIPELINE COMPANY, Divisions of ENSERCH
Corporation, a Texas corporation, hereinafter collectively or singularly
referred to as "Transporter" and TYSON FOODS, INC., a Delaware corporation,
hereinafter referred to as "Shipper";
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lone Star Gas Company and Shipper entered into a Contract for
Industrial Gas Service dated February 14 , 1996 (hereinafter referred to as the
"Contract for Industrial Gas Service") for the sale and purchase of natural gas
to Shipper's plant as described in the Contract for Industrial Gas Service; and
WHEREAS, Shipper qualifies for Lone Star Gas Company's Industrial Rate 1,
2, or 3 class of gas sales service and desires to purchase a portion of its fuel
requirements from Lone Star Gas Company and to purchase certain volumes of gas
from third parties and have Transporter transport such third party gas; and
WHEREAS, Lone Star Gas Company and Shipper have amended the Contract for
Industrial Gas Service to allow for such transportation hereunder; and
WHEREAS, Shipper owns or controls certain quantities of natural gas which
are not subject to the jurisdiction of the Federal Energy Regulatory Commission
(the "FERC") under either the Natural Gas Act of 1938, as amended, (the "NGA"),
or the Natural Gas Policy Act of 1978, as amended, (the "NGPA"), and Shipper
desires that Transporter (a) receive gas from Shipper (or its designee) at the
Point(s) of Receipt hereinafter set forth and (b) deliver equivalent quantities
of gas to the Point of Delivery hereinafter set forth; and
WHEREAS, Transporter owns and operates pipeline transmission and
distribution systems and is willing to transport gas for Shipper under the terms
and conditions hereinafter set forth;
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<PAGE>
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions herein contained, the adequacy and sufficiency of which are hereby
acknowledged, Transporter and Shipper hereby agree as follows:
ARTICLE I.
QUANTITY
--------
1.1(a) Shipper represents that from time to time it may desire for
Transporter to receive and deliver the above described gas at the points
hereinafter set forth in quantities as agreed to by the parties. It is agreed
that the volume of gas to be transported under this Agreement shall be in
accordance with the provisions set forth in Article VIII of the Contract for
Industrial Gas Service. It is further hereby agreed that the calculation of all
quantities of gas received and delivered hereunder shall, for all purposes,
including, but not limited to, payment and determination of imbalance and
retention volumes, be on an MMBtu basis. Transporter's receipt and delivery of
such gas volumes will be on a wholly interruptible basis and subject to: (i) the
most efficient and economic utilization of Transporter's pipeline capacity as
determined by Transporter in its reasonable sole discretion, (ii) pipeline
capacity necessary to serve existing or future sales customers under tariffs
filed with applicable regulatory authorities as determined by Transporter in its
reasonable sole discretion and (iii) the other terms and conditions contained
herein.
(b) Shipper hereby acknowledges that the transportation service to be
performed hereunder by Transporter will be on a wholly interruptible basis as
provided herein. Shipper agrees that such service may be interrupted, in whole
or in part, from time to time, without notice; however, Transporter's dispatcher
will endeavor to advise (by telephone) Shipper's dispatcher or authorized
representative of an interruption as soon as practicable, either before or after
such interruption, but Transporter shall have no liability for any failure to
give such notice. In no event shall an interruption of service pursuant to the
terms, conditions and contingencies of this Agreement constitute a breach of
this Agreement, and Transporter shall not be liable to Shipper or third parties
in damages or otherwise because of any interruption of service. Shipper agrees
to indemnify and hold harmless Transporter for any damages, causes of actions or
claims asserted by any third parties as a result of any termination, suspension,
or interruption of services hereunder by Transporter.
1.2(a) It is recognized that a day-to-day balance of gas received by
Transporter and delivered to Shipper may not be possible due to the inability of
the parties to control precisely such receipts or deliveries. However,
Transporter, to the extent practicable, will deliver to Shipper each day a
quantity of gas equivalent to ninety-eight and one-half percent (98.5%) of the
quantity of gas received by Transporter from Shipper (or its designee) on such
day and Transporter shall retain the one and one-half percent (1.5%) balance of
the quantity of gas received as normal gas lost, gas used as fuel and gas used
in day-to-day pipeline operations (the "Retention Volume").
-12-
<PAGE>
(b) It shall be the responsibility of Shipper to monitor, and if
necessary, adjust, or cause to be adjusted, (i) deliveries of gas to Transporter
for transportation and (ii) receipts of transportation gas from Transporter, in
order to maintain a daily balance of receipts and deliveries. Transporter shall
not be obligated to receive or deliver quantities of gas on any day in excess of
those quantities nominated by Shipper, in accordance with Section 1.3 hereof,
for transportation hereunder on such day, nor shall Transporter be obligated to
deliver to Shipper at the Delivery Point quantities of gas in excess of those
quantities of gas received from Shipper on such day at the Receipt Point(s),
less the Retention Volume. Shipper shall monitor, to the best of its and its
designee's ability, receipts and deliveries hereunder and shall advise
Transporter of any situation wherein an imbalance has occurred or may occur
unless corrective action is taken. Shipper shall be obligated to adjust its
receipts and/or deliveries of transportation gas to the extent necessary to
correct or avoid any imbalance and to notify Transporter of such adjustments,
Any adjustments to receipts and/or deliveries by Shipper, whether or not
pursuant to notification from either party, shall be coordinated with
Transporter's gas control personnel.
(c)(1) In the event of a monthly imbalance [as described in paragraph
(c)(3) below] which Shipper fails to make up during the next month and Shipper's
deliveries to Transporter at the Receipt Point(s) during such two (2) month
period are in excess of, or deficient by, more than ten percent (10%) of the
transportation quantities delivered by Transporter to Shipper at the Delivery
Point during said two (2) month period, then (i) in the case of any cumulative
imbalance, as hereinafter defined, due Transporter ("underdeliveries by
Shipper"), Transporter shall have the right to require Shipper to purchase such
cumulative imbalance volume(s) from Transporter as industrial rate sales gas
under the Contract for Industrial Gas Service; or (ii) in the case of any
cumulative imbalance, as hereinafter defined, due Shipper ("overdeliveries by
Shipper"), Transporter shall have the right to collect from Shipper an amount
equal to the product of twenty-five cents (25c) multiplied by the number of
MMBtus in such cumulative imbalance volume(s). In the event Shipper is required
to purchase from Transporter any cumulative imbalance(s), as provided in (i)
above, Transporter agrees to credit Shipper for transportation fees paid by
Shipper to Transporter hereunder on such cumulative imbalance volume(s). For
the purposes of this paragraph, the term "cumulative imbalance" shall mean the
sum of (1) any imbalance carried forward from an immediately preceding month to
the next succeeding month, plus (2) any imbalance based on the delivery and
receipt of gas hereunder during such succeeding month.
(2) Notwithstanding the preceding paragraph, Transporter expressly reserves
the right, at any time in the future upon at least ninety (90) days written
notice given prior to the beginning of any contract year(s) hereunder, to
institute, and from time to time revise, a cash out balancing process.
Transporter may from time to time apply the process to all Shippers, or just
certain categories of Shippers, on a non-discriminatory basis, and may apply the
process on a daily or monthly basis. Any such cash out balancing process shall
be similar to what other pipelines are then using. Upon such cash out balancing
notice by Transporter, Shipper shall have the right to cancel this Agreement by
giving at
-13-
<PAGE>
least thirty (30) days written notice to Transporter prior to the beginning of
such contract year.
(3) An imbalance shall exist hereunder where, during any applicable period
of the term hereof, there is a numerical difference between the quantity of gas,
exclusive of the total of those volumes of gas delivered under the Contract for
Industrial Gas Service and the Retention Volume, delivered by Transporter to
Shipper and the quantity of gas received by Transporter from Shipper (or its
designee) during such applicable period.
(d) Notwithstanding anything contained herein which might be construed to
the contrary, Transporter shall always have the total and unrestricted right,
but with no obligation whatsoever, to at any time and from time to time
restrict, interrupt, or reduce its receipt and/or delivery of gas in order to
maintain a daily balance or to correct an imbalance hereunder.
1.3 At least five business days prior to the first calendar day of each
month during the term hereof, Shipper shall notify Transporter of the volumes of
gas Shipper nominates for transportation at the Receipt and Delivery Points
under this Agreement for such month. Each such transportation nomination shall
contain Shipper's nominated quantities for the Receipt and Delivery Points,
designation of the appropriate contract(s) covering such gas, and the identity
by name and telephone number of individual(s) who have authority to confirm the
nominated gas volumes at each Receipt Point and the Delivery Point. Timely
nominations may be given by verbal notice; provided, however, Shipper shall
furnish written confirmation thereof within five (5) business days of the date
of such verbal notice. Shipper may change nominated quantities on any business
day upon verbal notice of any such reduction of nominated quantities, but such
verbal notice must be received by Transporter prior to 12:00 noon Central time
of any business day to be effective the next succeeding business day. If
Shipper fails to furnish transportation nominations as required herein for any
month during the term hereof, Transporter may suspend transportation hereunder
for such month and such interruption of service shall not prevent enforcement by
Transporter of any other of its legal rights or remedies nor be construed as a
breach of Transporter's obligations hereunder. Shipper understands that with
regard to Receipt Point nominations, Transporter at any time and from time to
time and for any specified or unspecified time period(s), may for operational
reasons prorate and/or totally refuse to accept new nominations or honor then
existing nominations at certain then existing and/or newly proposed Receipt
Points; however, Transporter will endeavor to notify Shipper or Shipper's
designee of such refusal as soon as practicable, but Transporter shall not be
liable for any failure to do so.
ARTICLE II.
LOCATIONS OF POINTS OF RECEIPT AND DELIVERY
-------------------------------------------
2.1 Receipt Point(s): Gas delivered by Shipper (or its designee) to
Transporter hereunder shall be delivered at points which are sometimes herein
referred to as the
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<PAGE>
"Transporter Receipt Point(s)" or "Point(s) of Receipt" and which shall be
located at mutually agreeable points on Transporter's intrastate pipeline
transmission system, and any such mutually agreeable points shall be set forth
and identified in writing signed by both Transporter and Shipper. It is agreed
that (i) all points to be established hereunder will be subject to Transporter's
prior approval, (ii) certain points may require that Shipper pay a compression
fee and/or additional retention, with such requirements for any specific
point(s) to be provided to Shipper by Transporter prior to the incurment of
liability for same, and (iii) for each MMBtu received by Transporter from
Shipper (or its designee) at any Receipt Point(s) located on Transporter's Line
X, an additional five cents (5c) per MMBtu shall be added to the transportation
rate hereunder and Transporter shall retain an additional one percent (1%) of
such gas over and above the standard one and one half percent (1 1/2%) retention
referenced in Article 1.2(a) above. Notwithstanding anything contained in this
Agreement which might be construed to the contrary, in the event of unfavorable
operating conditions or a change of ownership of specific Receipt Point(s) or
appurtenant facilities, or if, in Transporter's sole opinion, the receipt of gas
from a specific Receipt Point(s) hereunder ever becomes uneconomical for any
reason whatsoever, then Transporter shall have the right (i) to immediately
discontinue the receipt of gas from any such Receipt Point(s) and/or (ii) upon
thirty (30) days' prior written notice to Shipper, to delete any such Receipt
Point(s) from this Agreement. Furthermore, Transporter reserves the right, at
any time in the future upon at least ninety (90) days written notice given prior
to the beginning of any contract year hereunder, to require that Shipper
install, or caused to be installed, telemetering equipment reasonably
satisfactory to Transporter at all then existing as well as future Receipt
Points hereunder. In the event Shipper fails to comply, Transporter may refuse
to accept gas at any such Receipt Point(s) and may delete, or refuse to add,
such point(s) from/to this Agreement.
2.2 Delivery Point: Gas transported by Transporter hereunder shall be
delivered to Shipper where gas first passes from Transporter's metering
equipment into Shipper's equipment at or near Shipper's plant as described in
the Contract for Industrial Gas Service (sometimes herein referred to as the
"Point of Delivery").
2.3 Additional Receipt Points: It is understood by both parties that
Shipper and Transporter may mutually agree in writing to establish other Receipt
Points hereunder; provided, however, that Transporter shall not be obligated to
establish new Receipt Points more frequently than once every six (6) months,
unless, due to circumstances beyond Shipper's control, Shipper (or its designee)
is unable to supply gas to the original Receipt Point(s) hereunder. In such
event, and upon receipt by Transporter of documentation satisfactory to
Transporter verifying such event and Shipper's inability to remedy same,
Transporter may, in its sole discretion, agree to establish an additional
Receipt Point. In the event Shipper desires that Transporter receive gas at a
proposed point(s), Shipper shall notify Transporter in writing of such proposed
point(s), including in such notice estimated daily delivery volume(s) at such
point(s) and the location(s) thereof and Shipper shall therein warrant that the
quality of gas to be received at such proposed point(s) meets the quality
specifications as defined herein and all other applicable terms and conditions
contained in this Agreement. Transporter will promptly evaluate each point and,
within
-15-
<PAGE>
thirty (30) days of Transporter's receipt of Shipper's notice, notify Shipper
whether or not Transporter is able to accept gas from Shipper's proposed new
Receipt Point(s). Failure to respond within thirty (30) days shall not be
construed as Transporter's acceptance of any proposed new point(s). If
Transporter agrees to establish any additional Receipt Point(s) pursuant hereto,
such agreement shall be evidenced in writing signed by both Shipper and
Transporter.
ARTICLE III.
PRESSURES AT POINTS OF RECEIPT AND DELIVERY
-------------------------------------------
3.1 Shipper (or its designee) shall deliver gas to Transporter at the
Receipt Point(s) at pressures sufficient to enter Transporter's intrastate
pipeline transmission system at such point; provided, however, that Shipper's
delivery pressure into Transporter's system at the Receipt Point(s) shall not
exceed Transporter's maximum allowable operating pressure, as such may vary from
time to time, at any such point(s) or cause the pressure at such point(s) to
exceed Shipper's (or its designee's) maximum allowable operating pressure.
3.2 Transporter shall deliver gas to Shipper at Transporter's operating
pressure, as such may vary from time to time, at the Delivery Point.
ARTICLE IV.
RATES
-----
4.1 Shipper shall pay Transporter, for services rendered hereunder, at the
rate set forth below, commencing with initial deliveries of gas hereunder:
(a) Shipper shall pay Transporter each month for the transportation of gas
by Transporter hereunder during such month an amount equal to fifty-eight
cents (58c) for each MMBtu delivered hereunder at the Delivery Point. Such
rate shall be allocated as follows: (i) fifty percent (50%) of such rate
shall represent the charge per MMBtu for the use of Transporter's
transmission system and (ii) the remaining fifty percent (50%) of such rate
shall represent the charge per MMBtu for the use of Transporter's
distribution system serving Garland.
(b) It is agreed by the parties hereto that the fifty-eight cents (58c) fee
charged in paragraph (a) above shall be escalated one cent (1c) per MMBtu
at the beginning of the second contract year of the Contract for Industrial
Gas Service and each contract year thereafter during the term of this
Agreement.
(c) Should the appropriate regulatory agency find such rates to be
unreasonable for any reason or in any way in violation of any provision of
law, and determine a rate lower than that provided for herein, Transporter
may terminate
-16-
<PAGE>
this Agreement by giving Shipper thirty (30) days' prior written notice of
such termination within thirty (30) days of such rate decrease or finding.
Should the agency determine a rate higher than that provided for herein,
Shipper may terminate this Agreement by giving Transporter thirty (30)
days' prior written notice of such termination within thirty (30) days of
such rate increase or finding.
ARTICLE V.
TERM
----
5.1 This Agreement shall be effective as of the effective date of the
above referenced Amendment of Contract for Industrial Gas Service, and this
Agreement shall thereafter remain in full force and effect, subject to the terms
and provisions hereof, for a primary term contemporaneous with the primary term
of the Contract for Industrial Gas Service, and contract year to contract year
thereafter until canceled by either party giving the other party thirty (30)
days prior written notice; provided, however, notwithstanding anything contained
herein to the contrary, if this Agreement is still in effect when the
termination, expiration or cancellation of the Contract for Industrial Gas
Service occurs, then this Agreement shall thereupon automatically terminate
simultaneously therewith. Notwithstanding the above, if an imbalance in
deliveries exists on the date of termination hereof between the quantities
theretofore delivered at the Receipt Point(s) and Delivery Point, the term of
this Agreement shall be extended for a period sufficient to allow the party
whose deliveries are in arrears to promptly eliminate any imbalance. Provided
further, any termination, cancellation, or expiration of this Agreement shall
never operate to extinguish the obligation to make payment for monies due
hereunder.
ARTICLE VI.
LAWS AND REGULATIONS
--------------------
6.1 This Agreement shall be subject to all applicable State and Federal
laws, and orders, directives, rules and regulations of any governmental body,
official or agency having jurisdiction over Transporter or this Agreement;
therefore, Transporter's obligations and liabilities hereunder shall be limited
accordingly.
6.2 Each party warrants to the other that its or its agent's facilities
utilized for the delivery and acceptance of gas hereunder are not subject to the
NGA, as heretofore amended. As a material representation, without which both
parties would not have been willing to agree to this Agreement, each party
warrants to the other party that it and its agents will take no action nor
commit any act of omission which will subject its facilities, this transaction
or the other party's facilities, to jurisdiction of the FERC or its successor
governmental agency under the terms of the NGA or NGPA. The gas delivered and
accepted hereunder shall not have been nor shall be sold, transported, or
otherwise utilized in interstate commerce in a manner which will subject either
party to the terms of the NGA or NGPA. In addition to and without excluding any
remedy the aggrieved party
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<PAGE>
may have at law or in equity, the party who breaches the above warranties and
representations shall be liable to the aggrieved party for all damages, injury
and reasonable expense the aggrieved party may sustain by reason of any breach
hereof. Further, should either party or its agents perform any act, or cause any
action to be performed, at any time, that results in any gas covered hereunder
becoming regulated by or subject to jurisdictional authority of the FERC, or
successor governmental authority, under the terms of the NGA or NGPA contrary to
this Agreement, this Agreement shall be deemed of its own terms to terminate on
the day before the date of such occurrence; provided, however such termination
shall never be construed to impair any right under this paragraph. Shipper
hereby waives any defense for breach of this paragraph that Transporter could
avoid NGA jurisdiction under the provisions of Section l(c) of such Act.
ARTICLE VII.
GENERAL TERMS AND CONDITIONS
----------------------------
7.1 The GENERAL TERMS AND CONDITIONS attached hereto as APPENDIX "A" are
incorporated herein and made a part hereof by this reference.
ARTICLE VIII.
MISCELLANEOUS
-------------
8.1 All notices, requests, demands, statements and payments provided for
in this Agreement must be given in writing directed to the party to whom given,
and mailed to or delivered at such party's address as follows:
(Notices) (invoices)
Jim Doss Tyson Foods, Inc.
Tyson Foods, Inc. P.O. Box 462368
P.O. Box 2020 Garland, TX 75046-2368
Springdale, AR 72765
(Notices) (Payments)
Lone Star Pipeline Company Lone Star Gas Company
301 S. Harwood Street P.O. Box 910255
Dallas, Texas 75201 Dallas, Texas 75391-0255
ATTN: Transportation Contract
Administration
or at such address as each party may by like notice give to the other. Such
mailed notices shall be deemed to have been given when deposited in the United
States mail (first class,
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<PAGE>
registered or certified), postage prepaid, or in the case of hand delivery, when
delivered to a representative of either party by a representative of the other
party.
8.2 This Agreement and the Contract for Industrial Gas Service
constitute the entire agreement between the parties covering the subject matter
hereof, and there are no agreements, modifications, conditions or
understandings, written or oral, express or implied, pertaining to the subject
matter hereof which are not contained herein.
8.3 Modifications of this Agreement shall be or become effective only
upon the mutual execution of appropriate supplemental agreements or amendments
hereto by duly authorized representatives of the respective parties.
8.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be transferred or assigned by Shipper without the
prior written consent of Transporter, and any purported transfer or assignment
without such consent shall be null and void and shall not operate to release
Shipper's obligations hereunder.
8.5 The captions or headings preceding the various parts of this
Agreement are inserted and included solely for convenience and shall never be
considered or given any effect in construing this Agreement or any part of this
Agreement, or in connection with the intent, duties, obligations or liabilities
of the parties hereto.
8.6 Transporter and Shipper acknowledge, agree and intend that this
Agreement is entered into solely for the respective benefit of Transporter and
Shipper and nothing contained in this Agreement, either express or implied,
shall be interpreted or construed as conferring any rights, remedies or claims
under or in respect to this Agreement or any provision hereof upon any person or
entity not a party hereto, other than the successors or assigns of the Parties
hereto.
In Witness Whereof, this Agreement has been executed in duplicate
originals by the parties hereto as of the day and year first herein written.
LONE STAR GAS COMPANY TYSON FOODS, INC.
LONE STAR PIPELINE COMPANY,
Divisions of ENSERCH Corporation
By: /s/ Richard A. Erskine By: /s/ Gerald Johnston
----------------------- --------------------
Richard A. Erskine Name: Gerald Johnston
Vice President Title: EVP Finance
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<PAGE>
SHEET NO. 1
APPENDIX "A"
to
INTERRUPTIBLE GAS TRANSPORTATION AGREEMENT
GENERAL TERMS AND CONDITIONS
----------------------------
1. Measuring Equipment and Testing
-------------------------------
(a) The gas delivered to Transporter at the Receipt Point(s) shall be
measured by means of measuring devices of standard type which shall be
installed, operated and maintained by Transporter (or its designee) and gas
delivered to Shipper at the Delivery Point shall be measured by meters of
standard type which shall be installed, operated and maintained by Transporter
(or its designee). Measurement devices and equipment shall be tested and
adjusted for accuracy on a regular schedule by the party metering the gas (the
"metering party").
(b) Subject to Shipper's prior approval of costs, Shipper agrees to
reimburse Transporter, within ten (10) days from the date of receipt of
Transporter's invoice, for any tap valves, metering facilities and associated
equipment and all labor and overhead expenses, attributable to the installation
of such equipment, incurred by Transporter in effectuating the receipt of gas
hereunder. If the invoiced amount is not paid when due, interest on all unpaid
amounts shall accrue at the rate of one and one-half percent (1 1/2%) per month,
or the highest rate allowed by law, whichever is less, from the date such amount
is due Transporter. Failure of Transporter to receive total reimbursement
within thirty (30) days of Shipper's receipt of Transporter's invoice will allow
Transporter to suspend and/or terminate this Agreement. It is understood that
although Shipper shall reimburse Transporter for any tap valves, metering
facilities and all associated costs incurred by Transporter in establishing any
Receipt Point(s), Shipper shall receive ownership of only the metering
facilities and Transporter will be solely responsible for all activities in
connection with said metering facilities, including, but not limited to,
operation, testing, calibration, adjusting, repair and replacement (both at
Shipper's expense), and maintenance, necessary for performance hereunder until
Transporter disconnects and removes the metering facilities within a reasonable
time after termination of this Agreement. After said disconnection and removal,
Shipper will have the right within a reasonable period of time thereafter to
pick up the metering facilities from Transporter. Shipper's failure to so claim
the metering facilities within ninety (90) days of Transporter's disconnection
and removal thereof, shall constitute a waiver by Shipper of any right, title or
interest in and to such metering facilities and all right, title and interest
therein shall thereafter vest in Transporter. Transporter shall retain
ownership of all equipment associated with the tap and tap valve installation.
Notwithstanding the above, if adequate metering facilities are already in
existence at the Receipt Points hereunder, such existing metering facilities
shall be used and the party having title to such facilities shall retain title
to such facilities.
<PAGE>
SHEET NO. 2
(c) The non-metering party shall have access to the metering party's
metering equipment at all times, but the maintenance, calibration and adjustment
thereof shall be done only by the employees or agents of the metering party.
Records from such metering equipment shall remain the property of the metering
party and shall be kept on file by said party for a period of not less than two
(2) years. However, upon request of the other party, the metering party shall
make available to the other party volume records from its metering equipment,
together with calculations therefrom, for inspection and verification, subject
to return by the other party to the metering party within thirty (30) days after
receipt thereof.
(d) The non-metering party may, at its option and expense, install and
operate meters, instruments and equipment, in a manner which will not interfere
with the metering party's equipment, to check the metering party's meters,
instruments and equipment, but the measurement of gas for the purpose of this
Agreement shall be by the metering party's meter only, except as hereinafter
specifically provided. The meters, check meters, instruments and equipment
installed by each party shall be subject at all reasonable times to inspection
or examination by the other party, but the calibration and adjustment thereof
shall be done only by the installing party.
(e) Transporter shall give to Shipper notice of the time of all tests of
the Delivery Point meter sufficiently in advance of such tests so that Shipper
may conveniently have its representatives present; provided, however, that if
Transporter has given such notice to Shipper and Shipper is not present at the
time specified, then Transporter may proceed with the test as though Shipper
were present. Transporter shall give notice to Shipper's Receipt Point Designee
(who is physically responsible for the delivery of gas at the point) of the time
of all tests of the Receipt Point meter sufficiently in advance of such tests so
that Shipper's Designee may conveniently be present; provided, however, that if
Transporter has given such notice to Shipper's Designee and Shipper's Designee
is not present at the time specified, then Transporter may proceed with the test
as though Shipper's Designee were present.
(f) Meter measurements computed by the metering party shall be deemed to
be correct except where the meter is found to be inaccurate by as much as one
percent (1%), fast or slow, or to have failed to register, in either of which
cases the metering party shall repair or replace the meter. The quantity of gas
delivered while the meter was inaccurate or failed to register shall be
determined by the readings of the other party's check meter, if installed and in
good operating condition, or, if not installed and in good operating condition,
then by correcting the error if the percentage of error is ascertainable by
calibration or mathematical calculation. If not so ascertainable, then it shall
be determined by estimating the quantity on a basis of deliveries under similar
conditions when the meter was registering accurately. Such adjustments or
corrections shall be made only for one-half (1/2) of the period which has
elapsed since the previous test; however, no such adjustment or correction shall
exceed a time period of ninety (90) days.
<PAGE>
SHEET NO. 3
2. Measurements
------------
(a) In gas measurement computations, the metering party may use the
findings and rules of the Railroad Commission; with respect to flowing
temperature, the metering party shall at its expense properly install and
operate a device of standard make to continuously determine or record flowing
temperature. With respect to specific gravity, such shall be determined by "on-
site" sampling and laboratory analysis or any other mutually agreeable method
which is of standard industry practice (provided, however, that either party may
at its expense properly install and operate a recording specific gravity
instrument of standard make and in this event the specific gravity as recorded
shall be used).
(b) The meters for measurement of volumes at the Receipt Point(s) and
Delivery Point hereunder shall be installed and operated, and computations shall
be made, in accordance with current industry standards. The unit of measurement
of gas shall be one thousand (1000) cubic feet at a pressure base of fourteen
and sixty-five one hundredths (14.65) pounds per square inch absolute and at a
temperature base of sixty (60) degrees Fahrenheit. Meter measurements shall be
computed by the measuring party into such units in accordance with the Ideal Gas
Laws for volume variations due to metered pressure and corrected for deviation
using daily averages of recorded specific gravity and flowing temperature, or by
using the calculated specific gravity determined by the method mentioned in
paragraph (c) below.
(c) The daily average heating value and specific gravity of the gas
delivered hereunder by either party may be determined by the use of BTU
recording instruments of standard type, which may be installed and operated by
the metering party at the metering point, or at such other point or points as
are mutually agreeable to both parties; provided, however, if there is no BTU
recording instrument at a particular Receipt or Delivery Point specified herein
or agreed upon hereunder, then the heating value and specific gravity of the gas
at such point may be determined by "on-site" sampling and laboratory analysis or
any other mutually agreeable method which is of standard industry practice.
(d) The daily average meter pressure, specific gravity, flowing
temperature and heating value shall be determined only during periods of time
when the gas is actually flowing.
3. Quality
-------
(a) Each party shall deliver to the other party hereto natural gas which
is of merchantable quality and is commercially free from water, hazardous
substances, hydrocarbon liquids, bacteria, and other objectionable liquids,
solids or gas components. In addition, the gas delivered by each party shall
specifically contain (i) not more than five one hundredths of one percent (.05%)
oxygen, (ii) not more than five (5) grains of total sulphur consisting of not
more than one quarter (1/4) grain of hydrogen sulphide and one (1) grain of
mercaptan sulphur per one hundred (100) cubic feet of gas, (iii) not more than
<PAGE>
SHEET NO. 4
three percent (3%) by volume of carbon dioxide, (iv) not more than six percent
(6%) by volume total non-hydrocarbon and inert gases (including carbon dioxide,
nitrogen, oxygen, helium, etc.), and (v) not more than seven pounds (7#) of
water vapor per one million (1,000,000) cubic feet of gas; provided, however, if
Shipper tenders gas for transportation upstream of a dehydration plant,
Transporter may waive Shipper's obligation to deliver dehydrated gas, subject to
Transporter's continuing right to withdraw such waiver at any time in the
future. The gas shall be at temperatures not in excess of one hundred twenty
(120) degrees Fahrenheit or less than forty (40) degrees Fahrenheit, provided
that the gas shall have a hydrocarbon dew point not to exceed forty (40) degrees
Fahrenheit at the delivery pressure, and shall have a heat content of not less
than nine hundred fifty (950) or more than eleven hundred (1,100) British
Thermal Units per cubic foot under the conditions of measurement contained
herein; provided, however, if Shipper tenders gas for transport on Transporter's
gathering system, such gas shall in addition to meeting the other quality
specifications described herein, have a minimum BTU content of one thousand
(1,000) British Thermal Units under the conditions of measurement contained
herein, but there shall not be a maximum BTU content or a minimum hydrocarbon
dewpoint requirement for such gas. Transporter shall not be obligated to accept
any gas delivered by Shipper (or its designee) hereunder which is not
interchangeable with other gas in Transporter's pipeline at the Point of Receipt
hereunder. Transporter's determination of such interchangeability shall be
based upon a factor which is equivalent to the quotient obtained by dividing the
total heating value of such gas, expressed in BTU's, by the square root of the
specific gravity of such gas. Such factor must be within plus/minus 7% of the
interchange factor established by Transporter for its system at the Receipt
Point hereunder; provided, however, if Shipper tenders gas for transport on
Transporter's gathering system, Transporter may waive Shipper's obligation to
meet these interchangeability conditions, subject to Transporter's right to
withdraw such waiver at any time in the future.
(b) If at any time the gas fails to meet the quality specifications
enumerated herein, the party receiving such gas shall notify the party
delivering such gas, and the delivering party shall immediately correct such
failure. If the delivering party is unable or unwilling to deliver gas
according to such specifications, the party receiving such gas may refuse to
accept delivery of gas hereunder for so long as such condition exists.
4. Taxes
-----
(a) Shipper agrees to pay Transporter, by way of reimbursement, all Taxes
paid by Transporter with respect to the transportation services provided
hereunder and any associated facilities related to the performance of this
Agreement. If any such Taxes paid by Transporter to any governmental authority
are calculated based upon the value of or price paid for the gas transported
hereunder, Shipper shall disclose to Transporter the purchase price of such gas
to enable Transporter to calculate and pay all such fees and taxes to
appropriate governmental authorities in a timely manner. If Shipper fails or
refuses to disclose the purchase price of such gas, Transporter shall have the
right to terminate this Agreement by giving Shipper ten (10) days' prior written
notice. In any
<PAGE>
SHEET NO. 5
event, Shipper hereby agrees to indemnify and hold Transporter harmless from and
against any and all claims, demands, losses or expenses, including attorneys'
fees, which Transporter may incur as a result of Shipper's failure or refusal to
disclose the purchase price of gas transported hereunder.
(b) The term "Taxes" as used above, shall mean all taxes and fees levied
-----
upon and/or paid by Transporter [other than ad valorem, capital stock, income or
excess profit taxes (except as provided herein), general franchise taxes imposed
on corporations on account of their corporate existence or on their right to do
business within the state as a foreign corporation and similar taxes),
including, but not limited to, gross receipts tax, street and alley rental fees
agreed upon in franchise ordinances, licenses, fees and other charges levied,
assessed or made by any governmental authority on the act, right or privilege of
transporting, handling or delivering gas, which taxes or fees are based upon the
volume, heat content, value or sales/purchase price of the gas, or
transportation fee payable hereunder and applicable federal income tax imposed
as a result of the installation of equipment at the Receipt Point(s) hereunder.
5. Billing, Accounting and Reports
-------------------------------
(a) On approximately the 15th day of each month, Transporter shall render
to Shipper a statement for the preceding month showing the Mcf and MMBtu
delivered at the Receipt Point(s) and Delivery Point; the amount of compensation
due to Transporter hereunder, including the tax reimbursement; and other
reasonable and pertinent information which is necessary to explain and support
same and any adjustments made by Transporter in determining the amount billed.
(b) Shipper shall pay Transporter ten (10) days from the date
Transporter's statement is deposited prepaid in the United States mail for gas
transported hereunder during the preceding month, or as to payment which is
otherwise due hereunder, according to the measurements, computations and rates
herein provided. Transporter hereby agrees, however, that Shipper may pay any
such statement by bank wire transfer by directing the bank wire transfer to Lone
Star Gas Company at Texas Commerce Bank, Dallas, Texas, ABA No. 111001150, for
deposit to Lone Star Gas Company Account No. 08805016795. To assure proper
credit, Shipper should designate the company name, invoice number and amount
being paid in the Fedwire Text Section. If the invoiced amount of any payment
due is not paid when due, interest on all unpaid amounts shall accrue at the
rate of one and one half percent (1-1/2%) per month, or the highest rate allowed
by law, whichever is less, from the date such amount is due Transporter;
provided, however no interest shall accrue on unpaid amounts when failure to
make payment is the result of a bona fide dispute between the parties hereto
regarding such amounts and Shipper timely pays all amounts not in dispute.
(c) Each party hereto shall have the right at all reasonable times to
examine the measurement records and charts of the other party, or its
agent/designee, if any, to the extent necessary to verify the accuracy of any
statement, charge, computation or demand
<PAGE>
SHEET NO. 6
made under or pursuant to any of the provisions in this Agreement. If any such
examinations reveal any inaccuracy in such billing theretofore made, the
necessary adjustments in such billing and payment shall be made; provided, that
no adjustments for any billing or payment shall be made for any inaccuracy
claimed after the lapse of twenty five (25) months from the rendition of the
invoice relating thereto.
(d) If the credit worthiness or financial responsibility of Shipper
should, in Transporter's reasonable sale opinion, ever become unsatisfactory,
then upon request by Transporter at anytime and from time to time during the
term hereof, Shipper shall deposit with Transporter (i) such amount of money
requested by Transporter, or (ii) a letter of credit in a form acceptable to
Transporter from a financial institution acceptable to Transporter in an amount
requested by Transporter, to guarantee the payment of statements and invoices
hereunder, as well as any possible imbalances hereunder. Upon the termination
of this Agreement, any money so deposited, less any amount due Transporter by
Shipper, shall be refunded to Transporter.
6. Responsibility
--------------
Shipper shall be in control and possession of the gas and be responsible
for and shall indemnify and hold Transporter harmless from any damage or injury
caused thereby until the same shall have been delivered to Transporter at the
Receipt Point(s) and after such gas shall have been delivered at the Delivery
Point, except for injuries and damages caused by the negligence of Transporter.
Transporter shall be in control and possession of the gas and be responsible for
and shall indemnify and hold Shipper harmless from any damage or injury caused
thereby upon receipt of the gas at the Receipt Point(s) and until such gas shall
have been delivered to Shipper (or for its account) at the Delivery Point,
except for injuries and damages caused by the negligence of Shipper or Shipper's
Designee. Subject to the other terms and conditions of this Agreement, each
party shall have the right to treat, process and/or dehydrate the gas prior to
delivering said gas to the other party.
7. Title--Warranty & Indemnity
---------------------------
Shipper warrants to the Transporter that at the time of delivery of gas
hereunder to Transporter, Shipper will have good title or the right to deliver
such gas, and that such gas shall be free and clear of all liens and adverse
claims; and Shipper agrees to indemnify Transporter, with respect to the gas
delivered by it, against all suits, actions, debts, accounts, damages, costs
(including attorneys' fees), losses and expenses arising from or out of any
adverse claims of any and all persons to or against said gas.
8. Force Majeure
-------------
(a) In the event either party is rendered unable, wholly or in part, by
force majeure to carry out its obligations under this Agreement, except the
obligation to pay monies due hereunder, it is agreed that, on such party's
giving notice and reasonably full
<PAGE>
SHEET NO. 7
particulars of such force majeure, in writing or by telecopy, to the other party
within a reasonable time after the occurrence of the cause relied on, the
obligations of the party giving such notice, so far as they are affected by such
force majeure, shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall, so far as possible, be
remedied with all reasonable dispatch.
(b) The term "force majeure", as employed herein, shall mean acts of God;
strikes, lockouts or other industrial disturbances; acts of the public enemy,
wars, blockades, insurrections, civil disturbances and riots, and epidemics;
landslides, lightning, earthquakes, fires, storms, floods and washouts; arrests,
orders, directives, restraints and requirements of the government and
governmental agencies, either federal or state, civil and military; and
application of governmental conservation rules and regulations; explosions,
breakage or accident to machinery or lines of pipe; outages (shutdowns) of power
plant equipment or lines of pipe for inspection, maintenance or repair; freezing
of wells or lines of pipe; and any other causes, whether of the kind enumerated
or otherwise, not reasonably within the control of the party claiming
suspension. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the party having the
difficulty, and that the above reasonable dispatch shall not require the
settlement of strikes or lockouts by acceding to the demand of the opposing
party when such course is or is deemed to be inadvisable or inappropriate in the
discretion of the party having the difficulty.
9. Waiver of Breaches, Defaults or Rights
--------------------------------------
No waiver by either party hereto of any one or more breaches, defaults or
rights under any provisions of this Agreement shall operate or be construed as a
waiver of any other breaches, defaults or rights, whether of a like or of a
different character. By providing written notice to the other party, either
party may assert any right not previously asserted hereunder or may assert its
right to object to a default not previously protested. Except as specifically
provided herein, in the event of any dispute under this Agreement, the parties
shall, notwithstanding the pendency of such dispute, diligently proceed with the
performance of this Agreement without prejudice to the rights of either party.
10. Remedy for Breach
-----------------
Except as otherwise specifically provided herein, if either party shall
fail to perform any of the covenants or obligations imposed upon it in this
Agreement (except where such failure shall be excused under the Force Majeure
provisions hereof), then, and in that event, the other party may, at its option
(without waiving any other remedy for breach hereof), by notice in writing
specifying wherein the default has occurred, indicate such party's election to
terminate this Agreement by reason thereof; provided, however, that Shipper's
failure to pay Transporter within a period of ten (10) days following Shipper's
receipt of written notice from Transporter advising of such failure to make
payment in full within the time specified previously herein, shall be a default
which shall give Transporter the right to immediately terminate this Agreement,
unless such failure to pay such amounts
<PAGE>
SHEET NO. 8
is the result of a bona fide dispute between the parties hereto regarding such
amounts hereunder and Shipper timely pays all amounts not in dispute. With
respect to any other matters, the party in default shall have thirty (30) days
from receipt of such notice to remedy such default, and upon failure to do so,
this Agreement shall terminate from and after the expiration of such thirty (30)
day period. Such termination shall be an additional remedy and shall not
prejudice the right of the party not in default to collect any amounts due it
hereunder for any damage or loss suffered by it and shall not waive any other
remedy to which the party not in default may be entitled for breach of this
Agreement.
11. Dispute Resolution
------------------
Pursuant to the Federal Arbitration Act the parties hereby agree that any
controversy, claim, or alleged breach, including but not limited to torts and
statutory claims, arising out of or related to this Agreement shall be settled
by binding arbitration administered by the American Arbitration Association
("AAA") in accordance with its Commercial Arbitration Rules. Demand for
arbitration may be made no later than the time that such action would be
permitted under the applicable Texas statute of limitation. Any disputes
regarding the timeliness of the demand for arbitration shall be decided by the
arbitrator(s). Judgment upon the award rendered by the arbitrator(s) may be
entered in any Court having jurisdiction thereof in order to obtain compliance
therewith. Any case in which any claim, or combination of claims, exceeds
$500,000 shall be subject to the AAA's Large, Complex Case Procedures and
decided by the majority of a panel of three (3) neutral arbitrators. In
rendering the award, the arbitrator(s) shall determine the rights and
obligations of the parties according to the laws of the State of Texas. The
arbitration proceedings and hearings shall be conducted at the Dallas Regional
Office of the AAA or at such other place as may be selected by mutual agreement.
No party nor the arbitrator(s) may disclose the existence, content or results of
any arbitration hereunder without the prior written consent of all parties.
***END OF GENERAL TERMS AND CONDITIONS***
<PAGE>
Lone Star Gas Company
301 S. Harwood St. , Dallas, Texas 75201-5696
March 21, 1996
Tyson Foods, Inc.
P. O. Box 2020
Springdale, AR 72765-2020
Attention: Mr. Jim Doss
Re: LS-MC-#1442
Gas Transportation Agreement
Dated: January 7, 1993
Gentlemen:
Please be advised that effective May 9, 1995 the Transmission Division of
Lone Star Gas Company was renamed Lone Star Pipeline Company and made a separate
division of Enserch Corporation. Therefore, the "Transporter" under the above
referenced agreement is now collectively or individually Lone Star Gas Company
and Lone Star Pipeline Company.
Pursuant to Article II, paragraph 2.3 of the referenced agreement, Lone
Star Gas Company and Lone Star Pipeline Company as "Transporter" and Tyson
Foods, Inc., as "Shipper" agree that effective April 1, 1996 the attached list
of receipt points shall be the "Points of Receipt" under the agreement.
Please sign both copies of this letter in the space below and return one
letter for our files.
If you should have any questions, please call Nancy Blackburn at
(214) 573-5227.
Very truly yours,
LONE STAR GAS COMPANY
LONE STAR PIPELINE COMPANY
/s/ Russell H. Brown
Russell H. Brown
Manager, Transportation Contract Administration
RHB:sr
Attachment
BY: /s/
-------------------
TITLE: Corp. Purchasing
-----------------
<PAGE>
GAS TRANSPORTATION AGREEMENT
BETWEEN
LONE STAR GAS COMPANY
AND
TYSON FOODS, INC.
LS-MC-1442
TRANSPORTER RECEIPT POINT(S)
----------------------------
LOCATION COUNTY STATION NO.
- -------- ------ -----------
1. Amoco/Hydrocarbon Rusk 17-2621-00
2. Sklar & Phillips/Lula Mason C.P. Limestone 03-0614-00
3. Ram/Rasco C.P. Madison 17-1021-00
4. Texas Royalty/Dale C.P. Leon 17-1279-00
5. Mobil/Coyonasa Pecos 17-1871-01
6. Transok/Nolan Co. Nolan 17-0109-03
7. Gordon Plant Outlet Palo Pinto 20-1525-00
8. Springtown Plt. Outlet Parker 20-2725-00
9. Oasis/Waha Pecos 17-3000-00
10. Springtown Plt. Outlet Parker 20-2725-00
<PAGE>
[Lone Star Gas Company letterhead]
November 22, 1996
Ms. Courtney A. Smith
Tyson Foods, Inc.
2210 Oaklawn
Springdale, Arkansas 72762
Subject: Consent of Assignment Agreement for Contract for Industrial Gas
Service, Amendment of Contract for Industrial Gas Service and Addendum
to Amendment of Contract for Industrial Gas Service, all dated
February 14, 1996 between Lone Star Gas Company (Lone Star) and Tyson
Foods, Inc. (Tyson)
Dear Ms. Smith:
You have informed Lone Star that Tyson's frozen meat products plant located
at 209 Range in Garland, Texas has been sold in its entirety to Gorges/Quik-to-
Fix Foods, Inc., a Delaware corporation (hereinafter referred to as "Gorges").
Lone Star hereby gives its consent, as contemplated by the subject contract, for
Tyson to assign its rights and obligations under the subject contract to Gorges,
subject to the execution of this Letter Agreement by all of the undersigned
parties. Said assignment is to be effective as of November 22, 1996. This
consent in no way relieves Tyson from any obligations it has incurred pursuant
to the terms of the subject contract prior to the date of said assignment. Lone
Star hereby releases Tyson from any duties, obligations and liabilities under
the subject contract arising on or after the effective date of said assignment.
Gorges hereby agrees to be bound by all the terms and conditions contained
in the subject contract and agrees to perform all the duties and obligations set
forth therein in the same manner and to the same extent required in the subject
contract. It is agreed that Gorges shall succeed to all rights and benefits of
Tyson in the subject contract.
If the foregoing is acceptable, please indicate by signing all copies of
this Letter Agreement in the space provided and returning one copy to this
office.
Sincerely,
/s/ James G. Fielder
James G. Fielder
Attorney-in-Fact
Agreed to and Accepted this Agreed to and Accepted this
22nd day of November, 1996 22nd day of November, 1996
TYSON FOODS, INC. GORGES/QUIK-TO-FIX, INC.
By /s/ David L. VanBebber By /s/ William A. Davies
Name David L. VanBebber Name William A. Davies
Title Assistant Secretary Title Vice President/Secretary
<PAGE>
STATE OF ARKANSAS
COUNTY OF WASHINGTON
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State on this day personally appeared David L. VanBebber, Assistant
Secretary of TYSON FOODS, INC., a Delaware corporation, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged to
me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 22nd day of November,
A.D., 1996.
/s/ Tina M. Gross
Notary Public in and for Washington County, Arkansas
My commission expires the 17th day of December, 2003
STATE OF GEORGIA
COUNTY OF FULTON
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State on this day personally appeared Mr. William A. Davies, Vice
President/ Secretary of GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 22nd day of November,
A.D., 1996.
/s/ Patricia A. Altman
Notary Public in and for Fulton County, Georgia
My commission expires the 29th day of February, 2000
<PAGE>
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State on this day personally appeared James G. Fielder, Attorney-in-
Fact of LONE STAR GAS COMPANY, a division of ENSERCH Corporation, a Texas
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that she executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 22nd day of November,
A.D., 1996.
/s/
Notary Public in and for the State of Texas
<PAGE>
EXHIBIT 10.16
GAS SALES AGREEMENT
Contract #GS 5132
BETWEEN
TYSON FOODS, INC.
AND
MERCADO GAS SERVICES, INC.
Rio Grande Valley Region
Harlingen, Texas
<PAGE>
GAS SALES AGREEMENT
This Agreement, made and entered into this 1st day of June, 1995, by and
between TYSON FOODS, INC., a Delaware corporation, hereinafter called "Buyer",
and MERCADO GAS SERVICES, INC., a Delaware corporation, hereinafter called
"Seller".
WITNESSETH:
WHEREAS, Seller is a reseller as defined in regulations implementing the
Natural Gas Policy Act of 1978 (the "Act"); and
WHEREAS, Seller has a supply of gas available for delivery to Southern
Union Gas Company, which currently serves the Rio Grande Valley area; and
WHEREAS, any reference to Seller herein shall mean either Mercado Gas
Services, Inc., or its designated third-party representative; and
WHEREAS, Buyer has facilities located in or near Harlingen, Texas and
desires to purchase gas to fuel these facilities; and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE I
QUANTITY
--------
1.1 Subject to the other provisions of this Agreement, Seller agrees to
sell and deliver to Buyer, and Buyer agrees to purchase and receive from Seller
all of Buyer's gas requirements for Buyer's facilities in Cameron County, Texas
which receive transportation service from Southern Union Gas Company up to
99,100 Mcf per year with maximum daily rates not exceeding 500 Mcf per day. Gas
purchased under this Agreement shall be used in Buyer's facilities and none of
this gas shall be resold to a third party.
1.2 Seller shall not be obligated to make deliveries beyond the term of
this Agreement, or in any manner or under any condition other than specifically
provided herein.
1.3 Seller's obligations under this Agreement are contingent on Seller's
completion of all necessary transportation agreements and gas supply agreements
with third parties and continuation of such arrangements throughout the term of
this Agreement. If Seller has not completed all necessary agreements to begin
service to Buyer within sixty (60) days after full execution of this Agreement,
Buyer may terminate this Agreement with five (5) days notice to Seller. In the
event that any of such other contracts fail during the term hereof, Seller will
have the right to terminate this agreement.
<PAGE>
1.4 The atmospheric pressure and pressure base conditions for the purpose
of billing and measurement of the volumes of gas transported hereunder are
specified in Paragraphs 2.2 and 2.3 of Appendix A to this Agreement,
respectively.
ARTICLE II
POINT(S) OF DELIVERY
--------------------
2.1 The gas purchased and sold hereunder shall be delivered:
(i) At the points listed on Exhibit "A" attached and made a part
hereto; and
(ii) At any other points or points mutually agreed to in writing.
2.2 Title to the gas sold and delivered hereunder shall pass to Buyer at
the Point(s) of Delivery. As between the parties hereto, Seller shall be in
control and possession of the gas and responsible for any loss and/or any damage
or injury occurring until same shall have been delivered to Buyer or third
parties for the account of Buyer at the Point(s) of Delivery, after which
delivery Buyer shall be deemed to be in exclusive control and possession thereof
and responsible for any loss and/or injury or damage caused thereby.
ARTICLE III
PRICE
-----
3.1 Buyer shall pay Seller for gas delivered at the following rates:
(a) From the date of first delivery hereunder through May 31, 1997,
Buyer shall pay a monthly indexed price equivalent to the price
published by Inside F.E.R.C.'s Gas Market Report's "Delivered Spot Gas
-------------------------------------
Prices" for the month of delivery under the heading "Houston Ship
Channel\Beaumont, Texas, Index (large packages only)", plus $.75 per
mmbtu.
Should Inside F.E.R.C. discontinue publication of the "Houston
---------------
Ship Channel" index, or should such index be unavailable, an alternate
index, mutually agreed upon by Buyer and Seller, shall be used for
calculating the price hereunder.
(b) Should this Agreement be in effect on June 1, 1997, then effective
upon that date, and thereafter through the term of this Agreement, the
price may be redetermined, and mutually agreed upon in accordance with
the following procedure:
-2-
<PAGE>
(i) On or before ten (10) days prior to any requested date of
redetermination, Seller may provide Buyer with written
notification of such redetermined price.
(ii) On or before five (5) days prior to any effective date of
redetermination, Buyer may furnish Seller written notification to
accept or reject Seller's proposal. If no notice is received by
Seller, then such proposed redetermined price shall become
effective. If Buyer rejects the proposed redetermination, the
parties shall attempt to negotiate an acceptable price within two
(2) days of Buyer's notice of rejection. If agreement is not
reached, Seller may continue the previous contract price, or
terminate this Agreement upon two (2) days notice to Buyer.
(c) In the event Seller does not submit a notice of redetermination
to Buyer, pricing in effect at the time shall continue unchanged.
3.2 Buyer agrees that the Btu content per Mcf of the gas volumes delivered
by Southern Union Gas Company to Buyer's end-use facilities, pursuant to a
transportation agreement, having Buyer as Shipper and Southern Union Gas Company
as Transporter, shall be assumed to be the same as the Btu content per Mcf of
the gas volumes deliveries by Seller at the Point(s) of Delivery, when
calculated at the same pressure.
ARTICLE IV
INTERRUPTION OF DELIVERIES
--------------------------
4.1 Notwithstanding any other provision to the contrary, Seller shall have
the unconditional right at Seller's discretion, without giving notice, at any
and all times during the term hereof, to immediately decrease, suspend or
discontinue in whole or in part the delivery of gas quantities under this
Agreement for any reason, including partial or complete failure of gas supplies
or partial or complete curtailment of the necessary third-party transportation
services, and Seller shall not be liable, in any respect, to Buyer by reason of
any exercise of said right.
ARTICLE V
FIRST RIGHT OF SUPPLY
---------------------
5.1 At the end of the primary term, any extension thereof, or at any time
at which Buyer may terminate this agreement, if Buyer receives a bona fide offer
from any third party seller to supply gas for such extended period or longer
which Buyer is willing to accept, Seller or Seller's affiliate shall have the
right and option, but not the obligation, to either amend this Agreement or to
enter into a new gas sales agreement with Buyer to supply gas under terms
substantially similar to those contained in said third-party offer.
-3-
<PAGE>
Should Seller or Seller's affiliate not exercise its option, this Agreement
shall terminate at the end of the primary term or extension thereof.
ARTICLE VI
TERM
----
6.1 Subject to the terms hereof, this Agreement shall be effective June 1,
1995 and shall remain in full force and effect for a primary term extending
through May 31, 1997. This Agreement shall extend on a month-to-month basis
unless notice of termination is given thirty (30) days prior to the end of the
primary term or any extension thereof by either Buyer or Seller.
ARTICLE VII
NOTICES
-------
7.1 Any notice, request, demand, statement, or payment provided for in
this Agreement shall be in writing and deemed given when actually delivered or
when deposited in the United States mail, postage prepaid, directed to the post
office address of the parties:
BUYER: SELLER:
----- ------
All Notices All Notices
----------- -----------
Tyson Foods, Inc. Mercado Gas Services, Inc.
P.O. Box 2020 504 Lavaca Street, Suite 970
Springdale, AR 72765 Austin, Texas 78701
ATTN: Jim Doss C.P.351 ATTN: Gas Supply Department
Telephone: (800) 643-3410 Telephone: (512) 370-8220
Telecopy: (501) 290-4067 Telecopy: (512) 476-5985
Invoices: Payments:
-------- --------
Tyson Foods, Inc. Mercado Gas Services, Inc.
P.O. Box 2020 504 Lavaca Street, Suite 970
Springdale, AR 72765 Austin, Texas 78701
ATTN: Accounts Payable ATTN: Gas Accounting
Telephone: (800) 643-3410 Telephone: (512) 370-8220
Telecopy: () Telecopy: (512) 476-5985
-4-
<PAGE>
or at such other address as either party may from time to time designate as the
address for such purposes by registered or certified letter addressed to the
other party.
7.2 Payments to Seller for services rendered hereunder shall be made in
accordance with Article V of the General Terms and Conditions attached as
Appendix A hereto, are incorporated by this reference and made a part of this
Agreement.
7.3 The General Terms and Conditions attached as Appendix A hereto, are
incorporated by this reference and made a part of this Agreement.
ARTICLE VIII
CONFIDENTIALITY
---------------
8.1 The terms of this contract, including but not limited to the price
paid for the gas, and all other material items of this contract shall be kept
confidential by the parties hereto, except to the extent that any information
must be disclosed to a third party as required by law or for the purpose of
effectuating the purchase and third party transportation of the subject gas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove written.
ATTEST: BUYER:
TYSON FOODS, INC.
/s/ By: /s/
- --------------------------- Title: Executive VP, Finance
ATTEST: SELLER:
MERCADO GAS SERVICES, INC.
/s/ By: /s/
- --------------------------- Title: Executive Vice President
-5-
<PAGE>
EXHIBIT "A"
To the Gas Sales Agreement between MERCADO GAS SERVICES, INC. (Seller)
TYSON FOODS, INC., (Buyer), dated _________________________.
Point(s) of Delivery
--------------------
1. All existing delivery points under the Gas Sales Contract by and between
Reata Industrial Gas Company (Reata # 8000-88) and Southern Union Gas
Company dated January 1, 1986, as amended.
<PAGE>
APPENDIX A
GENERAL TERMS AND CONDITIONS
----------------------------
TABLE OF CONTENTS
-----------------
Page Number
-----------
ARTICLE I DEFINITIONS 1
ARTICLE II MEASUREMENT AND TESTS 2
ARTICLE III DELIVERY PRESSURE 4
ARTICLE IV QUALITY 4
ARTICLE V PAYMENTS 4
ARTICLE VI TAXES 5
ARTICLE VII WARRANTY OF TITLE 5
ARTICLE VIII FORCE MAJEURE 5
ARTICLE IX GOVERNMENTAL RULES, REGULATIONS
AND AUTHORIZATIONS 6
ARTICLE X ASSIGNMENT 6
ARTICLE XI MISCELLANEOUS 7
<PAGE>
APPENDIX A
GENERAL TERMS AND CONDITIONS
----------------------------
Attached to and made a part of that certain Gas Sales Agreement dated
June 1, 1995, between TYSON FOODS, INC., (Buyer) and MERCADO GAS SERVICES, INC.,
(Seller).
ARTICLE I
DEFINITIONS
-----------
Except in those certain instances where the context states another meaning,
the following terms when used in this Agreement shall mean:
1.1 Natural Gas and Gas: Natural gas produced from gas wells and gas
-------------------
produced in association with oil (casinghead gas) and/or the residue gas
resulting from processing both casinghead gas and gas-well gas.
1.2 Day: The period of twenty-four (24) consecutive hours beginning at
---
8:00 am. Central Time on any calendar day and ending at 8:00 a.m. Central Time
on the calendar day immediately following.
1.3 Month: A period beginning at 8:00 am. Central Time on the first day
-----
of a calendar month and ending at 8:00 a.m. Central Time on the first day of the
calendar month immediately following, except that the first month shall begin on
the date of initial deliveries of natural gas hereunder and shall end at 8:00
am. Central Time on the first day of the calendar month immediately following.
1.4 Mcf: One thousand (1000) cubic feet.
---
1.5 Btu: British thermal unit. The term MMBtu shall mean one million
---
(1,000,000) Btu.
1.6 Heating Value: The gross number of British thermal units (Btu's)
-------------
which would be contained in the volume of one (1) cubic foot of gas at a
temperature of sixty degrees (60 degrees) Fahrenheit, when saturated with water
vapor and under a pressure of fourteen and sixty-five hundredths (14.65) pounds
per square inch absolute and adjusted to reflect the actual water vapor content
of the gas delivered; however, if the water vapor content is seven (7) pounds
per million cubic feet or less, the gas shall be deemed dry.
1.7 The term "psig" shall mean pounds per square inch gauge.
1.8 The term "psia" shall mean pounds per square inch absolute.
<PAGE>
1.9 The term "Equivalent Quantity" shall mean the volume in Mcfs of gas
delivered by Seller for Buyer at the Point(s) of Delivery hereunder during a
given period of time.
ARTICLE II
MEASUREMENT AND TESTS
---------------------
The measurement and tests for quality of gas delivered hereunder shall be
governed by the following:
2.1 The volume shall be measured by meters installed, maintained and
operated by or on behalf of Seller. Computations shall be made in accordance
with industry practice.
2.2 For the purpose of measurement, calculation and meter calibration, the
average absolute atmospheric (Barometric) pressure shall be assumed to be
fourteen and four tenths (14.40) psia at the Point(s) of Delivery irrespective
of variations in natural atmospheric pressure from time to time.
2.3 The unit of volume for purposes of measurement shall be one (1) cubic
foot of gas at a temperature base of sixty degrees (60 degrees) Fahrenheit and
at a pressure base of fourteen and sixty-five hundredths (14.65) psia.
2.4 The temperature shall be adjusted to standard conditions and
corrections shall be made in accordance with industry practice.
2.5 Specific gravity shall be determined with accuracy to the nearest one-
thousandth by taking samples of the gas at the point of measurement at such
times as may be determined to be necessary in practice by the use of an
instrument commonly used and accepted in the industry.
2.6 Tests for carbon dioxide, sulfur, and hydrogen sulfide content of the
gas delivered hereunder shall be made by approved standard methods from time to
time as requested by any party hereto, but not more often than once each three
(3) months.
2.7 The total Heating Value of the gas shall be determined by taking
samples of the gas the Point(s) of Delivery at such times as may be determined
by Seller or its designee and by having the British thermal unit content per
cubic foot determined by calorimeter or by other means acceptable in the
industry at Seller's expense. Buyer shall have the right at such time or times
as it may desire to determine the Heating Value of the gas using the Thomas
Principle of calorimetry or its equal. In the event of any material variance
between such test by Buyer and the last or next succeeding test made by Seller,
a joint test will be run employing the method utilized by Seller, and the result
thereof will be controlling, effective the first day of the calendar month
preceding such joint test.
-2-
<PAGE>
2.8 All measuring equipment, housing devices, and materials shall be of
standard manufacture and shall, with all related equipment, appliances and
buildings, be installed, maintained, and furnished by Seller or its designee at
Seller's expense. Buyer may install and operate check-measuring equipment,
which shall not interfere with the use of Seller's equipment. All testing
equipment shall be of standard manufacture and shall be maintained, operated and
furnished by Seller or its designee at Seller's expense.
2.9 The accuracy of Seller's measuring and testing equipment shall be
verified by Seller at necessary intervals to insure accurate measurement. Tests
for quality of the gas may be made at the time of equipment testing, or at other
times, as deemed necessary by Seller. Notice of the time and nature of each
test shall be given Buyer sufficiently in advance to permit Buyer to have a
representative present. Measuring and testing equipment shall be tested by
reasonable means and methods in the presence of representatives of both Seller
and Buyer, if present. If Buyer fails to have a representative present after
proper notice, the results of such tests shall be provided to Buyer and shall
nevertheless be considered accurate until the next test. All tests shall be
made at Seller's expense, except that Buyer shall bear the expense of tests made
at its request, if the inaccuracy found is two percent (2%) or less.
2.10 If at any time any of the measuring or testing equipment is found to
be out of service, or registering inaccurately in any percentage, it shall be
adjusted at once to read accurately within the limits prescribed by the
manufacturer. If such equipment is out of service, or inaccurate by an amount
exceeding two percent (2%) at a reading corresponding to the average rate of
flow for the period since the last preceding test, the previous reading of such
equipment shall be disregarded for any period definitely known or agreed upon,
or if not so known or agreed upon, for a period of sixteen (16) days or one-half
(1/2) of the elapsed time since the last test, whichever is shorter. The volume
of gas delivered during such period shall be estimated by:
(a) Using the data recorded by any check-measuring equipment if
installed and accurately registering; or
(b) If not installed or registering accurately, by correcting the
error if the percentage of error is ascertainable by calibration, test or
mathematical calculation; or
(c) If neither such method is feasible, by estimating the quantity, or
quality, delivered based upon deliveries under similar conditions during a
period when the equipment was registering accurately.
No corrections shall be made for recorded inaccuracies of two
percent (2%) or less.
2.11 Buyer and Seller shall have the right to inspect equipment installed
or furnished by the other, and the charts and other measurement or testing data
of the other,
-3-
<PAGE>
at all times during business hours, but the reading, calibration
and adjustment of such equipment and changing of charts shall be done only by
the party owning such equipment. Each party shall preserve all original test
data, charts and other similar records in party's possession for a period of at
least two (2) years from the date such records were generated.
ARTICLE III
DELIVERY PRESSURE
-----------------
3.1 The gas sold and purchased hereunder shall be delivered to Buyer at a
pressure sufficient to effect delivery into the facilities of Buyer or Buyer's
designee at the Point(s) of Delivery set forth herein against the pressure
prevailing therein from time to time. Neither Buyer nor Seller shall have an
obligation to compress or to continue compression of the gas delivered
hereunder.
ARTICLE IV
QUALITY
-------
4.1 The gas delivered by Seller hereunder shall be commercially free of
gum, gum-forming constituents, gasoline and other solid and/or liquid matter
that may become separated from the gas during transportation thereof, and shall
conform to the following specifications:
<TABLE>
<S> <C> <C>
(a) Dust, rust & other solids None
(b) Carbon Dioxide and Nitrogen Not more than 3.0% by volume
(c) Oxygen Not more than 1.0% by volume
(d) Hydrogen Sulfide Not more than 1/4 grain per 100 cubic feet
(e) Total Sulfur Not more than 5 grains per 100 cubic feet
(f) Free Water None
(g) Heating Value Not less than 1000 Btu per cubic foot.
(h) Temperature Not more than 120 degrees F or less than 40 degrees F.
(i) Water Vapor Not more than 7# per million cubic feet
</TABLE>
4.2 Buyer, at its option, may refuse to accept delivery of any gas not
meeting the quality specifications set out above; thereafter, Seller shall have
the right to conform or cause the gas to be conformed to the above
specifications. If Seller does not elect to conform the gas to said
specifications, then Buyer at its sole option may accept or reject any such gas.
ARTICLE V
PAYMENTS
--------
5.1 After delivery of gas has commenced, Seller shall, on or before the
twentieth (20th) day of each month, render to Buyer a statement showing the
quantity of gas delivered by Seller to Buyer at the Delivery Point(s) and the
amount owed Seller.
-4-
<PAGE>
Buyer shall pay Seller the amount so billed, or Buyer shall remit payment to
Seller by wire transfer to Texas Commerce Bank, Austin, Texas, ABA #113000609
for credit to Mercado Gas Services, Inc., Account #10416072 or as may be
designated in writing from time-to-time, within ten (10) days after the receipt
of the statement.
5.2 In the event Buyer shall fail to pay any amount due Seller when the
same is due, then interest shall accrue each day at a per annum rate equal to
the prime rate as published by Texas Commerce Bank Austin, or its successor,
plus two percent (2%) from the date when such amount is due Seller, and in
addition to any other remedy it may have hereunder, Seller may suspend further
delivery of gas until such amount is paid. In the event such rate is deemed
usurious under Texas law, the default rate of interest will be the highest rate
permitted by Texas law.
5.3 In the case of disputed accounts, Buyer shall pay the disputed bill
under protest. Seller shall then promptly make a complete investigation of the
matter and, if the bill is correct, shall explain all points in question. If
the bill is in error, Seller shall promptly submit a corrected bill to Buyer,
together with any necessary refund.
5.4 At any time during the term of this Agreement or any extension
thereof, Seller may require Buyer to provide such deposits, letters of credit or
other security as Seller may reasonably require to ensure Buyer's payments for
gas purchased hereunder.
5.5 Each party hereto shall have the right, at any and all reasonable
times to examine the books and records of the other, to the extent necessary to
verify the accuracy of any statement, charge, computation or demand made under
this Agreement.
ARTICLE VI
TAXES
-----
6.1 Seller shall pay or cause to be paid the taxes lawfully levied on
Seller, or otherwise to be borne contractually by Seller, and applicable to the
gas delivered hereunder prior to its delivery to Buyer. Buyer shall pay all
taxes lawfully levied on Buyer applicable to such gas after delivery to Buyer or
Buyer's designee.
ARTICLE VII
WARRANTY OF TITLE
-----------------
7.1 Seller warrants title to all gas delivered by it, that it has the
right to sell the same, and that such gas is free from liens and adverse claims
of every kind. Seller shall pay or cause to be paid all sums due on the
gathering or handling of the gas delivered by Seller. Seller shall indemnify
and save Buyer harmless from and against all taxes, payments, liens or other
charges applicable to said gas arising prior to its delivery to Buyer or Buyer's
designee.
-5-
<PAGE>
ARTICLE VIII
FORCE MAJEURE
-------------
8.1 Except for Buyer's obligations to make payments hereunder, neither
party hereto shall be liable for any failure to perform the terms of the
Agreement when such failure is due to force majeure as hereinafter defined. The
term "force majeure" as employed in this Agreement shall mean acts of God,
strikes, lockouts, or industrial disputes or disturbances, civil disturbances,
arrests and restraint from rulers or people, interruptions or terminations by or
as a result of government or court action or orders, or present and future valid
orders of any regulatory body having jurisdiction, acts of the public enemy,
wars, riots, blockades, insurrections, inability to secure or delay in securing
labor or materials by reason of allocations promulgated by authorized
governmental agencies, epidemics, landslides, lightning, earthquakes, fire,
storm, floods, washouts, explosions, breakage or freezing of pipelines,
inability to obtain easement or rights-of-way, the making of repairs or
alterations to lines of pipe or plants, partial or entire failure of gas supply,
partial or complete interruption of necessary third-party transportation
services, failure or inability or any other cause, whether of the kind herein
enumerated or otherwise not reasonably within the control of the party claiming
force majeure. The force majeure shall, so far as possible, be remedied with
all reasonable dispatch. If Seller claims force majeure that affects one or
more Delivery Point(s), nothing herein shall require Seller to make deliveries
or to take gas at an alternative Delivery Point. The settlement of strikes or
lockouts or industrial disputes or disturbances shall be entirely within the
discretion of the party directly involved therein, and the above requirement
that any "force majeure" shall be remedied with all reasonable dispatch shall
not require the settlement of strikes, lockouts, or industrial disputes or
disturbances by acceding to the demands of any opposing party therein when such
course is inadvisable in the discretion of the party directly involved therein.
A decision to close a facility due to business or economic conditions shall not
fall within the meaning of force majeure.
ARTICLE IX
GOVERNMENTAL RULES, REGULATIONS AND AUTHORIZATION
-------------------------------------------------
9.1 This Agreement shall be subject to all valid applicable state, local
and federal laws, orders, directives, rules and regulations of any governmental
body, agency or official having jurisdiction over this Agreement and the sale
and purchase of gas hereunder.
9.2 If at any time during the term hereof, any governmental authority
having jurisdiction over this Agreement and the sale and purchase of gas
hereunder shall take any action as to Seller or Buyer or any transporter whereby
the sale, transportation, other handling (compression or treating), delivery,
receipt and use of gas as contemplated hereunder shall be proscribed or
subjected to terms, conditions, regulations, restraints, or price or rate
controls, ceilings or limits that in the sole judgment of Seller or Buyer are
unduly or overly burdensome to that party, such party may at any time thereafter
cancel
-6-
<PAGE>
and terminate this Agreement without further liability hereunder, except as to
payments due at the time of such termination.
9.3 Buyer and Seller agree to file or have filed in a timely manner all
applications, affidavits, statements and notices required for sale,
transportation and delivery necessary of the gas hereunder.
ARTICLE X
ASSIGNMENT
----------
10.1 This Agreement shall extend to and be binding upon the parties, their
successors and assigns, but no transfer of whatsoever kind, wholly or partially,
shall be made without the prior written consent of the non-transferring party
other than the assignment by Seller of its obligations hereunder to an
affiliate. Nothing herein contained shall in any way prevent either party
hereto from pledging or mortgaging all or any part of such party's property as
security under any mortgage, deed of trust, or other similar lien or from
pledging this Agreement or any benefits accruing hereunder to the party making
the pledge, without the assumption of the obligations hereunder by the
mortgagee, pledgee, or other grantee under such an instrument.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 No waiver by either Seller or Buyer of any default of the other under
this Agreement shall operate as a waiver of any future default, whether of like
or different character or nature.
11.2 This Agreement may be amended only by a written instrument executed
by the parties hereto and expressly stating that it is an amendment to this
Agreement.
11.3 The headings used throughout this Agreement are inserted for
reference purposes only, and are not to be construed or taken into account in
interpreting the terms and provisions of any Article, nor to be deemed in any
way to qualify, modify or explain the effects of any such term or provision.
11.4 As to all matters of performance, default, breach, enforcement,
construction and interpretation, this Agreement and the rights and duties of the
parties hereunder shall be governed by the laws of the State of Texas.
-7-
<PAGE>
November 11, 1996
Via FedEx - Priority
- --------------------
Mr. Marcus R. Hawkins
Manager of Gas Services
MERCADO GAS SERVICES, INC.
504 Lavaca Street, Suite 800
Austin, Texas 78701
RE: SALE OF BEEF DIVISION OF TYSON FOODS, INC. ('Tyson")
Dear Mr. Hawkins:
On October 17, 1996 Tyson entered into a definitive agreement (the
"Purchase Agreement') pursuant to which it agreed to sell its beef further
processing facilities and operations (the "Business") to Gorges/Quik-to-Fix
Foods, Inc. ("Buyer"), an entity formed by CGW Southeast Partners III, L.P.
("CGW") for the purpose of acquiring the Business. Under the terms of the
Purchase Agreement, the sale of the Business is expected to be consummated (the
"Closing") on November 22, 1996. Until such date, Tyson will own and operate
the Business. After the Closing, the Business will continue to be operated with
the same facilities employed by Tyson in its operation of the Business and will
be managed primarily by the people who now manage the Business for Tyson.
Pursuant to the Purchase Agreement, Tyson has agreed to assign all of its
rights, and Buyer has agreed to assume all of Tyson's obligations arising on or
after the Closing, under that certain Gas Sales Agreement the "Contract") dated
June 1, 1995 by and between Tyson and Mercado Gas Services, Inc. ("Mercado").
Pursuant to Article X, Section 10.1 of the General Terms and Conditions of the
Contract, Mercado's consent is required in order for Tyson to assign the
Contract to Buyer.
On behalf of Tyson and Buyer, I am writing to request Mercado's consent to
Tyson's assignment of the Contract to Buyer. Please sign below where indicated
to confirm Mercado's consent to the assignment and return a copy of this letter
to my attention via fax (501-290-7967) and the original via the enclosed FedEx
envelope. By consenting to this assignment, Mercado acknowledges and affirms
its duties and obligations under the Contract as if the Contract were entered
into between Mercado and Buyer. This consent does not constitute a consent to
further assignment of the Contract and, except as set forth herein, the Contract
remains in full force and effect, enforceable against Mercado and Buyer.
<PAGE>
Mercado Gas Services, Inc.
November 11, 1996
Page 2
Your assistance in this matter is greatly appreciated. If you have any
questions, please contact Courtney Smith (501-290-7330) or Read Hudson (501-
290-7023) in Tyson's legal department, or Jim O'Donnell with Buyer (404-816-
3255).
TYSON FOODS, INC.
/s/ Courtney A. Smith
Courtney A. Smith
Corporate Counsel
The undersigned hereby consents to the assignment of the Contract (as
defined hereinabove) from Tyson Foods, Inc. to Gorges/Quik-To-Fix Foods, Inc.
MERCADO GAS SERVICES, INC.
By: /s/ Thomas C. Robillard
Name: Thomas C. Robillard
Title: Executive Vice President
cc: Jim Doss
<PAGE>
EXHIBIT 10.17
Waste Water Treatment Agreement
The City of Orange City, Iowa and Tyson Foods, Inc. at its Orange City,
Iowa facility do hereby agree to the following treatment and construction
changes that will be made by the 1st of December, 1996.
1). Tyson Foods, Inc. does hereby agree to relocate the three
existing sewer lines at its Orange City, Iowa facility. These three lines
will be taken to one location where flow metering and sampling equipment
will be installed. All plans and specifications will be reviewed with the
city prior to construction. This work will be completed no later than the
1st day of June 1996.
2). After flow metering and sampling is installed, Tyson Foods, Inc.
will begin to collect samples weekly. Samples will be analyzed by Tyson
Foods, Inc. However, some of the samples may be split, with both Tyson
Food, Inc. and the City of Orange City analyzing and keeping records.
3). Tyson Foods, Inc. also agrees to pay for periodic cleanup of the
industrial and west lift stations and collection system between their plant
and the wastewater treatment plant.
4). The City of Orange City will continue to receive and treat the
wastewater at the same rate as it has in the past. Also, it will be
looking into whatever necessary changes may be needed to stay in compliance
with IDNR. If such changes are needed, the City of Orange City will take
the necessary steps that may be required.
5). By the 1st of December of 1996, the City of Orange City and Tyson
Foods, Inc. will fill out the IDNR operations permit application treatment
agreement.
Agreed to this 25 day of October, 1995.
City of Orange City, Iowa Tyson Foods, Inc.
By:/s/ By:/s/
------------------------- -------------------------
Title:Mayor Title:Plant Manager
---------------------- ----------------------
<PAGE>
EXHIBIT 10.18
EXECUTION COPY
===============================================================================
SECURITIES PURCHASE AND STOCKHOLDERS AGREEMENT
DATED
NOVEMBER 25, 1996
AMONG
CGW SOUTHEAST PARTNERS III, L.P.,
NATIONSBANC INVESTMENT CORPORATION,
MELLON BANK, N.A., AS TRUSTEE FOR FIRST PLAZA GROUP TRUST,
J. DAVID CULWELL,
RICHARD E. MITCHELL,
RANDALL H. COLLINS,
ROBERT M. POWERS,
HERNANDO AVILES,
STUART ALAN ENSOR,
AND
GORGES HOLDING CORPORATION
===============================================================================
<PAGE>
EXECUTION COPY
SECURITIES PURCHASE AND STOCKHOLDERS AGREEMENT
----------------------------------------------
This Securities Purchase and Stockholders Agreement is entered into on
this 25th day of November, 1996, by and among GORGES HOLDING CORPORATION, a
Delaware corporation (the "Company"), CGW SOUTHEAST PARTNERS III, L.P., a
Delaware limited partnership ("CGW"), MELLON BANK, N.A., as Trustee for First
Plaza Group Trust ("First Plaza"), NATIONSBANC INVESTMENT CORPORATION, a
Delaware corporation ("NationsBank"), J. David Culwell, Richard E. Mitchell,
Randall H. Collins, Robert M. Powers, Hernando Aviles and Stuart Alan Ensor
(Messrs. Culwell, Mitchell, Collins, Powers, Aviles and Ensor are each a
"Management Purchaser and are collectively the "Management Purchasers"). CGW,
First Plaza, NationsBank and the Management Purchasers are each referred to as a
"Purchaser" and are collectively referred to as the "Purchasers".
BACKGROUND
----------
CGW has caused the Company to be formed for the purpose of owning all
of the issued and outstanding capital stock of Gorges/Quik-to-Fix Foods, Inc., a
Delaware corporation ("Gorges"). CGW has subscribed for and purchased and now
owns one thousand (1,000) shares of the common capital stock of Gorges and is
presently the sole shareholder of Gorges. Gorges was formed for the purpose of
purchasing substantially all of the business and assets of the Gorges/Quik-to-
Fix Foods division of Tyson Foods, Inc. (the "Division") as provided in the
Asset Purchase Agreement, dated October 17, 1996 between Gorges, Tyson Foods,
Inc., Gorges Foodservice, Inc. and Tyson Holding Company (the "Purchase
Agreement"). Each of the Purchasers wish to subscribe for and purchase shares
of the capital stock of the Company as herein provided in order to capitalize
the Company and, in turn, Gorges, so that the transactions contemplated by the
Purchase Agreement can be consummated.
AGREEMENT
---------
NOW, THEREFORE, Purchasers and the Company agree as follows:
DEFINITIONS
-----------
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement have the following
meanings:
"Act" means the Securities Act of 1933, as amended from time to time,
---
or any successor statute.
"Affiliate" means, as to any Person, any other Person that directly or
---------
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") means possession,
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directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities, or partnership or other
ownership interests, by contract or otherwise), provided that, in any event: (a)
any Person that owns directly or indirectly fifty percent (50%) or more of the
securities having ordinary voting power for the election of directors or other
members of the governing body of a corporation or fifty percent (50%) or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person; (b) each director or officer of such Person shall
be deemed to be an Affiliate of such Person and (c) with respect to First Plaza,
each trust relating to an employee benefit plan of the General Motors
Corporation shall be deemed to be an Affiliate of First Plaza.
"Agreement" means this Securities Purchase Agreement, as it may be
---------
amended from time to time.
"Board of Directors" means the Company's board of directors.
------------------
"Business" means the business of the Company and its Subsidiaries as
--------
presently conducted and as presently proposed to be conducted.
"Business Day" means any day on which commercial banks in Atlanta,
------------
Georgia are required to be open for business.
"CGW" has the meaning set forth in the first paragraph of this
---
Agreement.
"Call Price" means (i) if a Management Purchaser's employment with the
----------
Company or any of its Subsidiaries is terminated for any reason other than Cause
(as defined in the Employment Agreement between the Company and such Management
Purchaser), the greater of Fair Value or Cost, and (ii) if such termination of
employment is for Cause, the lesser of Fair Value or Cost.
"Class A Stock" means the Class A Voting Common Stock, $.01 par value,
-------------
of the Company.
"Class B Stock" means the Class B Non-Voting Common Stock, $.01 par
-------------
value, of the Company.
"Closing" has the meaning set forth in Section 2.5.
-------
"Closing Date" has the meaning set forth in Section 2.5.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor statute.
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"Common Stock" means the Class A Stock and/or the Class B Stock, as
------------
the context so requires.
"Company" has the meaning set forth in the first paragraph of this
-------
Agreement.
"Consulting Agreement" means the Consulting Agreement to be entered
--------------------
into by Gorges and the General Partner substantially in the form attached as
EXHIBIT A hereto.
"Cost" means the amount per share of Common Stock paid by a Management
----
Purchaser upon his acquisition of such share of Common Stock.
"Credit Agreement" means the Credit Agreement, dated November 25,
----------------
1996, between Gorges, as borrower, NationsBank of Texas, N.A., as administrative
agent, and the several lenders that are party thereto, pursuant to which such
lenders will provide Gorges with a $30 million revolving credit facility and a
$40 million term loan facility, as the same may be amended from time to time.
"Dollars" and "$" mean the lawful money of the United States of
-------
America.
"Effective Date of Termination" means the effective date of
-----------------------------
Termination of Employment as stated in any notice of termination given by the
Company (including notice given by a Subsidiary of the Company) or the
Management Purchaser, or in the event no such notice of termination is given by
either the Company (including notice given by a Subsidiary of the Company), or
the Management Purchaser, then the date on which the Management Purchaser last
performs the duties of the Management Purchaser's employment or position with
the Company or a Subsidiary of the Company as determined by the Board of
Directors of the Company.
"Employment Agreements" mean the written contracts of employment
---------------------
between Gorges and each of the Management Purchasers.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor statute.
"Fair Value" means the value of the Common Stock of a Management
----------
Purchaser determined as follows: within thirty (30) days following the date the
Company gives written notice of the exercise of its repurchase rights under
Section 9.3, the Management Purchaser (or his executor or personal
representative) and the Company shall determine and mutually agree upon Fair
Value. If the Management Purchaser (or his executor or personal representative)
and the Company cannot agree upon Fair Value within such period, the Company and
such Management Purchaser (or his executor or personal representative) shall
have an additional ten (10) days within which to select an investment banking
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firm of nationally recognized standing with experience in valuing businesses
similar to the Company ("Independent Investment Banking Firm") which they shall
mutually agree upon to determine Fair Value. If the Management Purchaser (or
his executor or personal representative) and the Company cannot mutually agree
upon an Independent Investment Banking Firm within such period, an Independent
Investment Banking Firm shall be selected by an arbitrator chosen in accordance
with the rules of commercial arbitration of the American Arbitration Association
then in effect upon petition by either the Management Purchaser (or his executor
or personal representative) or the Company. The Independent Investment Banking
Firm selected either by mutual agreement of the parties or by the arbitrator as
provided in the preceding sentence shall determine the Fair Value of a share of
Common Stock of the Company and deliver its opinion in writing to the Company
and to the Management Purchaser within sixty (60) days after its election or
appointment. If the Independent Investment Banking Firm expresses its opinion
as to the Fair Value of a share of Common Stock in terms of a range of values,
the mean of such range shall be deemed to be Fair Value for purposes of this
Agreement, or if such opinion expresses Fair Value as an absolute number, such
number shall be deemed to be the Fair Value. Any determination of Fair Value
made in accordance with the foregoing provisions shall be conclusive and binding
on the Company and the Management Purchaser (and his executor or personal
representative) for purposes of determining the amount payable for each share of
Common Stock of the Company upon the exercise by the Company of its rights under
Section 9.3 hereof. The Company, on the one hand, and the Management Purchaser
(or his executor or personal representative), on the other hand, shall bear (x)
his or its out-of-pocket fees and expenses in connection with the determination
of Fair Value, and (y) one-half of the fees and expenses of the Independent
Investment Banking Firm making the determination of Fair Value.
"Fiscal Year" means the fiscal year of the Company, which shall be the
-----------
twelve-month period ending on the last day in the month of December.
"GAAP" means generally accepted accounting principles and practices,
----
consistently applied, as promulgated in (i) the documents of Rule 203 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants, (ii) Statement of Accounting Standards No. 43 "Omnibus Statement on
Auditing Standards" of the Auditing Standards Board of the American Institute of
Certified Public Accountants and (iii) any superseding or supplemental
documentation of equal authority promulgating generally accepted accounting
principles and practices, all as in effect from time to time.
"General Partner" means CGW Southeast III, L.L.C., the general partner
---------------
of CGW.
"Indenture" means the Indenture among Gorges, as issuer of the Senior
---------
Subordinated Notes, and IBJ Schroeder Bank & Trust Company, as trustee, dated
November 25, 1996, as the same may be amended from time to time.
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"Initial Public Offering" means the Company's first offering of Common
-----------------------
Stock of the Company that is registered under the Act, which offering is
underwritten on a firm commitment basis and produces gross proceeds to the
Company in excess of $30,000,000.
"Investment Banking Agreement" means the Investment Banking Agreement
----------------------------
to be entered into by Gorges and the Management Company substantially in the
form attached as EXHIBIT B hereto.
"Management Company" means CGW Southeast Management III, L.L.C.
------------------
"Material Adverse Effect" means any circumstances, change in, or
-----------------------
effect on the Company, its Subsidiaries or its business that, individually or
when taken together with all other circumstances, changes in or effects on the
Company, its Subsidiaries or its business is or is reasonably likely to be
materially adverse to the condition (financial or otherwise), results of
operations, earnings, business, assets (including intangible assets) or
prospects of the Company or its Subsidiaries or a material and adverse effect on
the Company's or any of its Subsidiaries' ability to perform its obligations
under any of this Agreement, the Indenture or the Credit Agreement or under any
other document, instrument or agreement issued in connection herewith or
therewith to which the Company or any of its Subsidiaries is a party or any
adverse effect, whether or not material, upon the binding nature, validity or
enforceability of any material provision of this Agreement.
"Permitted Transferee" means as to any Purchaser who is an individual
--------------------
his executor or administrator, any spouse, child, grandchild or sibling of such
Purchaser or any trust created for the benefit of any such spouse, child,
grandchild or sibling.
"Person" means and includes natural persons, corporations,, limited
------
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts and other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Purchaser" or "Purchasers" has the meaning set forth in the first
--------- ----------
paragraph of this Agreement.
"Registrable Securities" means (i) any Common Stock issued pursuant to
----------------------
this Agreement, (ii) any Common Stock owned by the Purchasers, and (iii) any
capital stock of the Company issued or issuable with respect to the Common Stock
described in clauses (i) and (ii) by way of a stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when they
have been distributed to the public pursuant to an offering registered under the
Act or sold to the public through a broker, dealer or market maker in compliance
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with Rule 144 under the Act (or any similar rule then in force) or repurchased
by the Company or any Subsidiary of the Company. For purposes of this
Agreement, a Purchaser shall be deemed to be a holder of Registrable Securities,
and the Registrable Securities shall be deemed to be in existence, whenever such
Purchaser has the right to acquire directly or indirectly such Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected, and such Purchaser shall be entitled to exercise the rights of a
holder of Registrable Securities hereunder.
"Sale of the Company" shall mean the sale of the Company and all of
-------------------
its Subsidiaries as a whole (whether by merger, share exchange, consolidation,
reorganization, recapitalization, sale of all of the outstanding capital stock
or sale of substantially all of their respective assets) to any Person other
than to an Affiliate of CGW.
"Second Closing" has the meaning set forth in Section 2.5.
--------------
"Second Closing Date" has the meaning set forth in Section 2.5.
-------------------
"Senior Subordinated Notes" means the 11.5% Senior Subordinated Notes
-------------------------
due 2006 to be issued by Gorges as provided in the Indenture.
"Stock Incentive Plan" has the meaning set forth in Section 3.2.2.
--------------------
"Subsidiary" of any Person means any other Person of which more than
----------
fifty percent (50%) of the securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
managers of such Person is owned by such first Person, by one or more
Subsidiaries of such first Person, or by such first Person and one or more of
its Subsidiaries or which is controlled directly or indirectly by the first
Person.
"Termination of Employment" means the termination of the employee-
-------------------------
employer relationship between the Management Purchaser and the Company (and its
Subsidiaries), regardless of the fact that severance or similar payments are
made to the Management Purchaser, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, disability, or
retirement.
1.2 Accounting Terms. For purposes of this Agreement, all accounting
----------------
terms not otherwise defined herein have the meanings assigned to them in
conformity with GAAP.
1.3 Other Definitional Provisions.
-----------------------------
1.3.1 Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, to the singular
include the plural, and to the part include the whole. The term "including" is
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not limiting and the term "or" has the inclusive meaning represented by the term
"and/or." The words "hereof," "herein," "hereunder," and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to "Sections," "Appendices," "Exhibits"
and "Schedules" are to Sections, Appendices, Exhibits and Schedules,
respectively, of this Agreement, unless otherwise specifically provided. Terms
defined herein may be used in the singular or the plural.
1.3.2 Accounting principles and practices are "consistently applied"
when the accounting principles and practices observed in a current period are
comparable in all material respects to the accounting principles and practices
applied in the preceding period.
SECTION 2
PURCHASE AND SALE OF SECURITIES
-------------------------------
2.1 Purchase and Sale of Class A Common Stock by CGW and First Plaza.
----------------------------------------------------------------
Each of CGW and First Plaza agrees to purchase from the Company, and the Company
agrees to issue and sell to each such Purchaser, that number of shares of Class
A Stock of the Company set forth opposite such Purchaser's name as follows:
CGW 250,000
First Plaza 110,000
In consideration of the issuance and sale of such shares to it, CGW shall
at the Closing and against delivery by the Company to CGW of a certificate for
the shares of Class A Stock purchased by CGW hereunder, (a) transfer, assign and
convey to the Company the one thousand (1,000) shares of the Common Stock of
Gorges owned by CGW, which the parties agree is valued at one thousand dollars
($1,000.00) and (b) deliver to the Company by wire transfer to an account
designated by the Company the sum of Twenty Four Million Nine Hundred Ninety
Nine Thousand Dollars ($24,999,000). In consideration of the issuance and sale
of such shares to it, First Plaza shall, at the Closing and against delivery by
the Company to First Plaza of a certificate for the shares of Class A Stock
purchased by First Plaza hereunder, deliver to the Company by wire transfer to
an account designated by the Company the sum of Eleven Million Dollars
($11,000,000).
2.2 Purchase and Sale of Class B Stock. NationsBank agrees to purchase
----------------------------------
from the Company, and the Company agrees to issue and sell to NationsBank,
Ninety Thousand (90,000) shares of Class B Stock of the Company. In
consideration of the issuance and sale of such shares to it, NationsBank shall,
at the Closing and against delivery by the Company to NationsBank of a
certificate for the shares of Class B Stock purchased by it hereunder, deliver
to the Company by wire transfer to an account designated by the Company the sum
of Nine Million Dollars ($9,000,000).
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2.3 Purchase of Class A Stock by Management Purchasers. Each Management
--------------------------------------------------
Purchaser agrees to purchase from the Company at the Second Closing, and the
Company agrees to issue and sell to such Management Purchaser at that time, the
number of shares of Class A Stock of the Company set forth opposite the name of
such Management Purchaser on SCHEDULE 2.3 hereto. As payment for the shares of
Class A Stock respectively to be purchased by him hereunder, each Management
Purchaser agrees to pay the Company at the Second Closing, by check or wire
transfer to an account designated by the Company, and against delivery by the
Company to such Management Purchaser of a certificate for the shares of Class A
Stock purchased by him hereunder, the sum set forth opposite the name of such
Management Purchaser on SCHEDULE 2.3 hereto. Unless and until a Management
Purchaser pays for the shares of Class A Stock to be purchased by him hereunder
and a certificate for such shares is issued as herein provided, such Management
Purchaser shall not be or be deemed to be a stockholder of the Company and shall
have no rights as a stockholder of the Company in respect of the shares of Class
A Stock subscribed for by such Management Purchaser herein.
2.4 Other Agreements. At the Closing, the Company shall cause Gorges to
----------------
enter into (a) the Consulting Agreement with the General Partner, and (b) the
Investment Banking Agreement with the Management Company.
2.5 Closing. Subject to the satisfaction or waiver of all conditions
-------
precedent which are set forth in Section 4.1 to the obligations of the parties
in Sections 2.1 and 2.2, the purchase and sale of Common Stock by CGW, First
Plaza and NationsBank provided for herein shall be consummated at a closing (the
"Closing") to be held at the offices of Alston & Bird, 1201 W. Peachtree Street,
Atlanta, Georgia 30309, on the date of and immediately prior to the consummation
of the transactions provided for in the Purchase Agreement. The date on which
the Closing occurs is referred to herein as the "Closing Date." Subject to the
satisfaction or waiver of all conditions precedent which are set forth in
Section 4.3 to the obligations of the parties in Section 2.3, the purchase and
sale of Class A Stock by the Management Purchasers provided for herein shall be
consummated at a closing (the "Second Closing") to be held at the offices of the
Company on March 31, 1997. The date on which the Second Closing occurs is
referred to as the "Second Closing Date."
SECTION 3
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of Purchasers. Each Purchaser,
--------------------------------------------
severally but not jointly, represents and warrants to the Company and each other
Purchaser as follows:
3.1.1 Organization and Qualification. If such Purchaser is a trust,
------------------------------
it is validly existing under the laws of the jurisdiction of its formation. If
such Purchaser is a corporation or a partnership, it is an entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.
3.1.2 Authority. Such Purchaser is an "accredited investor" as such
---------
term is defined in Rule 501 of the Rules and Regulations promulgated under the
Act, and has full power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. If such Purchaser is a trust,
corporation or partnership, the execution, delivery and performance by such
Purchaser of this Agreement have been duly and validly authorized and approved
by all necessary action on the part of such Purchaser. This Agreement is the
legal, valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (whether considered in an action at law or in
equity). Neither the execution and delivery by such Purchaser of this Agreement
nor the consummation by such Purchaser of the transactions contemplated hereby
will (a) if such Purchaser is a trust, corporation or partnership, violate such
Purchaser's organizational documents, (b) to the knowledge of such Purchaser,
violate any provisions of law or any order of any court or any governmental unit
to which such Purchaser is subject, or by which its assets are bound, or (c)
conflict with, result in a breach of, or constitute a default under any material
indenture, mortgage, lease, agreement or other instrument to which such
Purchaser is a party or by which its assets or properties are bound.
3.1.3 Investment. The Common Stock to be purchased by such Purchaser
----------
hereunder is being acquired for investment purposes only and for such
Purchaser's own account and not with a view to the resale or distribution of any
part thereof.
3.1.4 Sophistication. Such Purchaser has such knowledge and
--------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment in the Common Stock; such Purchaser has the
ability to bear the economic risks of such investment; such Purchaser has the
capacity to protect his or its own interests in connection with the transactions
contemplated by this Agreement; and such Purchaser has had an opportunity to
obtain such financial and other information from the Company as it deems
necessary or appropriate in connection with evaluating the merits of the
investment in the Common Stock. If such Purchaser is a Management Purchaser, he
has been employed as an executive officer of the Division, is now employed as an
executive officer of the Company or one of its Subsidiaries and is familiar with
the business and affairs of the Division.
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3.2 Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to each Purchaser as follows:
3.2.1 Legal Status; Qualification.
---------------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified or licensed to do business and in good standing as a foreign
corporation in all jurisdictions where the failure to be so qualified or
licensed would have a Material Adverse Effect. The Company has furnished to
Purchasers a complete and correct copy of the Company's Certificate of
Incorporation and Bylaws, each as currently in effect and as is in effect as of
the Closing. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
(b) As of the Closing, the only Subsidiary of the Company is Gorges.
Gorges is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Gorges is duly qualified or licensed
to do business and in good standing as a foreign corporation in all
jurisdictions where the failure to be so qualified or licensed would have a
Material Adverse Effect. The Company has furnished to Purchasers a complete and
correct copy of the Certificate of Incorporation and Bylaws of Gorges, each as
currently in effect and as in effect as of the Closing. Gorges is not in
violation of any of the provisions of its Certificate of Incorporation or
Bylaws.
3.2.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of one
million (1,000,000) shares of Class A Stock, one hundred thousand (100,000)
shares of Class B Stock, and one million (1,000,000) shares of preferred stock
without designation (the "Preferred Stock"). On the date hereof and at all
times prior to the Closing no shares of the Class A Stock, no shares of the
Class B Stock and no shares of the Preferred Stock are or will be issued and
outstanding. Immediately following the Closing, there will be issued and
outstanding 360,000 shares of the Class A Stock, 90,000 shares of the Class B
Stock and no shares of the Preferred Stock. Except for this Agreement, the
rights of the holders of Class B Stock to exchange shares of Class B Stock for
shares of Class A Stock as provided in the Company's Certificate of
Incorporation, and except for a total of one hundred twelve thousand five
hundred (112,500) shares of Class A Stock reserved for issuance upon the
exercise of stock options granted or to be granted pursuant to the Company's
1996 Stock Incentive Plan (the "Stock Incentive Plan"), there are not now
outstanding and will not be outstanding immediately following the Closing any
agreements, rights or options to acquire, or any debt or equity securities
convertible into or exchangeable for, any shares of the capital stock of the
Company.
(b) The authorized capital stock of Gorges consists of 2,000 shares of
common stock, $.01 par value, of which 1,000 shares are now and will be on the
Closing Date issued and outstanding. As of the Closing, all of the issued and
outstanding shares of capital stock of Gorges will be owned by the Company, free
and clear of all liens, charges and encumbrances except for the lien in favor of
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NationsBank of Texas, N.A. pursuant to the Credit Agreement. Except for this
Agreement, there are not now outstanding and will not be outstanding immediately
following the Closing any agreements, rights or options giving to any Person the
right to acquire, or any debt or equity securities convertible into or
exchangeable for, any shares of the capital stock of Gorges.
3.2.3 No Violation. The execution, delivery and performance by the
------------
Company of this Agreement and any other instruments or documents executed and
delivered by the Company hereunder and the execution, delivery and performance
by Gorges of the Purchase Agreement, the Indenture and the Credit Agreement and
any other instruments or documents executed and delivered by Gorges thereunder:
(a) do not conflict with the Company's or Gorges' Certificate of Incorporation
or Bylaws, (b) do not violate any provision of any law, rule, regulation or
ordinance, or any order or ruling of any court or governmental entity to which
the Company or Gorges is subject, and (c) do not result in a breach of or
constitute a default (or an event which with the passage of time or giving of
notice, or both, would constitute a default) under, or cause or permit the
acceleration of the maturity of or give rise to any right of termination,
cancellation, imposition of fees or penalties under, any contract, obligation,
debt, note, bond, lease, mortgage, license, indenture or other instrument to
which the Company or Gorges is a party or by which it or Gorges, or any of their
respective properties or assets, may be bound.
3.2.4 Corporate Power and Authority; Governmental or Other Consents.
-------------------------------------------------------------
The Company and Gorges each have all requisite corporate power and authority to
carry on their business as presently conducted and as currently proposed to be
conducted, and to own, lease, sell or operate their properties. The Company has
the requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement, and any other instruments or documents
executed and delivered by it hereunder. Gorges has the requisite corporate
power and authority to execute, deliver and perform its obligations under the
Purchase Agreement, the Indenture and the Credit Agreement and any other
instruments or documents executed and delivered by it thereunder. The Company
has furnished to Purchasers a complete and correct copy of the Purchase
Agreement, the Indenture and the Credit Agreement each as in effect on the date
hereof and on the Closing Date. No governmental or other consents, approvals,
authorizations, registrations, declarations or filings are required for the
execution, delivery and performance of this Agreement by the Company and the
Purchase Agreement, Indenture and Credit Agreement by Gorges. Neither the
Company nor Gorges is subject to any law, rule or regulation restricting in any
way its ability to issue shares of its capital stock or rights to acquire such
shares.
3.2.5 Due Authorization; Validity; Enforceability. This Agreement
-------------------------------------------
and all other instruments or documents executed by the Company in connection
herewith have been duly authorized, executed and delivered, and constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, except as enforceability may be limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether considered in an action at law or in equity). The Purchase
Agreement, the Indenture and the Credit Agreement, and all other instruments or
documents executed by Gorges in connection therewith, have been duly authorized,
executed and delivered by Gorges, and constitute legal, valid and binding
obligations of Gorges, enforceable in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (whether considered
in an action at law or in equity).
3.2.6 Truth and Accuracy of Information. None of the documents,
---------------------------------
instruments and other information furnished to Purchasers by the Company or
Gorges contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make any statements made therein not
misleading. No representation, warranty or statement made by the Company in
this Agreement, or in any document, certificate, exhibit or schedule attached to
or delivered in connection herewith, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make any statements made therein not misleading. There is no fact
which could reasonably be expected to have a Material Adverse Effect and which
has not been disclosed in the documents provided to Purchasers.
3.2.7 Litigation. There is no (a) legal, administrative, arbitration
----------
or other proceeding, suit, claim or action of any nature, investigation or
controversy, pending or, to the knowledge of the Company, threatened against the
Company or Gorges, whether at law or in equity, or before or by any arbitrator
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality that, if decided adversely to the
Company or Gorges would have a Material Adverse Effect or would restrain or
prohibit the Company from consummating the transactions provided for herein or
would restrain or prohibit Gorges from consummating the transactions provided
for in the Purchase Agreement; or (b) judgment, decree, injunction or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator against the Company or Gorges that would have a Material Adverse
Effect or that would restrain or prohibit the Company from consummating the
transactions provided for herein or would restrain or prohibit Gorges from
consummating the transactions provided for in the Purchase Agreement.
3.2.8 Valid Issuance. All of the outstanding capital stock of the
--------------
Company and Gorges has been duly authorized and validly issued and is fully paid
and non-assessable and has been issued in compliance with applicable securities
and other similar laws. When issued in accordance with, and for the
consideration specified in, this Agreement, the Common Stock to be purchased by
each Purchaser hereunder will have been duly authorized and validly issued and
will be fully paid and non-assessable with no personal liability attaching to
the ownership thereof. Each Purchaser will receive title to the Common Stock
purchased by it hereunder free and clear of any lien, charge or encumbrance,
other than as may be created by the action or inaction of such Purchaser.
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3.2.9 Business Operations. The Company and Gorges are each newly
-------------------
formed corporations. The Company has not engaged in any business or operations
since its formation other than entering into this Agreement. Gorges has not
engaged in any business or operations since its formation other than entering
into the Purchase Agreement and arranging for the issuance and sale by Gorges of
the Senior Subordinated Notes and for certain secured credit facilities such
that the net proceeds to Gorges from the issuance and sale of the Senior
Subordinated Notes and amounts available to be borrowed by Gorges under such
credit facilities, when taken together with capital to be contributed by the
Company to Gorges, will provide funds to pay the purchase price for the business
and assets of the Division to be acquired under the Purchase Agreement and
provide working capital for the operations of Gorges following such acquisition.
3.2.10 Purchase Agreement Representations. The representations and
----------------------------------
warranties of Gorges contained in Article 6 of the Purchase Agreement are true
and correct. To the best knowledge of the Company, the representations and
warranties of Tyson Foods, Inc., Gorges Foodservice, Inc. and Tyson Holding
Company contained in Article 5 of the Purchase Agreement are true and correct.
SECTION 4
CONDITIONS PRECEDENT
--------------------
4.1 CGW's, First Plaza's and NationsBank's Conditions to Closing. The
------------------------------------------------------------
obligation of each of CGW, First Plaza and NationsBank to purchase the Common
Stock at the Closing is subject to the fulfillment or waiver of all of the
following conditions prior to, or contemporaneously with, the Closing.
4.1.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date, and each such Purchaser shall have received
a certificate of an officer of the Company certifying the provisions of this
Section 4.1.1.
4.1.2 Certified Documents, Etc. The Company shall have delivered, or
------------------------
shall have caused to be delivered, to each such Purchaser copies of the
following documents, duly certified, or the following certificates, as
applicable:
(a) Resolutions of the Board of Directors of the Company authorizing
(i) the execution, delivery and performance of this Agreement and all other
agreements to be executed and delivered by the Company hereunder, (ii) the
consummation of the transactions contemplated by this Agreement, and (iii) all
other actions to be taken by the Company in connection with this Agreement;
(b) Resolutions of the Board of Directors of Gorges authorizing (i)
the execution, delivery and performance of the Purchase Agreement, the Indenture
and the Credit Agreement and all other agreements to be executed and delivered
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by Gorges thereunder, (ii) the consummation of the transactions contemplated by
the Purchase Agreement, the Indenture and the Credit Agreement, and (iii) all
other actions to be taken by Gorges in connection with the Purchase Agreement,
the Indenture and the Credit Agreement.
(c) Certificates, signed by the Secretary of the Company, dated as of
the Closing Date, as to the incumbency, and containing the specimen signature or
signatures, of the officer or officers of the Company authorized to execute this
Agreement on behalf of the Company, together with evidence of the incumbency of
such company officer;
(d) The Certificate of Incorporation of the Company and Gorges,
certified as of a recent date by the Secretary of State of Delaware, and copies
of the Bylaws of the Company and Gorges, certified as of the Closing Date by the
Secretary of the Company; and
(e) A certificate of status, good standing or existence with respect
to the Company and Gorges from the Secretary of State of Delaware, and of each
state or other jurisdiction in which the Company or Gorges is qualified to do
business, dated as of a recent date.
4.1.3 Executed Agreements. Gorges shall have executed and delivered
-------------------
the Consulting Agreement to the General Partner and the Investment Banking
Agreement to the Management Company.
4.1.4 Opinion of Counsel to Company. Each such Purchaser shall have
-----------------------------
received the written opinion of Alston & Bird, counsel to the Company in the
form of EXHIBIT C hereto.
4.1.5 Delivery of Certificates for Common Stock. The Company shall
-----------------------------------------
have delivered to each such Purchaser, against payment therefore as herein
provided, a certificate, registered in the name of each such Purchaser or its
nominee, representing the shares of the Common Stock respectively to be
purchased by each such Purchaser hereunder.
4.1.6 Other Acts, Conditions, Etc. All acts, conditions and things
----------------------------
(including, without limitation, the obtaining of any necessary regulatory
approvals and the making of any required filings, recordings or registrations)
required to be done and performed and to have happened precedent to the
execution, delivery and performance of this Agreement and to constitute the same
legal, valid and binding obligations of the parties thereto, enforceable in
accordance with their respective terms, shall have been done and performed and
shall have happened in due and strict compliance with all applicable laws.
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4.1.7 Documents in Satisfactory Form. All documentation, including,
------------------------------
without limitation, documentation for corporate and legal proceedings, and all
instruments in connection with the transactions contemplated by this Agreement
and all documents executed and delivered in connection with this Agreement
(including, without limitation, the Consulting Agreement, the Investment Banking
Agreement, the Indenture, the Credit Agreement and the Employment Agreements)
shall be reasonably satisfactory in form and substance to each such Purchaser
and its counsel.
4.1.8 Purchase of Common Stock. Each other Purchaser (other than the
------------------------
Management Purchasers) shall have purchased and paid for the Common Stock it is
obligated to purchase under this Agreement.
4.1.9 Consummation of Other Transactions. Each of the conditions
----------------------------------
precedent to the obligations of Gorges under the Purchase Agreement, the
Indenture and the Credit Agreement shall have occurred (or been waived by Gorges
with the consent of each such Purchaser), the transactions contemplated in the
Purchase Agreement, the Indenture and the Credit Agreement shall have been
consummated in accordance with the respective terms thereof concurrently with
the Closing, and each such Purchaser shall have received copies of the executed
Purchase Agreement, Indenture, Credit Agreement, Consulting Agreement,
Investment Banking Agreement and Employment Agreements and all other documents
and instruments executed and delivered by any of the parties to such agreements
as such Purchaser shall reasonably request.
4.2 The Company's Conditions to Closing. The obligation of the Company to
-----------------------------------
sell the Common Stock to each of CGW, First Plaza and NationsBank at the
Closing, is subject to the fulfillment or waiver of all of the following
conditions prior to, or contemporaneously with, the Closing.
4.2.1 Representations and Warranties. The representations and
------------------------------
warranties of such Purchasers contained herein shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date.
4.2.2 Payment of Purchase Price. CGW, First Plaza and NationsBank
-------------------------
shall have delivered to the Company, against delivery of certificates for the
Common Stock respectively purchased by such Purchaser hereunder, the
consideration for such Common Stock to be paid by such Purchaser as provided in
Sections 2.1 and 2.2 above.
4.3 Management Purchasers' Conditions to Closing. The obligation of each
--------------------------------------------
Management Purchaser to purchase Class A Stock at the Second Closing is subject
to the fulfillment or waiver of all of the following conditions prior to, or
contemporaneously with, the Second Closing.
4.3.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained herein shall be true and correct in all
material respects on and as of the Second Closing Date, with the same effect as
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if made on and as of the Second Closing Date, except for such changes as may
result from the passage of time and the conduct of the business of the Company
and its Subsidiaries in the ordinary course between the Closing Date and the
Second Closing Date, and such Management Purchaser shall have received a
certificate of an officer of the Company certifying the provisions of this
Section 4.3.1.
4.3.2 Delivery of Certificates for Class A Stock. The Company shall
------------------------------------------
have delivered to each Management Purchaser, against payment therefore as herein
provided, a certificate registered in the name of such Management Purchaser
representing the shares of Class A Stock respectively to be purchased by such
Management Purchaser hereunder.
4.3.3 Consummation of Other Transactions. The transactions provided
----------------------------------
for in the Purchase Agreement and in Sections 2.1 and 2.2 of this Agreement
shall have been consummated in accordance with the respective terms thereof.
4.4 The Company's Conditions to the Second Closing. The obligations of
----------------------------------------------
the Company to sell the Class A Stock to any Management Purchaser at the Second
Closing is subject to the fulfillment or waiver of all of the following
conditions prior to, or contemporaneously with, the Second Closing.
4.4.1 Representations and Warranties. The representations and
------------------------------
warranties of such Management Purchaser contained herein shall be true and
correct in all material respects on and as of the Second Closing Date, with the
same effect as though made on and as of the Second Closing Date, and such
Management Purchaser shall have executed and delivered to the Company a
certificate, dated the Second Closing Date, to that effect.
4.4.2 Payment of Purchase Price. Such Management Purchaser shall
-------------------------
have paid to the Company, by check or wire transfer to an account designated by
the Company, against delivery of a certificate for the Class A Stock purchased
by such Management Purchaser, the consideration for such Class A Stock to be
paid by such Management Purchaser as provided in Section 2.3 above.
4.4.3 Continued Employment. Such Management Purchaser is on the
--------------------
Second Closing Date an employee of the Company or one of its Subsidiaries.
SECTION 5
AFFIRMATIVE COVENANTS
---------------------
The Company covenants separately with each of First Plaza and
NationsBank that so long as such Purchaser and any Affiliate of it owns,
directly or beneficially, in the aggregate at least twenty-five percent (25%) of
the shares of Common Stock purchased by it hereunder, the Company shall:
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5.1 Reporting Requirements. Provide such Purchaser all of the following:
----------------------
(a) copies of all notices of meeting delivered to the members of the
Board of Directors and each committee thereof and of all other materials
delivered to the members of the Board of Directors and each committee thereof in
their capacity as such;
(b) as soon as available and in any event within 120 days after the
end of each Fiscal Year, audited consolidated and consolidating financial
statements of the Company and its Subsidiaries as of the end of and for such
Fiscal Year, together with the report thereon of the Company's independent
certified public accounting firm, such financial statements to include a balance
sheet, statements of income, stockholders' equity and cash flows, and footnotes,
all prepared in accordance with GAAP;
(c) as soon as available and in any event within 30 days after the end
of each fiscal reporting period, a consolidated and consolidating balance sheet
of the Company and its Subsidiaries as of the end of such fiscal reporting
period and statements of income, retained earnings and cash flows of the Company
and its Subsidiaries for such fiscal reporting period and for the Fiscal Year to
date, prepared in accordance with GAAP;
(d) as soon as possible and in any event within ten Business Days
after acquiring knowledge thereof, written notice of all litigation, actions,
suits or proceedings threatened or commenced affecting the Company or any of its
Subsidiaries or the properties or business of the Company or any of its
Subsidiaries if the relief sought thereunder is either unspecified as to amount,
or is for damages in excess of $100,000 or, if awarded, could reasonably be
expected to have a Material Adverse Effect, and as soon as possible and in any
event within five Business Days after any material development or change in the
status of any such litigation, action, suit or proceeding, notice of such
development or change;
(e) prompt written notice of the occurrence of any other event that
has had, or that could reasonably be expected to have, a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole;
(f) promptly from time to time, such other information or documents
respecting the business, properties or the condition or operations, financial or
otherwise, of the Company or any of its Subsidiaries, as such Purchaser may from
time to time reasonably request;
(g) promptly after the execution and delivery thereof by all parties
thereto, all amendments to the Indenture, the Credit Agreement or any other
agreement evidencing or relating to an obligation of the Company or any of its
Subsidiaries to repay borrowed monies;
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(h) prompt written notice of the occurrence of any default or event of
default under the Indenture, the Credit Agreement or any other agreement
evidencing or relating to an obligation of the Company or any of its
Subsidiaries to repay borrowed monies; and
(i) not less than thirty (30) Business Days prior to the first day of
each Fiscal Year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its Subsidiaries
in respect of such Fiscal Year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing.
5.2 Visitation Rights. Permit any representatives designated by such
-----------------
Purchaser, upon reasonable written notice and during normal business hours and
such other times as such Purchaser may reasonably request, to (i) visit and
inspect any of the properties of the Company or its Subsidiaries, (ii) examine
the corporate and financial records of the Company or its Subsidiaries and make
copies thereof or extracts therefrom, and (iii) discuss the affairs, finances
and accounts of the Company or its Subsidiaries with the directors, officers,
key employees and independent accountants of the Company or its Subsidiaries.
The presentation of an executed copy of this Agreement by any Purchaser to the
Company's independent accountants shall constitute the Company's permission to
its independent accountants to participate in discussions with such Persons.
5.3 Reservation of Class A Shares. The Company shall at all times reserve
-----------------------------
and keep available out of its authorized but unissued shares of Class A Stock,
for the purpose of effecting the conversion or exchange of the Class B Stock,
such number of its duly authorized shares of Class A Stock as shall be
sufficient to effect the conversion or exchange, in accordance with the terms
thereof, of any Class B Stock from time to time outstanding.
5.4 Corporate Existence. The Company shall maintain and cause each of its
-------------------
Subsidiaries to maintain their respective corporate existence, rights and
franchises in full force and effect.
5.5 Directors of Subsidiaries. The Company shall cause the boards of
-------------------------
directors of each of its Subsidiaries to be comprised of only those persons who
are directors of the Company.
5.6 Compliance with Laws. The Company shall comply with all applicable
--------------------
laws, except to the extent the failure to so comply would not have a Material
Adverse Effect.
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SECTION 6
NEGATIVE COVENANTS
------------------
The Company covenants that, so long as any shares of Common Stock remain
outstanding, without the prior written consent of Purchasers owning not less
than 75% of the number of shares of Common Stock owned by the Purchasers,
neither the Company nor any of its Subsidiaries shall:
6.1 Business. Discontinue its business or engage in any business
--------
activities or operations substantially different from or unrelated to the
manufacture, distribution, and sale of further processed meat.
6.2 Restrictions on Sales of Assets. Sell or otherwise dispose of any
-------------------------------
property except:
(a) sales, leases, rentals or dispositions of property as a result of
a constructive loss or similar loss of the property;
(b) sales, leases, rentals or dispositions of property in the ordinary
course of business and for consideration not less than the fair market value;
(c) sales, leases, rentals or dispositions of property having a fair
market value not in excess of $500,000 in the aggregate during any Fiscal Year;
and
(d) the disposition of any obsolete or retired property not used or
useful in its business the fair market value of which obsolete or retired
property, singly or when aggregated with all other such assets sold pursuant to
this clause, does not exceed $500,000.
6.3 Management or Consulting Fees. Pay fees or any other amount to any
-----------------------------
Person for consulting services or the management of the business or of any
assets of the Company or any Subsidiaries except for (a) the management of
employee benefit plan assets, (b) consulting fees payable to the General Partner
pursuant to the Consulting Agreement, (c) fees paid to the Management Company
pursuant to the Investment Banking Agreement; and (d) consulting, management or
similar fees payable to Persons who are not Affiliates of the Company, any
Purchaser or the General Partner for services provided to the Company or its
Subsidiaries pursuant to agreements entered into in the ordinary course of
business.
6.4 Transactions with Affiliates. Lend or advance money to, or contract
----------------------------
with or engage in any other transactions with Affiliates, except in the ordinary
course of business and on terms and for consideration which are no less
favorable to the Company or more favorable to the Affiliate than the terms and
consideration which the Company or such Affiliate, as the case may be, would be
obligated to pay or entitled to receive in an arm's length transaction.
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6.5 Amendments of Corporate Documents. Amend its Certificate of
---------------------------------
Incorporation or Bylaws in a manner that could reasonably be expected to have a
Material Adverse Effect, increase the authorized capital stock of the Company or
affect the rights of any Purchaser hereunder.
6.6 Executive Compensation. Allow any of its officers, directors or
----------------------
employees to use any assets or property of the Company or any of its
Subsidiaries for personal purposes, or increase the salary or other compensation
or benefits paid or provided to any officer or director of the Company or such
Subsidiary except to the extent that such increase is commercially reasonable,
in accordance with industry standards, and not in excess of the value of the
services rendered.
6.7 Issuance of Capital Stock. Except for shares of Common Stock issued
-------------------------
to employees pursuant to the terms and conditions of the Stock Incentive Plan in
effect on the Closing Date, not issue shares of Common Stock or Preferred Stock
or any options, rights, or warrants convertible into or exercisable or
exchangeable for Common Stock or Preferred Stock.
6.8 Amendments to Certain Other Agreements. Amend the Consulting
--------------------------------------
Agreement or the Investment Banking Agreement.
6.9 Demand Registrations. Enter into any agreement with any other holder
--------------------
of capital stock of the Company which permits such holder to demand registration
of such capital stock under the Act or under any other securities or blue sky
laws of any jurisdiction.
6.10 No Restrictive Agreements. Except as contemplated by the Credit
-------------------------
Agreement and the Indenture (each as in effect on the date hereof), enter into
any agreement which would restrict or otherwise be inconsistent with any of the
rights and obligations of any Purchaser under this Agreement.
SECTION 7
CO-SALE RIGHTS AND OBLIGATIONS
------------------------------
7.1 Co-Sale Rights of Non-CGW Purchasers. In the event that CGW receives
------------------------------------
a bona fide offer from any Person (a "Proposed Purchaser") to purchase all or
any portion of the Common Stock owned by CGW (a "Proposed Transfer"), then each
Purchaser other than CGW shall have the right, as a precondition to such
Proposed Transfer, to cause CGW to require the Proposed Purchaser to purchase
such percentage of the Common Stock owned by such Purchaser, as it elects, up to
and including the percentage of CGW's Common Stock being purchased by the
Proposed Purchaser. Any Common Stock purchased from such Purchaser pursuant to
this Section 7.1 shall be paid and contracted for at the same price per share,
with the same form of consideration and otherwise upon the same terms and
conditions as the sale by CGW.
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7.2 Co-Sale Obligations of Purchasers. (a) In the event the Board of
---------------------------------
Directors and the holders of a majority of the Common Stock then outstanding
approve a Sale of the Company, each Purchaser will (i) consent to, vote for and
raise no objections against such Sale of the Company, (ii) waive any dissenter's
or appraisal rights and similar rights with respect thereto and (iii) if such
Sale of the Company is structured as a sale of Common Stock, agree to sell all
of such Common Stock on the terms and conditions approved by the Board of
Directors and the holders of a majority of the Common Stock then outstanding.
The Purchasers will take all necessary and desirable actions in connection with
the consummation of any Sale of the Company including (x) if such sale is
structured as a sale of assets, actions necessary to cause the orderly
liquidation of the Company following the consummation of such Sale and (y) the
making of the same representations, warranties, covenants and undertakings (to
the extent applicable to any such Purchaser in his, her or its capacity as a
stockholder of the Company) to the prospective transferee(s) in such Sale of the
Company as the holders of a majority of the Common Stock then outstanding;
provided, that none of First Plaza, NationsBank or their respective permitted
transferees shall be required to make any representations or warranties
specifically concerning, or with respect to, the Company or its Subsidiaries or
their respective businesses or assets or provide indemnification for any
representations or warranties except out of funds of such Sale which are
retained as an escrow, hold back or similar arrangement, and provided, further,
if either First Plaza or NationsBank determines in good faith that any sale by
it of the capital stock of the Company owned by it would constitute a violation
of applicable law or regulation, such Purchaser shall not be required to sell
such capital stock in such Sale of the Company.
(b) The obligations of the Purchasers with respect to the Sale of the
Company are subject to the satisfaction of the condition that the consideration
received in such Sale by each Purchaser in respect of a share of Common Stock
owned by such Purchaser shall be in the same amount and form, and shall be
received at the same time, as each other Purchaser shall receive in respect of a
share of Common Stock owned by such other Purchaser. If any Purchaser shall be
given the right to elect the form of such consideration or the time or manner in
which such consideration is payable, such right to elect shall be given to all
Purchasers. Consideration received in such Sale shall be deemed to include all
consideration received by any Purchaser in any transaction which is consummated
substantially contemporaneously with such Sale.
(c) Notwithstanding anything to the contrary contained herein, in no
event shall First Plaza be required to sell its Common Stock if such sale would
cause First Plaza to engage in a prohibited transaction within the meaning of
Section 406 of the Employee Retirement Income Security Act of 1974, as amended,
or Section 4975 of the Code unless an exemption therefrom shall have been
obtained or otherwise apply.
(d) Notwithstanding anything to the contrary contained herein, in no
event shall NationsBank be required to sell its Common Stock if such sale would
cause NationsBank to take (i) any voting securities, the voting provisions of
which would cause NationsBank to violate any law, regulation or other
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requirement of any governmental body applicable to NationsBank, or (ii) any
securities convertible into voting securities, the voting provisions of which if
such conversion took place would cause NationsBank to violate any law,
regulation or other requirement of any governmental body applicable to
NationsBank other than securities which are specifically provided to be
convertible into voting securities only in the event that such conversion may
occur without any such violation.
7.3 Participation Notice. CGW shall, not less than fifteen (15) nor more
--------------------
than forty-five (45) days prior to any Proposed Transfer or Sale of the Company,
notify each other Purchaser in writing of any such Proposed Transfer or Sale of
the Company (the "Participation Notice"). Such Participation Notice shall set
forth: (a) the number and type of securities proposed to be transferred (the
"Transferred Securities"); (b) the name(s) and address(es) of the Proposed
Purchaser(s) in the event of a Proposed Transfer or the proposed transferee in
the event of a Sale of the Company; (c) the proposed amount and all forms of
consideration (with an adequate description of any non-cash consideration) and
terms and conditions of payment offered by such Proposed Purchaser in the event
of a Proposed Transfer or the proposed transferee in the event of a Sale of the
Company; (d) the date, time and place at which the Proposed Transfer or Sale of
the Company is to be consummated (the "Scheduled Closing"); and (v) that the
Proposed Purchaser in the case of a Proposed Transfer has been informed of the
co-sale rights of each Purchaser provided for in Section 7.1 hereof and has
agreed to purchase the Transferred Securities in accordance with the terms of
that Section.
7.4 Exercise of Co-Sale Rights or Obligations. The co-sale rights and
-----------------------------------------
obligations described in Sections 7.1 and 7.2 may be exercised by delivery of a
written notice (the "Exercise Notice"), at least ten (10) Business Days prior to
the Scheduled Closing, to either (a) CGW, in case of the co-sale rights
described in Section 7.1 hereof, or (b) each Purchaser, in case of the co-sale
obligations described in Section 7.2 hereof. In case of the co-sale rights
described in Section 7.1 hereof, such notice shall state the number of shares of
Common Stock that each Purchaser, as the case may be, elects to include in such
sale to the Proposed Purchaser.
7.5 Miscellaneous. In the event that any Purchaser exercises its co-sale
-------------
rights pursuant to Section 7.1 hereof and the Proposed Purchaser is not willing
to purchase shares of Common Stock from such Purchaser, as the case may be, on
the same terms and conditions as specified in the Participation Notice, then CGW
shall not be permitted to transfer or otherwise dispose of any of its shares of
Common Stock to the Proposed Purchaser pursuant to the Proposed Transfer unless
the Proposed Purchaser agrees to purchase (a) a lesser amount of CGW's shares of
Common Stock and (b) a pro rata amount (based on the number of shares of Common
Stock that CGW and all other Purchasers elect to sell) of the shares of Common
Stock of such Purchaser on the same terms and conditions as CGW's shares of
Common Stock are purchased. Upon exercising its respective co-sale rights
pursuant to Section 7.1, a Purchaser shall be obligated until the date of the
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Scheduled Closing, to transfer such number and type of securities as specified
in the Exercise Notice, to the Proposed Purchaser on the terms and conditions
stated in the Participation Notice and in accordance with the provisions of
Section 7.1.
7.6 Inapplicability of Article. Notwithstanding anything to the contrary
--------------------------
set forth in this Section 7, the rights and obligations arising under this
Section 7 shall not apply to the sale by CGW of shares of Common Stock pursuant
to a public offering of securities of the Company in which all Purchasers shall
be permitted to sell shares of Common Stock as set forth in Section 11.1 below.
7.7 CGW Distribution. CGW agrees with First Plaza and NationsBank that
----------------
CGW will not make any distribution to its partners of all or any portion of the
Common Stock owned by it (other than in connection with a final liquidation and
winding up of CGW) unless it has first offered to purchase from First Plaza and
NationsBank, respectively, all (or such lesser portion as First Plaza and
NationsBank respectively may elect) of the Common Stock owned by each of them
for a price equal to the fair market value thereof. As used in this Section
7.7, "fair market value" shall be determined in the same manner as set forth in
the definition of "Fair Value" (substituting for the rights of a Management
Purchaser described therein the rights of First Plaza and NationsBank) and any
valuation of the Common Stock by an Independent Investment Banking Firm shall be
made based on an arm's length sale of the Company as an entirety without
discount for minority interests, disparate voting rights or any similar matter.
SECTION 8
PREEMPTIVE RIGHTS
-----------------
8.1 Preemptive Rights. Except as provided in Section 8.2 below, if after
-----------------
the date hereof the Company authorizes the issuance and sale of any shares of
its Common Stock or other equity securities or any securities containing options
or rights to acquire any shares of Common Stock or other equity securities of
the Company, the Company, by written notice (the "First Notice"), will first
offer to sell to each Purchaser a portion of such Common Stock, equity
securities, options or rights equal to the percentage determined by dividing (i)
the number of shares of Common Stock then held by such Purchaser by (ii) the
number of shares of Common Stock then issued and outstanding. Each Purchaser
will be entitled to purchase its portion of such Common Stock, equity
securities, options or rights at the most favorable price and on the most
favorable terms as such Common Stock, equity securities, options or rights are
to be offered to any other Person. In the event any Purchaser shall not timely
exercise its right under this Section 8.1 to purchase a portion of such Common
Stock, equity securities, options or rights, or if after timely exercising such
right shall fail timely to consummate such purchase (a "Non-Purchasing
Purchaser"), each other Purchaser that has fully exercised its right under this
Section 8.1 to purchase such Purchaser's portion of such Common Stock, equity
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securities, options or rights and who has timely consummated such purchase (a
"Purchasing Purchaser") shall have the right to purchase such Purchasing
Purchaser's pro rata share (determined among all Purchasing Purchasers on the
basis of their respective ownership of Common Stock of the Company) of the
portion of such Common Stock, equity securities, options or rights which the
Non-Purchasing Purchaser had the right to purchase under this Section 8.1. The
Company shall notify all Purchasing Purchasers in writing within five (5) days
after the expiration of such thirty (30) day period of the amount of Common
Stock, equity securities, options or rights that were not subscribed for within
such thirty (30) day period by all Non-Purchasing Purchasers (the "Second
Notice"). Any computation of the number of shares of Common Stock, equity
securities, options or rights that a Purchaser has the right to purchase under
this Section 8.1 shall be rounded to the nearest whole share. Each Purchaser
must exercise its purchase rights, if it elects to do so, within thirty (30)
days after receipt of the First Notice or in the case of the purchase by a
Purchasing Purchaser of a portion of the Common Stock, equity securities,
options or rights that a Non-Purchasing Purchaser had the right to, but did not
purchase, within ten (10) days after receipt of the Second Notice.
If NationsBank shall so request, the Company shall offer to NationsBank, in
lieu of any Class A Stock or other voting securities that the Company proposes
to sell and that NationsBank has the right to acquire under this Section 8.1, a
comparable number of shares of Class B Stock or other securities which have no
voting rights and are convertible into Class A Stock on the same terms as Class
B Stock is convertible into Class A Stock but which are otherwise identical to
the stock or securities being offered.
The provisions of this Section 8.1 shall terminate upon the consummation of
an Initial Public Offering.
8.2 Exceptions for Stock Options, Etc. Section 8.1 above and the rights
---------------------------------
of the Purchasers thereunder shall not apply to (a) Class A Stock or any
securities of the Company which are convertible into or exchangeable for Class A
Stock that are issued to employees of the Company or any direct or indirect
Subsidiary of the Company, either directly or upon exercise of options, rights,
warrants, grants or awards, pursuant to the terms of the Stock Incentive Plan;
provided, however, that the aggregate number of shares of Class A Stock (or
securities exerciseable for, convertible into or exchangeable for shares of
Class A Stock) issued or issuable pursuant to such Stock Incentive Plan and all
similar plans adopted and approved by the directors of the Company shall not
exceed 112,500, (b) Class A Stock to be issued on the conversion or exchange of
Class B Stock, and (c) Class B Stock (or any other non-voting securities) to be
issued upon the conversion or exchange of any Class A Stock (or any other
comparable voting securities).
SECTION 9
RESTRICTIONS ON TRANSFER
------------------------
9.1 Restrictions on Transfer. Each Purchaser agrees that it will not
------------------------
sell, transfer, or assign any shares of Common Stock now owned or hereafter
acquired by it except (a) as provided in Section 7 above, (b) as provided in
this Section 9, (c) subject to Section 7.1 if the transferor is CGW, if such
Purchaser is a trust, corporation or partnership, to an Affiliate of such
Purchaser, (d) if such Purchaser is an individual, to a Permitted Transferee or
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(e) if such Purchaser is CGW, to its partners in connection with the liquidation
and winding up of its affairs; provided, however, any such Affiliate or
Permitted Transferee shall take such shares of Common Stock subject to all of
the rights, obligations and restrictions thereon set forth herein and shall
execute and deliver to the Company and each Purchaser such agreements as the
Company and such Purchasers shall reasonably require to evidence the agreement
thereto of such Affiliate or Permitted Transferee.
9.2 Right of First Refusal. If any Purchaser other than CGW shall receive
----------------------
a bona fide offer from a Person (other than an Affiliate of such Purchaser) to
purchase shares of Common Stock owned by such Purchaser and such Purchaser
desires to accept such offer, such Purchaser shall, within five (5) Business
Days after receipt of such bona fide offer, notify the Company of the offer,
stating in such notice (the "Notice") the following: (a) the name and address
of the offeror; (b) the number of shares subject to such offer and the price per
share offered by such offeror for such shares (the "Price"); (c) the terms and
methods of payment by such offeror for such shares, and (d) the agreement of
such offeror to acquire such shares subject to the restrictions on transfer set
forth herein. The Notice given by such Purchaser shall constitute an offer by
such Purchaser to the Company to sell such shares (the "Offered Shares"), at the
price and upon the terms and conditions set forth in this Section 9.2. The
Notice shall include a representation by such Purchaser to the effect that the
proposed terms in the Notice are contained in a bona fide offer and that the
offeror is an independent, unrelated third party, and the Notice shall be
accompanied by a copy of the written offer to purchase the Offered Shares by the
offeror, binding upon the offeror, and subject only to the terms and conditions
of this Agreement.
(a) The Company shall have an option to purchase all, but not less
than all, of the Offered Shares, which option shall be exerciseable by giving
written notice of exercise to such Purchaser within thirty (30) Business Days
after receipt of the Notice.
(b) The purchase price for each of the Offered Shares to be purchased
pursuant to this Section 9.2 by the Company shall be the Price set forth in the
Notice. The purchase price shall be paid, at the Company's option, (i) in
accordance with the terms offered by the offeror as set forth in the Notice, or
(ii) in immediately available funds delivered at the closing described in
Section 9.2(c) below.
(c) The closing of the purchase of the Offered Shares under this
Section 9.2 shall be at the principal office of the Company. The Company shall
designate a closing date and time, which date shall be within thirty (30)
Business Days after the date of the Notice or such later date and time as may be
agreed upon by the Company and such Purchaser. At the closing, such Purchaser
shall deliver certificates duly endorsed or accompanied by duly executed stock
powers for the Offered Shares being purchased pursuant to this Section 9.2, and
such Purchaser shall transfer the Offered Shares being purchased pursuant to
this Section 9.2 to the Company, free and clear of all liens, claims, charges,
or encumbrances, against payment to such Purchaser for the Offered Shares.
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(d) In the event that the right of first refusal provided in this
Section 9.2 is not exercised within the time period set forth in Section 9.2(a),
or if the purchase of the Offered Shares is not consummated within the time
period set forth in Section 9.2(c) through no fault of such Purchaser, such
Purchaser may transfer the Offered Shares to the offeror upon terms and
conditions no more favorable than those set forth in the Notice; provided
however, that prior to the consummation of any such transfer, the Company shall
have received the opinion of its counsel, or counsel reasonably satisfactory to
it, that such transfer does not require registration under the Act or any
applicable securities laws, and such offeror shall have entered into such
written agreements as the Company and the other Purchasers shall reasonably
request pursuant to which the shares of Common Stock acquired by such offeror
shall continue in the hands of such offeror to be subject to the restrictions on
transfer set forth herein. The Company shall not give effect on its books to
any transfer or purported transfer of shares held or owned by such Purchaser to
any Person unless each and all of the conditions hereof affecting such transfer
shall have been satisfied. If the transfer by such Purchaser to the offeror
named in the Notice is not made within ninety (90) days after the date that the
Purchaser first became free to make such transfer, the right to transfer in
accordance with this Section 9.2(d) shall expire. In such event, the
restrictions of this Agreement shall be reinstated as to the Offered Shares, and
any transfer of such Offered Shares proposed to be made by such Purchaser
subsequent to the expiration of such ninety (90) day period, whether or not to
the same transferee or on the same terms and conditions, must be made in
accordance with this Section 9.2.
9.3 Company's Right to Repurchase from Management Purchaser. For a period
-------------------------------------------------------
of one hundred eighty (180) days following the Effective Date of Termination as
to any Management Purchaser, the Company shall have the right, but not the
obligation, to repurchase from such Management Purchaser (or where shares of
Common Stock are owned or held by a Permitted Transferee of such Management
Purchaser, such Permitted Transferee) at a price per share equal to the Call
Price of all or any portion of the shares of Common Stock then owned by such
Management Purchaser or Permitted Transferee. If the Company elects to exercise
its right to repurchase pursuant to this Section 9.3, it shall do so by giving
written notice thereof to such Management Purchaser or such Permitted
Transferee, as the case may be, prior to the expiration of such 180-day period,
which notice shall specify the number of shares held by such Management
Purchaser or such Permitted Transferee as to which the Company is exercising its
repurchase right. The closing of any purchase of shares of Common Stock owned
by such Management Purchaser or such Permitted Transferee pursuant to this
Section 9.3 shall take place at the principal office of the Company not earlier
than thirty (30) nor later than forty-five (45) days after the date of the
Company's written notice of the exercise of its right to purchase such shares
pursuant to this Section 9.3.
9.4 Assignment to Purchasers. If the Company shall at any time during the
------------------------
term of this Agreement have the right pursuant to Sections 9.2 or 9.3 to
purchase from any Purchaser or any Affiliate or Permitted Transferee thereof, as
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the case may be, any shares of the Common Stock then owned by such Purchaser or
such Affiliate or Permitted Transferee, and the Company at such time is either
unable, or elects not, to exercise such right with respect to all or any part of
such shares of capital stock, the Company may, but shall not be obligated to,
assign its rights and delegate its obligations hereunder to the other
Purchasers, pro rata among them on the basis of their respective ownership of
Common Stock, which may then, pro rata among them in such manner, exercise all
of the rights of the Company with respect to the purchase of such shares of
Common Stock as to which such rights are assigned.
9.5 Prohibited Transactions. Notwithstanding anything to the contrary
-----------------------
contained herein, in no event shall First Plaza be required to sell its Common
Stock pursuant to this Section 9 if such sale would cause First Plaza to engage
in a prohibited transaction within the meaning of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, or Section 4975 of the Code
unless an exemption therefrom shall have been obtained or otherwise apply.
9.6 Legends. During the term of this Agreement, each certificate
-------
representing shares of the Common Stock held by the parties to this Agreement
shall bear the following legend (any such certificate not having such legend
shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
"Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate."
On the reverse:
"The shares of stock evidenced by this certificate are subject to
and transferable only in accordance with that certain Securities
Purchase and Stockholders Agreement by and among Gorges Holding
Corporation (the "Company") and certain Purchasers of the capital
stock thereof, dated as of November 25, 1996, a copy of which is
on file at the principal office of the Company in Dallas, Texas.
No transfer or pledge of the shares evidenced hereby shall be
made except in accordance with and subject to the provisions of
said Agreement. By acceptance of this certificate, any holder,
transferee, or pledgee hereof agrees to be bound by all of the
provisions of said Agreement."
A copy of this Agreement shall be kept on file in the principal offices of the
Company in Dallas, Texas. Upon termination of all applicable restrictions set
forth herein and upon tender to the Company of the appropriate stock
certificates, the Company shall reissue to the holder of such stock new stock
certificates which shall contain only such restrictive legend as may be required
by the terms and conditions of this Agreement.
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9.7 No Transfer If Change of Control. Notwithstanding anything to the
--------------------------------
contrary herein contained, a Purchaser may not sell, assign, transfer or convey
any shares of Common Stock or other securities of the Company owned by it if
such sale, assignment, transfer or conveyance would, either singly or when taken
together with the sale, assignment, transfer or conveyance by one or more other
Purchasers, shall cause, constitute or result in a Change of Control, as such
term is defined in the Indenture, or would cause, constitute or result in a
default or event of default under Section 9.1(j) the Credit Agreement.
SECTION 10
VOTING AGREEMENTS; ATTENDANCE RIGHTS
------------------------------------
10.1 Election of Directors. The Purchasers agree that the number of
---------------------
directors constituting the Board of Directors shall be not more than five (5).
Each Purchaser agrees to vote at each meeting of the stockholders of the Company
duly called and held for the purpose of electing directors all shares of the
capital stock of the Company respectively owned by such Purchaser and entitled
to vote for the election of directors of the Company (or otherwise take all
consensual action required) to fix the number of directors of the Company in
accordance with the preceding sentence, and to elect and qualify a Board of
Directors consisting of not more than five (5) persons nominated by CGW. If a
vacancy on the Board of Directors shall occur by reason of the death,
resignation or removal of any director elected as herein provided, CGW shall
have the right to nominate the successor to such director. Each Purchaser
agrees to vote all shares of the capital stock of the Company respectively owned
by such Purchaser and entitled to vote for the election of such successor
director (or otherwise take all consensual action required) for the election of
the person so nominated to fill such vacancy.
10.2 Right to Attend Board Meetings. The Company shall use its best
------------------------------
efforts to ensure that meetings of its Board of Directors and the Board of
Directors of any Subsidiary of the Company are held on the same day at least
four (4) times each year and at least once each quarter. So long as First Plaza
(or any Affiliate thereof) or NationsBank (or any Affiliate thereof), as the
case may be owns of record or beneficially at least twenty-five percent (25%) of
the number of shares of Common Stock purchased by it hereunder, such Purchaser
shall have the right to have one representative attend each meeting of the
Boards of Directors of the Company and any Subsidiary of the Company and each
meeting of any committee thereof and to participate in all discussions during
each such meeting. The Company shall send notice to each such Purchaser of the
time and place of any such meeting in the same manner and at the same time as it
shall send notice thereof to the directors or committee members of the Company
and any Subsidiary of the Company, as the case may be. The Company shall also
provide, and shall cause any Subsidiary of the Company to provide, to each such
Purchaser copies of all notices, reports, minutes and consents at the time and
in the manner as they are provided to the Boards of Directors or committee of
the Company or any Subsidiary of the Company, except for information reasonably
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designated as classified information of such Boards of Directors. The Company
shall furnish, and shall cause any Subsidiary of the Company to furnish, to each
such Purchaser a true and correct copy of all consensual action taken by the
Boards of Directors of the Company or any Subsidiary of the Company not later
than thirty (30) Business Days after such consensual action is taken. The
Company shall promptly reimburse in full each representative of such Purchaser
who attends any such meeting of such Boards of Directors of the Company or any
Subsidiary of the Company or any committee thereof for all of such
representative's reasonable out-of-pocket expenses incurred in attending such
meeting.
10.3 Stock Option Plan. The Company proposes to adopt the Stock Incentive
-----------------
Plan pursuant to which the Company shall be permitted to grant stock incentives
in the form of incentive stock options, non-qualified stock options, restricted
stock grants, and stock appreciation rights to employees of the Company as and
to the extent approved by the Board of Directors. The Purchasers hereby consent
and agree to the adoption of the Stock Incentive Plan and to the reservation of
112,500 shares of Class A Stock for issuance upon exercise of stock incentives
granted thereunder.
10.4 Certain Agreements with Affiliates of CGW. First Plaza and
-----------------------------------------
NationsBank hereby consent and agree to Gorges entering into (a) the Consulting
Agreement and (b) the Investment Banking Agreement, and further agree to the
performance by Gorges of all of its obligations thereunder, including the
payment by Gorges to CGW and the Management Company, respectively, of the fees
and remuneration provided to be paid thereunder.
10.5 Regulatory Matters. In the event of any reasonable determination by
------------------
any Purchaser (a "Regulated Holder") that, by reason of any existing or future
Federal or state rule, regulation, guideline, order, request or directive
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) (collectively, a "Regulatory Requirement"), it is
effectively restricted or prohibited from holding any of the Common Stock
(including any shares of capital stock or other securities distributable to such
Regulated Holder in any merger, reorganization, readjustment or other
reclassification of securities), the Company agrees to use reasonable efforts to
take, and to cause the other Purchasers to take, such action as may be
reasonably necessary to permit such Regulated Holder to comply with such
Regulatory Requirement. Any expenses related to taking such action will be borne
by the Regulated Holder. Such action to be taken may include, without
limitation, the Company's authorization of one or more new classes of capital
stock and the modification or amendment of the Certificate of Incorporation or
any other document or instrument executed in connection with the capital stock
or other securities held by such Regulated Holder. Such Regulated Holder shall
give written notice to the Company of any such determination and the action or
actions necessary to comply with such Regulatory Requirement, and the Company
shall take, and shall use its reasonable efforts to cause the other Purchasers
to take, all steps reasonably necessary to comply with such determination as
expeditiously as possible. Without limitation of the foregoing, the Company
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shall not effect any redemption or other similar transaction if NationsBank
would own upon consummation of such redemption or transaction greater than 24.9%
of the aggregate capital interests in the Company.
SECTION 11
REGISTRATION RIGHTS
-------------------
11.1 Piggyback Registrations.
-----------------------
(a) Whenever the Company proposes to register any of its securities
under the Act (whether in connection with the offering of securities for sale by
the Company or its stockholders or both), other than in the Initial Public
Offering where only securities of the Company are proposed to be included
therein, and the registration form to be used may be used for the registration
of any Registrable Securities (a "Piggyback Registration"), the Company shall
give prompt written notice to all Purchasers of its intention to effect such a
registration and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within twenty (20) Business Days after the receipt of the Company's
notice.
(b) The Registration Expenses (as defined below) of the Purchasers
shall be paid by the Company in all Piggyback Registrations.
(c) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company shall include securities in such registration in the following order of
priority (i) first, the securities the Company proposes to sell, (ii) second,
the Registrable Securities requested to be included in such registration, pro
rata among the Purchasers on the basis of the number of shares of Registrable
Securities as to which registration was requested by each such Purchaser, and
(iii) third, other securities requested to be included in such registration.
(d) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include securities in such registration in
the following order of priority (i) first, the Registrable Securities requested
to be included in such registration, pro rata among the Purchasers on the basis
of the number of shares of Registrable Securities as to which registration was
requested by each such Purchaser, (ii) second, the securities requested to be
included therein by the other holders requesting such registration and (iii)
third, other securities requested to be included in such registration.
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(e) If the Company has previously filed a registration statement with
respect to Registrable Securities pursuant to this Section 11.1, and if such
previous registration has not been withdrawn or abandoned, the Company shall not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for its
equity securities under the Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least 180 days has elapsed from the effective
date of such previous registration.
(f) The Purchasers who are selling Registrable Securities in an
underwritten offering shall not be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such Purchaser and such Purchaser's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in Section
11.6.
11.2 Lockup Agreements. If requested to do so by the underwriters managing
-----------------
the registered public offering, the Company (a) shall not effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the one hundred eighty (180) day period beginning on the effective
date of any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), and (b) each Purchaser shall agree not to effect any public
sale or distribution (including sales pursuant to Rule 144) of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted).
11.3 Designation of Underwriter. In the case of any registration pursuant
--------------------------
to the provisions of Section 11.1 hereof which is proposed to be effected
pursuant to a firm commitment underwriting, the Company shall select the
managing underwriter, and any Purchaser whose shares are included in such
registration statement shall sell such shares only pursuant to such
underwriting.
11.4. Registration Procedures. Whenever any Purchaser has requested that
-----------------------
any Registrable Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
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supplements thereto, the Company shall furnish to the counsel selected by the
Purchasers copies of all such documents proposed to be filed, and such counsel
shall have the opportunity to review and comment on such);
(b) notify each Purchaser of the effectiveness of each registration
statement filed hereunder and prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 180 days and to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each Purchaser such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Purchaser;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each Purchaser, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of any such
seller, the Company shall prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
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meaning of Rule 11Aa2-I of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, use its best efforts to
arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Purchasers
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(i) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 thereunder;
(j) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(k) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
(l) use its best efforts to obtain a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the holders
of a majority of the Registrable Securities being sold reasonably request
(provided that such Registrable Securities constitute at least ten percent (10%)
of the securities covered by such registration statement); and
(m) if any such registration or comparable statement refers to any
holder by name or otherwise as the holder of any securities of the Company and
if in such holder's sole and exclusive judgment, such holder is or might be
deemed to be an underwriter or a controlling person of the Company, such holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to such holder and presented to the
Company in writing, to the effect that the holding by such holder of such
securities is not to be construed as a recommendation by such holder of the
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investment quality of the Company's securities covered thereby and that such
holding does not imply that such holder shall assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such holder by name or otherwise is not required by the Act or any similar
Federal statute then in force, the deletion of the reference to such holder;
provided that with respect to this clause (ii) such holder shall furnish to the
Company an opinion of counsel to such effect, which opinion and counsel shall be
reasonably satisfactory to the Company.
11.5 Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Section 11, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Section 11, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Piggyback Registration, the Company shall
reimburse the Purchasers for their respective share of the reasonable fees and
disbursements of one counsel chosen by the sellers of Registrable Securities.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each Purchaser shall pay those Registration Expenses allocable to
the registration of such Purchaser's securities so included, and any
Registration Expenses not so allocable shall be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.
(d) Underwriting discounts and commissions and transfer taxes relating
to the Registrable Securities included in any registration hereunder, and all
fees and expenses of counsel for any Purchaser (other than fees and expenses of
one counsel chosen by the sellers of Registrable Securities as provided in
Section 11.5(b) above) shall be borne and paid by the sellers of Registrable
Securities.
11.6 Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each Purchaser, its officers and directors and each Person who controls such
Purchaser (within the meaning of the Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
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prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to the Company by
such Purchaser expressly for use therein or by such Purchaser's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Purchaser with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Act) to the same extent as provided above with respect to the
indemnification of each Purchaser.
(b) In connection with any registration statement in which a Purchaser
is participating, each such Purchaser shall furnish to the Company in writing
such information and affidavits relating to the Purchaser as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such Purchaser; provided that the obligation to indemnify shall be
individual, not joint and several, for each Purchaser and shall be limited to
the net amount of proceeds received by such Purchaser from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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(d) The indemnification provided for under this Section 11.6 shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
11.7 Contribution. If the indemnification provided for in this Section 11
------------
is unavailable to or insufficient to hold harmless an indemnified party under
Section 11.6 hereof (other than by reason of exceptions or other limitations
provided in such Section) in respect of any losses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and any such Purchaser on the other hand from its sale
of Registrable Securities or if such allocation is not permitted by applicable
law, the relative fault of the Company on the one hand and of the indemnified
Purchaser on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of the indemnified Purchaser on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
indemnified Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 11.6,
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 11.7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
11.8. Other Indemnification. Indemnification similar to that specified
---------------------
herein (with appropriate modifications) shall be given by the Company and the
Purchasers with respect to any required registration or other qualification of
securities under any state law or regulation or governmental authority other
than the Act.
11.9 Public Reports. If the Company shall have filed a registration
--------------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Act, the Company
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thereafter shall use its best efforts to file the reports required to be filed
by it under the Exchange Act on a timely basis. Further, the Company shall use
its best efforts to make such filings and disclosures as are necessary for the
Purchasers to dispose of their Common Stock pursuant to Rule 144 under the
Securities Act.
SECTION 12
MISCELLANEOUS
-------------
12.1 Termination.
-----------
12.1.1 Method of Termination. This Agreement and the transactions
---------------------
contemplated in Sections 2.1 and 2.2 hereof may be terminated at any time prior
to the Closing:
(a) By the mutual consent of the Company, CGW, First Plaza and
NationsBank;
(b) By the Company after December 31, 1996 if the transactions
contemplated hereby have not been closed or if any of the conditions to the
Company's obligations set forth in Section 4.2 have not been satisfied or waived
by the Company, unless the failure to close such transactions is due to any
failure by the Company to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date,
or a material breach of any of the Company's representations, warranties or
covenants contained herein;
(c) By CGW, First Plaza or NationsBank after December 31, 1996, if the
transactions contemplated hereby have not been closed or if any of the
conditions to such Purchaser's obligations set forth in Section 4.1 have not
been satisfied or waived by such Purchaser, unless the failure to close such
transactions is due to any failure by such Purchaser to perform in any material
respect its agreements contained herein required to be performed by it on or
prior to the Closing Date, or a material breach of any of such Purchaser's
representations, warranties or covenants contained herein;
(d) By the Company, CGW, First Plaza or NationsBank at any time after
January 31, 1997, if the Closing shall not have occurred for any reason on or
prior to January 31, 1997;
(e) By either CGW, First Plaza or NationsBank, on the one hand, or the
Company, on the other hand, if there shall be any order, writ, injunction or
decree of any court or governmental or regulatory agency binding on any such
Purchaser or the Company, which prohibits or restrains such Purchaser and/or the
Company from consummating the transactions contemplated by this Agreement,
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provided that each party to this Agreement who is prohibited or restrained by
such order, writ, injunction, or decree shall have used its reasonable best
efforts to have any such order, writ, injunction or decree lifted and the same
shall not have been lifted within thirty (30) days after entry, by any such
court or governmental or regulatory agency.
12.1.2 Notice of Termination. Notice of termination of this
---------------------
Agreement, as provided for in this Section 12.1, shall be given by the party so
terminating to the other party or parties hereto in accordance with Section 12.2
of this Agreement.
12.1.3 Effect of Termination. If this Agreement terminates pursuant
---------------------
to Section 12.1, this Agreement shall become void and of no further force and
effect, and each party shall pay the costs and expenses incurred by it in
connection with this Agreement and, provided this Agreement was not terminated
as a result of a breach of this Agreement, no party (or any of its officers,
directors, employees, agents, representatives or stockholders) shall be liable
to any other party for any costs, expenses, damages (direct or indirect) or loss
of anticipated profits. If, however, this Agreement is terminated as a result
of a breach, this Section 12.1.3 shall not relieve a breaching or defaulting
party from any liability to the other parties.
12.1.4 Termination of Certain Provisions. The rights, obligations
---------------------------------
and agreements of the Purchasers contained in Section 7 hereof, the restrictions
on transfer contained in Section 9 hereof, the voting agreement contained in
Section 10 hereof and the rights to attend meetings of the Board of Directors as
set forth in Section 10 hereof shall terminate upon the earliest to occur of (a)
completion of the Initial Public Offering, or (b) agreement to such termination
by the parties hereto or their permitted successors or assigns. Unless
theretofore terminated in accordance with the preceding sentence, the voting
agreement contained in Section 10.1 hereof shall terminate on the tenth
anniversary of the date hereof.
12.2 Notices. In order to be effective, any notice or other communication
-------
required or permitted hereunder, shall, unless otherwise stated herein, be in
writing and shall be transmitted by messenger, delivery service, mail or
telecopy, as specified below:
If to Purchasers:
CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, Georgia 30305
Telecopier: (404) 316-8258
Attention: William A. Davies
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with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopier: (404) 881-7777
Attention: Sidney J. Nurkin, Esq.
Mellon Bank, N.A., as Trustee of First Plaza Group Trust
c/o General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 418-3665
Attention: Donna O. Smolens
Mellon Bank, N.A.
One Mellon Bank Center
Room 3346
Pittsburgh, PA 15258
Telecopier: (412) 236-1928
Attention: Laurie A. Adams
with a copy (which shall not constitute notice) to:
Legal Department
General Motors Investment Management Corporation
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 418-6123
Attention: Cathleen A. Bacich, Esq.
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Telecopier: (212) 446-4900
Attention: Marjorie L. Reifenberg, Esq.
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NationsBanc Investment Corporation
c/o NationsBank Leveraged Capital
100 North Tryon Street
NationsBank Corporate Center
10th Floor
Charlotte, NC 28253
Telecopier: (704) 386-6432
Attention: Mr. Walker L. Poole
with a copy (which shall not constitute notice) to:
Kennedy Covington Lobdell & Hickman
100 North Tryon Street
NationsBank Corporate Center
42nd Floor
Charlotte, NC 28202
Telecopier: (704) 331-7598
Attention: Henry W. Flint, Esq.
If to the Company:
Gorges Holding Corporation
P. O. Box 2020
Springdale, AK 72765
Telecopier: (501) 290-7908
Attention: Mr. David Culwell
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopier: (404) 881-7777
Attention: Sidney J. Nurkin, Esq.
or at such other address as a party shall designate in a written notice to the
other parties hereto given in accordance with this Section 12.2. All notices
and other communications shall be effective (a) if sent by messenger or delivery
service, when delivered, (b) if sent by mail, five days after having been sent
by certified mail, with return receipt requested, or (c) if sent by telecopier
with receipt acknowledged, when sent.
12.3 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
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12.4 Entire Agreement, Amendment. This Agreement (including the Exhibits
---------------------------
and Schedules hereto) executed by the Company and Purchasers in connection with,
or as required by, this Agreement constitutes the entire agreement between the
Company and Purchasers with respect to the transactions contemplated by this
Agreement; supersedes all prior or contemporaneous negotiations, communications,
discussions and correspondence concerning the subject matter hereof; and may be
amended or modified only with the written consent of the Company and all of the
Purchasers.
12.5 Severability of Provisions. If any provision of this Agreement shall
--------------------------
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement, and the parties shall use their respective best efforts to negotiate
and enter into an amendment to this Agreement whereby such provision will be
modified in a manner that is consistent with the intended economic consequences
of the invalid provision and that, as modified, is legal and enforceable.
12.6 Governing Law. This agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of Delaware without giving effect
to any choice of law or conflict, provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Delaware to be applied.
12.7 Incorporation of Exhibits and Schedules by Reference. All Appendices,
----------------------------------------------------
Exhibits and Schedules to this Agreement are incorporated herein by this
reference.
12.8 Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which, when so executed, shall be deemed to be an original
and all of which, when taken together, shall constitute but one and the same
agreement.
12.9 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, notwithstanding any
investigation made by Purchasers or their agents or representatives.
12.10 Certain Expenses. The Company will pay all reasonable expenses of
----------------
the Purchasers (including reasonable fees, charges and disbursements of counsel)
in connection with the preparation and negotiation of this Agreement and any
amendment, supplement, modification or waiver of or to any provision of this
Agreement or the Certificate of Incorporation or any consent to any departure by
the Company from the terms of any provision of this Agreement or the Certificate
of Incorporation.
12.11 Publicity. Except as may be required by applicable law, none of the
---------
parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby without prior approval by the other parties hereto. If any
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announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other parties and shall give the other parties an opportunity to comment
thereon.
12.12 Additional Stockholders as Parties Hereto. Any person who
-----------------------------------------
hereinafter becomes a stockholder of the Company may become a party hereto by
executing a counterpart copy of this Agreement. Any such person executing this
Agreement shall thereafter be deemed a Purchaser as fully and to the same extent
as if he, she or it had been an original signatory hereof, provided however,
that with respect to such person, Sections 2, 3 and 4 shall be of no force and
effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first written above.
GORGES HOLDING CORPORATION
By: /s/ James A. O'Donnell
-------------------------------------
President
CGW SOUTHEAST PARTNERS III, L.P.
By: CGW Southeast III, L.L.C., its
General Partner
By: /s/ William A. Davies
-------------------------------------
William A. Davies
Managing Director
MELLON BANK, N.A., as Trustee for First Plaza
Group Trust (as directed by General Motors
Investment Management Corporation)
By: /s/ William R. Nee, its
--------------------
Authorized Officer
Associate Counsel
NATIONSBANC INVESTMENT CORPORATION
By: /s/ , its
------------------------
Authorized Officer
Senior Vice President
/s/ J. David Culwell (Seal)
------------------------------
J. David Culwell
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/s/ Richard E. Mitchell (Seal)
------------------------------
Richard E. Mitchell
/s/ Randall H. Collins (Seal)
-------------------------------
Randall H. Collins
/s/ Robert M. Powers (Seal)
-------------------------------
Robert M. Powers
/s/ Hernando Aviles (Seal)
-------------------------------
Hernando Aviles
/s/ Stuart Alan Ensor (Seal)
-------------------------------
Stuart Alan Ensor
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SCHEDULE 2.3
TO
SECURITIES PURCHASE AND STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
Number of Shares of Aggregate
Management Stock to be Purchase
Purchaser Purchased Price
- ----------- -------------------- ----------
<S> <C> <C>
J. David Culwell 500 $ 50,000
Richard E. Mitchell 2,250 225,000
Randall H. Collins 750 75,000
Robert M. Powers 1,000 100,000
Hernando Aviles 750 75,000
Stuart Alan Ensor 350 35,000
</TABLE>
<PAGE>
EXHIBIT A
AGREEMENT FOR CONSULTING SERVICES
THIS AGREEMENT FOR CONSULTING SERVICES is entered into this November ___,
1996, by and between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation (the
"Corporation"), and CGW SOUTHEAST III, L.L.C., a Delaware limited liability
company ("CGW").
BACKGROUND
A. The Corporation desires to engage CGW for the purpose of providing
financial and management consulting services to the Corporation.
B. CGW is willing to accept such engagement upon the terms and conditions
set forth herein.
AGREEMENT
For and in consideration of the above premises and the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties hereto agree as
follows:
1. SCOPE OF CONSULTING SERVICES. The Corporation retains CGW, and CGW
accepts engagement by the Corporation, to provide financial advisory and
management consulting services to the Corporation and its subsidiaries. In such
capacity, CGW will assist the Corporation and its subsidiaries in financial and
strategic planning and analysis. Such consulting services shall include having
a representative of CGW in attendance at all meetings of the Board of Directors
of the Corporation, evaluation of and negotiations with potential candidates for
acquisition by the Corporation, assisting the Corporation in relations with its
lenders, and providing advice to the Corporation on its capital needs and
structure, including general advice and assistance regarding refinancings or
public offerings or sale of the Corporation. CGW agrees to be available to the
Corporation as needed and to cause such services to be provided by persons
employed or retained by or affiliated with CGW or its general partner. Unless
required by reason of the nature of the particular consulting service, such
services may be performed at the offices of CGW.
2. TERM. The term (the "Term") of this Agreement shall commence on the
date hereof and end on the fifth anniversary of the date hereof. This Agreement
may be terminated prior to the expiration of the Term only (i) by mutual
agreement of CGW and the Corporation, (ii) as provided in Section 5 below, or
(iii) by the Corporation upon the willful failure of CGW to provide consulting
services hereunder if such failure is not remedied within thirty (30) days after
receipt by CGW of written notice by the Corporation to CGW. Upon any
termination of this Agreement for any reason other than as provided in Section 5
below, CGW's right to receive compensation pursuant to Section 3 hereof shall
cease and terminate.
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3. COMPENSATION.
(a) For the services rendered by CGW hereunder, the Corporation shall
pay to CGW (i) a monthly fee of $30,000 on the first day of each calendar month
occurring during the Term, (ii) a fee with respect to each fiscal year of the
Corporation that ends during the Term in an amount equal to the bonus paid to
the Chief Executive Officer of the Corporation with respect to such fiscal year,
such additional fee to be paid at the same time as such bonus is paid to the
Chief Executive Officer, and (iii) a fee with respect to the portion of the
fiscal year of the Corporation in which this Agreement begins or ends and during
which this Agreement is in effect in an amount equal to the portion of the bonus
paid to the chief executive officer of the Corporation with respect to such
fiscal year pro rated based upon the number of days during such fiscal year this
Agreement is in effect. The amount payable under this Section 3(a) is herein
referred to as the "Retainer Fee." Notwithstanding the foregoing, in no event
shall the Retainer Fee exceed $500,000 in any fiscal year that ends during the
term.
(b) In addition to the Retainer Fee, the Corporation shall pay to CGW
fees in such amounts as shall be mutually agreed upon in advance for any
services provided by CGW with respect to services provided to the Corporation by
CGW at the request of the Corporation or any of its subsidiaries which fall
outside the scope of services generally contemplated by Section 1 of this
Agreement.
(c) Upon termination of this Agreement as provided in Section 5 below,
the Corporation shall pay to CGW an amount equal to the aggregate Retainer Fee
that would have been paid over the remaining Term had such termination not
occurred. For purposes of determining such amount the bonus deemed to be paid
to the Chief Executive Officer of the Corporation for any fiscal year of the
Corporation ending after any such termination shall be the average of the
annual bonus paid to such officer for the full fiscal years of the Corporation
ended after the date hereof and prior to such termination, and if no full fiscal
years have ended during such period, then the bonus deemed to be paid to the
chief executive officer for each fiscal year of the Corporation ending after
such termination of this Agreement shall be $140,000.
4. EXPENSES. The Corporation shall reimburse CGW for all of CGW's costs
and expenses (other than ordinary overhead) reasonably incurred in connection
with (i) attendance at meetings with the Corporation or any subsidiary, and (ii)
provision of its services hereunder. Such reimbursements shall be paid to CGW
in a timely manner in accordance with the regular expense reimbursement policy
of the Corporation and upon submission by CGW of all documentation ordinarily
required by the Corporation's policy on reimbursement of expenses.
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5. CHANGE OF CONTROL. This Agreement shall terminate upon the occurrence
of a Change in Control with respect to the Corporation. As used herein, a
"Change in Control" shall be deemed to have occurred with respect to the
Corporation upon (i) the consummation of any merger, share exchange or
consolidation (other than with an affiliate of the Corporation) of the
Corporation in which the shareholders of the Corporation immediately prior to
such merger, share exchange or consolidation shall not following such merger,
share exchange or consolidation, own, directly or indirectly, at least fifty
percent (50%) of the aggregate voting power of the outstanding securities of
the continuing or surviving entity, (ii) any issuance or sale by the Corporation
in a single transaction or series of related transactions of shares of the
Corporation's capital stock which constitute after such issuance and sale fifty
percent (50%) or more of the aggregate voting power of the outstanding
securities of the Corporation, other than the issuance and sale of capital stock
in a public offering of such securities or in connection with the exercise of
options to purchase such voting securities granted to its employees or lenders,
(iii) any other transaction or series of transactions in which the current
holders of the Corporation's common stock cease to own, directly or indirectly,
fifty percent (50%) or more of the aggregate voting power of the outstanding
securities of the Corporation, other than through a public offering of the
voting securities of the Corporation or other than in connection with the
exercise of options to purchase voting securities of the Corporation granted to
employees or lenders of the Corporation, or (iv) any sale in a single
transaction or a series of related transactions of all or substantially all of
the assets of the Corporation. The Corporation agrees to notify CGW promptly of
any Change in Control of the Corporation by mailing to CGW written notice of
such Change in Control, it being the intent of this provision that CGW be
informed at all times concerning the ownership of the Corporation.
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereto with respect to the services to be provided by CGW hereunder. No
amendment or modification of this Agreement shall be valid or binding upon the
Corporation or CGW unless made in writing and signed by the parties hereto.
7. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment relationship between the Corporation and CGW is
intended to be created hereby.
8. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and its
affiliates, their respective officers, directors, controlling persons
(within the meaning of Section 15 of the Securities Act of 1933 or
Section 20(a) of the Securities Exchange Act of 1934), if any,
employees and agents of CGW or any of CGW's affiliates (each such
person being an "Indemnified Person") from and against any losses,
claims, damages or liabilities related to, arising out of or in
connection with CGW's engagement hereunder.
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(b) The Corporation shall reimburse each Indemnified Person for all
reasonable expenses (including fees and expenses of counsel) as they
are incurred in connection with investigating, preparing, pursuing or
defending any action, claim, suit, investigation or proceeding related
to, arising out of or in connection with CGW's engagement hereunder,
whether or not pending or threatened and whether or not any
Indemnified Person is a party; provided however, that if a final
judicial determination is made that any losses, claims, damages or
liabilities (or expenses related thereto) have resulted from the bad
faith or gross negligence of any Indemnified Person, then each
Indemnified Person will remit to the Corporation any amounts
reimbursed under this subparagraph 8(b).
(c) The Corporation will not be responsible for any losses, claims,
damages or liabilities (or expenses related thereto) that are finally
judicially determined to have resulted from the bad faith or gross
negligence of any Indemnified Person. The Corporation further agrees
that no Indemnified Person shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Corporation or to
any person claiming through the Corporation (including, without
limitation, equity holders and creditors of the Corporation) for or in
connection with CGW's engagement hereunder except for any such
liability for losses, claims, damages or liabilities incurred by the
Corporation that are finally judicially determined to have resulted
from the bad faith or gross negligence of such Indemnified Person. If
multiple claims are brought against CGW in an arbitration, with
respect to at least one of which indemnification is permitted under
applicable law and provided for under this Agreement, the Corporation
agrees that any arbitration award shall be conclusively deemed to be
based on claims as to which indemnification is permitted and provided
for, except to the extent the arbitration award expressly states that
the award, or any portion thereof, is based solely on a claim as to
which indemnification is not available.
(d) The Corporation agrees that each Indemnified Person is entitled to
retain separate counsel of its choice in connection with any of the
matters to which the indemnification and reimbursement commitments set
forth in subparagraphs 8(a) and 8(b) above relate.
(e) No Indemnified Person seeking indemnification, reimbursement or
contribution under this Agreement will, without the Corporation's
prior written consent, settle, compromise, consent to the entry of any
judgment in or otherwise seek to terminate any action, claim, suit,
investigation or proceeding referred to in this subparagraph 8(a)
above.
(f) The foregoing rights to indemnity and contribution shall be in
addition to any rights that CGW and/or any other Indemnified Person
may have at common law or otherwise and shall remain in full force and
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effect following the completion or any termination of CGW's
engagement. The Corporation hereby consents to personal jurisdiction
and to service and venue in any court in which any claim which is
subject to this Agreement is brought against CGW or any other
Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification or
reimbursement sought pursuant to this Section 8 is finally judicially
determined to be unavailable (except by reason of the gross negligence
or bad faith of any Indemnified Person), then, whether or not CGW is
the person entitled to indemnification or reimbursement, the
Corporation and CGW shall contribute to the losses, claims, damages,
liabilities and expenses for which such indemnification or
reimbursement is held unavailable in such proportion as is appropriate
to reflect the relative benefits to the Corporation on the one hand,
and CGW on the other, in connection with the transaction to which such
indemnification or reimbursement relates, and other equitable
considerations; provided however, that in no event shall the amount to
be contributed by CGW exceed the amount of the fee actually received
by CGW hereunder.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
10. DELEGATION. CGW hereby delegates to CGW Southeast Management III,
L.L.C. ("Management") the performance of all duties of CGW hereunder, and
directs the Corporation to make payment of the Retainer Fee and all other
amounts due CGW hereunder to Management. The Corporation hereby consents to the
delegation of the performance of CGW's duties hereunder to Management, and
agrees to make payment of the Retainer Fee and such other amounts as so
directed. CGW may terminate the delegation of its duties hereunder to
Management by a written notice to the Corporation which shall be effective upon
receipt by the Corporation. From and after the receipt of such written notice,
all amounts payable hereunder to CGW shall be paid to CGW rather than to
Management. Management agrees to accept the delegation of the duties hereunder
from CGW until such delegation is terminated by CGW, and agrees to provide the
consulting services herein described in accordance with the terms hereof.
[Signatures on Next Page]
5
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CGW SOUTHEAST III, L.L.C.
By:
----------------------------------
Name:
--------------------------------
Managing Director
CGW SOUTHEAST MANAGEMENT III, L.L.C.
By:
----------------------------------
Name:
--------------------------------
Managing Director
6
<PAGE>
EXHIBIT B
AGREEMENT FOR INVESTMENT BANKING SERVICES
THIS AGREEMENT is entered into this November 25, 1996, by and between
GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation (the "Corporation"), and
CGW SOUTHEAST MANAGEMENT III, L.L.C., a Delaware limited liability company
("CGW").
BACKGROUND
CGW has heretofore provided investment banking services to the Company in
connection with the transactions contemplated by that certain Asset Purchase
Agreement, dated October 17, 1996, among the Corporation, Tyson Foods, Inc.,
Tyson Holding Company and Gorges Foodservice, Inc. (the "Asset Purchase
Agreement"), and in connection with structuring and negotiating certain senior
credit facilities and the terms of the issuance and sale by the Corporation of
senior subordinated notes and in arranging for contributions to the equity
capital of the Corporation (collectively, the "Financings"). The Corporation
desires to continue to engage CGW to provide such investment banking services in
connection with the consummation of the transactions contemplated by the Asset
Purchase Agreement and the Financings.
AGREEMENT
For and in consideration of the above premises and the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties hereto agree as
follows:
1. SCOPE OF CONSULTING SERVICES. CGW has provided and agrees to continue
to provide to the Corporation investment banking and advisory services in
connection with the structuring and negotiation of the transactions contemplated
by the Asset Purchase Agreement and the Financings and the consummation of such
transactions.
2. COMPENSATION. For the services rendered by CGW as herein described,
upon consummation of the transactions provided for in the Asset Purchase
Agreement and the Financings the Corporation shall pay to CGW Two Million Six
Hundred Fifty Thousand Dollars ($2,650,000) (the "Fee"). The Fee shall be paid
at the time of the consummation of such transactions by wire transfer of
immediately available funds.
3. EXPENSES. The Corporation shall reimburse CGW for all of CGW's costs
and expenses (other than ordinary overhead) reasonably incurred in connection
with providing the investment banking services hereunder. Such reimbursements
shall be paid to CGW upon submission by CGW of all documentation ordinarily
required by the Corporation's policy on reimbursement of expenses.
<PAGE>
EXECUTION COPY
4. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment or agency relationship between the Corporation and
CGW is intended to be created hereby.
5. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and its
affiliates, their respective officers, directors, controlling
persons (within the meaning of Section 15 of the Securities Act
of 1933 or Section 20(a) of the Securities Exchange Act of 1934),
if any, employees and agents of CGW or any of CGW's affiliates
(each such person being an "Indemnified Person") from and against
any losses, claims, damages or liabilities related to, arising
out of or in connection with CGW's engagement hereunder.
(b) The Corporation shall reimburse each Indemnified Person for all
reasonable expenses (including fees and expenses of counsel) as
they are incurred in connection with investigating, preparing,
pursuing or defending any action, claim, suit, investigation or
proceeding related to, arising out of or in connection with CGW's
engagement hereunder, whether or not pending or threatened and
whether or not any Indemnified Person is a party; provided
however, that if a final judicial determination is made that any
losses, claims, damages or liabilities (or expenses related
thereto) have resulted from the bad faith or gross negligence of
any Indemnified Person, then each Indemnified Person will remit
to the Corporation any amounts reimbursed under this subparagraph
8(b).
(c) The Corporation will not be responsible for any losses, claims,
damages or liabilities (or expenses related thereto) that are
finally judicially determined to have resulted from the bad faith
or gross negligence of any Indemnified Person. The Corporation
further agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or
otherwise) to the Corporation or to any person claiming through
the Corporation (including, without limitation, equity holders
and creditors of the Corporation) for or in connection with CGW's
engagement hereunder except for any such liability for losses,
claims, damages or liabilities incurred by the Corporation that
are finally judicially determined to have resulted from the bad
faith or gross negligence of such Indemnified Person. If
multiple claims are brought against CGW in an arbitration, with
respect to at least one of which indemnification is permitted
under applicable law and provided for under this Agreement, the
Corporation agrees that any arbitration award shall be
2
<PAGE>
EXECUTION COPY
conclusively deemed to be based on claims as to which
indemnification is permitted and provided for, except to the
extent the arbitration award expressly states that the award, or
any portion thereof, is based solely on a claim as to which
indemnification is not available.
(d) The Corporation agrees that each Indemnified Person is entitled
to retain separate counsel of its choice in connection with any
of the matters to which the indemnification and reimbursement
commitments set forth in subparagraphs 8(a) and 8(b) above
relate.
(e) No Indemnified Person seeking indemnification, reimbursement or
contribution under this Agreement will, without the Corporation's
prior written consent, settle, compromise, consent to the entry
of any judgment in or otherwise seek to terminate any action,
claim, suit, investigation or proceeding referred to in this
subparagraph 8(a) above.
(f) The foregoing rights to indemnity and contribution shall be in
addition to any rights that CGW and/or any other Indemnified
Person may have at common law or otherwise and shall remain in
full force and effect following the completion or any termination
of CGW's engagement. The Corporation hereby consents to personal
jurisdiction and to service and venue in any court in which any
claim which is subject to this Agreement is brought against CGW
or any other Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification or
reimbursement sought pursuant to this Section 8 is finally
judicially determined to be unavailable (except by reason of the
gross negligence or bad faith of any Indemnified Person), then,
whether or not CGW is the person entitled to indemnification or
reimbursement, the Corporation and CGW shall contribute to the
losses, claims, damages, liabilities and expenses for which such
indemnification or reimbursement is held unavailable in such
proportion as is appropriate to reflect the relative benefits to
the Corporation on the one hand, and CGW on the other, in
connection with the transaction to which such indemnification or
reimbursement relates, and other equitable considerations;
provided however, that in no event shall the amount to be
contributed by CGW exceed the amount of the fee actually received
by CGW hereunder.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
3
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CGW SOUTHEAST MANAGEMENT L.L.C.
By:
--------------------------------
Name:
-----------------------------
Managing Director
4
<PAGE>
EXHIBIT C
November 25, 1996
CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, GA 30305
NationsBanc Investment Corporation
100 North Tryon Street
NationsBank Corporate Center, 10th Floor
Charlotte, NC 28253
Mellon Bank, N.A., as Trustee for First
Plaza Group Trust
c/o General Motors Investment Management
Corporation
767 Fifth Avenue
New York, New York 10153
Ladies and Gentlemen:
We have acted as counsel to Gorges Holding Corporation, a Delaware
corporation (the "Company"), in connection with the preparation of the
Securities Purchase and Stockholders Agreement between the Company, NationsBanc
Investment Corporation, Mellon Bank, N.A. as Trustee for First Plaza Group
Trust, CGW Southeast Partners III, L.P., J. David Culwell, Richard E. Mitchell,
Randall H. Collins, Robert M. Powers, Hernando Aviles and Stuart A. Ensor, dated
November 25, 1996 (the "Agreement") and have participated in the closing of the
issuance and sale by the Company of shares of its Common Stock at the Closing as
provided in the Agreement (the "Transaction"). This opinion letter is rendered
pursuant to Section 4.1.4 of the Agreement.
This opinion letter is limited by, and is in accordance with, the January
1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia, which
Interpretive Standards are attached hereto as Appendix I and are incorporated in
this opinion letter by this reference. For purposes of the opinions herein
which are based on the general corporate law of the State of Delaware, the
Interpretive Standards shall be deemed to refer to the general corporate law of
the State of Delaware as in effect on the date of this opinion letter instead of
the Georgia Business Corporation Code as in effect on the date of this opinion
letter. Capitalized terms used in this opinion letter and not otherwise defined
herein shall have the meanings assigned to such terms in the Interpretive
Standards and the Agreement.
In the capacity described above, we have considered such matters of law and
of fact, including the examination of originals or copies, certified or
<PAGE>
CGW Southeast Partners III, L.P.
NationsBanc Investment Corporation
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust
Page 2
otherwise identified to our satisfaction, of such records and documents of the
Company, certificates of officers and representatives of the Company,
certificates of public officials and such other documents as we have deemed
appropriate as a basis for the opinions hereinafter set forth.
The opinions set forth herein are limited to the laws of the State of
Georgia, the general corporate law of the State of Delaware, and applicable
federal laws.
Based upon the foregoing, it is our opinion that:
(1) Each of the Company and Gorges was duly organized as a
corporation, and is existing and in good standing, under the laws of the
State of Delaware.
(2) The Company has the corporate power to execute and deliver the
Agreement, to perform its obligations thereunder, to own and use its assets
and to conduct its business. Gorges has the corporate power to execute
and deliver the Purchase Agreement, to perform its obligations thereunder,
to own and use its assets and to conduct its business.
(3) The Company has duly authorized the execution and delivery of the
Agreement and all performance by the Company thereunder and has duly
executed and delivered the Agreement. Gorges has duly authorized the
execution and delivery of the Purchase Agreement and all performance by
Gorges thereunder and has duly executed and delivered the Purchase
Agreement.
(4) The execution and delivery by the Company of the Agreement do not,
and if the Company were now to perform its obligations under the Agreement
such performance would not, result in any:
(i) violation of the Company's certificate of incorporation or
bylaws;
(ii) violation of any existing federal or state constitution,
statute, regulation, rule, order, or law to which the Company is
subject;
(iii) breach of or default under any material written agreements
to which the Company is a party;
(iv) creation or imposition of a contractual lien or security
interest in, on or against the assets and properties of the Company
under any material written agreements to which the Company is a party;
or
2
<PAGE>
CGW Southeast Partners III, L.P.
NationsBanc Investment Corporation
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust
Page 3
(v) violation of any judicial or administrative decree, writ,
judgment or order to which, to our knowledge, the Company is subject.
(5) The execution and delivery by Gorges of the Purchase Agreement do
not, and if Gorges were now to perform its obligations under the Purchase
Agreement such performance would not, result in any:
(i) violation of Gorges' certificate of incorporation or bylaws;
(ii) violation of any existing federal or state constitution,
statute, regulation, rule, order, or law to which Gorges is subject;
(iii) breach of or default under the material written agreements
to which Gorges is a party listed on Schedule I hereto;
(iv) creation or imposition of a contractual lien or security
interest in, on or against the assets and properties of Gorges under
any material written agreements to which Gorges is a party listed on
Schedule I hereto; or
(v) violation of any judicial or administrative decree, writ,
judgment or order to which, to our knowledge, Gorges is subject.
(6) No consent, approval, authorization or other action by, or filing
with, any governmental authority of the United States or the States of
Georgia or Delaware is required for the Company's execution and delivery of
the Agreement and consummation of the Transaction, or for Gorges' execution
and delivery of the Purchase Agreement and the consummation of the
transactions provided for therein.
(7) The Agreement is enforceable against the Company. The Purchase
Agreement is enforceable against Gorges.
(8) The Company's authorized shares consist of 1,000,000 shares of
Class A Stock, 100,000 shares of Class B Stock and 1,000,000 shares of
Preferred Stock. After giving effect to the Transaction there are
outstanding 360,000 shares of Class A Stock, 90,000 shares of Class B
Stock, and no shares of Preferred Stock. Five Thousand Six Hundred (5,600)
shares of Class A Stock are reserved for issuance to the Management
Purchasers at the Second Closing, One Hundred Twelve Thousand Five Hundred
(112,500) shares of Class A Stock are reserved for issuance pursuant to the
3
<PAGE>
CGW Southeast Partners III, L.P.
NationsBanc Investment Corporation
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust
Page 4
Stock Incentive Plan and 90,000 shares of Class A Stock are reserved for
issuance upon conversion of the Class B Stock. All shares of the Common
Stock issued and outstanding on the date hereof are duly authorized,
validly issued, fully paid and nonassessable.
(9) The authorized capital stock of Gorges consists of 2,000 shares of
common stock, $.01 par value, of which 1,000 are issued and outstanding and
owned by the Company. All of the issued and outstanding shares of the
common stock of Gorges are duly authorized, validly issued, fully paid and
nonassessable.
(10) Assuming the accuracy of the representations and warranties of
the Purchasers contained in Section 3.1 of the Agreement, the issuance and
sale of the Common Stock to the Purchasers as provided in the Agreement is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and applicable state securities laws.
Based upon the limitations and qualifications set forth above, we confirm
to you that:
(1) To our knowledge, no litigation or other proceeding against the
Company or Gorges or any of their respective properties is pending or
overtly threatened by a written communication to the Company or Gorges.
(2) The Company is not qualified to transact business as a foreign
corporation in any state. Gorges is qualified to transact business as a
foreign corporation in the states of Texas, Iowa, Arkansas, California,
North Carolina, Georgia, Minnesota and Colorado.
This opinion letter is provided to you for your exclusive use solely in
connection with the Transaction, and may not be relied upon by any other person
or for any other purpose without our prior written consent.
Very truly yours,
ALSTON & BIRD
4
<PAGE>
APPENDIX I
----------
INTERPRETIVE STANDARDS
APPLICABLE TO CERTAIN LEGAL OPINIONS
TO THIRD PARTIES IN CORPORATE TRANSACTIONS
Effective January 1, 1992
Purpose and Scope of Interpretive Standards
-------------------------------------------
The purpose of these Interpretive Standards is to explain the meaning
of Opinion Letters (which incorporate these Interpretive Standards by reference)
addressed to non-client third parties in connection with corporate acquisition
or financing transactions. Included in these Interpretive Standards are general
qualifications to legal opinions, common assumptions as to fact and law,
standards governing an opinion that an agreement is "enforceable" and
interpretations of certain recurring legal opinions and confirmations of fact.
Incorporation in an Opinion Letter of these Interpretive Standards is intended
to shorten the content of the letter while expanding the mutual understanding of
its meaning. Any part of these Interpretive Standards, however, may be
overridden by a specific statement in an Opinion Letter which supersedes a
contrary Interpretive Standard.
Definitions of Terms Used in Interpretive Standards
---------------------------------------------------
The following capitalized terms have the following meanings when used
in these Interpretive Standards:
Agreement means the primary legal document which evidences the
---------
Transaction.
Assets means all of the tangible and intangible real and personal
------
property of Company.
Company means the entity which is the client of Opinion Giver and on
-------
whose behalf the Opinion Letter is given.
Documents means the Agreement, together with any other document
---------
identified in the Opinion Letter,. which contains one or more obligations of
Company related to the Transaction.
GBCC means the Georgia Business Corporation Code in effect on the date
----
of the Opinion Letter.
<PAGE>
Law(s), whether or not a capitalized term, means the constitution,
------
statutes, judicial and administrative decisions, and rules and regulations of
governmental agencies of the Opining Jurisdiction and, unless otherwise
specified, federal law.
Local Law means the statutes, administrative decisions, and any rules
---------
and regulations of any county, municipality or subdivision, whether created at
the federal, state or regional level.
Opining Jurisdiction means a jurisdiction, the law of which Opinion
--------------------
Giver addresses.
Opinion means a legal opinion contained in an Opinion Letter.
-------
Opinion Giver means the law firm or lawyer giving an Opinion .
-------------
Opinion Letter means the letter containing one or more Opinions or
--------------
confirmations of fact by Opinion Giver.
Opinion Recipient means the person or persons to whom the Opinion
-----------------
Letter is addressed.
Other Agreements mean documents (other than the Documents) to which
----------------
Company is a party or by which Company is bound.
Other Counsel means counsel (other than Opinion Giver) providing a
-------------
legal opinion or confirmation of fact on aspects of the Transaction directed to
Opinion Recipient or Opinion Giver or both.
Other Jurisdiction means any jurisdiction (other than the Opining
------------------
Jurisdiction) the law of which is stipulated to be the governing law.
Personal Property means all of the tangible and intangible personal
-----------------
property of Company.
Primary Lawyer Group has the meaning discussed in Interpretive
--------------------
Standard 7.
Public Authority Documents means certificates issued by a governmental
--------------------------
office or agency, such as the Secretary of State, or by a private organization
having access to and regularly reporting on government files and records, as to
a person's property or status.
Remedies opinion means an Opinion dealing with the enforceability
----------------
against Company of one or more Documents.
Transaction means the transaction with respect to which the Opinion
-----------
Letter is given.
- 2 -
<PAGE>
Qualifications To Each Opinion
------------------------------
1. Law Addressed by Opinion.
------------------------
If an Opinion Letter is expressly limited to the Law of one or more
specified jurisdictions or to one or more discrete laws within one or more
jurisdictions, an Opinion with respect to any other law, or the effect of any
other law, is disclaimed.
2. Scope of Opinion.
----------------
An Opinion covers only those matters both essential to the conclusion
stated by the Opinion and, based upon prevailing norms and expectations found
among experienced legal practitioners in the Opining Jurisdiction, reasonable in
the circumstances. Other matters are not included in an Opinion by implication.
The following matters, including their effects and the effects of noncompliance,
are not covered by implication or otherwise in any Opinion, unless coverage is
specifically addressed in the Opinion Letter as provided by Interpretive
Standard 11:
(1) Local Law
(2) Law relating to permissible rates, computation or disclosure of
interest, e.g., usury
----
(3) Antitrust and unfair competition law
(4) Securities law
(5) Fiduciary obligations
(6) Pension and employee benefit law, e.g., ERISA
----
(7) Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System
(8) Fraudulent transfer law
(9) Environmental law
(10) Land use and subdivision law
(11) Except with respect to a No Consent Opinion (Interpretive Standard
28), Hart-Scott-Rodino, Exon-Florio and other laws related to filing
requirements, other than charter-related filing requirements, such as
requirements for filing articles of merger
(12) Except with respect to a No Violation Opinion (Interpretive Standard
27), law concerning creation, attachment, perfection or priority of a
security interest in any Assets
(13) Bulk transfer law
(14) Tax law
(15) Patent, copyright, trademark and other intellectual property law
(16) Racketeering law, e.g., RICO
----
(17) Criminal statutes of general application, e.g., mail fraud and wire
----
fraud
(18) Health and safety law, e.g., OSHA
----
(19) Labor law
- 3 -
<PAGE>
(20) Law concerning national or local emergency
3. Unwarranted Reliance.
--------------------
Opinion Giver may not rely for purposes of the Opinion Letter upon
information, whether or not in a Public Authority Document, or (except in the
case of arbitrary or hypothetical assumptions contained in an overriding
agreement referred to in Interpretive Standard 11 or as stated in Interpretive
Standard 22 with respect to choice of law) upon an assumption otherwise
appropriate, if Opinion Giver has knowledge that such information or assumption
is false, or recognizes factors that compel the conclusion that reliance upon
such information or assumption would be unreasonable. "Knowledge" or
"recognizes" for purposes of the foregoing sentence and wherever used in these
Interpretive Standards means the current awareness of information by any lawyer
in the Primary Lawyer Group.
4. Reliance on Other Sources of Information.
----------------------------------------
Subject to Interpretive Standard 3, Opinion Giver may rely, without
investigation, upon facts established by a Public Authority Document, facts
provided by an agent of Company or others and, if disclosed in the Opinion
Letter, facts asserted by a party to the Transaction in a representation or
warranty embodied in the Documents, provided:
(1) if not established by a Public Authority Document, the facts do
not constitute a statement, directly or in practical effect, of the legal
conclusion in question;
(2) the person providing facts is, in Opinion Giver's professional
judgment, an appropriate source; and
(3) if the facts are set forth in a certificate, Opinion Giver has
used reasonable professional judgment as to its form and content.
5. Scope of Opinion Giver's Inquiry.
--------------------------------
Opinion Giver is presumed to have reviewed such documents and given
consideration to such matters of law and fact as Opinion Giver deemed
appropriate in order to give an Opinion or confirmation of fact, unless Opinion
Giver has expressly limited the scope of inquiry in the Opinion Letter. A
recital of specific documents reviewed or specific procedures followed, without
more, is not a limitation on the scope of Opinion Giver's inquiry for purposes
of the foregoing presumption.
- 4 -
<PAGE>
6. Opinion or Confirmation Qualified by Knowledge of Opinion Giver.
---------------------------------------------------------------
Whenever an Opinion Letter qualifies an Opinion or confirmation of
fact by the words "to our knowledge," "known to us" or words of similar meaning,
the quoted words mean the current awareness by lawyers in the Primary Lawyer
Group of information such lawyers recognize as relevant to the Opinion or
confirmation so qualified. The quoted words do not include within what is
"known" information not within such current awareness that might be revealed if
a canvass of lawyers outside the Primary Lawyer Group were made, if the Opinion
Giver's files were searched or if any other investigation were made.
7. "Primary Lawyer Group".
----------------------
"Primary Lawyer Group" means that lawyer in Opinion Giver's
organization who signs the Opinion Letter and, solely as to information relevant
to an Opinion or confirmation issue, any lawyer in Opinion Giver's organization
who is primarily responsible for providing the response concerning the
particular issue.
8. Who May Rely On Opinion.
-----------------------
Opinion Recipient and designated principals of Opinion Recipient, if
Opinion Recipient is identified in the Opinion Letter as an agent for designated
principals, are the only persons entitled to rely upon any Opinion or
confirmation of fact contained in the Opinion Letter, and then only for purposes
of the Transaction.
9. Other Counsel.
-------------
Opinion Giver's responsibility for the opinion of Other Counsel
depends upon what is stated in the Opinion Letter. A statement that Opinion
Giver has relied on an opinion of Other Counsel means only that Opinion Giver
believes that (i) based upon Other Counsel's professional reputation, it is
competent to render such opinion, and (ii) such opinion on its face appears to
address the matters upon which Opinion Giver places reliance. A statement that
Opinion Giver believes that Opinion Recipient is justified in relying on an
opinion of Other Counsel means only that Opinion Giver believes that, based upon
Other Counsel's professional reputation, it is competent to render such opinion.
A statement that Opinion Giver concurs in an opinion of Other Counsel means that
Opinion Giver has assumed the responsibility for verifying the accuracy of the
opinion of Other Counsel. If no concurrence by Opinion Giver is expressed, no
concurrence is implied. If Opinion Giver merely identifies or remains silent
with respect to the opinion of Other Counsel, Opinion Giver assumes no
responsibility for Other Counsel's opinion, and Opinion Recipient may assume
that Opinion Giver has relied upon Other Counsel's opinion.
- 5 -
<PAGE>
10. Updating.
--------
An Opinion Letter speaks as of the date of its delivery, and Opinion
Giver has no obligation to advise Opinion Recipient or anyone else of any matter
of fact or law thereafter occurring, whether or not brought to the attention of
Opinion Giver, even though that matter affects any analysis or conclusion in the
Opinion Letter.
11. Overriding Agreement.
--------------------
Opinion Giver and Opinion Recipient may agree upon arbitrary or
hypothetical assumptions that may not be true and upon qualifications, standards
or interpretations inconsistent with these Interpretive Standards. Any such
agreement with respect to such assumptions, qualifications, standards or
interpretations, when described with reasonable particularity in the Opinion
Letter, will supersede any contrary provision of these Interpretive Standards.
Assumptions
-----------
12. Assumptions As To Parties Other Than Company.
--------------------------------------------
Opinion Recipient in the Transaction has acted in good faith and
without notice of any defense against enforcement of rights created by, or
adverse claim to any property transferred as part of, the Transaction. Each
party to the Transaction other than Company has complied with all laws
applicable to it that affect the Transaction.
13. Assumptions As To Natural Persons and Documents.
-----------------------------------------------
Each natural person acting on behalf of any party to the Transaction
has sufficient legal competency to carry out such person's role in the
Transaction. Each document submitted to Opinion Giver for review is accurate
and complete, each document purporting to be original is authentic, each
document purporting to be a copy conforms to an authentic original, and each
signature on a document is genuine.
14. Assumptions As To Transaction.
-----------------------------
The Transaction complies with any test required by law of good faith
or fairness. Each party will act in accordance with the terms and conditions of
the Documents.
15. Assumption As To Accessibility of Laws.
--------------------------------------
Each Law for which Opinion Giver is deemed to be responsible is
published, accessible and generally available to lawyers practicing in the
Opining Jurisdiction.
- 6 -
<PAGE>
16. Assumptions As To Company.
-------------------------
No discretionary act of Company or on its behalf will be taken after
the date of the Transaction if such act might result in a violation of law or
breach or default under any agreement, decree, writ, judgment or court order.
Company will obtain all permits and governmental approvals and take all other
actions which are both (i) relevant to performance of the Documents or
consummation of the Transaction, and (ii) required in the future under
applicable law. Company holds requisite title and rights to its Assets.
17. Assumptions As To Other Agreement.
---------------------------------
Any Other Agreement will be enforced as written.
18. Assumption As To Understandings.
-------------------------------
There is no understanding or agreement not embodied in a Document
among parties to the Transaction that would modify any term of a Document or any
right or obligation of a party.
19. Assumption As To Absence of Mistake or Fraud.
--------------------------------------------
With respect to the Transaction and the Documents, there has been no
mutual mistake of fact and there exists no fraud or duress.
20. Assumption As To Invalidity.
---------------------------
No issue of unconstitutionality or invalidity of a relevant Law exists
unless a reported case has so held.
Remedies Opinion Standards
--------------------------
21. Meaning of Remedies Opinion.
---------------------------
A. General Meaning. The Remedies Opinion, with respect to any
---------------
referenced Document, and subject to the limitations contained in these
Interpretive Standards and in the Opinion Letter, means that:
(i) a contract has been formed under the law of contracts of the
jurisdiction applicable under Interpretive Standard 22; and
(ii) under laws normally applicable to contracts like the Document, to
parties like the Company and to transactions like the Transaction, each
obligation imposed on Company by the Document, each agreement made by
Company in the Document, and each right, benefit and remedy conferred by
Company in the Document, will be given effect as stated in the Document.
- 7 -
<PAGE>
B. Existence of Contract. The professional judgment reflected in
---------------------
subparagraph A(i) above requires the Opinion Giver to conclude that:
(i) All legal requirements under contract law for the formation of
a contract of the type involved in the referenced Document effective
against Company (other than requirements that would be covered by a
Corporate Status Opinion, a Corporate Powers Opinion and a Corporate Acts
Opinion discussed at Interpretive Standards 24, 25 and 26) are met, such as
necessary formalities (including compliance with any applicable statute of
frauds), consideration (where necessary), definiteness, and the inclusion
of essential terms.
(ii) The Document does not violate a law as to formation of
contracts that would prevent a court presented with the Document from
enforcing it.
(iii) Company does not presently have available any contractual
defense to the Document, such as the statute of limitations.
22. Choice of Law in Remedies Opinion.
---------------------------------
If a Document covered by the Remedies Opinion contains no governing
law provision, or contains a governing law provision which names the Opining
Jurisdiction, the Remedies Opinion means that if Company is brought before a
proper court of the Opining jurisdiction to enforce rights under the Document,
and if such court applies the substantive law of the Opining Jurisdiction, the
result will be as stated in the Opinion and these Interpretive Standards.
If the Document contains a governing law provision which names a
jurisdiction other than the Opining Jurisdiction, the Remedies Opinion does not
opine whether any court of any jurisdiction will give effect to the governing
law provision in the Agreement, but assumes that if Company is brought before a
proper court of the Opining Jurisdiction to enforce rights under the Document,
such court will apply the substantive law of the Opining Jurisdiction,
notwithstanding the governing law provision in the Document, and based upon such
assumption the result will be as stated in the Opinion and these Interpretive
Standards.
The Remedies Opinion does not extend to the content or effect of any
law other than the law of the Opining Jurisdiction and federal law.
23. Exceptions To The Remedies Opinion.
----------------------------------
Any Remedies Opinion contained in an Opinion Letter which incorporates
these Interpretive Standards by reference will be deemed not to address the
matters excluded in Interpretive Standard 2 and subject to the following
exceptions:
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<PAGE>
(i) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights and remedies of
creditors. This includes the effect of the Federal Bankruptcy Code in its
entirety, including matters of contract rejection, fraudulent conveyance
and obligation, turn-over, preference, equitable subordination, automatic
stay, conversion of a non-recourse obligation into a recourse obligation,
and substantive consolidation. This also includes state laws regarding
fraudulent transfers, obligations, and conveyances, including O.C.G.A.
(S) 18-2-20, et seq., and state receivership laws.
-- ---
(ii) The effect of general principles of equity, whether applied by
a court of law or equity. This includes the following concepts: (a)
principles governing the availability of specific performance, injunctive
relief or other traditional equitable remedies; (b) principles affording
traditional equitable defenses (e.g., waiver, laches and estoppel); (c)
----
good faith and fair dealing; (d) reasonableness; (e) materiality of the
breach; (f) impracticability or impossibility of performance; (g) the
effect of obstruction, failure to perform or otherwise to act in accordance
with an agreement by any person other than Company; (h) the effect of
Section 1-102(3) of the Uniform Commercial Code; and (i) unconscionability.
(iii) The effect and possible unenforceability of contractual
provisions providing for choice of governing law.
(iv) The possible unenforceability of provisions purporting to waive
certain rights of guarantors.
(v) The possible unenforceability of provisions requiring
indemnification for, or providing exculpation, release or exemption from
liability for, action or inaction, to the extent such action or inaction
involves negligence or willful misconduct or to the extent otherwise
contrary to public policy.
(vi) The possible unenforceability of provisions purporting to
require arbitration of disputes.
(vii) The possible unenforceability of provisions prohibiting
competition, the solicitation or acceptance of customers, of business
relationships or of employees, the use or disclosure of information, or
other activities in restraint of trade.
(viii) The possible unenforceability of provisions imposing increased
interest rates or late payment charges upon delinquency in payment or
default or providing for liquidated damages, or for premiums on prepayment,
acceleration, redemption, cancellation, or termination, to the extent any
such provisions are deemed to be penalties or forfeitures.
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<PAGE>
(ix) The possible unenforceability of waivers or advance consents
that have the effect of waiving statutes of limitation, marshalling of
assets or similar requirements, or as to the jurisdiction of courts, the
venue of actions, the right to jury trial or, in certain cases, notice.
(x) The possible unenforceability of provisions that waivers or
consents by a party may not be given effect unless in writing or in
compliance with particular requirements or that a person's course of
dealing, course of performance, or the like or failure or delay in taking
actions may not constitute a waiver of related rights or provisions or that
one or more waivers may not under certain circumstances constitute a waiver
of other matters of the same kind.
(xi) The effect of course of dealing, course of performance, or the
like, that would modify the terms of an agreement or the respective rights
or obligations of the parties under an agreement.
(xii) The possible unenforceability of provisions that enumerated
remedies are not exclusive or that a party has the right to pursue multiple
remedies without regard to other remedies elected or that all remedies are
cumulative.
(xiii) The effect of O.C.G.A. (S)13-1-11 on provisions relating to
attorneys fees.
(xiv) The possible unenforceability of provisions that
determinations by a party or a party's designee are conclusive.
(xv) The possible unenforceability of provisions permitting
modifications of an agreement only in writing.
(xvi) The possible unenforceability of provisions that the
provisions of an agreement are severable.
(xvii) The effect of laws requiring mitigation of damages.
(xviii) The possible unenforceability of provisions permitting the
exercise, under certain circumstances, of rights without notice or without
providing opportunity to cure failures to perform.
(xix) The effect of agreements as to rights of set off otherwise
than in accordance with the applicable law.
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<PAGE>
Interpretations
---------------
24. Corporate Status Opinion.
------------------------
An Opinion to the effect that Company was duly organized as a
corporation and is existing in good standing under the laws of the State of
Georgia (Corporate Status Opinion) is subject to the following understandings:
(1) "duly organized" means that Company (i) properly complied with the
Georgia statutory requirements for incorporation, and (ii) thereafter
properly complied with the Georgia statutory requirements for organization;
(2) "is existing" means that Company is a corporation which has not
ceased to exist under the GBCC;
(3) the Opinion refers to the status of Company only for purposes of
and under the GBCC; and
(4) "good standing" has no official meaning under the GBCC, and for
purposes of any Opinion with respect to a corporation subject to the GBCC
means:
(i) Company has filed no notice of intent to dissolve under
Section 1403 of the GBCC;
(ii) the Secretary of State has signed no certificate of
dissolution with respect to Company;
(iii) the Superior Court of the county of Company's registered
office has entered no decree ordering Company dissolved; and
(iv) Company has satisfied its tax and annual registration
requirements under Section 1420 of the GBCC.
An Opinion limited to the conclusion that the Company "is a
corporation" means that third parties may not challenge Company's corporate
existence, the State of Georgia recognizes such existence, and the state may
challenge Company's incorporation only under the circumstances described in
Section 203(b) of the GBCC.
25. Corporate Powers Opinion.
------------------------
An Opinion to the effect that Company has the corporate power to
execute and deliver a Document, to perform its obligations under a Document, to
own and use its Assets and to conduct its business (Corporate Powers Opinion) is
subject to the following understandings:
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<PAGE>
(1) the Opinion refers only to the GBCC and Company's articles of
incorporation as sources of corporate power;
(2) "power" refers only to whether the acts referenced in the Opinion
are ultra vires;
------------
(3) the Opinion is built upon an assumption that the Corporate Status
Opinion could also be given;
4) "own and use" refers to every right Company has in the Assets;
(5) the Opinion refers to Assets owned and used and business conducted
on the date of the Opinion, and not those contemplated for future
ownership, use or conduct except to the extent the acquisition of the
Assets or conduct of the business is concurrent with, and recognized by
Opinion Giver as constituting part of, the consummation of the Transaction;
and
(6) the Opinion does not affirm that Company is engaged in no unlawful
business and in no business which Georgia law would not permit to be
conducted by a corporation incorporated under the GBCC.
26. Corporate Acts Opinion.
----------------------
An Opinion to the effect that Company has duly authorized the
execution and delivery of, and performance by Company under, the Documents and
has duly executed and delivered the Documents (Corporate Acts Opinion) is
subject to the following understandings:
(1) the Opinion affirms compliance with all corporate action necessary
under the GBCC, Company's articles of incorporation and bylaws and, if
applicable, Company's duly adopted policies and practices for delegation of
authority in order to authorize the execution and delivery of, and
performance under, the Documents;
2) the Opinion affirms that the execution and delivery of the
Documents was, and Company's performance of its obligations under the
Documents in accordance with the Documents as written will be, in
accordance with the authorization;
(3) the Opinion is built upon an assumption that the Corporate Status
Opinion and the Corporate Powers Opinion could also be given;
(4) the Opinion addresses no law other than the GBCC and applicable
law of agency.
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<PAGE>
27. No Violation Opinion.
--------------------
An Opinion to the effect that Company's execution and delivery of the
Documents do not, and if Company were now to perform its obligations under the
Documents such performance would not, result in (i) a violation of Company's
articles of incorporation, bylaws or any law to which Company or its Assets are
subject, or (ii) a breach of or default under described agreements, or (iii) a
creation or imposition of contractual liens or security interests arising out of
described agreements, or (iv) a violation of any known judicial or
administrative decree, writ, judgment or order to which Company or its Assets
are subject (No Violation Opinion) is subject to the following understandings:
(1) a "violation" or "breach or default" means any act or omission
that, by itself or upon notice or the passage of time or both, would
constitute a violation, breach or default giving rise to a remedy under the
document or law in question;
(2) the Opinion addresses only the relevant facts and law as they
exist on the date of the Opinion Letter;
(3) "agreements" refers to agreements, indentures, documents and other
instruments in writing, identified in the Opinion Letter;
(4) references to any law or to "'decree, writ, judgment or order" or
the like include only those (i) which either prohibit performance by
Company under the Documents or subject Company to a fine, penalty or other
similar sanction, and (ii) which a lawyer, using customary professional
diligence, would reasonably recognize as applicable to Company and the
Transaction;
(5) the Opinion addresses only whether the specific terms of the
relevant Document violate law or cause a breach of or default under the
specific terms of an obligation created by a described Other Agreement,
taking into account information provided in accordance with Interpretive
Standard 4 and other facts known to Opinion Giver;
(6) the Opinion does not address acts permitted or contemplated but
not required, or inferred but not set forth, by the relevant Document,
except to the extent such acts are concurrent with, and recognized by
Opinion Giver as constituting part of, the consummation of the Transaction;
(7) to the extent the interpretation of words in described agreements
requires resort to law, the law is that of the Opining Jurisdiction; and
- 13 -
<PAGE>
(8) the Opinion does not address liens or security interests created
by or in favor of Opinion Recipient, created under a Document or arising by
operation of law.
28. No Consent Opinion.
------------------
An Opinion to the effect that no consent, approval, authorization or
other action by, or filing with, any governmental authority is required for
Company's execution and delivery of the Documents and consummation of the
Transaction (No Consent Opinion) is subject to the understandings set forth in
Interpretive Standards 2 and 27(2) and (4). "Required" means that there is no
governmental consent, approval, authorization or filing, the absence of which
would either prohibit performance by Company of its obligations under the
Documents or subject Company to a fine, penalty or other similar sanction.
29. Capitalization Opinion.
----------------------
An Opinion to the effect that described shares have been duly
authorized and are, or upon issuance will be, validly issued, fully paid and
nonassessable (Capitalization Opinion) is subject to the following
understandings:
(1) the Opinion affirms compliance with all corporate action necessary
to create and issue the shares under the Georgia corporate law in effect at
the time of such creation and issuance ("Corporate Code") and Company's
articles of incorporation and bylaws;
(2) "duly authorized" means Company had the corporate power to create
the shares, the shares so created have the rights and attributes required
by the Corporate Code, and the rights and attributes of the shares so
created were permitted by the Corporate Code and are permitted by the GBCC
and Company's articles of incorporation and bylaws;
(3) "validly issued" means that at the time of issuance Company had
sufficient authorized and unissued shares to permit the shares to be
issued, Company took the steps necessary to accord shareholder status to
the persons to whom the shares were issued and Company has taken no step to
deprive the shares of the "validly issued" status;
(4) "fully paid and nonassessable" means that the consideration
received upon issuance of the shares (i) was legally sufficient, (ii)
satisfied the requirements of the Corporate Code, Company's articles of
incorporation and bylaws, and relevant corporate resolutions, (iii) was
approved (e.g., as to value of property or services) by the directors or
shareholders, as required, and (iv) was in fact received, subject to
paragraph (1) above; and
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<PAGE>
(5) the opinion is based upon the assumption that the Corporate Status
Opinion could also be given.
30. Share Transfer Opinion.
----------------------
The only laws addressed in any Opinion as to the rights of a seller in
shares of Company acquired by any purchaser are the GBCC and Article 8 of the
UCC, and no Opinion is given regarding liens (other than UCC security interests)
that may be perfected without filing or possession of the share certificate.
The Opinion is based upon the assumption that the Capitalization Opinion could
also be given.
31. Personal Property Transfer Opinion.
----------------------------------
An Opinion as to Company's transfer of Personal Property expresses no
opinion as to Company's title. See Interpretive Standard 16.
32. Foreign Qualification Confirmation.
----------------------------------
A confirmation to the effect that Company is qualified to transact
business as a foreign corporation in any one or more named jurisdictions is not
a legal opinion, but a statement which may be based solely upon one or more
certificates referenced in the Opinion Letter and limited in meaning to the
words of each certificate. No implication arises from such confirmation that
certificates have been acquired from all jurisdictions in which Company is
required to be qualified, or that certificates obtained are from the appropriate
public officials in the jurisdictions referenced.
33. Litigation Confirmation.
-----------------------
A confirmation regarding litigation pending or threatened in writing
against Company or any Assets derives from Opinion Giver's knowledge as defined
at Interpretive Standard 6 and certificate reliance discussed at Interpretive
Standard 4, but not from any reviews of public or court records or files of
Opinion Giver or others.
Incorporation by Reference Accord
---------------------------------
34. These Interpretive Standards may be incorporated by reference in the
Opinion Letter by a Statement similar to the following:
This Opinion Letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable to
Legal Opinions to Third Parties in Corporate Transactions adopted by
the Legal Opinion Committee of the Corporate and Banking Law Section
of the State Bar of Georgia, which Interpretive Standards are
incorporated in this Opinion Letter by this reference.
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<PAGE>
SCHEDULE I
----------
MATERIAL CONTRACTS
------------------
1. Asset Purchase Agreement, dated as of October 17, 1996, by and among Tyson
Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
2. Transition Services Agreement, dated as of November 25, 1996, by and
between Tyson Foods, Inc. and Gorges/Quik-to-Fix Foods, Inc.
3. Credit Agreement dated as of November 25, 1996, by and among Gorges/Quik-
to-Fix Foods, Inc., Gorges Holding Corporation, the Lenders identified
therein and NationsBank of Texas, N.A.
4. Indenture dated as of November 25, 1996, between Gorges/Quik-to-Fix Foods,
Inc. and IBJ Schroder Bank & Trust, as Trustee.
5. Purchase Agreement dated November 25, 1996, by and between NationsBanc
Capital Markets, Inc. and Gorges/Quik-to-Fix Foods, Inc.
6. Registration Rights Agreement dated November 25, 1996, by and between
NationsBanc Capital Markets, Inc. and Gorges/Quik-to-Fix Foods, Inc.
7. Agreement of Lease dated December 15, 1995 by and between Stover Steel
Structures, Inc. and Tyson Foods, Inc. assigned to Gorges/Quik-to-Fix
Foods, Inc. pursuant to that certain Bill of Sale dated as of November 25,
1996 by and among Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson
Holding Company and Gorges/Quik-to-Fix Foods, Inc.
8. Lease Agreement dated May 1992 by and between Cope Properties and Tyson
Foods, Inc., as amended by letter agreement dated August 25, 1992, from
Terry W. Cozby and as amended by letter agreement dated May 23, 1995 from
Terry W. Cozby assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant to that
certain Bill of Sale dated as of November 25, 1996 by and among Tyson
Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
9. Supply Agreement dated November 9, 1990 by and between Harker's
Distribution, Inc. and Tyson Foods, Inc., as amended by Modification to
Supply Agreement dated September 14, 1993 and Second Modification to Supply
Agreement dated May 1, 1995 assigned to Gorges/Quik-to-Fix Foods, Inc.
pursuant to that certain Assignment Assumption and Consent Agreement dated
as of November 25, 1996 by and among Tyson Foods, Inc., Harker's
Distribution, Inc. and Gorges/Quik-to-Fix Foods, Inc.
<PAGE>
10. Letter Agreement dated September 12, 1996 by and between Sonic Corporation
and Tyson Foods, Inc. assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant
to that certain Bill of Sale dated as of November 25, 1996 by and among
Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
11. Beef Pattie Contract dated November 1, 1995, by and between Sam's Clubs and
Tyson Foods, Inc. assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant to
that certain Bill of Sale dated as of November 25, 1996 by and among Tyson
Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
12. Gas Sales Agreement dated December 1, 1995 by and between Tyson Foods, Inc.
and US Gas Services LLC assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant
to that certain Bill of Sale dated as of November 25, 1996 by and among
Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
13. Contract for Industrial Gas Service dated February 14, 1996 by and between
Lone Star Gas Company and Tyson Foods, Inc., as amended by (i) Amendment of
Contract for Industrial Gas Service dated February 14, 1996, (ii) Addendum
to Amendment of Contract for Industrial Gas Service (a/k/a Interruptible
Gas Service Agreement) dated February 14, 1996, and (iii) letter of March
21, 1996 assigned to Gorges/Quik-to-Fix Foods, Inc. pursuant to that
certain Bill of Sale dated as of November 25, 1996 by and among Tyson
Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company and
Gorges/Quik-to-Fix Foods, Inc.
14. Gas Sales Agreement dated June 1, 1995 by and between Tyson Foods, Inc. and
Mercado Gas Services, Inc. assigned to Gorges/Quik-to-Fix Foods, Inc.
pursuant to that certain Bill of Sale dated as of November 25, 1996 by and
among Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson Holding Company
and Gorges/Quik-to-Fix Foods, Inc.
15. Waste Water Treatment Agreement dated October 25, 1995 by and between the
City of Orange City, Iowa and Tyson Foods, Inc. assigned to Gorges/Quik-to-
Fix Foods, Inc. pursuant to that certain Bill of Sale dated as of November
25, 1996 by and among Tyson Foods, Inc., Gorges Foodservice, Inc., Tyson
Holding Company and Gorges/Quik-to-Fix Foods, Inc.
16. Securities Purchase and Stockholders Agreement dated November 25, 1996 by
and among CGW Southeast Partners III, L.P., NationsBanc Investment
Corporation, Mellon Bank, N.A., as Trustee for First Plaza Group Trust, J.
David Culwell, Richard E. Mitchell, Randall H. Collins, Robert M. Powers,
Hernando Aviles, Stuart Alan Ensor, and Gorges Holding Corporation.
<PAGE>
EXHIBIT 10.19
AGREEMENT FOR CONSULTING SERVICES
THIS AGREEMENT FOR CONSULTING SERVICES is entered into this November ___,
1996, by and between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware corporation (the
"Corporation"), and CGW SOUTHEAST III, L.L.C., a Delaware limited liability
company ("CGW").
BACKGROUND
A. The Corporation desires to engage CGW for the purpose of providing
financial and management consulting services to the Corporation.
B. CGW is willing to accept such engagement upon the terms and conditions
set forth herein.
AGREEMENT
For and in consideration of the above premises and the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties hereto agree as
follows:
1. SCOPE OF CONSULTING SERVICES. The Corporation retains CGW, and CGW
accepts engagement by the Corporation, to provide financial advisory and
management consulting services to the Corporation and its subsidiaries. In such
capacity, CGW will assist the Corporation and its subsidiaries in financial and
strategic planning and analysis. Such consulting services shall include having
a representative of CGW in attendance at all meetings of the Board of Directors
of the Corporation, evaluation of and negotiations with potential candidates for
acquisition by the Corporation, assisting the Corporation in relations with its
lenders, and providing advice to the Corporation on its capital needs and
structure, including general advice and assistance regarding refinancings or
public offerings or sale of the Corporation. CGW agrees to be available to the
Corporation as needed and to cause such services to be provided by persons
employed or retained by or affiliated with CGW or its general partner. Unless
required by reason of the nature of the particular consulting service, such
services may be performed at the offices of CGW.
2. TERM. The term (the "Term") of this Agreement shall commence on the
date hereof and end on the fifth anniversary of the date hereof. This Agreement
may be terminated prior to the expiration of the Term only (i) by mutual
agreement of CGW and the Corporation, (ii) as provided in Section 5 below, or
(iii) by the Corporation upon the willful failure of CGW to provide consulting
services hereunder if such failure is not remedied within thirty (30) days after
receipt by CGW of written notice by the Corporation to CGW. Upon any
termination of this Agreement for any reason other than as provided in Section 5
below, CGW's right to receive compensation pursuant to Section 3 hereof shall
cease and terminate.
<PAGE>
3. COMPENSATION.
(a) For the services rendered by CGW hereunder, the Corporation shall
pay to CGW (i) a monthly fee of $30,000 on the first day of each calendar month
occurring during the Term, (ii) a fee with respect to each fiscal year of the
Corporation that ends during the Term in an amount equal to the bonus paid to
the Chief Executive Officer of the Corporation with respect to such fiscal year,
such additional fee to be paid at the same time as such bonus is paid to the
Chief Executive Officer, and (iii) a fee with respect to the portion of the
fiscal year of the Corporation in which this Agreement begins or ends and during
which this Agreement is in effect in an amount equal to the portion of the bonus
paid to the chief executive officer of the Corporation with respect to such
fiscal year pro rated based upon the number of days during such fiscal year this
Agreement is in effect. The amount payable under this Section 3(a) is herein
referred to as the "Retainer Fee." Notwithstanding the foregoing, in no event
shall the Retainer Fee exceed $500,000 in any fiscal year that ends during the
term.
(b) In addition to the Retainer Fee, the Corporation shall pay to CGW
fees in such amounts as shall be mutually agreed upon in advance for any
services provided by CGW with respect to services provided to the Corporation by
CGW at the request of the Corporation or any of its subsidiaries which fall
outside the scope of services generally contemplated by Section 1 of this
Agreement.
(c) Upon termination of this Agreement as provided in Section 5 below,
the Corporation shall pay to CGW an amount equal to the aggregate Retainer Fee
that would have been paid over the remaining Term had such termination not
occurred. For purposes of determining such amount the bonus deemed to be paid
to the Chief Executive Officer of the Corporation for any fiscal year of the
Corporation ending after any such termination shall be the average of the
annual bonus paid to such officer for the full fiscal years of the Corporation
ended after the date hereof and prior to such termination, and if no full fiscal
years have ended during such period, then the bonus deemed to be paid to the
chief executive officer for each fiscal year of the Corporation ending after
such termination of this Agreement shall be $140,000.
4. EXPENSES. The Corporation shall reimburse CGW for all of CGW's costs
and expenses (other than ordinary overhead) reasonably incurred in connection
with (i) attendance at meetings with the Corporation or any subsidiary, and (ii)
provision of its services hereunder. Such reimbursements shall be paid to CGW
in a timely manner in accordance with the regular expense reimbursement policy
of the Corporation and upon submission by CGW of all documentation ordinarily
required by the Corporation's policy on reimbursement of expenses.
5. CHANGE OF CONTROL. This Agreement shall terminate upon the occurrence
of a Change in Control with respect to the Corporation. As used herein, a
"Change in Control" shall be deemed to have occurred with respect to the
2
<PAGE>
Corporation upon (i) the consummation of any merger, share exchange or
consolidation (other than with an affiliate of the Corporation) of the
Corporation in which the shareholders of the Corporation immediately prior to
such merger, share exchange or consolidation shall not following such merger,
share exchange or consolidation, own, directly or indirectly, at least fifty
percent (50%) of the aggregate voting power of the outstanding securities of
the continuing or surviving entity, (ii) any issuance or sale by the Corporation
in a single transaction or series of related transactions of shares of the
Corporation's capital stock which constitute after such issuance and sale fifty
percent (50%) or more of the aggregate voting power of the outstanding
securities of the Corporation, other than the issuance and sale of capital stock
in a public offering of such securities or in connection with the exercise of
options to purchase such voting securities granted to its employees or lenders,
(iii) any other transaction or series of transactions in which the current
holders of the Corporation's common stock cease to own, directly or indirectly,
fifty percent (50%) or more of the aggregate voting power of the outstanding
securities of the Corporation, other than through a public offering of the
voting securities of the Corporation or other than in connection with the
exercise of options to purchase voting securities of the Corporation granted to
employees or lenders of the Corporation, or (iv) any sale in a single
transaction or a series of related transactions of all or substantially all of
the assets of the Corporation. The Corporation agrees to notify CGW promptly of
any Change in Control of the Corporation by mailing to CGW written notice of
such Change in Control, it being the intent of this provision that CGW be
informed at all times concerning the ownership of the Corporation.
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereto with respect to the services to be provided by CGW hereunder. No
amendment or modification of this Agreement shall be valid or binding upon the
Corporation or CGW unless made in writing and signed by the parties hereto.
7. INDEPENDENT CONTRACTOR. CGW is and shall be an independent
contractor, and no employment relationship between the Corporation and CGW is
intended to be created hereby.
8. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless CGW and its
affiliates, their respective officers, directors, controlling persons
(within the meaning of Section 15 of the Securities Act of 1933 or
Section 20(a) of the Securities Exchange Act of 1934), if any,
employees and agents of CGW or any of CGW's affiliates (each such
person being an "Indemnified Person") from and against any losses,
claims, damages or liabilities related to, arising out of or in
connection with CGW's engagement hereunder.
(b) The Corporation shall reimburse each Indemnified Person for all
reasonable expenses (including fees and expenses of counsel) as they
are incurred in connection with investigating, preparing, pursuing or
3
<PAGE>
defending any action, claim, suit, investigation or proceeding related
to, arising out of or in connection with CGW's engagement hereunder,
whether or not pending or threatened and whether or not any
Indemnified Person is a party; provided however, that if a final
judicial determination is made that any losses, claims, damages or
liabilities (or expenses related thereto) have resulted from the bad
faith or gross negligence of any Indemnified Person, then each
Indemnified Person will remit to the Corporation any amounts
reimbursed under this subparagraph 8(b).
(c) The Corporation will not be responsible for any losses, claims,
damages or liabilities (or expenses related thereto) that are finally
judicially determined to have resulted from the bad faith or gross
negligence of any Indemnified Person. The Corporation further agrees
that no Indemnified Person shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Corporation or to
any person claiming through the Corporation (including, without
limitation, equity holders and creditors of the Corporation) for or in
connection with CGW's engagement hereunder except for any such
liability for losses, claims, damages or liabilities incurred by the
Corporation that are finally judicially determined to have resulted
from the bad faith or gross negligence of such Indemnified Person. If
multiple claims are brought against CGW in an arbitration, with
respect to at least one of which indemnification is permitted under
applicable law and provided for under this Agreement, the Corporation
agrees that any arbitration award shall be conclusively deemed to be
based on claims as to which indemnification is permitted and provided
for, except to the extent the arbitration award expressly states that
the award, or any portion thereof, is based solely on a claim as to
which indemnification is not available.
(d) The Corporation agrees that each Indemnified Person is entitled to
retain separate counsel of its choice in connection with any of the
matters to which the indemnification and reimbursement commitments set
forth in subparagraphs 8(a) and 8(b) above relate.
(e) No Indemnified Person seeking indemnification, reimbursement or
contribution under this Agreement will, without the Corporation's
prior written consent, settle, compromise, consent to the entry of any
judgment in or otherwise seek to terminate any action, claim, suit,
investigation or proceeding referred to in this subparagraph 8(a)
above.
(f) The foregoing rights to indemnity and contribution shall be in
addition to any rights that CGW and/or any other Indemnified Person
may have at common law or otherwise and shall remain in full force and
effect following the completion or any termination of CGW's
engagement. The Corporation hereby consents to personal jurisdiction
4
<PAGE>
and to service and venue in any court in which any claim which is
subject to this Agreement is brought against CGW or any other
Indemnified Person.
(g) The Corporation and CGW agree that if any indemnification or
reimbursement sought pursuant to this Section 8 is finally judicially
determined to be unavailable (except by reason of the gross negligence
or bad faith of any Indemnified Person), then, whether or not CGW is
the person entitled to indemnification or reimbursement, the
Corporation and CGW shall contribute to the losses, claims, damages,
liabilities and expenses for which such indemnification or
reimbursement is held unavailable in such proportion as is appropriate
to reflect the relative benefits to the Corporation on the one hand,
and CGW on the other, in connection with the transaction to which such
indemnification or reimbursement relates, and other equitable
considerations; provided however, that in no event shall the amount to
be contributed by CGW exceed the amount of the fee actually received
by CGW hereunder.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
10. DELEGATION. CGW hereby delegates to CGW Southeast Management III,
L.L.C. ("Management") the performance of all duties of CGW hereunder, and
directs the Corporation to make payment of the Retainer Fee and all other
amounts due CGW hereunder to Management. The Corporation hereby consents to the
delegation of the performance of CGW's duties hereunder to Management, and
agrees to make payment of the Retainer Fee and such other amounts as so
directed. CGW may terminate the delegation of its duties hereunder to
Management by a written notice to the Corporation which shall be effective upon
receipt by the Corporation. From and after the receipt of such written notice,
all amounts payable hereunder to CGW shall be paid to CGW rather than to
Management. Management agrees to accept the delegation of the duties hereunder
from CGW until such delegation is terminated by CGW, and agrees to provide the
consulting services herein described in accordance with the terms hereof.
[Signatures on Next Page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ James A. O'Donnell
------------------------------
Name: James A. O'Donnell
---------------------------
Title: President
--------------------------
CGW SOUTHEAST III, L.L.C.
By: /s/ William A. Davies
-----------------------------
Name: William A. Davies
---------------------------
Managing Director
CGW SOUTHEAST MANAGEMENT III, L.L.C.
By: /s/ William A. Davies
-----------------------------
Name: William A. Davies
-----------------------------
Managing Director
6
<PAGE>
EXHIBIT 10.20
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that TYSON FOODS, INC., a Delaware
corporation (the "Seller") for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, to it paid by GORGES/QUIK-
TO-FIX FOODS, INC., a Delaware corporation (the "Purchaser"), the receipt
whereof is hereby acknowledged, has granted, bargained, sold, transferred and
delivered, and by these presents does hereby grant, bargain, sell, transfer and
deliver unto the Purchaser, its successors and assigns, the personal property
and interests of Seller therein described and set forth in Exhibit A attached
---------
hereto and made a part hereof (the "Property"), excluding, however, the Excluded
Assets to the extent they are owned by Seller.
TO HAVE AND TO HOLD the same upon the Purchaser, its successors and assigns
forever.
This Bill of Sale has been executed and delivered in connection with, and
as a closing document required by, that certain Asset Purchase Agreement dated
October 17, 1996 between the Seller, Gorges Foodservice, Inc., a Texas
corporation, Tyson Holding Corporation, a Delaware corporation, and Purchaser
(the "Agreement"). Capitalized terms used herein or in Exhibit A without
---------
definition shall have the meaning given to such terms in the Agreement.
AND the Seller, for itself and its successors and assigns, represents,
warrants and covenants to and with the Purchaser, its successors and assigns,
that
(i) the Seller is the lawful owner of the Property;
(ii) the Property is free from all liens, claims and encumbrances,
(iii) the Seller has the right to sell, transfer and deliver the Property
to Purchaser as herein provided, and
(iv) the Seller will warrant and defend the title to the Property unto the
Purchaser, its successors and assigns, against the claims and demands
of all persons whomsoever.
<PAGE>
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as of the
25th day of November, 1996.
TYSON FOODS, INC.
By: /s/ David L. Van Bebber
---------------------------
Authorized Officer
Assistant Secretary
STATE OF GEORGIA
COUNTY OF FULTON
The foregoing instrument was acknowledged before me this 25th day of
November, 1996, by David L. Van Bebber who is personally known to me or
who has produced ____________________ as identification and who did (did not)
-------
take an oath.
Notary Public
/s/ Lisa M. Durham
---------------------------
Lisa M. Durham
[Print Name of Notary Public]
My Commission Expires: 2/4/2000
2
<PAGE>
EXHIBIT A
1. All interest of Seller in, to or under all leases (of real and
personal property), contracts, licenses, Permits, distribution arrangements,
sales and purchase agreements, other agreements and business arrangements
(including deposits made by Seller pursuant thereto), to the extent assignable
pursuant to which Seller enjoys a right or benefit solely in connection with the
Business, whether oral or written, other than an Excluded Contract;
2. All machinery, equipment, furniture, tools, computers, office
equipment, business machines, telephones and telephone systems owned by Seller
located at the Owned Real Estate and Leased Real Estate described in Schedule
5.8 to the Agreement;
3. All vehicles and rolling stock owned by a Seller and described in
Schedule 5.10 to the Agreement;
4. All of Seller's office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind located at
the Facilities as of the date hereof;
5. All Inventories of the Business (other than inventories related to or
a part of Seller's discontinued steak business and any poultry or poultry based
products to the extent not included or related to those items listed in Schedule
2.1(a)(ix) to the Agreement);
6. As used exclusively in the Business and as disclosed on Schedule 5.11
to the Agreement, all of any Seller's ownerships, where applicable, and/or
right, title and interest in and to Intellectual Property, together with all of
such Seller's rights to use all of the foregoing and all other rights in, to and
under the foregoing in the United States and in all countries anywhere outside
the United States; and all goodwill and going concern value and all other
intangible properties of the Business, all of the foregoing to the extent
assignable;
7. As used exclusively in the Business, copies of all records pertaining
to customers and accounts, personnel records, all lists and records pertaining
to suppliers, and all books, ledgers, files and business records except as
relating to Excluded Assets or Excluded Liabilities, and subject to Seller's and
Purchaser's respective rights and obligations under Section 8.6 of the
Agreement;
8. In furtherance of but not in any way limiting the foregoing, those
poultry based products listed on Schedule 2.1(a)(ix) to the Agreement;
9. All of the pork chop co-pack business of Seller, whether or not
currently produced or conducted at any of the Facilities or considered a part of
the Business;
<PAGE>
10. All of the business which is part of Tyson product codes 15030, 15006
and 15008 (i.e. St. Louis and Baby Back Ribs) whether or not currently produced
or conducted at any of the Facilities or considered a part of the Business;
11. All assignable rights against third parties under any warranty with
respect to any of the foregoing; and
12. All other similar property not referred to above which is used
exclusively in Seller's operation of the Business, wherever located, but
specifically excluding the Excluded Assets.
<PAGE>
EXHIBIT 10.21
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that GORGES FOODSERVICE, INC., a Texas
corporation (the "Seller") for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, to it paid by GORGES/QUIK-
TO-FIX FOODS, INC., a Delaware corporation (the "Purchaser"), the receipt
whereof is hereby acknowledged, has granted, bargained, sold, transferred and
delivered, and by these presents does hereby grant, bargain, sell, transfer and
deliver unto the Purchaser, its successors and assigns, the personal property
and interests of Seller therein described and set forth in Exhibit A attached
---------
hereto and made a part hereof (the "Property"), excluding, however, the Excluded
Assets to the extent they are owned by Seller.
TO HAVE AND TO HOLD the same upon the Purchaser, its successors and assigns
forever.
This Bill of Sale has been executed and delivered in connection with, and
as a closing document required by, that certain Asset Purchase Agreement dated
October 17, 1996 between the Seller, Tyson Foods, Inc., a Delaware corporation,
Tyson Holding Corporation, a Delaware corporation, and Purchaser (the
"Agreement"). Capitalized terms used herein or in Exhibit A without definition
---------
shall have the meaning given to such terms in the Agreement.
AND the Seller, for itself and its successors and assigns, represents,
warrants and covenants to and with the Purchaser, its successors and assigns,
that
(i) the Seller is the lawful owner of the Property;
(ii) the Property is free from all liens, claims and encumbrances,
(iii) the Seller has the right to sell, transfer and deliver the Property
to Purchaser as herein provided, and
(iv) the Seller will warrant and defend the title to the Property unto the
Purchaser, its successors and assigns, against the claims and demands
of all persons whomsoever.
<PAGE>
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as of the
25th day of November, 1996.
TYSON FOODS, INC.
By: /s/ David L. Van Bebber
---------------------------
Authorized Officer
Assistant Secretary
STATE OF GEORGIA
COUNTY OF FULTON
The foregoing instrument was acknowledged before me this 25th day of
November, 1996, by David L. Van Bebber who is personally known to me or
who has produced ____________________ as identification and who did (did not)
-------
take an oath.
Notary Public
/s/ Lisa M. Durham
---------------------------
Lisa M. Durham
[Print Name of Notary Public]
My Commission Expires: 2/4/2000
2
<PAGE>
EXHIBIT A
1. All interest of Seller in, to or under all leases (of real and
personal property), contracts, licenses, Permits, distribution arrangements,
sales and purchase agreements, other agreements and business arrangements
(including deposits made by Seller pursuant thereto), to the extent assignable
pursuant to which Seller enjoys a right or benefit solely in connection with the
Business, whether oral or written, other than an Excluded Contract;
2. All machinery, equipment, furniture, tools, computers, office
equipment, business machines, telephones and telephone systems owned by Seller
located at the Owned Real Estate and Leased Real Estate described in Schedule
5.8 to the Agreement;
3. All vehicles and rolling stock owned by a Seller and described in
Schedule 5.10 to the Agreement;
4. All of Seller's office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind located at
the Facilities as of the date hereof;
5. All Inventories of the Business (other than inventories related to or
a part of Seller's discontinued steak business and any poultry or poultry based
products to the extent not included or related to those items listed in Schedule
2.1(a)(ix) to the Agreement);
6. As used exclusively in the Business and as disclosed on Schedule 5.11
to the Agreement, all of any Seller's ownerships, where applicable, and/or
right, title and interest in and to Intellectual Property, together with all of
such Seller's rights to use all of the foregoing and all other rights in, to and
under the foregoing in the United States and in all countries anywhere outside
the United States; and all goodwill and going concern value and all other
intangible properties of the Business, all of the foregoing to the extent
assignable;
7. As used exclusively in the Business, copies of all records pertaining
to customers and accounts, personnel records, all lists and records pertaining
to suppliers, and all books, ledgers, files and business records except as
relating to Excluded Assets or Excluded Liabilities, and subject to Seller's and
Purchaser's respective rights and obligations under Section 8.6 of the
Agreement;
8. In furtherance of but not in any way limiting the foregoing, those
poultry based products listed on Schedule 2.1(a)(ix) to the Agreement;
9. All of the pork chop co-pack business of Seller, whether or not
currently produced or conducted at any of the Facilities or considered a part of
the Business;
<PAGE>
10. All of the business which is part of Tyson product codes 15030, 15006
and 15008 (i.e. St. Louis and Baby Back Ribs) whether or not currently produced
or conducted at any of the Facilities or considered a part of the Business;
11. All assignable rights against third parties under any warranty with
respect to any of the foregoing; and
12. All other similar property not referred to above which is used
exclusively in Seller's operation of the Business, wherever located, but
specifically excluding the Excluded Assets.
<PAGE>
EXHIBIT 10.22
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and J. DAVID CULWELL, a resident of the State of
Texas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
2
<PAGE>
Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as Chief Executive Officer of
the Company. In such capacity Executive shall report to the Board of Directors
of the Company or its designee, and shall perform such duties and
responsibilities relating to the Business of the Company as may be assigned or
delegated to him from time to time by the Board of Directors of the Company or
its designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
3
<PAGE>
(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of One Hundred
Seventy-Five Thousand Dollars ($175,000) per annum (the "Base Salary"), which
Base Salary will be reviewed periodically and may be increased by the Company
from time to time. The Base Salary shall be paid in accordance with the
Company's standard payroll practices in effect from time to time. All amounts
payable to Executive hereunder shall be subject to such deductions and
withholdings as are required by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 50% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
4
<PAGE>
senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
5
<PAGE>
(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
6
<PAGE>
with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
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<PAGE>
7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
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(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
J. David Culwell
2809 Country Valley
Garland, Texas 75043
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7266
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
------------------------------
Name: /s/ William A. Davies
----------------------------
Title: VP-Secretary
---------------------------
EXECUTIVE:
/s/ J. David Culwell (SEAL)
------------------------
J. David Culwell
10
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EXHIBIT 10.23
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and HERNANDO AVILES, a resident of the State of
Arkansas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
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<PAGE>
Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as Director of Human
Resources of the Company. In such capacity Executive shall report to the
President of the Company or his designee, and shall perform such duties and
responsibilities relating to the Business of the Company as may be assigned or
delegated to him from time to time by the President of the Company or his
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
3
<PAGE>
(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of Ninety
Thousand Dollars ($90,000) per annum (the "Base Salary"), which Base Salary will
be reviewed periodically and may be increased by the Company from time to time.
The Base Salary shall be paid in accordance with the Company's standard payroll
practices in effect from time to time. All amounts payable to Executive
hereunder shall be subject to such deductions and withholdings as are required
by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 30% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
4
<PAGE>
(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
5
<PAGE>
(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
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<PAGE>
with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
7
<PAGE>
7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
8
<PAGE>
(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
___________________
___________________
___________________
___________________
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies
Telephone:(404) 816-3255
Telecopy:(404) 816-3258
9
<PAGE>
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7260
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
10
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
----------------------------
Name: William A. Davies
--------------------------
Title: VP-Secretary
-------------------------
EXECUTIVE:
/s/ Hernando Aviles (SEAL)
----------------------
Hernando Aviles
11
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EXHIBIT 10.24
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and STUART A. ENSOR, a resident of the State of
Arkansas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
Executive or to the public generally without a breach of any obligation of
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confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as Director of Research and
Development of the Company. In such capacity Executive shall report to the
President of the Company or his designee, and shall perform such duties and
responsibilities relating to the Business of the Company as may be assigned or
delegated to him from time to time by the President of the Company or his
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
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(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of Eighty-Seven
Thousand Seven Hundred Fifty Dollars ($87,750) per annum (the "Base Salary"),
which Base Salary will be reviewed periodically and may be increased by the
Company from time to time. The Base Salary shall be paid in accordance with the
Company's standard payroll practices in effect from time to time. All amounts
payable to Executive hereunder shall be subject to such deductions and
withholdings as are required by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 20% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
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senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
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(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
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with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
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7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
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(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
-------------------
-------------------
-------------------
-------------------
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
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with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7260
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
-----------------------------------
Title: VP-Secretary
---------------------------------
EXECUTIVE:
/s/ Stuart A. Ensor (SEAL)
----------------------------------
Stuart A. Ensor
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EXHIBIT 10.25
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and ROBERT M. POWERS, a resident of the State of
Arkansas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
Executive or to the public generally without a breach of any obligation of
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confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as Vice President -
Operations of the Company. In such capacity Executive shall report to the
President of the Company or his designee, and shall perform such duties and
responsibilities relating to the Business of the Company as may be assigned or
delegated to him from time to time by the President of the Company or his
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
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(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of One Hundred
Fifteen Thousand Dollars ($115,000) per annum (the "Base Salary"), which Base
Salary will be reviewed periodically and may be increased by the Company from
time to time. The Base Salary shall be paid in accordance with the Company's
standard payroll practices in effect from time to time. All amounts payable to
Executive hereunder shall be subject to such deductions and withholdings as are
required by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 40% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
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(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
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(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
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with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
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7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
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(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
-------------------
-------------------
-------------------
-------------------
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
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with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7260
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
------------------------------
Title: VP-Secretary
-----------------------------
EXECUTIVE:
/s/ Robert M. Powers (SEAL)
----------------------------------
Robert M. Powers
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EXHIBIT 10.26
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and RANDALL H. COLLINS, a resident of the State of
Arkansas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
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Executive or to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as Vice President - Sales and
Marketing of the Company. In such capacity Executive shall report to the
President of the Company or his designee, and shall perform such duties and
responsibilities relating to the Business of the Company as may be assigned or
delegated to him from time to time by the President of the Company or his
designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
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(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of One Hundred
Forty-Two Thousand Five Hundred Dollars ($142,500) per annum (the "Base
Salary"), which Base Salary will be reviewed periodically and may be increased
by the Company from time to time. The Base Salary shall be paid in accordance
with the Company's standard payroll practices in effect from time to time. All
amounts payable to Executive hereunder shall be subject to such deductions and
withholdings as are required by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 50% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
4
<PAGE>
senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
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(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
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with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
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7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
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(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
Mr. Randall H. Collins
3122 Warwick Drive
Fayetteville, Arkansas 72703
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
9
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with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7260
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
-----------------------
Name: William A. Davies
--------------------------
Title: VP-Secretary
-------------------------
EXECUTIVE:
Randall H. Collins (SEAL)
-----------------------
Randall H. Collins
11
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EXHIBIT 10.27
EMPLOYMENT AND
CONFIDENTIALITY AGREEMENT
THIS EMPLOYMENT AND CONFIDENTIALITY AGREEMENT (this "Agreement") is made
November 25, 1996, between GORGES/QUIK-TO-FIX FOODS, INC., a Delaware
corporation (the "Company"), and RICHARD E. MITCHELL, a resident of the State of
Arkansas ("Executive").
BACKGROUND
On the date of this Agreement and pursuant to that certain Asset Purchase
Agreement (the "Agreement" dated October 17, 1996 by and among the Company,
Tyson Foods, Inc., Gorges Foodservices, Inc., and Tyson Holding Company the
Company has acquired substantially all of the business and assets of the
Gorges/Quik-to-Fix division of Tyson Foods, Inc. (the "Division"). Prior to the
date hereof, Executive was an employee of the Division, and the Company desires
to employ the Executive in the capacities and on the terms and conditions set
forth below. Executive desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the employment and continued
employment of Executive by the Company, the premises, and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. The following terms used herein shall have the
-----------
definitions set forth below:
(a) "Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with another person.
(b) "Area" means the territorial United States.
(c) "Business" or "Business of the Company" means the business of the
manufacture, sale and distribution of further processed meat products.
(d) "Cause" means (i) conduct amounting to fraud or dishonesty against
the Corporation or any subsidiary or affiliate of the Corporation; (ii)
Executive's intentional misconduct or repeated refusal to follow the reasonable
directions of the Board of Directors of the Corporation, provided an officer of
the Corporation, upon the direction of the Board of Directors, notifies
Executive of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Executive fails to correct such acts (or begins
such action as may be necessary to correct such acts and thereafter diligently
pursues the completion thereof) within five (5) business days after written
<PAGE>
notice has been given; (iii) repeated absences from work without a reasonable
excuse, (iv) repeated intoxication with alcohol or drugs while on Corporation
business during regular business hours; (v) a conviction or plea of guilty or
nolo contendere to a felony (other than one arising from the operation of a
motor vehicle or resulting from actions taken (or not taken) by Executive in
good faith in his capacity as an employee or officer of the Corporation; or (vi)
a breach or violation by the Executive of any material terms of this Agreement
or any other agreement to which Executive and the Corporation are a party.
(e) "Change of Control" means (i) the sale of all or substantially all
of the assets of the Company other than to an affiliate of the Company or (ii)
prior to the initial public offering of shares of common stock of either Gorges
Holding Corporation ("Parent") or the Company, CGW Southeast Partners III, L.P.
shall cease to have the right and power to designate or appoint, either directly
or indirectly, a majority of the Board of Directors of the Company or (iii)
after such initial public offering, any person or entity or group of persons or
entitites acting in concert (in either case, other than the persons and entities
that are the stockholders of Parent on the date hereof) shall acquire more than
thirty-five percent (35%) of the outstanding common stock of Parent or the
Company.
(f) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly or indirectly within the Area in
the Business of the Company.
(g) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration, or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(h) "Effective Date of Termination" means the later of the last day on
which Executive performs any duties of his employment as a full-time employee of
the Company hereunder or the effective date of the termination of Executive's
employment hereunder specified in any notice of termination of such employment
given by the Company as permitted herein.
(i) "Excluded Information" means any data or information that is a
Trade Secret hereunder (i) that has been voluntarily disclosed to the public by
the Company or any Affiliate thereof or has become generally known to the public
(except where such public disclosure has been made by or through Executive or by
a third person or entity with the knowledge of Executive without authorization
by the Company); (ii) that has been independently developed and disclosed by
parties other than Executive or the Company or any Affiliate thereof to
Executive or to the public generally without a breach of any obligation of
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<PAGE>
confidentiality by any such person running directly or indirectly to the Company
or any Affiliate thereof; or (iii) that otherwise enters the public domain
through lawful means.
(j) "Subsidiary" means any subsidiary of the Company.
(k) "Trade Secrets" means information which derives economic value,
actual or potential, from not being generally known and not being readily
ascertainable to other persons who can obtain economic value from its disclosure
or use and which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality. Trade Secrets may
include either technical or non-technical data, including without limitation,
(i) any useful process, machine, chemical formula, composition of matter, or
other device which (A) is new or which Executive has a reasonable basis to
believe may be new, (B) is being used or studied by the Company or any Affiliate
thereof and is not described in a printed patent or in any literature already
published and distributed externally by the Company or any Affiliate thereof,
and (C) is not readily ascertainable from inspection of a product of the Company
or any Affiliate thereof; (ii) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or any Affiliate thereof or to be used, or the use of which is
contemplated, in a future product of the Company or any Affiliate thereof; (iii)
any application, operating system, communication system, or other computer
software (whether in source or object code) and all flow charts, algorithms,
coding sheets, routines, subroutines, compilers, assemblers, design concepts,
test data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the Business of the
Company or any Affiliate thereof; or (iv) information concerning the customers,
suppliers, products, pricing strategies of the Company or any Affiliate thereof,
personnel assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any Affiliate thereof;
provided however, that Trade Secrets shall not include any Excluded Information.
2. Terms of Engagement; Duties
---------------------------
(a) The Company hereby employs Executive as President of the Company.
In such capacity Executive shall report to the Chief Executive Officer of the
Company or its designee, and shall perform such duties and responsibilities
relating to the Business of the Company as may be assigned or delegated to him
from time to time by the Chief Executive Officer or its designee.
(b) Executive accepts such employment and agrees to:
(i) devote substantially all of Executive's effort, time,
energy, and skill (reasonable vacations and reasonable
absences due to illness excepted) during regular business
hours to the duties of his employment hereunder;
3
<PAGE>
(ii) faithfully, loyally, and industriously perform such duties,
subject to the supervision of the Board of Directors of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated
to Executive.
(c) During the Term of this Agreement, Executive shall not engage
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Executive from (i) investing his personal assets in businesses which do not
compete with the Business of the Company or any Affiliate thereof in such form
or manner as will not require any services on the part of Executive in the
operation or the affairs of the entities in which such investments are made and
in which his participation is solely that of an investor, or (ii) purchasing
securities in any corporation whose securities are regularly traded on a
national securities exchange, provided that such purchase does not result in
Executive collectively owning beneficially at any time five (5%) percent or more
of the voting securities of any Competing Enterprise or any Affiliate thereof.
3. Compensation.
------------
(a) In consideration of the services rendered by Executive pursuant to
this Agreement, the Company shall pay to Executive a base salary of One Hundred
Fifty-Nine Thousand Dollars ($159,000) per annum (the "Base Salary"), which Base
Salary will be reviewed periodically and may be increased by the Company from
time to time. The Base Salary shall be paid in accordance with the Company's
standard payroll practices in effect from time to time. All amounts payable to
Executive hereunder shall be subject to such deductions and withholdings as are
required by law or by policies of the Company.
(b) Executive shall be eligible to receive an annual bonus in the
amount of up to 50% of the Base Salary then being paid to Executive, if, as and
when declared and paid by the board of Directors of the Company pursuant to an
executive incentive plan to be established by the Company's Board of Directors.
The award and payment of any such bonus, and the amount thereof if awarded and
paid, shall be in the sole discretion of the Board of Directors of the Company.
(c) Executive shall also have the right to participate in any medical,
hospitalization, dental, disability income, life or other similar insurance
plans maintained by the Company from time to time to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate, and such other fringe benefits as are provided to the other
senior management employees of the Company, provided that the Company shall not
be required to adopt or continue any insurance plans or fringe benefit plans.
4
<PAGE>
(d) The Company shall reimburse Executive for all reasonable business
expenses incurred by Executive in connection with the business of the Company
subject to compliance with the expense reimbursement policies established by the
Company and in sufficient detail to comply with Internal Revenue Service
Regulations.
(e) Except for stock incentive awards which may be granted from time
to time to Executive, the remuneration and benefits set forth in this Section 3
shall be the only compensation payable to Executive with respect to his
employment hereunder, and Executive shall not be entitled to receive any
compensation in addition to that set forth in this Section 3 or under such stock
incentive awards for any services rendered by him in any capacity to the Company
or any Affiliate thereof unless agreed to in writing by the Company or such
Affiliate thereof.
4. Term and Termination of this Agreement. The term of employment of
--------------------------------------
Executive (the "Term") pursuant to this Agreement shall commence on the date
hereof and shall continue for a term of five (5) years from the date hereof (the
"Term").
(a) Executive's employment hereunder shall be terminated during the
Term upon the death or Disability of Executive.
(b) Executive's employment hereunder may be terminated during the Term
by the Company (i) with Cause at any time, and (ii) without Cause upon thirty
(30) days written notice to Executive, provided that Executive shall immediately
cease the performance of his duties hereunder if the Company shall so request
following the date of such notice. In the event Executive's employment is
terminated without Cause, the Company shall pay to Executive, as severance pay
hereunder, an amount equal to the annual Base Salary paid to Executive at the
Effective Date of Termination, which amount shall be paid in twelve (12)
substantially equal monthly installments (less such deductions and withholdings
as are required by law or the policies of the Company) commencing with the first
day of the calendar month next following.
(c) Upon termination of Executive's employment hereunder pursuant to
subsection 4(a) or for Cause pursuant to subsection 4(b), or upon voluntary
termination by Executive of Executive's employment hereunder, the Company shall
have no further obligation to Executive or his personal representative with
respect to remuneration due under this Agreement, except for Base Salary earned
but unpaid at the Effective Date of Termination and, in the case of termination
of employment under subsection 4(a), a pro rata portion (based on the number of
days of the fiscal year of the Company in which such termination occurred during
which this Agreement was in effect) of the bonus, if any, payable under Section
3(b) with respect to such fiscal year. Payment of such bonus, if any, shall be
made at such time as similar bonuses are paid to other executives of the Company
with respect to such fiscal year.
5
<PAGE>
(d) If Executive's employment hereunder is terminated during the Term
by the Company without Cause pursuant to subsection 4(b), the Company shall have
no obligation to Employee with respect to renumeration due under this Agreement
or such termination other than (i) Base Salary earned but unpaid at the
Effective Date of Termination, and (ii) a pro rata portion (based on the number
of days of the fiscal year of the Company in which the Effective Date of
Termination occurred during which this Agreement was in effect) of the bonus, if
any, payable under Section 3(b) with respect to such fiscal year, and (iii) the
severance pay described in subsection 4(b). Payment pursuant to clause (ii) of
the preceding sentence shall be made when such bonuses are paid to other
executive officers receiving bonus payments with respect to such fiscal year.
(e) Notwithstanding anything to the contrary expressed or implied
herein, the covenants and agreements of Executive in Sections 5 and 6 of this
Agreement shall survive the termination of Executive's employment hereunder.
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
-------------------------------------------------------
(a) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and any Affiliate thereof and that
any Trade Secrets produced by Executive during the period of Executive's
employment by the Company shall be considered "work for hire" as such term is
defined in 17 U.S.C. Section 101, the ownership and copyright of which shall be
vested solely in the Company. Executive agrees (i) immediately to disclose to
the Company all Trade Secrets developed in whole or part by Executive during the
Term of Executive's employment by the Company, and (ii) at the request and
expense of the Company, to do all things and sign all documents or instruments
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Executive's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Executive's
employment by the Company for any reason, Executive shall promptly deliver to
the Company all property belonging to the Company or any of its Affiliates,
including, without limitation, all Trade Secrets (and all embodiments thereof)
then in Executive's custody, control, or possession.
(b) Executive agrees that all Trade Secrets of the Company or any
Affiliate thereof received or developed by Executive as a result of Executive's
employment with the Company will be held in trust and strictest confidence, that
Executive will protect such Trade Secrets from disclosure, and that Executive
will make no use of such Trade Secrets, except in connection with Executive's
employment hereunder, without the Company's prior written consent. The
obligations of confidentiality contained in this Agreement will apply during
Executive's employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
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with respect to all other Trade Secrets, for a period of five (5) years after
such expiration or termination, unless a longer period of protection is provided
by law.
6. Non-Compete: Non-Solicitation Covenants.
---------------------------------------
(a) In consideration of the amounts to be paid to Executive hereunder,
Executive covenants that Executive shall, during the Term of this Agreement, and
for one (1) year following the termination or expiration of the Term of this
Agreement or Executive's employment hereunder (other than a termination of
Executive's employment hereunder by either the Company or its assignee or the
Executive within six (6) months following a Change of Control), observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, within the Area, either
directly or indirectly, (A) become financially interested in
a Competing Enterprise (other than as a holder of less than
five percent (5%) of the outstanding voting securities of
any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of
Securities Dealers, Inc. National Market System), or, (B)
engage in or be employed by any Competing Enterprise as an
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or appropriate, or
attempt to solicit, divert, or appropriate, to any Competing
Enterprise within the Area, any person or entity that was a
customer of the Company during the Term of this Agreement
who was solicited or serviced as such by or under the
supervision of Executive.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or
indirectly, on Executive's own behalf or in the service or
on behalf of others, solicit, divert, or hire away, or
attempt to solicit, divert, or hire away, to any Competing
Enterprise, any person employed by the Company or one of its
Affiliates, whether or not such employee is a full-time or a
temporary employee of the Company or such Affiliate and
whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
7
<PAGE>
7. Remedies. Executive acknowledges and agrees that the Company is
--------
engaged in the Business of the Company in and throughout the Area, that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the Business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein, and that
by virtue of Executive's senior management position with the Company Executive
has been and will be throughout the Term of this Agreement directly and
indirectly involved in servicing the accounts of the Company's customer.
Executive further acknowledges and agrees that each such covenant and agreement
is reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or threatened
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. General Provisions.
------------------
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any Subsidiary or to any successor
to the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee shall
agree to assume and be bound by this Agreement. This Agreement and the rights
and obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
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(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company are hereby expressly terminated.
(f) Any notice, request, demand, or other communication required to be
given hereunder shall be made in writing and shall be deemed to have been fully
given if personally delivered or if mailed by overnight delivery (the date on
which such notice, request, demand, or other communication is received shall be
the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Executive:
Mr. Richard E. Mitchell
821 Summit Drive
Rogers, Arkansas 72756
If to Company:
Gorges/Quik-To-Fix Foods, Inc.
c/o CGW Southeast Partners III, L.P.
Suite 210
Twelve Piedmont Center
Atlanta, Georgia 30305
Attention: William A. Davies
Telephone: (404) 816-3255
Telecopy: (404) 816-3258
9
<PAGE>
with a copy (which shall not constitute notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: S.J. Nurkin, Esq.
Telephone: (404) 881-7260
Telecopy: (404) 881-7777
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
GORGES/QUIK-TO-FIX FOODS, INC.
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
------------------------------
Title: VP-Secretary
-----------------------------
EXECUTIVE:
/s/ Richard E. Mitchell (SEAL)
----------------------------------
Richard E. Mitchell
11
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EXHIBIT 23.1
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated November 1, 1996, in the Registration Statement
(Form S-1 No. 333- ) and related Prospectus of Gorges/Quik-to-Fix Foods,
Inc. dated on January 21, 1997.
/s/ Ernst & Young LLP
January 20, 1997
Dallas, Texas
<PAGE>
Exhibit 25
-------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_
-----------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
1 State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
GORGES/QUIK-TO-FIX FOODS, INC.
(Exact names of obligor as specified in its charter)
Delaware 58-2283508
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
209 Range Road
Garland, Texas 75041
(Address of principal executive offices) (Zip code)
11 1/2% Senior Subordinated Notes Due 2006
-----------
(Title of Indenture securities)
<PAGE>
Item 1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, Two Rector Street,
New York, New York
Federal Deposit Insurance Corporation, Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligors are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been
a default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
None
List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
<PAGE>
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as amended to
date. (See Exhibit 1A to Form T-1, Securities and Exchange Commission File
No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to Commence Business
(included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate trust
powers, as amended to the date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date (See
Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 22-
19146).
5. Not Applicable
6. The consent of United States institutional trustee required by Section
321(b) of the Act.
7. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission,
to which there have been no amendments or changes.
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said item
is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
18 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 21st day of November, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
--------------------------------
Barbara McCluskey
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issue by Gorges/Quik-To-Fix
Foods, Inc. of its 11 1/2% Senior Subordinated Notes due 2006, we hereby consent
that reports of examinations by Federal, State, Territorial, or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
-----------------------------
Barbara McCluskey
Vice President
Dated: November 21, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of June 30, 1996
Dollar Amounts
In Thousands
--------------
ASSETS
------
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .............. $ 39,834
Interest-bearing balances ....................................... $ 238,748
Securities : Held to Maturity ..................................... $ 173,034
Available-for-sale ................................... $ 35,882
Federal funds sold and securities purchased under
agreement to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold .............................................. $ 36,968
Securities purchased under agreements to resell ................. $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income ............. $ 1,688,191
LESS: Allowance for loan and lease losses ............ $ 54,288
LESS: allocated transfer risk reserve ................ $ -0-
Loans and leases, net of unearned income, allowance, and reserve. $ 1,613,903
Assets held in trading accounts .................................... $ 500
Premises and fixed assets .......................................... $ 7,413
Other real estate owned ............................................ $ 397
Investments in unconsolidated subsidiaries and associated companies. $ -0-
Customers' liability to this bank on acceptances outstanding ....... $ 223
Intangible assets .................................................. $ -0-
Other assets ....................................................... $ 55,007
TOTAL ASSETS ....................................................... $ 2,199,909
<PAGE>
LIABILITIES
-----------
Deposits:
In domestic office............................................. $ 652,676
Noninterest-bearing............................ $ 278,082
Interest-bearing............................... $ 374,594
In foreign offices, Edge and Agreement
subsidiaries, and IBFs......................................... $ 893,475
Noninterest-bearing............................ $ 15,577
Interest-bearing............................... $ 877,898
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal Funds purchased........................................ $ 212,000
Securities sold under agreements to repurchase................. $ -0-
Demand notes issued to the U.S. Treasury......................... $ 48,606
Trading Liabilities.............................................. $ 293
Other borrowed money:
a) With original maturity of one year or less.................. $ 102,049
b) With original maturity of more than one year................ $ 3,000
Mortgage indebtedness and obligations under
capitalized leases............................................... $ -0-
Bank's liability on acceptances executed and outstanding......... $ 223
Subordinated notes and debentures................................ $ -0-
Other liabilities................................................ $ 74,608
TOTAL LIABILITIES................................................ $1,986,930
Limited life preferred stock and related surplus................. $ -0-
EQUITY CAPITAL
Perpetual preferred stock........................................ $ -0-
Common Stock..................................................... $ 29,649
Surplus.......................................................... $ 217,008
Undivided profits and capital reserves........................... $ (34,414)
Plus: Net unrealized gains (losses) on marketable equity
securities................................................. $ 736
Cumulative foreign currency translation adjustments.............. $ -0-
TOTAL EQUITY CAPITAL............................................. $ 212,979
TOTAL LIABILITIES AND EQUITY CAPITAL............................. $2,199,909
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1995 SEP-28-1996
<PERIOD-START> OCT-02-1994 OCT-01-1995
<PERIOD-END> SEP-30-1995 SEP-28-1996
<CASH> 9 9
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 30,634 31,325
<CURRENT-ASSETS> 30,643 31,334
<PP&E> 97,441 90,895
<DEPRECIATION> 43,510 44,439
<TOTAL-ASSETS> 145,706 137,298
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 145,706 137,298
<SALES> 304,474 232,761
<TOTAL-REVENUES> 304,474 232,761
<CGS> 250,787 189,559
<TOTAL-COSTS> 284,961 217,597
<OTHER-EXPENSES> 678 796
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 18,835 14,368
<INCOME-TAX> 7,931 6,205
<INCOME-CONTINUING> 10,904 8,163
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,904 8,163
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
NON-QUALIFIED STOCK
OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and J. DAVID CULWELL ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 28,125 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
2
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
3
<PAGE>
by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
4
<PAGE>
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
5
<PAGE>
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
6
<PAGE>
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
7
<PAGE>
the determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
----------------------------------
Title: VP-Secretary
---------------------------------
OPTIONEE:
/s/ J. David Culwell (SEAL)
----------------------------------
J. David Culwell
9
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
--------------------------------------------
Address
-----------------------------------------
------------------------------------------------
Date
--------------------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
----------------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
-------------------------
Title:
----------------------
Number of Shares
Exercised:
------------------
Number of Shares
Remaining: Date:
------------------ -----------------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
----------------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of ___________ for ___________ shares of Gorges
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to _____________
shares of the Stock issuable upon whole or partial exercise(s) of the
Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose
of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
be withheld is determined, a fair market value equal to the minimum
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- ----------------------------------------
Legal Signature
- ----------------------------- ----------------------------------------
Social Security Number Name (Printed)
----------------------------------------
Street Address
----------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Company, and thereafter, no further shares shall become Vested Shares.
<PAGE>
EXHIBIT 99.2
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and RICHARD E. MITCHELL ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 16,875 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
2
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
3
<PAGE>
by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
4
<PAGE>
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
5
<PAGE>
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
6
<PAGE>
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
7
<PAGE>
the determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
-----------------------------------
Title: VP-Secretary
---------------------------------
OPTIONEE:
/s/ Richard E. Mitchell (SEAL)
----------------------------------
Richard E. Mitchell
9
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
--------------------------------------------
Address
-----------------------------------------
------------------------------------------------
Date
--------------------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
----------------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
--------------------------
Title:
-----------------------
Number of Shares
Exercised:
-------------------
Number of Shares
Remaining: Date:
------------------- -----------------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
----------------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of for shares of Gorges
----------- -----------
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to
-------------
shares of the Stock issuable upon whole or partial exercise(s) of the
Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose
of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
be withheld is determined, a fair market value equal to the minimum
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- ----------------------------------------
Legal Signature
- ----------------------------- ----------------------------------------
Social Security Number Name (Printed)
----------------------------------------
Street Address
---------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Corporation, and thereafter, no further shares shall become Vested Shares.
<PAGE>
EXHIBIT 99.3
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and RANDALL H. COLLINS ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 16,875 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
2
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
3
<PAGE>
by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
4
<PAGE>
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
5
<PAGE>
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
6
<PAGE>
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
7
<PAGE>
the determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
----------------------------------
Title: VP-Secretary
---------------------------------
OPTIONEE:
/s/ Randall H. Collins (SEAL)
----------------------------------
Randall H. Collins
9
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
--------------------------------------------
Address
-----------------------------------------
------------------------------------------------
Date
--------------------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
----------------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
--------------------------
Title:
-----------------------
Number of Shares
Exercised:
-------------------
Number of Shares
Remaining: Date:
------------------- -----------------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
----------------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of for shares of Gorges
----------- -----------
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to
-------------
shares of the Stock issuable upon whole or partial exercise(s) of the
Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose
of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
be withheld is determined, a fair market value equal to the minimum
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- ----------------------------------------
Legal Signature
- ----------------------------- ----------------------------------------
Social Security Number Name (Printed)
----------------------------------------
Street Address
---------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Company, and thereafter, no further shares shall become Vested Shares.
<PAGE>
EXHIBIT 99.4
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and ROBERT M. POWERS ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 7,030 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
2
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
3
<PAGE>
by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
4
<PAGE>
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
5
<PAGE>
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
discretion, it deems reasonable and not unduly burdensome or costly. If the
6
<PAGE>
Option cannot be exercised at the time it would otherwise expire due to the
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
7
<PAGE>
the determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
------------------------------
Title: VP-Secretary
-----------------------------
OPTIONEE:
/s/ Robert M. Powers (SEAL)
----------------------------------
Robert M. Powers
9
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
--------------------------------------------
Address
-----------------------------------------
------------------------------------------------
Date
--------------------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
10
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
11
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
--------------------------
Title:
-----------------------
Number of Shares
Exercised:
-------------------
Number of Shares
Remaining: Date:
------------------- -----------------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
12
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
-----------------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of for shares of Gorges
----------- -----------
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to
-------------
shares of the Stock issuable upon whole or partial exercise(s) of the
Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose
of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
13
<PAGE>
be withheld is determined, a fair market value equal to the minimum
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- ----------------------------------------
Legal Signature
- ----------------------------- ----------------------------------------
Social Security Number Name (Printed)
----------------------------------------
Street Address
----------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
14
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Company, and thereafter, no further shares shall become Vested Shares.
15
<PAGE>
EXHIBIT 99.5
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and HERNANDO AVILES ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 1,757 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
2
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
3
<PAGE>
by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
4
<PAGE>
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
date that is three (3) days after the date on which such notice or other
5
<PAGE>
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
6
<PAGE>
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
7
<PAGE>
the determination of Disability shall be made reasonably by the Board of
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
------------------------------------
Name: William A. Davies
----------------------------------
Title: VP-Secretary
---------------------------------
OPTIONEE:
/s/ Hernando Aviles (SEAL)
----------------------------------
Hernando Aviles
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
--------------------------------------------
Address
-----------------------------------------
------------------------------------------------
Date
--------------------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
----------------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
--------------------------
Title:
-----------------------
Number of Shares
Exercised:
-------------------
Number of Shares
Remaining: Date:
------------------- -----------------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
----------------------------
RE: Withholding Election
- -------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of for shares of Gorges
----------- -----------
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to
-------------
shares of the Stock issuable upon whole or partial exercise(s) of the
Option (the "Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose
of having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
be withheld is determined, a fair market value equal to the minimum
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- ----------------------------------------
Legal Signature
- ----------------------------- ----------------------------------------
Social Security Number Name (Printed)
----------------------------------------
Street Address
----------------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Company, and thereafter, no further shares shall become Vested Shares.
<PAGE>
EXHIBIT 99.6
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of November, 25, 1996 (the
"Grant Date") by and between GORGES HOLDING CORPORATION (the "Corporation"), a
Delaware corporation, and STUART ALAN ENSOR ("Optionee").
BACKGROUND
A. The Corporation has adopted the 1996 Stock Incentive Plan (the
"Plan"). Pursuant to the Plan, the Committee has authorized the grant to
Optionee of a non-qualified stock option to purchase shares of the common stock
of the Corporation. Capitalized terms used herein and not defined in context
are defined in Section 4.11 hereof or in the Plan.
B. The Corporation and Optionee wish to confirm herein the terms,
conditions, and restrictions of the option.
C. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Corporation hereby grants to Optionee a non-
qualified option (the "Option") to purchase all or any part of 1,757 shares of
Class A Voting Common Stock of the Corporation (the "Option Shares"). This
Option is intended to be a non-qualified stock option.
1.2 Exercise of Option.
------------------
(a) The Option may be exercised during the Option Period (as defined
in Section 1.4) only to the extent of the number of Option Shares that are
then vested ("Vested Shares") as determined pursuant to the vesting
schedule attached hereto as Schedule I.
(b) The Option may be exercised with respect to all or any portion of
the Vested Shares at any time during the Option Period by the delivery to
the Corporation, at its principal place of business, of (i) a written
notice of exercise, in substantially the form attached hereto as Exhibit A
(or as otherwise permitted by the Committee), which shall be delivered to
the Corporation no earlier than thirty (30) days and no later than ten (10)
days (or such lesser number of days as permitted by the Committee) prior to
the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the
<PAGE>
Corporation in the amount of the Exercise Price multiplied by the number of
-------------
Option Shares being purchased (the "Purchase Price") or, at the discretion
of the Committee, by delivery of a number of shares of Stock having a Fair
Market Value as of the Exercise Date at least equal to the Purchase Price;
and (iii) a certified check payable to the Corporation in the amount of all
withholding tax obligations (whether federal, state or local), imposed on
the Corporation by reason of the exercise of the Option, or the Withholding
Election described in Section 1.2(c). Upon acceptance of such notice,
receipt of payment in full, and receipt of payment of all withholding tax
obligations, the Corporation shall cause a certificate representing the
shares of Stock purchased to be issued and delivered to Optionee.
(c) In lieu of paying the withholding tax obligation in cash, as
described in Section 1.2(b)(iii), Optionee may elect to have the actual
number of shares issuable upon exercise of the Option reduced by the
smallest number of whole shares of Stock which, when multiplied by the Fair
Market Value per share of the Stock as of the Exercise Date, is sufficient
to satisfy the amount of the withholding tax obligations imposed on the
Corporation by reason of the exercise hereof (the "Withholding Election").
The Withholding Election must be made by executing and delivering to the
Corporation a properly completed Notice of Withholding Election, in
substantially the form of Exhibit B attached hereto (or as otherwise
permitted by the Committee).
1.3 Exercise Price. The price for each share of Stock for which the
--------------
Option is exercised is US $100.00.
1.4 Term and Termination of Option. Except as otherwise provided herein,
------------------------------
the period in which the Option may be exercised as to any Vested Shares (the
"Option Period") shall commence on the date such shares become Vested Shares and
terminate at 5:00 p.m. Eastern Time on the date of the first to occur of the
following events:
(a) the 10th anniversary of the Grant Date;
(b) If the employment of Optionee by the Corporation terminates for
any reason other than as provided in paragraph (c) or (d) below, the Option
shall lapse, unless it is previously exercised, three months after
Optionee's Termination of Employment; provided, however, that if Optionee's
employment is terminated by the Corporation for Cause or by Optionee
without the consent of the Corporation, the Option shall (to the extent not
previously exercised) lapse immediately.
(c) If the employment of Optionee by the Corporation terminates by
reason of his Disability, the Option shall lapse, unless it is previously
exercised, within one year after Optionee's Termination of Employment.
<PAGE>
(d) If Optionee dies while employed by the Corporation, or during the
three-month period described in paragraph (b) or during the one-year period
described in paragraph (c) and before the Option otherwise lapses, the
Option shall lapse one year after Optionee's death. Upon Optionee's death,
any exercisable Options may be exercised by Optionee's beneficiary.
Unless the exercisability of the Option is accelerated as provided in
Article 13 of the Plan, if Optionee exercises the Option after Termination of
Employment, the Option may be exercised only with respect to the shares that
were otherwise vested on Optionee's Termination of Employment. Upon the
expiration of any Option Period, this Option, and all unexercised rights granted
to Optionee hereunder shall terminate as to all Vested Shares to which such
Option Period relates, and thereafter be null and void.
1.5 Rights as Stockholder. Optionee, or, if applicable, the Transferee
---------------------
(as defined in Section 4.11), shall have no rights as a stockholder with respect
to any Option Shares until Optionee has exercised this Option as to such Option
Shares and has tendered to the Corporation the Purchase Price due in respect of
such exercise. No adjustment to the number of Option Shares covered by this
Option or the Exercise Price shall be made for dividends paid or declared on or
with respect to Stock in cash, securities or other property, for which the
record date is prior to the date of exercise hereof.
1.6 Changes in Capitalization. The Committee may proportionately adjust
-------------------------
the number of Option Shares and the Exercise Price for any increase or decrease
in the number of issued shares of Stock (without any change in the aggregate
price to be paid upon exercise of all of the Option Shares) resulting from an
event described in Article 14 of the Plan. Any adjustment pursuant to this
Section 1.6 may provide, in the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to the Option without
payment therefor.
1.7 Accelerated Vesting.
-------------------
(a) Change in Control. If a Change in Control occurs, the Option
-----------------
shall become fully exercisable.
(b) Other Events. As provided in Section 13.9 and Section 13.10 of
------------
the Plan, the Committee may accelerate the vesting of the Option in other
events.
(c) Effect of Acceleration. If the vesting of the Option accelerates
----------------------
due to a Change in Control or is accelerated by the Committee pursuant to
Section 13.9 of the Plan (i.e., events that could lead to a Change in
Control), the Committee shall determine (i) whether the fully exercisable
Option will expire after a designated period of time to the extent not then
exercised, (ii) whether the difference between the Exercise Price and the
Fair Market Value of the Option Shares as of a date designated by the
Committee will be settled in cash, (iii) whether the Option will be assumed
by another party to the transaction giving rise to the acceleration or
<PAGE>
otherwise be equitably converted in connection with such transaction, or
(iv) any combination of the foregoing.
1.8 Rights of Optionee Subject to Plan. This Option is granted pursuant
----------------------------------
to the Plan and is, in all respects, subject to the terms and provisions of the
Plan, a copy of which is available at the offices of the Corporation. In the
event of any conflict between any part or provision of this Agreement and any
part or provision of the Plan, the part or provision of the Plan shall control.
1.9 Securities Purchase and Stockholders Agreement. Upon exercise of this
----------------------------------------------
Option pursuant to Section 1.2, Optionee shall enter into and be bound by that
certain Securities Purchase and Stockholders Agreement, dated November 25, 1996,
among CGW Southeast Partners III, L.P. NationsBanc Investment Corporation and
Mellon Bank, N.A. as Trustee for First Plaza Group Trust, certain other
Stockholders of the Corporation, and the Corporation in accordance with Section
12.12 thereof (the "Securities Purchase and Stockholders Agreement").
ARTICLE 2
RESTRICTION ON TRANSFER OF OPTION
2.1 Restrictions on Transfer of Option. The Option evidenced hereby is
----------------------------------
nontransferable other than by will or the laws of descent and distribution.
ARTICLE 3
LEGENDS
3.1 Legends. Each certificate representing the Option Shares purchased
-------
upon exercise of this Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option Shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A NON-QUALIFIED STOCK OPTION AGREEMENT DATED NOVEMBER 25,
1996, A COPY OF WHICH IS AVAILABLE FROM THE CORPORATION.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
<PAGE>
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
Optionee agrees that the Corporation may also endorse any other legends
required by applicable federal or state securities laws.
The Corporation shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
3.2 Removal of Legend and Transfer Restrictions.
-------------------------------------------
(a) Any legend endorsed on a certificate pursuant to Section 3.1
hereof and the stop transfer instructions with respect to the Option Shares
shall be removed and the Corporation shall issue a certificate without such
legend to the holder thereof if such Option Shares are registered under the
Securities Act of 1933 and a prospectus meeting the requirements of Section
10 of the Securities Act of 1933 is available.
(b) The restrictions described in the second sentence of the legend
set forth in Section 3.1 hereof may be removed at such time as permitted by
Rule 144 promulgated under the Securities Act of 1933.
ARTICLE 4
GENERAL PROVISIONS
4.1 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, this
Option may not be exercised except, in the reasonable judgment of the Committee,
in compliance with exemptions under applicable state securities laws of the
state in which Optionee resides, and/or any other applicable securities laws.
4.2 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
4.3 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient. In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
<PAGE>
date that is three (3) days after the date on which such notice or other
communication was mailed or sent. Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.
4.4 Severability. In the event that any one or more of the provisions or
------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
4.5 Entire Agreement. Except as set forth in Section 1.9, this Agreement
----------------
expresses the entire understanding and agreement of the parties with respect to
the subject matter hereof. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
4.6 Violation. Except as provided herein, any transfer, pledge, sale,
---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.
4.7 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
4.8 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
4.9 No Employment Rights Created. The grant of the Option hereunder shall
----------------------------
not be construed as giving Optionee the right to continued employment with the
Corporation.
4.10 Special Limitation on Exercise. Notwithstanding anything contained
------------------------------
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Corporation, which approval may be withheld
if the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Corporation, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Corporation shall avail itself of any exemptions from
registration contained in applicable federal and state securities laws which are
reasonably available to the Corporation on terms which, in its sole and absolute
<PAGE>
discretion, it deems reasonable and not unduly burdensome or costly. If the
Option cannot be exercised at the time it would otherwise expire due to the
restrictions contained in this Section 4.10, the Exercise Period may, upon
request of Optionee, be extended for successive one-year periods until it can be
exercised in accordance with this Section 4.10. Any attempt by Optionee to
exercise the Option that is not effective due to the restrictions contained in
this Section 4.10 shall be deemed to be a request for a one-year extension
period under the preceding sentence. Optionee shall deliver to the Corporation,
prior to the exercise of the Option, such information representations, and
warranties as the Corporation may reasonably request in order for the
Corporation to be able to satisfy itself that the Option Shares to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
4.11 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
(a) "Cause" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
conduct amounting to fraud or dishonesty against the Corporation or any
subsidiary or affiliate of the Corporation; (ii) Optionee's intentional
misconduct or repeated refusal to follow the reasonable directions of the
Board of Directors of the Corporation, provided an officer of the
Corporation, upon the direction of the Board of Directors, notifies
Optionee of the acts deemed to constitute such intentional misconduct or
repeated refusal in writing and Optionee fails to correct such acts (or
begins such action as may be necessary to correct such acts and thereafter
diligently pursues the completion thereof) within five (5) business days
after written notice has been given; (iii) repeated absences from work
without a reasonable excuse, (iv) repeated intoxication with alcohol or
drugs while on Corporation business during regular business hours; (v) a
conviction or plea of guilty or nolo contendere to a felony (other than one
arising from the operation of a motor vehicle or resulting from actions
taken (or not taken) by Optionee in good faith in his capacity as an
employee or officer of the Corporation; or (vi) a breach or violation by
the Optionee of any material terms of this Agreement or any other agreement
to which Optionee and the Corporation are a party.
(b) "Disability" shall have the meaning assigned such term in any
employment agreement that exists between the Corporation and the Optionee
provided, however, if no definition exists, it shall mean as follows: (i)
the inability of Optionee to perform the duties of Optionee's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration, or (ii) Optionee
shall be entitled to (x) disability retirement benefits under the federal
Social Security Act or (y) recover benefits under any long-term disability
plan or policy maintained by the Corporation. In the event of a dispute,
the determination of Disability shall be made reasonably by the Board of
<PAGE>
Directors of the Corporation and shall be supported by advice of a
physician competent in the area to which such Disability relates.
(c) "Fair Market Value" shall mean the value of the share of Stock of
the Corporation determined as follows:
(i) If the Stock is, at the time of the determination of Fair Market Value,
listed or traded on any national securities exchange or quoted on a
national securities or central market system, the Fair Market Value of a
share of Stock shall be the average of the daily closing prices for the
thirty (30) consecutive trading days before such date of determination,
excluding any trades which are not bona fide arms-length transactions. The
closing price for each day shall be (A) if such securities are listed are
admitted for trading on any national securities exchange, the last sale
price for such security, regular way, or the mean of the closing bid and
asked prices therefor if no such sale occurred, in each case as officially
reported on the principal securities exchange on which such Stock is
listed; or (B) if quoted on a national securities exchange or market
system, the mean between the closing high bid and low asked quotations for
such Stock for each day during such thirty (30) day period.
(ii) If, at time of such determination, the Stock of the Corporation is not
listed or quoted on any national securities exchange or market system, the
Fair Market Value of a share of Stock shall be determined in good faith by
the Directors of the Corporation.
(d) "Termination of Employment" means the termination of the employee-
employer relationship between Optionee and the Corporation (and its Parents
and Subsidiaries), regardless of the fact that severance or similar
payments are made to Optionee, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Employment.
Other capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Plan.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
GORGES HOLDING CORPORATION
By: /s/ William A. Davies
-------------------------------
Name: William A. Davies
-----------------------------
Title: V-P Secretary
----------------------------
OPTIONEE: /s/ Stuart Alan Ensor (SEAL)
------------------------
Stuart Alan Ensor
<PAGE>
EXHIBIT A
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
------------------
Name
---------------------------------
Address
------------------------------
------------------------------
Date
---------------------------------
Gorges Holding Corporation
209 Range Road
Garland, TX 75041
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me to
purchase shares of $.01 par value Class A (voting) Stock (the "Stock")
--------
of Gorges Holding Corporation (the "Corporation") under Gorges Holding
Corporation Non-Qualified Stock Option Agreement dated (the
-----------
"Agreement"). The purchase shall take place as of (the "Exercise
-----------
Date").
On or before the Exercise Date, I will present you with a certified check
(or bank cashier's check) for $ for the full purchase price payable to
----------
the order of .
--------------------------
I hereby represent, warrant, covenant, and agree with the Corporation as
follows:
The shares of the Stock being acquired by me will be acquired for my
own account without the participation of any other person, with the intent
of holding the Stock for investment and without the intent of
participating, directly or indirectly, in a distribution of the Stock and
not with a view to, or for resale in connection with, any distribution of
the Stock, nor am I aware of the existence of any distribution of the
Stock;
I am not acquiring the Stock based upon any representation, oral or
written, by any person with respect to the future value of, or income from,
the Stock but rather upon an independent examination and judgment as to the
prospects of the Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
The Stock was not offered to me by means of publicly disseminated
advertisements or sales literature, nor am I aware of any offers made to
other persons by such means;
I am able to bear the economic risks of the investment in the Stock
including the risk of a complete loss of my investment therein;
I understand and agree that the Stock will be issued and sold to me
without registration under any state law relating to the registration of
securities for sale, and will be issued and sold in reliance on the
exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
The Stock cannot be offered for sale, sold or transferred by me other
than pursuant to: (A) an effective registration under the 1933 Act or in a
transaction, otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Corporation of compliance with the applicable
securities laws of other jurisdictions. The Corporation shall be entitled
to rely upon an opinion of counsel satisfactory to it with respect to
compliance with the above laws;
The Corporation will be under no obligation to register the Stock or
comply with any exemption available for sale of the Stock without
registration or filing, and the information or conditions necessary to
permit routine sale of securities of the Corporation under Rule 144 of the
1933 Act are not now available and no assurance has been given that it or
they will become available. The Corporation is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Stock;
I have and have had complete access to and the opportunity to review
and make copies of all material documents related to the business of the
Corporation, including, but not limited to, contracts, financial
statements, tax returns, leases, deeds and other books and records. I have
examined such of these documents as I wished and am familiar with the
business and affairs of the Corporation. I realize that purchase of the
Stock is a speculative investment and that any possible profit therefrom is
uncertain;
I have had the opportunity to ask questions of and receive answers
from the Corporation and any person acting on its behalf and to obtain all
material informal reasonably available with respect to the Corporation and
its affairs. I have received all information and data with respect to the
Corporation which I have requested and which I have deemed relevant in
connection with the evaluation of the merits and risks of investment in the
Corporation;
Exhibit A to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of the purchase of the
Stock hereunder and I am able to bear the economic risk of such purchase;
and
The agreements, representations, warranties, and covenants made by me
herein extend to and apply to all of the Stock of the Corporation issued to
me pursuant to this Option. Acceptance by me of the certificate
representing such Stock shall constitute a confirmation by me that all such
agreements, representations, warranties, and covenants made herein shall be
true and correct at that time.
I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
-----------------------------------
AGREED TO AND ACCEPTED:
GORGES HOLDING CORPORATION
By:
------------------------
Title:
---------------------
Number of Shares
Exercised:
-----------------
Number of Shares
Remaining: Date:
----------------- ---------------------------
Exhibit A to Non-Qualified Stock Option Agreement - Page 3
<PAGE>
EXHIBIT B
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Withholding Election
------------------------------
TO: GORGES HOLDING CORPORATION
FROM: Name
-------------------------
RE: Withholding Election
- --------------------------------------------------------------------------------
This election relates to the Option identified in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current address are
set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original recipient
of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated and was
issued in the name of for shares of Gorges
----------- -----------
Holding Corporation (the "Corporation") $.01 par value Class A
(voting) Stock (the "Stock"). This election relates to shares of the
-------------
Stock issuable upon whole or partial exercise(s) of the Option (the
"Option Shares").
(4) In connection with any exercise of the Option with respect to the
Option Shares, I hereby elect to have certain of the shares issuable
pursuant to the exercise withheld by the Corporation for the purpose of
having the value of the shares applied to pay federal, state, and
local, if any, taxes arising from exercise. The shares to be withheld
shall have, as of the date on which the amount of the tax required to
be withheld is determined, a fair market value equal to the minimum
Exhibit B to Non-Qualified Stock Option Agreement - Page 1
<PAGE>
statutory tax withholding requirement under federal, state, and local
law in connection with the exercise.
(5) I understand that this Withholding Election is subject to the
disapproval of the Board of Directors.
(6) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Corporation shall withhold
from the Option Shares a number of shares of the Stock having the
value specified in Paragraph 4 above.
Dated:
----------------------- -----------------------------------
Legal Signature
- ------------------------------ -----------------------------------
Social Security Number Name (Printed)
-----------------------------------
Street Address
-----------------------------------
City, State, Zip Code
Exhibit B to Non-Qualified Stock Option Agreement - Page 2
<PAGE>
SCHEDULE I
TO
GORGES HOLDING CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule
----------------
The Option Shares shall vest as follows:
Anniversary of % of Option
Grant Date Shares Vested
-------------- -------------
1 20%
2 40%
3 60%
4 80%
5 100%
Construction.
- -------------
Unless the vesting shall be accelerated, the right of Optionee to vest in
Option Shares shall cease upon the termination of Optionee's employment by the
Company, and thereafter, no further shares shall become Vested Shares.
<PAGE>
EXHIBIT 99.7
GORGES HOLDING CORPORATION
1996 STOCK INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1. GENERAL. The purpose of Gorges Holding Corporation 1996 Stock
-------
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
Gorges Holding Corporation (the "Corporation"), by linking the personal
interests of its employees and officers to those of Corporation stockholders and
by providing such persons with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Corporation in its
ability to motivate, attract, and retain the services of employees and officers
upon whose judgment, interest, and special effort the successful conduct of the
Corporation's operation is largely dependent. Accordingly, the Plan permits the
grant of incentive awards from time to time to selected employees and officers.
ARTICLE 2
EFFECTIVE DATE
2.1. EFFECTIVE DATE. The Plan shall be effective as of the date upon
--------------
which it shall be approved by the Board. However, the Plan shall be submitted
to the stockholders of the Corporation for approval within 12 months of the
Board's approval thereof. No Incentive Stock Options granted under the Plan may
be exercised prior to approval of the Plan by the stockholders and if the
stockholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
Unless the Committee specifies otherwise at the time of grant, no Awards granted
under the Plan shall be contingent upon the stockholders having approved the
Plan. In the discretion of the Committee, Awards may be made to Covered
Employees which are intended to satisfy the conditions for deductibility under
Code Section 162(m).
ARTICLE 3
DEFINITIONS
3.1. DEFINITIONS. When a word or phrase appears in this Plan with the
-----------
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award, or Other
Stock-Based Award, or any other right or interest relating to Stock or
cash, granted to a Participant under the Plan.
<PAGE>
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "CGW" means Cravey, Green & Wahlen, Inc.
(e) "CGW Affiliate" means any corporation, limited liability company,
partnership, joint venture or other entity in which CGW owns or controls,
directly or indirectly through one or more intermediaries, 20% or more of
the combined voting power of the outstanding voting securities of such
entity.
(f) "Cause" has the same meaning as provided in any employment
agreement between the Participant in question and the Corporation on the
date of the Participant's termination of employment, or if no such
definition or employment agreement exists, "Cause" means (i) conduct by the
Participant amounting to fraud or dishonesty against the Corporation, (ii)
the Participant's intentional misconduct, repeated refusal to follow the
reasonable directions of the Board, or knowing violation of law in the
course of performance his duties of employment with the Corporation, (iii)
the Participant's repeated absences from work without a reasonable excuse,
(iv) the Participant's repeated intoxication with alcohol or drugs while on
the Corporation's premises during regular business hours, (v) the
Participant's conviction or plea of guilty or nolo contendere to a felony
---- ----------
or a crime involving dishonesty, or (vi) a breach or violation by the
Participant of the terms of any employment or other agreement to which the
Participant and the Corporation are parties.
(g) "Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 25% or more of the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is
on the Effective Date the beneficial owner of 25% or more of the
Outstanding Company Voting Securities, (ii) any acquisition directly
from the Company, (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company, (v) any acquisition by CGW or any CGW Affiliate or (vi) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of this
definition; or
2
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(2) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(3) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the Company to any individual, entity or group other than CGW or a CGW
Affiliate (a "Business Combination"), in each case, unless, following
such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of
the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Voting
Securities, and (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 25%
or more of the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(i) "Committee" means the committee of the Board described in Article
4.
3
<PAGE>
(j) "Corporation" means Gorges Holding Corporation, a Delaware
corporation.
(k) "Covered Employees" is defined in Code Section 162(m).
(m) "Disability" has the same meaning as provided in any employment
agreement or shareholder agreement between the Participant in question and
the Corporation on the date the Participant ceases active work due to a
disability, or if no such definition or agreement exists, "Disability"
means (1) the inability of the Participant to perform the duties of his
employment due to physical or emotional incapacity or illness, where such
inability is expected to be of long-continued and indefinite duration, or
(2) the Participant shall be entitled to (i) disability retirement benefits
under the federal Special Security Act or (ii) recover benefits under any
long-term disability plan or policy maintained by the Corporation. In the
event of a dispute, the determination of Disability shall be made by the
Committee and shall be supported by advice of a physician competent in the
area to which such Disability relates.
(l) "Dividend Equivalent" means a right granted to a Participant under
Article 11.
(n) "Effective Date" has the meaning assigned such term in Section
2.1.
(o) "Fair Market Value" means with respect to Stock or any other
property, the fair market value of such Stock or other property determined
by such methods or procedures as may be established from time to time by
the Committee. Unless otherwise determined by the Committee, (i) if at any
time the Stock is traded on an over-the-counter market, Fair Market Value
of Stock as of any date shall mean the average bid and ask price of a share
of Stock on the over-the-counter market on such date, or, if no bid and ask
prices are available with respect to such day, on the next preceding day on
which such bid and ask prices were available, and (ii) if at any time the
Stock is listed on a securities exchange or is traded over the Nasdaq
National Market, Fair Market Value of Stock as of any date shall mean the
closing sales price on such exchange or over such system on such date or,
in the absence of reported sales on such date, the closing sales price on
the immediately preceding date on which sales were reported.
(p) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(q) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(r) "Option" means a right granted to a Participant under Article 7 of
the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Non-
Qualified Stock Option.
4
<PAGE>
(s) "Other Stock-Based Award" means a right, granted to a Participant
under Article 12, that relates to or is valued by reference to Stock or
other Awards relating to Stock.
(t) "Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(u) "Participant" means a person who, as an officer or employee of the
Corporation or any Parent or Subsidiary, has been granted an Award under
the Plan.
(v) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
(w) "Plan" means Gorges Holding Corporation 1996 Stock Incentive Plan,
as amended from time to time.
(x) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(y) "Stock" means the Class A (voting) Common Stock, $.01 par value,
of the Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(z) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of the SAR over the grant price of the SAR, all as determined
pursuant to Article 8.
(aa) "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation. For Incentive Stock Options, the term shall
have the meaning set forth in Code Section 424(f).
(bb) "1933 Act" means the Securities Act of 1933, as amended from time
to time.
(cc) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.
5
<PAGE>
ARTICLE 4
ADMINISTRATION
4.1. COMMITTEE. The Plan shall be administered by the Compensation
---------
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. From and after the time, if any, at which the Company shall have a
class of securities registered under Section 12 of the 1934 Act, the Committee
shall consist of at least two members of the Board who are "non-employee
directors" as such term is defined in Rule 16b-3 promulgated under Section 16 of
the 1934 Act or any successor provision. During any time that the Board is
acting as administrator of the Plan, it shall have all the powers of the
Committee hereunder, and any reference herein to the Committee (other than in
this Section 4.1) shall include the Board.
4.2. ACTION BY THE COMMITTEE. For purposes of administering the Plan, the
-----------------------
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3. AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
----------------------
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
6
<PAGE>
(e) Accelerate the vesting or lapse of restrictions of any outstanding
Award, based in each case on such considerations as the Committee in its
sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in,
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided in Article 15.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
-----------------
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1,
----------------
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be one hundred twelve thousand five hundred (112,500).
5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates,
-------------
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
-----------------
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
7
<PAGE>
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are employees
-------
or officers of the Corporation, Parent or a Subsidiary, as determined by the
Committee.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to Participants
-------
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
--------------
Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
-------------------------------
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised. The Committee may waive any exercise provisions at any time in
whole or in part based on factors as the Committeemay determine in its sole
discretion so that the Option becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which the
-------
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants. Without
limiting the power and discretion conferred on the Committee pursuant to
the preceding sentence, the Committee may, in the exercise of its
discretion, but need not, allow a Participant to pay the Option price by
directing the Corporation to withhold from the shares of Stock that would
otherwise be issued upon exercise of the Option that number of shares
having a Fair Market Value on the exercise date equal to the Option price,
all as determined pursuant to rules and procedures established by the
Committee.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
-----------------
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions as may be specified by the
Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
-----------------------
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
--------------
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date of
the grant.
8
<PAGE>
(b) EXERCISE. In no event may any Incentive Stock Option be
--------
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
---------------
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if the Option
is exercised after the dates specified in paragraphs (3) or (4) and (5)
above, it will automatically become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason other
than as provided in paragraph (4) or (5) below, the Incentive Stock
Option shall lapse, unless it is previously exercised, three months
after the Participant's termination of employment; provided, however,
that if the Participant's employment is terminated by the Company for
Cause or by the Participant without the consent of the Company, the
Incentive Stock Option shall (to the extent not previously exercised)
lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination of
employment.
(5) If the Participant dies while employed, or during the three-
month period described in paragraph (3) or during the one-year period
described in paragraph (4) and before the Option otherwise lapses, the
Option shall lapse one year after the Participant's death. Upon the
Participant's death, any exercisable Incentive Stock Options may be
exercised by the Participant's beneficiary.
Unless the exercisability of the Incentive Stock Option is accelerated
as provided in Article 13, if a Participant exercises an Option after
termination of employment, the Option may be exercised only with respect to
the shares that were otherwise vested on the Participant's termination of
employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
----------------------------
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
9
<PAGE>
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to
------------------
any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
the Corporation or any Subsidiary unless the exercise price per share of
such Option is at least 110% of the Fair Market Value per share of Stock at
the date of grant and the Option expires no later than five years after the
date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
-------------------------------------
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
-----------------
Stock Option may be exercised only by the Participant.
(h) DIRECTORS. The Committee may not grant an Incentive Stock Option
---------
to a non-employee director. The Committee may grant an Incentive Stock
Option to a director who is also an employee of the Corporation or a
Subsidiary but only in that individual's position as an employee and not as
a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
-------------
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
----------------
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as determined
by the Committee, which shall not be less than the Fair Market Value of
one share of Stock on the date of grant in the case of any SAR related
to an Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
-----------
evidenced by an Award Agreement. The terms, methods of exercise, methods
of settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
10
<PAGE>
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
---------------------------
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant
----------------
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Shares are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
-----------
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
-------------------------
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
-------------------------
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at the
----------
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
11
<PAGE>
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
---------------------------------
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Corporation shall retain physical possession of the certificate until such
time as all applicable restrictions lapse.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1. GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
-----------------------------
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Option Award or SAR
Award, as determined by the Committee. The Committee may provide that Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
---------------------------------
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
------------------------------------------
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
12
<PAGE>
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
-------------------
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
-------------
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
--------------------------
any applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
------------------
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Corporation or a Parent or Subsidiary, or shall be subject to any
lien, obligation, or liability of such Participant to any other party other than
the Corporation or a Parent or Subsidiary. No Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
domestic relations order as defined in Section 414(p)(1)(B) of the Code, if the
order satisfies Section 414(p)(1)(A) of the Code; provided however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any state or federal securities laws applicable
to transferable Award.
13.6. BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
-------------
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13
<PAGE>
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan
------------------
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock. The Committee may, as a condition precedent to the
issuance of any certificate evidencing Stock, require the Participant to execute
a shareholder voting, or similar agreement if all other shareholders of the
Corporation have at that time either executed or been asked to execute such an
agreement.
13.8. ACCELERATION UPON A CHANGE IN CONTROL. If a Change in Control
-------------------------------------
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards in
the nature of rights that may be exercised shall become fully exercisable and
all restrictions on outstanding Awards shall lapse; provided however, that such
acceleration will not occur if, in the opinion of the Company's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
-------------------------------------------------------------
CONTROL. In the event of the occurrence of any circumstance, transaction or
- -------
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case as of such date as the Committee may, in its
sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
---------------------------------
has occurred as described in Section 13.8 or 13.9 above, the Committee may in
its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.10.
14
<PAGE>
13.11. EFFECT OF ACCELERATION. If an Award is accelerated under Section
----------------------
13.8 or 13.9, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different Participants whether or not such Participants are similarly situated.
13.12. PERFORMANCE GOALS. The Committee may determine that any Award
-----------------
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Subsidiary of a specified target
return, or target growth in return, on equity or assets, (b) the Corporation's
or Subsidiary's stock price, (c) the achievement by a business unit of the
Corporation or a Subsidiary of a specified target, or target growth in, net
income or earnings per share, or (d) any combination of the goals set forth in
(a) through (c) above. Furthermore, the Committee reserves the right for any
reason to reduce (but not increase) any Award, notwithstanding the achievement
of a specified goal. If an Award is made on such basis, the Committee shall
establish goals prior to the beginning of the period for which such performance
goal relates (or such later date as may be permitted under Code Section 162(m)).
Any payment of an Award granted with performance goals shall be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied.
13.13. TERMINATION OF EMPLOYMENT. Whether military, government or other
-------------------------
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Corporation to one of its Subsidiaries, transfers from a Subsidiary to
the Corporation, or transfers from one Subsidiary to another Subsidiary.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a stock dividend is declared upon the Stock,
-------
the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of stock or securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such share of Stock then subject to each Award the number and class of
shares into which each outstanding share of Stock shall be so exchanged, all
without any change in the aggregate purchase price for the shares then subject
to each Award.
15
<PAGE>
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. Either the
---------------------------------------------------
Board or the Committee may at any time and from time to time amend, modify or
terminate the Plan without stockholder approval; provided, however, that the
Board or Committee may condition any amendment or modification on the approval
of stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
15.2. AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
-------------------------
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that such amendment, modification or
termination shall not, without the Participant's consent, reduce or diminish the
value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination.
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or any employee or officer
-------------------
shall have any claim to be granted any Award under the Plan, and neither the
Corporation nor the Committee is obligated to treat Participants or employees
and officers uniformly.
16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
---------------------
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have
-----------
the authority and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan.
With respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
16.4. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award Agreement
----------------------
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate any Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the
Corporation or any Parent or Subsidiary.
16
<PAGE>
16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
-------------------------
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation or any Parent or Subsidiary.
16.6. INDEMNIFICATION. To the extent allowable under applicable law, each
---------------
member of the Committee shall be indemnified and held harmless by the
Corporation from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Corporation an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Corporation's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify them or hold
them harmless.
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
------------------------------
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.8. EXPENSES. The expenses of administering the Plan shall be borne by
--------
the Corporation and its Parents or Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the Sections in the
-------------------
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.10. GENDER AND NUMBER. Except where otherwise indicated by the
-----------------
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
16.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
-----------------
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
--------------------------------
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, any of the shares of Stock paid under the Plan. If
the shares paid under the Plan may in certain circumstances be exempt from
17
<PAGE>
registration under the 1933 Act, the Corporation may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
16.13. GOVERNING LAW. To the extent not governed by federal law, the Plan
--------------
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Delaware.
16.14. ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
---------------------
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
GORGES HOLDING CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
18
<PAGE>
EXHIBIT 99.8
FORM OF LETTER OF TRANSMITTAL
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON ,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
GORGES/QUIK-TO-FIX FOODS, INC.
9441 LBJ FREEWAY
SUITE 214
DALLAS, TEXAS 75243
LETTER OF TRANSMITTAL
FOR 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
EXCHANGE AGENT:
IBJ SCHRODER BANK & TRUST COMPANY
By Facsimile:
(212) 858-2611
Attention: Reorganization Operations Department
Confirm by telephone to:
(212) 858-2103
Attention: Reorganization Operations Department
By Hand/Overnight Courier Service:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window
Subcellar One, (SC-1)
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Department
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention: Reorganization Operations Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1997 (the
"Prospectus") of Gorges/Quik-to-Fix Foods, Inc., a Delaware corporation (the
"Issuer"), and this Letter of Transmittal for 11 1/2% Senior Subordinated
Notes due 2006 which may be amended from time to time (this "Letter"), which
together constitute the Issuer's offer (the "Exchange Offer") to exchange for
each $1,000 principal amount of its outstanding 11 1/2% Senior Subordinated
Notes due 2006 (the "Initial Notes") $1,000 in principal amount of 11 1/2%
Senior Subordinated Notes due 2006, Series B (the "Exchange Notes"). The terms
of the Exchange Notes are the same in all respects (including principal
amount, interest rate, maturity and ranking) to the terms of the Initial Notes
for which they may be exchanged pursuant to the Exchange Offer, except that
the Exchange Notes have been registered under the Securities Act and
1
<PAGE>
therefore will not be subject to certain restrictions of transfer applicable
to the Initial Notes and will not be entitled to registration rights.
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Initial Notes who wish to tender their Initial Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Initial Notes or, if a tender of
Initial Notes is to be made by book-entry transfer to the account maintained
by the Exchange Agent at The Depository Trust Company (the "Book-Entry
Transfer Facility"), confirm such book-entry transfer (a "Book-Entry
Confirmation"), in each case in accordance with the procedures for tendering
described in the Instructions to this Letter. All tenders must be received on
or prior to the Expiration Date.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of
the Prospectus or this Letter may be directed to the Exchange Agent, at the
address listed above, or A. Scott Letier, Vice President and Chief Financial
Officer of the Company at (972) 690-7675, 9441 LBJ Freeway, Suite 214, Dallas,
Texas 75243.
PLEASE READ CAREFULLY THE ENTIRE LETTER OF TRANSMITTAL,
INCLUDING THE INSTRUCTIONS TO THIS LETTER,
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Initial Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Initial Notes on a separate SIGNED SCHEDULE AND AFFIX THAT
SCHEDULE TO THIS LETTER.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES)
OF
REGISTERED
HOLDER(S) PRINCIPAL AMOUNT PRINCIPAL
(PLEASE OF INITIAL NOTES AMOUNT OF
FILL IN IF CERTIFICATE REPRESENTED INITIAL NOTES
BLANK) NUMBER(S)(1) BY CERTIFICATE(S) TENDERED(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
TOTALS:
</TABLE>
- -------------------------------------------------------------------------------
(1) Need not be completed if Initial Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Initial Notes
represented by a certificate delivered to the Exchange Agent will be
deemed to have been tendered.
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Initial Notes
indicated above. Subject to, and effective upon, the acceptance for exchange
of the Initial Notes tendered with this Letter, the undersigned exchanges,
assigns and transfers to, or upon the order of, the Issuer all right, title
and interest in and to the Initial Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Initial Notes,
with full power of substitution, to: (a) deliver certificates for such Initial
Notes; (b) deliver Initial Notes and all
2
<PAGE>
accompanying evidence of transfer and authenticity to or upon the order of the
Issuer upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon the acceptance by the
Issuer of the Initial Notes tendered under the Exchange Offer; and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Initial Notes, all in accordance with the terms of the Exchange Offer. The
power of attorney granted in this paragraph shall be deemed irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Initial Notes
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Issuer to be
necessary or desirable to complete the assignment and transfer of the Initial
Notes tendered.
The undersigned agrees that acceptance of any tendered Initial Notes by the
Issuer and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Issuer of its obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon
the issuance of the Exchange Notes, the Issuer will have no further
obligations or liabilities thereunder except in certain limited
circumstances). By tendering Initial Notes, the undersigned certifies that (a)
it is not an "affiliate" of the Issuer within the meaning of Rule 405 under
the Securities Act, that it is not a broker-dealer that owns Initial Notes
acquired directly from the Issuer or an affiliate of the Issuer, that it is
acquiring the Exchange Notes in the ordinary course of the undersigned's
business and that the undersigned has no arrangement with any person to
participate in the distribution of the Exchange Notes or (b) that is an
"affiliate" (as so defined) of the Issuer or of the initial purchaser in the
original offering of the Initial Notes, and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering oral or written notice of acceptance to the Exchange
Agent, at which time the undersigned's right to withdraw such tender will
terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of
the undersigned under this Letter shall be binding upon the undersigned's
heirs, personal representatives, successors and assigns. Tenders may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Initial Notes not tendered but represented by a certificate also
encompassing Initial Notes which are tendered) to the undersigned at the
address set forth in Box 1.
This Letter is to be completed by holders if certificates are to be
forwarded herewith pursuant to the procedures set forth in the Prospectus.
Holders whose certificates are not immediately available or who cannot deliver
their certificates and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their Initial Notes
according to the guaranteed delivery procedure set forth under the caption
"The Exchange Offer--How to Tender" in the Prospectus. (See Instruction 1.)
The undersigned understands that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
3
<PAGE>
[_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(WHETHER OR NOT INITIAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY)
x _____________________________ _______
x _____________________________ _______
(SIGNATURE(S) OF OWNER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number: ___________________________
This box must be signed by registered holder(s) of Initial Notes as their
name(s) appear(s) on certificate(s) for Initial Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
Name(s)____________________________________________________________________
___________________________________________________________________________
(PLEASE PRINT)
Capacity___________________________________________________________________
Address____________________________________________________________________
___________________________________________________________________________
(INCLUDE ZIP CODE)
SIGNATURE GUARANTEE
Signaure(s) _____________________________________________________
Guaranteed by an (AUTHORIZED SIGNATURE)
Eligible _____________________________________________________
Institution: (TITLE)
(If required _____________________________________________________
byInstruction 3) (NAME OF FIRM)
- --------------------------------------------------------------------------------
4
<PAGE>
BOX 3
- --------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
- --------------------------------------------------------------------------------
PAYOR'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR
TAXPAYER IDENTIFICATION
NUMBER (TIN) IN THE BOX AT ----------------------------
RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER OR
SIGNING AND DATING BELOW. EMPLOYER IDENTIFICATION
NUMBER
- --------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE PART 2--CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACK-UP
TREASURY INTERNAL WITHHOLDING UNDER THE PROVISIONS OF SECTION
REVENUE SERVICE 2406(A)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE (1)
YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO
BACK-UP WITHHOLDING AS A RESULT OF FAILURE TO REPORT
ALL INTEREST OR DIVIDENDS OR (2) THE INTERNAL REVENUE
SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT
TO BACK-UP WITHHOLDING. [_]
PAYER'S REQUEST
FOR TAXPAYER
IDENTIFICATION
NUMBER (TIN)
------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION PART 3
PROVIDED ON THIS FORM IS TRUE, CORRECT, AND CHECK IF
COMPLETE. AWAITING
TIN [_]
SIGNATURE = ______________ DATE = _________
5
<PAGE>
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS (SEE
INSTRUCTIONS 3 AND 4) INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Initial Notes in a certificates for Initial Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes, are to be issued in Exchange Notes, are to be sent to
the name of someone other than the someone other than the person whose
person whose signature appears in signature appears in Box 2 or to an
Box 2. address other than that shown in
Box 1.
Issue and deliver:
Deliver:
(check appropriate boxes)
(check appropriate boxes)
[_] Initial Notes not tendered
[_] Initial Notes not tendered
[_] Exchange Notes, to:
[_] Exchange Notes, to:
Name _______________________________
(Please Print) Name _______________________________
Address ____________________________ (Please Print)
____________________________________ Address ____________________________
____________________________________
Please complete the Substitute Form
W-9 at Box 3
Tax I.D. or Social Security Num-
ber: _______________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Initial Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Initial Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the Exchange
Agent. If delivery is by mail, the use of registered mail with return receipt
requested, properly insured, is suggested.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes or a Book-Entry confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Initial Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure:
(i) tender must be made by or through an Eligible Institution (as defined in
the Prospectus under the caption "The Exchange Offer"); (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
(x) setting forth the name and address of the holder, the description of the
Initial Notes and the principal amount of Initial Notes tendered, (y) stating
that the tender is being made thereby and (z) guaranteeing that, within three
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery, this Letter together with the certificates
representing the Initial Notes or a Book-Entry Confirmation, as the case may
be, and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) the certificates for
all tendered Initial Notes, as well as all other documents required by this
Letter, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The Exchange
Offer--How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Initial Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders that are not
in proper form or the acceptance of which, in the opinion of the Issuer's
counsel, would be unlawful. The Issuer also reserves the right to waive any
irregularities or conditions of tender as to particular Initial Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Initial Notes.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Initial Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Initial Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated. A certificate for Initial Notes not tendered will be sent to the
holder, unless otherwise provided in Box 5, as soon as practicable after the
Expiration Date, in the event that less than the entire principal amount of
Initial Notes represented by a submitted certificate is tendered (or, in the
case of Initial Notes tendered by book-entry transfer, such non-exchanged
Senior Notes will be credited to an account maintained by the holder with the
Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Initial Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Company notifies the Exchange Agent that it has
accepted the tender of Initial Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Initial Notes; (iii) contain a
description of the Initial Notes to be withdrawn, the certificate numbers
shown on the particular certificates evidencing such Initial Notes and the
principal amount of Initial Notes represented by such certificates; and (iv)
be signed by the holder in the same manner as the original signature on this
Letter (including any required signature guarantee).
7
<PAGE>
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Initial Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Initial Notes, without alteration, enlargement or any
change whatsoever.
If any of the Initial Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Initial Notes are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of Initial Notes represented by submitted certificates are
tendered; and/or (ii) the certificates for any untendered Initial Notes, if
any, are to be issued to the holder of record, then the holder of record need
not endorse any certificates for tendered Initial Notes, nor provide a
separate bond power. In any other case, the holder of record must transmit a
separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
the Issuer of its authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Initial Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter; or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The
Securities Transfer Agents Medallion Program (STAMP), The New York Stock
Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion
Program (SEMP) (collectively, "Eligible Institutions"). If Initial Notes are
registered in the name of a person other than the signer of this Letter, the
Initial Notes surrendered for exchange must be endorsed by, or be accompanied
by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Issuer in its sole discretion, duly
executed by the registered holder with the signature thereon guaranteed by an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Initial Notes not tendered are to be sent
or issued, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Initial
Notes by book-entry transfer may request that Initial Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as
such holder may designate.
5. RETURN OF NOTES. If any tendered Initial Notes are not exchanges pursuant
to the Exchange Offer for any reason, such unexchanged Initial Notes shall be
returned, without expense, to the undersigned at the address shown in Box 1 or
at a different address as may be indicated herein under "Special Delivery
Instructions" (box 5).
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Initial Notes are accepted for exchange must provide the
exchange agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to the holder of the Exchange
Notes pursuant to the Exchange Offer may be subject to back-up withholding.
(If withholding results in overpayment of taxes, a refund may be obtained.)
Exempt holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the
TIN provided is correct (or that the holder is awaiting a TIN) and that: (i)
the holder has not been notified by the Internal Revenue Service that he or
she is subject to back-up withholding as a
8
<PAGE>
result of failure to report all interest or dividends; or (ii) the Internal
Revenue Service has notified the holder that he or she is no longer subject to
back-up withholding; or (iii) certify in accordance with the Guidelines that
such holder is exempt from back-up withholding. If the Initial Notes are in
more than one name or are not in the name of the actual owner, consult the
enclosed Guidelines for information on which TIN to report.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Initial Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Initial
Notes not tendered are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed by any reason other than the transfer of
Initial Notes to the Company or its order pursuant to the Exchange Offer, then
the amount of such transfer taxes (whether imposed on the record holder or any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of taxes or exemption from taxes is not submitted with
this letter, the amount of transfer taxes will be billed directly to the
tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
8. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
Initial Notes tendered.
9. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of initial notes or transmittal of this letter will be
accepted.
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Initial Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Initial Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
9
<PAGE>
IMPORTANT TAX INFORMATION
Under Federal income tax law, a holder of Initial Notes (a "Noteholder")
whose Initial Notes are surrendered for exchange is required to provide the
Exchange Agent with such Noteholder's correct TIN on Substitute Form W-9
below. If such Noteholder is an individual, the TIN is his social security
number. If the Exchange Agent is not provided with the correct TIN, the
Noteholder may be subject to a $50 penalty imposed by the Internal Revenue
Service.
Certain Noteholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Noteholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Exchange Agent.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a Noteholder with
respect to any Initial Notes, the Noteholder is required to notify the
Exchange Agent of his correct TIN by completing the form below certifying that
the TIN provided on the Substitute Form W-9 is correct (or that such
Noteholder is awaiting a TIN).
What Number to Give the Exchange Agent
The Noteholder is required to give the Exchange Agent the social security
number or employer identification number of the record owner of the Initial
Notes. If the Initial Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report.
PURPOSE OF FORM W-9--A person who is required to file an information return
with the IRS must obtain your correct TIN to report income paid to you, real
estate transactions, mortgage interest you paid, the acquisition or
abandonment of secured property, or contributions you made to an IRA. Use Form
W-9 to furnish your correct TIN to the requester (the person asking you to
furnish your TIN) and, when applicable, (1) to certify that the TIN you are
furnishing is correct (or that you are waiting for a number to be issued), (2)
to certify that you are not subject to backup withholding, and (3) to claim
exemption from backup withholding if you are an exempt payee. Furnishing your
correct TIN and making the appropriate certifications will prevent certain
payments from being subject to backup withholding.
NOTE: If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form.
HOW TO OBTAIN A TIN--If you do not have a TIN, apply for one immediately. To
apply, get FORM SS--5, application for a Social Security Number Card (for
individuals) from your local office of the Social Security Administration, or
FORM SS--4, Application for Employer Identification Number (for business and
all other entities) from your IRS office.
To complete Form W-9 if you do not have a TIN, check the space for "Awaiting
TIN" on Part 3, sign and date the form, and give it to the requester.
Generally, you will then have 60 days to obtain a TIN and furnish it to the
requester. If the requester does not receive your TIN within 60 days, backup
withholding, if applicable, will begin and continue until you furnish your TIN
to the requester. For reportable interest or dividend payments, the payer must
exercise one of the following options concerning backup withholding during
this 60-day period. Under option (1), a payer must backup withhold on any
reportable interest or dividend payments made to your account, regardless of
whether you make any withdrawals. The backup withholding under option (2) must
begin no later than seven business days after the requester receives this form
back. Under option (2), the payer is required to refund the amounts withheld
if your certified TIN is received within the 60-day period and you were not
subject to backup withholding during that period.
NOTE: Checking "Awaiting TIN" on the form means that you have already
applied for a TIN, OR that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
10
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer--Social Security Numbers have nine digits separated by two hyphens:
I.E., 000-00-0000. Employer Identification Numbers have nine digits separated
by only one hyphen: i.e., 000-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under State
law
8. Sole proprietorship The Owner(4)
account
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ------------------------------------------------------
<S> <C>
9. A valid trust estate, Legal entity (Do
or pension fund not furnish the
identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or
prison) that receives
agricultural
program payments
- ------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
11
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification or you don't know your number,
obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. (Section references are to the Internal Revenue Code)
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, political subdivision of a foreign government, or
agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A (a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a TIN to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable causes and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION WITH RESPECT TO WITHHOLDING --
Willfully falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
12
<PAGE>
EXHIBIT 99.9
GORGES/QUIK-TO-FIX FOODS, INC.
EXCHANGE OFFER
TO HOLDERS OF ITS
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated , 1997 (the "Prospectus") of
Gorges/Quik-to-Fix Foods, Inc. (the "Issuer") under "The Exchange Offer--How
to Tender" and in the Letter of Transmittal for the 11 1/2% Senior
Subordinated Notes due 2006 issued pursuant to an Offering Memorandum dated
, 1996 (the "Letter of Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (as defined below)
of the Issuer if: (i) certificates for the above-referenced Notes (the
"Initial Notes") are not immediately available; or (ii) time will not permit
all required documents to reach the Exchange Agent (as defined below) on or
prior to the Expiration Date (as defined in the Prospectus) of the Exchange
Offer. Such form may be delivered by hand or transmitted by telegram, telex,
facsimile transmission or letter to the Exchange Agent.
TO: IBJ SCHRODER BANK & TRUST COMPANY (THE "EXCHANGE AGENT")
By Facsimile:
(212) 858-2611
Attention: Reorganization Operations Department
Confirm by telephone to:
(212) 858-2103
Attention: Reorganization Operations Department
By Hand/Overnight Courier Service:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window,
Subcellar One, (SC-1)
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention: Reorganization Operations Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO
A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged,
the principal amount of Initial Notes set forth below pursuant to the
guaranteed delivery procedure described in the Prospectus and the Letter of
Transmittal.
Sign Here
Principal Amount of Initial Notes
Tendered ________________________ Signature(s) ________________________
_____________________________________
Certificate Nos. Please Print the Following
Information
(if available) __________________ Name(s) _____________________________
_____________________________________
Total Principal Amount Address _____________________________
Represented by Initial Note
Certificate(s) _________________
_____________________________________
Area Code and Tel. No(s). ___________
_____________________________________
Account Number __________________
Dated: ____________________, 199
<PAGE>
GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion
program or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17A(d)-15 under the Securities Exchange Act of 1934, as amended,
hereby guarantees that delivery to the Exchange Agent of certificates tendered
hereby, in proper form for transfer, or delivery of such certificates pursuant
to the procedure for book-entry transfer, in either case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, will be made within three trading
days after the date of execution of a Notice of Guaranteed Delivery of the
above-named person.
_____________________________________
Name of Firm
_____________________________________
Authorized Signature
_____________________________________
Number and Street or P.O. Box
_____________________________________
City State Zip Code
_____________________________________
Area Code and Tel. No.
Dated: ____________________, 199
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.10
GORGES/QUIK-TO-FIX FOODS, INC.
OFFER TO EXCHANGE
$100,000,000 IN PRINCIPAL AMOUNT OF
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
FOR
$100,000,000 IN PRINCIPAL AMOUNT OF
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1997 (as the
same may be amended or supplemented from time to time, the "Prospectus") and a
form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Gorges/Quik-to-Fix Foods, Inc. (the "Issuer")
to exchange up to $100,000,000 in principal amount of its 11 1/2% Senior
Subordinated Notes due 2006 (the "Initial Notes") for $100,000,000 in
principal amount of its 11 1/2% Senior Subordinated Notes due 2006 (the
"Exchange Notes").
The material is being forwarded to you as the beneficial owner of Initial
Notes carried by us for your account or benefit but not registered in your
name. A tender of any Initial Notes may be made only by us as the registered
holder and pursuant to your instructions. Therefore, the Issuer urges
beneficial owners of Initial Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such registered
holder promptly if they wish to tender Initial Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Initial Notes, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Initial Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER
TO PERMIT US TO TENDER INITIAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH THE
PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00 p.m.,
Eastern Standard Time, on , , 1997, unless extended (the "Expiration
Date"). Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the prospectus, at any time
prior to the Expiration Date.
If you wish to have us tender any or all of your Initial Notes held by us
for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Initial Notes held by us and registered in
our name for your account or benefit.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Gorges/Quik-to-
Fix Foods, Inc.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF NOTES INDICATED
BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED AND TO DELIVER
THE UNDERSIGNED'S CONSENT WITH RESPECT TO SUCH NOTES, PURSUANT TO THE TERMS OF
AND CONDITIONS SET FORTH IN THE STATEMENT AND THE LETTER OF TRANSMITTAL.
Box 1 [_] Please tender my Notes held by you for my account or benefit and
deliver my Consent with respect to such Notes. I have identified
on a signed schedule attached hereto the principal amount of
Notes to be tendered, in integral multiples of $1,000, if I wish
to tender less than all of my Notes.
Box 2 [_] Please do not tender any Notes held by you for my account or
benefit and do not deliver my Consent.
Date: , 1997
_____________________________________
_____________________________________
Signature(s)
_____________________________________
_____________________________________
Please print name(s) here
- --------
Unless a specific contrary instruction is given in a signed Schedule attached
hereto, your signature(s) hereon shall constitute an instruction to us to
tender all your Notes and to deliver your Consent with respect thereto.
<PAGE>
EXHIBIT 99.11
GORGES/QUIK-TO-FIX FOODS, INC.
OFFER TO EXCHANGE
$100,000,000 IN PRINCIPAL AMOUNT OF
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
FOR
$100,000,000 IN PRINCIPAL AMOUNT OF
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1997 (as the same
may be amended or supplemented from time to time, the "Prospectus") and a form
of Letter of Transmittal (the "Letter of Transmittal") relating to the offer
(the "Exchange Offer") by Gorges/Quik-to-Fix Foods, Inc. (the "Issuer") to
exchange up to $100,000,000 in principal amount of its 11 1/2% Senior
Subordinated Notes due 2006 (the "Exchange Notes") for $100,000,000 in
principal amount of its 11 1/2% Senior Subordinated Notes due 2006 (the
"Initial Notes").
We are asking you to contact your clients for whom you hold Initial Notes
registered in your name or in the name of your nominee. In addition, we ask
you to contact your clients who, to your knowledge, hold Initial Notes
registered in their own name. The Issuer will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by
the Issuer for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Issuer will pay
all transfer taxes, if any, applicable to the tender of Initial Notes to it or
its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1.The Prospectus;
2.A Letter of Transmittal for your use in connection with the tender of
Initial Notes and for the information of your clients;
3.A form of letter that may be sent to your clients for whose accounts you
hold Initial Notes registered in your name or the name of your nominee, with
space provided for obtaining the clients' instructions with regard to the
Exchange Offer;
4.A form of Notice of Guaranteed Delivery; and
5.Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on , , 1997 unless extended (the "Expiration
Date"). Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
<PAGE>
To tender Initial Notes, certificates for Initial Notes, a duly executed and
properly completed Letter of Transmittal or a facsimile thereof, together with
any other required documents, must be received by the Exchange Agent as
provided in the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the Exchange
Agent, IBJ Schroder Bank & Trust Company, by calling (212) 858-2000.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH
RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
