GORGES QUIK TO FIX FOODS INC, 10-K405, 2000-01-18

GORGES QUIK TO FIX FOODS INC
10-K405, 2000-01-18
SAUSAGES & OTHER PREPARED MEAT PRODUCTS

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MASTER
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_______________________

FORM 10-K

_______________________

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 1999

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____

Commission file number 333-20155

Gorges/Quik-to-Fix Foods, Inc.
(Exact name of registrant as specified in its charter)

Delaware 58-2263508
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)

9441 LBJ Freeway
Suite 214
Dallas, Texas 75243
(Address of principal executive offices)

(972) 690-7675
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The number of shares of the registrant's Common Stock outstanding at
January 14, 1999, were 1,000. There is no public trading market for shares of
the registrant's Common Stock.

Documents Incorporated by Reference

Certain exhibits to this Form 10-K are incorporated by reference in Part IV.

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GORGES/QUIK-TO-FIX-FOODS, INC.

1999 ANNUAL REPORT ON FORM 10-K

PART I

Item 1. Business

General

Gorges/Quik-to-Fix Foods, Inc., (the "Company"), or its representatives,
may make forward looking statements, oral or written, including statements in
this report's Management's Discussion and Analysis of Financial Condition and
Results of Operations, press releases and filings with the Securities and
Exchange Commission (the "Commission"), regarding estimated future operating
results, planned capital expenditures (including the amount and nature thereof)
and the Company's financing plans, if any, related thereto, changes in the
Company's financial position and other plans and objectives for future
operations. Certain of the matters discussed 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 set forth among the factors set forth in the
"Factors Affecting Future Performance" section in Item 7 of this report or in
the description of the Company's business in Item 1 of this report, as well as
factors contained in the Company's other filings with the Commission.

All subsequent oral and written forward looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by these factors. The Company assumes no obligation to update any of
these statements. The Company's fiscal year ends on the Saturday closest to
September 30. References in this report to, "fiscal 2000," "fiscal 1999,"
"fiscal 1998," and "fiscal 1997," refer to the twelve month periods ended
September 30, 2000, October 2, 1999 and October 3, 1998 and the three hundred
six days ended September 27, 1997, respectively.

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 toward 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.

The Company purchases fresh and frozen beef and, to a lesser extent, pork
and poultry, which it processes into a broad range of value added products. The
Company produces value added products which 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.
Prior to February 1, 1999, the Company produced ground beef products. Ground
beef product offerings consisted primarily of ready to cook individually quick
frozen ("IQF") hamburger patties. The Company operates three manufacturing
facilities, which are dedicated to value added 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.

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The Company was formed in 1996 in connection with the acquisition of the
processed beef operations (the "Business") of Tyson Foods, Inc. ("Tyson" and the
"Acquisition," respectively). 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, Inc. ("Harker's") and Quik-to-Fix Foods, Inc. ("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 processing operations further by acquiring Gorges Foodservice,
Inc., ("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.

The Company is incorporated under the laws of the state of Delaware. The
Company's principal executive offices are located at 9441 LBJ Freeway, Suite
214, Dallas, Texas, 75243, and its telephone number is 972/690-7675. The
Company is a wholly owned subsidiary of Gorges Holding Corporation ("GHC"),
which, in turn, is substantially owned by CGW Southeast Partners III, L.P.
("CGW"). 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,
which beneficially owns shares representing 73.9% of the voting interest in GHC,
(73.1% on a fully diluted basis) and 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.

Recent Developments

. Focus on Retail and Industrial business. The Company intends to focus more
attention on the retail and industrial customer. The Company also has identified
various other areas in which it believes it can reduce its overhead expenses.

. Strengthening of Management Team. The Company has strengthened its
management team by hiring a new Chief Executive Officer, new Vice President of
Operations, a new Vice President of Human Resources and a new Chief Financial
Officer. The Company believes this will greatly improve its business management.
See "Directors and Executive Officers of the Registrant."

. Credit Facility Amendment. Effective December 30, 1999 the Company and The
CIT Group/Business Credit, Inc. amended the current credit facility by replacing
existing covenants with a new set of covenants that are more appropriate for the
financial structure of the Company. The document also waived the Company's non-
compliance with the covenants that existed as of October 2, 1999.

. Bridge Loan. On December 21, 1998 the Company, through GHC, obtained from
certain shareholders a $4.0 million subordinated bridge loan (the "Bridge
Loan"). The terms of the Bridge Loan provide for a one year loan to the Company
at an interest rate of 9%. Under the terms of the Loan, on December 15, 1999,
the remaining principal balance of $3,000,000 and accrued interest outstanding
under the Bridge Loan converted to equity in GHC.

Industry Overview

The Foodservice Industry. Purchases of food prepared away from home have
grown consistently for over forty years and currently represent approximately
50% 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 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

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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 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 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.

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.

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.

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, Golden Corral, Ryan's,
Steak and Ale and Sodexho 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 Ryan's, Golden Corral and Sodexho,
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

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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 charbroiled beef strips, 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 Tyson, Stouffer's, Steak and Ale,
and Subway.

Value added products accounted for $137.0 million (90.8%), $149.0 million
(73.9%), and $124.2 million (71.9%) of sales in fiscal 1999, fiscal 1998, and
fiscal 1997, respectively.

Ground Beef. The Company served 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. Ground beef
customers included Sonic, Harker's, and Sysco. During 1999 the Company exited
the ground beef market.

Ground beef accounted for $13.9 million (9.2%), $52.6 million (26.1%), and
$48.5 million (28.1%) of sales in fiscal 1999, fiscal 1998, and fiscal 1997
respectively. The Company exited the ground beef business due to low margin
profitability and increasing industry food safety regulatory concerns. The
Company expects that sales of ground beef products will be insignificant in
fiscal 2000 and in the future.

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 ready to cook and fully cooked business. Value added products
address many of the concerns within the foodservice industry, including cost
reduction, food safety and product quality and consistency. Management believes
that by focusing on its core value added product offerings, 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 50% 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
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.

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. Focused Sales and Marketing Team. The Company's sales and marketing
team consists of 17 experienced professionals. The Company's sales force is
compensated based on sales volume, margins, expense control and growth-
based incentive programs, all of which are tied to sales of the Company's
predominantly beef based product lines.

. Extensive Foodservice Broker Network. Management believes that the
Company's extensive independent foodservice broker network, consisting of
53 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.

. 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 several of the 50
largest multi-unit restaurant chains in the United States, including
Shoney's, Metromedia (Steak and Ale, Bennigan's and Ponderosa) and
Advantica (Denny's, Coco's and Carrow's) as well as by institutional
customers such as Sodexho and Aramark. The Company also services school
districts through the USDA Commodity Reprocessing Program.

. Modern Facilities with Excess Capacity. The Company's three remaining
modern facilities use state-of-the-art equipment with capacity that will
allow significant volume increases without major additional capital
expenditures.

. Experienced and Focused Management Team. The Company's three plants
operate primarily as an integrated unit. The Company has strengthened its
management team by hiring a new Chief Executive Officer, a new Vice
President of Operations, a new Vice President of Human Resources and a new
Chief Financial Officer. The Company believes this will allow it to more
efficiently operate its business.

Sales and Marketing

Foodservice Broker Network

Management believes that the Company's extensive independent foodservice
broker network consisting of 53 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. Most brokers sell a wide variety of products produced by other
manufacturers. However, the brokers generally do not carry products that compete
directly with those produced by the Company. The brokers are compensated on a
commission basis and do not take title to the Company's 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,

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multi-unit national chain accounts and regional chain accounts. 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 and multi-unit
chains. 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 1999, Sysco and Harker's accounted for 17.2% and 7.4% of
gross sales, respectively. See Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Factors Affecting Future
Performance."

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,
US Food Service, 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) retail grocery chains;
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 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 a product 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. Despite this segment's continued growth
as a percent of the Company's sales, the Company has historically derived less
than 10% of its revenues from the USDA Commodity Reprocessing Program.

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
consummation of the Acquisition, Tyson required the Business to stock inventory
at four separate warehouses to accommodate Tyson's poultry shipping needs,
thereby resulting in higher inventory levels. Beginning June 1, 1997, the
Company established a distribution network using its own warehouses and two
primary public warehouses. Substantially all of the Company's products are
shipped by common and contract carriers. Management believes that this network
will allow the Company to maintain its national distribution capability.

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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 that is responsible for
sourcing beef for all of its facilities. The Company's beef needs are obtained
from a variety of suppliers. The Company's pork and poultry needs also are
sourced from various 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 typically purchases raw
materials from its suppliers using short-term purchase orders. The Company does
not speculate in the markets for its raw materials and generally does not enter
into long-term contractual arrangements with its suppliers. As a matter of
policy, the Company performs its own quality assurance testing of its raw
materials; however, the Company does require pre-testing by its suppliers of raw
materials to be used in its IQF raw ground beef products.

Batters, breading, spices and other ingredients, once specified, are
currently 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 acquired on a local
basis for each of the plants. The Company intends to centralize purchasing for
substantially all of these items during the fiscal year 2000.

Research and Development

Over the past three years, the Company has introduced a variety of new
products or product extensions, including the Super and Ultra Crispy Country
Fried Steaks, Pub Burger, Beef TastyRib, charbroiled meatballs, cooked taco
meat, philly beef steak slices, breaded turkey and flame broiled chicken
breasts. The Company currently employs nine research and development
professionals dedicated to product development, headed by a team leader with a
BS in Biochemistry and Food Science and Masters degrees in Biochemistry and
Business Administration. The Company's research and development team works
closely with the sales force to respond to changing customer needs.

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 2000. However, 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 and not modify the facility to allow for reduction or
elimination of the surcharges. Since the Acquisition, the Company has continued
to incur the monthly surcharges, although slightly reduced in amount due to
certain modifications of the facility. The Company currently does not intend to
further modify the facility to allow its operation without incurring any
surcharge due to the prohibitive nature of the amount of needed investment;
however, this will not preclude other minor modifications as needed or deemed
necessary over time to help further reduce these charges. The amount of the
surcharge is calculated based on the amount of effluent discharge and the total
amount of water used

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by the Garland, Texas plant. 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.

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.

Recently, several of the Company's competitors allegedly have been
responsible for the distribution and sale of beef products contaminated with the
pathogenic e-coli 0157: H7 bacteria. Although the Company has taken measures to
ensure that its products are not contaminated with such bacteria, there can be
no assurance that such contamination will not occur or that, in the absence of
such contamination, the Company's results of operations, financial condition and
debt service capabilities will not be adversely affected by negative publicity
about the Company's industry. In addition, such publicity or other factors may
result in increased government regulation of the Company's business and there
can be no assurance that such regulation will not adversely affect the Company's
results of operations, financial condition, and debt service capabilities.

The Company was involved in a voluntary product recall July 16, 1999. The
recall involved approximately 563,600 pounds that were shipped of various fully
cooked products, a portion of which may possibly have been undercooked. The
products involved were produced at the Harlingen, Texas facility. Production on
the affected line was restarted on July 30, 1999. All other production lines
running at this plant continued operations.

No foodborne illness precipitated the recall. The action was taken in an
effort to ensure customer safety and minimize potential Company liability
exposure. No adverse regulatory consequences occurred from USDA. The recall was
handled in a timely fashion and the matter was closed with USDA in December
1999. All products involved were disposed of according to the approved
government guidelines. Corrective actions were taken at the producing location
to ensure that the situation identified as the possible cause did not occur
again.

The Company operates an 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.

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 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.

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). Although the Company's management considers all such
intellectual property to be valuable assets, management believes that the loss
or expiration of any patents or trademarks, other than the Gorges or Quik-to-Fix
trademarks, would not have a material adverse effect on the Company's business,
results of operations and debt service capabilities.

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The above referenced trademarks, service marks and trade names used by the
Company are the property of the Company. In addition, the Company uses other
trademarks under co-pack arrangements for various customers. Various
trademarks, service marks and trade names used under such co-pack arrangements
or to which reference is made in this report 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.

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, Pierre/Fresh 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. The
Company seeks to successfully compete with these suppliers by providing a
diversity of product offerings and custom order packaging to meet its customers'
needs. However, 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 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.

Employees

The Company employs approximately 750 people. Currently, approximately 71
employees of a total of approximately 250 union-eligible employees at the
Garland, Texas facility are represented by the United Food & Commercial Workers
International Union, AFL-CIO, CLC, Local 540 (the "Union"). The Garland, Texas
facility is being operated pursuant to the terms and conditions specified by a
contract between the Company and the Union. The current contract will come up
for renewal in September 2000.

Item 2. Properties.

The Company's properties consist of the following owned manufacturing
facilities:

----------------------------------------------------------------
Location Product Category Square Footage
----------------------------------------------------------------
Garland, Texas Value added products 122,166
----------------------------------------------------------------
Harlingen, Texas Value added products 111,412
----------------------------------------------------------------
Sioux Center, Iowa Value added products 72,211
----------------------------------------------------------------

Additionally, the Company's warehouse facilities are leased under a number
of leases, each of which is terminable upon less than 60 days notice. The
Company believes that should it or the owners of the warehouses terminate these
leases, the Company could obtain replacement space on substantially the same
terms and without a material adverse affect on the Company's business.

The Company also leases approximately 15,000 square feet of office space in
Dallas, Texas for use as its executive and administrative offices. This lease
expires in 2001.

Item 3. Legal Proceedings.

At the present, 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. However, 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.

9
<PAGE>

Item 4. Submission of Matters to a vote of Security Holders.

The Company did not submit any matters to a vote of security holders during
the year covered by this report.

10
<PAGE>

Part II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.

The Company's common stock is not publicly traded. The Company is a wholly
owned subsidiary of GHC, which, in turn, is substantially owned by CGW. 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, which
beneficially owns shares representing 73.9% of the voting interest in GHC,
(73.1% on a fully diluted basis) and 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.

On November 25, 1996, CGW, NationsBanc Investment Corp. ("NBIC"), Mellon
Bank, N.A., as trustee of First Plaza Group Trust, a General Motors pension plan
("FPGT") and Messrs. Culwell, Mitchell, Powers, Collins and Aviles (each a
"Senior Manager" and, collectively, the "Senior Managers" and, together with
NBIC and FPGT, the "Stockholders") entered into a Securities Purchase and
Stockholders Agreement (the "Securities Purchase and Stockholders Agreement")
with regard to GHC. Subsequent to the Acquisition Closing, Mr. Letier became a
party to the Securities Purchase and Stockholders' Agreement (Mr. Letier shall
hereinafter be included in the definitions of Stockholder and Senior Manager).
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.

In connection with the Financial Restructuring, in December 1998 CGW
acquired additional equity securities of GHC. In order to provide NBIC, FPGT and
the Senior Managers with the benefit of the pre-emptive rights under the
Securities Purchase and Stockholders Agreement, CGW agreed to offer to each of
NBIC, FPGT and the Senior Managers the opportunity to acquire its pro rata share
of such equity securities at the same price as such equity securities were
acquired by CGW. FPGT was the only group which used its pre-emptive rights and
kept their pro rata share of the equity securities. CGW as of December 1998 owns
shares representing 74.2% of the voting interest in GHC and FPGT own shares
representing 24.0% of the voting interest 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

11
<PAGE>

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.

Item 6. Selected Financial Data.

The following table presents (i) selected historical financial information
of the Company and the business of the Company prior to its acquisition from
Tyson (the "Business"), as of the dates and for the periods indicated, adjusted
for the completion of the Acquisition. The historical financial information for
the years ended October 2, 1999, ended October 3, 1998 and the three hundred six
days ended September 27, 1997 have been derived from the Company's financial
statements, which have been audited by Ernst & Young LLP. The historical
information for the two years in the period ended September 28, 1996, and the
fifty-eight days ended November 25, 1996 has been derived from the Business'
financial statements, which have been audited by Ernst & Young LLP. 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and the Notes thereto
included elsewhere in this annual report.
<TABLE>
<CAPTION>
Business Company
-----------------------------------------------------------------------------------------------------------
Year Ended Year Ended September 28, November 26, September 20, Year Ended Year Ended
September 30, September 26, 1996 to 1998 to 1998 to October 3 October 2
1995 1996 November 25, September 27, September 27, 1998 1998
1996 1997 1997
(58 days) (306 days) (Pro forma)(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
operations data
Revenues $ 304,474 $ 232,764 $ 31,966 $ 172,738 $ 204,704 $ 201,581 $ 150,874
Cost and expenses,
excluding
Amortization and
restructing 283,337 215,973 30,070 158,794 189,649 179,627 148,717
Amortization 1,624 1,624 250 2,706 3,057 3,294 3,258
Restructing expense 0 0 0 0 0 13,900 0
Operating income (loss) 19,513 15,164 1,646 11,238 12,098 (15,240) (1,101)
Interest expense 0 0 0 13,709 16,378 17,243 12,113
Other expenses (income) 678 796 0 11 11 (10) (257)
Income tax 7,931 6,205 731 0 0 58 42
Net income (loss) before
extra-ordinary items $ 10,904 8,163 915 (2,482) (4,311) (32,531) (12,999)
Extraordinary item-Gain on
retirement of Debt 0 0 0 0 0 0 26,959

Net income (loss) $ 10,004 $ 8,163 $ 915 ($2,482) ($4,311) ($32,531) $ 13,960

Balance sheet data (at
period end)
Total assets $ 211,261 $ 211,261 $ 171,803 $ 155,805
Total debt 149,500 149,500 147,850 98,205
Total equity 43,103 43,103 10,572 41,439

Other data:
EBITDA (1) 29,877 24,080 2,238 21,291 24,768 11,487 10,780
Cash provided by (used for)
operating activities 21,107 15,895 962 3,117 N/A 6,785 1,282
Cash provided by (used for)
Investing activities 2,510 (609) (141) (187,944) N/A (3,208) 1,711
Cash provided by (used for)
Financing activities (23,637) (15,286) (821) 184,827 N/A (1,906) (4,082)
Capital expenditures 2,792 735 141 3,691 3,832 3,112 1,883
</TABLE>
(1) Excludes one time charge of $13,900 for the year ended October 3, 1998,
relating to the Restructing.
(2) The proforma results reflect the information assuming the Acquisition
occurred at September 29, 1996.

EBITDA for any period is calculated as the sum of net income plus the following
to the extent deducted in calculating net Income: (1) interest expense (income),
(2) income tax expense, (3) depreciation expense, (4) amortization expense and
(5) extraordinary gains or losses. We consider EBITDA to be a widely accepted
financial indicator of a company's ability to service debt, fund capital
expenditures and expand its business; however, EBIDTA is not calculated in the
same way by all companies and is neither a measurement required, nor represents
cash flow from operations as defined, by generally accepted accounting
principles. EBITDA should not be considered by you as an alternative to net
income, as an indicator of operating performance or to cash flow as a measure of
liquidity.

<PAGE>

Item 7. 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 Acquisition and the related financing (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 Audited
Financial Statements and the Notes thereto.

Results of Operations

The Company's fiscal year ends on the Saturday closest to September 30.
References in this report to "fiscal 1999," "fiscal 1998" and "fiscal 1997"
refer to the twelve month periods ended October 2, 1999 and October 3, 1998 and
the three hundred six days ended September 27, 1997 respectively.

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.

Fiscal Year Ended
-----------------------------------------------------------------------------
September 27, October 3, October 2,
1997 1998 1999
(306 Days)
-----------------------------------------------------------------------------
(Dollars and pounds in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales $172,738 100.0% $201,581 100.0% $150,874 100.0%
Cost of goods sold 140,149 81.1 171,746 85.2 123,855 82.1
-----------------------------------------------------------------------------
Gross profit 32,589 18.9 29,835 14.8 27,019 17.9
Operating expenses 21,351 12.4 45,075 22.4 28,120 18.6
-----------------------------------------------------------------------------
Operating income (loss) 11,238 6.5 (15,240) -7.6 (1,101) -.7
Other expenses 13,698 7.9 17,233 8.5 11,856 7.9
-----------------------------------------------------------------------------
Earnings before taxes
on income (loss) ($2,482) -1.4 ($32,473) -16.1 ($12,957) -8.6
Provision for income
taxes 0 0 58 0 42 0.0
-----------------------------------------------------------------------------
Net income (loss)before ($2,482) -1.4% ($32,531) -16.1% ($12,999) -8.6
extraordinary items
Extraordinary item 26,959 17.9
Net Income (loss) ($2,482) -1.4% ($32,531) -16.1% $ 13,960 9.3%
-----------------------------------------------------------------------------
Volume (in pounds) 130,383 156,192 105,040
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------
September 27, 1997 October 3, 1998 October 2, 1999
------------------ --------------- ---------------
306 Days
--------
(dollars and pounds in thousands, except per pound amounts)
<S> <C> <C> <C>
Dollars
Value added products................ $ 124,199 $ 149,051 $ 137,006
Ground beef......................... 48,539 52,530 13,868
---------- ---------- ----------
$ 172,738 $ 201,581 $ 150,874
========== ========== ==========
Volumes (in pounds)
Value added products................ 77,624 92,494 88,589
Ground beef......................... 52,759 63,698 16,451
---------- ---------- ----------
130,383 156,192 105,040
========== ========== ==========
Sales Per Pound
Value added products................ $ 1.60 $ 1.61 $ 1.55
Ground beef......................... 0.92 .82 0.84
---------- ---------- ----------
Overall average..................... $ 1.32 $ 1.29 $ 1.44
========== ========== ==========
</TABLE>

Fiscal Year Ended October 2, 1999 Compared to Fiscal Year Ended October 3, 1998

Sales. Total sales decreased $50.7 million, or 25.1%, from $201.6 million
in fiscal 1998 to $150.9 million in fiscal 1999. This decrease was primarily due
to decreased sales of ground beef.

Sales of value added products decreased $12.0 million, or 8.1%, from $149.1
million in fiscal 1998 to $137.0 million in fiscal 1999. This decrease is
partially attributable to the inclusion of an additional week in fiscal 1998
compared to fiscal 1999 and decreases in average selling prices, partially
offset by the discontinuation of sales of certain less profitable value added
products. Value added product sales decreased 3.9 million pounds, or 4.2%, from
92.5 million pounds in fiscal 1998 to 88.6 million pounds in fiscal 1999.

Sales of ground beef products decreased $38.6 million, or 73.6%, from $52.5
million in fiscal 1998 to $13.9 million in fiscal 1999. This decrease was
primarily due to a decision made by the company to exit the ground beef portion
of the business. Ground beef product sales decreased 47.3 million pounds, or
74.3%, from 63.7 million pounds in fiscal 1997 to 16.4 million pounds in fiscal
1999.

Gross Profit. Gross profit decreased $2.8 million, or 9.4%, from $29.8
million in fiscal 1998 to $27.0 million in fiscal 1999. As a percentage of
sales, gross profit increased from 14.8% in fiscal 1998 to 17.9% in fiscal 1999.
This decrease in gross profit reflects operating inefficiencies resulting from
lower production levels, discounted sales of older or overstocked products and
sales of lower margin ground beef products. This decrease also reflects reduced
sales of higher margin value added products.

Operating Expenses. Operating expenses decreased $17.0 million, or 37.7%,
from $45.1 million in fiscal 1998 to $28.1 million in fiscal 1999. Operating
expenses for fiscal 1998 include a one time charge of $13.9 million relating to
the sale of the Orange City facility (the "Restructuring"). Excluding this one
time charge, operating expenses decreased $3.1 million, or 9.9%, from $31.2
million in fiscal 1998 to $28.1 million in fiscal 1999. This decrease is
primarily the result of the decrease in volume.

Operating Income (loss). Operating loss decreased $14.1 million, or 92.8%,
from ($15.2) million in fiscal 1998 to ($1.1) million in fiscal 1999. Operating
income (loss) for fiscal 1998 includes a one time charge of $13.9 million
relating to the Restructuring. Excluding this one time charge, operating loss
decreased $.2 million, or 15.4%, from ($1.3) million in fiscal 1998 to ($1.1)
million in fiscal 1999.

14
<PAGE>

Interest Expense. Interest expense decreased $5.1 million, or 29.8%, from
$17.2 million in fiscal 1998 to $12.1 million in fiscal 1999. This decrease
reflects the retirement of $48 million of bonds and to a lesser extent the new
borrowing under the Revolver and Term Loan. See "-Liquidity and Capital
Resources."

Income Tax. The Company's effective income tax rate was approximately 0%
and 0% for fiscal 1998 and fiscal 1999, respectively.

Net Income (loss). Net income (loss) increased $46.5 million, from ($32.5)
million in fiscal 1998 to $14.0 million in fiscal 1999. Net income (loss) for
fiscal 1998 includes a one time charge of $13.9 million relating to the
Restructuring. Excluding this one time charge, net income (loss) increased $32.6
million, from ($18.6) million in fiscal 1998 to $14.0 million in fiscal 1999.
Net income for 1999 includes a gain of $27.0 million related to an
extraordinary item. Excluding this extraordinary item, net income (loss)
decreased $19.5 million, or 60%, to ($13.0) million in fiscal 1999.

The extraordinary items consists of $27.0 million, $31.1 million of which
is income from the repurchase of the Company's subordinated notes, maturing
December 1, 2006 ("the Notes"), $1.6 million in income from interest forgiven on
the repurchase of Notes, $3.1 of expenses related to the repurchase of the
Notes, $2.6 million of expenses related to the write off of deferred debt fees
(partially related to the repurchased Notes and partially related to the
repayment of the Old Credit Facility). The extraordinary item resulted in no
additional tax expense due to the carry forward of prior year tax net operating
losses.

Fiscal Year Ended October 3, 1998 Compared to Fiscal Year (306 days) Ended
September 27, 1997

Sales. Total sales increased $28.8 million, or 16.7%, from $172.7 million
in fiscal 1997 to $201.6 million in fiscal 1998. This increase was primarily due
to increased number of days in sales 306 in 1997 compared to 372 days in
1998 (fiscal 1998 was a 53 week year).

Sales of value added products increased $24.9 million, or 20.0%, from
$124.2 million in fiscal 1997 to $149.1 million in fiscal 1998. This increase
reflects the number of additional days in 1997 in relation to sales days in
1998.

Sales of ground beef products increased $4.0 million, or 8.2%, from $48.5
million in fiscal 1997 to $52.5 million in fiscal 1998. This increase reflects
the number of additional days in 1998 in relation to sales days in 1997. Sales
dollars are not as great due to the sales per pound was less than the previous
year due to contracts with national account customers.

Gross Profit. Gross profit decreased $2.8 million, or 8.5%, from $32.6
million in fiscal 1997 to $29.8 million in fiscal 1998. As a percentage of
sales, gross profit decreased from 18.9% to 14.8% in fiscal 1997 and fiscal
1998. This decrease reflects operating inefficiencies resulting from lower
production levels, discounted sales of older or overstocked products in
connection with the Company's inventory reduction initiative and increased sales
of lower margin ground beef products.

Operating Expenses. Operating expenses decreased $23.7 million, or 110.7%,
from $21.4 million in fiscal 1997 to $45.1 million in fiscal 1998. Operating
expenses for fiscal 1998 include a one time charge of $13.9 million relating to
the Restructuring. Excluding this one time charge, operating expenses increased
$9.8 million, or 45.8% from $21.4 million in fiscal 1997 to $31.2 million in
fiscal 1998. This is primarily the result of the complete organization and
staffing of the Company's corporate headquarters following the Acquisition,
increased sales and promotional activity in fiscal 1998, full staffing of the
Company's research and development group, a significantly higher level of
product development activity and, to a lesser extent, increased amortization of
goodwill relating to the Acquisition.

Operating Income. Operating income decreased $26.5 million, or 235.6%, from
$11.2 million in fiscal 1997 to ($15.2) million in fiscal 1998. Operating Income
for fiscal 1998 includes a one time charge of $13.9 million relating to the
Restructuring. Excluding this one time charge, operating expenses decreased
$12.6 million, or 111.9% from $11.2 in fiscal 1997 to ($1.3) million in 1998.

Interest Expense. Interest expense increased $3.5 million, or 25.8%, from
$13.7 million in fiscal 1997 to $17.2 million in fiscal 1998. This increase
reflects increased borrowings incurred under the Revolver, the Term Loan and the
Notes in connection with the Acquisition, and additional days in fiscal 1998
compared to fiscal 1997.

Income Tax. The Company's effective income tax rate was approximately 0%
for fiscal 1997 and fiscal 1998, respectively.

15
<PAGE>

Net Income (loss). Net income (loss) decreased $30.0 million, from ($2.5)
million in fiscal 1997 to ($32.5) million in fiscal 1998. Removing the one time
charge of $13.9 million in 1998, the net income (loss) decreased $16.1 million,
from ($2.5) million in fiscal 1997 to ($18.6) million in fiscal 1998.

Liquidity and Capital Resources

As a result of the Restructuring the Company has significant annual
principal and interest obligations. Borrowings under the Credit Facility and
Bridge Loan, which totaled $46.2 million at October 2, 1999 ($26.5 million under
the Term Loan, $16.7 million under the Revolver, and $3.0 million under the
Bridge Loan), accrued interest at an average rate of approximately 9.55% in the
year ended October 2, 1999. Borrowings under the Notes totaled $52.0 million at
October 2, 1999, and accrued interest at 11.5%.

As of October 2, 1999, the Company was not in compliance with certain
covenants under its credit agreement with CIT which provides the Company with
the Revolver and the Term Loan. As of December 30, 1999, CIT delivered to the
Company a written waiver of this non-compliance. As a result of such waiver, as
of December 31, 1999, the Company was in compliance with all covenants under the
Credit Facility. At the same time, the Credit Facility was amended by replacing
the covenants with a new set of covenants that are more appropriate for the
financial structure of the Company.

. Amendment to Credit Facility. On March 5, 1999, the Company entered into a
credit agreement with The CIT Group/Business Credit, Inc. ("CIT") as agent for a
syndicate of banks and financial institutions (the "Replacement Credit
Facility") which provides the Company with a revolving credit facility (the
"Revolver") and a $29.0 million term loan facility (the "Term Loan"). The
Company currently anticipates that the Replacement Credit Facility will provide
it with sufficient working capital. The Revolver includes covenants under which
the Company can borrow funds based on the levels of its accounts receivable and
inventory in an aggregate amount of not more than $25.0 million. The Revolver
includes a sub-facility of $3.0 million for commercial and standby letters of
credit. The Revolver has a term of five years and all amounts outstanding under
the Revolver will become due and payable on April 1, 2004. The Term Loan has a
five year term and is subject to principal payments in an annual amount of $4.3
million in each of fiscal 2000, 2001, 2002 and 2003 and $9.3 million in fiscal
2004.

Outstanding borrowings under the Replacement Credit Facility bear interest
at floating rates per annum equal to the prime rate plus 1.625% for borrowings
under the Revolver and the prime rate plus 2.125% for borrowings under the Term
Loan. At July 3, 1999, the interest rate for the Company based on this formula
was 9.875% for borrowings under the Revolver and 10.375% for borrowings under
the Term Loan. The interest rates under the Replacement Credit Facility may vary
based on changes in the prime rate or the London Interbank Offered Rate.
Additionally, the interest rates under the Replacement Credit Facility may vary
based on the Company's future financial performance. The Company may be required
to make mandatory prepayments against both facilities, comprised of principal
payments totaling: (i) 100% of cash received in asset sales wherein the proceeds
are not used to purchase replacement assets, and (ii) 50% of the Company's
Surplus Cash (as defined in the Replacement Credit Facility). These payments are
to be applied first to the Term Loan and, upon the Term Loan's retirement, to
the Revolver as a permanent reduction.

. Repurchase and Retirement of Notes. On October 29, 1998, the Company
announced a tender offer pursuant to which it offered to purchase not less than
$36,000,000 and up to $46,000,000 aggregate principal amount of its Notes. On
December 2, 1998, the Company elected to waive all conditions to the
consummation of the Offer, including the Minimum Tender Condition, and
consummated the Offer with respect to $29,970,000 aggregate principal amount of
Notes. Additionally, on December 21, 1998, the Company's controlling
stockholder, CGW, contributed to the Company $18,030,000 aggregate principal
amount of Notes acquired by CGW through open market purchases. The Tendered
Notes and the CGW Notes were retired on December 21, 1998. The repurchase and
retirement of the Tendered Notes and the CGW Notes were financed through an
equity investment by CGW in GHC totaling $16,900,000.

16
<PAGE>

. Bridge Loan. On December 15, 1999 the Company's remaining balance of
$3,000,000,together with accrued interest of $.3 million on the Bridge Loan with
CGW was converted to Equity. In connection with the Bridge Loan on December 15,
1999 CGW acquired additional equity securities of GHC. In order to provide NBIC,
FPGT and the Senior Managers with the benefit of the pre-emptive rights under
the Securities Purchase and Stockholders Agreement, CGW agreed to offer to each
of NBIC, FPGT and the Senior Managers the opportunity to acquire its pro rata
share of such equity securities at the same price as such equity securities were
acquired by CGW. FPGT was the only group which used its pre-emptive rights and
kept their pro rata share of the equity securities. CGW as of December 1999 owns
shares representing 74.3% of the voting interest in GHC and FPGT own shares
representing 24.0% of the voting interest in GHC.

For the fiscal year ended October 2, 1999 the Company spent $1.8 million on
capital projects. For the year ended October 3, 1998, the Company spent $3.1
million, on capital projects, principally for the relocation of equipment to the
Harlingen, Texas facility. The remaining capital expenditures are primarily for
the capital maintenance of the Company's facilities.

The Company's primary sources of liquidity are cash flows from operations.
In the year ended October 2, 1999, net cash provided by operations of $1.3
million, was used by financing activities of $4.1 million, primarily in
connection with reduced term loan balances. In addition, net cash provided by
operations was used by investing activities for capital asset purchases. In the
year ended October 3, 1998, net cash provided by operating activities of $6.8
million was used by investing activities of $3.2 million and financing
activities of $1.9 million in connection with the Acquisition and normal capital
expenditures. At October 2, 1999, the Company had $.6 million in cash and cash
equivalents. The Company anticipates that its working capital requirements,
capital expenditures, and scheduled repayments for fiscal 2000 will be satisfied
through a combination of cash flows generated from operations together with
funds available under the Revolving Credit Facility.

Effects of Inflation

Inflation has not had a significant effect on the Company's operations.
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.

Effects of Year 2000 Problems

As of the date of filing, the company has experienced no significant "Y2K"
problems.

Recent Accounting Pronouncements

In addition, the financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 Reporting Comprehensive Income and
Statement of Financial Accounting Standards No. 131 Disclosures About Segments
of an Enterprise and Related Information which are effective for financial
statement periods beginning after December 15, 1997. As these statements require
only additional disclosures, they will have no effect on the Company's financial
position, results of operations or cash flows. Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed for Internal Use and SOP
98-5, Reporting on the Costs of Start Up Activities are effective for years
beginning after December 15, 1998. The Company does not anticipate that SOP 98-1
will have a significant effect on the Company's financial position, results of
operations or cash flows. With the adoption of SOP 98-5 the Company will have to
write off existing organizational costs. As of October 3, 1998, organizational
costs are approximately $3.0 million and will be written off in the first
quarter of fiscal year 2000.

17
<PAGE>

Factors Affecting Future Performance

Significant Leverage and Debt Service. Upon consummation of the
Transactions, the Company became highly leveraged. At October 2, 1999, the
Company had total outstanding debt of $98.2 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.

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 Facility 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 Revolver or successor facilities. The Company anticipates
that its operating cash flow and borrowings under the Revolver 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 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 Notes are 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 Facility. 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. At October 2, 1999, the aggregate
principle amount of Senior Indebtedness was $46.2 million, including outstanding
borrowings of approximately $16.7 million under the Revolver.

Decreases in Net Sales. The Company has experienced an overall decrease in
net sales during fiscal 1998 and fiscal 1999. The decrease was due primarily to
the Company decision to exit the ground beef business. Sales volumes for the
Company's value added products have generally increased during the past three
years 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. As
set forth under "Business--Recent Developments," the Company has discontinued
the production of ground beef products, which will result in further decreases
in net sales. Management intends to pursue the strategies set forth under
"Business--Recent Developments" and "--Growth Strategy." However, there can be
no assurance that these strategies will be successful. Continued decreases in
net sales could have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See "Business--Growth
Strategy."

18
<PAGE>

Restrictions Imposed by Terms of the Company's Indebtedness. The Indenture
for the notes 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 Facility contains other and more restrictive covenants and prohibits 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.

The Replacement Credit Facility also requires 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 Replacement Credit Facility. Upon the occurrence of an event of
default under the Replacement Credit Facility, the lenders could elect to
declare all amounts outstanding under the Replacement Credit Facility, 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 Replacement
Credit Facility was 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 Replacement Credit
Facility. Such assets may also be pledged in the future to secure other
Indebtedness.

Raw Materials. The Company uses large quantities of meat proteins,
including beef, pork and poultry. Approximately 70% of the Company's beef needs
are sourced from three major suppliers: IBP; Monfort (ConAgra); and Excel
(Cargill). The Company's pork and poultry needs also are sourced from these
major suppliers. 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 Company 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.

Dependence on Key Personnel. The Company's success depends to a large
extent on the skills and efforts of its senior management. Consequently, the
loss of one or more members of senior management could have a material adverse
effect on the Company. Further, the Company's business requires that it continue
to attract and retain additional personnel with a variety of food service, food
processing, sales, distribution and managerial skills. Significant competition
exists for such personnel, and there can be no assurance that the Company will
be able to attract and retain personnel with the skills and experience needed to
achieve and manage growth.

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 products that
compete directly with certain of the Company's products. The Company seeks to
successfully compete with these suppliers by providing a diversity of product
offerings and custom order packaging to meet its customers needs. However, 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.

19
<PAGE>

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.

Recently, several of the Company's competitors allegedly have been
responsible for the distribution and sale of beef products contaminated with the
pathogenic e-coli 0157: H7 bacteria. Although the Company has taken measures to
ensure that its products are not contaminated with such bacteria, there can be
no assurance that such contamination will not occur or that, in the absence of
such contamination, the Company's results of operations, financial condition,
and debt service capabilities will not be adversely affected by negative
publicity about the Company's industry. In addition, such publicity or other
factors may result in increased government regulation of the Company's business
and there can be no assurance that such regulation will not adversely affect the
Company's results of operations, financial condition, and debt service
capabilities.

The Company was involved in a voluntary product recall July 16, 1999. The
recall involved approximately 563,600 pounds that were shipped of various fully
cooked products of which a portion may possibly have been undercooked. The
products involved were produced at the Harlingen, Texas facility. Production on
the affected line was restarted on July 30, 1999. All other production lines
running at this plant continued operations.

Compliance with Environmental Regulations. The Company's operations 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 Company, some of which may be material.
The Company believes it is currently in material compliance with all known
material and applicable environmental regulations.

The Company incurs monthly surcharges of approximately $40,000 to the city
of Garland, Texas as a result of effluent wastewater discharges from the
Garland, Texas facility. The Company has elected to incur the monthly surcharges
and 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.

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

20
<PAGE>

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. The Company's largest customer is a group of
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 1997, fiscal 1998, and fiscal 1999 total sales to Sysco affiliates
accounted for 16.6%, 16.6%, and 17.2% of sales, respectively.

The Company's second largest customer is Harker's. The Company supplies
Harker's with ground beef pursuant to a supply agreement that remained in effect
until 1999 (the "Harker's Agreement"). The Harker's Agreement requires Harker's
to purchase minimum amounts of the Company's products. The Harker's Agreement
provides that amounts charged by the Company thereunder may be adjusted in
response to fluctuations in the Company's costs. During fiscal 1997, fiscal
1998, and fiscal 1999 the Harker's Agreement accounted for 12.8%, 10.7% and 7.4%
of sales, respectively. At the consummation of the Acquisition, 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 Agreement. Tyson will continue
to supply poultry products to Harker's pursuant to the Harker's Agreement.

Harker's and affiliates of Sysco collectively accounted for approximately
29.4%, 27.3%, and 24.6% of sales during fiscal 1997, fiscal 1998, and fiscal
1999, respectively. The loss of the Harker's Agreement 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.

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 current agreement with the union
expires October 1, 2000. 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.

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.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements and financial statement schedule in
Part IV, Item 14(a) 1 and 2 of this report are incorporated by reference into
this Item 8.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

21
<PAGE>

PART III

Item 10. Directors and Executive Officers of the Registrant.

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>
William D. Day 45 Chief Executive Officer
John C. Douthett 50 Executive Vice President of Sales and Marketing
Shelley W. Arnette 55 Chief Financial Officer
Richard L. Cravey 54 Director
William A. Davies 53 Director
James A. O'Donnell 46 Director
</TABLE>

William D. Day became Chief Executive Officer on August 16, 1999. From 1997
until joining the Company he was President and Chief Executive Officer of H & M
Food Systems Company, Inc., a producer of pre-cooked foods with revenues of two
hundred million dollars. From 1996 until 1997 Mr. Day was Executive Vice
President of Operations and Technology for Stella Foods, Inc., a specialty
cheese company with revenues of seven hundred million dollars. Prior to that
position Mr. Day was Vice-President of Quality and Technology at Stella Foods.
Prior to Stella Foods Mr. Day spent 16 years at Kraft and General Foods, where
he held various positions of increasing responsibility.

John C. Douthett has been Executive Vice President of Sales and Marketing
since joining the Company on November 10, 1998. Prior to joining the Company,
Mr. Douthett was employed by Tyson Foods, Inc., for one year as Vice President
of Distribution Sales, where he was responsible for a sales and marketing staff
that was responsible for over $1 billion in sales. Prior to this position, Mr.
Douthett worked for 25 years, and held a number of positions at Campbell Soup
Company, including Vice President of Sales, Vice President of Sales for
Campbell's Foodservice division, and other divisional, regional and district
sales positions at Campbell's.

Shelley W. Arnette has been Chief Financial Officer since joining the
Company on June 30, 1999. Immediately prior to his association with the Company
he was an independent consultant. From 1993 until 1997 Mr. Arnette was President
of Universal Display and Fixtures Company, a supplier to the food industry. He
has been an officer of companies in the manufacturing and distribution
industries throughout his career. Mr. Arnette is a Certified Public Accountant.

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 Southwest Management
III, L.L.C. (the "Management Company"), an affiliate of CGW. In addition, Mr.

22
<PAGE>

Cravey is a member of Le Select III, L.L.C. (the "Limited Partner"), a limited
partner 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 each of the General Partner and the Limited Partner,
and is responsible for sourcing, structuring and negotiating transactions,
participating in strategic planning with portfolio company management 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 management to
maximize value and managing exit strategies. Mr. O'Donnell is also a member of
the Limited Partner. 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.

The Company is party to a Securities Purchase and Stockholders' Agreement
that provides that the Board of Directors of the Company shall be the directors
of GHC. The Board of Directors of GHC are all designated by CGW. Messrs. Cravey,
O'Donnell and Davies have been nominated and elected to the Board of Directors
pursuant to the Securities Purchase and Stockholder's Agreement. See Item 5--
"Market for Registrant's Common Stock and Related Stockholder Matters."

Item 11. Executive Compensation.

The following table sets forth certain summary information concerning the
compensation paid or awarded to the Company's Chief Executive Officer and other
executive officers receiving compensation in excess of $100,000 for the period
October 4, 1998 through October 2, 1999 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Name and Principal Salary Bonus Other Annual Securities All Other
Position Compensation Underlying Compensation
(1) Options/
SARs(#)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William D. Day 38,461 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
J. David Culwell (2) 175,000 0 5411 0 0
John C. Douthett 152,307 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Hernando Aviles (3) 100,000 0 4,074 0 0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Consists of 401K contribution match.
(2) No longer employed by the Company.
(3) No longer employed by the Company.

Employment Agreements

The Company entered into an employment agreement (the "Employment
Agreement") with Mr. Culwell for a term 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 had the right to terminate the
Employment Agreement at any time prior to expiration. Pursuant to the terms of
its agreement with Mr. Culwell, upon his termination, the Company remained
obligated to pay Mr. Culwell severance equal to one year's salary. The remainder
of this obligation will be paid in full during fiscal 2000.

The Company has also entered into a Performance Agreement with William D.
Day which provides that the Company will pay Mr. Day one-full year's salary of
$250,000 as severance pay if the Company should terminate his employment without
due cause.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table presents certain information relating to the beneficial
ownership of the Company's common stock.

<TABLE>
<CAPTION>
Name and address of Beneficial Number of Shares Percent of Class
Owner
<S> <C> <C>
Gorges Holding Company 1000 100%
Twelve Piedmont Center, Suite 210
Atlanta, GA 30305

CGW Southeast Partners III, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, GA 30305/1/

First Plaza Group Trust/2/
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, NY 10153
</TABLE>

- -------------------------
/1/ CGW Southeast Partners III, L.P., as owner of 73.1% of the common stock of
Gorges Holding Company has voting and dispositive power over 1,000 shares of the
Company's common stock.
/2/ First Plaza Group Trust, as 23.8% owner of the common stock of Gorges
Holding Company has voting and dispositive power over 1,000 shares of the
Company's common stock.

GHC owns 100% of the issued and outstanding capital stock of the
Company. As of October 2, 1999, GHC was owned 73.9% by CGW, 1.9% by NBIC, 24.0%
by FPGT and .2%, in the

23
<PAGE>

aggregate, by the Senior Managers, none of whom individually owns more than 1%.
As of October 2, 1999, on a fully-diluted basis, GHC was owned 73.1% by CGW,
1.9% by NBIC, 23.8% by FPGT and 1.2% in the aggregate, by the Senior Managers
and other employees of the Company who hold options to purchase GHC common
stock, none of whom individually owns more than 1% on a fully diluted basis. In
December 1998, in connection with the repurchase and retirement of the Tendered
Notes and the CGW Notes, CGW invested $16,900,000 in equity securities of GHC.
CGW agreed to offer to each of NBIC, FPGT and the Senior Managers the
opportunity to acquire its pro rata share of such equity securities at the same
price as such equity securities were acquired by CGW. FPGT was the only group
which used its pre-emptive rights and kept their pro rata share of the equity
securities. CGW as of December 1998 own shares representing 73.9% of the voting
interest in GHC and FPGT own shares representing 24.0% of the voting interest in
GHC. In connection with the Bridge Loan on December 15, 1999 CGW acquired
additional equity securities of GHC. In order to provide NBIC, FPGT and the
Senior Managers with the benefit of the pre-emptive rights under the Securities
Purchase and Stockholders Agreement, CGW agreed to offer to each of NBIC, FPGT
and the Senior Managers the opportunity to acquire its pro rata share of such
equity securities at the same price as such equity securities were acquired by
CGW. FPGT was the only group which used its pre-emptive rights and kept their
pro rata share of the equity securities. CGW as of December 1999 own shares
representing 74.3% of the voting interest in GHC and FPGT own shares
representing 24.0% of the voting interest in GHC. 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.

Item 13. Certain Relationships and Related Transactions.

Securities Purchase and Stockholders Agreement

See "Market for Registrant's Common Stock and Related Stockholder Matters."

Transactions with CGW and its Affiliates

On December 21, 1998 the Company obtained from CGW a $4,000,000
subordinated bridge loan, the proceeds of which were used to fund the Interest
Payment. On March 5, 1999 the Company repaid $1,000,000 of the principal amount
of the Loan. The terms of the Bridge Loan provided for a one year loan to the
Company at an interest rate of 9%. As of December 15, 1999, the Company had not
repaid the Bridge Loan and, according to its terms, the Loan automatically
converted to equity in GHC.

On November 25, 1996, the General Partner entered into 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 Company paid $360,000 to the General Partner for the year ended
October 3, 1998 for such 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 November 25, 1996. The General Partner has
delegated its rights and obligations under the Consulting Agreement to the
Management Company, an affiliate of CGW.

The Company believes that the terms and conditions of the Consulting
Agreement, the fees paid to the General Partner thereunder and the fees paid to
the Management Company are consistent with arms-length transactions with
unaffiliated parties. In addition, the terms and conditions of the Credit
Agreement and the Indenture restrict the Company's ability to enter into certain
transactions with Affiliates.

24
<PAGE>

Transactions with NBIC and its Affiliates

The Company paid, in the normal course of business, interest and fees to
Nationsbank of Texas, N.A. ("Nationsbank"), an affiliate of NBIC, of $2.8
million. A portion of these amounts are paid to Nationsbank as agent for the
other lends participating in the Company's Senior Credit Facility.

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.

25
<PAGE>
PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) The following documents are filed as a part of this Annual Report on
Form 10-K.

1. Consolidated Financial Statements at Item 8.

The following financial statements at Gorges/Quik-to-Fix Foods, Inc.
are incorporated by reference into Item 8 and are attached hereto:

Report of Independent Auditors

Balance Sheets at October 2, 1999 and October 3, 1998

Statements at Operation, for the years ended October 2, 1999 and
October 3, 1998 and the three-hundred six days ended September 27,
1997.

Statements of Cash Flows for the years ended October 2, 1999 and
October 3, 1998 and the three-hundred six days ended September 27,
1997.

Statement of Change in Stockholders' Equity for the years ended
October 2, 1999 and October 3, 1998 and the three hundred six days
ended September 27, 1997.

Notes to Financial Statements

2. Consolidated Financial Statement Schedules:

All Financial Statement Schedules have been omitted because
(i) the required information is not present in amounts sufficient to
require submission of the schedule, (ii) the information required is
included in the Consolidated Financial Statements or the Notes
thereto, or (iii) the information required in the Schedules is not
applicable to the Company.

3. Exhibits:

The following exhibits either (i) are filed herewith; or (ii) have
previously been filed with the Securities and Exchange Commission and
are incorporated herein by reference to such prior filings.

10.1 Fourth Amendment and Waiver, dated October 29, 1998, by and among
Gorges Holding Corporation, the Company, the lending institutions
party to the Credit Agreement and NationsBank, N.A., successor by
merger to NationsBank of Texas, N.A. (incorporated by reference to the
Company's Current Report on Form 8-K, dated October 29, 1998
(Commission File No. 333-20155)).

10.2 Letter Agreement, dated December 21, 1998, by and among Gorges
Holding Corporation, the Company, the lending institutions party to
the Credit Agreement and NationsBank, N.A., successor by merger to
NationsBank of Texas, N.A. incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q, dated May 18, 1999
(Commission File No. 333-20155).

10.3 Waiver and First Amendment, dated December 30, 1999, by and among
Gorges/Quik-to-Fix Foods, the CIT Group and the lenders a party
thereto.

10.4 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. (incorporated by reference from Exhibit
10.18 to Registrant's Registration Statement on Form S-1 (file no.
333-20155) filed on January 22, 1997)

10.5 Consulting Agreement, dated November 25, 1996, between
Georges/Quik-To-Fix Foods, Inc. and CGW Southeast Partners III, L.L.C.
(incorporated by reference from Exhibit 10.19 to Registrant's
Registration Statement on Form S-1 (file no. 333-20155) filed on
January 22, 1997)

27. Financial Data Schedule.

(b) Reports on Form 8-K

On August 18, 1999, the Company filed a current report on Form 8-K,
relating to a recall of potentially defective products and the
resignation of J. David Colwell as Chief Executive Officer

See Item 14(a)3.

(d) Financial Statement Schedules

See Item 14(a)2.

26
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.

Index to Consolidated Financial Statements

Report of Independent Auditors F-2
Balance Sheets F-3
Statements of Operations F-4
Statements of Cash Flows F-5
Statement of Changes in Stockholder's Equity F-6
Notes to Financial Statements F-7

F-1
<PAGE>

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholder
Gorges/Quick-to-Fix Foods, Inc.

We have audited the accompanying balance sheets of Gorges/Quik-to-Fix Foods,
Inc. as of October 2, 1999 and October 3, 1998, and the related statements of
operations, stockholder's equity, and cash flows for the two years ended October
2, 1999 and the three hundred and six day period ended September 27, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. 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 provides 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 Gorges/Quik-to-Fix Foods, Inc.
at October 2, 1999, and October 3,1998, and the results of operations and cash
flows for the two years ended October 2, 1999 and the three hundred six day
period ended September 27, 1997, in conformity with generally accepted
accounting principles in the United States.

/s/ Ernst & Young LLP
---------------------

Dallas, Texas
November 24, 1999,
except for Note 3 and 11, as to which the date is December 30, 1999

F-2
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
-----------------------------------
October 3, October 2,
1998 1999
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash $ 1,671 $ 582
Accounts receivable, net of allowance for doubtful
accounts of $207 and $ 499 16,970 13,937
Inventory 15,880 17,365
Prepaid expenses and other 448 589
-------------- --------------
Total current assets 34,969 32,473

Property, plant and equipment:
Land 1,499 1,371
Buildings and leasehold improvements 38,174 35,171
Machinery and equipment 38,826 39,798
Construction in process and other 1,002 794
-------------- --------------
79,501 77,134
Accumulated depreciation (13,067) (20,524)
-------------- --------------
Net property, plant and equipment 66,434 56,610

Other assets:
Intangible assets, net 63,090 60,854
Organizational and deferred debt issuance costs,net 7,282 5,313
Other 28 555
-------------- --------------
Total assets $171,803 $155,805
============== ==============

Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and accrued expenses $ 13,381 $ 16,161
Current portion of long-term debt 8,500 4,260
Convertible debt with shareholders - 3,000
-------------- --------------
Total current liabilities 21,881 23,421

Long-term debt, less current portion 139,350 90,945

Stockholder's equity:
Common stock, $.01 par value; 2,000 shares
Authorized, 1,000 shares issued and
Outstanding - -

Additional paid-in capital 45,585 62,492
Accumulated deficit (35,013) (21,053)
-------------- --------------

Total stockholder's equity 10,572 41,439
-------------- --------------
Total liabilities and stockholder's equity $171,803 $155,805
============== ==============
</TABLE>

See accompanying notes to financial statements

F-3
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
STATEMENTS OF OPERATIONS
(In thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------
Three Hundred
Six Days Ended Year Ended Year Ended
September 27 1997 October 3, 1998 October 2,1999
----------------------------------------------------------------
<S> <C> <C> <C>
Sales $172,738 $201,581 $150,874
Costs of goods sold 140,149 171,746 123,855
--------------- --------------- ---------------
Gross profit 32,589 29,835 27,019

Operating expenses:
Selling, general and
Administrative 18,645 27,881 24,862
Amortization 2,706 3,294 3,258
Restructuring expense - 13,900 -
--------------- --------------- ---------------
Total operating 21,351 45,075 28,120
Expenses
--------------- --------------- ---------------
Operating income (loss) 11,238 (15,240) (1,101)

Interest expense 13,709 17,243 12,113
Other expense (income) 11 (10) (257)
--------------- --------------- ---------------
Loss before
income taxes and
extraordinary items (2,482) (32,473) (12,957)
Income tax expense - 58 42
--------------- --------------- ---------------
Loss net of taxes
before extraordinary items $ (2,482) $(32,531) $(12,999)

Extraordinary items 26,959
(Gain on retirement of Debt) --------

Net Income (loss) $ (2,482) $(32,531) $ 13,960
=============== =============== ===============
</TABLE>

See accompanying notes to financial statements

F-4
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Three Hundred
Six Days Ended Year Ended Year Ended
September 27, 1997 October 3, 1998 October 2, 1999
----------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,482) $(32,531) $ 13,960
Adjustments to reconcile net income (loss) to
net cash provided by operating
activities:
Depreciation 7,358 9,523 8,366
Amortization 2,706 3,294 3,258
Amortization of deferred debt costs 595 831 599
Loss on Sale of asset sale/restructuring - - 66
Gain on Debt Retirement - - (28,628)
Non-cash restructuring expenses - 13500 -
Provision for losses on doubtful accounts 795 370 292
Changes in assets and liabilities: - - -
(Increase) decrease in accounts receivable (22,755) 4,620 2,741
(Increase) decrease in inventory (645) 12,765 (1,485)
Increase in prepaid expenses and other (167) (310) (668)
Increase in accounts payable and
Accrued expenses 17,712 (5,277) 2,781
----------------------------------------------------------------------
Net cash provided by operating activities 3,117 6,785 1,282

Cash flows from investing activities:
Purchases of plant and equipment (3,691) (3,112) (1,883)
Acquisition, net of cash received (184,349) - -
Proceeds from sale of equipment 45 - 3,600
Other 51 (96) (6)
----------------------------------------------------------------------
Net cash provided by (used in) investing (187,944) (3,208) 1,711
Activities

Cash flows from financing activities:
Proceeds from note offering 100,000 - -
Payment to retire notes - - (16,907)
Proceeds from new credit facility - - 33,052
Payoff old credit facility - - (32,742)
Capital contributions 45,585 - 16,907
Proceeds from revolving line of credit 19,000 24,000 91,461
Payments on revolving line of credit (7,000) (17,000) (91,704)
Proceeds from term loan 40,000 - -
Payments on term loan (2,500) (8,650) (2,130)
Debt issuance and organizational costs (10,258) (256) (2,019)
----------------------------------------------------------------------
Net cash (used in) provided by financing
Activities 184,827 (1,906) (4,082)
----------------------------------------------------------------------
Net decrease in cash - 1,671 (1,089)
Cash at beginning of period - - 1,671
----------------------------------------------------------------------
Cash at end of period $ - $ 1,671 $ 582
======================================================================
</TABLE>

See accompanying notes to financial statements

F-5
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(In thousands, except share data)

<TABLE>
<CAPTION>
Common Additional
Stock Common Paid in Accumulated
Shares Stock Capital Deficit Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
November 25, 1996 - $ - $ - $ - $ -
Initial sale
(issuance of common stock) 1,000 45,585 - 45,585
Net loss - - - (2,482) (2,482)
-----------------------------------------------------------------------------------
September 27, 1997 1,000 - 45,585 (2,482) 43,103

Net loss (32,531) (32,531)
-----------------------------------------------------------------------------------
October 3, 1998 1,000 - 45,585 (35,013) 10,572

Capital contribution 16,907 16,907

Net income 13,960 13,960
-----------------------------------------------------------------------------------
October 2, 1999 1,000 $ - $62,492 $(21,053) $ 41,439
===================================================================================
</TABLE>

F-6
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
October 2 1999

1. Organization and Basis of Presentation

On November 25, 1996 Gorges/Quik-to-Fix Foods, Inc. acquired certain assets
and liabilities of the beef processing division of Tyson Foods, Inc., ("Tyson"),
in exchange for a cash payment of approximately $184.0 million (the
"Acquisition"). The cash used to consummate the Acquisition was obtained through
the issuance of $45.0 million in common stock, and the proceeds from the
borrowings of senior debt and subordinated debt. The Company assumed no
liabilities or obligations from Tyson with the exception of those defined in the
Purchase Agreement: future obligations of normal course of business executory
contracts, agreements to purchase inventory or supply products, accrued vacation
pay, and certain property tax obligations. Tyson agreed to indemnify the Company
from any and all liabilities and obligations, other than the aforementioned
liabilities assumed by the Company.

The Company, a wholly owned subsidiary of Gorges Holding Company ("GHC"),
is a leading producer, marketer and distributor 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
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.
Currently the Company produces value added products which include: (i) breaded
beef items such as country fried steak and beef fingers; (ii) charbroiled beef
items 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. Prior to February 1, 1999, the Company's product offerings
included ground beef (see Restructuring Expenses in Note 2 and Note 10). Ground
beef products consist primarily of individually quick frozen 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 primarily through broadline and
specialty foodservice distributors.

2. Summary of Significant Accounting Policies

Fiscal Year

The Company utilizes a 52 or 53 week accounting period, ending on the
Saturday closest to September 30. Fiscal year 1998, which ended on October 3,
1998, was a 53 week year. Fiscal year 1999, which ended on October 2, 1999, was
a 52 week year.

F-7
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

2. Summary of Significant Accounting Policies - Continued

Accounts Receivable

The Company periodically evaluates the credit worthiness of its customers
as accounts receivable balances are not collateralized. The Company has not
experienced significant credit losses.

Inventories

Inventories, valued at the lower of cost (first-in, first-out) or market
(replacement or net realizable value), consist of the following (in thousands):

October 3, October 2,
1998 1999
--------------------------------
Finished goods $10,306 $10,901
Supplies and ingredients 5,574 6,464
--------------------------------
Total $15,880 $17,365
================================

Property, Plant and Equipment

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 20 years.

Capital expenditures for equipment and capital improvements are generally
capitalized while maintenance is expensed.

Intangible assets and Organizational and Deferred Debt Issuance Costs

Intangible assets, consisting of goodwill and trademarks, are stated at
cost and are amortized on a straight-line basis over 30 years. Recoverability
of the carrying value of intangible assets is evaluated on a recurring basis
with consideration toward recovery through future operating results on an
undiscounted basis.

Organizational costs are amortized on a straight-line basis over five
years, and deferred debt issuance costs are amortized over the life of the debt
instrument to which it relates. At October 2, 1999 and October 3, 1998, the
accumulated amortization was $10.1 million and $7.3 million, respectively.
During the year ended October 2, 1999, the Company repaid all amounts
outstanding under its then existing credit agreement (the "Old Credit
Agreement") with NationsBank, N.A. (the "Bank") as agent for a syndicate of
banks and financial institutions, and as a result wrote-off approximately $1.2
million of deferred debt issuance costs related to the Old Credit Agreement.
Also during the year then ended October 2, 1999, the Company retired $48.0
million of Notes ( see Note 3) and wrote-off approximately $1.4 million of
deferred debt issuance costs. The Company currently has $4.9 million of
organizational costs and $2.9 million of accumulated amortization related to
organizational costs. The Company will adopt Statement of Position (SOP) 98-5 in
the first quarter of fiscal 2000. The result of adopting SOP 98-5 will be a
cumulative effect charge for a change in accounting principle of $2.0 million
for the first quarter of fiscal 2000.

F-8
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

2. Summary of Significant Accounting Policies - Continued

Income Taxes

The Company follows the liability method of 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 include product line expenses such as shipping and
storage, external handling, external freezer charges, product and package
design, brokerage expense, and other direct selling expenses such as certain
salaries, travel, and research and development.

Advertising, Promotion and Research and Development Expenses

Advertising, promotion, and research and development expenses are charged
to operations in the period incurred. Advertising and promotion expenses were
$11.8 million for the period ending October 2, 1999, compared to $9.4 million
and $6.6 million for period ending October 3, 1998 and the period ending
September 27, 1997, respectively. Research and Development expenses were $0.9
million for the year ended October 2, 1999 compared to $0.7 million and $0.4
million, for the year ended October 3, 1998 and the period ending September 27,
1997 respectively.

Restructuring Expenses

On October 7, 1998, the Company announced its intent to exit the ground
beef business to concentrate on its core value added products. Certain expenses
were recorded in the fourth quarter of fiscal 1998 in conjunction with this
decision. The $13.9 million charge recorded in fiscal 1998 was comprised of:
(I) a $13.5 million charge to write down the value of certain assets used in the
ground beef business (the Company's Orange City, Iowa manufacturing facility) to
the estimated net realizable value of these assets (approximately $ 4 million),
and (ii) a $0.4 million charge for severance and other expenses related to the
exit from the ground beef business and restructuring of the Company's value
added business. On February 1, 1999, the Company sold its Orange City, Iowa
manufacturing facility for approximately $ 4 million in cash, which includes
$400,000 which remains in escrow at October 2, 1999. The sales resulted in no
additional significant gain or loss.

Extraordinary Item

Included in the extraordinary item of $27.0 million is $31.1 million of
income from the repurchase of the Notes(see Note 3), $1.6 million in income from
interest forgiven on the repurchase of Notes, $3.1 of expenses related to the
repurchase of the Notes, $2.6 million of expenses related to the write off of
deferred debt fees (partially related to the repurchased Notes and partially
related to the repayment of the Old Credit Facility). The extraordinary item
resulted in no additional tax expense due to the carry forward of prior year tax
net operating losses.

F-9
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

2. Summary of Significant Accounting Policies - Continued

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Collective Bargaining Agreements

Currently the Company has approximately 200 employees of its total
workforce of approximately 750 employees covered under a collective bargaining
agreement that expires on October 1, 2000.

Segments

As of January 1, 1998, the Financial Accounting Standards Board issued
Statement No. 131, Disclosures about Segments of an Enterprise and Related
information ("SFAS 131"), which establishes standards for the way in which
public enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. The Company
adopted SFAS 131 effective October 4, 1998. The Company evaluates its operations
by location and has determined that it operates under one reportable segment.

3. Long Term Debt

Senior Debt

On March 5, 1999, the Company repaid all amounts outstanding under its Old
Credit Agreement (NationsBank) and entered into a new credit facility with The
CIT Group/Business Credit, Inc. ("CIT") as agent for a syndicate of banks and
financial institutions (the "New Credit Facility") which provides the Company
with a revolving credit facility (the "Revolver") and a $29.0 million term loan
facility (the "Term Loan"). The Revolver includes covenants under which the
Company can borrow funds based on the levels of its accounts receivable and
inventory in an aggregate amount of not more than $25.0 million. The Revolver
includes a sub-facility of $3.0 million for commercial and standby letters of
credit. The Revolver has a term of five years and all amounts outstanding under
the Revolver will become due and payable on April 1, 2004. The Term Loan has a
five year term and is subject to principal payments in an annual amount of $4.3
million in each of fiscal 2000, 2001, 2002 and 2003 and $9.3 million in fiscal
2004.

Outstanding borrowings under the New Credit Facility bear interest at
floating rates per annum equal to the prime rate plus 1.625% for borrowings
under the Revolver and the prime rate plus 2.125% for borrowings under the Term
Loan. At October 2, 1999, the interest rate for the Company based on this
formula was 9.875% for borrowings under the Revolver and 10.375% for borrowings
under the Term Loan. The Company pays a commitment fee of 0.5% for unused
amounts under the Revolver.

F-10
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)

3. Long Term Debt - Continued

The interest rates under the New Credit Facility may vary based on changes
in the prime rate or the London Interbank Offered Rate. Additionally, the
interest rates under the New Credit Facility may vary based on the Company's
future financial performance. The Company may be required to make mandatory
prepayments against both facilities, comprised of principal payments totaling:
(i) 100% of cash received in asset sales wherein the proceeds are not used to
purchase replacement assets, and (ii) 50% of the Company's Surplus Cash (as
defined in the New Credit Facility). These payments are to be applied first to
the Term Loan and, upon the Term Loan's retirement, to the Revolver as a
permanent reduction. At October 2, 1999, the Company's outstanding borrowings
under the New Credit Facility were $43.2 million, $16.7 million under the
Revolver and $26.5 million under the Term Loan. Also, at October 2, 1999, the
Company had $0.2 million in outstanding letters of credit. At October 2, 1999,
the Company had $4.5 million of additional available borrowings under the
Revolver.

Under the New Credit Facility, the Company is subject to customary
financial and other covenants including certain financial limit and ratio
covenants as well as limitations on further indebtedness, guaranties, liens,
dividends and other restricted payments (including transactions with
affiliates), prepayments and redemption of debt, mergers, acquisitions, asset
sales, consolidations, and other investments. The New Credit Facility also
provides that a first-priority security interest in, and lien upon,
substantially all of the Company's present and future tangible and intangible
assets and capital stock to secure indebtedness outstanding. As of October 2,
1999, the Company was not in compliance with the covenants in the New Credit
Facility relating to minimum net worth and fixed charge coverage ratio. On
December 30, 1999, the Company and "CIT" entered into an amendment and a
written waiver to the New Credit Facility which waived this non-compliance and
established new financial covenants. As a result of such waiver, as of December
30, 1999, the Company was in compliance with all technical, financial covenants
under the New Credit Facility.

Subordinated Debt

On November 25, 1996, the Company consummated a private placement of $100.0
million aggregate principal amount of subordinated notes (the "Notes"). The
Notes will mature on December 1, 2006, unless previously redeemed. Interest on
the notes is payable semiannually in arrears, commencing June 1, 1997, and is
payable on June 1 and December 1 of each year at a rate of 11.5% per annum. The
issuance of the Notes resulted in net proceeds to the Company of approximately
$95.0 million after underwriting discounts and other debt issuance costs
aggregating approximately $5.0 million. On April 30, 1997, the Company
consummated an exchange offer where by the private placement Notes were replaced
with similar Notes that are publicly traded. In December 1998, the Company
retired $48.0 million aggregate principal amount of Notes, through a combination
of open market purchases and a cash tender offer. The Company's outstanding
indebtedness under these Notes is $52.0 million. (See Note 10).

F-11
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

The Notes were issued pursuant to an indenture that contains certain
restrictive covenants and limitations. Among other things, the Indenture limits
(but does not prohibit) the incurrence of additional indebtedness, limits the
making of restricted payments including the declaration and/or payment of
dividends, places limitations on dividends and other payments by the Company,
and places limitations on liens, certain asset dispositions and merger/sale of
assets activity. The Company was in compliance with these covenants at October
2, 1999.

The Notes are unsecured subordinated general obligations of the Company.
The Notes become redeemable at the Company's option on December 1, 2001, at
which time the Notes are redeemable in whole or in part, subject to a redemption
premium which begins at 105.75 % of the face value in 2001 and reduces at a
scheduled rate annually until 2004 at which time the redemption is 100% of face
value. No mandatory redemption or sinking fund payments are required with
respect to the Notes; however, at each Note holder's option, the Company may be
required to repurchase the Notes at a redemption premium of 101% in the event
the Company incurs a change of control.

The Company paid interest of $11.6 million for the year ended October 2,
1999 compared to $16.4 million for the year ended October 3, 1998, and $13.7
million for the three hundred six day period ended September 27, 1997.

Convertible Debt with Shareholders

The Company, through GHC, obtained from certain shareholders a $4.0 million
subordinated bridge loan (the "Bridge Loan"), the proceeds of which were used to
fund the December 1, 1998 interest payments on the Notes. The terms of the
Bridge Loan provide for a one year loan to the Company at an interest rate of
9%. Unless earlier repaid, On December 15, 1999, the remaining principal and
interest outstanding under Bridge Loan will automatically convert to equity in
GHC. On March 5, 1999, the Company repaid approximately $1.0 million of the
principal and interest outstanding under the Bridge Loan using proceeds from the
New Credit Facility.

F-12
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

4. Income Taxes

Detail of the provision for income taxes consists of:

<TABLE>
<CAPTION>
-------------------------------------------------------------
Three hundred Year ended Year ended
six days ended October 3, October 2,
September, 1998 1999
27 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ - $ - $ -
State - 58 42
----------------- ---------------- ------------------
- 58 42
Current - 58 42
Deferred - - -
----------------- ---------------- ------------------
$ - $ 58 $ 42
</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>
-------------------------------------------------------------
Three hundred Year ended Year ended
six days ended October 3, October 2,
September, 1998 1999
27 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U. S. federal income tax rate (35.0%) (35.0%) (35.0%)
State income taxes (4.2) (4.2) (4.2)
Amortization of excess of - - -
investments over net assets
acquired
Loss Carry forward benefit - -
Valuation allowance 39.2 39.2 39.2
----------------- ---------------------------------------
-% -% -%
================= =======================================
</TABLE>

The significant components of the Company's deferred tax assets and
liabilities are as follows (in thousands):

F-13
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

4. Income Tax - continued

<TABLE>
<CAPTION>
October 3, October 2,
1998 1999
<S> <C> <C>
Deferred tax liabilities:
Tax-over-book amortization $ (3,032) $(2,446)
Tax over book depreciation (1,586) (460)
-------- -------
Total deferred tax liabilities $ (4,618) $(2,906)
----------------------------
Deferred tax assets:
Accounts receivable reserves 81 195
Inventory reserves 328 119
Inventory capitalization 80 103
Book-over-tax depreciation - -
Restructuring Reserve 5,265 -
Severance 156 147
Contribution carryforward 3 -
Net operating loss carryforward 12,295 10,456
-------- -------
Total deferred tax assets $ 18,208 $11,020
----------------------------

Total net deferred tax assets $ 13,590 $ 8,114
Valuation allowance (13,590) (8,114)
-------- -------
Total net - -
============================
</TABLE>

The Company has $12.8 million of net operating loss carryforwards that
expire in fiscal 2012 and $14.0 million of net operating loss carryforwards that
expire in fiscal 2018. The Company has not recorded income tax benefits related
to the net deferred tax assets because in the opinion of management it is
uncertain when the Company will be able to realize such deferred tax assets.

5. Commitments

The Company leased certain properties and equipment for which the total
rentals thereon approximated $0.4 million for the year ended October 2, 1999,
approximately $0.4 for the year ended October 3, 1998 and approximately $0.1
million for the three hundred six day period ended September 27, 1997. Future
minimum lease payments for all noncancelable operating leases for the Company at
October 2, 1999 consist of $377,000, $342,000, $120,000, and $31,000 for fiscal
2000 through 2003.

F-14
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

6. Benefit Plans

The Company has defined contribution retirement and incentive benefit
programs for all employees after meeting requirements concerning time employed.
Incentive benefit programs are of a profit sharing nature, and are discretionary
as to amount and timing. No incentive contributions were made by the Company for
any period presented. Contributions to the defined contribution plans totaled
$481,000 for the year ended October 2, 1999, compared to $575,000 for the year
ended October 3, 1998, and $453,000 for the three hundred six day period ending
September 27, 1997.

7. Significant Customers

The Company's products are primarily sold to major foodservice distributors
for distribution to foodservice outlets. As a result, customers with purchases
greater than 10% of total sales accounted for approximately 17.2% of sales for
the year ended October 2, 1999 and 27.3% for the year ended October 3, 1998.

8. Transactions with Affiliates

The Company has entered into a consulting agreement with an affiliate of
majority shareholder CGW, under which CGW will receive a monthly fee of $30,000
for financial and management consulting services. In addition to the monthly
fee to CGW, the Board of Directors may approve an additional fee not to exceed
$500,000 annually, based upon overall Company operations. At the closing of the
acquisition, CGW received a fee of $2.65 million, included as part of the
Company's organizational costs, for its services in assisting the Company with
the structuring and negotiating of this transaction. The Company paid CGW
$360,000 for each of the years ended October 2, 1999 and October 3, 1998, and
$300,000 for the three hundred and six day period ended September 27, 1997.

F-15
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

9. Stock Options

In 1997, GHC adopted a stock option plan (the "Stock Option Plan") which
provides for the granting of up to 112,250 incentive stock options to employees
to purchase shares of GHC's common stock. All options granted under the Stock
Option Plan have a five year vesting period and a term of up to ten years. GHC
has no assets or liabilities, other than their direct investment in the Company.
Stock option activity is as follows:

<TABLE>
<CAPTION>
Weighted Average and
Number of Shares Option Price per Share
-----------------------------------------------
<S> <C> <C>
Options granted 84,968 $100.00
Options exercised - -
Options cancelled - -
-----------------------------------------------
Options outstanding September 27, 1997 84,968 $100.00
Options granted 8543 $100.00
Options exercised - -
Options cancelled 15,843 $100.00
-----------------------------------------------
Options outstanding October 3, 1998 77,668 $100.00
Options granted
Options exercised
Options canceled 25,868 $100.00
-----------------------------------------------
Options outstanding October 2, 1999 51,800 $100.00
</TABLE>

The weighted-average remaining contractual life of options outstanding at
October 2, 1999, October 3, 1998 and September 27, 1997 is, 7.1 years, 8.1 years
and 9.0 years, respectively.

At October 2, 1999 there are 28,920 shares issueable upon exercise or
conversion of outstanding options under the Stock Option Plan.

Under APB 25, because exercise price of the Company's employee stock
options exceeds the market price of the underlying stock on the date of grant,
no compensation expense is recognized.

Pro forma information regarding net income (loss) is required by SFAS 123,
and has been determined as if the Company had accounted for its stock options at
fair value. The fair value for these options was estimated at the date of grant
using a minimum value pricing model with the following weighted-average
assumptions, risk-free interest rate of 5.57% to 6.15% in 1998 and 6.0% in 1997,
dividend yield of 0%, a weighted-average expected life of the option of 8 years
and near zero volatility for 1998 and 1997.

F-16
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)

9. Stock Options - Continued

Option valuation models are used in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the options'
vesting period. The Company's pro-forma net loss for the three hundred and six
days ended September 27, 1997 is $3.0 million. The Company's pro-forma net loss
for the year ended October 3, 1998 is $33.1 million, and the Company's pro-forma
net income for the year end October 2, 1999 is $13.6 million.

10. Restructuring

Prior to the end of fiscal 1998, the Company began a restructuring process
that encompassed two main actions: (i) exiting the raw ground beef business, and
the related closing or sale of the Orange City, Iowa, plant principally
responsible for this business line's production; and (ii) restructuring of its
balance sheet primarily through a debt restructuring plan and equity offering.

On October 7, 1998, the Company announced its intent to exit the ground
beef business to concentrate on its core value added products. Certain expenses
were recorded in fiscal 1998 in conjunction with this decision. The $13.9
million charge recorded in fiscal 1998 is comprised of: (i) a $13.5 million
charge to write down the value of certain assets used in the ground beef
business to the estimated net realizable value of these assets, and (ii) a $0.4
million charge for severance and other expenses related to the exit from the
ground beef business and restructuring of the Company's value added business.

On October 29, 1998, the Company announced a tender offer pursuant to which
it offered to purchase not less than $36.0 million (the "Minimum Tender
Condition") and up to $46.0 million aggregate principal amount of its Notes (the
"Offer"). On December 2, 1998, the Company elected to waive all conditions to
the consummation of the Offer, including the Minimum Tender Condition, and
consummated the Offer with respect to $30.0 million aggregate principal amount
of Notes (the "Tendered Notes"). Additionally, on December 21, 1998, CGW
contributed to the Company $18.0 million aggregate principal amount of Notes
(the "CGW Notes") acquired by CGW through open market purchases. The Tendered
Notes and the CGW Notes were retired on December 21, 1998. As a result of the
retirement of the $48 million of Tendered Notes, the Company recorded $29.1
million in income net of related transaction expenses and the write off of
deferred debt fees. The repurchase and retirement of the Tendered Notes and the
CGW Notes was financed through an equity investment by the shareholders in GHC
totaling $16.9 million.

F-17
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC.
NOTES TO FINANCIAL STATEMENTS- (Continued)

On February 1, 1999, the Company sold its Orange City, Iowa manufacturing
facility (the "Ground Beef Facility") for $4.0 million in cash of which $400,000
remains in escrow. The sale of the Company's Orange City, Iowa Manufacturing
facility resulted in no additional significant gain or loss. Historically, the
Ground Beef Facility has produced almost exclusively ground beef product
offerings, representing almost 100% of the Company's total ground beef
production. The proceeds from the sale of this facility were used to reduce the
outstanding indebtedness under the Old Credit Facility.

11. Subsequent Events

On December 15, 1999, the Bridge Loan and interest associated with the
Bridge Loan was converted to equity of the Company. The conversion of the Bridge
Loan to equity resulted in the issuance of 822,188 shares of common stock and an
increase to shareholders equity of $3.2 million.

On December 30, 1999 the Company and CIT entered into an amendment and
waiver of the New Credit Facility which waived the Company's non-compliance with
certain financial covenants. The amendment to the New Credit Facility
establishes new financial covenants for future years.

F-18
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on January 18, 2000.

GORGES/QUIK-TO-FIX INC.

By /s/ William D. Day
--------------------
William D. Day
Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant in the capacities indicated on January 18, 2000.

Signature Title
--------- -----

/s/ William D. Day Chairman of the Executive Committee
------------------------------- (Principal Executive Officer)
William D. Day

Director
-------------------------------
Richard L. Cravey

/s/ William A. Davies Director
-------------------------------
William A. Davies

/s/ James A. O'Donnell Director
-------------------------------
James A. O'Donnell

/s/ Shelley W. Arnette Chief Financial Officer
------------------------------- (Principal Financial and Accounting
Shelley W. Arnette Officer)

<PAGE>

EXHIBIT 10.4

WAIVER AND FIRST AMENDMENT TO FINANCING AGREEMENT

THIS WAIVER AND FIRST AMENDMENT TO FINANCING AGREEMENT (this "Waiver and
First Amendment") is dated as of the 30/th/ day of December, 1999 among
GORGES/QUIK-TO-FIX FOODS, INC. (the "Borrower"), THE CIT GROUP/BUSINESS CREDIT,
INC. (the "Agent") and the Lenders parties hereto;

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the Borrower and The CIT Group/Business Credit, Inc., as the Agent
and as a Lender, executed and delivered that certain Financing Agreement, dated
as of the 5/th/ day of March, 1999 (the "Financing Agreement"); and

WHEREAS, each of Capital Business Credit, a Division of Capital Factors,
Inc., Green Tree Financial Servicing Corporation and IBJ Whitehall Business
Credit Corporation became a Lender under the Financing Agreement pursuant to an
Assignment and Acceptance Agreement between it and The CIT Group/Business
Credit, Inc. dated April 15, 1999;

WHEREAS, Events of Default has occurred under Sections 7.9, 7.12 and 7.13
of the Financing Agreement for the fiscal quarters ending on or about September
30, 1999 and December 31, 1999 (such Events of Default under such Sections for
such fiscal quarters only being the "Existing Defaults"), and the Borrower has
requested and the Agent and the Lenders have agreed to a waiver of the Existing
Defaults and to an amendment of such Sections, subject to the terms and
conditions hereof, including the addition of a new Section 7.18 and an amendment
to Section 10.1(e) relating thereto, and certain other amendments, all as set
forth herein, subject to the terms and conditions hereof;

NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged by the parties hereto, the Borrower, the Agent and the Required
Lenders hereby covenant and agree as follows:

1. Definitions. Unless otherwise specifically defined herein, each term
-----------
used herein which is defined in the Financing Agreement shall have the meaning
assigned to such term in the Financing Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Financing Agreement shall from and after the date hereof refer to the Financing
Agreement as amended hereby.

Waiver of Existing Defaults. The Existing Defaults hereby are waived by
---------------------------
the Agent and the Required Lenders, effective as of the end of the fiscal
quarters ending on or about September 30, 1999, and December 31, 1999, but such
waivers do not constitute
<PAGE>

a waiver of any future Event of Default under Sections 7.9, 7.12 or 7.13 as
amended by this First Amendment, or of any other Default or Event of Default.

Amendment to Section 1.1. Section 1.1 of the Financing Agreement hereby is
------------------------
amended by deleting the definition of "Availability" and adding the following
definitions of "Availability" and "Collateral Disclosure Certificate":

Availability shall mean at any time the excess of the sum of (i) the
------------
advance rate amount with respect to Eligible Accounts Receivable as
such amount is calculated pursuant to clause (i) of Section 3.1 of
this Financing Agreement, and (ii) the advance rate amount with
respect to Eligible Finished Goods, Eligible Raw Meat Inventory, and
Eligible Supply Inventory as such amounts are calculated pursuant to
clause (ii) of Section 3.1 of this Financing Agreement over the sum of
(x) the outstanding aggregate amount of all Obligations (other than
the Term Loans) and (y) the Availability Reserve.

Collateral Disclosure Certificate shall mean the Collateral Disclosure
---------------------------------
Certificate dated February 10, 1999 and furnished to the Agent.

Amendment to Section 2.1(k) Section 2.1(k) of the Financing Agreement
---------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:

(k) Additional Documents - The Company shall have executed and
--------------------
delivered to the Agent all loan documents necessary to consummate the
lending arrangement contemplated between the Company and the Agent and
the Lenders, including, without limitation, the Term Notes, the Pledge
Agreement, the Trademark Security Agreement, the Collateral Disclosure
Certificate and the Guaranty (all such loan documents, including this
Financing Agreement and all mortgages, deeds to secure debt and deeds
of trust pertaining to the Real Estate, as the same may be amended or
otherwise modified from time to time are herein referred to as the
"Loan Documents"). The terms of all Loan Documents shall be
satisfactory to the Agent and the Lenders in all respects.

Amendment to Section 2.2(b) Section 2.2(b) of the Financing Agreement
---------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:

(b) Representations and Warranties - The representations
------------------------------
and warranties contained herein and in the Collateral Disclosure
Certificate shall be true and correct in all material respects at the
date of each extension of credit, except to the extent they expressly
relate to an earlier date or, as to matters disclosed in the
Collateral Disclosure Certificate, as otherwise disclosed in writing
to the Agent and the Lenders;

-2-
<PAGE>

Amendment to Section 7.9. Section 7.9 of the Financing Agreement hereby is
------------------------
amended by deleting it in its entirety and substituting the following therefor:

Section 7.9 Net Worth. The Company shall maintain at the end of
---------
each of the periods below, a Net Worth of not less than:

<TABLE>
<CAPTION>
Period Net Worth
------ ---------
<S> <C>
Fiscal quarter ending on or about March 31, 2000 39,800,000

Each fiscal quarter ending on or about June 30, 2000 38,500,000

Fiscal quarter ending on or about September 30, 2000 38,000,000

Each fiscal quarter thereafter the sum of the Net
Worth required for the
preceding fiscal
quarter plus $500,000.
</TABLE>

2. Amendment to Section 7.12. Section 7.12 of the Financing Agreement
-------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:

Section 7.12 Fixed Charge Coverage Ratio. The Company shall
---------------------------
maintain at the end of each fiscal period, an Fixed Charge Coverage Ratio of at
least:

<TABLE>
<CAPTION>
Fiscal Period Ending on or about Ratio
-------------------------------- -----
<S> <C>
for the fiscal quarter ending on or about on March 31, 2000 and the
immediately preceding two fiscal quarters
0.70 to 1.0

for the fiscal quarter ending on or about on June 30, 2000 and the
immediately preceding three fiscal quarters
0.80 to 1.0

for the fiscal quarter ending on or about September 30, 2000 and the
immediately preceding four fiscal quarters
1.00 to 1.0

for each fiscal quarter thereafter and the immediately preceding
four fiscal quarters 1.10 to 1.0

</TABLE>

3. Amendment to Section 7.13. Section 7.13 of the Financing Agreement
-------------------------
hereby is amended by deleting it in its entirety and substituting the following
therefor:

Section 7.13 Leverage Ratio. The Company shall maintain at the
---------------------------
end of each fiscal quarter ending on or about the dates set forth
below a Leverage Ratio of not more than:

-3-
<PAGE>

<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
For each of the fiscal quarters ended on or about

March 31, 2000, June 30, 2000
and September 30, 2000 2.75 to 1.0

for each fiscal quarter thereafter, 2.80 to 1.0
</TABLE>

4. New Section 7.18. A new Section 7.18 hereby is added to the Financing
----------------
Agreement, as follows:

Section 7.18 Minimum Availability. The Company shall maintain at
---------------------------------
all times Availability of not less than $1,500,000; provided, however,
-------- -------
that solely for purposes of calculating. Availability pursuant to this
Section 7.18, Section clause (ii) (y) of Section 3.1 shall be
included, but clause (ii)(x) of Section 3.1 shall be disregarded.

5. Amendment to Section 10.1(d). Section 10.1(d) of the Financing
----------------------------
Agreement hereby is amended by deleting it in its entirety and substituting the
following therefor:

(d) breach by the Company or the Parent of any warranty,
representations or covenant contained herein (other than those referred to in
sub-paragraphs (e) and (f) below) or in any other written agreement between the
Company or the Parent and the Agent and/or the Lenders (including any of the
other Loan Documents), provided that such breach by the Company or the Parent of
any of the covenants referred in this clause (d) shall not be deemed to be an
Event of Default unless and until such breach shall remain unremedied, as
determined by the Agent in the exercise of its discretion, for a period of
thirty (30) days from the date of such breach; or

6. Amendment to Section 10.1(e). Section 10.1(e) of the Financing
----------------------------
Agreement hereby is amended by deleting it in its entirety and substituting the
following therefor:

(e) breach by the Company of any covenant contained in any of
Sections 3.3 (other than the third sentence thereof), 3.4, 4.3(C),
6.3, 6.4 (other than the first sentence thereof), 7.1, 7.5, 7.6, 7.9
through 7.13 or 7.16 or 7.18.

7. Amendment to Section 12.1. Section 12.1 of the Financing Agreement
-------------------------
hereby is amended by adding the following new sentence at the end thereof:

Neither the Agent not any Lender shall be under any obligation to
marshal any assets in favor of any of the Company or the Parent or any
other Person or against or in payment of any or all of the
Obligations.

-4-
<PAGE>

8. Amendment to Section 13.4. Section 13.4 of the Financing Agreement
-------------------------
hereby is amended by adding the following new paragraph (c) at the end thereof:

(c) Promptly after receipt thereof, the Agent shall furnish to
each Lender a copy of any written instructions or directions given to
it pursuant to paragraph (a) or (b) above.

9. Restatement of Representations and Warranties. The Company hereby
---------------------------------------------
restates and renews each and every representation and warranty heretofore made
by it in the Financing Agreement and the other Loan Documents as fully as if
made on the date hereof (except to the extent they expressly relate to an
earlier date) and with specific reference to this Waiver and First Amendment and
all other loan documents executed and/or delivered in connection herewith.

10. Effect of Amendment. Except as set forth expressly hereinabove, all
-------------------
terms of the Financing Agreement and the other Loan Documents shall be and
remain in full force and effect, and shall constitute the legal, valid, binding
and enforceable obligations of the Borrower. The amendments contained herein
shall be deemed to have prospective application only, unless otherwise
specifically stated herein.

11. Reaffirmation; No Novation or Mutual Departure. The Company expressly
----------------------------------------------
acknowledges and agrees that: (i) there has not been, and this Waiver and First
Amendment does not constitute or establish, a novation with respect to the
Financing Agreement or any of the Loan Documents, or a mutual departure from the
strict terms, provisions and conditions thereof, other (x) than the amendments
and modifications expressly set forth in Sections 3 through 13, inclusive,
hereof and (y) the waiver of the Existing Default pursuant to Section 2 hereof;
and (ii) nothing in this Waiver and First Amendment shall affect or limit the
Agent's and the Lenders' right to demand payment of liabilities owing from the
Company to the Agent and the Lenders under, or to demand strict performance of
the terms, provisions and conditions of, the Financing Agreement and the other
Loan Documents, to exercise any and all rights, powers and remedies under the
Financing Agreement or the other Loan Documents or at law or in equity, or to do
any and all of the foregoing, immediately at anytime after the occurrence of a
Default or an Event of Default which is not an Existing Default, pursuant to the
Financing Agreement or the other Loan Documents.

12. Ratification. The Company hereby restates, ratifies and reaffirms
------------
each and every term, covenant and condition set forth in the Financing Agreement
and the other Loan Documents effective as of the date hereof.

13. Counterparts. This Waiver and First Amendment may be executed in any
------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same instrument.

-5-
<PAGE>

14. Section References. Section titles and references used in this Waiver
------------------
and First Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.

15. No Default. To induce the Agent and the Required Lenders to enter
----------
into this Waiver and First Amendment and to continue to make advances pursuant
to the Financing Agreement, the Company hereby acknowledges and agrees that, as
of the date hereof, and after giving effect to the terms hereof, there exists
(i) no Default or Event of Default and (ii) no right of offset, defense,
counterclaim, claim or objection in favor of the Company arising out of or with
respect to any of the Loans or other obligations of the Company owed to the
Agent and the Lenders under the Financing Agreement.

16. Further Assurances. The Company agrees to take such further actions
------------------
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Company.

17. Governing Law. This Waiver and First Amendment shall be governed by
-------------
and construed and interpreted in accordance with, the laws of the State of
Georgia.

18. Conditions Precedent. This Waiver and First Amendment shall become
--------------------
effective only upon execution and delivery (i) of this First Amendment by the
Company, the Agent and the Required Lenders, and (ii) of the Consent and
Reaffirmation of Guarantor at the end hereof by the Parent.

-6-
<PAGE>

CONSENT AND REAFFIRMATION OF GUARANTORS

The undersigned (i) acknowledges receipt of the foregoing Waiver and First
Amendment to Financing Agreement (the "Waiver and First Amendment"), (ii)
consents to the execution and delivery of the Waiver and First Amendment by the
parties thereto and (iii) reaffirms all of its obligations and covenants under
the Guaranty dated as of March 5, 1999 executed by it, and agrees that none of
such obligations and covenants shall be affected by the execution and delivery
of the Waiver and First Amendment.

GORGES HOLDING CORPORATION, as the Parent
(SEAL)

By: _____________________________________
Title:

-7-
<PAGE>

IN WITNESS WHEREOF, the Company, the Agent and the Required Lenders have
caused this Waiver and First Amendment to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

GORGES/QUIK-TO-FIX FOODS, INC., as the
Company (SEAL)

________________________________________
By: ____________________________________
Title:

THE CIT GROUP/BUSINESS CREDIT, INC., as
Agent and as a Lender (SEAL)

By: ____________________________________
Title:

CAPITAL BUSINESS CREDIT, INC., A
DIVISION OF CAPITAL FACTORS, INC.,
as a Lender (SEAL)

By: ____________________________________
Title:

GREEN TREE FINANCIAL SERVICING
CORPORATION, as a Lender (SEAL)

By: ____________________________________
Title:

IBJ WHITEHALL BUSINESS CREDIT
CORPORATION, as a Lender (SEAL)

By: ____________________________________
Title:

-8-
<PAGE>

GORGES/QUIK-TO-FIX FOODS, INC., as the
Company (SEAL)

________________________________________
By: ____________________________________
Title:

THE CIT GROUP/BUSINESS CREDIT, INC., as
Agent and as a Lender (SEAL)

By: ____________________________________
Title:

CAPITAL BUSINESS CREDIT, INC., A
DIVISION OF CAPITAL FACTORS, INC.,
as a Lender (SEAL)

By: ____________________________________
Title:

GREEN TREE FINANCIAL SERVICING
CORPORATION, as a Lender (SEAL)

By: ____________________________________
Title:

IBJ WHITEHALL BUSINESS CREDIT
CORPORATION, as a Lender (SEAL)

By: ____________________________________
Title:

-9-

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> OCT-02-1999
<CASH> 582
<SECURITIES> 0
<RECEIVABLES> 13,937
<ALLOWANCES> 499
<INVENTORY> 17,365
<CURRENT-ASSETS> 32,473
<PP&E> 77,134
<DEPRECIATION> (20,524)
<TOTAL-ASSETS> 155,805
<CURRENT-LIABILITIES> 20,421
<BONDS> 90,945
0
0
<COMMON> 0
<OTHER-SE> 62,492
<TOTAL-LIABILITY-AND-EQUITY> 155,805
<SALES> 150,874
<TOTAL-REVENUES> 150,874
<CGS> 123,855
<TOTAL-COSTS> 78,120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 292
<INTEREST-EXPENSE> 12,113
<INCOME-PRETAX> (12,957)
<INCOME-TAX> 42
<INCOME-CONTINUING> (12,988)
<DISCONTINUED> 0
<EXTRAORDINARY> 26,959
<CHANGES> 0
<NET-INCOME> 13,960
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>